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Professional Diversity Network, Inc.Greatness Cultivated design build attract 2013 Annual Report As business becomes increasingly globalized and knowledge-based, the demand for top talent grows ever more urgent. For many companies, talent is now recognized as a key driver of long-term performance. And for others, it is seen as nothing less than a question of survival. Greatness cultivated. Potential realized. Nobody is better placed to advise, guide and serve the world’s leading organizations than Korn/Ferry. Building on our peerless heritage in executive search and leadership consulting, we’ve enhanced our capabilities to cover nearly every business-critical area of talent management. 2013 Annual Report1 In essence Korn/Ferry offers unrivalled breadth of expertise in talent management. From an organization’s boardroom to the vital many, our offerings help clients deliver and develop the superior talent that will accelerate future success. • Strategic Alignment• Integrated Talent Management• Leadership Strategy• Board Effectiveness• CEO / Top Team Effectiveness• Assessment• Leadership Development• Diversity and Inclusion• Online and Blended Learning• Board, Executive, Professional, and Project Recruitment• Recruitment Process Outsourcing• Onboarding• Talent Communications and Employer Branding2013 Annual Report2 In figures Our financial results for fiscal year 2013 continue to demonstrate the long-term value created by our strategy of service diversification. Total fee revenue In millions, fiscal year 2013 2012 2011 By business segment* Executive Search 60% 26% 14% Futurestep Leadership and Talent Consulting * Q4 FY 2013 $812.8$812.8$790.5$790.5$744.3$744.32013 Annual Report3 In review Dear Stockholders, In fiscal year 2013: • We achieved revenue of $812.8 million (an all-time high in the Firm’s 43-year history) • One out of every five employees was new to Korn/Ferry • 40% of our revenue in the fiscal fourth quarter was generated outside of our core offering of Executive Search • We delivered a firm-wide adjusted EBITDA margin of 12%* • We remained financially strong with cash and marketable securities totaling $366 million at fiscal year’s end, with $157 million of investable cash and no debt Looking back over the past fiscal year, we can reflect on the significant transformation the Firm has undertaken in a short period of time—from a monoline to a multi-solutions organization. A high-level view of Korn/Ferry today looks radically different than it did just a few years ago. Today, our landscape is far more diverse; Korn/Ferry has rapidly amassed an array of unique assets, intellectual property and talent management offerings as we build the infrastructure to scale the Firm and support the delivery of a comprehensive approach to talent. This is something we take pride in, particularly given the stubborn economic climate of the past several years. Our Firm is seizing the opportunity to create the world’s preeminent leadership and talent consulting organization. Over the last 12 months, by further diversifying our business and making strategic acquisitions, most notably Global Novations and PDI Ninth House, we have broadened the value we bring to clients, making Korn/Ferry more relevant, our brand more elastic and our flagship Search offering more differentiated. Today’s Korn/Ferry is well positioned to assist with the larger, more strategic talent and leadership issues facing our clients. As CEOs struggle with a wide array of issues—most immediately, the fight for relevancy and growth—Korn/Ferry is the bridge between a client’s business and talent strategies. Regardless of the strategic path chosen, an organization’s workforce—its people—is ultimately what matters most. This raises pertinent questions in this interconnected world: How can a company’s workforce become better aligned with its strategy? What new skills will be required to execute the plan? What talent is needed to realize the CEO’s vision? How can a CEO overcome employee fatigue, accelerate engagement and establish a common purpose? Finding people is no longer enough; finding out the “who” of someone is what matters most. In other words, equally important to experience is “fit” for the client organization—cultural fit. Korn/Ferry is a knowledge-based company with deep intellectual property and research that allow us to deliver meaningful outcomes for our clients. Case in point: including PDI Ninth House, we have now assessed more than 2.5 million professionals. We understand perhaps greater than any other firm what makes great leaders tick, the competencies they possess that distinguish them from others, as well as the potential derailers that can damage not only their careers, but their organization’s performance. Utilizing our intellectual capital, we are systematically driving more integrated, scalable client relationships within the C-suite, boardrooms and offices of human resources leaders worldwide. This is evidenced by the fact that 88% of our top 50 clients now utilize at least two of our service lines. In today’s environment, global organizations have increasingly complex talent management needs. A piecemeal approach to talent-oriented services is no longer viable nor valuable to clients. These organizations need a true talent partner—someone who “connects the dots” across their entire talent continuum. Korn/Ferry’s “Many to One” approach to talent starts with Search. Our premier offering continues to open doors for Korn/Ferry’s talent management offerings and approach at the highest levels of global organizations, which can cascade to create additional opportunities throughout our clients’ talent management spectrum. Our Leadership and Talent Consulting business concluded the fiscal year with an annual revenue run rate of $240 million (26% of the Firm’s revenue mix). On an annual run rate basis, our Futurestep business generated 14% of the Firm’s overall revenue mix, with more than 55% of that business stemming from Recruitment Process Outsourcing—major projects producing more regular, multi-year, higher growth and recurring revenue streams. Through our breadth and depth of assets and offerings, we are increasingly in a class by ourselves—designing and building talent strategies and attracting the right talent for our clients. It has been said that without change, there can be no growth. Embedded within every extraordinary company is a distinctive sense of purpose—one that disrupts the old order of how things have always been done and empowers the creation of the new and different. * Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, further adjusted to exclude restructuring charges, transaction and integration costs and separation costs. Unadjusted EBITDA margin for fiscal year 2013 was 8.8%. 2013 Annual Report4 Korn/Ferry is indeed the world’s preeminent leadership and talent consulting organization, creating better leaders for a better world, accelerating the destination of our clients and driving long-term value for our stockholders. Gary D. Burnison President and Chief Executive Officer As our results throughout this fiscal year affirm, Korn/Ferry is on the move. Looking ahead, we will maintain our forward-leaning, innovative minded approach—delivering a robust pipeline of talent management offerings to our clients, embracing progressive technologies, exploring cutting-edge leadership and talent solutions. Through the efforts of our global colleagues, we have much to be proud of and much to which we can look forward. As the world continues to evolve, we are at the forefront defining who we are, one client, one professional at a time. As we drive our strategy, the Firm will remain focused on not only meeting but exceeding our financial operating boundaries, delivering outstanding performance for our many stockholders. I would like to take this opportunity to thank our more than 3,200 colleagues around the globe for their efforts in shaping a new Korn/Ferry and changing the lives and accelerating the success of our clients. I extend my gratitude to the Firm’s leadership team for their unyielding commitment to our mission, vision and strategy, and to our board of directors for their continued guidance and support. Revenue – Global fee revenue in fiscal 2013, including Futurestep By region 1 North America 2 EMEA 3 Asia Pacific 4 Latin America 56% 24% 15% 5% 3 10 5 By industry 5 Industrial 6 Consumer 26% 19% 7 Life Sciences & Healthcare 18% 8 Technology 9 Financial Services 10 Education/Nonprofit 16% 14% 7% 2 4 1 9 8 6 7 Korn/Ferry’s Board of Directors Top row (l to r): George T. Shaheen (Non Executive Chairman), Jerry Leamon, Gary D. Burnison, Edward D. Miller Bottom row (l to r): Debra Perry, Gerhard Schulmeyer, Harry L. You, William Floyd 2013 Annual Report515%5%24%56%26%19%18%16%14%7% UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended April 30, 2013OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934Commission File Number 001-14505 KORN/FERRY INTERNATIONAL(Exact Name of Registrant as Specified in its Charter) Delaware 95-2623879(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification Number)1900 Avenue of the Stars, Suite 2600, 90067Los Angeles, California (Zip code)(Address of principal executive offices) (310) 552-1834(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ¨Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No 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 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No The number of shares outstanding of our common stock as of June 18, 2013 was 48,813,213 shares. The aggregate market value of the registrant’svoting and non-voting common stock held by non-affiliates of the registrant on October 31, 2012, the last business day of the registrant’s most recentlycompleted second fiscal quarter, (assuming that the registrant’s only affiliates are its officers, directors and 10% or greater stockholders) was approximately$591,403,079 based upon the closing market price of $13.39 on that date of a share of common stock as reported on the New York Stock Exchange.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement for its 2013 Annual Meeting of Stockholders scheduled to be held on September 26, 2013 areincorporated by reference into Part III of this Form 10-K. KORN/FERRY INTERNATIONALIndex to Annual Report on Form 10-K for the Fiscal Year Ended April 30, 2013 Item # Description Page PART I. Item 1 Business 1 Item 1A Risk Factors 11 Item 1B Unresolved Staff Comments 19 Item 2 Properties 19 Item 3 Legal Proceedings 19 Item 4 Mine Safety Disclosures 19 Executive Officers 19 PART II. Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6 Selected Financial Data 24 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A Quantitative and Qualitative Disclosures About Market Risk 47 Item 8 Financial Statements and Supplementary Data 47 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 47 Item 9A Controls and Procedures 48 Item 9B Other Information 48 PART III. Item 10 Directors, Executive Officers and Corporate Governance 48 Item 11 Executive Compensation 48 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 48 Item 13 Certain Relationships and Related Transactions, and Director Independence 48 Item 14 Principal Accountant Fees and Services 48 PART IV. Item 15 Exhibit and Financial Statements Schedules 49 Signatures 53 Financial Statements and Financial Statement Schedules F-1 PART I. Item 1.BusinessBusiness OverviewKorn/Ferry International (referred to herein as the “Company,” “Korn/Ferry,” or in the first person notations “we,” “our,” and “us”) is a premier globalprovider of talent management solutions that help clients to design strategies to assist clients in building and attracting their talent. We opened our first office inLos Angeles in 1969 and currently operate in 87 offices in 37 countries. As of April 30, 2013, we had 3,272 full-time employees, including 399 ExecutiveRecruitment, 133 Leadership & Talent Consulting, and 75 Futurestep consultants who are primarily responsible for client services. Our clients include manyof the world’s largest and most prestigious public and private companies, middle market and emerging growth companies, as well as government andnonprofit organizations. We have built strong client loyalty with 81% of our assignments performed during fiscal 2013 on behalf of clients for whom we hadconducted assignments in the previous three fiscal years.We were originally formed as a California corporation in November 1969 and reincorporated as a Delaware corporation in fiscal 2000.Korn/Ferry delivers and develops superior talent for the world’s leading organizations. We focus on three areas: We Design talent strategies to accelerate the achievement of our clients’ business goals; We Build high-performing talent through engagement and development; and We Attract the right talent and create talent pools for the future.Delivered by our professionals and utilizing proprietary research and intellectual property, Korn/Ferry helps clients design strategies to assist clients inbuilding and attracting leaders who can drive organizational success, through the following business segments:Executive Recruitment: Executive Recruitment, our largest business, focuses on recruiting board-level, chief executive and other senior executivepositions for clients predominantly in the consumer, financial services, industrial, life sciences/healthcare provider, technology and educationalindustries. The relationships that we develop through this business allows us to add incremental value to our clients through the delivery of our manytalent management solutions.Leadership & Talent Consulting (“LTC”): Our comprehensive blend of talent management offerings assists clients with their ongoingassessment, organizational design and leadership development efforts. Services address six fundamental needs — board effectiveness, Chief ExecutiveOfficer (“CEO”) & top team effectiveness, diversity & inclusion, integrated talent management, leadership development, and organizationtransformation. Each of Korn/Ferry’s solutions is delivered by an experienced team of leadership consultants, a global network of top executive coachesand the intellectual property of research-based, time-tested leadership assessment and developmental tools.High-Impact Recruitment Solutions: In 1998, we extended our market reach into recruitment for non-executive professionals with theintroduction of our subsidiary, Futurestep. Futurestep draws from Korn/Ferry’s four decades of industry experience to offer fully customized, flexibleservices to help organizations meet their talent and recruitment needs. Futurestep’s portfolio of services includes recruitment process outsourcing(“RPO”), project recruitment, search and consulting.We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”),pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”). You may read and copy any materials that we file with the SEC at the SEC’s PublicReference Room at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SECat 1-800-732-0330. Our reports, proxy statements and other documents filed electronically with the SEC are available at the website maintained by the SEC atwww.sec.gov. 1 We also make available, free of charge on our website at www.kornferry.com, our annual, quarterly, and current reports, and, if applicable,amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after weelectronically file such reports with, or furnish them to, the SEC.Our Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of the Audit Committee, Compensation and PersonnelCommittee, and Nominating and Corporate Governance Committee of our Board of Directors are also posted on our website at www.kornferry.com.Stockholders may request copies of these documents by writing to our Corporate Secretary at 1900 Avenue of the Stars, Suite 2600, Los Angeles, California90067.Industry OverviewExecutive Recruitment Services: Our executive recruitment services concentrate on searches for positions with annual compensation of $250,000 ormore, or comparable in foreign locations, which may involve board-level, chief executive and other senior executive positions. The industry is comprised ofretained and contingency recruitment firms. Retained firms, such as Korn/Ferry, typically charge a fee for their services equal to approximately one-third of thefirst year annual cash compensation for the position being filled regardless of whether the position is filled. Contingency firms generally work on a non-exclusive basis and are compensated only upon successfully placing a recommended candidate.Leadership & Talent Consulting Services: Our LTC services are accelerating our transformation into a broad-based talent management firm. Thesediversified offerings help our clients to not only attract but to design and develop their talent, to maximize leadership effectiveness and business impact. OurLTC offerings have recently been expanded and enhanced through the acquisitions of PDI Ninth House (“PDI”) and Global Novations, LLC (“GlobalNovations”).High-Impact Recruitment Solutions: Futurestep, a Korn/Ferry subsidiary, offers talent acquisition solutions for mid- and high-level management,with annual compensation less than $250,000 or comparable in foreign locations. Futurestep has locations on five continents and a record of success inhelping clients improve business performance through high-impact talent.Industry TrendsThe current global economic environment is unpredictable as we face such challenges as low job growth, uneven consumer demand, and sovereigngovernments near financial crisis. Despite these market conditions, we remain vigilant about accelerating our clients’ success and believe the mid- to long-termbusiness outlook for the talent management industry is positive. Contributing to this is a confluence of market trends which should ultimately fuel job growthand hiring, including the following:Consolidation of Talent Management Solution Providers — In choosing recruitment and human resource service providers, we believe: Companies are actively in search of preferred providers in order to create efficiencies and consolidate vendor relationships; Companies that can offer a full suite of talent management solutions are becoming increasingly attractive; and Clients seek trusted advisors who understand their business and unique organizational culture in order to manage the multiple needs of their businesson a global scale.Skills Gaps — There are not enough highly “skilled” people coming into the labor market to fill open jobs. Particularly at the senior management levels,there is an inadequate available talent pool. New leaders must step into bigger, more complex, and more global roles faster — and with less experience — thantheir predecessors. We believe employers will increasingly seek service providers who can help them find, develop and retain highly qualified talent thatsecures a competitive advantage. 2 Human Capital Is One of the Top CEO Challenges — Whereas the innovation solution used to be technology, now the human element — the people,the minds, the alliances and the culture that can create and then nurture innovative ideas — are seen as central to CEOs. In fact, according to the ConferenceBoard, human capital — including talent acquisition, leadership, employee development, training and engagement — is the single biggest challenge facingCEOs in 2013.Emerging Markets Are Focus for New Growth — We are experiencing a global workforce imbalance as slower-growth countries are facing hiringslowdowns and emerging economies’ need for talent is increasing. If emerging markets in Asia, Eastern Europe and Africa are to continue their growthtrajectory, they will need to solve human capital issues like how to attract, engage and retain highly competent, innovative talent, as well as how to developeffective leaders to drive the business. As companies expand internationally, and different markets present more attractive business opportunities, they have tothink about their workforce and talent in this way too. Clients are turning to firms that understand the global complexities impacting workforce planningtoday.Talent Analytics — Companies are increasingly leveraging big data and analytics to measure the influence of activities across all aspects of theirbusiness, including HR. They expect their service providers to deliver superior metrics and measures and better ways of communicating results. Korn/Ferry’sgo-to-market approach is increasingly focused on talent analytics — we are injecting research-based intellectual property (“IP”) into all areas of our business,cascading innovation and new offerings up to our clients.Increased Outsourcing of Recruitment Functions — More companies are focusing on core competencies and outsourcing non-core, back-officefunctions to providers who can provide efficient, high-quality services. Third-party providers can apply immediate and long-term approaches for improvingall aspects of talent acquisition. Advantages to outsourcing part or all of the recruitment function include: Access to a diverse and highly qualified pool of candidates, which is refreshed on a regular basis; Reduction or elimination of the costs required to maintain and train an in-house recruiting department in a rapidly changing industry; Ability to use the workflow methodologies we have developed over tens of thousands of assignments, which allows clients to fulfill positions on astreamlined basis; Access to the most updated industry and geographic market information; Access to cutting-edge search technology software; and Ability to maintain management focus on core strategic business issues.Key Role of Technology — At Korn/Ferry, we are adding more discipline and scientific research into the recruitment and talent management process,with emphasis shifting from candidate identification to candidate assessment, fit and attraction. Driving this initiative is enhanced technology, as the power ofthe Internet, databases and online talent communities make it possible to efficiently identify greater numbers of qualified candidates. Innovative technology,when combined with world-class intellectual property and thought leadership, creates a compelling set of tools to manage the process of identifying, assessingand recruiting the most desirable candidates.Other Industry Trends — In addition to the industry trends mentioned above, we believe the following factors will have a long-term positive impact onthe talent management industry: Increasing demand for professionals with not just the right technical skills, but also the right leadership style, values and motivation to meet thespecific requirements of the position and organizational culture; Decreasing executive management tenure and more frequent job changes; Shifting balance of power towards the employee as more people take charge of their own careers, and the new norm of employee-driven development; Increasing importance of talent mobility in engaging and developing people within an organization; 3 Consumer-grade employer branding; and Inadequate succession planning.Growth StrategyOur objective is to expand our position as a premier global provider of talent management solutions. In order to meet this objective, we will continue topursue five strategic initiatives:1. Drive an Integrated, Solutions-Based Go-to-Market StrategyDifferentiating Client Value Proposition — Korn/Ferry offers its clients a global, integrated, enterprise-wide talent management solution. To that end,we have made progress in helping clients more effectively and efficiently design strategies to assist clients in building and attracting their talent.In analyzing talent management across the entire value chain, Korn/Ferry has developed a robust suite of offerings and leverages our market-leadingposition in executive recruitment to extend the value we bring our clients through our diversified capabilities along the rest of the talent lifecycle through ourLTC and Futurestep service lines.Our synergistic go-to-market strategy, utilizing all three of our service lines, is driving more integrated, scalable client relationships, while acceleratingour evolution to a consultative solutions-based organization. This is evidenced by the fact that nearly 88% of our top 50 clients utilize at least two of ourservice lines.We are an increasingly diversified enterprise in the world of human capital services and products, an industry, that according to Bain & Company,represents an estimated $380 billion global market opportunity.In an effort to better coordinate global recruiting and to gain operational efficiencies, we expect that multinational clients increasingly will turn to strategicpartners who can manage their recruitment needs on a centralized basis. This will require vendors with a global network of offices and technological supportsystems to manage multiple hires across geographical regions. We established our Premier Client Partnership (“PCP”) program to act as a catalyst for changeas we transform our Company from individual operators to an integrated talent solutions provider, in an effort to drive major global and regional strategicaccount development as well as to provide a framework for all of our client development activities. Today, the PCP program consists of global colleagues fromevery line of business and geography. We are in the process of cascading this methodology throughout every market, country and office.2. Deliver Unparalleled Client ExcellenceWorld-class Intellectual Property — Korn/Ferry continues to scale and more deeply embed our industry-leading intellectual property within the talentmanagement processes of our global clients.Our IP-driven Lominger tools and services are being utilized by our clients for everything from organizational development and job profiling to selection,training, individual and team development, succession planning and more. We have more than doubled the Lominger business since we acquired it in 2006.As a product-focused offering, Lominger helps us to generate long-term relationships with our clients. We continue to seek ways to scale the Lominger productoffering to our global clients.Global organizations utilizing our Company’s validated assessment capability are realizing the power and benefits of Korn/Ferry IP in their talentevaluation process. Our assessment capability, currently utilized by more than 70% of our clients, can improve executive retention and prospects of promotion.According to internal research conducted by Korn/Ferry over the period of 2006-2009, executive candidates placed in a position where our proprietaryassessment methodology was utilized were eight times more likely to be promoted within the first three years of employment than those searches where ourassessment tool was not employed.Our IP orientation is further validated by our recent acquisitions of PDI and Global Novations. These firms offer a variety of leadership development,coaching and assessment solutions for different organizational levels, as well as technology-driven talent management solutions. 4 Technology — Information technology is a critical element of all of our businesses. In fiscal 2013, we continued to invest in enhanced tools andknowledge management to gain competitive advantage. We introduced key enhancements to Searcher Express, our engagement execution platform and thecornerstone of the Company’s strategy to better share knowledge. We introduced iSearcher, an iOS mobile version that enables our consultants to convenientlymanage their search assignments on their iPhone or iPad wherever they go, providing secure access to key information from the field. We launched a newinitiative to consolidate regional databases to improve cross border collaboration and visibility of multinational engagements and clients. We have expanded ourIT security team and enhanced our security infrastructure to protect the Company’s assets against today’s threats.The technology supporting LTC continued to evolve in fiscal 2013 through the integration of Lominger’s intellectual property into our assessment andtalent management services. We continued to build out our intellectual property platform, including enhancements to Lominger’s e-Suite, Voices 360 suite,Learning Agility tools, and library of e-books. Through the PDI acquisition, we acquired a sophisticated, cloud-based technology platform (PALMS) and arobust library of intellectual property. PALMS provides Korn/Ferry with the client-facing technology platform to launch all assessment activities, a centralizeddatabase to track and analyze all assessment data and an e-learning platform to launch interactive, simulation based learning modules. We are currently in theprocess of integrating PALMS across our entire LTC portfolio.Information technology is a key driver of Futurestep’s growth in RPO, project recruitment and search. Database technology and the Internet have greatlyimproved capabilities in identifying, targeting and reaching potential candidates. In fiscal 2013, we continued the integration of advanced, Internet-basedsourcing, assessment and selection technologies into the engagement workflow. We launched Foresight, a new data aggregation warehouse for analyticalreporting of Futurestep recruiting activities across internal systems and external clients’ applicant tracking systems.We are committed to investing in technology across all lines of business — extending the Company’s brand through integration with social networks —and delivering our unique intellectual property through smart phones and tablets. We released Forte, a mobile/desktop application for career development andtransitions. It enables users to build a customized, personal development plan drawing on the ProSpective assessment and Lominger competencies.We will continue to enhance our technology in order to strengthen our relationships with clients, expand our markets through new delivery channels andmaintain a competitive advantage in offering the full range of executive talent management services.3. Extend and Elevate the Korn/Ferry BrandNext to our people, the Korn/Ferry brand is the strongest asset of the Company. Since inception, Korn/Ferry has always maintained an aggressive stancein building our global presence and supporting our vision and ongoing growth through a comprehensive marketing approach. At the highest level, we willcontinue to extend and elevate the Korn/Ferry brand to raise awareness and drive higher market share within key segments.Our leadership in executive recruitment enables us to grow our business by increasing the number of recruitment assignments we handle for existingclients. We also believe that our strong relationships and well-recognized brand name will enable us to bring a broader base of solutions and services to ourexisting client base and to potential new clients, while allowing us to build communities of candidates to whom we can directly market our services.For example, we will leverage the work our Board & CEO Services practice performs at the top of our clients’ organizations to promote awareness of ourvarious solutions at the highest levels. We believe these engagements will create significant “trickle-down” revenue opportunities across all of our lines ofbusiness and lead to the expansion of other high-level, consultative relationships within the board and CEO community. Additionally, we have developed andlaunched an in-depth and ongoing professional development program called The Edge for our consultants and client-facing practitioners to further train themon our strategy, our various solutions and a systematic approach for broadening the conversations, and subsequently, the relationships with our clients. 5® 4. Advance Korn/Ferry as a Premier Career DestinationAs our business strategy evolves, so should our talent strategy in order to drive the growth we need and the culture we want, at a pace we can absorb.Our talent strategy is what we do to allow us to design, build and attract the best talent for ourselves (and, by extension, for our clients) to achieve ourbusiness potential.Our goal is to become the premier career destination for top talent through offering a client-focused culture, promotional/developmental opportunities andcompensation that aligns employee behavior to corporate strategy.5. Pursue Transformational Opportunities Along the Broad Human Resources SpectrumIn addition to our heritage as a leading provider of executive recruitment, we also offer clients RPO, project recruitment, search and consulting servicesthrough Futurestep, and board effectiveness, CEO & top team effectiveness, diversity & inclusion, leadership development, organization transformation andintegrated talent management services through LTC.We will continue to develop and add new products and services that our clients demand and continue to pursue a disciplined acquisition strategy, bothof which are consistent with our strategic goals.Our Services and OrganizationOrganizationThe Company operates in three global business segments: Executive Recruitment, LTC, and Futurestep. Beginning in the first quarter of fiscal 2013, theCompany disaggregated its previously reported business segment, Executive Recruitment, into two business segments Executive Recruitment andLeadership & Talent Consulting. Our executive recruitment business is managed on a geographic basis throughout our four regions: North America, Europe,the Middle East and Africa (“EMEA”), Asia Pacific and South America. LTC and Futurestep are managed on a worldwide basis with operations in NorthAmerica, Europe, Asia Pacific and South America.We address the global recruitment needs of our clients at all levels of management by offering the following services:Executive Recruitment ServicesOverview — Our executive recruitment services are typically used to fill executive-level positions, such as board directors, CEO, chief financial officers(“CFO”), chief operating officers (“COO”), chief information officers (“CIO”) and other senior executive officers. Once we are retained by a client to conduct asearch, we assemble a team comprised of consultants with appropriate geographic, industry and functional expertise. Our search consultants serve asmanagement advisors who work closely with the client in identifying, assessing and placing qualified candidates. In fiscal 2013, we executed 7,554 executiverecruitment assignments.We utilize a standardized approach to placing talent that integrates research with our practical experience. Providing a more complete view of thecandidate than is otherwise possible, we believe our proprietary tools generate better results in identifying the right person for the position. We call our executiverecruitment methodology The Korn/Ferry Advantage.We emphasize a close working relationship with the client and a comprehensive understanding of the client’s business issues, strategy and culture, aswell as an in-depth knowledge of the skills necessary to succeed within a client’s organization. Initially, the search team consults with the client to betterunderstand its history, culture, structure, expectations, challenges, future direction and operations. In these meetings, the team identifies the specific needs ofthe client and develops a profile of an ideal candidate for the position using our proprietary Leadership Sort System, which allows clients to select the desiredleadership characteristics for specific roles. Early in the process, the team also works with the client to develop the general parameters of a compensationpackage that will attract highly qualified candidates. 6 Once the position is defined and outlined via an enhanced job specification that embodies the desired leadership characteristics, a research teamidentifies through the use of our proprietary databases and other information resources, companies in related industries facing similar issues and withoperating characteristics similar to those of the client. In addition, the team consults with its established network of resources and searches our databasescontaining profiles of approximately five million executives to assist in identifying individuals with the right background, cultural fit and abilities. Thesesources are a critical element in assessing the marketplace.An original list of candidates is carefully screened through phone interviews, video conferences and in-person meetings, using our proprietary behavioralinterviewing approach. Candidates also complete Search Assessment, a behavioral mapping tool that provides clients with insights into how candidates willlead, how they will approach and solve complex problems, what their emotional profile is likely to be and what motivates them to succeed. The client is thenpresented final qualified candidates to interview. We conduct due diligence and background verification of the candidate throughout the process, at times withthe assistance of an independent third party.The finalist for the position will usually meet with the client for a second and possibly a third round of discussions. At this point, the compensationpackage will have been discussed in detail, increasing the likelihood that an offer will be accepted. Throughout the process, ongoing communication with theclient is critical to keep client management apprised of progress.Industry Specialization — Consultants in our five global markets and one regional specialty practice groups bring an in-depth understanding of themarket conditions and strategic management issues faced by clients within their specific industry and geography. We are continually looking to expand ourspecialized expertise through internal development and strategic hiring in targeted growth areas.Percentage of Fiscal 2013 Assignments by Industry Specialization Global Markets: Industrial 26% Consumer 19% Life Sciences/Healthcare Provider 18% Technology 16% Financial Services 14% Regional Specialties: Education/Not-for-Profit 7% Functional Expertise — We have organized executive recruitment centers of functional expertise, composed of consultants who have extensivebackgrounds in placing executives in certain functions, such as board directors, CEOs and other senior executive officers. Our Board & CEO Servicesgroup, for example, focuses exclusively on placing CEOs and board directors in organizations around the world. This is a dedicated team from the mostsenior ranks of the Company. Their work is with CEOs and in the board room, and their expertise is organizational leadership and governance. They conducthundreds of engagements every year, tapping talent from every corner of the globe. This work spans all ranges of organizational scale and purpose. Membersof functional groups are located throughout our regions and across our industry groups.Percentage of Fiscal 2013 Assignments by Functional Expertise Board Level/CEO/CFO/Senior Executive and General Management 75% Finance and Control 7% Marketing and Sales 6% Manufacturing/Engineering/Research and Development/Technology 5% Human Resources and Administration 4% Information Systems 3% 7SM RegionsNorth America — We opened our first office in Los Angeles in 1969 and currently have 19 offices throughout the United States and Canada. In fiscal2013, the region generated fee revenue of $290.3 million from 3,119 assignments billed with an average of 196 consultants.EMEA — We opened our first European office in London in 1972 and currently have 19 offices in 16 countries throughout the region. In fiscal 2013,the region generated fee revenue of $128.8 million from 2,246 assignments billed with an average of 114 consultants.Asia Pacific — We opened our first Asia Pacific office in Tokyo in 1973 and currently have 17 offices in 10 countries throughout the region. In fiscal2013, the region generated fee revenue of $73.2 million from 1,260 assignments billed with an average of 73 consultants.South America — We opened our first South America office in Brazil in 1974. As of April 30, 2013, we operate a network of eight offices in sevencountries covering the entire South American region. The region generated fee revenue of $30.2 million in fiscal 2013 from 929 assignments billed with anaverage of 18 consultants.Mexico — We expanded our practice to Mexico through the 1977 acquisition of a less than 50% interest in a Mexico City company. We currently serveour clients needs in two offices in Mexico through a subsidiary in which we hold a minority interest. Our share of the net earnings from our Mexico subsidiarywas $1.7 million for both the years ended April 30, 2013 and 2012, and is included in equity in earnings of unconsolidated subsidiaries on the consolidatedstatements of income.Client Base — Our 5,228 clients include many of the world’s largest and most prestigious public and private companies, and 42% of FORTUNE500 companies were clients in fiscal 2013. In fiscal 2013, only one single client represented more than 1% of fee revenue, with that client representing 1.3%.Competition — Other multinational executive recruitment firms include Egon Zehnder International, Heidrick & Struggles International, Inc., RussellReynolds Associates and Spencer Stuart. Although these firms are our largest competitors, we also compete with smaller boutique firms that specialize inspecific regional, industry or functional searches. We believe our brand name, differentiated business model, systematic approach to client service, cutting-edge technology, global network, prestigious clientele, strong specialty practices and high-caliber colleagues are recognized worldwide. We also believe our long-term incentive compensation arrangements, as well as other executive benefits, distinguish us from most of our competitors and are important in attracting andretaining our key consultants.Leadership & Talent Consulting ServicesWe consolidated our strategic management assessment and executive coaching and development services under the name Leadership & TalentConsulting to more accurately reflect the array of solutions we now offer and to accommodate further growth. We have made significant investments in theseservice areas with the acquisitions of Lominger Limited, Inc., Lominger Consulting (“Lominger”), LeaderSource in fiscal 2007, Lore International in fiscal2009, SENSA Solutions in fiscal 2010, and PDI and Global Novations in fiscal 2013. Our comprehensive blend of talent management offerings assistsclients with the ongoing assessment and development of their senior executives and management teams and addresses six fundamental needs:1. Board effectiveness;2. CEO and top team effectiveness;3. Diversity and inclusion;4. Leadership development;5. Organization transformation; and6. Integrated talent management. 8 Each of Korn/Ferry’s solutions is delivered by an experienced team of leadership consultants, a global network of top executive coaches and theintellectual property of research-based, time-tested leadership assessment and developmental tools. As of April 30, 2013, we had LTC operations in 15 cities inNorth America, 10 in Europe, 12 in Asia Pacific, and 5 in Latin America.Client Base — During fiscal 2013, LTC partnered with 2,087 clients across the globe, including 42% of the FORTUNE 500.Competition — Outside of the large talent management software players such as SAP and Oracle, this is a cottage industry with many small players.The main competitors include firms like Development Dimensions International, Center for Creative Leadership, Right Management, and SHL, a subsidiaryof Corporate Executive Board. Although these firms are our largest competitors, we also compete with smaller boutique firms that specialize in specificregional, industry or functional aspects of talent management. We believe the strong leadership brands that comprise LTC offer a robust, research-basedleadership and talent management content.High-Impact Recruitment Solutions — FuturestepOverview — Founded in 1998 as Korn/Ferry’s scalable, outsourced recruitment subsidiary, Futurestep offers clients a portfolio of talent acquisitionsolutions, including RPO, project recruitment, search and consulting. Each Futurestep engagement leverages a world-class global recruitment process and best-in-class technology to maximize and measure quality.Futurestep combines traditional recruitment expertise with a multi-tiered portfolio of talent acquisition solutions. Futurestep consultants, based in 16countries, have access to our databases of pre-screened, mid-level professionals. Our global candidate pool complements our international presence and multi-channel sourcing strategy to aid speed, efficiency and quality service for clients worldwide.Futurestep RPO solutions are flexible and scalable, improving talent operations and delivering business impact for today’s large, complex and globalorganizations.Project recruitment services offer a proven, outsourced approach for managing multiple hires within a specific timeframe.In terms of search, Futurestep’s brand association with Korn/Ferry has helped us become regarded by today’s industry leaders as a trusted resource forsecuring management and specialized talent on a professional level.Consulting services support clients with the wider aspects of the employee lifecycle including recruitment diagnostic, workforce planning, talentcommunication and employer brand, candidate assessment and selection and recruitment technology services. Aided by the consulting expertise of TheNewman Group, acquired by Futurestep in fiscal 2008, Futurestep helps companies align people, processes and technology.Regions — We opened our first Futurestep office in Los Angeles in May 1998. In January 2000, we acquired the Executive Search & Selectionbusiness of PA Consulting with operations in Europe and Asia Pacific. As of April 30, 2013, we had Futurestep operations in nine cities in North America, 10in Europe, 11 in Asia Pacific, and one in Latin America.Client Base — During fiscal 2013, Futurestep partnered with 1,052 clients across the globe and 32% of Futurestep’s fiscal 2013 fee revenue wasreferred from Korn/Ferry’s Executive Recruitment and LTC segments.Competition — Futurestep primarily competes for business with other RPO providers such as Alexander Mann Solutions, Hays, Kenexa, Spherion,KellyOCG and The RightThing and competes for search assignments with regional contingency recruitment firms and large national retained recruitmentfirms.For talent acquisition and management consulting services, Futurestep competes with boutique consulting providers such as HRchitect and KnowledgeInfusion and larger consulting firms such as Accenture, Aon Hewitt and Towers Watson that are building businesses in human resource managementconsulting. 9 Professional Staff and EmployeesAs of April 30, 2013, we had a total of 3,272 full-time employees. Of this, 1,471 were executive recruitment employees consisting of 399 consultantsand 1,072 associates, researchers, administrative and support staff. In addition, there are 9 consultants in our unconsolidated Mexico office. LTC had 886employees as of April 30, 2013, consisting of 133 consultants and 753 associates, researchers, administrative and support staff. Futurestep had 835employees as of April 30, 2013, consisting of 75 consultants and 760 administrative and support staff. Corporate had 80 professionals at April 30, 2013. Weare not party to a collective bargaining agreement and consider our relations with our employees to be good. Korn/Ferry is an equal opportunity employer.In Executive Recruitment, senior associates, associates and researchers support the efforts of our consultants with candidate sourcing and identification,but do not generally lead assignments. These colleagues are developed through our training and professional development programs. Promotion to senior clientpartner is based on a variety of factors, including demonstrated superior execution and business development skills, the ability to identify solutions tocomplex issues, personal and professional ethics, a thorough understanding of the market and the ability to develop and help build effective teams. Inaddition, we have a program for recruiting experienced professionals into our Company.The following table provides information relating to each of our business segments for fiscal 2013. Financial information regarding our businesssegments for fiscal 2012 and 2011 and additional information for fiscal 2013 is contained in Note 11 — Business Segments, in the Notes to ourConsolidated Financial Statements included in this Annual Report on Form 10-K. FeeRevenue OperatingIncome(Loss) Number ofOffices as ofApril 30, 2013 Number ofConsultants as ofApril 30, 2013 (dollars in thousands) Executive Recruitment: North America $290,317 $58,832 19 195 EMEA 128,807 9,173 19 116 Asia Pacific 73,221 6,973 17 70 South America 30,134 5,987 8 18 Total Executive Recruitment 522,479 80,965 63 399 LTC(1) 168,115 6,424 14 133 Futurestep(2) 122,237 10,975 10 75 Corporate — (54,488) — — Total $812,831 $43,876 87 607 (1)Leadership & Talent Consulting partially occupies 32 of the executive recruitment offices globally in 21 countries. (2)Futurestep partially occupies 21 of the executive recruitment offices globally in 16 countries. 10 The following table provides information on fee revenues for each of the last three fiscal years attributable to the regions in which the Company operates: Year Ended April 30, 2013 2012 2011 (in thousands) Fee Revenue: United States $416,987 $383,955 $365,919 Canada 42,263 45,164 45,313 EMEA 192,242 196,514 183,373 Asia Pacific 124,720 128,281 117,685 South America 36,619 36,591 31,959 Total $812,831 $790,505 $744,249 Additional financial information regarding the regions in which the Company operates can be found in Note 11 — Business Segments, in the Notes toour Consolidated Financial Statements included in this Annual Report on Form 10-K. Item 1A.Risk FactorsThe risks described below are the material risks facing our Company. Additional risks not presently known to us or that we currently deemimmaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affectedby any of these risks.Competition in our industries could result in our losing market share and/or require us to charge lower prices for services, which could reduceour revenue.We compete for executive recruitment business with numerous executive recruitment firms and businesses that provide job placement services, includingother large global executive search firms, smaller specialty firms and web-based firms. Traditional executive recruitment competitors include Egon ZehnderInternational, Heidrick & Struggles International, Inc., Russell Reynolds Associates and Spencer Stuart. In each of our markets, our competitors may possessgreater resources, greater name recognition, lower overhead or other costs and longer operating histories than we do, which may give them an advantage inobtaining future clients, capitalizing on new technology and attracting qualified professionals in these markets. Additionally, specialty firms can focus onregional or functional markets or on particular industries and executive search firms that have a smaller client base may be subject to fewer off-limitsarrangements. There are no extensive barriers to entry into the executive recruitment industry and new recruiting firms continue to enter the market. We believethe continuing development and increased availability of information technology will continue to attract new competitors, especially web-enabled professionaland social networking website providers and these providers may be facilitating a company’s ability to insource their recruiting capabilities. As these providerscontinue to evolve, they may develop offerings similar to or more expansive than ours, thereby increasing competition for our services or more broadly causingdisruption in the executive recruitment industry. The human resource consulting business has been traditionally fragmented and a number of large consultingfirms, such as Accenture, Aon Hewitt and Towers Watson are building businesses in human resource management consulting to serve these needs. Increasedcompetition, whether as a result of these professional and social networking website providers or traditional executive recruitment firms, may lead to pricingpressures that could negatively impact our business. For example, increased competition could require us to charge lower prices, and/or cause us to losemarket share, each of which could reduce our fee revenue.If we fail to attract and retain qualified and experienced consultants, our revenue could decline and our business could be harmed.We compete with other executive recruitment and consulting firms for qualified and experienced consultants. These other firms may be able to offergreater compensation and benefits or more attractive lifestyle choices, career paths or geographic locations than we do. Attracting and retaining consultants inour industry is 11 particularly important because, generally, a small number of consultants have primary responsibility for a client relationship. Because client responsibility isso concentrated, the loss of key consultants may lead to the loss of client relationships. In 2013, for example, our top three executive search consultants hadprimary responsibility for generating business equal to approximately 2% of our net revenues, and our top ten executive search consultants had primaryresponsibility for generating business equal to approximately 5% of our net revenues. This risk is heightened due to the general portability of a consultant’sbusiness; consultants have in the past, and will in the future, terminate their employment with our Company. Any decrease in the quality of our reputation,reduction in our compensation levels relative to our peers or restructuring of our compensation program, whether as a result of insufficient revenue, a decline inthe market price of our common stock or for any other reason, could impair our ability to retain existing consultants or attract additional qualified consultantswith the requisite experience, skills and established client relationships. Our failure to retain our most productive consultants, whether in ExecutiveRecruitment, LTC or Futurestep, or maintain the quality of service to which our clients are accustomed and the ability of a departing consultant to movebusiness to his or her new employer could result in a loss of clients, which could in turn cause our fee revenue to decline and our business to be harmed. Wemay also lose clients if the departing executive search, LTC or Futurestep consultant has widespread name recognition or a reputation as a specialist in his orher line of business in a specific industry or management function. We could also lose additional consultants if they choose to join the departing executivesearch consultant at another executive search or consulting firm. If we fail to limit departing consultants from moving business or recruiting our consultants toa competitor, our business, financial condition and results of operations could be adversely affected.Acquisitions may have an adverse effect on our business.We have completed strategic acquisitions of businesses in the last several years, including our acquisition of PDI and Global Novations in fiscal 2013.While we may, under certain circumstances, pursue additional acquisitions in the future, we may not be able to consummate such acquisitions on satisfactoryterms or integrate acquired businesses effectively and profitably into our existing operations. Our future success may depend in part on our ability to completethe integration of the acquisition target successfully into our operations. The process of integrating an acquired business, including that of PDI and GlobalNovations, may subject us to a number of risks, including: diversion of management attention; amortization of intangible assets, adversely affecting our reported results of operations; inability to retain and/or integrate the management, key personnel and other employees of the acquired business; inability to properly integrate business acquisitions resulting in operating inefficiencies; inability to establish uniform standards, disclosure controls and procedures, internal control over financial reporting and other systems, proceduresand policies in a timely manner; inability to retain the acquired company’s clients; exposure to legal claims for activities of the acquired business prior to acquisition; and incurrence of additional expenses in connection with the integration process.If our acquisitions are not successfully integrated, our business, financial condition and results of operations, as well as our professional reputation,could be materially adversely affected.Global economic developments and the conditions in the geographic regions and the industries from which we derive a significant portion ofour fee revenue could negatively affect our business, financial condition and results of operations.Demand for our services is affected by global economic conditions and the general level of economic activity in the geographic regions and industries inwhich we operate. When conditions in the global economy, including the 12 credit markets, deteriorate, or economic activity slows, many companies hire fewer permanent employees and some companies, as a cost-saving measure,choose to rely on their own human resources departments rather than third-party search firms to find talent, which negatively affects our financial conditionand results of operations, as evidenced by our results of operations for fiscal 2009 and fiscal 2010. We may also experience more competitive pricing pressureduring periods of economic decline. During the recent economic downturn, our fee revenue significantly decreased from $790.6 million in fiscal 2008 to$572.4 million in fiscal 2010. While the economic activity in the regions and industries in which we operate has shown improvement, general marketuncertainty continues to exist. If such uncertainty persists, if the national or global economy or credit market conditions in general deteriorate, or if theunemployment rate increases, such uncertainty or changes could put additional negative pressure on demand for our services and our pricing, resulting inlower cash flows and a negative effect on our business, financial condition and results of operations. In addition, some of our clients may experience reducedaccess to credit and lower revenues resulting in their inability to meet their payment obligations to us.The continuing recession in the Euro zone and the instability of the Euro could have a material adverse effect on our results of operations.A significant portion of our revenue is derived from our business in Europe. For the year ended April 30, 2013, approximately 10% of our revenues werederived from countries which use the Euro as their primary currency. The ongoing European financial crisis, coupled with the policy actions taken by theEuropean central banks to support their financial system, have caused exchange rates to remain volatile. Concerns persist regarding several Europeancountries’ sovereign debt obligations, the overall stability of the Euro, the continuing recession in the Euro zone economy and the health of the Europeanbanking system. In the event that these conditions persist, or worsen, the Company’s fee revenue and operating results would likely be adversely impacteduntil economic confidence is restored and the debt obligations, banking system and Euro are stabilized. If economic and financial market conditions in Europeremain uncertain or deteriorate further, our clients may respond by suspending, delaying or reducing their expenditures, which may adversely affect our cashflows and results of operations. In addition, if the conditions in Europe lead to disorderly bank failures it could adversely impact our bank accounts inaffected countries.If we are unable to retain our executive officers and key personnel, or integrate new members of our senior management who are critical toour business, we may not be able to successfully manage our business in the future.Our future success depends upon the continued service of our executive officers and other key management personnel. Competition for qualifiedpersonnel is intense, and we may compete with other companies that have greater financial and other resources than we do. If we lose the services of one ormore of our executives or key employees, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, or if we areunable to integrate new members of our senior management who are critical to our business, we may not be able to successfully manage our business orachieve our business objectives.If we are unable to maintain our professional reputation and brand name, our business will be harmed.We depend on our overall reputation and brand name recognition to secure new engagements and to hire qualified professionals. Our success alsodepends on the individual reputations of our professionals. We obtain a majority of our new engagements from existing clients or from referrals by thoseclients. Any client who is dissatisfied with our services can adversely affect our ability to secure new engagements.If any factor, including poor performance or negative publicity, whether or not true, hurts our reputation, we may experience difficulties in competingsuccessfully for both new engagements and qualified consultants. Failing to maintain our professional reputation and the goodwill associated with our brandname could seriously harm our business. 13 We are subject to potential legal liability from clients, employees and candidates for employment. Insurance coverage may not be available tocover all of our potential liability and available coverage may not be sufficient to cover all claims that we may incur.Our ability to obtain liability insurance, its coverage levels, deductibles and premiums are all dependent on market factors, our loss history andinsurers’ perception of our overall risk profile. We are exposed to potential claims with respect to the executive recruitment process. For example, a client couldassert a claim for matters such as breach of an off-limit agreement or recommending a candidate who subsequently proves to be unsuitable for the positionfilled. Further, the current employer of a candidate whom we placed could file a claim against us alleging interference with an employment contract, acandidate could assert an action against us for failure to maintain the confidentiality of the candidate’s employment search, and a candidate or employee couldassert an action against us for alleged discrimination, violations of labor and employment law or other matters. Also, in various countries, we are subject todata protection laws impacting the processing of candidate information and other regulatory requirements.Additionally, as part of our LTC services, we often send a team of leadership consultants to our client’s workplaces. Such consultants generally haveaccess to client information systems and confidential information. An inherent risk of such activity includes possible claims of misuse or misappropriation ofclient intellectual property, confidential information, funds, or other property; harassment; criminal activity; torts; or other claims. Such claims may result innegative publicity, injunctive relief, criminal investigations and/or charges, payment by us of monetary damages or fines, or other material adverse effects onour business.We cannot ensure that our insurance will cover all claims or that insurance coverage will be available at economically acceptable rates. Our insurancemay also require us to meet a deductible. Significant uninsured liabilities could have a material adverse effect on our business, financial condition and resultsof operations.We rely heavily on our information systems and if we lose that technology, or fail to further develop our technology, our business could beharmed.Our success depends in large part upon our ability to store, retrieve, process, manage and protect substantial amounts of information. To achieve ourstrategic objectives and to remain competitive, we must continue to develop and enhance our information systems. This may require the acquisition ofequipment and software and the development of new proprietary software, either internally or through independent consultants. If we are unable to design,develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to compete effectively, or for anyreason any interruption or loss of our information processing capabilities occurs, this could harm our business, results of operations and financial condition.Although we have disaster recovery procedures in place and insurance to protect against the effects of a disaster on our information technology, we cannot besure that insurance or these services will continue to be available at reasonable prices, cover all our losses or compensate us for the possible loss of clientsoccurring during any period that we are unable to provide business services.Cyber security vulnerabilities could lead to improper disclosure of information obtained from our clients, candidates and employees that couldresult in liability and harm our reputation.We use information technology and other computer resources to carry out operational and marketing activities and to maintain our business records. Thecontinued occurrence of high-profile data breaches against various entities and organizations provides evidence of an external environment increasingly hostileto information security. This environment demands that we continuously improve our design and coordination of security controls across our business groupsand geographies in order to protect information that we develop or that is obtained from our clients, candidates and employees. Despite these efforts, oursecurity controls over this information, our training of employees, and other practices we follow may not prevent the improper disclosure of such information.In fiscal 2013, we discovered that our computer network was the target of a criminal data breach that accessed certain such information obtained from ourclients, candidates and employees. The information we collected about this breach suggests that the intrusion falls within the category of an “AdvancedPersistent Threat,” which is activity consistent with state sponsored cyber criminals. Although this data breach was limited 14 in scope, and as such, did not have a material adverse effect on our operations or financial reporting capabilities, future breaches of this nature as well as anyother security breach or other misuse of our data could lead to improper disclosure of Company information, including information obtained from our clients,candidates and employees, that could harm our reputation, lead to legal exposure, divert management attention and resources, increase our operating expensesdue to the employment of consultants and third party experts and the purchase of additional infrastructure, and/or subject us to liability, resulting in increasedcosts and loss of revenue. We depend on our overall reputation and brand name recognition to secure new engagements. Perceptions that we do not adequatelyprotect the privacy of information could inhibit attaining new engagements and qualified consultants, and could potentially damage currently existing clientrelationships.Limited protection of our intellectual property could harm our business, and we face the risk that our services or products may infringe uponthe intellectual property rights of others.We cannot guarantee that trade secret, trademark and copyright law protections are adequate to deter misappropriation of our intellectual property (whichhas become an increasingly important part of our business). Existing laws of some countries in which we provide services or products may offer only limitedprotection of our intellectual property rights. Redressing infringements may consume significant management time and financial resources. Also, we may beunable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our rights, which may have a material adverse impacton our business, financial condition or results of operations. We cannot be sure that our services and products, or the products of others that we offer to ourclients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or our clients. Theseclaims may harm our reputation, result in financial liability and prevent us from offering some services or products.We have invested in specialized technology and other intellectual property for which we may fail to fully recover our investment or which maybecome obsolete.We have invested in developing specialized technology and intellectual property, including proprietary systems, processes and methodologies, that webelieve provide us a competitive advantage in serving our current clients and winning new engagements. Many of our service and product offerings rely onspecialized technology or intellectual property that is subject to rapid change, and to the extent that this technology and intellectual property is rendered obsoleteand of no further use to us or our clients, our ability to continue offering these services, and grow our revenues, could be adversely affected. There is noassurance that we will be able to develop new, innovative or improved technology or intellectual property or that our technology and intellectual property willeffectively compete with the intellectual property developed by our competitors. If we are unable to develop new technology and intellectual property or if ourcompetitors develop better technology or intellectual property, our revenues and results of operations could be adversely affected.We face risks associated with social and political instability, legal requirements, economic conditions and currency fluctuations in ourinternational operations.We operate in 37 countries and during the year ended April 30, 2013, generated 49% of our fee revenue from operations outside of the United States. Weare exposed to the risk of changes in social, political, legal and economic conditions inherent in international operations. Examples of risks inherent intransacting business worldwide that we are exposed to include: changes in and compliance with applicable laws and regulatory requirements, including U.S. laws affecting the activities of U.S. companies abroad,including the Foreign Corrupt Practices Act of 1977 and sanctions programs administered by the U.S. Department of the Treasury Office of ForeignAssets Control, and similar foreign laws such as the U.K. Bribery Act, as well the fact that many countries have legal systems, local laws and tradepractices that are unsettled and evolving, and/or commercial laws that are vague and/or inconsistently applied; difficulties in staffing and managing global operations, which could impact our ability to maintain an effective system of internal control; 15 difficulties in building and maintaining a competitive presence in existing and new markets; social, economic and political instability; differences in cultures and business practices; fluctuations in currency exchange rates; statutory equity requirements; differences in accounting and reporting requirements; repatriation controls; differences in labor and market conditions; potential adverse tax consequences; and multiple regulations concerning pay rates, benefits, vacation, statutory holiday pay, workers’ compensation, union membership, termination pay,the termination of employment, and other employment laws.We have no hedging or similar foreign currency contracts and therefore, as described below, fluctuations in the value of foreign currencies could impactour global results of operations. We cannot ensure that one or more of these factors will not harm our business, financial condition or results of operations.Foreign currency exchange rate risks may adversely affect our results of operations.A material portion of our revenue and expenses are generated by our operations in foreign countries, and we expect that our foreign operations willaccount for a material portion of our revenue and expenses in the future. Most of our international expenses and revenue are denominated in foreign currencies.As a result, our financial results could be affected by factors, such as changes in foreign currency exchange rates or weak economic conditions in Europeanand other foreign markets in which we have operations. Fluctuations in the value of those currencies in relation to the United States dollar have caused and willcontinue to cause dollar-translated amounts to vary from one period to another. Given the volatility of exchange rates, we may not be able to manage effectivelyour currency translation or transaction risks, which may adversely affect our financial condition and results of operations.We may be limited in our ability to recruit employees from our clients and we could lose those opportunities to our competition, which couldharm our business.Either by agreement with clients, or for client relations or marketing purposes, we sometimes refrain from, for a specified period of time, recruitingcandidates from a client when conducting searches on behalf of other clients. These off-limit agreements can generally remain in effect for up to two yearsfollowing completion of an assignment. The duration and scope of the off-limit agreement, including whether it covers all operations of the client and itsaffiliates or only certain divisions of a client, generally are subject to negotiation or internal policies and may depend on factors such as the scope, size andcomplexity of the client’s business, the length of the client relationship and the frequency with which we have been engaged to perform executive searches forthe client. If a prospective client believes that we are overly restricted by these off-limit agreements from recruiting employees of our existing clients, theseprospective clients may not engage us to perform their executive searches. Therefore, our inability to recruit candidates from these clients may make it difficultfor us to obtain search assignments from, or to fulfill search assignments for, other companies in that client’s industry. We cannot ensure that off-limitagreements will not impede our growth or our ability to attract and serve new clients, or otherwise harm our business.Consolidation in the industries that we serve could harm our business.Companies in the industries that we serve may seek to achieve economies of scale and other synergies by combining with or acquiring other companies.If two or more of our clients merge or consolidate and combine their operations, we may experience a decrease in the amount of services we perform for theseclients. If one of 16 our clients merges or consolidates with a company that relies on another provider for its services, we may lose work from that client or lose the opportunity togain additional work. The increased market power of larger companies could also increase pricing and competitive pressures on us. Any of these possibleresults of industry consolidation could harm our business, results of operations and financial condition.We have provisions that make an acquisition of us more difficult and expensive.Anti-takeover provisions in our Certificate of Incorporation, our Bylaws and under Delaware law make it more difficult and expensive for us to beacquired in a transaction that is not approved by our Board of Directors. Some of the provisions in our Certificate of Incorporation and Bylaws include: limitations on the removal of directors; limitation on stockholder actions; advance notification requirements for director nominations and actions to be taken at stockholder meetings; and the ability to issue one or more series of preferred stock by action of our Board of Directors.These provisions could discourage an acquisition attempt or other transaction in which stockholders could receive a premium over the current marketprice for the common stock.Unfavorable tax laws, tax law changes and tax authority rulings may adversely affect results.We are subject to income taxes in the United States and in various foreign jurisdictions. Domestic and international tax liabilities are subject to theallocation of income among various tax jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings among countries withdiffering statutory tax rates or changes in tax laws. The amount of income taxes and other taxes are subject to ongoing audits by United States federal, stateand local tax authorities and by non-United States authorities. If these audits result in assessments different from estimated amounts recorded, future financialresults may include unfavorable tax adjustments.We have deferred tax assets that we may not be able to use under certain circumstances.If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the time period within which theunderlying temporary differences become taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets. Thiswould result in an increase in our effective tax rate, and an adverse effect on our future operating results. In addition, changes in statutory tax rates may alsochange our deferred tax assets or liability balances, with either a favorable or unfavorable impact on our effective tax rate. Our deferred tax assets may also beimpacted by new legislation or regulation.An impairment in the carrying value of goodwill and other intangible assets could negatively impact our consolidated results of operations andnet worth.Goodwill is initially recorded as the excess of amounts paid over the fair value of net assets acquired. While goodwill is not amortized it is reviewed forimpairment at least annually or more frequently if impairment indicators are present. In assessing the carrying value of goodwill, we make qualitative andquantitative assumptions and estimates about revenues, operating margins, growth rates and discount rates based on our business plans, economicprojections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment inapplying these factors. Goodwill valuations have been calculated using an income approach based on the present value of future cash flows of each reportingunit and a market approach. We could be required to evaluate the carrying value of goodwill prior to the annual assessment, if we experience unexpectedsignificant declines in operating results or sustained market capitalization declines. These types of events and the resulting analyses could result in goodwillimpairment charges in the future. Impairment charges could substantially affect our results of operations and net worth in the periods of such charges. 17 We may not be able to align our cost structure with our revenue level.We continuously evaluate our cost base in relation to projected near to mid-term demand for our services in an effort to align our cost structure with thecurrent realities of our markets. If actual or projected fee revenue are negatively impacted by weakening customer demand, we may find it necessary to takecost cutting measures so that we can minimize the impact on our profitability. There is, however, no guarantee that if we do take such measures that suchmeasures will properly align our cost structure to our revenue level. Any failure to maintain a balance between our cost structure and our revenue couldadversely affect our business, financial condition, and results of operations and lead to negative cash flows, which in turn might require us to obtainadditional financing to meet our capital needs.We may require additional capital in the future, which may not be available at all or may be available only on unfavorable terms.Future adverse changes in the Company’s revenue could require us to institute cost cutting measures. To the extent our efforts are insufficient, we mayincur negative cash flows. If such conditions persist over an extended period of time, it might require us to obtain financing to meet our capital needs. If we areunable to secure financing on favorable terms, or at all, our ability to fund our operations could be impaired, which could have a material adverse effect on ourresults of operations.We invest in marketable securities classified as trading and available for sale and if the market value of these securities declines materially, theycould have an adverse effect on our financial position and results of operations.Marketable securities consist of mutual funds and investments in corporate bonds, commercial paper and U.S. Treasury and agency securities. Theprimary objectives of the mutual funds are to meet the obligations under certain of our deferred compensation plans, while the other securities are available forgeneral corporate purposes. If the financial markets in which these securities trade were to materially decline in value, the unrealized losses and potentialrealized losses could negatively impact the Company’s financial position and results of operations.Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss,loss of human capital, regulatory actions, reputational harm or legal liability.Should we experience a disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack, pandemic, security breach,power loss, telecommunications failure or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel,our office facilities, and the proper functioning of our computer, telecommunication and other related systems and operations. In such an event, we couldexperience near-term operational challenges with regard to particular areas of our operations. In particular, our ability to recover from any disaster or otherbusiness continuity problem will depend on our ability to protect our technology infrastructure against damage from business continuity events that couldhave a significant disruptive effect on our operations. We could potentially lose client data or experience material adverse interruptions to our operations ordelivery of services to our clients in a disaster. We will continue to regularly assess and take steps to improve upon our business continuity plans. However, adisaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to successfully recover should weexperience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of humancapital, regulatory actions, reputational harm, damaged client relationships or legal liability.Changes in our accounting estimates and assumptions could negatively affect our financial position and results of operations.We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). These accountingprinciples require us to make estimates and assumptions that affect the 18 reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of our financial statements. We are also required tomake certain judgments that affect the reported amounts of revenues and expenses during each reporting period. We periodically evaluate our estimates andassumptions including those relating to revenue recognition, restructuring, deferred compensation, goodwill and other intangible assets, contingencies, annualperformance related bonus, allowance for doubtful accounts, marketable securities, share-based payments and deferred income taxes. We base our estimateson historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Actual results could differ from theseestimates, and changes in accounting standards could have an adverse impact on our future financial position and results of operations. Item 1B.Unresolved Staff CommentsNot applicable. Item 2.PropertiesOur corporate office is located in Los Angeles, California. We lease all 87 of our Executive Recruitment, Leadership & Talent Consulting, andFuturestep offices located in North America, EMEA, Asia Pacific and South America. As of April 30, 2013, we leased an aggregate of approximately902,770 square feet of office space. The leases generally are for terms of one to 13 years and contain customary terms and conditions. We believe that ourfacilities are adequate for our current needs and we do not anticipate any difficulty replacing such facilities or locating additional facilities to accommodate anyfuture growth. Item 3.Legal ProceedingsOn April 18, 2013, the Los Angeles Regional Office of the SEC formally notified the Company that it had completed its inquiry regarding theaccounting for certain bonus and related accruals for the Company’s periodic reporting periods in fiscal 2009, 2010, and 2011 and that it did not intend torecommend any action be taken against the Company. Item 4.Mine Safety DisclosuresNot applicable.Executive Officers of the Registrant Name Age PositionGary D. Burnison 52 President and Chief Executive OfficerRobert P. Rozek 52 Executive Vice President and Chief Financial OfficerRJ Heckman 45 President of Leadership & Talent ConsultingByrne Mulrooney 52 Chief Executive Officer, FuturestepOur executive officers serve at the discretion of our Board of Directors. There is no family relationship between any executive officer or director. Thefollowing information sets forth the business experience for at least the past five years for each of our executive officers.Gary D. Burnison has been President and Chief Executive Officer since July 2007. He was Executive Vice President and Chief Financial Officer fromMarch 2002 until June 30, 2007 and Chief Operating Officer from November 2003 until June 30, 2007. Prior to joining Korn/Ferry, Mr. Burnison wasPrincipal and Chief Financial Officer of Guidance Solutions, a privately held consulting firm, from 1999 to 2001. Prior to that, he served as an executiveofficer and a member of the board of directors of Jefferies and Company, an investment bank and brokerage firm, from 1995 to 1999. Earlier, Mr. Burnisonwas a partner at KPMG Peat Marwick.Robert P. Rozek joined the Company in February 2012 as our Executive Vice President and Chief Financial Officer. Prior to joining Korn/Ferry, heserved as Executive Vice President and Chief Financial Officer of Cushman & Wakefield, Inc., a privately held commercial real estate services firm, fromJune 2008 to February 2012. 19 Prior to joining Cushman & Wakefield, Inc., Mr. Rozek served as Senior Vice President and Chief Financial Officer of Las Vegas Sands Corp, a leadingglobal developer of destination properties (integrated resorts) that feature premium accommodations, world-class gaming and entertainment, convention andexhibition facilities and many other amenities, from 2006 to 2008. Prior to that, Mr. Rozek held senior leadership positions at Eastman Kodak, and spent fiveyears as a partner with PricewaterhouseCoopers LLP.RJ Heckman was appointed President of Leadership and Talent Consulting in April 2013. He is responsible for driving the global growth of ourLeadership and Talent Consulting services. From 2008 until he joined the Company he served as president and Chief Executive Officer of PDI. During thattime, he led the acquisition and integration of Ninth House and positioned PDI to become the premier global leadership solutions organization. Prior to this role,he held key leadership positions at Honeywell and AT&T. Mr. Heckman has a Ph.D. in industrial and organizational psychology from the University ofTulsa.Byrne Mulrooney joined the Company in April 2010 as Chief Executive Officer of Futurestep. Prior to joining Korn/Ferry, he was President and ChiefOperating Officer of Flynn Transportation Services, a third party logistics company, from 2007 to 2010. Prior to that, he led Spherion’s workforce solutionsbusiness in North America, which provides workforce solutions in professional services and general staffing, including recruitment process outsourcing andmanaged services, from 2003 to 2007. Mr. Mulrooney has held executive positions for almost 20 years at EDS and IBM in client services, sales, marketingand operations. Mr. Mulrooney is a graduate of Villanova University in Pennsylvania. He holds a master’s degree in management from NorthwesternUniversity’s J.L. Kellogg Graduate School of Management. 20 PART II. Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesCommon StockOur common stock is listed on the New York Stock Exchange under the symbol “KFY”. The following table sets forth the high and low sales price pershare of the common stock for the periods indicated, as reported on the New York Stock Exchange: High Low Fiscal Year Ended April 30, 2013 First Quarter $16.54 $12.10 Second Quarter $15.94 $12.73 Third Quarter $17.22 $12.83 Fourth Quarter $19.38 $15.15 Fiscal Year Ended April 30, 2012 First Quarter $23.98 $18.94 Second Quarter $21.65 $11.25 Third Quarter $18.75 $14.26 Fourth Quarter $17.27 $15.07 On June 18, 2013, the last reported sales price on the New York Stock Exchange for the Company’s common stock, was $18.04 per share and therewere approximately 6,113 beneficial holders of the Company’s common stock. 21 Performance GraphWe have presented below a graph comparing the cumulative total stockholder return on the Company’s shares with the cumulative total stockholderreturn on (1) the Standard & Poor’s 500 Stock Index and (2) a company-established peer group. Cumulative total return for each of the periods shown in theperformance graph is measured assuming an initial investment of $100 on April 30, 2008 and the reinvestment of any dividends paid by any company in thepeer group on the date the dividends were declared.In fiscal 2011, we established a new peer group, which the Company continues to use today, comprised of a broad number of publicly tradedcompanies, which are principally or in significant part involved in either professional staffing or consulting. The peer group is comprised of the following 15companies: CBIZ, Inc. (CBZ), FTI Consulting, Inc. (FCN), Heidrick & Struggles International, Inc. (HSII), Huron Consulting Group Inc. (HURN), ICFInternational, Inc. (ICFI), Insperity, Inc. (NSP), Kelly Services, Inc. (KELYA), Kforce Inc. (KFRC), Navigant Consulting, Inc. (NCI), ResourcesConnection, Inc. (RECN), Robert Half International Inc. (RHI), The Corporate Executive Board Company (EXBD), The Dun & Bradsheet Corporation(DNB), Towers Watson & Co. (TW) and TrueBlue, Inc. (TBI). We believe this group of professional services firms, is more reflective of similar sizedcompanies in terms of our market capitalization, revenue or profitability, and therefore provides a more meaningful comparison of stock performance. Thereturns of each company have been weighted according to their respective stock market capitalization at the beginning of each measurement period for purposesof arriving at a peer group average.The stock price performance depicted in this graph is not necessarily indicative of future price performance. This graph will not be deemed to beincorporated by reference by any general statement incorporating this Form 10-K into any filing by us under the Securities Act of 1933 or the SecuritiesExchange Act of 1934, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed soliciting material ordeemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. 22 *$100 invested on 4/30/08 in stock or index-including reinvestment of dividends. Fiscal year ending April 30, 2013.Copyright 2013, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htmWe have not paid any cash dividends on our common stock since April 30, 1996, and we currently have no plans to pay any cash dividends on ourcommon stock. The Board of Directors has authorized the Company to repurchase up to $50.0 million of the Company’s outstanding shares of commonstock pursuant to an issuer repurchase program. Since this program was approved on November 2, 2007 through April 30, 2013, we have repurchasedapproximately $25.6 million of the Company’s common stock under this program. Our future dividend policy as well as any decision to execute on ourcurrently outstanding issuer repurchase program will depend on our earnings, capital requirements, financial condition and other factors considered relevantby our Board of Directors. Our credit facility requires us to maintain $50 million in unrestricted cash and/or marketable securities (excluding any marketablesecurities that are held in trust for the settlement of the Company’s obligation under certain deferred compensation plans) as a condition to consummatingpermitted acquisitions, paying dividends to our shareholders and share repurchases of our common.Issuer Purchases of Equity SecuritiesThe following table summarizes common stock repurchased by us during the fourth quarter of fiscal 2013: SharesPurchased(1) Average PricePaid Per Share Shares Purchasedas Part of Publicly-Announced Programs(2) Approximate DollarValue of Sharesthat May Yet bePurchased underthe Programs(2)February 1, 2013 — February 28, 2013 7,330 $18.41 — $24.4 millionMarch 1, 2013 — March 31, 2013 — $— — $24.4 millionApril 1, 2013 — April 30, 2013 1,855 $16.42 — $24.4 millionTotal 9,185 $18.01 — $24.4 million (1)Represents withholding of a portion of restricted shares to cover taxes upon vesting of restricted shares. (2)On November 2, 2007, the Board of Directors approved the repurchase of up to $50 million of the Company’s common stock in a common stockrepurchase program. The shares can be repurchased in open market transactions or privately negotiated transactions at the Company’s discretion. 23© Item 6.Selected Financial DataThe following selected financial data are qualified by reference to, and should be read together with, our “Audited Consolidated Financial Statementsand Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearingelsewhere in this Annual Report on Form 10-K. The selected statement of income data set forth below for the fiscal years ended April 30, 2013, 2012 and 2011and the selected balance sheet data as of April 30, 2013 and 2012 are derived from our consolidated financial statements, audited by Ernst & Young LLP,appearing elsewhere in this Form 10-K. The selected balance sheet data as of April 30, 2011, 2010 and 2009 and the selected statement of operations data setforth below for the fiscal years ended April 30, 2010 and 2009 are derived from consolidated financial statements and notes thereto which are not included inthis Form 10-K report and were audited by Ernst & Young LLP. Year Ended April 30, 2013(1) 2012 2011 2010 2009 (in thousands, except per share data and other operating data) Selected Statement of Income Data: Fee revenue $812,831 $790,505 $744,249 $572,380 $638,223 Reimbursed out-of-pocket engagement expenses 36,870 36,254 32,002 27,269 37,905 Total revenue 849,701 826,759 776,251 599,649 676,128 Compensation and benefits 555,346 534,186 507,405 413,340 442,632 General and administrative expenses 142,771 138,872 116,494 115,280 126,882 Engagement expenses 65,847 55,889 51,766 41,585 49,388 Depreciation and amortization 19,004 14,017 12,671 11,493 11,583 Restructuring charges, net(2) 22,857 929 2,130 20,673 41,915 Total operating expenses 805,825 743,893 690,466 602,371 672,400 Operating income (loss) 43,876 82,866 85,785 (2,722) 3,728 Other income (loss), net 6,309 (271) 6,454 10,066 (14,738) Interest expense, net (2,365) (1,791) (2,535) (2,622) (1,063) Provision (benefit) for income taxes 16,637 28,351 32,692 (485) 384 Equity in earnings of unconsolidated subsidiaries, net 2,110 1,850 1,862 91 2,365 Net income (loss) $33,293 $54,303 $58,874 $5,298 $(10,092) Basic earnings (loss) per share $0.71 $1.17 $1.30 $0.12 $(0.23) Diluted earnings (loss) per share $0.70 $1.15 $1.27 $0.12 $(0.23) Basic weighted average common shares outstanding 47,224 46,397 45,205 44,413 43,522 Diluted weighted average common shares outstanding 47,883 47,261 46,280 45,457 43,522 Other Operating Data: Fee revenue by business segment: Executive recruitment: North America $290,317 $305,717 $306,180 $224,549 $259,227 EMEA 128,807 141,409 137,398 122,194 132,125 Asia Pacific 73,221 82,230 81,951 59,858 64,575 South America 30,134 31,846 29,177 20,715 21,285 Total executive recruitment 522,479 561,202 554,706 427,316 477,212 Leadership & Talent Consulting 168,115 115,407 99,352 77,085 66,141 Futurestep 122,237 113,896 90,191 67,979 94,870 Total fee revenue $812,831 $790,505 $744,249 $572,380 $638,223 Number of offices (at period end) 87 76 76 76 78 Number of consultants (at period end) 607 522 562 547 547 Number of new engagements opened 11,750 11,624 11,854 9,794 9,630 Number of full-time employees: Executive recruitment 1,471 1,471 1,494 1,387 1,351 Leadership & Talent Consulting 886 291 280 277 232 Futurestep 835 826 628 487 493 Corporate 80 66 61 48 48 Total full-time employees 3,272 2,654 2,463 2,199 2,124 24 Year Ended April 30, 2013(1) 2012 2011 2010 2009 (in thousands, except per share data and other operating data) Selected Balance Sheet Data as of April 30: Cash and cash equivalents $224,066 $282,005 $246,856 $219,233 $255,000 Marketable securities(3) 141,916 135,734 122,231 77,219 75,255 Working capital 178,549 278,343 207,731 182,781 198,250 Total assets 1,115,229 1,014,689 971,680 827,098 740,879 Long-term obligations 182,210 163,489 159,477 137,673 108,433 Total stockholders’ equity 664,468 629,476 578,337 491,342 459,099 (1)Due to the acquisitions of PDI and Global Novations, which accounted for $45.6 million and $116.2 million of fee revenue and total assets, respectively,during fiscal 2013, financial data trends are not comparative to prior periods. See Note 12 — Acquisitions, in the Notes to our Consolidated FinancialStatements for discussion of fiscal 2013 acquisitions. (2)During fiscal 2013, we implemented two restructuring plans in order to rationalize our cost structure in response to anticipated revenue levels and to focuson the integration synergies associated with the current year acquisitions. As a result, we recorded $22.8 million of restructuring charges with $16.3million of severance and $6.5 million relating to the consolidation of premises. During fiscal 2012 and 2011, we increased our previously recordedrestructuring charges by $0.9 million and $2.1 million, respectively primarily related to the inability to sublease space, which was included in theoriginal estimate. During fiscal 2010, our restructuring initiatives resulted in restructuring charges of $25.8 million against operations, of which$16.0 million and $9.8 million related to severance costs and the consolidation of premises, respectively. These restructuring charges were partially offsetby $5.1 million of reductions from previous restructuring charges resulting in net restructuring costs of $20.7 million during fiscal 2010. During fiscal2009, the restructuring charges were comprised of severance charges of $26.9 million and facilities charges of $15.0 million. (3)As of April 30, 2013, 2012, 2011, 2010, and 2009, the Company’s marketable securities included $98.0 million, $82.2 million, $71.4 million, $69.0million, and $60.8 million, respectively, held in trust for settlement of the Company’s obligations under certain of its deferred compensation plans. Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsForward-looking StatementsThis Annual Report on Form 10-K may contain certain statements that we believe are, or may be considered to be, “forward-looking”statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,”“foresee,” “may,” “will,” “likely,” “estimates,” “potential,” “continue” or other similar words or phrases. Similarly, statements that describe ourobjectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to risks and uncertainties that couldcause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that couldcause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, dependence onattracting and retaining qualified and experienced consultants, maintaining our brand name and professional reputation, potential legal liability andregulatory developments, portability of client relationships, global and local political or economic developments in or affecting countries where wehave operations, currency fluctuations in our international operations, risks related to growth, restrictions imposed by off-limits agreements,competition, reliance on information processing systems, cyber security vulnerabilities, limited protection of our intellectual property, our ability toenhance and develop new technology, our ability to successfully recover from a disaster or business continuity problems, employment liability risk, animpairment in the carrying value of goodwill and other intangible assets, deferred tax assets that we may not be able to use, our ability to develop newproducts and services, changes in our accounting estimates and assumptions, alignment of our cost structure, risks related to the integration ofrecently acquired businesses and the matters disclosed under the heading “Risk Factors” in the 25 Company’s Exchange Act reports, including Item 1A included in this Annual Report. Readers are urged to consider these factors carefully in evaluatingthe forward-looking statements. The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of thisAnnual Report on Form 10-K and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events orcircumstances.The following presentation of management’s discussion and analysis of our financial condition and results of operations should be read togetherwith our consolidated financial statements and related notes included in this Annual Report on Form 10-K.Executive SummaryKorn/Ferry International (referred to herein as the “Company,” “Korn/Ferry,” or in the first person notations “we,” “our,” and “us”) is a premier globalprovider of talent management solutions that helps clients design strategies to assist clients in building and attracting their talent. We are the premier provider ofexecutive recruitment, leadership and talent consulting and talent acquisition solutions with the broadest global presence in the recruitment industry. Ourservices include Executive Recruitment, consulting and solutions services through Leadership & Talent Consulting (“LTC”) and recruitment for non-executiveprofessionals and recruitment process outsourcing (“RPO”) through Futurestep. Approximately 75% of the executive recruitment searches we performed infiscal 2013 were for board level, chief executive and other senior executive and general management positions. Our 5,228 clients in fiscal 2013 included manyof the world’s largest and most prestigious public and private companies, including approximately 42% of the FORTUNE 500, middle market and emerginggrowth companies, as well as government and nonprofit organizations. We have built strong client loyalty, with 81% of assignments performed during fiscal2013 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years.In an effort to maintain our long-term strategy of being the leading provider of talent management solutions, our strategic focus for fiscal 2014 centersupon enhancing the integration of our multi-service strategy. We plan to continue to address areas of increasing client demand including LTC and RPO. Wefurther plan to explore new products and services, continue to pursue a disciplined acquisition strategy, enhance our technology and processes andaggressively leverage our brand through thought leadership and intellectual capital projects as a means of delivering world-class service to our clients. Duringfiscal 2013, nearly 88% of our top 50 clients utilized at least two of our service lines. During fiscal 2013, we completed the acquisitions of Minneapolis-basedPDI Ninth House (“PDI”), a leading, globally-recognized provider of leadership assessment and development solutions and Global Novations, LLC, (“GlobalNovations”) a leading provider of diversity and inclusion and leadership development solutions (see Note 12 — Acquisitions for additional informationregarding acquisitions completed during fiscal 2013). As a result of the uncertainties and challenges that continue to face the global economy and financialmarkets, we implemented a restructuring plan in fiscal 2013 in order to align our cost structure with anticipated revenue levels. The Company alsoimplemented a restructuring plan focused on the integration synergies associated with the current year acquisitions. In fiscal 2013, the Company recordedrestructuring charges of $22.8 million of which $16.3 million were for severance costs and $6.5 million in facility costs due to the consolidation andelimination of office space around the world.As previously announced, beginning in the first quarter of fiscal 2013, the Company disaggregated its previously reported business segment, ExecutiveRecruitment, into two business segments, Executive Recruitment and LTC. The Company now operates in three global business segments: ExecutiveRecruitment, LTC and Futurestep. See Note 11 — Business Segments, in the Notes to our Consolidated Financial Statements for discussion of theCompany’s global business segments. Amounts reported for prior periods in this report have been reclassified to conform to the revised global businesssegments.The Company evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) earningsbefore interest, taxes, depreciation and amortization (“EBITDA”), which is further adjusted to exclude restructuring charges, transaction and integration costs,and certain separation costs (“Adjusted EBITDA”). EBITDA and Adjusted EBITDA are non-GAAP financial measures. They have limitations as analyticaltools, should not be viewed as substitutes for financial information determined in 26 accordance with GAAP, and should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under GAAP, nor arethey necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes the presentation of thesenon-GAAP financial measures provides meaningful supplemental information regarding Korn/Ferry’s performance by excluding certain charges and otheritems that may not be indicative of Korn/Ferry’s ongoing operating results. The use of these non-GAAP financial measures facilitate comparisons toKorn/Ferry’s historical performance. Korn/Ferry includes these non-GAAP financial measures because management believes they are useful to investors inallowing for greater transparency with respect to supplemental information used by management in its evaluation of Korn/Ferry’s ongoing operations andfinancial and operational decision-making. The accounting policies for the reportable segments are the same as those described in the summary of significantaccounting policies in the accompanying consolidated financial statements, except that the above noted items are excluded from adjusted EBITDA.Fee revenue increased $22.3 million, or 3% (3% decrease excluding fee revenue from the recently acquired PDI and Global Novations) in fiscal 2013 to$812.8 million compared to $790.5 million in fiscal 2012, with increases in fee revenue in Futurestep and LTC, offset by decreases in fee revenue in allregions of Executive Recruitment. During fiscal 2013, we recorded operating income of $43.9 million with Executive Recruitment, LTC, and Futurestepsegments contributing $81.0 million, $6.4 million, and $11.0 million, respectively, offset by corporate expenses of $54.5 million. Net income for fiscal 2013and fiscal 2012 was $33.3 million and $54.3 million, respectively. Adjusted EBITDA was $97.8 million with Executive Recruitment, LTC, and Futurestepsegments contributing $99.9 million, $22.6 million, and $15.7 million, respectively, offset by corporate expenses of $40.4 million. Adjusted EBITDAdecreased $3.5 million in fiscal 2013, from adjusted EBITDA of $101.3 million in fiscal 2012.Our cash, cash equivalents and marketable securities decreased $51.7 million, or 12%, to $366.0 million at April 30, 2013 compared to $417.7million at April 30, 2012, mainly due to bonuses earned in fiscal 2012 and paid during the first quarter of fiscal 2013 and the purchase price paid as a resultof the acquisitions of Global Novations and PDI during fiscal 2013, partially offset by cash provided by operating activities. As of April 30, 2013, we heldmarketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $94.9 million and a fair value of$98.0 million. Our obligations for which these assets were held in trust totaled $99.2 million as of April 30, 2013. Our working capital decreased by $99.8million to $178.5 million in fiscal 2013. We believe that cash on hand and funds from operations will be sufficient to meet our anticipated working capital,capital expenditures and general corporate requirements in the next twelve months. We had no long-term debt or any outstanding borrowings under our creditfacility at April 30, 2013 or 2012. We are required to maintain $2.9 million of restricted cash to provide collateral for the standby letters of credit associatedwith certain lease premises. As of April 30, 2013 and 2012, we had $2.7 million and $2.9 million, respectively, of standby letters of credit issued under ourprevious credit facility.Critical Accounting PoliciesThe following discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements.Preparation of our periodic filings requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Actualresults could differ from those estimates and assumptions and changes in the estimates are reported in current operations as new information is learned orupon the amounts becoming fixed and determinable. In preparing our consolidated financial statements and accounting for the underlying transactions andbalances, we apply our accounting policies as disclosed in the notes to our consolidated financial statements. We consider the policies discussed below ascritical to an understanding of our consolidated financial statements because their application places the most significant demands on management’s judgmentand estimates. Specific risks for these critical accounting policies are described in the following paragraphs. Senior management has discussed thedevelopment and selection of the critical accounting estimates with the Audit Committee of the Board of Directors. 27 Revenue Recognition. Management is required to establish policies and procedures to ensure that revenue is recorded over the performance period forvalid engagements and related costs are matched against such revenue. We provide professional services related to executive recruitment activities andrecruitment for non-executive professionals, on a retained basis, recruitment process outsourcing and leadership & talent consulting services. For executiverecruitment activities and recruitment for non-executive professionals we generally recognize revenue in three monthly installments commencing the month ofclient acceptance as this is the period over which the recruitment services are performed. Fees earned in excess of the initial contract amount are recognizedupon completion of the engagement, which reflect the difference between the final actual compensation of the placed executive and the estimate used forpurposes of the previous billings. Since the fees are generally not contingent upon placement of a candidate, our assumptions primarily relate to establishingthe period over which such service is performed. These assumptions determine the timing of revenue recognition and profitability for the reported period. Ifthese assumptions do not accurately reflect the period over which revenue is earned, revenue and profit could differ. Any services that are provided on acontingent basis are recognized once the contingency is fulfilled. In addition to recruitment for non-executive professionals, Futurestep provides recruitmentprocess outsourcing services and fee revenue is recognized as services are rendered. Fee revenue from LTC services is recognized as services are rendered forconsulting engagements and other time based services, measured by total hours incurred to the total estimated hours at completion. It is possible that updatedestimates for the consulting engagement may vary from initial estimates with such updates being recognized in the period of determination. LTC revenue is alsoderived from the sale of solution services, which includes revenue from licenses and the sale of products. Revenue from licenses is recognized using a straight-line method over the term of the contract (generally 12 months), which begins upon execution and is invoiced in the same month. Products sold by theCompany mainly consist of books covering a variety of topics including performance management, team effectiveness, and coaching and development. TheCompany recognizes revenue for its products when the product has been sold. Furthermore, a provision for doubtful accounts on recognized revenue isestablished with a charge to general and administrative expenses based on historical loss experience, assessment of the collectability of specific accounts, aswell as expectations of future collections based upon trends and the type of work for which services are rendered.Annual Performance Related Bonuses. Each quarter, management records its best estimate of its annual performance related bonuses, whichrequires management to, among other things, project annual consultant (employees who originate business) productivity (as measured by engagement feesbilled and collected by executive search consultants and revenue for LTC and Futurestep consultants), Company performance including profitability,competitive forces and future economic conditions impact our results. At the end of each fiscal year, annual performance related bonuses take into accountfinal individual consultant productivity, Company results including profitability, the achievement of strategic objectives and the results of individualperformance appraisals, and the current economic landscape. Management takes these factors into consideration, and any changes in the estimate are reportedin current operations. Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year results,actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimates historically have been immaterialand are recorded in current operations in the period in which they are determined.Deferred Compensation. Estimating deferred compensation requires assumptions regarding the timing and probability of payments of benefits toparticipants and the discount rate. Changes in these assumptions would significantly impact the liability and related cost on our consolidated balance sheetand statement of income. Management engages an independent actuary to periodically review these assumptions in order to ensure that they reflect thepopulation and economics of our deferred compensation plans in all material respects and to assist us in estimating our deferred compensation liability and therelated cost. The actuarial assumptions we use may differ from actual results due to changing market conditions or changes in the participant population.These differences could have a significant impact on our deferred compensation liability and the related cost.Carrying Values. Valuations are required under U.S. generally accepted accounting principles (“GAAP”) to determine the carrying value of variousassets. Our most significant assets for which management is required to prepare valuations are carrying value of receivables, marketable securities, goodwill,intangible assets, fair value of contingent consideration, and recoverability of deferred income taxes. Management must identify 28 whether events have occurred that may impact the carrying value of these assets and make assumptions regarding future events, such as cash flows andprofitability. Differences between the assumptions used to prepare these valuations and actual results could materially impact the carrying amount of theseassets and our operating results.Of the assets mentioned above, goodwill is the largest asset requiring a valuation. Fair value of goodwill for purposes of the goodwill impairment test isdetermined utilizing a discounted cash flow analysis based on forecast cash flows (including estimated underlying revenue and operating income growth rates)discounted using an estimated weighted-average cost of capital for market participants. A market approach, utilizing observable market data such ascomparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available), is usedto corroborate the discounted cash flow analysis performed at each reporting unit. The Company also reconciles the results of these analyses to its marketcapitalization. If the carrying amount of a reporting unit exceeds its estimated fair value, goodwill is considered potentially impaired and further tests areperformed to measure the amount of impairment loss, if any. We recorded no goodwill impairments in conjunction with our annual goodwill impairmentassessment performed as of January 31, 2013. While historical performance and current expectations have resulted in fair values of goodwill in excess ofcarrying values, if our assumptions are not realized, it is possible that in the future an impairment charge may need to be recorded. However, it is not possibleat this time to determine if an impairment charge would result or if such a charge would be material. Fair value determinations require considerable judgmentand are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made forpurposes of the annual goodwill impairment test will prove to be accurate predictions of the future. As of our testing date, the fair value of each reporting unitexceeded its carrying amount and none of the reporting units were considered at risk. As a result, no impairment charge was recognized. There was also noindication of impairment during the fourth quarter of fiscal 2013.Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact theestimated fair value of the reporting units may include such items as follows: A prolonged downturn in the business environment in which the reporting units operate especially in EMEA; An economic recovery that significantly differs from our assumptions in timing or degree; and Volatility in equity and debt markets.Results of OperationsThe following table summarizes the results of our operations as a percentage of fee revenue: Year Ended April 30, 2013 2012 2011 Fee revenue 100.0% 100.0% 100.0% Reimbursed out-of-pocket engagement expenses 4.5 4.6 4.3 Total revenue 104.5 104.6 104.3 Compensation and benefits 68.3 67.6 68.2 General and administrative expenses 17.6 17.5 15.7 Engagement expenses 8.1 7.1 6.9 Depreciation and amortization 2.3 1.8 1.7 Restructuring charges, net 2.8 0.1 0.3 Operating income 5.4 10.5 11.5 Net income 4.1% 6.9% 7.9% 29 The following tables summarize the results of our operations by business segment: Year Ended April 30, 2013 2012 2011 Dollars % Dollars % Dollars % (dollars in thousands) Fee revenue Executive Recruitment: North America $290,317 35.7% $305,717 38.7% $306,180 41.1% EMEA 128,807 15.9 141,409 17.9 137,398 18.5 Asia Pacific 73,221 9.0 82,230 10.4 81,951 11.0 South America 30,134 3.7 31,846 4.0 29,177 3.9 Total Executive Recruitment 522,479 64.3 561,202 71.0 554,706 74.5 LTC 168,115 20.7 115,407 14.6 99,352 13.4 Futurestep 122,237 15.0 113,896 14.4 90,191 12.1 Total fee revenue 812,831 100.0% 790,505 100.0% 744,249 100.0% Reimbursed out-of-pocket engagement expense 36,870 36,254 32,002 Total revenue $849,701 $826,759 $776,251 Year Ended April 30, 2013 2012 2011 Dollars Margin(1) Dollars Margin(1) Dollars Margin(1) (dollars in thousands) Operating income (loss) Executive Recruitment: North America $58,832 20.3% $75,580 24.7% $70,782 23.1% EMEA 9,173 7.1 13,288 9.4 12,768 9.3 Asia Pacific 6,973 9.5 11,859 14.4 13,172 16.1 South America 5,987 19.9 9,207 28.9 7,539 25.8 Total Executive Recruitment 80,965 15.5 109,934 19.6 104,261 18.8 LTC 6,424 3.8 16,360 14.2 5,138 5.2 Futurestep 10,975 9.0 8,445 7.4 6,955 7.7 Corporate (54,488) (51,873) (30,569) Total operating income (loss) $43,876 5.4% $82,866 10.5% $85,785 11.5% (1)Margin calculated as a percentage of fee revenue by business segment. 30 Year Ended April 30, 2013 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Net income $33,293 Other income, net (6,309) Interest expense, net 2,365 Income tax provision 16,637 Equity in earnings ofunconsolidated subsidiaries, net (2,110) Operating income (loss) $58,832 $9,173 $6,973 $5,987 $80,965 $6,424 $10,975 $(54,488) 43,876 Depreciation and amortization 4,726 2,347 1,546 372 8,991 6,012 1,180 2,821 19,004 Other income (loss), net 466 95 200 32 793 (75) 51 5,540 6,309 Equity in earnings ofunconsolidated subsidiaries, net 434 — — — 434 — — 1,676 2,110 EBITDA 64,458 11,615 8,719 6,391 91,183 12,361 12,206 (44,451) 71,299 Restructuring charges, net 3,583 3,982 629 — 8,194 10,198 3,527 938 22,857 Transaction and integration costs — — — — — — — 3,106 3,106 Separation costs — 516 — — 516 — — — 516 Adjusted EBITDA $68,041 $16,113 $9,348 $6,391 $99,893 $22,559 $15,733 $(40,407) $97,778 Adjusted EBITDA margin 23.4% 12.5% 12.8% 21.2% 19.1% 13.4% 12.9% 12.0% Year Ended April 30, 2012 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Net income $54,303 Other loss, net 271 Interest expense, net 1,791 Income tax provision 28,351 Equity in earnings ofunconsolidated subsidiaries,net (1,850) Operating income (loss) $75,580 $13,288 $11,859 $9,207 $109,934 $16,360 $8,445 $(51,873) 82,866 Depreciation and amortization 4,624 1,881 1,268 367 8,140 2,613 1,070 2,194 14,017 Other income (loss), net 5 (149) 60 (61) (145) 146 41 (313) (271) Equity in earnings ofunconsolidated subsidiaries,net 159 — — — 159 — — 1,691 1,850 EBITDA 80,368 15,020 13,187 9,513 118,088 19,119 9,556 (48,301) 98,462 Restructuring charges, net (15) 897 — (99) 783 — 146 — 929 Separation costs — — — — — — 920 999 1,919 Adjusted EBITDA $80,353 $15,917 $13,187 $9,414 $118,871 $19,119 $10,622 $(47,302) $101,310 Adjusted EBITDA margin 26.3% 11.3% 16.0% 29.6% 21.2% 16.6% 9.3% 12.8% 31 Year Ended April 30, 2011 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Net income $58,874 Other income, net (6,454) Interest expense, net 2,535 Income tax provision 32,692 Equity in earnings ofunconsolidated subsidiaries, net (1,862) Operating income (loss) $70,782 $12,768 $13,172 $7,539 $104,261 $5,138 $6,955 $(30,569) 85,785 Depreciation and amortization 3,956 1,858 919 335 7,068 2,801 926 1,876 12,671 Other income (loss), net 319 (156) 186 56 405 121 11 5,917 6,454 Equity in earnings ofunconsolidated subsidiaries, net — — — — — — — 1,862 1,862 EBITDA 75,057 14,470 14,277 7,930 111,734 8,060 7,892 (20,914) 106,772 Restructuring charges, net (340) 2,569 — — 2,229 — (99) — 2,130 Separation costs — — — — — — — — — Adjusted EBITDA $74,717 $17,039 $14,277 $7,930 $113,963 $8,060 $7,793 $(20,914) $108,902 Adjusted EBITDA margin 24.4% 12.4% 17.4% 27.2% 20.5% 8.1% 8.6% 14.6% Fiscal 2013 Compared to Fiscal 2012Fee RevenueFee Revenue. Fee revenue increased $22.3 million, or 3%, to $812.8 million in fiscal 2013 compared to $790.5 million in fiscal 2012. Theacquisitions of PDI and Global Novations, collectively referred to as current year acquisitions, contributed $45.6 million in fee revenue in LTC. Excluding feerevenue from the current year acquisitions, fee revenue was $767.2 million during fiscal 2013, a decrease of $23.3 million, or 3%, compared to fiscal 2012.The decrease in fee revenue was attributable to a 4% decrease in the weighted-average fees billed per engagement during fiscal 2013 as compared to fiscal 2012,offset by a 2% increase in the number of engagements billed during the same period. Weighted-average fees billed is impacted by the mix of engagements bysegment and fluctuating foreign currencies. Exchange rates unfavorably impacted fee revenues by $15.1 million in fiscal 2013.Executive Recruitment. Executive Recruitment reported fee revenue of $522.5 million, a decrease of $38.7 million, or 7%, in fiscal 2013 compared to$561.2 million in fiscal 2012. As detailed below, Executive Recruitment fee revenue decreased in all regions in fiscal 2013 compared to fiscal 2012. Thedecrease in Executive Recruitment fee revenue was mainly due to a 4% decrease in the number of Executive Recruitment engagements billed in fiscal 2013 ascompared to fiscal 2012 and a 3% decrease in the weighted-average fee billed per engagement during the same period and due to a decline in the number ofconsultants. Exchange rates unfavorably impacted fee revenues by $10.5 million in fiscal 2013.North America reported fee revenue of $290.3 million, a decrease of $15.4 million, or 5%, in fiscal 2013 compared to $305.7 million in fiscal 2012.North America’s decrease in fee revenue is primarily due to a 4% decrease in the number of engagements billed during fiscal 2013 as compared to fiscal 2012,and a 1% decrease in the weighted-average fees billed per engagement in the region during the same period. The overall decrease in fee revenue was driven bydecreases in fee revenue in the industrial, life sciences/healthcare and 32 financial services sectors, partially offset by the growth in education/non-profit sector. Exchange rates unfavorably impacted North America fee revenue by$0.4 million in fiscal 2013.EMEA reported fee revenue of $128.8 million, a decrease of $12.6 million, or 9%, in fiscal 2013 compared to $141.4 million in fiscal 2012. Exchangerates unfavorably impacted EMEA’s fee revenue by $5.9 million in fiscal 2013. EMEA’s decrease in fee revenue was primarily driven by a 7% decrease in thenumber of engagements billed and a 2% decrease in weighted-average fees billed per engagement in fiscal 2013 as compared to fiscal 2012. The performance inexisting offices in the France, United Kingdom, Spain, Turkey and Sweden were the primary contributors to the decrease. In terms of business sectors,industrial and life sciences/healthcare experienced the largest decreases in fee revenue, partially offset by the growth in consumer goods, education/non-profitand financial services sectors in fiscal 2013 as compared to fiscal 2012.Asia Pacific reported fee revenue of $73.2 million, a decrease of $9.0 million, or 11%, in fiscal 2013 compared to $82.2 million in fiscal 2012.Exchange rates unfavorably impacted fee revenue for Asia Pacific by $1.4 million in fiscal 2013. The decrease was mainly due to a 13% decrease in thenumber of engagements billed, partially offset by a 3% increase in weighted-average fees billed per engagement in fiscal 2013 compared to fiscal 2012. Thedecrease in performance in Japan, Australia, Hong Kong, and Malaysia were the primary contributors to the decrease in fee revenue, partially offset by anincrease in fee revenues in Singapore. The largest decrease in fee revenue was experienced in the industrial, financial services and consumer goods sectors,offset by growth in the technology sector.South America reported fee revenue of $30.2 million, a decrease of $1.7 million, or 5%, in fiscal 2013 compared to $31.9 million in fiscal 2012.Exchange rates unfavorably impacted fee revenue for South America by $2.8 million in fiscal 2013. The decrease in fee revenue was mainly due to a decreasein the weighted-average fees billed offset by an increase in the number of engagements billed. The decrease in performance in Brazil was the primarycontributor to the decrease in fee revenue, offset by increases in fee revenue in Peru and Venezuela. Industrial and financial services were the main sectorscontributing to the decrease in fee revenue, partially offset by growth in the technology and consumer goods sectors.Leadership & Talent Consulting. LTC serves as a bridge between a client’s business strategy and their talent strategy. LTC combines intellectualcontent with traditional consulting services such as CEO & top team effectiveness, integrated talent management as well as leadership development andenterprise learning. LTC reported fee revenue of $168.1 million, an increase of $52.7 million, or 46%, in fiscal 2013 compared to $115.4 million in fiscal2012. Excluding fee revenue of $45.6 million from the current year acquisitions, fee revenue would have been $122.5 million, an increase of $7.1 million, or6% as compared to fiscal 2012. Exchange rates unfavorably impacted fee revenue for LTC by $2.1 million in fiscal 2013. Excluding fee revenue from thecurrent year acquisitions, the improvement in fee revenue was driven by an increase in broad based client demand with increases in the number of consultingclients. The increase in fee revenue consisted of an increase in fee revenue in EMEA of $1.3 million, or 6%, to $24.0 million, an increase in South America feerevenue of $1.1 million to $5.0 million, an increase in Asia Pacific fee revenue of $0.5 million to $13.5 million and an increase in fee revenue in NorthAmerica of $4.2 million or 6% to $80.0 million.Futurestep. Futurestep reported fee revenue of $122.2 million, an increase of $8.3 million, or 7%, in fiscal 2013 compared to $113.9 million in fiscal2012. Exchange rates unfavorably impacted fee revenue for Futurestep by $2.5 million in fiscal 2013. The increase in Futurestep’s fee revenue was due to a14% increase in the number of engagements billed, offset by a 6% decrease in the weighted-average fees billed per engagement in fiscal 2013 compared to fiscal2012. The increase in fee revenue was also positively impacted by an increase in level of activity for existing clients in fiscal 2013 as compared to fiscal 2012.Improvement in Futurestep fee revenue is primarily driven by increases in recruitment process outsourcing and to a lesser extent recruitment for non-executiveprofessionals.Compensation and BenefitsCompensation and benefits expense increased $21.1 million, or 4%, to $555.3 million in fiscal 2013 from $534.2 million in fiscal 2012. The increasein compensation and benefits expense was due to the current year acquisitions, which contributed $30.9 million in compensation and benefits expense.Excluding the current year 33 acquisitions, compensation and benefits expense decreased by $9.8 million, or 2% compared to fiscal 2012. The decrease in compensation and benefits wasmainly due to a $9.5 million, or 3% decrease in salaries and related taxes (excluding current year acquisitions). Salaries and related payroll taxes declined dueto a decrease in the average Executive Recruitment headcount during fiscal 2013 compared to fiscal 2012. Also contributing to the decline in compensation andbenefits expense was a $1.7 million decrease in performance related bonus expense to $113.9 million from $115.6 million as result of a decline in theCompany’s overall level of profitability as defined by pre-tax income before bonus and restructuring expense in fiscal 2013 compared to fiscal 2012. Offsettingthe decline in compensation and benefits expense was an increase in the fair value of amounts owed under certain compensation plans of $5.2 million,partially offset by $1.9 million decrease in amortized prepaid compensation and a $1.8 million decrease in stock based compensation due to a smaller amountof awards granted in fiscal 2013 compared to prior years. Exchange rates favorably impacted compensation and benefits expenses by $10.2 million duringfiscal 2013.The changes in the fair value of vested amounts owed under certain deferred compensation plans resulted in an increase to compensation and benefitsexpense of $5.6 million and $0.4 million in fiscal 2013 and 2012, respectively. Offsetting these changes in compensation and benefits expense was an increasein the fair value of marketable securities classified as trading (held in trust to satisfy obligations under certain deferred compensation liabilities), of $7.6million and $1.1 million in fiscal 2013 and 2012, respectively, recorded in other income (loss), net on the consolidated statement of income.Executive Recruitment compensation and benefits expense decreased $11.6 million, or 3%, to $354.1 million in fiscal 2013 compared to $365.7 millionin fiscal 2012, primarily due to a $8.4 million or 4% decrease in salaries and related payroll taxes, a decrease of $1.4 million in stock based compensation anda $1.3 million decline from the reduction in the use of outside contractors due to ongoing cost control initiatives, partially offset by an increase in the fair valueof vested amounts owed under certain deferred compensation plans that resulted in an increase in compensation expense of $4.9 million in fiscal 2013compared to fiscal 2012. Salaries and related payroll taxes declined due to the decrease in average Executive Recruitment headcount while the decrease in stockbased compensation was due to the smaller amount of awards being granted in fiscal 2013 compared to prior years. In addition, performance related bonusexpense decreased by $2.5 million driven by the decrease in Executive Recruitment overall level of profitability. Exchange rates favorably impactedcompensation and benefits expense by $7.2 million during fiscal 2013. Executive Recruitment compensation and benefits expense increased as a percentage offee revenue to 68% in fiscal 2013 from 65% in fiscal 2012.LTC compensation and benefits expense increased $32.7 million, or 52%, to $95.8 million in fiscal 2013 from $63.1 million in fiscal 2012. Theincrease was primarily due to the current year acquisitions, which contributed $30.9 million of compensation and benefits expense, an increase of $1.4million in salaries and related payroll taxes and an increase in performance related bonus expense of $1.3 million. The increase in the performance relatedbonus expense was driven by the 6% increase in fee revenue (excluding fee revenue from current year acquisitions), which contributed to the overall level ofprofitability as defined by pre-tax income before bonus and restructuring expense while the increase in salaries and related payroll taxes is due to a 5% increasein average headcount (excluding current year acquisitions) in fiscal 2013 compared to fiscal 2012. LTC compensation and benefits expense as a percentage offee revenue increased to 57% in fiscal 2013 from 55% in fiscal 2012. Exchange rates favorably impacted compensation and benefits expense by $1.4 millionduring fiscal 2013.Futurestep compensation and benefits expense increased $0.1 million to $82.8 million in fiscal 2013 from $82.7 million in fiscal 2012. The increasewas primarily due to an increase in performance related bonus expense of $1.2 million which was driven by the 7% increase in fee revenue offset by savingsin salaries and related payroll taxes due to fewer senior — level employees and more execution personnel. Exchange rates favorably impacted compensation andbenefits expense by $1.6 million. Futurestep compensation and benefits expense as a percentage of fee revenue decreased to 68% in fiscal 2013 from 73% infiscal 2012.Corporate compensation and benefits expense decreased $0.1 million to $22.6 million in fiscal 2013 from $22.7 million in fiscal 2012. Compensationand benefits expense decreased due to a decrease in performance related bonus expense of $1.7 million. Offsetting the decrease in compensation and benefitsexpense was a 34 15% increase in the average headcount contributed in part by transfers of certain individuals performing functions that benefit the Company worldwide.General and Administrative ExpensesGeneral and administrative expenses increased $3.9 million, or 3%, to $142.8 million in fiscal 2013 compared to $138.9 million in fiscal 2012. Thecurrent year acquisitions, resulted in an increase in general and administrative expenses of $7.9 million. Excluding the current year acquisitions, general andadministrative expenses decreased $4.0 million, or 3%, in fiscal 2013 compared to fiscal 2012. The decrease in general and administrative expenses isattributable to a decrease in legal and professional fees of $6.0 million, a decrease in foreign exchange loss of $2.0 million, a $0.8 million decrease in businessdevelopment expense and a decrease in travel related expenses of $0.7 million. These decreases were partially offset by an increase of $3.1 million intransaction and integration costs incurred as part of the acquisition of PDI, a reduction in contingent consideration relating to a prior acquisition of $2.2million, which reduced general and administrative expenses in fiscal 2012, and an increase in the bad debt expense of $0.8 million. The decrease in businessdevelopment expense and travel related expenses was due to the ongoing cost control initiatives. Exchange rates favorably impacted general and administrativeexpenses by $3.5 million in fiscal 2013. General and administrative expenses as a percentage of fee revenue was 18% in both fiscal 2013 and 2012.Executive Recruitment general and administrative expenses decreased $6.3 million, or 8%, to $69.9 million in fiscal 2013 from $76.2 million in fiscal2012. The decrease in general and administrative expenses was driven by a decrease of $2.9 million in premise and office expense, $1.2 million decrease inforeign exchange loss, a decrease of $0.8 million in travel related expense, $0.7 million decrease in bad debt expense, and a decrease of $0.4 million inbusiness development expense. The decrease in premise expense was due to the restructuring that took place in fiscal 2013 and lower maintenance costs whilethe decrease in bad debt expense was due to a decline in historical bad debt trends. The decrease in travel related expense and business development expensewas due to the implementation of ongoing cost control initiatives. Exchange rates favorably impacted general and administrative expenses by $2.2 million.Executive Recruitment general and administrative expenses as a percentage of fee revenue was 13% in fiscal 2013 compared to 14% in fiscal 2012.LTC general and administrative expenses increased $9.2 million, or 55%, to $25.8 million in fiscal 2013 from $16.6 million in fiscal 2012. Theincrease in general and administrative expense was due in large part to the current year acquisitions, which contributed $7.9 million to the increase. Alsocontributing to the increase was an increase in bad debt expense of $0.9 million and an increase in business development expense of $0.5 million in fiscal2013 compared to fiscal 2012. The increases in business development expense and bad debt expense were due to the increase in LTC’s business activity.Exchange rates favorably impacted general and administrative expenses by $0.3 million. LTC general and administrative expenses as a percentage of feerevenue was 15% in fiscal 2013 compared to 14% in fiscal 2012.Futurestep general and administrative expenses decreased $0.1 million, or 1%, to $19.0 million in fiscal 2013 from $19.1 million in fiscal 2012. Ascompared to fiscal 2012, the following components of general and administrative expenses decreased in fiscal 2013: business development expense decreased$0.6 million, professional service fees decreased $0.6 million and travel related expenses decreased $0.2 million; such decreases were offset by increases inpremise and office expense of $0.8 million and bad debt expense of $0.5 million due to an increase in business activity during fiscal 2013 compared to fiscal2012. The decrease in business development and travel related expenses were both due to cost control initiatives, while the decrease in professional serviceswas due to lower legal fees. The increase in the premise and office expense was due to higher maintenance costs. Exchange rates favorably impacted general andadministrative expenses by $1.0 million. Futurestep general and administrative expenses as a percentage of fee revenue was 16% in fiscal 2013 compared to17% in fiscal 2012.Corporate general and administrative expenses increased $1.1 million, or 4%, to $28.1 million in fiscal 2013 from $27.0 million in fiscal 2012. Theincrease in general and administrative expenses was due to $3.1 million in transaction and integration costs incurred as a result of the acquisition of PDI, andan increase of $1.1 million in premise and office expense as a result of higher insurance and maintenance costs. In addition, fiscal 2012 35 included a reduction in a contingent consideration of $2.2 million relating to a prior acquisition. These increases were partially offset by a decrease of $5.1million in professional services mainly due to a decline in legal fees.Engagement ExpensesEngagement expenses consist of expenses incurred by candidates and our consultants that are normally reimbursed by clients. In addition, engagementexpenses include non-billable contractor and product costs related to the delivery of various services and products. Engagement expenses increased $10.0million, or 18%, to $65.9 million in the fiscal 2013 compared to $55.9 million in fiscal 2012. Excluding engagement expenses of $9.4 million from thecurrent year acquisitions, engagement expenses would have been $56.5 million, an increase of $0.6 million compared to fiscal 2012. Engagement expenses asa percentage of fee revenue was 8% and 7% during fiscal 2013 and 2012, respectively.Depreciation and Amortization ExpensesDepreciation and amortization expenses were $19.0 million and $14.0 million in fiscal 2013 and 2012, respectively, an increase of $5.0 million or 36%.This increase is attributable to the current year acquisition which resulted in an increase in depreciation and amortization expense of $3.5 million due to theincrease in intangible assets from the acquisitions and fixed assets. This expense relates mainly to computer equipment, software, furniture and fixtures,leasehold improvements and intangible assets.Restructuring Charges, NetDuring fiscal 2013, we implemented two restructuring plans in order to rationalize our cost structure in response to anticipated revenue levels and tofocus on the integration synergies associated with the current year acquisitions. As a result, we recorded $22.8 million of restructuring charges, net with $16.3million of severance costs and $6.5 million in facility costs due to the consolidation and elimination of office space around the world. During fiscal 2012, weincreased previously recorded restructuring charges, net by $0.9 million, primarily related to the inability to sublease space, which was included in theoriginal estimate.Operating IncomeOperating income decreased $39.0 million to $43.9 million in fiscal 2013 as compared to $82.9 million in fiscal 2012. This decrease in operatingincome resulted from an increase in restructuring charges, compensation and benefits expense, engagement expenses, depreciation and amortization expensesand general administrative expenses of $21.9 million, $21.1 million, $10.0 million, $5.0 million and $3.9 million, respectively, offset by a $22.3 millionincrease in fee revenue, during fiscal 2013 as compared to fiscal 2012. Operating margin declined by 5.1 percentage points during fiscal 2013 as compared tofiscal 2012, primarily due to a change in mix of fee revenues by operating segment, lower operating margins in Executive Recruitment and LTC, partiallyoffset by an increase in Futurestep operating margins and an increase in the operating loss in the Corporate segment.Executive Recruitment operating income decreased $28.9 million to $81.0 million in fiscal 2013 as compared to $109.9 million in fiscal 2012. Thedecrease in Executive Recruitment operating income is attributable to a decrease of $38.7 million in fee revenue and in increase in restructuring charges of $7.3million, offset by a decrease of $11.6 million in compensation and benefits expense and a decrease of $6.3 million in general and administrative expenses, ascompared to fiscal 2012. Executive Recruitment operating income during fiscal 2013 as a percentage of fee revenue was 16% compared to 20% in fiscal 2012.LTC operating income decreased by $10.0 million to $6.4 million in fiscal 2013 as compared to $16.4 million in fiscal 2012. The decrease in LTCoperating income is primarily due to an increase of $32.7 million in compensation and benefits expense, $10.7 million in engagement expenses, $9.2 millionin general and administrative expenses, $10.2 million in restructuring charges and $3.4 million in depreciation and amortization expenses, offset by anincrease of $52.7 million in fee revenue and a $3.6 million increase in reimbursed out of pocket engagement expenses, during fiscal 2013 as compared tofiscal 2012. LTC operating income as a percentage of fee revenue was 4% in fiscal 2013 compared to 14% in fiscal 2012 and was negatively impacted, in part,by the incremental infrastructure and support services costs related to the current year acquisitions. 36 Futurestep operating income increased by $2.5 million to $11.0 million in fiscal 2013 as compared to $8.5 million in fiscal 2012. The increase inFuturestep operating income was primarily due to an increase in fee revenue of $8.3 million, offset by an increase in cost to execute resource processoutsourcing engagements of $2.1 million and an increase in restructuring of $3.4 million during fiscal 2013 as compared to fiscal 2012. Futurestep operatingincome as a percentage of fee revenue was 9% in fiscal 2013 compared to 7% in fiscal 2012.Adjusted EBITDAAdjusted EBITDA decreased $3.5 million to $97.8 million in fiscal 2013 as compared to $101.3 million in fiscal 2012. This decrease in adjustedEBITDA resulted from an increase in compensation and benefits expense (excluding separation costs), engagement expenses, and general administrativeexpenses (excluding transaction and integration costs) of $22.4 million, $10.0 million, and $0.8 million, respectively, offset by a $22.3 million increase in feerevenue and $6.6 million in other income, during fiscal 2013 as compared to fiscal 2012. Adjusted EBITDA margin declined by 0.8 percentage points duringfiscal 2013 as compared to fiscal 2012, primarily due to a change in mix of fee revenues by operating segment, lower adjusted EBITDA margins in ExecutiveRecruitment, partially offset by an increase in Futurestep adjusted EBITDA margins and a decrease in the adjusted EBITDA in the Corporate segment.Executive Recruitment adjusted EBITDA decreased $19.0 million to $99.9 million in fiscal 2013 as compared to $118.9 million in fiscal 2012. Thedecrease in Executive Recruitment adjusted EBITDA is attributable to a decrease of $38.7 million in fee revenue, offset by a decrease of $12.2 million incompensation and benefits expense (excluding separation costs) and a decrease of $6.3 million in general and administrative expenses, as compared to fiscal2012. Executive Recruitment adjusted EBITDA during fiscal 2013 as a percentage of fee revenue was 19% compared to 21% in fiscal 2012.LTC adjusted EBITDA increased by $3.5 million to $22.6 million in fiscal 2013 as compared to $19.1 million in fiscal 2012. The increase in LTCadjusted EBITDA is primarily due to an increase of $52.7 million in fee revenue and a $3.6 million increase in reimbursed out of pocket engagementexpenses, offset by an increase of $32.7 million in compensation and benefits expense, $10.7 million in engagement expenses and $9.2 million in general andadministrative expenses during fiscal 2013 as compared to fiscal 2012. LTC adjusted EBITDA as a percentage of fee revenue was 13% in fiscal 2013compared to 17% in fiscal 2012 and was negatively impacted, in part, by the incremental infrastructure and support services costs related to the current yearacquisitions.Futurestep adjusted EBITDA increased by $5.1 million to $15.7 million in fiscal 2013 as compared to $10.6 million in fiscal 2012. The increase inFuturestep adjusted EBITDA was primarily due to an increase in fee revenue of $8.3 million, offset by an increase in cost to execute resource processoutsourcing engagements of $2.1 million and an increase in compensation and benefits expense (excluding separation costs) of $1.0 million during fiscal 2013as compared to fiscal 2012. Futurestep adjusted EBITDA as a percentage of fee revenue was 13% in fiscal 2013 compared to 9% in fiscal 2012.Other Income (Loss), NetOther income (loss), net increased by $6.6 million, to income of $6.3 million in fiscal 2013 compared to a loss of $0.3 million in fiscal 2012. Theincrease in other income (loss), net reflects a $6.5 million increase in the market value of mutual funds held in trust for settlement of our obligations undercertain deferred compensation plans (see Note 6 — Deferred Compensation and Retirement Plans, included in the consolidated financial statements) duringfiscal 2013 as compared to fiscal 2012. Offsetting this increase in other income (loss), net is a $5.4 million increase in certain deferred compensationretirement plan liabilities (see Note 6 — Deferred Compensation and Retirement Plans, included in the Notes to our Consolidated Financial Statements)during the same period, which resulted in an increase of compensation and benefits expense.Interest Expense, NetInterest expense, net primarily relates to borrowings under our COLI policies, which is partially offset by interest earned on cash and cash equivalentbalances. Interest expense, net was $2.3 million and $1.8 million in fiscal 2013 and 2012, respectively. 37 Income Tax ProvisionThe provision for income taxes was $16.7 million in fiscal 2013 compared to $28.4 million in fiscal 2012. The provision for income taxes in fiscal2013 and 2012 reflects a 35% effective tax rate for both periods.Equity in Earnings of Unconsolidated Subsidiaries, NetEquity in earnings of unconsolidated subsidiaries, net is comprised of our less than 50% interest in our Mexican subsidiary and IGroup, LLC. IGroup,LLC became an unconsolidated subsidiary in the third quarter of fiscal 2012 when we sold a portion of the interest in the subsidiary. We report our interest inearnings or loss of our Mexican subsidiary and IGroup, LLC on the equity basis as a one-line adjustment to net income, net of taxes. Equity in earnings was$2.1 million in fiscal 2013, compared to $1.9 million in fiscal 2012.Fiscal 2012 Compared to Fiscal 2011Fee RevenueFee Revenue. Fee revenue increased $46.2 million, or 6%, to $790.5 million in fiscal 2012 compared to $744.3 million in fiscal 2011. The increasein fee revenue was primarily attributable to a 4% increase in the weighted-average fees billed per engagement during fiscal 2012 as compared to fiscal 2011 anda 2% increase in the number of engagements billed during the same period. Weighted-average fees billed are impacted by the mix of engagements by geographyand segment, and fluctuating foreign currencies. Exchange rates favorably impacted fee revenues by $18.3 million in fiscal 2012.Executive Recruitment. Executive recruitment reported fee revenue of $561.2 million, an increase of $6.5 million, or 1%, in fiscal 2012 compared to$554.7 million in fiscal 2011. The increase in executive recruitment fee revenue was driven by a 6% increase in the weighted-average fees billed perengagement in fiscal 2012 as compared to fiscal 2011, offset by a 5% decrease in the number of executive recruitment engagements billed during the sameperiod. Weighted-average fees billed are impacted by the mix of engagements by geography and fluctuating foreign currencies. Exchange rates favorablyimpacted fee revenues by $11.7 million in fiscal 2012.North America reported fee revenue of $305.7 million, a decrease of $0.5 million in fiscal 2012 compared to $306.2 million in fiscal 2011. NorthAmerica’s decrease in fee revenue was primarily due to a 2% decrease in the number of engagements billed during fiscal 2012 as compared to fiscal 2011,offset by an increase of 2% in the weighted-average fees billed per engagement in the region during the same period. The overall decrease in fee revenue wasdriven by decreases in fee revenue in the technology and financial services sectors, partially offset by an increase in fee revenue in the life sciences/healthcare,industrial and education/non-profit sector. Exchange rates favorably impacted North America fee revenue by $0.8 million in fiscal 2012.EMEA reported fee revenue of $141.4 million, an increase of $4.0 million, or 3%, in fiscal 2012 compared to $137.4 million in fiscal 2011. EMEA’sincrease in fee revenue was primarily driven by a 9% increase in the weighted-average fees billed, offset by a 6% decrease in the number of engagements billedin fiscal 2012 as compared to fiscal 2011. The performance in existing offices in Switzerland, Germany, and Belgium were the primary contributors to theincrease in fee revenue in fiscal 2012 compared to fiscal 2011, offset by a decrease in fee revenue in the United Arab Emirates. In terms of business sectors,industrial and consumer goods experienced the largest increases in fee revenue in fiscal 2012 as compared to fiscal 2011, partially offset by a decrease in feerevenue in the financial services sector. Exchange rates favorably impacted EMEA’s fee revenue by $4.9 million in fiscal 2012.Asia Pacific reported fee revenue of $82.2 million, an increase of $0.3 million, in fiscal 2012 compared to $81.9 million in fiscal 2011. This increasewas mainly due to a 16% increase in weighted-average fees billed per engagement, offset by a 13% decrease in the number of engagements billed in fiscal 2012compared to fiscal 2011. The performance in Japan and Australia were the primary contributors to the increase in fee revenue in fiscal 2012 compared to fiscal2011, offset by a decrease in fee revenue from Hong Kong. The largest increase in fee revenue was experienced in the consumer goods and industrial sectors,offset by a decrease in fee revenue in the financial services sector. Exchange rates favorably impacted fee revenue for Asia Pacific by $3.9 million in fiscal2012. 38 South America reported fee revenue of $31.9 million, an increase of $2.7 million, or 9%, in fiscal 2012 compared to $29.2 million in fiscal 2011. Theincrease in South America’s fee revenue was due to a 7% increase in the number of engagements billed during fiscal 2012 as compared to fiscal 2011 and a 2%increase in the weighted- average fees billed per engagement in the region during the same period. The performance in Chile and Brazil were the primarycontributors to the increase in fee revenue in fiscal 2012 compared to fiscal 2011. Industrial, financial services and life sciences/healthcare were the mainsectors contributing to the increase in fee revenue in fiscal 2012 compared to fiscal 2011, partially offset by a decrease in fee revenue in the technology sector.Exchange rates favorably impacted fee revenue for South America by $2.1 million in fiscal 2012.Leadership & Talent Consulting. LTC reported fee revenue of $115.4 million, an increase of $16.0 million, or 16%, in fiscal 2012 compared to$99.4 million in fiscal 2011. The improvement in fee revenue was driven by an increase in broad based client demand with increases in the number ofconsulting clients and in fee revenue productivity per consultant in fiscal 2012 compared to fiscal 2011. The increase in fee revenue consisted of an increase infee revenue in North America of $6.0 million or 9% to $75.8 million, an increase in Asia Pacific fee revenue of $4.6 million to $13.0 million, an increase infee revenue in EMEA of $4.3 million, or 23%, to $22.7 million and an increase in South America fee revenue of $1.1 million to $3.9 million. Exchange ratesfavorably impacted fee revenue for LTC by $1.7 million in fiscal 2012.Futurestep. Futurestep reported fee revenue of $113.9 million, an increase of $23.7 million, or 26%, in fiscal 2012 compared to $90.2 million infiscal 2011. The increase in Futurestep’s fee revenue was due to a 23% increase in the weighted-average fees billed per engagement and a 3% increase in thenumber of engagements billed in fiscal 2012 compared to fiscal 2011. The increase in fee revenue was also positively impacted by an increase in new clientsand in the level of activity for existing clients in fiscal 2012 as compared to fiscal 2011. The increase in Futurestep’s fee revenue consisted of North Americafee revenue increase of $12.3 million, or 35%, to $47.6 million; Asia Pacific fee revenue increase of $5.8 million, or 21% to $33.1 million; an increase inEurope fee revenue of $4.8 million, or 17%, to $32.4 million and fee revenue of $0.8 million in South America. Improvement in Futurestep fee revenue isprimarily driven by increases in RPO, which have higher average fees per engagement, and recruitment for non-executive professionals. Exchange ratesfavorably impacted fee revenue for Futurestep by $4.9 million in fiscal 2012.Compensation and BenefitsCompensation and benefits expense increased $26.8 million, or 5%, to $534.2 million in fiscal 2012 from $507.4 million in fiscal 2011. The increasein compensation and benefits expense is mainly due to a 14% increase in salaries and related payroll taxes in fiscal 2012 as compared to fiscal 2011 due inlarge part to a 10% growth in average worldwide headcount, and to a lesser extent, $1.9 million of separation charges related to changes in certain corporateand Futurestep leadership positions recorded in fiscal 2012. The growth in average worldwide headcount was primarily due to an increase in execution andsupport staff to support our growth in Futurestep and other business activities. Compensation and benefits expense in Futurestep increased $19.4 million infiscal 2012 compared to fiscal 2011. The increase in compensation and benefits expense was partially offset by a $10.7 million decrease in performancerelated bonus expense. This decrease was driven by the Company’s overall level of profitability and was also impacted by a change in the mix of business byoperating segment, notably from the strong performance of Futurestep, where bonus expense relative to revenues is lower than in the Executive Recruitmentoperating segment. During fiscal 2012, Futurestep and LTC fee revenue increased by 26% and 16%, respectively compared to fiscal 2011 while ExecutiveRecruitment fee revenue only increased by 1% for the same period. The performance related bonus expense was $116.8 million in fiscal 2012 compared to$128.3 million in fiscal 2011. In addition, the performance related bonus expense for fiscal 2012 and fiscal 2011 was reduced by a change in the bonusexpense estimate of $1.2 million and $2.0 million for fiscal 2011 and fiscal 2010, respectively, resulting in net bonus expense of $115.6 million and $126.3million, respectively. These changes in estimates represent the difference between the bonus expense recorded for fiscal 2011 and fiscal 2010 and the actualcash payments made or to be made with respect to amounts earned during such fiscal years. Exchange rates unfavorably impacted compensation and benefitsexpenses by $13.2 million during fiscal 2012.In addition, changes in the fair value of vested amounts owed under certain deferred compensation plans resulted in an increase of compensation expenseof $0.4 million and $6.2 million in fiscal 2012 and fiscal 2011, 39 respectively. Offsetting these changes in compensation and benefits expense was an increase in the fair value of marketable securities classified as trading (heldin trust to satisfy obligations under certain deferred compensation liabilities) of $1.1 million and $7.6 million during fiscal 2012 and fiscal 2011,respectively, recorded in other (loss) income, net on the consolidated statements of income.Executive recruitment compensation and benefits expense decreased $1.9 million to $365.7 million in fiscal 2012 compared to $367.6 million in fiscal2011. The decrease in compensation and benefits expense is primarily due to a reduction in the performance related bonus expense of $10.4 million in fiscal2012 compared to the fiscal 2011 driven by the Company’s overall level of profitability as defined by pre-tax income before bonus expense. Offsetting thesedecreases was a 7% increase in salaries and related payroll taxes due in large part to a 3% growth in average executive recruitment headcount (primarily supportstaff). In addition, changes in the fair value of vested amounts owed under certain deferred compensation plans resulted in an increase of compensationexpense of $0.4 million and $5.6 million in fiscal 2012 and fiscal 2011, respectively. Executive recruitment compensation and benefits expense decreased as apercentage of fee revenue to 65% from 66% in fiscal 2012 and 2011, respectively. Exchange rates unfavorably impacted compensation and benefits expensesby $8.9 million during fiscal 2012.LTC compensation and benefits expense increased $4.8 million, or 8%, to $63.1 million in fiscal 2012 from $58.3 million in fiscal 2011. The increasewas primarily due to an increase in salaries and related payroll taxes which was due to a 3% increase in average headcount in fiscal 2012 compared to fiscal2011 and an increase in resources used to support the increase in the volume of business activity. LTC compensation and benefits expense as a percentage offee revenue decreased to 55% in fiscal 2012 from 59% in fiscal 2011. Exchange rates unfavorably impacted compensation and benefits expense by $1.1million during fiscal 2012.Futurestep compensation and benefits expense increased $19.4 million, or 31%, to $82.7 million in fiscal 2012 from $63.3 million in fiscal 2011. Theincrease was primarily due to a 30% increase in average headcount in support of Futurestep’s increased business activities and 26% increase in fee revenue,and to a lesser extent, $0.9 million of separation changes related to changes in Futurestep leadership positions. Exchange rates unfavorably impactedcompensation and benefits expense by $3.2 million. Futurestep compensation and benefits expense as a percentage of fee revenue increased to 73% in fiscal2012 from 70% in fiscal 2011.Corporate compensation and benefits expense was $22.7 million in fiscal 2012 which is net of $6.3 million increase in the cash surrender value(“CSV”) of company owned life insurance (“COLI”) compared to $18.2 million in fiscal 2011 which is net of $7.2 million increase of the CSV of COLI. TheCSV of COLI is held to fund other deferred compensation retirement plans and the change in CSV of COLI was the primary reason for the increase incompensation and benefits expense in addition to an increase in average headcount. The increase in the CSV of COLI was due to changes in the value of theunderlying investments due to market changes. Contributing to the increase in compensation and benefit expense in fiscal 2012 is $1.0 million in separationcharges related to changes in a Corporate leadership position and a 17% increase in average headcount.General and Administrative ExpensesGeneral and administrative expenses increased $22.4 million, or 19%, to $138.9 million in fiscal 2012 compared to $116.5 million in fiscal 2011.The increase is attributable to an increase of $12.4 million in legal and other professional fees associated with regulatory matters and, to a much lesser extent,our investments to enhance our internal control environment, business development activities and other employee related matters an increase of $5.8 million inpremise and office expenses and $3.2 million in business development expenses, which includes costs associated with social media initiatives. Also,contributing to the increase in general and administrative expenses were foreign exchange transaction losses in fiscal 2012 compared to foreign exchangetransaction gains in fiscal 2011, netting to an increase in general and administrative expenses of $2.7 million. Partially offsetting these increases was adecrease of $1.9 million in bad debt expense due to greater than anticipated collections in the second half of fiscal 2012. Exchange rates unfavorably impactedgeneral and administrative expenses by $4.0 million in fiscal 2012. General and administrative expenses as a percentage of fee revenue were 18% in fiscal 2012as compared to 16% in fiscal 2011. 40 Executive recruitment general and administrative expenses increased $5.5 million, or 8%, to $76.2 million in fiscal 2012 from $70.7 million in fiscal2011. The increase in general and administrative expenses was driven by an increase in premises and office expense, foreign exchange transaction losses andan increase in business development, partially offset by a decrease in bad debt expense in fiscal 2012 compared to fiscal 2011. Premise and office expensesincreased due to obtaining additional office space in existing locations and bad debt expense decreased due to greater than anticipated collections in fiscal 2012.Exchange rates unfavorably impacted general and administrative expenses by $2.4 million. Executive recruitment general and administrative expenses as apercentage of fee revenue were 14% in in fiscal 2012 as compared to 13% in fiscal 2011.LTC general and administrative expenses decreased $2.3 million, or 12%, to $16.6 million in fiscal 2012 from $18.9 million in fiscal 2011. Thedecrease in general and administrative expense was due to write-off the Sensa trademark, in fiscal 2011 and decrease in bad debt expense in fiscal 2012compared to fiscal 2011. Exchange rates unfavorably impacted general and administrative expenses by $0.3 million. LTC general and administrative expensesas a percentage of fee revenue were 14% in fiscal 2012 compared to 19% in fiscal 2011.Futurestep general and administrative expenses increased $2.7 million, or 16%, to $19.1 million in fiscal 2012 compared to $16.4 million in fiscal2011, primarily due to increases of $1.8 million in premises and office expenses and $1.0 million in business development related to the increase in ouroverall business activities reflected in the 26% increase in fee revenues. Exchange rates unfavorably impacted general and administrative expenses by $1.3million in fiscal 2012. Futurestep general and administrative expenses as a percentage of fee revenue were 17% in fiscal 2012 compared to 18% in fiscal 2011.Corporate general and administrative expenses increased $16.5 million to $27.0 million in fiscal 2012 compared to $10.5 million in fiscal 2011. Theincrease is largely attributable to an increase in legal and other professional fees of $11.0 million, and to a lesser extent, an increase of $2.7 million as a resultof recording a reduction of $2.2 million in the estimated fair value of acquisition-related contingent consideration in fiscal 2012 compared to $4.9 million infiscal 2011. In addition, business development expenses and foreign exchange transaction losses increased $1.7 million and $1.0 million, respectively.Business development expenses, including costs associated with social media initiatives, increased primarily due to the increase in our overall businessactivities.Engagement ExpensesEngagement expenses consist of expenses incurred by candidates and our consultants that are normally reimbursed by clients. In addition, engagementexpenses include non-billable contractor and product costs related to the delivery of various services and products. Engagement expenses increased $4.1million, or 8%, to $55.9 million in fiscal 2012 compared to $51.8 million in fiscal 2011, driven by the increase in the volume of business activity.Engagement expenses as a percentage of fee revenue were 7% in both fiscal 2012 and 2011.Depreciation and Amortization ExpensesDepreciation and amortization expenses were $14.0 million and $12.7 million in fiscal 2012 and 2011, respectively. This expense relates mainly tocomputer equipment, software, furniture and fixtures and leasehold improvements.Restructuring Charges, NetDuring fiscal 2012 and 2011, we increased previously recorded restructuring charges, net by $0.9 million and $2.1 million, respectively primarilyrelated to the inability to sublease space, which was included in the original estimate.Operating IncomeOperating income decreased $2.9 million to $82.9 million in fiscal 2012 as compared to $85.8 million in fiscal 2011. This decrease in operatingincome resulted from an increase in compensation and benefits expense and general administrative expenses of $26.8 million and $22.4 million, respectively,offset by a $46.2 million increase in fee revenue during fiscal 2012 as compared to fiscal 2011. Operating margin declined by 1.0 percentage points 41 during fiscal 2012 as compared to fiscal 2011, primarily due to a change in mix of fee revenues by operating segment and a decrease in operating loss in theCorporate segment.Executive Recruitment operating income increased $5.6 million to $109.9 million in the fiscal 2012 as compared to $104.3 million in fiscal 2011. Theincrease in Executive Recruitment operating income is attributable to an increase of $6.5 million in fee revenue, a decrease of $1.9 million and $1.4 million incompensation and benefits expense and restructuring charges, respectively, offset by an increase of $5.5 million in general and administrative expenses duringfiscal 2012 as compared to fiscal 2011. Executive Recruitment operating income as a percentage of fee revenue were 20% in fiscal 2012 as compared to 19% infiscal 2011.LTC operating income increased by $11.3 million to $16.4 million in fiscal 2012 as compared to $5.1 million in fiscal 2011. The increase in LTCoperating income is primarily due to an increase of $16.0 million in fee revenue and a decrease of $2.3 million in general and administrative expenses, offsetby an increase of $4.8 million in compensation and benefits expense during fiscal 2012 as compared to fiscal 2011. LTC operating income as a percentage offee revenue was 14% in fiscal 2012 as compared to 5% in fiscal 2011.Futurestep operating income increased by $1.5 million to $8.5 million in fiscal 2012 as compared to $7.0 million in fiscal 2011. The increase inFuturestep operating income was primarily due to an increase in fee revenue of $23.7 million, offset by an increase in compensation and benefits expense of$19.4 million and an increase of $2.7 million in general and administrative expenses during fiscal 2012 as compared to fiscal 2011. Futurestep operatingincome as a percentage of fee revenue were 7% in fiscal 2012 as compared to 8% in fiscal 2011.Adjusted EBITDAAdjusted EBITDA decreased $7.6 million to $101.3 million in fiscal 2012 as compared to $108.9 million in fiscal 2011. This decrease in adjustedEBITDA resulted from an increase in compensation and benefits expense (excluding separation charges), and general administrative expenses of $24.9 millionand $22.4 million, respectively, and a decrease of $6.7 million in other income, due to an increase in the market value of mutual funds held in trust forsettlement of our obligations under certain deferred compensation plans, offset by a $46.2 million increase in fee revenue and $4.3 million increase inreimbursed out of pocket engagement expenses during fiscal 2012 as compared to fiscal 2011. Adjusted EBITDA margin declined by 1.8 percentage pointsduring fiscal 2012 as compared to fiscal 2011, primarily due to a change in mix of fee revenues by operating segment and a decrease in adjusted EBITDA inthe Corporate segment.Executive Recruitment adjusted EBITDA increased $5.0 million to $118.9 million in the fiscal 2012 as compared to $113.9 million in fiscal 2011.The increase in Executive Recruitment adjusted EBITDA is attributable to an increase of $6.5 million in fee revenue, a decrease of $1.9 million incompensation and benefits expense, offset by an increase of $5.5 million in general and administrative expenses during fiscal 2012 as compared to fiscal2011. Executive Recruitment adjusted EBITDA as a percentage of fee revenue were 21% in both fiscal 2012 and 2011.LTC adjusted EBITDA increased by $11.0 million to $19.1 million in fiscal 2012 as compared to $8.1 million in fiscal 2011. The increase in LTCadjusted EBITDA is primarily due to an increase of $16.0 million in fee revenue and a decrease of $2.3 million in general and administrative expenses, offsetby an increase of $4.8 million in compensation and benefits expense during fiscal 2012 as compared to fiscal 2011. LTC adjusted EBITDA as a percentage offee revenue was 17% in fiscal 2012 as compared to 8% in fiscal 2011.Futurestep adjusted EBITDA increased by $2.8 million to $10.6 million in fiscal 2012 as compared to $7.8 million in fiscal 2011. The increase inFuturestep adjusted EBITDA was primarily due to an increase in fee revenue of $23.7 million, offset by an increase in compensation and benefits expense(excluding separation costs) of $18.5 million and an increase of $2.7 million in general and administrative expenses during fiscal 2012 as compared to fiscal2011. Futurestep adjusted EBITDA as a percentage of fee revenue were 9% in both fiscal 2012 and 2011. 42 Other (Loss) Income, NetOther (loss) income, net decreased by $6.7 million to a loss of $0.3 million in fiscal 2012 as compared to other income of $6.4 million in fiscal 2011.This decrease was primarily due to net gains on marketable securities of $1.1 million and $7.6 million classified as trading in fiscal 2012 and fiscal 2011,respectively. The decrease in other (loss) income, net reflects a $6.5 million change in the increase in the market value of mutual funds held in trust forsettlement of our obligations under certain deferred compensation plans (see Note 5 — Marketable Securities, in the Notes to our Consolidated FinancialStatements) during fiscal 2012 as compared to fiscal 2011. Offsetting this decrease in other (loss) income, net is a $5.8 million decrease in certain deferredcompensation retirement plan liabilities (see Note 6 — Deferred Compensation and Retirement Plans, in the Notes to our Consolidated FinancialStatements) during the same period, which resulted in a reduction of compensation and benefits expense.Interest Expense, NetInterest expense, net primarily relates to borrowings under our COLI policies, which is partially offset by interest earned on cash and cash equivalentbalances. Interest expense, net was $1.8 million in fiscal 2012 as compared to $2.5 million in fiscal 2011. The decrease in interest expense, net is due to adecline in our average borrowings under our COLI policies and an increase in dividend and interest income primarily as a result of higher average balances ofinterest earning assets.Income Taxes ProvisionThe provision for income taxes was $28.4 million in fiscal 2012 compared to $32.7 million in fiscal 2011. The provision for income taxes in fiscal2012 reflects a 35% effective tax rate, compared to a 36% effective tax rate for fiscal 2011. The decrease in the effective tax rate during fiscal 2012 ascompared to fiscal 2011, is due to a decline in international income tax rates and a greater percentage of our worldwide income arising in jurisdictions outsidethe U.S. with lower income tax rates.Equity in Earnings of Unconsolidated Subsidiaries, NetEquity in earnings of unconsolidated subsidiaries, net is comprised of our less than 50% interest in our Mexican subsidiary and IGroup, LLC. IGroup,LLC became an unconsolidated subsidiary in fiscal 2012 when we sold a portion of the interest in the subsidiary. We report our interest in earnings or loss ofour Mexican subsidiary and IGroup, LLC on the equity basis as a one-line adjustment to net income, net of taxes. Equity in earnings were $1.9 million inboth fiscal 2012 and 2011.Liquidity and Capital ResourcesOur performance is subject to the general level of economic activity in the geographic regions and the industries which we service. While we believe,based on current economic conditions, that our cash on hand and funds from operations will be sufficient to meet anticipated working capital, capitalexpenditures and general corporate requirements during the next twelve months, if the national or global economy, credit market conditions, and/or labormarkets were to deteriorate in the future, it is likely that such changes would put negative pressure on demand for our services and affect our operating cashflows. In light of the current economic uncertainty, the Company implemented a restructuring plan in the second quarter of fiscal 2013 in order to align ourcost structure with anticipated revenue levels. In addition, in the third and fourth quarters of fiscal 2013, we implemented another restructuring plan focusedon the integration synergies associated with the current year acquisitions. If the uncertain economic environment negatively impacts the demand for ourservices for a prolonged period of time, we may incur negative cash flows, and if such conditions persist over an extended period of time, it might require us toaccess our existing credit Facility to meet our capital needs.Cash and cash equivalents and marketable securities were $366.0 million and $417.7 million as of April 30, 2013 and 2012, respectively. As ofApril 30, 2013 and 2012, we held $146.8 million and $130.3 million, respectively of cash and cash equivalents in foreign locations, substantially all ofwhich is readily convertible 43 into other foreign currencies. If these amounts were distributed to the United States, in the form of dividends, we would be subject to additional U.S. incometaxes. The Company has a plan to distribute a portion of the cash held in foreign locations to the United States and has recorded a $0.9 million deferred taxliability for additional taxes that would arise in connection with these distributions. Cash and cash equivalents consist of cash and highly liquid investmentspurchased with original maturities of three months or less. Marketable securities consist of mutual funds and investments in corporate bonds, U.S. Treasuryand agency securities and commercial paper. The primary objectives of our investment in mutual funds are to meet the obligations under certain of our deferredcompensation plans, while the other securities are available for general corporate purposes.As of April 30, 2013 and 2012, our marketable securities of $141.9 million and $135.7 million, respectively, included $98.0 million (net of grossunrealized gains of $3.1 million and no gross unrealized losses) and $82.2 million (net of gross unrealized gains of $3.5 million and gross unrealized lossesof $0.4 million), respectively, held in trust for settlement of our obligations under certain deferred compensation plans, of which $93.5 million and $74.6million, respectively, are classified as non-current. Our obligations for which these assets were held in trust totaled $99.2 million and $82.6 million as ofApril 30, 2013 and 2012, respectively. As of April 30, 2013 and 2012, we had marketable securities classified as available-for-sale with a balance of $43.9million and $53.5 million, respectively. These securities represent excess cash invested under our investment policy with a professional money manager andare available for general corporate purposes.The net decrease in our working capital of $99.8 million as of April 30, 2013 compared to April 30, 2012 is primarily attributable to a decrease in cashand cash equivalents and current portion of marketable securities and an increase in other accrued liabilities, partially offset by an increase in accountsreceivable. Cash and cash equivalents decreased due to the payment of annual bonuses earned in fiscal 2012 and paid during the first quarter fiscal 2013 andCompany contributions made to the ECAP. Cash and cash equivalents also decreased as a result of the acquisitions of Global Novations and PDI whileaccounts receivable increased due to an increase in the number of days sales outstanding which increased from 64 days to 68 days from April 30, 2012 toApril 30, 2013. Accounts receivable also increased as a result of the acquisitions of PDI and Global Novations, which accounted for $25.7 million of theincrease as of acquisition date. The decrease in marketable securities is due to lower expected ECAP payments in the next twelve months and an overalldecrease in our available-for-sale securities as a result of the acquisitions of Global Novations and PDI. The increase in other accrued liabilities is primarilydue to restructuring accruals recorded in fiscal 2013 that are due within one year and $15.0 million in contingent consideration liabilities due to the acquisitionof PDI. Cash provided by operating activities was $61.7 million in fiscal 2013, a decrease of $9.3 million, from cash provided by operating activities of$71.0 million in fiscal 2012. The decrease in cash provided in operating activities is primarily due to lower operating income, offset by a decrease in fiscal2012 bonuses paid in fiscal 2013 as compared to fiscal 2011 bonuses paid in fiscal 2012.Cash used in investing activities was $116.7 million in fiscal 2013; an increase of $83.7 million from cash used in investing activities of $33.0 millionin fiscal 2012. The increase in cash used in investing activities is primarily attributable to the purchase price payment for the acquisition of PDI of $77.6million and Global Novations of $34.5 million, offset by an increase of $13.6 million in net proceeds from the purchase and sale/maturities of marketablesecurities. In addition, there was $7.2 million in restricted cash that became unrestricted during the year as a result of entering into a new credit agreement, asdescribed below, that does not require the Company to maintain a certain amount of cash as collateral (which was required under the Company’s prior creditfacility), and a decrease in cash used to purchase property and equipment of $5.5 million.Cash used in financing activities was $0.4 million in fiscal 2013, an increase of $2.6 million from cash provided by financing activities of $2.2million in fiscal 2012. Cash used in financing activities increased primarily due to a decrease of $2.2 million in cash proceeds from the exercise of employeestock options and our employee stock purchase plan, a decrease of $1.4 million in tax benefit from the exercise of stock options and a $0.4 million decrease inthe amount of borrowings under life insurance policies, offset by a decrease in the cash used to repurchase shares of common stock to satisfy tax withholdingrequirements upon the vesting of restricted stock by $1.4 million. As of April 30, 2013, $24.4 million remained available for common stock repurchasesunder our stock repurchase program, approved by the Board of Directors on November 2, 2007. 44 Off-Balance Sheet ArrangementsWe have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, special purpose entities.Contractual ObligationsContractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities forwhich we cannot reasonably predict future payment. The following table represents our contractual obligations as of April 30, 2013: Payments Due in: Note(1) Total Less Than1 Year 1-3 Years 3-5 Years More Than5 Years (in thousands) Operating lease commitments 14 $213,328 $44,096 $65,456 $37,681 $66,095 Accrued restructuring charges(2) 7 11,045 8,426 2,041 558 20 Interest payments on COLI loans(3) 10 49,385 4,139 8,277 8,266 28,703 Contingent consideration 12 15,000 15,000 — — — Total $288,758 $71,661 $75,774 $46,505 $94,818 (1)See Note in the accompanying consolidated financial statements in Item 15. (2)Represents rent payments, net of sublease income on an undiscounted basis and severance costs. (3)Assumes COLI loans remain outstanding until receipt of death benefits on COLI policies and applies current interest rates on COLI loans ranging from4.76% to 8.00%.In addition to the contractual obligations above, we have liabilities related to certain employee benefit plans. These liabilities are recorded in ourConsolidated Balance Sheets. The obligations related to these employee benefit plans are described in Note 6 — Deferred Compensation and RetirementPlans, in the Notes to our Consolidated Financial Statements.Lastly, we have contingent commitments under certain employment agreements that are payable upon involuntary, termination without cause, asdescribed in Note 14 — Commitments and Contingencies, in the Notes to our Consolidated Financial Statements.Cash Surrender Value of Company Owned Life Insurance Policies, Net of LoansThe Company purchased Company Owned Life Insurance (“COLI”) policies or contracts insuring certain employees eligible to participate in thedeferred compensation and pension plans as a means of funding benefits under such plans. As of April 30, 2013 and 2012, we held contracts with gross CSVof $159.2 million and $151.1 million, respectively. Total outstanding borrowings against the CSV of COLI contracts were $73.3 million as of April 30, 2013and 2012. At April 30, 2013 and 2012, the net cash value of these policies was $85.9 million and $77.8 million, respectively. Such borrowings do not requireannual principal repayments, bear interest primarily at variable rates and are secured by the CSV of COLI contracts. Starting in second quarter of fiscal2012, we paid our premiums under our COLI contracts from operating cash, and in prior years, we generally borrowed under our COLI contracts to payrelated premiums and as a result there were no borrowings under our COLI contracts in fiscal 2013.Long-Term DebtWe entered into a new senior unsecured revolving Credit Agreement (the “Facility”) on January 18, 2013, which provides for an aggregate availability upto $75.0 million with an option to increase the Facility by an additional $50.0 million, subject to lender consent, and a $15.0 million sub-limit for letters ofcredit. The Facility matures on January 18, 2018 and replaces the senior secured Loan Agreement dated as of March 14, 2011 (the “Previous Facility”), whichwas terminated on the same date the Facility was entered into with the exception of 45 $2.7 million of letters of credits that are still outstanding under the Previous Facility. Borrowings under the Facility bear interest, at our election, at the LondonInterbank Offered Rate (“LIBOR”) plus the applicable margin or the base rate plus the applicable margin. The base rate is the highest of (i) the publishedprime rate, (ii) the federal funds rate plus 1.50%, or (iii) one month LIBOR plus 1.50%. The applicable margin is based on a percentage per annumdetermined in accordance with a specified pricing grid based on the total funded debt to adjusted EBITDA ratio. For LIBOR loans, the applicable margin willrange from 0.50% to 1.50% per annum, while for base rate loans the applicable margin will range from 0.00% to 0.25% per annum. We are required to pay aquarterly commitment fee of 0.25% to 0.35% on the Facility’s unused commitments based on the Company’s funded debt to adjusted EBITDA ratio. Thefinancial covenants include a maximum consolidated funded debt to adjusted EBITDA ratio, and a minimum adjusted EBITDA. As of April 30, 2013, we arein compliance with the financial covenants. In addition, there is a domestic liquidity requirement that we maintain $50.0 million in unrestricted cash and/ormarketable securities (excluding any marketable securities that are held in trust for the settlement of our obligations under certain deferred compensation plans)as a condition to consummating permitted acquisitions, paying dividends to our shareholders and shares repurchases of our common stock.As of April 30, 2013 and 2012, we had no borrowings under the Facility or Previous Facility. At April 30, 2013 and 2012, there was $2.7 million and$2.9 million, respectively, of standby letters of credit associated with certain lease premises. We were required to maintain $2.9 million in restricted cash toprovide collateral for the standby letters of credit that remain outstanding as of April 30, 2013. As of April 30, 2012, under the Previous Facility, we had $10.0million of restricted cash. There is no restricted cash requirement under the Facility.We are not aware of any other trends, demands or commitments that would materially affect liquidity or those that relate to our resources.Accounting DevelopmentsRecently Adopted Accounting StandardsIn June 2011, the Financial Accounting Standards Board (“FASB”) issued guidance on the presentation of comprehensive income in the financialstatements. The new guidance eliminates the option to present other comprehensive income and its components as part of the statement of changes instockholders’ equity. Instead, it requires the Company to present either a continuous statement of net income and other comprehensive income, or in twoseparate but consecutive statements. The new guidance was effective for the Company beginning May 1, 2012. The Company now presents the components ofcomprehensive income as a separate, consecutive statement. The adoption of this guidance did not have an impact on the Company’s financial position orresults of operations.Recently Proposed Accounting StandardsIn July 2012, the FASB issued updated guidance on the periodic testing of indefinite-lived intangible assets for impairment. This guidance allowscompanies to assess qualitative factors to determine if it is more likely than not that the indefinite—lived intangible asset might be impaired and whether it isnecessary to perform a quantitative impairment test. This new guidance is effective for the Company beginning May 1, 2013, with early adoption permitted.The adoption of this update is not expected to have a material impact on our Consolidated Financial Statements.In February 2013, the FASB issued updated guidance requiring entities to provide information about the amounts reclassified out of accumulated othercomprehensive income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes,significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in itsentirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference toother disclosures that provide additional details about those amounts. No changes were made to the current requirements for reporting net income or othercomprehensive income in the financial statements. The guidance is effective for annual and interim reporting periods beginning after December 15, 2012. Theadoption of this update is not expected to have a material impact on the Consolidated Financial Statements of the Company. 46 In March 2013, the FASB issued guidance on releasing cumulative translation adjustments when a reporting entity (parent) ceases to have a controllingfinancial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provideguidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisitions. This new guidance iseffective on a prospective basis for fiscal years and interim reporting periods beginning after December 15, 2013. The amendments should be appliedprospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted and early adoption is permitted. The Companyplans to adopt this guidance beginning May 1, 2014. Item 7A.Quantitative and Qualitative Disclosures About Market RiskAs a result of our global operating activities, we are exposed to certain market risks, including foreign currency exchange fluctuations and fluctuationsin interest rates. We manage our exposure to these risks in the normal course of our business as described below. We have not utilized financial instruments fortrading, hedging or other speculative purposes nor do we trade in derivative financial instruments.Foreign Currency RiskSubstantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities are translated into U.S. dollars at therates of exchange in effect at the end of each reporting period and revenue and expenses are translated at average rates of exchange during the reporting period.Resulting translation adjustments are reported as a component of accumulated other comprehensive income on our consolidated balance sheets.Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to transaction gains and losses that impactour results of operations. Historically, we have not realized significant foreign currency gains or losses on such transactions. Foreign currency losses, on anafter tax basis, included in net income were $0.5 million and $1.6 million during fiscal 2013 and 2012, respectively. Foreign currency gains, on an after taxbasis, included in net income were $0.1 million in fiscal 2011.Our primary exposure to exchange losses or gains is based on outstanding intercompany loan balances denominated in U.S. dollars. If the U.S. dollarstrengthened or weakened by 15%, 25% and 35% against the Pound Sterling, the Euro, the Canadian dollar, the Australian dollar and the Yen, our exchangeloss or gain would have been $0.6 million, $1.1 million and $1.5 million, respectively, based on outstanding balances at April 30, 2013.Interest Rate RiskWe primarily manage our exposure to fluctuations in interest rates through our regular financing activities, which generally are short term and providefor variable market rates. As of April 30, 2013 and 2012, we had no outstanding borrowings under our Facility and Previous Facility. We had $73.3 million ofborrowings against the CSV of COLI contracts as of April 30, 2013 and 2012, bearing interest primarily at variable rates. The risk of fluctuations in thesevariable rates is minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate on the CSV on our COLI contracts. Item 8.Financial Statements and Supplementary DataSee Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.Supplemental Financial Information regarding quarterly results is contained in Note 15 — Quarterly Results, in the Notes to our ConsolidatedFinancial Statements. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable. 47 Item 9A.Controls and Procedures (a)Evaluation of Disclosure Controls and Procedures.Based on their evaluation of our disclosure controls and procedures conducted as of the end of the period covered by this Annual Report on Form 10-K,our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (the “Exchange Act”)) are effective. (b)Changes in Internal Control over Financial Reporting.There were no changes in our internal control over financial reporting during the fourth fiscal quarter that have materially affected or are reasonablylikely to materially affect our internal control over financial reporting. See Management’s Report on Internal Control Over Financial Reporting and Report ofIndependent Registered Public Accounting Firm on Internal Control Over Financial Reporting on pages F-2 and F-3, respectively. Item 9B.Other InformationNot applicable.PART III. Item 10.Directors, Executive Officers and Corporate GovernanceThe information required by this Item will be included under the captions “The Board of Directors” and “Section 16(a) Beneficial Ownership ReportingCompliance” and elsewhere in our 2013 Proxy Statement, and is incorporated herein by reference. The information under the heading “Executive Officers ofthe Registrant” in Part I of this Annual Report on Form 10-K is also incorporated by reference in this section.We have adopted a “Code of Business Conduct and Ethics,” which is applicable to our directors, chief executive officer and senior financial officers,including our principal financial officer, who is also our principal accounting officer. The Code of Business Conduct and Ethics is available on our website atwww.kornferry.com. We intend to post amendments to or waivers to this Code of Business Conduct and Ethics on our website when adopted. Item 11.Executive CompensationThe information required by this Item will be included in our 2013 Proxy Statement, and is incorporated herein by reference. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item will be included under the caption “Security Ownership of Certain Beneficial Owners and Management” andelsewhere in our 2013 Proxy Statement, and is incorporated herein by reference. Item 13.Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item will be included under the caption “Certain Relationships and Related Transactions” and elsewhere in our 2013Proxy Statement, and is incorporated herein by reference. Item 14.Principal Accountant Fees and ServicesThe information required by this Item will be included under the captions “Fees Paid to Ernst & Young LLP,” and “Audit Committee Pre-ApprovalPolicies and Procedures,” and elsewhere in our 2013 Proxy Statement, and is incorporated herein by reference. 48 PART IV. Item 15.Exhibits and Financial Statement SchedulesFinancial Statements. Page 1. Index to Financial Statements: See Consolidated Financial Statements included as part of this Form 10-K and Schedule II — Valuation and Qualifying Accounts.Pursuant to Rule 7-05 of Regulation S-X, the other schedules have been omitted as the information to be set forth therein is included in thenotes of the audited consolidated financial statements F-1 Exhibits: ExhibitNumber Description 2.1**+ Agreement and Plan of Merger, dated as of December 5, 2012, by and among Korn/Ferry International, Personnel Decisions InternationalCorporation, Unity Sub, Inc., Personnel Decisions International Corporation, all of the stockholders of Personnel Decisions InternationalCorporation, and PDI Stockholder Representative, LLC, filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed onDecember 6, 2012. 3.1+ Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed December 15,1999. 3.2+ Certificate of Designations of 7.5% Convertible Series A Preferred Stock, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed June 18, 2002. 3.3+ Second Amended and Restated Bylaws of the Company, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed April 29,2009. 4.1+ Form of Common Stock Certificate of the Company, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-49286), filed November 3, 2000. 4.2+ Form of Stock Purchase Warrant, filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed June 18, 2002.10.1*+ Form of Indemnification Agreement between the Company and some of its executive officers and directors, filed as Exhibit 10.1 to theCompany’s Registration Statement on Form S-1 (No. 333-61697), effective February 10, 1999.10.2*+ Form of U.S. and International Worldwide Executive Benefit Retirement Plan, filed as Exhibit 10.3 to the Company’s Registration Statementon Form S-1 (No. 333-61697), effective February 10, 1999.10.3*+ Form of U.S. and International Worldwide Executive Benefit Life Insurance Plan, filed as Exhibit 10.4 to the Company’s RegistrationStatement on Form S-1 (No. 333-61697), effective February 10, 1999.10.4*+ Worldwide Executive Benefit Disability Plan (in the form of Long-Term Disability Insurance Policy), filed as Exhibit 10.5 to the Company’sRegistration Statement on Form S-1 (No. 333-61697), effective February 10, 1999.10.5*+ Form of U.S. and International Enhanced Executive Benefit and Wealth Accumulation Plan, filed as Exhibit 10.6 to the Company’sRegistration Statement on Form S-1 (No. 333-61697), effective February 10, 1999.10.6*+ Form of U.S. and International Senior Executive Incentive Plan, filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1(No. 333-61697), effective February 10, 1999.10.7*+ Executive Salary Continuation Plan, filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (No. 333-61697), effectiveFebruary 10, 1999. 49 ExhibitNumber Description10.8*+ Form of Amended and Restated Stock Repurchase Agreement, filed as Exhibit 10.10 to the Company’s Registration Statement on Form S-1(No. 333-61697), effective February 10, 1999.10.9*+ Form of Standard Employment Agreement, filed as Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (No. 333-61697),effective February 10, 1999.10.10*+ Form of U.S. and Foreign Executive Participation Program, filed as Exhibit 10.27 to the Company’s Registration Statement on Form S-1(No. 333-61697), effective February 10, 1999.10.11*+ Korn/Ferry International Special Severance Pay Policy, dated January 1, 2000, filed as Exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q, filed March 19, 2001.10.12*+ Korn/Ferry International Second Amended and Restated Performance Award Plan, filed as Appendix A to the Company’s Definitive ProxyStatement, filed August 12, 2004.10.13*+ Letter from Korn/Ferry International Futurestep, Inc. to Robert H. McNabb, dated December 3, 2001, filed as Exhibit 10.29 to theCompany’s Amended Annual Report on Form 10-K/A, filed August 12, 2002.10.14*+ Letter from the Company to Robert H. McNabb, dated November 28, 2001, filed as Exhibit 10.30 to the Company’s Amended AnnualReport on Form 10-K/A, filed August 12, 2002.10.15*+ Employment Agreement between the Company and Robert H. McNabb, dated October 1, 2003, filed as Exhibit 10.2 to the Company’sQuarterly Report on Form 10-Q, filed December 12, 2003.10.16*+ Employment Agreement between the Company and Gary D. Burnison, dated October 1, 2003, filed as Exhibit 10.2 to the Company’sQuarterly Report on Form 10-Q, filed March 12, 2004.10.17+ Letter Agreement, dated December 31, 2003, among the Company, Friedman Fleischer & Lowe Capital Partners, L.P. and FFL ExecutivePartners, L.P., filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed March 12, 2004.10.18*+ Form of Indemnification Agreement between the Company and some of its executive officers and directors, filed as Exhibit 10.4 to theCompany’s Quarterly Report on Form 10-Q, filed March 12, 2004.10.19+ Summary of Non-Employee Director Compensation, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 12,2006.10.20*+ Form of Restricted Stock Award Agreement to Employees Under the Performance Award Plan filed as Exhibit 10.1 to the Company’s CurrentReport on Form 8-K, filed June 29, 2006.10.21*+ Form of Restricted Stock Award Agreement to Non-Employee Directors Under the Performance Award Plan filed as Exhibit 10.2 to theCompany’s Current Report on Form 8-K, filed June 29, 2006.10.22*+ Stock and Asset Purchase Agreement dated as of August 8, 2006, by and among Lominger Limited, Inc., Lominger Consulting, Inc.,Michael M. Lombardo, Robert W. Eichinger, and the Company filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q,filed September 8, 2006.10.23*+ Letter Agreement between the Company and Robert H. McNabb, dated as of September 29, 2006, filed as Exhibit 10.1 to the Company’sQuarterly Report on Form 10-Q, filed December 11, 2006.10.24*+ Letter from the Company to Gary Burnison, dated March 30, 2007, filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K,filed June 29, 2007.10.25*+ Employment Agreement between the Company and Gary Burnison, dated April 24, 2007, filed as Exhibit 10.41 to the Company’s AnnualReport on Form 10-K, filed June 29, 2007. 50 ExhibitNumber Description10.26*+ Form of Restricted Stock Unit Award Agreement to Directors Under the Performance Award Plan, filed as Exhibit 10.2 to the Company’sQuarterly Report on Form 10-Q, filed December 10, 2007.10.27*+ Letter from the Company to Ana Dutra, dated January 16, 2008, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q,filed March 11, 2008.10.28*+ Form of Restricted Stock Award Agreement to Employees and Non-Employee Directors Under the Korn/Ferry International 2008 StockIncentive Plan, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed June 12, 2009.10.29*+ Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry International 2008 Stock IncentivePlan, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed June 12, 2009.10.30*+ Korn/Ferry International Executive Capital Accumulation Plan, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8(No. 333-111038), filed December 10, 2003.10.31*+ Letter Agreement dated June 25, 2009, by and among the Company and Robert McNabb, modifying the terms of Mr. McNabb’sEmployment Agreement, dated October 1, 2003, as renewed and amended on September 29, 2006, filed as Exhibit 10.50 to the Company’sAnnual Report on Form 10-K, filed June 29, 200910.32*+ Letter Agreement between the Company and Gary D. Burnison dated June 25, 2009, filed as Exhibit 10.51 to the Company’s AnnualReport on Form 10-K, filed June 29, 2009.10.33*+ Employment Agreement between the Company and Byrne Mulrooney dated March 5, 2010, filed as Exhibit 10.40 to the Company’sAnnual Report on Form 10-K, filed June 29, 2010.10.34*+ Korn/Ferry International Amended and Restated Employee Stock Purchase Plan, filed as Exhibit 10.1 to the Company’s Quarterly Reporton Form 10-Q, filed December 12, 2011.10.35*+ Employment Agreement between the Company and Robert P. Rozek, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K,filed February 21, 2012.10.36*+ Separation and General Release Agreement, between Michael DiGregorio and Korn/Ferry International, dated as of February 17, 2012, filedas Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 21, 2012.10.37*+ Second Amended and Restated Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.1 to the Company’s Current Reporton Form 8-K, filed October 2, 2012.10.38* Form of Restricted Stock Unit Award Agreement to Non-Employee Directors Under the Performance Award Plan.10.39* Form of Restricted Stock Unit Award Agreement to Employees Under the Performance Award Plan.10.40* Letter Agreement between the Company and R.J. Heckman, Ph.D., dated December 4, 2012.21.1 Subsidiaries of Korn/Ferry International.23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.24.1 Power of Attorney (contained on signature page).31.1 Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.31.2 Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.32.1 Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350. 51 ExhibitNumber Description101.INS XBRL Instance Document.101.SCH XBRL Taxonomy Extension Schema Document.101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF XBRL Taxonomy Extension Definition Linkbase Document.101.LAB XBRL Taxonomy Extension Label Linkbase Document.101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. *Management contract, compensatory plan or arrangement. **Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to theSecurities and Exchange Commission upon request. +Incorporated herein by reference. 52 SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.KORN/FERRY INTERNATIONAL By: /s/ Robert P. Rozek Robert P. Rozek Executive Vice President andChief Financial OfficerDate: June 25, 2013POWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of the registrant hereby constitutes and appoints PeterL. Dunn and Gary D. Burnison, and each of them, as lawful attorney-in-fact and agent for each of the undersigned (with full power of substitution andresubstitution, for and in the name, place and stead of each of the undersigned officers and directors), to sign and file with the Securities and ExchangeCommission under the Securities Exchange Act of 1934, as amended, any and all amendments, supplements and exhibits to this report and any and all otherdocuments in connection therewith, hereby granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and everyact and thing necessary or desirable to be done in order to effectuate the same as fully and to all intents and purposes as each of the undersigned might or coulddo if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or any of their substitutes, may do orcause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalfof the registrant and in the capacities and on the dates indicated. Signature Title Date/S/ GEORGE T. SHAHEEN George T. Shaheen Chairman of the Board and Director June 25, 2013/S/ GARY D. BURNISON Gary D. Burnison President & Chief Executive Officer(Principal Executive Officer) and Director June 25, 2013/S/ ROBERT P. ROZEK Robert P. Rozek Executive Vice President and Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer) June 25, 2013/S/ WILLIAM R. FLOYD William R. Floyd Director June 25, 2013/S/ JERRY LEAMON Jerry Leamon Director June 25, 2013 53 Signature Title Date/S/ EDWARD D. MILLER Edward D. Miller Director June 25, 2013/S/ DEBRA J. PERRY Debra J. Perry Director June 25, 2013/S/ GERHARD SCHULMEYER Gerhard Schulmeyer Director June 25, 2013/S/ HARRY L. YOU Harry L. You Director June 25, 2013 54 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTSAPRIL 30, 2013 Page Management’s Report on Internal Control over Financial Reporting F-2 Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting F-3 Report of Independent Registered Public Accounting Firm F-5 Consolidated Balance Sheets as of April 30, 2013 and 2012 F-6 Consolidated Statements of Income for the years ended April 30, 2013, 2012 and 2011 F-7 Consolidated Statements of Comprehensive Income for the years ended April 30, 2013, 2012 and 2011 F-8 Consolidated Statements of Stockholders’ Equity for the years ended April 30, 2013, 2012 and 2011 F-9 Consolidated Statements of Cash Flows for the years ended April 30, 2013, 2012 and 2011 F-10 Notes to Consolidated Financial Statements F-11 Financial Statements Schedule II — Valuation and Qualifying Accounts F-45 F-1 MANAGEMENT’S REPORT ONINTERNAL CONTROL OVER FINANCIAL REPORTINGManagement of Korn/Ferry International (the “Company”) is responsible for establishing and maintaining adequate internal control over financialreporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission,internal control over financial reporting is a process designed by, or supervised by, the issuer’s principal executive and principal financial officers, andeffected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.The Company’s internal control over financial reporting is supported by written policies and procedures, that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that couldhave a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that control may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In connection with the preparation of the Company’s annual financial statements, management of the Company has undertaken an assessment of theeffectiveness of the Company’s internal control over financial reporting as of April 30, 2013 based on criteria established in Internal Control — IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO Framework”). Management’s assessmentincluded an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of the Company’sinternal control over financial reporting.Our evaluation did not include assessing the effectiveness of internal control over financial reporting for the 2013 acquisition of PDI Ninth House whichis included in the 2013 consolidated financial statements of the Company and constituted 11% and 13% of total and net assets, respectively, as of April 30,2013 and 3% of fee revenues, for the year then ended. We did not assess the effectiveness of internal control over financial reporting at this newly acquiredentity due to the insufficient time between the date acquired and year-end and the complexity associated with assessing internal controls during integrationefforts making the process impractical.Based on this assessment, management did not identify any material weakness in the Company’s internal control over financial reporting, andmanagement has concluded that the Company’s internal control over financial reporting was effective as of April 30, 2013.Ernst & Young, LLP, the independent registered public accounting firm that audited the Company’s financial statements for the year ended April 30,2013 included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reportingas of April 30, 2013, a copy of which is included in this Annual Report on Form 10-K.June 25, 2013 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMON INTERNAL CONTROL OVER FINANCIAL REPORTINGStockholders and Board of DirectorsKorn/Ferry InternationalWe have audited Korn/Ferry International and subsidiaries’ (the “Company”) internal control over financial reporting as of April 30, 2013 based oncriteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (theCOSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of theeffectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.As indicated in the accompanying Report of Management on Korn/Ferry International’s Internal Control Over Financial Reporting, management’sassessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the 2013 acquisition of PDINinth House, which is included in the 2013 consolidated financial statements of the Company and constituted 11% and 13% of total and net assets,respectively, as of April 30, 2013 and 3% of fee revenue, for the year then ended. Our audit of internal control over financial reporting of Korn/FerryInternational also did not include an evaluation of the internal control over financial reporting of this newly acquired entity.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, Korn/Ferry International and subsidiaries maintained, in all material respects, effective internal control over financial reporting as ofApril 30, 2013, based on the COSO criteria. F-3 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Korn/Ferry International and subsidiaries as of April 30, 2013 and 2012, and the related consolidated statements of income, comprehensive income,stockholders’ equity, and cash flows for each of the three years in the period ended April 30, 2013 and our report dated June 25, 2013, expressed anunqualified opinion thereon./s/ Ernst & Young LLPLos Angeles, CaliforniaJune 25, 2013 F-4 REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRMStockholders and Board of DirectorsKorn/Ferry InternationalWe have audited the accompanying consolidated balance sheets of Korn/Ferry International and subsidiaries (the “Company”) as of April 30, 2013 and2012, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the periodended April 30, 2013. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Korn/FerryInternational and subsidiaries at April 30, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in theperiod ended April 30, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internalcontrol over financial reporting as of April 30, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our report dated June 25, 2013, expressed an unqualified opinion thereon./s/ Ernst & Young LLPLos Angeles, CaliforniaJune 25, 2013 F-5 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS April 30, 2013 2012 (in thousands, except pershare data) ASSETS Cash and cash equivalents $224,066 $282,005 Marketable securities 20,347 40,936 Receivables due from clients, net of allowance for doubtful accounts of $9,097 and $9,437, respectively 161,508 126,579 Income taxes and other receivables 8,944 11,902 Deferred income taxes 3,511 10,830 Prepaid expenses and other assets 28,724 27,815 Total current assets 447,100 500,067 Marketable securities, non-current 121,569 94,798 Property and equipment, net 53,628 49,808 Cash surrender value of company owned life insurance policies, net of loans 85,873 77,848 Deferred income taxes, net 63,203 57,290 Goodwill, net 257,293 176,338 Intangible assets, net 58,187 20,413 Investments and other assets 28,376 38,127 Total assets $1,115,229 $1,014,689 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $19,460 $14,667 Income taxes payable 5,502 8,720 Compensation and benefits payable 160,298 160,810 Other accrued liabilities 83,291 37,527 Total current liabilities 268,551 221,724 Deferred compensation and other retirement plans 159,706 142,577 Other liabilities 22,504 20,912 Total liabilities 450,761 385,213 Commitments and contingencies Stockholders’ equity: Common stock: $0.01 par value, 150,000 shares authorized, 61,022 and 59,975 shares issued and 48,734 and47,913 shares outstanding, respectively 431,508 419,998 Retained earnings 236,090 202,797 Accumulated other comprehensive (loss) income, net (2,631) 7,191 Stockholders’ equity 664,967 629,986 Less: notes receivable from stockholders (499) (510) Total stockholders’ equity 664,468 629,476 Total liabilities and stockholders’ equity $1,115,229 $1,014,689 The accompanying notes are an integral part of these consolidated financial statements. F-6 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME Year Ended April 30, 2013 2012 2011 (in thousands, except per share data) Fee revenue $812,831 $790,505 $744,249 Reimbursed out-of-pocket engagement expenses 36,870 36,254 32,002 Total revenue 849,701 826,759 776,251 Compensation and benefits 555,346 534,186 507,405 General and administrative expenses 142,771 138,872 116,494 Engagement expenses 65,847 55,889 51,766 Depreciation and amortization 19,004 14,017 12,671 Restructuring charges, net 22,857 929 2,130 Total operating expenses 805,825 743,893 690,466 Operating income 43,876 82,866 85,785 Other income (loss), net 6,309 (271) 6,454 Interest expense, net (2,365) (1,791) (2,535) Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries 47,820 80,804 89,704 Income tax provision 16,637 28,351 32,692 Equity in earnings of unconsolidated subsidiaries, net 2,110 1,850 1,862 Net income $33,293 $54,303 $58,874 Earnings per common share: Basic $0.71 $1.17 $1.30 Diluted $0.70 $1.15 $1.27 Weighted-average common shares outstanding: Basic 47,224 46,397 45,205 Diluted 47,883 47,261 46,280 The accompanying notes are an integral part of these consolidated financial statements. F-7 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended April 30, 2013 2012 2011 (in thousands) Net income $33,293 $54,303 $58,874 Other comprehensive income: Foreign currency translation adjustments (5,254) (12,826) 16,739 Defined benefit pension plan, net of tax (4,578) (5,644) (4,048) Unrealized gains on marketable securities, net of tax 10 1 35 Comprehensive income $23,471 $35,834 $71,600 The accompanying notes are an integral part of these consolidated financial statements. F-8 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY RetainedEarnings AccumulatedOtherComprehensive(Loss)Income, Net Total Common Stock Shares Amount (in thousands) Balance at May 1, 2010 45,979 $388,717 $90,220 $12,934 $491,871 Comprehensive income — — 58,874 12,726 71,600 Exercise of warrants 274 2,983 — — 2,983 Purchase of stock (934) (13,844) — — (13,844) Issuance of stock 1,684 10,084 — — 10,084 Stock-based compensation — 15,476 — — 15,476 Tax benefit from exercise of stock options — 1,287 — — 1,287 Payment of dividends by majority owned consolidated subsidiaries — — (600) — (600) Balance at April 30, 2011 47,003 404,703 148,494 25,660 578,857 Comprehensive income — — 54,303 (18,469) 35,834 Purchase of stock (190) (4,215) — — (4,215) Issuance of stock 1,100 4,371 — — 4,371 Stock-based compensation — 13,475 — — 13,475 Tax benefit from exercise of stock options — 1,664 — — 1,664 Balance at April 30, 2012 47,913 419,998 202,797 7,191 629,986 Comprehensive income — — 33,293 (9,822) 23,471 Purchase of stock (197) (2,838) — — (2,838) Issuance of stock 1,018 2,134 — — 2,134 Stock-based compensation — 11,920 — — 11,920 Tax benefit from exercise of stock options — 294 — — 294 Balance at April 30, 2013 48,734 $431,508 $236,090 $(2,631) $664,967 The accompanying notes are an integral part of these consolidated financial statements. F-9 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended April 30, 2013 2012 2011 (in thousands) Cash flows from operating activities: Net income $33,293 $54,303 $58,874 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,004 14,017 12,671 Stock-based compensation expense 11,906 13,399 15,547 Impairment of intangible assets — — 880 Provision for doubtful accounts 6,748 5,732 7,650 Gain on cash surrender value of life insurance policies (6,502) (6,268) (7,218) Gain on marketable securities (7,556) (1,013) (7,599) Change in fair value of acquisition-related contingent consideration — (2,196) (4,919) Deferred income taxes (176) 6,512 5,954 Change in other assets and liabilities, net of effect of acquisitions: Deferred compensation 8,477 6,320 11,588 Receivables due from clients (16,011) (4,227) (29,294) Income taxes and other receivables 4,616 (6,664) 1,154 Prepaid expenses and other assets 750 2,194 (6,172) Investment in unconsolidated subsidiaries (2,110) (1,850) (1,862) Income taxes payable (3,399) 4,058 (1,686) Accounts payable and accrued liabilities 8,494 (20,519) 40,885 Other 4,173 7,177 (819) Net cash provided by operating activities 61,707 70,975 95,634 Cash flows from investing activities: Purchase of property and equipment (13,101) (18,632) (27,889) Purchase of intangible assets — (325) — Cash paid for acquisitions, net of cash acquired and contingent consideration (112,064) (442) — Purchase of marketable securities (50,437) (55,718) (65,964) Proceeds from sales/maturities of marketable securities 51,511 43,181 28,618 Change in restricted cash 7,222 (221) (10,007) Payment of purchase price held back from previous acquisition — (800) — Payment of contingent consideration from acquisitions — — (5,795) Premiums on life insurance policies (1,739) (1,739) (1,702) Dividends received from unconsolidated subsidiaries 1,897 1,669 1,608 Net cash used in investing activities (116,711) (33,027) (81,131) Cash flows from financing activities: Borrowings under life insurance policies — 366 6,039 Purchase of common stock (2,838) (4,215) (13,844) Proceeds from exercise of warrants — — 2,983 Proceeds from issuance of common stock upon exercise of employee stock options and in connectionwith an employee stock purchase plan 2,134 4,371 10,084 Tax benefit from exercise of stock options 294 1,664 1,287 Payment of dividends by majority owned consolidated subsidiaries — — (600) Net cash (used in) provided by financing activities (410) 2,186 5,949 Effect of exchange rate changes on cash and cash equivalents (2,525) (4,985) 7,171 Net (decrease) increase in cash and cash equivalents (57,939) 35,149 27,623 Cash and cash equivalents at beginning of year 282,005 246,856 219,233 Cash and cash equivalents at end of year $224,066 $282,005 $246,856 Supplemental cash flow information: Cash used to pay interest $4,361 $4,480 $4,834 Cash used to pay income taxes $10,611 $17,916 $25,329 The accompanying notes are an integral part of these consolidated financial statements. F-10 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSApril 30, 2013 1.Organization and Summary of Significant Accounting PoliciesNature of BusinessKorn/Ferry International, a Delaware corporation (the “Company”), and its subsidiaries are engaged in the business of providing talent managementsolutions, including executive recruitment on a retained basis, recruitment process outsourcing and leadership & talent consulting services. The Company’sworldwide network of 87 offices in 37 countries enables it to meet the needs of its clients in all industries.Basis of Consolidation and PresentationThe consolidated financial statements include the accounts of the Company and its wholly and majority owned/controlled domestic and internationalsubsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The preparation of the consolidated financial statementsconform with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and prevailing practice within the industry. The consolidatedfinancial statements include all adjustments, consisting of normal recurring accruals and any other adjustments that management considers necessary for afair presentation of the results for these periods.As previously announced, beginning in the first quarter of fiscal 2013, the Company disaggregated its previous reported business segment, ExecutiveRecruitment, into two business segments, Executive Recruitment and Leadership & Talent Consulting (“LTC”). The Company now operates in three globalbusiness segments, as described in more detail in Note 11 – Business Segments.The Company has revised comparative segment information to reflect the new global business segment structure. The adjusted segment informationconstitutes a reclassification and had no impact on reported net income or earnings per share for preceding periods. This change does not restate informationpreviously reported in the consolidated statements of income, consolidated balance sheets, comprehensive income, consolidated statements of stockholders’equity or consolidated statements of cash flows for the Company for preceding periods.Investments in affiliated companies, which are 50% or less owned and where the Company exercises significant influence over operations, are accountedfor using the equity method. Dividends received from our unconsolidated subsidiaries were approximately $1.9 million, $1.7 million and $1.6 million duringfiscal 2013, 2012 and 2011, respectively.The Company considers events or transactions that occur after the balance sheet date but before the consolidated financial statements are issued toprovide additional evidence relative to certain estimates or to identify matters that require additional disclosures.Use of Estimates and UncertaintiesThe preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and thereported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates, and changes in estimates are reported incurrent operations as new information is learned or upon the amounts becoming fixed and determinable. The most significant areas that require managementjudgment are revenue recognition, restructuring, deferred compensation, annual performance related bonus, evaluation of the carrying value of receivables,marketable securities, goodwill and other intangible assets, fair value of contingent consideration, share-based payments and the recoverability of deferredincome taxes. F-11 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Revenue RecognitionSubstantially all professional fee revenue is derived from fees for professional services related to executive recruitment performed on a retained basis,recruitment for non-executive professionals, recruitment process outsourcing and leadership & talent consulting services. Fee revenue from executiverecruitment activities and recruitment for non-executive professionals are generally one-third of the estimated first year cash compensation of the placedexecutive plus a percentage of the fee to cover indirect expenses. The Company generally recognizes revenue straight-line over a three month period,commencing upon client acceptance, as this is the period over which the recruitment services are performed. Fees earned in excess of the initial contract amountare recognized upon completion of the engagement, which reflect the difference between the final actual compensation of the placed executive and the estimateused for purposes of the previous billings. Since the initial contract fees are generally not contingent upon placement of a candidate, our assumptions primarilyrelate to establishing the period over which such service is performed. These assumptions determine the timing of revenue recognition and profitability for thereported period. Any services that are provided on a contingent basis are recognized once the contingency is fulfilled. In addition to recruitment for non-executive professionals, Futurestep provides recruitment process outsourcing services and fee revenue is recognized as services are rendered. Fee revenue fromLTC services is recognized as services are rendered for consulting engagements and other time based services, measured by total hours incurred to the totalestimated hours at completion. It is possible that updated estimates for the consulting engagement may vary from initial estimates with such updates beingrecognized in the period of determination. LTC revenue is also derived from the sale of solution services, which includes revenue from licenses and from thesale of products. Revenue from licenses is recognized using a straight-line method over the term of the contract (generally 12 months), which begins uponexecution and is invoiced in the same month. Products sold by the Company mainly consist of books covering a variety of topics including performancemanagement, team effectiveness, and coaching and development. The Company recognizes revenue for its products when the product has been sold.ReimbursementsThe Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in its consolidated statementsof income.Allowance for Doubtful AccountsAn allowance is established for doubtful accounts by taking a charge to general and administrative expenses. The amount of the allowance is based onhistorical loss experience, assessment of the collectability of specific accounts, as well as expectations of future collections based upon trends and the type ofwork for which services are rendered. After the Company exhausts all collection efforts, the amount of the allowance is reduced for balances identified asuncollectible.Cash and Cash EquivalentsThe Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.Restricted CashThe Company had $2.9 million and $10.0 million of restricted cash at April 30, 2013 and 2012, respectively, related to standby letters of creditassociated with certain leases for premises, which is included in investments and other assets in the accompanying consolidated balance sheets (see Note 10 —Long-Term Debt). F-12 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Marketable SecuritiesThe Company currently has investments in marketable securities and mutual funds which are classified as either trading securities or available-for-sale,based upon management’s intent and ability to hold, sell or trade such securities. The classification of the investments in these marketable securities andmutual funds is assessed upon purchase and reassessed at each reporting period. These investments are recorded at fair value and are classified as marketablesecurities in the accompanying consolidated balance sheets. The investments that the Company may sell within the next twelve months, are carried as currentassets. Realized gains (losses) on marketable securities are determined by specific identification. Investments are made based on the Company’s investmentpolicy which restricts the types of investments that can be made. Interest is recognized on an accrual basis, dividends are recorded as earned on the ex-dividend date. Interest and dividend income are recorded in the accompanying consolidated statements of income in interest expense, net.The Company’s investments in mutual funds, (for which market prices are readily available), are held in trust to satisfy obligations under theCompany’s deferred compensation plans (see Note 5 — Marketable Securities), are classified as trading securities. The changes in fair values on tradingsecurities are recorded in the accompanying consolidated statements of income in other income (loss), net.The Company also invests cash in excess of its daily operating requirements and capital needs primarily in marketable fixed income (debt) securities inaccordance with the Company’s investment policy. The Company’s investment portfolio includes corporate bonds, commercial paper and U. S. Treasury andagency securities. These marketable fixed income (debt) securities are classified as available-for-sale securities based on management’s decision, at the datesuch securities are acquired, not to hold these securities to maturity or actively trade them. The Company carries these marketable debt securities at fair valuebased on the market prices for these marketable debt securities or similar debt securities whose prices are readily available. The changes in fair values, net ofapplicable taxes, are recorded as unrealized gains or losses as a component of comprehensive income. When, in the opinion of management, a decline in thefair value of an investment below its amortized cost is considered to be “other-than-temporary,” a credit loss is recorded in the statement of income in otherincome (loss), net; any amount in excess of the credit loss is recorded as unrealized gains or losses as a component of comprehensive income. Generally, theamount of the loss is the difference between the cost or amortized cost and its then current fair value; a credit loss is the difference between the discountedexpected future cash flows to be collected from the debt security and the cost or amortized cost of the debt security. The determination of the other-than-temporary decline includes, in addition to other relevant factors, a presumption that if the market value is below cost by a significant amount for a period oftime, a write-down may be necessary. During fiscal 2013, 2012 and 2011, no other-than-temporary impairment was recognized.Fair Value of Financial InstrumentsFair value is the price the Company would receive to sell an asset or transfer a liability (exit price) in an orderly transaction between market participants.For those assets and liabilities recorded or disclosed at fair value, the Company determines the fair value based upon the quoted market price, if available. If aquoted market price is not available for identical assets, the fair value is based upon the quoted market price of similar assets. The fair values are assigned alevel within the fair value hierarchy as defined below: • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical,unrestricted assets or liabilities. F-13 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices forsimilar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. • Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.As of April 30, 2013 and 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included cashequivalents and marketable securities. The carrying amount of cash, cash equivalents and accounts receivable approximates fair value due to the shortmaturity of these instruments. The fair values of marketable securities classified as trading are obtained from quoted market prices, and the fair values ofmarketable securities classified as available-for-sale are obtained from a third party, which are based on quoted prices or market prices for similar assets.Business AcquisitionsBusiness acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer,determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiredentity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated financialstatements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over theamounts assigned is recorded as goodwill, or if the fair value of the assets acquired exceeds the purchase price consideration, a bargain purchase gain isrecorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (generally not longer than twelve months). Theacquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requiresthe Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a businesscombination. During fiscal 2012 and fiscal 2011, the Company recorded a $2.2 million and $4.9 million reduction in the estimated fair value of contingentconsideration relating to a prior acquisition, respectively, as a component of general and administrative expenses.Property and EquipmentProperty and equipment is carried at cost less accumulated depreciation. Leasehold improvements are amortized on a straight-line basis over theestimated useful life of the asset, or the lease term, whichever is shorter. Software development costs for internal use are capitalized and, once placed in service,amortized using the straight-line method over the estimated useful life, generally three to seven years. All other property and equipment is depreciated oramortized on a straight-line basis over the estimated useful lives of three to ten years.The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset maynot be recoverable.Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of areporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unitwould be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carryingamount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.If the carrying amount of a reporting F-14 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, thefair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology.To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach, is utilized using observable market data such ascomparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). Resultsof the annual impairment test performed as of January 31, 2013, indicated that the fair value of each reporting unit exceeded its carrying amount. As a result,no impairment charge was recognized. There was also no indication of impairment during the fourth quarter of fiscal 2013.Intangible assets primarily consist of customer lists, non-compete agreements, proprietary databases, intellectual property and trademarks and arerecorded at their estimated fair value at the date of acquisition and are amortized in a pattern in which the asset is consumed if that pattern can be reliablydetermined, or using the straight-line method over their estimated useful lives which range from two to 24 years. For intangible assets subject to amortization,an impairment loss is recognized if the carrying amount of the intangible assets is not recoverable and exceeds fair value. The carrying amount of the intangibleassets is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use of the asset. Intangible assets withindefinite lives are not amortized, but are reviewed annually for impairment or more frequently whenever events or changes in circumstances indicate that thefair value of the asset may be less than its carrying amount. During fiscal 2011, the Company wrote-off a trademark no longer in use with a net book value of$0.9 million. As of April 30, 2013 and 2012, there were no further indicators of impairment with respect to the Company’s intangible assets.Compensation and Benefits ExpenseCompensation and benefits expense in the accompanying consolidated statements of income consist of compensation and benefits paid to consultants(employees who originate business), executive officers and administrative and support personnel. The most significant portions of this expense are salaries andthe amounts paid under the annual performance related bonus plan to employees. The portion of the expense applicable to salaries is comprised of wages andsalaries earned by employees during a reporting period. The portion of the expenses applicable to annual performance related bonuses refers to the Company’sannual employee performance related bonus with respect to a fiscal year, the amount of which is communicated and paid to each eligible employee followingthe completion of the fiscal year.Each quarter, management makes its best estimate of its annual performance related bonuses, which requires management to, among other things,project annual consultant productivity (as measured by engagement fees billed and collected by executive search consultants and revenue for LTC andFuturestep consultants), Company performance including profitability, competitive forces and future economic conditions and their impact on the Company’sresults. At the end of each fiscal year, annual performance related bonuses take into account final individual consultant productivity, Company resultsincluding profitability, the achievement of strategic objectives and the results of individual performance appraisals, and the current economic landscape.Accordingly, each quarter the Company re-evaluates the assumptions used to estimate annual performance related bonus liability and adjusts the carryingamount of the liability recorded on the consolidated balance sheet and reports any changes in the estimate in current operations.Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year results, actual performance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and are recorded incurrent operations in the period in which they are determined. The performance related bonus expense was $114.1 million, $116.8 million F-15 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 and $128.3 million for the years ended April 30, 2013, 2012 and 2011, respectively, which was reduced by a change in the previous years’ estimate recordedin fiscal 2013, 2012 and 2011 of $0.2 million, $1.2 million and $2.0 million, respectively. This resulted in net bonus expense of $113.9 million, $115.6million and $126.3 million for the years ended April 30, 2013, 2012 and 2011, respectively, included in compensation and benefits expense in theconsolidated statements of income.These annual performance related bonuses are generally paid within twelve months following the fiscal year end, though the Company delayed paymentof $5.4 million and $10.2 million of bonuses earned in fiscal 2010 and 2009 respectively, due to economic conditions prevailing at the time. The bonusesearned in fiscal 2009 of $10.2 million were paid in December 2010, and the bonuses earned in fiscal 2010 of $5.4 million were paid in December 2011.Other expenses included in compensation and benefits expense are due to changes in deferred compensation and pension plan liabilities, changes in cashsurrender value (“CSV”) of company owned life insurance (“COLI”) contracts, amortization of stock compensation awards, payroll taxes and employeeinsurance benefits.Deferred Compensation and Pension PlansFor financial accounting purposes, the Company estimates the present value of the future benefits payable under the deferred compensation and pensionplans as of the estimated payment commencement date. The Company also estimates the remaining number of years a participant will be employed by theCompany. Then, each year during the period of estimated employment, the Company accrues a liability and recognizes expense for a portion of the futurebenefit using the “benefit/years of service” attribution method for Senior Executive Incentive Plan (“SEIP”), Wealth Accumulation Plan (“WAP”) andEnhanced Wealth Accumulation Plan (“EWAP”) and the “projected unit credit” method for the Worldwide Executive Benefit Plan (“WEB”).In calculating the accrual for future benefit payments, management has made assumptions regarding employee turnover, participant vesting, violation ofnon-competition provisions and the discount rate. Management periodically reevaluates all assumptions. If assumptions change in future reporting periods, thechanges may impact the measurement and recognition of benefit liabilities and related compensation expense.Executive Capital Accumulation PlanThe Company, under its incentive plans, makes discretionary contributions and such contributions may be granted to key employees annually basedon the employee’s performance. Certain key management may also receive Company contributions upon commencement of employment. The Companyamortizes these contributions on a straight-line basis as they vest, generally over a four year period. The amounts that are expected to be paid to employees overthe next 12 months are classified as a current liability included in compensation and benefits payable on the accompanying balance sheet.The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a correspondingcharge (or credit) to compensation and benefits costs.Cash Surrender Value of Life InsuranceThe Company purchased COLI policies or contracts insuring certain employees eligible to participate in the deferred compensation and pension plans asa means of funding benefits under such plans. The Company F-16 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 purchased both fixed and variable life insurance contracts and does not purchase “split-dollar” life insurance policy contracts. The Company has bothcontracts or policies that provide for a fixed or guaranteed rate of return and a variable rate of return depending on the return of the policies’ investment in theirunderlying portfolio in equities and bonds. The CSV of these COLI contracts are carried at the amounts that would be realized if the contract were surrenderedat the balance sheet date, net of the outstanding loans borrowed from the insurer. The Company has the intention and ability to continue these COLI policiesand contracts. Additionally, the loans secured by the policies do not have any scheduled payment terms and the Company also does not intend to repay theloans outstanding on these policies until death benefits under the policy have been realized. Accordingly, the investment in COLI is classified as long-term inthe accompanying consolidated balance sheet.The change in the CSV of COLI contracts, net of insurance premiums paid and gains realized, is reported in compensation and benefits expense. As ofApril 30, 2013 and 2012, the Company held contracts with gross CSV of $159.2 million and $151.1 million, offset by outstanding policy loans of $73.3million in both periods. If these insurance companies were to become insolvent, the Company would be considered a general creditor for $40.5 million and$35.4 million of net CSV as of April 30, 2013 and 2012, respectively; therefore, these assets are subject to credit risk. Management, together with its outsideadvisors, routinely monitors the claims paying abilities of these insurance companies.Restructuring ChargesThe Company accounts for its restructuring charges as a liability when the obligations are incurred and records such charges at fair value. Changes inthe estimates of the restructuring charges are recorded in the period the change is determined.Stock-Based CompensationThe Company has employee compensation plans under which various types of stock-based instruments are granted. These instruments, principallyinclude stock options, restricted stock units, restricted stock and an Employee Stock Purchase Plan (“ESPP”). The Company recognizes compensationexpense related to restricted stock units, restricted stock and the estimated fair value of stock options and stock purchases under the ESPP on a straight-linebasis over the service period for the entire award.Translation of Foreign CurrenciesGenerally, financial results of the Company’s foreign subsidiaries are measured in their local currencies. Assets and liabilities are translated intoU.S. dollars at exchange rates in effect at the balance sheet date, while revenue and expenses are translated at weighted-average exchange rates during the fiscalyear. Resulting translation adjustments are recorded as a component of accumulated comprehensive income. Gains and losses from foreign currencytransactions of these subsidiaries and the translation of the financial results of subsidiaries operating in highly inflationary economies are included in generaland administrative expense in the period incurred. Foreign currency losses, on an after tax basis, included in net income were $0.5 million and $1.6 millionduring fiscal 2013 and 2012, respectively. Foreign currency gains, on an after tax basis, included in net income were $0.1 million in fiscal 2011.Income TaxesThere are two components of income tax expense: current and deferred. Current income tax expense (benefit) approximates taxes to be paid or refundedfor the current period. Deferred income tax expense (benefit) F-17 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 results from changes in deferred tax assets and liabilities between periods. These gross deferred tax assets and liabilities represent decreases or increases intaxes expected to be paid in the future because of future reversals of temporary differences in the basis of assets and liabilities as measured by tax laws andtheir basis as reported in the consolidated financial statements. Deferred tax assets are also recognized for tax attributes such as net operating losscarryforwards and tax credit carryforwards. Valuation allowances are then recorded to reduce deferred tax assets to the amounts management concludes aremore likely than not to be realized.Income tax benefits are recognized and measured based upon a two-step model: (1) a tax position must be more-likely-than-not to be sustained basedsolely on its technical merits in order to be recognized and (2) the benefit is measured as the largest dollar amount of that position that is more-likely-than-not tobe sustained upon settlement. The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred to as anunrecognized tax benefit. The Company records income tax related interest and penalties within income tax expense.Concentration of Credit RiskFinancial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents,investments, receivables due from clients and net CSV due from insurance companies, which is discussed above. Cash equivalents include investments incommercial paper of companies with high credit ratings, investments in money market securities and securities backed by the U.S. government. Investmentsare diversified throughout many industries and geographic regions. The Company conducts periodic reviews of its customers’ financial condition andcustomer payment practices to minimize collection risk on accounts receivable. At April 30, 2013 and 2012, the Company had no other significant creditconcentrations.ReclassificationsCertain prior year amounts have been reclassified to conform to the current year presentation, including reclassifications related to the Company’s newreporting segment structure as discussed above.Recently Adopted Accounting StandardsIn June 2011, the Financial Accounting Standards Board (“FASB”) issued guidance on the presentation of comprehensive income in the financialstatements. The new guidance eliminates the option to present other comprehensive income and its components as part of the statement of changes instockholders’ equity. Instead, it requires the Company to present either, a continuous statement of net income and other comprehensive income, or in twoseparate but consecutive statements. The new guidance was effective for the Company beginning May 1, 2012. The Company now presents the components ofcomprehensive income as a separate, consecutive statement. The adoption of this guidance did not have an impact on the Company’s financial position orresults of operations.Recently Proposed Accounting StandardsIn July 2012, the FASB issued updated guidance on the periodic testing of indefinite-lived intangible assets for impairment. This guidance allowscompanies to assess qualitative factors to determine if it is more likely than not that the indefinite–lived intangible asset might be impaired and whether it isnecessary to perform a quantitative impairment test. This new guidance is effective for the Company beginning May 1, 2013, with early adoption permitted.The adoption of this update is not expected to have a material impact on the financial statements of the Company.In February 2013, the FASB issued updated guidance requiring entities to provide information about the amounts reclassified out of accumulated othercomprehensive income (“AOCI”) by component. In addition, an F-18 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective lineitems of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are notrequired to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about thoseamounts. No changes were made to the current requirements for reporting net income or other comprehensive income in the financial statements. The guidanceis effective for annual and interim reporting periods beginning after December 15, 2012. The adoption of this update is not expected to have a material impacton the consolidated financial statements of the Company.In March 2013, the FASB issued guidance on releasing cumulative translation adjustments when a reporting entity (parent) ceases to have a controllingfinancial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provideguidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisitions. This new guidance iseffective on a prospective basis for fiscal years and interim reporting periods beginning after December 15, 2013. The amendments should be appliedprospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted and early adoption is permitted. The Companyplans to adopt this guidance beginning May 1, 2014. 2.Basic and Diluted Earnings Per ShareBasic earnings per common share was computed by dividing net earnings attributable to common stockholders by the weighted-average number ofcommon shares outstanding. Diluted earnings per common share was computed by dividing net earnings attributable to common stockholders by theweighted-average number of common shares outstanding plus dilutive common equivalent shares. Dilutive common equivalent shares include all in-the-moneyoutstanding options or other contracts to issue common stock as if they were exercised or converted. During fiscal 2013, 2012 and 2011, options to purchase0.50 million shares, 0.57 million shares and 0.39 million shares, respectively, were outstanding but not included in the computation of diluted earnings pershare because they were anti-dilutive.The following table summarizes basic and diluted earnings per share calculations: Year Ended April 30, 2013 2012 2011 (in thousands, except per share data) Net earnings attributable to common stockholders $33,293 $54,303 $58,874 Weighted-average common shares outstanding: Basic weighted-average number of common shares outstanding 47,224 46,397 45,205 Effect of dilutive securities: Restricted stock 485 582 646 Stock options 174 267 425 ESPP — 15 4 Diluted weighted-average number of common shares outstanding 47,883 47,261 46,280 Net earnings per common share: Basic earnings per share $0.71 $1.17 $1.30 Diluted earnings per share $0.70 $1.15 $1.27 F-19 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 3.Comprehensive (Loss) IncomeComprehensive (loss) income is comprised of net income and all changes to stockholders’ equity, except those changes resulting from investments bystockholders (changes in paid in capital) and distributions to stockholders (dividends) and is reported in the accompanying consolidated statements ofcomprehensive income. Accumulated comprehensive (loss) income, net of taxes, is recorded as a component of stockholders’ equity.The components of accumulated other comprehensive (loss) income were as follows: April 30, 2013 2012 (in thousands) Foreign currency translation adjustments $17,559 $22,813 Defined benefit pension adjustments, net of taxes (20,236) (15,658) Unrealized gains on marketable securities, net of taxes 46 36 Accumulated other comprehensive (loss) income, net $(2,631) $7,191 4.Employee Stock PlansStock-Based CompensationThe following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of incomefor the periods indicated: Year Ended April 30, 2013 2012 2011 (in thousands) Restricted stock $11,001 $12,381 $14,090 Stock options 905 933 1,028 ESPP — 85 429 Total stock-based compensation expense, pre-tax 11,906 13,399 15,547 Tax benefit from stock-based compensation expense (4,142) (4,701) (5,675) Total stock-based compensation expense, net of tax $7,764 $8,698 $9,872 The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options. The expected volatilityreflects consideration of the historical volatility in the Company’s publicly traded stock during the period the option is granted. The Company believeshistorical volatility in these instruments is more indicative of expected future volatility than the implied volatility in the price of the Company’s common stock.The expected life of each option is estimated using historical data. The risk-free interest rate is based on the U.S. Treasury zero-coupon issue with a remainingterm approximating the expected term of the option. The Company uses historical data to estimate forfeiture rates applied to the gross amount of expensedetermined using the option valuation model.The weighted-average assumptions used to estimate the fair value of each employee stock option for fiscal 2012 were 47.07% expected volatility, 1.47%risk-free interest rate, 5.0 years expected option life, and 0.00% dividend yield. The weighted-average assumptions used to estimate the fair value of eachemployee stock option for fiscal 2011 were 47.67% expected volatility, 1.83% risk-free interest rate, 5.0 years expected option life, and 0.00% dividend yield.There were no grants of stock options in fiscal 2013. F-20 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options. The assumptions used in option valuationmodels are highly subjective, particularly the expected stock price volatility of the underlying stock.Stock Incentive PlanAt the Company’s 2012 Annual Meeting of Stockholders, held on September 27, 2012, the Company’s stockholders approved an amendment andrestatement to the Korn/Ferry International Amended and Restated 2008 Stock Incentive Plan (the 2012 amendment and restatement being the “Second A&R2008 Plan”), which among other things, increased the current maximum number of shares that may be issued under the plan to 5,700,000 shares, subject tocertain changes in the Company’s capital structure and other extraordinary events. The Second A&R 2008 Plan provides for the grant of awards to eligibleparticipants, designated as either nonqualified or incentive stock options, restricted stock and restricted stock units, any of which may be performance-based,and incentive bonuses, which may be paid in cash or a combination thereof. Under the Second A&R 2008 Plan, the ability to issue full-value awards islimited by requiring full-value stock awards to count 1.91 times as much as stock options.Options granted to officers, non-employee directors and other key employees generally vest over a three to four year period and generally expire seven toten years from the date of grant. Stock options are granted at a price equal to the fair market value of the common stock on the date of grant. Key employees areeligible to receive a grant of stock options annually with the number of options determined by the employee’s performance level. In addition, certain keymanagement members typically receive stock option grants upon commencement of employment.Stock OptionsStock options transactions under the Company’s Second A&R 2008 Plan, as amended to date, were as follows: April 30, 2013 2012 2011 Options Weighted-AverageExercisePrice Options Weighted-AverageExercisePrice Options Weighted-AverageExercisePrice (in thousands, except per share data) Outstanding, beginning of year 1,492 $14.00 1,833 $13.78 2,723 $14.72 Granted — $— 48 $22.71 211 $13.97 Exercised (238) $9.32 (235) $12.76 (625) $12.81 Forfeited/expired (154) $16.87 (154) $15.63 (476) $20.55 Outstanding, end of year 1,100 $14.72 1,492 $14.00 1,833 $13.78 Exercisable, end of year 864 $15.01 1,061 $14.33 1,219 $14.64 As of April 30, 2013, the aggregate intrinsic value of options outstanding and options exercisable were $3.3 million and $2.4 million, respectively.As of April 30, 2013, there was $0.7 million of total unrecognized compensation cost related to non-vested awards of stock options. That cost is expectedto be recognized over a weighted-average period of 0.8 years. For stock option awards subject to graded vesting, the Company recognizes the total compensationcost on a straight-line basis over the service period for the entire award. F-21 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Outstanding stock options: April 30, 2013 Options Outstanding Options Exercisable Range of Exercise Prices Shares Weighted-AverageRemainingContractualLife(in years) Weighted-AverageExercisePrice Shares Weighted-AverageRemainingContractualLife(in years) Weighted-AverageExercisePrice (in thousands, except per share data) $ 7.76 - $ 9.75 361 2.1 $9.19 281 1.8 $9.03 $ 9.76 - $14.93 238 3.9 $13.94 120 3.8 $14.06 $14.94 - $19.25 239 2.1 $17.81 231 2.1 $17.84 $19.26 - $24.08 262 2.1 $20.24 232 1.7 $19.92 1,100 2.5 $14.72 864 2.1 $15.01 Additional information pertaining to stock options: Year Ended April 30, 2013 2012 2011 (in thousands, except per share data) Weighted-average fair value per share of stock options granted $— $9.61 $6.07 Total fair value of stock options vested $1,001 $1,065 $747 Total intrinsic value of stock options exercised $1,547 $1,485 $5,164 Restricted StockThe Company grants time-based restricted stock to executive officers and other senior employees generally vesting over a three to four year period. Time-based restricted stock is granted at a price equal to fair value, which is determined based on the closing price of the Company’s common stock on the grantdate. The Company recognizes compensation expense for time-based restricted stock awards on a straight-line basis over the vesting period.The Company also grants market-based restricted stock to executive officers and other senior employees. These market-based shares vest after threeyears depending upon the Company’s total stockholder return over the three-year performance period relative to other companies in its selected peer group. Thefair value of these market-based restricted stock awards was determined by a third-party valuation using extensive market data that are based on historicalCompany and peer group information. The Company recognizes compensation expense for market-based restricted stock awards on a straight-line basis overthe vesting period. Employees may receive restricted stock annually in conjunction with the Company’s performance review as well as upon commencement ofemployment. F-22 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Restricted stock activity is summarized below: April 30, 2013 2012 2011 Shares Weighted-AverageGrant DateFair Value Shares Weighted-AverageGrant DateFair Value Shares Weighted-AverageGrant DateFair Value (in thousands, except per share data) Non-vested, beginning of year 1,781 $9.85 2,007 $8.64 2,480 $9.93 Granted 889 $13.93 687 $21.46 562 $15.12 Vested (780) $14.10 (794) $15.58 (920) $15.32 Forfeited/expired (80) $14.75 (119) $18.19 (115) $14.83 Non-vested, end of year 1,810 $9.80 1,781 $9.85 2,007 $8.64 As of April 30, 2013, there was $17.7 million of total unrecognized compensation cost related to non-vested awards of restricted stock, which isexpected to be recognized over a weighted-average period of 2.4 years. For restricted stock awards subject to graded vesting, the Company recognizes the totalcompensation cost on a straight-line basis over the service period for the entire award. During fiscal 2013 and fiscal 2012, 197,456 shares and 190,141shares of restricted stock totaling $2.8 million and $4.2 million, respectively, were repurchased by the Company, at the option of the employee, to pay fortaxes related to vesting of restricted stock.Employee Stock Purchase PlanThe Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible employees to authorize payroll deductionsof up to 15% of their salary, or $25,000 annually, to purchase shares of the Company’s common stock at 85% of the fair market price of the common stockon the last day of the enrollment period. At the Company’s 2011 Annual Meeting of Stockholders, held on September 28, 2011, the Company’s stockholdersapproved an amendment and restatement of the ESPP, which among other things, increased the maximum number of shares that may be issued under theESPP from 1.5 million shares to 3.0 million shares. During fiscal 2012 and 2011, employees purchased 76,909 shares at $18.69 per share and 153,913shares at $14.13 per share, respectively. The ESPP was suspended during the second half of fiscal 2012 and as a result, no shares were purchased duringfiscal 2013 or the second half of fiscal 2012. At April 30, 2013, the ESPP had approximately 1.6 million shares remaining available for future issuance.Common StockDuring fiscal 2013 and 2012, the Company issued 237,856 shares and 228,835 shares of common stock, respectively, as a result of the exercise ofstock options, with cash proceeds from the exercise of $2.1 million and $2.9 million, respectively.During fiscal 2011, the Company repurchased 724,064 shares of the Company’s common stock on the open market for $10.6 million. No shares wererepurchased on the open market during fiscal 2013 and 2012.In June 2002, the Company issued warrants to purchase 274,207 shares of its common stock at an exercise price of $11.94, subject to anti-dilutionprovisions. During fiscal 2011, these warrants were exercised for 274,207 shares of common stock in exchange for $3.0 million in cash. F-23 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 5.Marketable SecuritiesAs of April 30, 2013, marketable securities consisted of the following: Trading(1)(3) Available-for-Sale(2)(3) Total (in thousands) Mutual funds $98,001 $— $98,001 Corporate bonds — 42,111 42,111 U.S. Treasury and agency securities — 1,804 1,804 Total 98,001 43,915 141,916 Less: current portion of marketable securities (4,537) (15,810) (20,347) Non-current marketable securities $93,464 $28,105 $121,569 As of April 30, 2012, marketable securities consisted of the following: Trading(1)(3) Available-for-Sale(2)(3) Total (in thousands) Mutual funds $82,176 $— $82,176 Corporate bonds — 44,563 44,563 Commercial paper — 5,989 5,989 U.S. Treasury and agency securities — 3,006 3,006 Total 82,176 53,558 135,734 Less: current portion of marketable securities (7,613) (33,323) (40,936) Non-current marketable securities $74,563 $20,235 $94,798 (1)These investments are held in trust for settlement of the Company’s obligations of $99.2 million and $82.6 million as of April 30, 2013 and 2012,respectively, under the Executive Capital Accumulation Plan (see Note 6 — Deferred Compensation and Retirement Plans). (2)These securities represent excess cash available for general corporate purposes invested, under our investment policy, with a professional moneymanager. (3)The Company’s financial assets measured at fair value on a recurring basis include trading securities classified as Level 1 and available-for-salesecurities classified as Level 2. As of April 30, 2013 and 2012, the Company had cash equivalents of $93.6 million and $60.5 million, and restrictedcash of $2.9 million and $10.0 million, respectively, classified as Level 1. As of April 30, 2013 and 2012, the Company had no investments classifiedas Level 3.The amortized cost and fair values of marketable securities classified as available-for-sale investments were as follows: April 30, 2013 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses(1) EstimatedFairValue (in thousands) Corporate bonds $42,033 $92 $(14) $42,111 U.S. Treasury and agency securities 1,802 2 — 1,804 Total $43,835 $94 $(14) $43,915 F-24 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 April 30, 2012 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses(1) EstimatedFairValue (in thousands) Corporate bonds $44,498 $81 $(16) $44,563 Commercial paper 5,993 1 (5) 5,989 U.S. Treasury and agency securities 3,006 — — 3,006 Total $53,497 $82 $(21) $53,558 (1)There are no marketable securities that have been in a continuous unrealized loss position for 12 months or more.Investments in marketable securities classified as available-for-sale securities are made based on the Company’s investment policy, which restricts thetypes of investments that can be made. As of April 30, 2013 and 2012, the Company’s investments associated with cash equivalents, including restrictedcash, consist of money market funds for which market prices are readily available. As of April 30, 2013 and 2012, marketable securities classified asavailable-for-sale consist of corporate bonds and U.S. Treasury and agency securities and as of April 30, 2012 also includes commercial paper, all for whichmarket prices for similar assets are readily available. As of April 30, 2013, available-for-sale marketable securities have remaining maturities ranging from onemonth to 3.0 years. Investments in marketable securities classified as trading are based upon investment selections the employee elects from a pre-determinedset of securities in the ECAP and the Company mirrors these elections. As of April 30, 2013 and 2012, the Company’s investments in marketable securitiesclassified as trading consist of mutual funds for which market prices are readily available.As of April 30, 2013 and 2012, the Company’s marketable securities were $98.0 million (net of gross unrealized gains of $3.1 million and no grossunrealized losses) and $82.2 million (net of gross unrealized gains of $3.5 million and gross unrealized losses of $0.4 million), respectively. 6.Deferred Compensation and Retirement PlansThe Company has several deferred compensation and retirement plans for eligible consultants and vice-presidents that provide defined benefits toparticipants based on the deferral of current compensation or contributions made by the Company subject to vesting and retirement or termination provisions.The total benefit obligations for these plans were as follows: Year Ended April 30, 2013 2012 (in thousands) Deferred compensation plans $85,562 $78,479 Pension plan 4,536 4,214 International retirement plans 3,646 2,776 Executive Capital Accumulation Plan 75,913 71,134 Total benefit obligations 169,657 156,603 Less: current portion of benefit obligation (9,951) (14,026) Non-current benefit obligation $159,706 $142,577 F-25 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Deferred Compensation PlansThe Enhanced Wealth Accumulation Plan (“EWAP”) was established in fiscal 1994, which replaced the Wealth Accumulation Plan (“WAP”). Certainvice presidents elected to participate in a “deferral unit” that required the participant to contribute a portion of their compensation for an eight year period, or insome cases, make an after tax contribution, in return for defined benefit payments from the Company over a fifteen year period generally at retirement age of65 or later. Participants were able to acquire additional “deferral units” every five years. Vice presidents who did not choose to roll over their WAP units intothe EWAP continue to be covered under the earlier version in which participants generally vest and commence receipt of benefit payments at retirement age of65. In June 2003, the Company amended the EWAP and WAP plans, so as not to allow new participants or the purchase of additional deferral units byexisting participants.The Company also maintains a Senior Executive Incentive Plan (“SEIP”) for participants approved by the Board. Generally, to be eligible, the vicepresident must be participating in the EWAP. Participation in the SEIP required the participant to contribute a portion of their compensation during a four-yearperiod, or in some cases make an after tax contribution, in return for a defined benefit paid by the Company generally over a fifteen year period after ten yearsof participation in the plan or such later date as elected by the participant. In June 2003, the Company amended the SEIP plan, so as not to allow newparticipants or the purchase of additional deferral units by existing participants.Pension PlanThe Company has a defined benefit pension plan, referred to as the Worldwide Executive Benefit (“WEB”), covering certain executives in the U.S. andforeign countries. The WEB is designed to integrate with government sponsored and local benefits and provide a monthly benefit to vice presidents uponretirement from the Company. Each year a plan participant accrued and was fully vested in one-twentieth of the targeted benefits expressed as a percentage setby the Company for that year. Upon retirement, a participant receives a monthly benefit payment equal to the sum of the percentages accrued over suchparticipant’s term of employment, up to a maximum of 20 years, multiplied by the participant’s highest average monthly salary during the 36 consecutivemonths in the final 72 months of active full-time employment through June 2003. In June 2003, the Company froze the WEB, so as to not allow newparticipants, future accruals and future salary increases.Accounting for Deferred Compensation and Pension PlansDuring fiscal 2013, due to the change in the discount rate from 3.79% to 3.12%, the Company recorded an increase in deferred compensation andpension plan liabilities of $7.5 million, a decrease in accumulated other comprehensive income of $4.6 million and a net increase of $2.9 million in deferredincome tax assets.During fiscal 2012, due to the change in the discount rate from 4.94% to 3.79%, the Company recorded an increase in deferred compensation andpension plan liabilities of $8.8 million, a decrease in accumulated other comprehensive income of $5.6 million and a net increase of $3.2 million in deferredincome tax assets. F-26 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Deferred Compensation PlanThe following tables reconcile the benefit obligation for the deferred compensation plans: Year Ended April 30, 2013 2012 2011 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $78,479 $70,319 $64,890 Service cost — — 137 Interest cost 2,868 3,346 3,495 Plan participants’ contributions with interest — — 65 Actuarial loss 9,420 9,885 6,764 Benefits paid (5,205) (5,071) (5,032) Benefit obligation, end of year 85,562 78,479 70,319 Less: current portion of benefit obligation (5,182) (4,959) (3,682) Non-current benefit obligation $80,380 $73,520 $66,637 The components of net periodic benefits costs are as follows: Year Ended April 30, 2013 2012 2011 (in thousands) Service cost $— $— $137 Interest cost 2,868 3,346 3,495 Amortization of actuarial loss 2,357 1,374 422 Net periodic benefit cost $5,225 $4,720 $4,054 The weighted-average assumptions used in calculating the benefit obligations were as follows: Year Ended April 30, 2013 2012 2011 Discount rate, beginning of year 3.79% 4.94% 5.61% Discount rate, end of year 3.12% 3.79% 4.94% Rate of compensation increase 0.00% 0.00% 0.00% F-27 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Pension PlanThe following tables reconcile the benefit obligation for the pension plan: Year Ended April 30, 2013 2012 2011 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $4,214 $3,952 $3,630 Interest cost 154 189 197 Actuarial loss 426 289 307 Benefits paid (258) (216) (182) Benefit obligation, end of year 4,536 4,214 3,952 Less: current portion of benefit obligation (232) (212) (137) Non-current benefit obligation $4,304 $4,002 $3,815 The components of net periodic benefits costs are as follows: Year Ended April 30, 2013 2012 2011 (in thousands) Interest cost $154 $189 $197 Amortization of actuarial loss (gain) 18 47 (2) Net periodic benefit cost $172 $236 $195 The weighted-average assumptions used in calculating the benefit obligations were as follows: Year Ended April 30, 2013 2012 2011 Discount rate, beginning of year 3.79% 4.94% 5.61% Discount rate, end of year 3.12% 3.79% 4.94% Rate of compensation increase 0.00% 0.00% 0.00% Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as follows: Year Ending April 30, DeferredCompensationPlans PensionBenefits (in thousands) 2014 $6,602 $313 2015 6,515 319 2016 6,789 320 2017 6,520 316 2018 6,184 274 2019-2023 30,853 1,335 F-28 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 International Retirement PlansThe Company also maintains various retirement plans and other miscellaneous deferred compensation arrangements in nine foreign jurisdictions. Theaggregate of the long-term benefit obligation accrued at April 30, 2013 and 2012 is $3.6 million for 221 participants and $2.8 million for 188 participants,respectively. The Company’s contribution to these plans was $1.1 million in both fiscal 2013 and 2012.Executive Capital Accumulation PlanThe Company’s Executive Capital Accumulation Plan and similar plans in Asia Pacific and Canada (collectively “ECAP”), are intended to providecertain employees an opportunity to defer salary and/or bonus on a pre-tax basis or make an after-tax contribution. In addition, the Company, under itsincentive plans, makes discretionary contributions into the ECAP and such contributions may be granted to key employees annually based on the employee’sperformance. Certain key management may also receive Company ECAP contributions upon commencement of employment. The Company amortizes thesecontributions on a straight-line basis as they vest, generally over a four year period. Participants have the ability to allocate their deferrals among a number ofinvestment options and may receive their benefits at termination, retirement or “in service” either in a lump sum or in quarterly installments over five, ten orfifteen years. The ECAP amounts that are expected to be paid to employees over the next 12 months are classified as a current liability included incompensation and benefits payable on the accompanying balance sheet.The Company made contributions to the ECAP during fiscal 2013, 2012 and 2011, of $20.0 million, $15.8 million and $0.4 million, respectively.The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a correspondingcharge (or credit) to compensation and benefits costs. During fiscal 2013, 2012 and 2011, the deferred compensation liability increased; therefore, theCompany recognized compensation expense of $6.3 million, $0.9 million and $6.7 million, respectively.Changes in the ECAP liability were as follows: Year Ended April 30, 2013 2012 (in thousands) Balance, beginning of year $71,134 $67,214 Employee contributions 1,943 3,483 Amortization of employer contributions 9,010 7,423 Gain on investment 6,281 884 Employee distributions (12,244) (7,661) Exchange rate translations (211) (209) Balance, end of year 75,913 71,134 Less: current portion (4,537) (8,855) Non-current portion, end of year $71,376 $62,279 As of April 30, 2013 and 2012, the unamortized portion of the Company contributions to the ECAP was $23.3 million and $11.5 million, respectively. F-29 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Defined Contribution PlanThe Company has a defined contribution plan (“401(k) plan”) for eligible employees. Participants may contribute up to 50% of their base compensationas defined in the plan agreement. In addition, the Company has the option to make matching contributions. The Company did not make a matchingcontribution for fiscal 2013 and fiscal 2012 but did make a $1.2 million matching contribution for fiscal 2011.Company Owned Life InsuranceThe Company purchased COLI contracts insuring employees eligible to participate in the deferred compensation and pension plans as a means offunding benefits under such plans. The gross CSV of these contracts of $159.2 million and $151.1 million is offset by outstanding policy loans of $73.3million in the accompanying consolidated balance sheets as of April 30, 2013 and 2012, respectively. Total death benefits payable, net of loans under COLIcontracts, were $212.7 million and $202.9 million at April 30, 2013 and 2012, respectively. Management intends to use the future death benefits from theseinsurance contracts to fund the deferred compensation and pension arrangements; however, there may not be a direct correlation between the timing of thefuture cash receipts and disbursements under these arrangements. The CSV value of the underlying COLI investments increased by $6.5 million and $6.3million during the year ended April 30, 2013 and 2012, respectively, recorded as a decrease in compensation and benefits expense. In addition, certain policiesare held in trusts to provide additional benefit security for the deferred compensation and pension plans, excluding the WEB. As of April 30, 2013, COLIcontracts with a net CSV of $64.4 million and death benefits payable, net of loans, of $123.9 million were held in trust for these purposes. 7.Restructuring Charges, NetDuring fiscal 2013, the Company implemented restructuring plans in order to align its cost structure to anticipated revenue levels and to integrate PDINinth House (“PDI”) in order to eliminate redundant positions and consolidate premises. This resulted in restructuring charges of $22.8 million againstoperations during fiscal 2013 of which $16.3 million relates to severance and $6.5 million relates to consolidation of premises.During fiscal 2012 and 2011, the Company increased previously recorded restructuring charges resulting in restructuring costs of $0.9 million and$2.1 million, respectively. The increase in restructuring expense primarily relates to the inability to sublease space, which was included in the originalestimate.Changes in the restructuring liability are as follows: Severance Facilities Total (in thousands) Liability as of April 30, 2011 $978 $3,943 $4,921 Restructuring (reductions) charges, net (324) 1,253 929 Reductions for cash payments (586) (2,324) (2,910) Exchange rate fluctuations (30) (140) (170) Liability as of April 30, 2012 38 2,732 2,770 Restructuring charges, net(1) 16,369 6,488 22,857 Reductions for cash payments, net of recoveries (11,561) (2,437) (13,998) Exchange rate fluctuations (27) (54) (81) Liability as of April 30, 2013 $4,819 $6,729 $11,548 F-30 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 (1)During fiscal 2013, the Company recovered $1.0 million from a legal settlement (related to premises) attributable to a previous restructuring action.As of April 30, 2013 and 2012, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balance sheets,except for $2.4 million and $1.4 million, respectively, of facilities costs which primarily relate to commitments under operating leases, net of sublease income,which are included in other long-term liabilities and will be paid over the next five years.The restructuring liability by segment is summarized below: April 30, 2013 Severance Facilities Total (in thousands) Executive Recruitment North America $918 $659 $1,577 Europe, Middle East and Africa (“EMEA”) 678 856 1,534 Asia Pacific — 69 69 Total Executive Recruitment 1,596 1,584 3,180 LTC 2,497 3,956 6,453 Futurestep 277 1,189 1,466 Corporate 449 — 449 Liability as of April 30, 2013 $4,819 $6,729 $11,548 April 30, 2012 Severance Facilities Total (in thousands) Executive Recruitment North America $ — $43 $43 EMEA 38 1,780 1,818 Total Executive Recruitment 38 1,823 1,861 Futurestep — 909 909 Liability as of April 30, 2012 $38 $2,732 $2,770 8.Income TaxesThe provision for income taxes is based on reported income before income taxes. Deferred income tax assets and liabilities reflect the impact of temporarydifferences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes, as measuredby applying the currently enacted tax laws. F-31 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 The provision (benefit) for domestic and foreign income taxes was as follows: Year Ended April 30, 2013 2012 2011 (in thousands) Current income taxes: Federal $4,100 $4,173 $7,606 State 1,237 1,609 5,714 Foreign 8,759 12,670 11,826 Current provision for income taxes 14,096 18,452 25,146 Deferred income taxes: Federal (423) 7,281 (2,442) State 1,895 3,508 830 Foreign 1,069 (890) 9,158 Deferred provision for income taxes 2,541 9,899 7,546 Total provision for income taxes $16,637 $28,351 $32,692 The domestic and foreign components of income from continuing operations before domestic and foreign income and other taxes and equity in earningsof unconsolidated subsidiaries were as follows: Year Ended April 30, 2013 2012 2011 (in thousands) Domestic $15,915 $42,375 $56,741 Foreign 31,905 38,429 32,963 Income before provision for income taxes andequity in earnings of unconsolidated subsidiaries $47,820 $80,804 $89,704 The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows: Year Ended April 30, 2013 2012 2011 U.S. federal statutory income tax rate 35.0% 35.0% 35.0% Foreign source income, net of credits generated 0.6 3.0 1.9 Foreign tax rates differential (3.7) (2.9) (3.8) COLI increase, net (4.8) (2.7) (2.8) Repatriation of foreign earnings (3.2) (1.7) 0.1 State income taxes, net of federal benefit 5.7 4.0 4.6 Adjustments for valuation allowance (0.4) (0.7) 4.8 Non-deductible business acquisition transaction costs 1.3 — — Expense disallowances 1.1 0.8 0.5 Change in uncertain tax positions 1.9 — (2.3) Other 1.3 0.3 (1.6) Effective income tax rate 34.8% 35.1% 36.4% F-32 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Components of deferred tax assets and liabilities are as follows: April 30, 2013 2012 (in thousands) Deferred tax assets: Deferred compensation $64,791 $63,133 Loss and credit carryforwards 42,984 33,355 Allowance for doubtful accounts 1,804 1,388 Deferred rent 6,366 6,901 Deferred revenue 1,646 — Reserves and accruals 7,613 3,773 Other 4,556 4,284 Gross deferred tax assets 129,760 112,834 Deferred tax liabilities: Intangibles (21,560) (11,103) Property and equipment (6,747) (4,527) Prepaid expenses (4,184) — Other (2,824) (3,995) Gross deferred tax liabilities (35,315) (19,625) Valuation allowances (27,731) (25,089) Net deferred tax asset $66,714 $68,120 Changes to the valuation allowance balances are recorded through the provision for income taxes in the respective year.The deferred tax amounts have been classified in the consolidated balance sheets as follows: April 30, 2013 2012 (in thousands) Current: Deferred tax assets $12,561 $15,868 Deferred tax liabilities (9,050) (5,038) Current deferred tax asset 3,511 10,830 Non-current: Deferred tax asset 117,199 96,966 Deferred tax liabilities (26,265) (14,587) Valuation allowance (27,731) (25,089) Non-current deferred tax asset, net 63,203 57,290 Net deferred tax assets $66,714 $68,120 F-33 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.Management believes uncertainty exists regarding the realizability of certain operating losses and has, therefore, established a valuation allowance for thisportion of the deferred tax asset. Realization of the deferred income tax asset is dependent on the Company generating sufficient taxable income of theappropriate nature in future years. Although realization is not assured, management believes that it is more likely than not that the net deferred income tax assetwill be realized.As of April 30, 2013, the Company has U.S. federal net operating loss carryforwards of $20.4 million from the acquisition of PDI, which will begin toexpire in 2028. The utilization of these losses is subject to an annual limitation as defined under Section 382 of the Internal Revenue Code. The Company alsohas U.S. federal foreign tax credit carryforwards of $3.2 million, which will begin to expire in 2023. The Company has state net operating loss carryforwardsof $13.2 million, which will begin to expire in 2014. The Company also has foreign net operating loss carryforwards of $108.0 million, which will begin toexpire in 2014.The Company has a plan to distribute a portion of the cash held in foreign locations to the United States and has recorded a $0.9 million deferred taxliability for additional taxes that would arise in connection with these distributions. Other than these amounts, the Company has not provided for U.S. taxes orforeign withholding taxes on approximately $119.0 million of undistributed earnings of its foreign subsidiaries as such earnings are intended to be reinvestedindefinitely. If a distribution of these earnings were to be made, the Company might be subject to both foreign withholding taxes and U.S. income taxes, net ofany allowable foreign tax credits or deductions. An estimate of these taxes, however, is not practicable.The Company or one of its subsidiaries files federal and state income tax returns in the United States as well as foreign jurisdictions. These income taxreturns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities. In October 2012, the IRS commenced anexamination of the Company’s U.S. federal income tax returns for the tax years ended April 30, 2011 and 2010. The Company’s income tax returns are nototherwise under examination in any material jurisdiction. The statute of limitations varies by jurisdiction in which the Company operates. With fewexceptions, however, the Company’s tax returns for years prior to fiscal year 2008 are no longer open to examination by tax authorities (including U.S. federal,state and foreign).Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected to be taken, on a tax return and theamount of benefits recognized for financial reporting purposes. As of April 30, 2013, the Company had a liability of $2.0 million for unrecognized taxbenefits. A reconciliation of the beginning and ending balances of the gross unrecognized tax benefits is as follows: Year Ended April 30, 2013 2012 2011 (in thousands) Unrecognized tax benefits, beginning of year $— $ — $3,532 Settlement with tax authority — — (1,473) Additions based on tax positions related to the current year 1,454 — — Additions based on tax positions related to prior years 569 — 72 Reductions due to lapse of statute of limitations — — (2,131) Unrecognized tax benefits, end of year $2,023 $— $— F-34 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The liability forunrecognized tax benefits is included in income taxes payable in the consolidated balance sheets. The full amount of unrecognized tax benefits would impactthe effective tax rate if recognized. The total liability for unrecognized tax benefits is not expected to change within the next twelve months. 9.Property and EquipmentProperty and equipment include the following: April 30, 2013 2012 (in thousands) Computer equipment and software(1) $98,538 $75,096 Leasehold improvements 41,884 42,319 Furniture and fixtures 31,805 29,126 Automobiles 1,725 1,870 173,952 148,411 Less: accumulated depreciation and amortization (120,324) (98,603) Property and equipment, net $53,628 $49,808 (1)Depreciation expense for capitalized software was $4.0 million, $2.5 million and $2.3 million during fiscal 2013, 2012 and 2011, respectively. 10.Long-Term DebtThe Company entered into a new senior unsecured revolving Credit Agreement (the “Facility”) on January 18, 2013, which provides for an aggregateavailability up to $75.0 million with an option to increase the facility by an additional $50.0 million, subject to lender consent, and a $15.0 million sub-limitfor letters of credit. The facility matures on January 18, 2018 and replaces the senior secured Loan Agreement dated as of March 14, 2011 (the “PreviousFacility”), which was terminated on the same date the Facility was entered into with the exception of the letters of credits that are still outstanding under thePrevious Facility. Borrowings under the Facility bear interest, at the election of the Company, at the London Interbank Offered Rate (“LIBOR”) plus theapplicable margin or the base rate plus the applicable margin. The base rate is the highest of (i) the published prime rate, (ii) the federal funds rate plus 1.50%,or (iii) one month LIBOR plus 1.50%. The applicable margin is based on a percentage per annum determined in accordance with a specified pricing grid basedon the total funded debt to adjusted EBITDA ratio. For LIBOR loans, the applicable margin will range from 0.50% to 1.50% per annum, while for base rateloans the applicable margin will range from 0.00% to 0.25% per annum. The Company is required to pay a quarterly commitment fee of 0.25% to 0.35% onthe Facility’s unused commitments based on the Company’s funded debt to adjusted EBITDA ratio. The financial covenants include a maximum consolidatedfunded debt to adjusted EBITDA ratio and a minimum adjusted EBITDA. As of April 30, 2013, the Company is in compliance with its financial covenants.In addition, there is a domestic liquidity requirement that the Company maintain $50.0 million in unrestricted cash and/or marketable securities (excludingany marketable securities that are held in trust for the settlement of the Company’s obligation under certain deferred compensation plans) as a condition toconsummating permitted acquisitions, paying dividends to our shareholders and share repurchases of our common stock. F-35 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 As of April 30, 2013 and 2012, the Company had no borrowings under the Facility or Previous Facility. At April 30, 2013 and 2012, there was $2.7million and $2.9 million, respectively, of standby letters of credit issued under the Previous Facility. The Company was required to maintain $2.9 million inrestricted cash to provide collateral for the standby letters of credit that remain outstanding under the Previous Facility as of April 30, 2013. As of April 30,2012, under the Previous Facility, the Company had $10.0 million of restricted cash. There is no restricted cash requirement under the Facility.The Company has outstanding borrowings against the CSV of COLI contracts of $73.3 million at April 30, 2013 and 2012. CSV reflected in theaccompanying balance sheet is net of the outstanding borrowings, which are secured by the CSV of the life insurance policies. Principal payments are notscheduled and interest is payable at least annually at various fixed and variable rates ranging from 4.76% to 8.00%. 11.Business SegmentsIn the first quarter of fiscal 2013, the Company changed the composition of its global business segments. Given the importance to the Company’sstrategy and development of financial and operational metrics for the LTC business services, the Company’s chief operating decision maker (“CODM”) beganto regularly make resource allocation decisions and assess performance separately for Executive Recruitment and LTC. Therefore, under the new reportingformat Executive Recruitment and LTC are reported separately. Revenues are directly attributed to a segment and expenses not directly associated with aspecific segment are allocated based on the most relevant measures applicable, including revenues, headcount and other factors. Operating results for fiscal2012 and 2011 have been revised to conform to the new segment reporting. During fiscal 2012 and 2011, the Company also revised the presentation ofexpenses that are not directly associated with Futurestep resulting in an increase in Futurestep’s operating income of $2.2 million and $2.0 million,respectively, offset by a decrease in Executive Recruitment operating income.The Company currently operates in three global businesses: Executive Recruitment, LTC and Futurestep. The Executive Recruitment segment focuses onrecruiting Board of Director and C-level positions, in addition to research-based interviewing and onboarding solutions, for clients predominantly in theconsumer, financial services, industrial, life sciences/healthcare provider and technology industries. LTC provides a comprehensive blend of leadership andtalent management solutions including both consulting services and product revenue. Service and product offerings in this segment include: LeadershipStrategy, Board, CEO and Top Team Effectiveness, Succession Planning, Assessment, Leadership and Employee Development, Diversity and Inclusion aswell as a rich library of online and blended learning modules. Futurestep is a global industry leader in high impact enterprise-wide consulting and recruitmentsolutions. Their portfolio of services includes recruitment process outsourcing, talent acquisition and management consulting services, project-basedrecruitment, mid-level recruitment and interim professionals. The Executive Recruitment business segment is managed by geographic regional leaders. LTC’sand Futurestep’s worldwide operations are managed by their respective Chief Executive Officers. The Executive Recruitment geographic regional leaders, theChief Executive Officers of LTC and Futurestep report directly to the Chief Executive Officer of the Company. The Company also operates a Corporatesegment to record global expenses of the Company.The Company evaluates performance and allocates resources based on the CODM’s review of (1) fee revenue and (2) earnings before interest, taxes,depreciation and amortization (“EBITDA”), which is further adjusted to exclude restructuring charges, transaction and integration costs, and certainseparation costs (adjusted EBITDA). The accounting policies for the reportable segments are the same as those described in the summary of significantaccounting policies, except that unusual or infrequent items are excluded from adjusted EBITDA. F-36 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Financial highlights by business segment are as follows: Year Ended April 30, 2013 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Fee revenue $290,317 $128,807 $73,221 $30,134 $522,479 $168,115 $122,237 $— $812,831 Total revenue $305,993 $132,988 $75,359 $30,491 $544,831 $176,566 $128,304 $— $849,701 Net income $33,293 Other income, net (6,309) Interest expense, net 2,365 Income tax provision 16,637 Equity in earnings of unconsolidatedsubsidiaries, net (2,110) Operating income (loss) $58,832 $9,173 $6,973 $5,987 $80,965 $6,424 $10,975 $(54,488) 43,876 Depreciation and amortization 4,726 2,347 1,546 372 8,991 6,012 1,180 2,821 19,004 Other income (loss), net 466 95 200 32 793 (75) 51 5,540 6,309 Equity in earnings of unconsolidatedsubsidiaries, net 434 — — — 434 — — 1,676 2,110 EBITDA 64,458 11,615 8,719 6,391 91,183 12,361 12,206 (44,451) 71,299 Restructuring charges,net 3,583 3,982 629 — 8,194 10,198 3,527 938 22,857 Transaction and integration costs — — — — — — — 3,106 3,106 Separation costs — 516 — — 516 — — — 516 Adjusted EBITDA $68,041 $16,113 $9,348 $6,391 $99,893 $22,559 $15,733 $(40,407) $97,778 Identifiable assets(2) $209,079 $148,491 $72,303 $23,616 $453,489 $248,611 $93,331 $319,798 $1,115,229 Long-lived assets(2) $19,167 $6,312 $2,784 $894 $29,157 $10,383 $2,523 $11,565 $53,628 Goodwill(2) $54,513 $50,264 $972 $— $105,749 $119,090 $32,454 $— $257,293 F-37 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Year Ended April 30, 2012 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate (1) Consolidated (in thousands) Fee revenue $305,717 $141,409 $82,230 $31,846 $561,202 $115,407 $113,896 $— $790,505 Total revenue $323,116 $146,573 $84,279 $32,517 $586,485 $120,281 $119,993 $— $826,759 Net income $54,303 Other loss, net 271 Interest expense, net 1,791 Income tax provision 28,351 Equity in earnings of unconsolidatedsubsidiaries, net (1,850) Operating income (loss) $75,580 $13,288 $11,859 $9,207 $109,934 $16,360 $8,445 $(51,873) 82,866 Depreciation and amortization 4,624 1,881 1,268 367 8,140 2,613 1,070 2,194 14,017 Other income (loss), net 5 (149) 60 (61) (145) 146 41 (313) (271) Equity in earnings of unconsolidatedsubsidiaries, net 159 — — — 159 — — 1,691 1,850 EBITDA 80,368 15,020 13,187 9,513 118,088 19,119 9,556 (48,301) 98,462 Restructuring charges, net (15) 897 — (99) 783 — 146 — 929 Separation costs — — — — — — 920 999 1,919 Adjusted EBITDA $80,353 $15,917 $13,187 $9,414 $118,871 $19,119 $10,622 $(47,302) $101,310 Identifiable assets(2) $171,641 $140,980 $76,027 $22,957 $411,605 $83,576 $90,560 $428,948 $1,014,689 Long-lived assets(2) $22,288 $7,542 $3,938 $955 $34,723 $2,648 $3,420 $9,017 $49,808 Goodwill(2) $55,608 $50,664 $972 $— $107,244 $36,251 $32,843 $— $176,338 F-38 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Year Ended April 30, 2011 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate (1) Consolidated (in thousands) Fee revenue $306,180 $137,398 $81,951 $29,177 $554,706 $99,352 $90,191 $— $744,249 Total revenue $323,251 $141,746 $83,711 $29,739 $578,447 $101,852 $95,952 $— $776,251 Net income $58,874 Other income, net (6,454) Interest expense, net 2,535 Income tax provision 32,692 Equity in earnings of unconsolidatedsubsidiaries, net (1,862) Operating income (loss) $70,782 $12,768 $13,172 $7,539 $104,261 $5,138 $6,955 $(30,569) 85,785 Depreciation and amortization 3,956 1,858 919 335 7,068 2,801 926 1,876 12,671 Other income (loss), net 319 (156) 186 56 405 121 11 5,917 6,454 Equity in earnings of unconsolidatedsubsidiaries, net — — — — — — — 1,862 1,862 EBITDA 75,057 14,470 14,277 7,930 111,734 8,060 7,892 (20,914) 106,772 Restructuring charges, net (340) 2,569 — — 2,229 — (99) — 2,130 Adjusted EBITDA $74,717 $17,039 $14,277 $7,930 $113,963 $8,060 $7,793 $(20,914) $108,902 Identifiable assets(2) $177,774 $156,485 $77,694 $21,143 $433,096 $79,774 $81,544 $377,266 $971,680 Long-lived assets(2) $22,249 $5,319 $2,633 $808 $31,009 $1,559 $2,410 $8,164 $43,142 Goodwill(2) $57,319 $53,908 $972 $— $112,199 $36,251 $35,502 $— $183,952 (1)The Company recorded an adjustment to the fair value of contingent consideration for a prior acquisition of $2.2 million and $4.9 million during theyears ended April 30, 2012 and 2011, respectively. (2)As of the end of the fiscal year.Fee revenue attributed to an individual customer or country, other than the United States, did not account for more than 10% of the total in fiscal year2013, 2012 or 2011. Fee revenue classified by country in which the Company derives revenues are as follows: Year Ended April 30, 2013 2012 2011 (in thousands) United States $416,987 $383,955 $365,919 Other countries 395,844 406,550 378,330 Total fee revenue $812,831 $790,505 $744,249 F-39 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Long-lived assets, excluding financial instruments and tax assets, classified by controlling countries over 10% of the total are as follows: Year Ended April 30, 2013 2012 2011 (in thousands) United States(1) $40,200 $33,559 $30,539 United Kingdom 2,982 3,741 4,323 Other countries 10,446 12,508 8,280 Total long-lived assets $53,628 $49,808 $43,142 (1)Includes Corporate long-lived assets 12.AcquisitionsFollowing is a summary of acquisitions the Company completed during the periods indicated (no acquisition completed in fiscal 2011): Year Ended April 30, 2013(1)(2) 2012(3) (in thousands) Assets acquired $32,784 $137 Intangibles acquired 42,800 — Liabilities acquired 31,506 38 Net assets acquired 44,078 99 Purchase price 126,917 442 Goodwill $82,839 $343 Acquisition costs $2,710 $— Goodwill by segment: Executive Recruitment $— $— LTC 82,839 — Futurestep — 343 Goodwill $82,839 $343 (1)On December 31, 2012, the Company acquired all outstanding shares of Minneapolis-based PDI, a leading, globally-recognized provider of leadershipassessment and development solutions, for $92.5 million, net of cash acquired, which includes $14.9 million in contingent consideration, for theachievement of certain post-closing synergies. As of April 30, 2013, the contingent consideration is included in other accrued liabilities in theaccompanying consolidated balance sheets, which is payable, upon reaching post-closing synergies up to $8.0 million. The Company expects to pay theentire amount of the contingent consideration during the first quarter of fiscal 2014. PDI has been in business for over 45 years and operates in morethan 20 global locations. The acquisition strengthens and expands the Company’s talent management offerings through adding complementary productand service offerings and rich intellectual property. Actual results of operations of PDI are included in the Company’s consolidated financial statementsfrom December 31, 2012, the effective date of the acquisition, and include $28.2 million in fee revenue during fiscal 2013. F-40 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 (2)On September 1, 2012, the Company acquired all outstanding membership interests of Global Novations, LLC, (“Global Novations”) a leadingprovider of diversity and inclusion and leadership development solutions, for $34.5 million in cash, net of cash acquired. Global Novations has morethan 150 offerings designed to develop leaders, enable high-performing cultures and deliver business outcomes for its clients. Key diversity andinclusion and leadership offerings include consulting, training and education and e-learning. Global Novations has more than 30 years of experience andhas served clients in more than 40 countries, including more than half of the Fortune 100. The acquisition strengthens and expands the Company’stalent management offerings through adding complementary product and service offerings and rich intellectual property. Actual results of operations ofGlobal Novations are included in the Company’s consolidated financial statements from September 1, 2012, the effective date of the acquisition, andinclude $17.4 million in fee revenue during fiscal 2013. (3)On March 1, 2012, the Company purchased Avature USA Recruiting Business and Avature Argentina Recruiting Business. Avature USA RecruitingBusiness and Avature Argentina Recruiting Business are engaged in providing back-office functions including, database candidate searching, dataprocessing, filling forms, call-center activities, and other administrative functions. As a result of these acquisitions, the Company obtained the rights tocertain client contracts from Avature USA, license agreements to use the Customer Relationship Management software, employees of Avature Argentinaengaged in the recruiting business and the office lease and equipment in Argentina used in the recruiting business. Actual results of operations of AvatureUSA Recruiting Business and Avature Argentina Recruiting Business are included in the Company’s consolidated financial statements from March 1,2012, the effective date of the acquisition.The aggregate purchase price for PDI and Global Novations was allocated on a preliminary basis to the assets acquired and liabilities assumed on theirestimated fair values at the date of acquisition. As of April 30, 2013, these allocations remain preliminary as it relates to, among other things, items such asworking capital adjustments and income taxes. The measurement period for purchase price allocation ends as soon as information on the facts andcircumstances becomes available, not to exceed 12 months. Adjustments to purchase price allocation may require a recasting of the amounts allocated togoodwill retroactive to the period in which the acquisitions occurred. Tax deductible goodwill from fiscal 2013 acquisitions amounted to $20.5 million. 13.Goodwill and Intangible AssetsChanges in the carrying value of goodwill by reportable segment were as follows: Executive Recruitment NorthAmerica EMEA AsiaPacific Subtotal LTC Futurestep Consolidated (in thousands) Balance as of April 30, 2011 $57,319 $53,908 $972 $112,199 $36,251 $35,502 $183,952 Additions — — — — — 343 343 Deletion(1) (586) — — (586) — — (586) Exchange rate fluctuations (1,125) (3,244) — (4,369) — (3,002) (7,371) Balance as of April 30, 2012 55,608 50,664 972 107,244 36,251 32,843 176,338 Additions — — — — 82,839 — 82,839 Exchange rate fluctuations (1,095) (400) — (1,495) — (389) (1,884) Balance as of April 30, 2013 $54,513 $50,264 $972 $105,749 $119,090 $32,454 $257,293 (1)During fiscal 2012, the Company sold a majority interest in a previously consolidated subsidiary, requiring the Company to deconsolidate thesubsidiary and reduce goodwill by $0.6 million. F-41 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Intangible assets include the following: Weighted-AverageAmortization Period April 30, 2013 April 30, 2012 (in thousands) Gross AccumulatedAmortization Net Gross AccumulatedAmortization Net Amortized intangible assets: Customer lists 10 years $34,899 $(4,887) $30,012 $6,399 $(2,748) $3,651 Proprietary databases 10 years 4,256 (1,500) 2,756 4,256 (1,074) 3,182 Intellectual property 20 years 22,900 (3,887) 19,013 11,400 (2,241) 9,159 Trademarks(1) 4 years 3,686 (1,331) 2,355 1,186 (698) 488 Non-compete agreements 5 years 810 (510) 300 510 (367) 143 Total 11 years $66,551 $(12,115) 54,436 $23,751 $(7,128) 16,623 Unamortized intangible assets: Trademarks 3,800 3,800 Exchange rate fluctuations (49) (10) Intangible assets $58,187 $20,413 (1)During fiscal 2011, the Company wrote-off a trademark no longer in use with a net book value of $0.9 million, which is included as a component ofgeneral and administrative expenses in the accompanying consolidated statements of income.Amortization expense for amortized intangible assets was $5.0 million, $2.2 million and $2.4 million during fiscal 2013, 2012 and 2011, respectively.Estimated annual amortization expense related to amortizing intangible assets is as follows: Year Ending April 30, EstimatedAnnualAmortizationExpense (in thousands) 2014 $8,592 2015 8,156 2016 7,017 2017 5,696 2018 5,008 Thereafter 19,967 $54,436 All amortizable intangible assets will be fully amortized by the end of fiscal 2031. 14.Commitments and ContingenciesLease CommitmentsThe Company leases office premises and certain office equipment under leases expiring at various dates through 2026. Total rental expense during fiscal2013, 2012 and 2011 amounted to $38.4 million, $35.5 million and $32.4 million, respectively. F-42 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 Future minimum commitments under non-cancelable operating leases with lease terms in excess of one year excluding commitments accrued in therestructuring liability are as follows: Year Ending April 30, Lease Commitments (in thousands) 2014 $44,096 2015 37,623 2016 27,833 2017 20,893 2018 16,788 Thereafter 66,095 $213,328 Employment AgreementsAs of April 30, 2013, the Company has employment agreements with certain of its executive officers that provide benefits if these executives areterminated or resign under certain limited circumstances. Though the Company could, on a case by case basis, agree to make termination payments to otheremployees and executive officers, the maximum aggregate amount payable under the agreements referenced above, is $8.2 million in the absence of a change ofcontrol and $10.8 million for terminations or resignations that occur within 12 months from the change of control. In certain cases, executives’ outstandingoptions will immediately vest and remain exercisable for periods ranging from three months to their original expiration date following termination ofemployment.The Company has a policy of entering into offer letters of employment or letters of promotion with vice presidents which provide for an annual basesalary and discretionary and incentive bonus payments. Certain key vice presidents who typically have been employed by the Company for several years mayalso have a standard form employment agreement. In addition, the Company has a severance policy for all of its vice presidents that provides for minimumpayments based on length of service. Upon termination without cause, the Company is required to pay the greater of the amount due under the employmentagreement, if any, or the severance policy. The Company also requires its vice presidents to agree in their employment letters and their employment agreement,if applicable, not to compete with the Company both during the term of their employment, and for a period of up to two years after their employment ends. Fora period of two years after their employment with the Company, former vice presidents are prohibited from soliciting employees of the Company foremployment outside of the Company.LitigationFrom time to time, the Company has been and is involved in litigation incidental to its business. The Company is currently not a party to any litigationwhich, if resolved adversely against the Company, would, in the opinion of management, after consultation with legal counsel, have a material adverse effecton the Company’s business, financial position or results of operations. F-43 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2013 15.Quarterly Results (Unaudited)The following table sets forth certain unaudited consolidated statement of income data for the quarters in fiscal 2013 and 2012. The unaudited quarterlyinformation has been prepared on the same basis as the annual financial statements and, in management’s opinion, includes all adjustments necessary topresent fairly the information for the quarters presented. Quarters Ended Fiscal 2013 Fiscal 2012 April 30(1) January 31 October 31 July 31 April 30 January 31 October 31 July 31 (in thousands, except per share data) Fee revenue $227,902 $202,004 $196,231 $186,694 $198,087 $185,951 $200,136 $206,331 Operating income $15,392 $8,706 $2,769 $17,009 $15,352 $16,165 $25,407 $25,942 Net income $12,197 $9,482 $1,196 $10,418 $12,028 $11,717 $15,147 $15,411 Net income per share: Basic $0.26 $0.20 $0.03 $0.22 $0.26 $0.25 $0.33 $0.34 Diluted $0.25 $0.20 $0.03 $0.22 $0.25 $0.25 $0.32 $0.33 (1)During the three months ended April 30, 2013, the Company implemented a restructuring plan to continue to integrate PDI in order to eliminateredundant positions and consolidate premises. This resulted in restructuring charges, net of recoveries of $2.9 million against operations during thethree months ended April 30, 2013. 16.Supplemental Balance Sheet InformationOther accrued liabilities included deferred revenue of $33.8 million and $13.5 million as of April 30, 2013 and 2012, respectively. 17.Subsequent EventsDuring June 2013, the Company paid contingent consideration to the selling shareholders of PDI in the amount of $15.0 million, as required under thepurchase and sale agreement because the required post-closing synergies were accomplished. F-44 KORN/FERRY INTERNATIONAL AND SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSApril 30, 2013 Column A Column B Column C Column D Column E Additions Description Balance atBeginningof Period Charges toCost andExpenses Charges toOtherAccounts(1) Deductions(2) Balance atEnd ofPeriod (in thousands) Allowance for doubtful accounts: Year Ended April 30, 2013 $9,437 $6,748 $(118) $(6,970) $9,097 Year Ended April 30, 2012 $9,977 $5,732 $(220) $(6,052) $9,437 Year Ended April 30, 2011 $5,983 $7,650 $413 $(4,069) $9,977 Deferred tax asset valuation allowance: Year Ended April 30, 2013 $25,089 $5,678 $— $(3,036) $27,731 Year Ended April 30, 2012 $26,168 $443 $— $(1,522) $25,089 Year Ended April 30, 2011 $21,037 $15,689 $— $(10,558) $26,168 (1)Exchange rate fluctuations. (2)Allowance for doubtful accounts represents accounts written-off, net of recoveries and deferred tax asset valuation represents release of prior valuationallowances. F-45 “As CEOs struggle with a wide array of issues – most immediately, the fight for relevancy and growth—Korn/Ferry is the bridge between a client’s business and talent strategies.” Gary D. Burnison President and Chief Executive Officer 2013 Annual Report7 Company informationStock listingKorn/Ferry International common stock is traded on the New York Stock Exchange under the symbol KFY.Annual meetingThe annual meeting of stockholders will be held at 8:00 a.m. PDT, September 26, 2013, at: InterContinental Los Angeles Century City2151 Avenue of the StarsLos Angeles, California 90067 USARegistrar & transfer agentFor address and changes, account consolidation, registration changes, stock holdings, and lost stock certificates, please contact:ComputershareP.O. Box 43006Providence, Rhode Island 02940 USADomestic: +1 800 622 6757 International: +1 781 575 4735 www.computershare.com/investorInvestor contactGregg Kvochak+1 310 556 8550Media contact Dan Gugler+1 310 226 26452013 Annual Report8 www.kor nfer r y.com The AmericasAtlantaBogotaBostonBuenos AiresCalgaryCaracasChicago CincinnatiDallasDurangoHoustonIrvineLimaLos AngelesMedellinMexico CityMiamiMinneapolisMonterreyMontrealNew YorkNorthern VirginiaPhiladelphiaPrincetonQuitoRio de Janeiro*San FranciscoSantiagoSao Paulo Scottsdale*StamfordTorontoVancouverWashington, DCAsia PacificAucklandBangaloreBeijingBrisbane*GuangzhouHong KongJakartaKuala LumpurMelbourneMumbaiNew DelhiSeoulShanghaiSingaporeSydneyTaipei TokyoWellingtonEurope, MiddleEast, and AfricaAbu Dhabi AmsterdamAthensBarcelona BratislavaBrusselsBudapestCasablanca**CopenhagenDubai DusseldorfFrankfurtGenevaHamburgHelsinki**IstanbulKiev**LondonLyonMadridMilanMoscow** MunichOsloParisStockholmTel Aviv**ViennaWarsawZurich* Satellite office** Alliance partnerOur locations worldwideKorn/Ferry International1900 Avenue of the Stars, Suite 2600, Los Angeles, California 90067 USATel: +1 310 552 1834 Fax: +1 310 553 6452www.kornferry.com
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