Korn Ferry
Annual Report 2015

Plain-text annual report

Where there’s talent, there’s Korn Ferry. 2015 Annual Report The right TALENT Aligned to the business STRATEGY Ignites UNIMAGINABLE SUCCESS for our clients 1 Maximizing leadership and talent to create true competitive advantage is a complex business. At Korn Ferry, it is our business. And while the breadth and depth of our expertise is vast, there is one constant. Whether it’s through attraction, development or engagement, we empower organizations to activate and accelerate their strategy through their people. Dear stockholders IN FISCAL 2015, KORN FERRY: • Achieved record fiscal year fee revenue of $1.028 billion, up almost 10% year-over-year at constant currency • Reported $1.76 of diluted earnings per share, up 19% year-over-year • Maintained our No. 1 position among the “Big 5” global search firms • Generated 42% of our revenue outside of Executive Recruitment • Integrated all of our developed and acquired intellectual property into a single assessment and development platform – Korn Ferry’s Four Dimensions of Leadership & Talent I recently asked Korn Ferry founders Richard Ferry and Lester Korn if they ever dreamed that the enterprise that bears their names and was founded nearly five decades ago would have the size, scale and reach it has today. Lester, with a sheepish smile, didn’t hesitate in answering: “Yes.” This fiscal year, we celebrate reaching the major milestone of becoming a $1 billion company, thanks to the expansion of our differentiating talent management offerings. The size of the business and our pace of growth, while admirable, are not what’s most important. That distinction belongs to all of our colleagues across the globe working together, rowing in unison to achieve a common purpose – delivering unimaginable outcomes for our clients through people strategies. Today, where there’s talent, there’s Korn Ferry – we are truly ubiquitous. To think about the lives we have changed is humbling. During the fiscal year, Korn Ferry placed nearly 35,000 professionals in a new job – that’s one every three and a half minutes. For decades, clients have trusted us to recruit leaders throughout the world. Today, we are their partner in designing and delivering people strategies that help them achieve their strategic goals. As a result of our efforts, 42% of our business is now generated from broader talent management-focused solutions outside of our flagship Executive Recruitment offering. In today’s complex, globalized business world, our clients are finding that growth is still incredibly difficult to sustain. To be relevant and meaningful to customers and clients, CEOs are increasingly demanding an engaged, motivated and productive workforce that can innovate, is highly agile and can drive growth across borders. For Korn Ferry, the opportunity this presents is enormous. CEOs have long claimed that people are their most competitive asset – but all too often, that’s been just talk. Today, leaders who don’t truly embrace this view and are unable to reward and inspire their people to innovate and disrupt, will be at a distinct disadvantage. Through advances in technology, joined with data and decades of statistically validated research, our firm can now measure and assess which leaders will likely be successful in any given role, organization, industry and geography. What was once simple motivational talk is now proven science. For CEOs, leadership teams and boards of directors who want to use talent as a competitive asset to drive sustained growth, Korn Ferry can help. Without question, our transformation is real. Our outcomes-oriented approach starts with the firm’s iconic Executive Recruitment offering, which was up almost 8% at constant currency for the fiscal year. Our work and relationships at the highest echelons of global organizations have never been more profound. Over the fiscal year our firm achieved more marquee Executive Recruitment placements than in any previous year in the firm’s history – while also opening doors for our broader talent management offerings. Our Leadership and Talent Consulting business, up almost 7% at constant currency for the fiscal year, comprised 26% of our revenue. Through our diversified talent management offerings, our LTC colleagues are working with CEOs and leadership teams to activate and accelerate their strategy through people – transforming their companies in the process. Our Futurestep business, up 22% for the fiscal year at constant currency, has been a shining star for us, with 10 consecutive quarters of growth. Futurestep also secured a record level of new RPO assignments during the fiscal year with significant global brands. Its business accounted for 16% of our overall revenue mix during the fiscal year. By embracing innovation and integration across all lines of business, we’re making our brand even more elastic Financial highlights 3 Share price Total fee revenue in millions $1,028.2 $31.53 $29.05 $16.55 CAGR = 38.03% $960.3 $812.8 April 30, 2013 April 30, 2014 April 30, 2015 2013 2014 2015 I would also like to thank our board of directors and leadership team for their unwavering quest to drive positive results for our clients and stockholders. Quarter over quarter, leading companies are increasingly turning to Korn Ferry to address multiple leadership and talent needs. And, with every success story, we will continue to propel Korn Ferry and the talent industry ahead in the years to come. Regards, Gary D. Burnison as we build upon Korn Ferry being a knowledge- based firm. At the forefront of our strategy is our intellectual property – our vast library of proprietary tools and techniques that underpin all of our services. We have amassed a profound depth of knowledge about our clients’ people – their strengths and areas to develop, as well as how they stack up against their competition. With continued investments in the Korn Ferry Institute, and research around key areas such as talent analytics, learning and enterprise agility, high potential identification and development, we will help drive growth at the global organizations we serve. I would like to thank our more than 3,600 colleagues around the globe who have accomplished all of this through their relentless passion, diverse backgrounds and unique perspectives and talents. At Korn Ferry we value performance over pedigree, and pride ourselves as a lifetime destination where opportunity is open and available to anyone. Board of directors Top row (l to r): Edward D. Miller; Gary D. Burnison; George T. Shaheen; Jerry Leamon Middle row (l to r): Harry L. You; William R. Floyd Gary D. Burnison Chief Executive Officer George T. Shaheen Non Executive Chairman Bottom row (l to r): Christina Gold; Debra Perry William R. Floyd Former Chairman Buffet Holdings Inc. Christina Gold Former Chief Executive Officer The Western Union Company Jerry Leamon Former Global Managing Director Deloitte Edward D. Miller Chairman of the Board American Express Centurion Bank Debra Perry Former Senior Managing Director Moody’s Corporation Harry L. You Executive Vice President, Office of the Chairman EMC Corporation Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended April 30, 2015OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934Commission 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,Los Angeles, California 90067(Address of principal executive offices) (Zip code)(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 x 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 xIndicate 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 x 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 x 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.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨Non-accelerated filer ¨ (Do not check if a smaller reporting company) 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 xThe number of shares outstanding of our common stock as of June 19, 2015 was 50,626,827 shares. The aggregate market value of the registrant’svoting and non-voting common stock held by non-affiliates of the registrant on October 31, 2014, 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$1,437,981,608 based upon the closing market price of $27.93 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 2015 Annual Meeting of Stockholders scheduled to be held on September 24, 2015 areincorporated by reference into Part III of this Form 10-K. Table of ContentsKORN/FERRY INTERNATIONALIndex to Annual Report on Form 10-K for the Fiscal Year Ended April 30, 2015 Item # Description Page Part I. Item 1 Business 1 Item 1A Risk Factors 13 Item 1B Unresolved Staff Comments 23 Item 2 Properties 23 Item 3 Legal Proceedings 23 Item 4 Mine Safety Disclosures 23 Executive Officers 24 Part II. Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6 Selected Financial Data 28 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A Quantitative and Qualitative Disclosures About Market Risk 53 Item 8 Financial Statements and Supplementary Data 54 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 54 Item 9A Controls and Procedures 54 Item 9B Other Information 54 Part III. Item 10 Directors, Executive Officers and Corporate Governance 55 Item 11 Executive Compensation 55 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 55 Item 13 Certain Relationships and Related Transactions, and Director Independence 55 Item 14 Principal Accountant Fees and Services 55 Part IV. Item 15 Exhibit and Financial Statement Schedules 56 Signatures 60 Financial Statements and Financial Statement Schedules F-1 Table of ContentsPART I. Item 1.BusinessAbout Korn FerryKorn/Ferry International (referred to herein as the “Company,” “Korn Ferry,” or in the first person notations “we,” “our,” and “us”) is a leadingauthority on leadership and talent. We opened our first office in Los Angeles in 1969 and currently operate in 78 offices in 37 countries. We have the abilityto deliver our solutions on a global basis, wherever our clients do business. As of April 30, 2015, we had 3,687 full-time employees, including 452 ExecutiveRecruitment, 164 Leadership & Talent Consulting, and 78 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 79% of our assignments performed during fiscal 2015 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.The Korn Ferry OpportunitySince Korn Ferry’s inception, clients have trusted us to help recruit world-class talent. Today, we have evolved into a single source for leadership andtalent consulting services going far beyond executive recruitment and encompassing leadership development, enterprise learning, succession planning,recruitment process outsourcing, and more.We understand strategic transformation because we are doing it ourselves. Today, more than 40% of our business comes from outside our flagshipExecutive Recruitment solution.About Our SolutionsAt Korn Ferry, we design talent strategies, which allows us to build and attract talent: • When we design, we are crafting a unique talent strategy through our expertise in organizational design and change management that will helpour clients navigate a successful course through even the most complex transformations. Talent StrategyWe help clients align their talent processes and organizational capabilities to fully activate their business strategy. • When we build, we are delivering development solutions that help leaders, teams, individuals, and whole organizations to grow — while alsohelping to drive business results and deliver sustainable change. Succession ManagementWe help clients understand their talent gaps by assessing and benchmarking current talent and future potential.Leadership DevelopmentWe help clients close the gaps between what talent they have, and what talent they need. 1Table of Contents • When we attract, we bring a depth of expertise to the business of identifying, recruiting, and retaining the best board, C-suite, executive andprofessional-level talent. Board, CEO, and Executive RecruitmentOnboardingWe integrate scientific research with practical experience and industry-specificexpertise to identify and recruit board directors, CEOs, and senior-levelexecutives across all sectors and functions.We accelerate new executives’ time-to-contribution by providingpractical guidance on cultural integration and stakeholder management,as well as collaborating to define 100-day plans.Professional RecruitmentEmployer Brand and Talent CommunicationsWe help clients around the world identify and secure emerging leaders andspecialized high impact talent.We help clients create an employer value proposition as well as themessaging and tools that deliver a consistent brand experience across theemployee lifecycle.Recruitment Process OutsourcingWe provide flexible and scalable talent acquisition solutions that deliverbusiness impact while simultaneously reducing cost and time to hire.About Our Intellectual Property and TechnologyKorn Ferry is increasingly a knowledge-based company with deep intellectual property and research that allow us to deliver meaningful outcomes forour clients. We understand what makes a great leader, the competencies they possess that distinguish them from others, as well as the potential shortcomingsthat can damage their careers as well as their organization’s performance. Today, our talent data includes 2.5 million assessments (heavily weighted by thevery top executive levels), and profiles of 7.0 million candidates. This database provides the insight and intelligence for Korn Ferry’s team of social scientiststo determine the true drivers of leadership and performance and how any individual or organization measures up.Our vast library of proprietary tools and techniques has been developed through research by our scientists, statisticians and intellectual property (“IP”)development specialists. It underpins all of our services, giving us unique insight into how strategic talent decisions help contribute to competitiveadvantage and success. We continue to add more discipline and scientific research into the recruitment and talent management process, with emphasisshifting from candidate identification to candidate assessment, fit and attraction. Driving this focus is our enhanced technology, as the power of the Internet,databases and online talent communities make it possible to efficiently identify greater numbers of qualified candidates. Innovative technology, whencombined with world-class intellectual property and thought leadership, creates a compelling set of tools to manage the process of identifying, assessing andrecruiting the most desirable candidates.In the fiscal year ahead, we will continue to place a strong focus on our new talent intelligence engine — Korn Ferry’s Four Dimensions ofLeadership & Talent, which harnesses all of our IP and provides organizations with robust diagnostics at both the individual and enterprise levels. We haveidentified four crucial areas that matter most for individual and organizational success. The analytics we collect enable us to help organizations accentuatestrengths and identify areas to develop, as well as understand how they stack up against their competition: • Competencies — the skills and behaviors required for success that can be observed. • Experiences — assignments or roles that prepare a person for future opportunities. • Traits — inclinations, aptitudes and natural tendencies a person leans toward, including personality and intellectual capacity. • Drivers — values and interests that influence a person’s career path, motivation, and engagement. 2Table of ContentsKorn Ferry’s Four Dimensions of Leadership & Talent will serve as the assessment engine for the Company’s executive search and professionalrecruiting processes, leadership development and consulting, and recruitment process outsourcing engagements, as well as internal hiring and leadershipdevelopment efforts.About Our Business SegmentsKorn Ferry solutions and intellectual property are delivered through the following business segments to empower organizations and leaders to reachtheir goals:Executive Recruitment: Is managed by geographical regional leaders that focus 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 educational/not-for-profit industries. The relationships that we develop through this business allow us to add incremental value to our clients through the delivery of our manytalent management solutions.Our executive recruitment services concentrate on searches for positions with annual compensation of $250,000 or more, or comparable in foreignlocations, which may involve board-level, chief executive and other senior executive positions. The industry is comprised of retained and contingencyrecruitment firms. Retained firms, such as Korn Ferry, typically charge a fee for their services equal to approximately one-third of the first year annual cashcompensation for the position being filled regardless of whether the position is filled. Contingency firms generally work on a non-exclusive basis and arecompensated only upon successfully placing a recommended candidate.Leadership & Talent Consulting (“LTC”): Our LTC services are accelerating our transformation into a broad-based talent management firm. Ourcomprehensive blend of talent management offerings assists clients with their ongoing assessment, organizational design and leadership development efforts.Our LTC offerings have been expanded and enhanced through the acquisitions of Pivot Leadership, PDI Ninth House (“PDI”) and Global Novations, LLC(“Global Novations”). As discussed above, our services address three fundamental needs — Talent Strategy, Succession Management, and LeadershipDevelopment. Each of Korn Ferry’s solutions is delivered by an experienced team of leadership consultants, a global network of top executive coaches andthe intellectual property of research-based, time-tested leadership assessment and developmental tools.Professional Search and Recruitment Process Outsourcing: In 1998, we extended our market reach into recruitment for non-executive professionalswith the introduction 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. Our portfolio of services includes Recruitment Process Outsourcing (“RPO”), ProjectRecruitment, Professional Search, Talent Consulting and Talent Communications.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 theSEC at 1-800-732-0330. Our reports, proxy statements and other documents filed electronically with the SEC are available at the website maintained by theSEC at www.sec.gov.We also make available, free of charge on the Investor Relations portion of our website at www.kornferry.com, our annual, quarterly, and currentreports, 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 reasonablypracticable after we electronically file such reports with, or furnish them to, the SEC.We also make available on the Investor Relations portion of our website at www.kornferry.com earnings slides and other important information, whichwe encourage you to review. 3Table of ContentsOur 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 http://ir.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 TrendsDespite a relatively healthy global economic environment, our clients are finding that growth is difficult to sustain. CEOs are increasingly demandingan agile workforce that can innovate and drive growth across borders. We believe Korn Ferry is uniquely positioned to help organizations align their strategy,talent, and culture to unlock growth.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 theirbusiness on 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 managementlevels, the available talent pool is inadequate. New leaders must step into bigger, more complex, and more global roles faster — and with less experience —than their predecessors. Given this, learning agility — one’s ability to solve complex problems, easily adapt in a constantly changing world and drive change— is more important than ever. We believe employers will increasingly seek service providers who can help them find, develop and retain highly qualified,learning agile talent that secures a competitive advantage.Human Capital Is One of the Top CEO Challenges — The people, the minds, the alliances and the culture that can create and then nurture innovativeideas — are seen as central to CEOs. In fact, according to the Conference Board, human capital — how best to develop, engage, manage and retain talent — isthe single biggest challenge facing CEOs in 2015.Emerging Markets Are Our 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 such as how to attract, engage and retain highly competent, innovative talent, as well as how todevelop effective leaders to drive the business. As companies expand internationally, and different markets present more attractive business opportunities,they have to think about their workforce and talent in this way too. Clients are turning to firms that understand the global complexities impacting workforceplanning today.Talent Analytics — Companies are increasingly leveraging big data and predictive analytics to measure the influence of activities across all aspects oftheir business, including HR. They expect their service providers to deliver superior metrics and measures and better ways of communicating results. KornFerry’s go-to-market approach is increasingly focused on talent analytics. Leveraging a large set of data on talent accumulated over decades of research, wehave cataloged the elements of talent and isolated the most potent facets. The result, Korn Ferry’s Four Dimensions of Leadership & Talent, is the talentintelligence engine that powers all our solutions and products. 4Table of ContentsIncreased 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 ona streamlined basis; • Ability to quickly review millions of resumes and provide the right fit for the client; • 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.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; • Retiring baby boomers, creating a skills gap in the workforce; • Shifting balance of power towards the employee as more people take charge of their own careers, and the new norm of employee-drivendevelopment; • Increasing importance of talent mobility in engaging and developing people within an organization; and • Increased attention on succession planning due to heightened scrutiny on CEOs, pressure to generate growth, shorter CEO tenures and theemphasis being placed on making succession planning a systemic governance process within global organizations.Growth StrategyOur objective is to expand our position as a single source of leadership and talent consulting services. In order to meet this objective, we will continueto pursue 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 design talent strategies that accelerate business outcomes. Where there are critical gaps, we build talent from withinand attract new talent from the outside.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 throughour LTC and Futurestep service lines. 5Table of ContentsOur 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 approximately 60% of our revenues come from clients thatutilize multiple lines of business.We are an increasingly diversified enterprise in the world of human capital services and products, an industry that represents an estimated $600 billionglobal market opportunity.In an effort to better coordinate global recruiting and to gain operational efficiencies, we expect that multinational clients increasingly will turn tostrategic partners who can manage their recruitment and talent management needs on a centralized basis. This will require vendors with a global network ofoffices and technological support systems to manage multiple hires across geographical regions. We established our Strategic Accounts program to act as acatalyst for change as we transform our Company from individual operators to an integrated talent solutions provider, in an effort to drive major global andregional strategic account development as well as to provide a framework for all of our client development activities. Today, the program consists of globalcolleagues from every line of business and geography. We are 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 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. Our Global Products Group helps us generate long-term relationships with ourclients. We continue to seek ways to scale our product offering 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 Executive Recruitment clients, can improve executive retentionand prospects of promotion.Our IP orientation is further expanded by our acquisitions of Pivot Leadership, PDI Ninth House and Global Novations. These firms offer a variety ofleadership development, coaching and assessment solutions for different organizational levels, as well as technology-driven talent management solutions.Technology — Information technology is a critical element of all of our businesses. In fiscal 2015, we continued to invest in enhanced tools andknowledge management to gain a competitive advantage. We introduced a new technology platform to support delivery of Korn Ferry’s Four Dimensions ofLeadership (“KF4D”), our newest and most robust assessment for Executive Recruitment, LTC and Futurestep. We enhanced KF Insight, an iOS mobileapplication that enables our consultants to have a 360-degree view of all activities across Korn Ferry at their clients, providing them the secure tools toenable more integrated, scalable client relationships, while connecting it to our new global customer relationship management platform. We continued toinvest in our IT security team and enhanced our security infrastructure in an effort to protect the Company’s assets against today’s cyber-security threats.The technology supporting LTC continued to evolve in fiscal 2015 through the integration of our intellectual property into our assessment and talentmanagement services. Through the PDI acquisition, we acquired a sophisticated technology platform (PALMS) and a robust library of intellectual property.PALMS provides Korn Ferry with a client-facing technology platform to launch all assessment activities, a centralized database to track and analyze allassessment data and an e-learning platform to launch interactive, simulation based learning modules. In fiscal 2015, we integrated our scalable intellectualproperty content repository, allowing us to leverage our IP across all products and services, within LTC and across lines of business. This enables us to 6Table of Contentscontinue to integrate services provided across the entire LTC portfolio, as well as Executive Recruitment and Futurestep, and we have continued work on aunified talent analytics layer to support Korn Ferry’s strategy to address this key industry trend.Information technology is a key driver of Futurestep’s growth in RPO, project recruitment and search. Database technology and the Internet havegreatly improved capabilities in identifying, targeting and reaching potential candidates. In fiscal 2015, we continued the integration of advanced, Internet-based sourcing, assessment and selection technologies into the engagement workflow. We expanded the use of Foresight, our data aggregation warehouse foranalytical reporting 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. In fiscal 2015, Forte, a mobile/desktop application for careerdevelopment and transitions, was enhanced to be used in more client situations, not just for RPO, but as a value-added component of broader LTC serviceofferings. It enables users to build a customized, personal development plan drawing on the Korn Ferry assessment and development portfolio.We will continue to enhance our technology in order to strengthen our relationships with clients, expand our markets through new delivery channelsand maintain 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 ofour various solutions at the highest levels. We believe these engagements will create “trickle-down” revenue opportunities across all of our lines of businessand lead to the expansion of other high-level, consultative relationships within the board and CEO community.We drive additional awareness and brand equity through a global marketing program that leverages Korn Ferry Institute-generated thought leadership(whitepapers, bylined articles, and our award-winning Briefings periodical), aggressive media relations, social media, a sophisticated demand generationplatform and other vehicles that include sponsorships, speaking opportunities, advertising and events.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 allows us to build and attract the best talent for ourselves (and, by extension, for our clients) to achieve our business potential.Our goal is to become the premier career destination for top talent through offering a client-focused culture, promotional/developmental opportunitiesand compensation that aligns employee behavior to corporate strategy. 7Table of ContentsWe continue to support an in-depth and ongoing professional development program called The Edge for our consultants and client-facing practitionersto further train them on our strategy, our various solutions and a systematic approach for broadening the conversations, and subsequently, the relationshipswith our clients. Additional initiatives include aligning workforce and leadership competencies to our strategy, enhancing performance practices, developingsuccession slates across the Company, and evolving our rewards system.5. Pursue Transformational Opportunities Along the Broad Human Resources SpectrumIn addition to our heritage as a provider of executive recruitment, we also offer clients RPO, Project Recruitment, Professional Search, TalentConsulting and Talent Communications services through Futurestep, and Talent Strategy, Succession Management and Leadership Development servicesthrough LTC.We will continue to internally develop and add new products and services that our clients demand while pursuing a disciplined acquisition strategy.We have developed a core competency in the identification, acquisition and integration of M&A targets that play a significant role in the attainment of ourstrategic objectives. As we look forward, we will continue building Korn Ferry as the leading authority on those talent management strategies that truly drivethe execution of business strategies. Our disciplined approach to M&A will continue to play a vital role in this journey.Our Services and OrganizationOrganizationThe Company operates in three global business segments: Executive Recruitment, LTC, and Futurestep. Our executive recruitment business ismanaged 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 global basis with operations in North America, Europe, Asia Pacific and South America.We address the global recruitment and talent management 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, CEOs, chief financialofficers, chief operating officers, chief information officers and other senior executive officers. As part of being retained by a client to conduct a search, weassemble a team comprised of consultants with appropriate geographic, industry and functional expertise. Our search consultants serve as managementadvisors who work closely with the client in identifying, assessing and placing qualified candidates. In fiscal 2015, we executed 8,480 executive recruitmentassignments.We utilize a standardized approach to placing talent that integrates research based IP with our practical experience. Providing a more complete view ofthe candidate than is otherwise possible, we believe our proprietary tools generate better results in attracting the right person for the position.We emphasize a close working relationship with the client and a comprehensive understanding of the client’s business issues, strategy and culture.Initially, the search team invites the client to an online portal where they complete a series of exercises designed to capture the most relevant, criticalrequirements for the role. The input gathered in the client exercises is the lever that controls the Unique Client Profile, the benchmark against which allcandidates are compared. Once the Unique Client Profile is finalized, a research team identifies, through the use of our proprietary databases and otherinformation resources, companies in related industries facing similar issues and with operating characteristics similar to those of the client. In addition, theteam consults with its established network of resources and searches our databases containing profiles of approximately five million executives to assist inidentifying individuals with the right background, cultural fit and abilities. These resources are a critical element in assessing the marketplace. 8Table of ContentsAn original list of candidates is carefully screened through phone interviews, video conferences and in-person meetings. Candidates also completeKorn Ferry’s Four Dimensional Executive Assessment. Launched in fiscal 2015 and powered by Korn Ferry’s Four Dimensions of Leadership & Talent, thistool gives clients insights about each candidate’s competencies, personality traits, drivers, and past experiences that are aligned to the role. We conduct duediligence and background verification of the candidates throughout this process, at times with the 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 withthe client 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 2015 Assignments by Industry Specialization Global Markets:Industrial 29% Life Sciences/Healthcare Provider 20% Financial Services 17% Consumer 17% Technology 11% Regional Specialties:Education/Not-for-Profit 6% 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 Services group,for example, focuses exclusively on placing CEOs and board directors in organizations around the world. This is a dedicated team from the most senior ranksof the Company. Their work is with CEOs and in the board room, and their expertise is organizational leadership and governance. They conduct hundreds ofengagements every year, tapping talent from every corner of the globe. This work spans all ranges of organizational scale and purpose. Members of functionalgroups are located throughout our regions and across our industry groups.Percentage of Fiscal 2015 Assignments by Functional Expertise Board Level/CEO/CFO/Senior Executive and General Management 72% Finance and Control 9% Marketing and Sales 6% Human Resources and Administration 5% Manufacturing/Engineering/Research and Development/Technology 4% Information Systems 4% RegionsNorth America — We currently have 20 offices throughout the United States and Canada. In fiscal 2015, the region generated fee revenue of $330.6million and opened 2,196 new engagements with an average of 207 consultants. 9Table of ContentsEMEA — We currently have 19 offices in 17 countries throughout the region. In fiscal 2015, the region generated fee revenue of $153.5 million andopened 1,533 new engagements with an average of 128 consultants.Asia Pacific — We currently have 16 offices in 10 countries throughout the region. In fiscal 2015, the region generated fee revenue of $84.1 millionand opened 984 new engagements with an average of 86 consultants.South America — We currently operate a network of 7 offices in 7 countries covering the entire South American region. The region generated feerevenue of $29.2 million in fiscal 2015 and opened 452 new engagements with an average of 21 consultants.Mexico — We currently serve our clients’ needs in two offices in Mexico through a subsidiary in which we hold a minority interest. Our share of the netearnings from our Mexico subsidiary was $1.8 million for the year ended April 30, 2015 and is included in equity in earnings of unconsolidated subsidiarieson the consolidated statement of income for the year ended April 30, 2015.Client Base — Our 5,350 clients include many of the world’s largest and most prestigious public and private companies, and 56% of FORTUNE500 companies were clients in fiscal 2015. In fiscal 2015, only three clients represented more than 1% of fee revenue, with those clients representing acombined 3.6% of fee revenue.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 in executive search, we also compete with smaller boutique firmsthat specialize in specific regional, industry or functional searches. We believe our brand name, differentiated business model, systematic approach to clientservice, cutting-edge technology, global network, prestigious clientele, strong specialty practices and high-caliber colleagues are recognized worldwide. Wealso believe our long-term incentive compensation arrangements, as well as other executive benefits, distinguish us from most of our competitors and areimportant in attracting and retaining our key consultants.Leadership & Talent Consulting ServicesOur strategic management assessment and executive coaching and development services are consolidated under the name Leadership & TalentConsulting to reflect the array of solutions we offer and to accommodate further growth. We have made significant investments in these service areas with theacquisitions of Lominger Limited, Inc., Lominger Consulting (“Lominger”) and LeaderSource in fiscal 2007, Lore International in fiscal 2009, SENSASolutions in fiscal 2010, PDI and Global Novations in fiscal 2013 and Pivot Leadership in fiscal 2015. Our comprehensive blend of talent managementofferings assists clients with the ongoing assessment and development of their senior executives and management teams and addresses three fundamentalneeds: 1.Talent Strategy; 2.Succession Management; and 3.Leadership DevelopmentWhile Korn Ferry’s Four Dimensions of Leadership & Talent has thus far been embedded into the recruitment process, our research shows the fourdimensions are highly predictive of many other key talent variables: engagement, retention, productivity, leadership effectiveness, and leadership potential.Korn Ferry intends to embed this intelligence and methodology into all of LTC solutions — providing clients with a more intelligent, sophisticated and real-time understanding of their overall global workforce performance and potential, including talent strengths and gaps, areas to develop, and industrybenchmarks.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, 2015, we had LTC operations in 16 citiesin North America, 10 in Europe, 12 in Asia Pacific, and 7 in Latin America. 10Table of ContentsClient Base — During fiscal 2015, LTC partnered with 2,363 clients across the globe, including 61% of the FORTUNE 500.Competition — Our main competitors include firms like Development Dimensions International, Center for Creative Leadership, Right Management,Mercer, Egon Zehnder, Kenexa, Hay Group, YSC and SHL, a subsidiary of Corporate Executive Board. Although these firms are our largest competitors, wealso compete with smaller boutique firms that specialize in specific regional, industry or functional aspects of talent management. We believe the strongleadership brands that comprise LTC offer a robust, research-based leadership and talent management content.Professional Search and Recruitment Process Outsourcing — FuturestepOverview — Futurestep offers clients a portfolio of talent acquisition solutions, including RPO, Project Recruitment, Professional Search, TalentConsulting and Talent Communications. Each Futurestep engagement leverages a global recruitment process and best-in-class technology to maximize andmeasure quality.Futurestep combines traditional recruitment expertise with a multi-tiered portfolio of talent acquisition solutions. Futurestep consultants, based in 19countries, have access to our databases of pre-screened, mid-level professionals. Our global candidate pool complements our international presence andmulti-channel sourcing strategy to aid speed, efficiency and quality service for clients worldwide.Futurestep’s customizable end-to-end RPO solution combines our recruiting expertise with state-of-the-art technologies and sophisticatedmethodologies to help companies streamline recruitment processes, enhance candidate experience, and improve quality of hire.Project Recruitment services offer a proven, outsourced approach for delivering the right talent in the right numbers and in the right location — withina 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 emerging leaders and specialized talent on a professional level.Talent Consulting services support clients with the wider aspects of the talent lifecycle including talent acquisition advisory, candidate assessment andselection and recruitment technology services.Talent Communications services help clients create a compelling employer brand experience. We use the latest research techniques to identify eachclient’s unique Employer Value Proposition and then bring it to life across the full range of traditional and digital media.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, 2015, we had Futurestep operations in 12 cities in North America, 10 inEurope, 15 in Asia Pacific, and 2 in Latin America.Client Base — During fiscal 2015, Futurestep partnered with 1,181 clients across the globe and 38% of Futurestep’s fiscal 2015 fee revenue wasreferred from Korn Ferry’s Executive Recruitment and LTC segments.Competition — Futurestep primarily competes for business with other RPO providers such as Cielo Talent, Alexander Mann Solutions, Hays, Kenexa,Spherion, KellyOCG and The RightThing and competes for search assignments with regional contingency recruitment firms and large national retainedrecruitment firms. 11Table of ContentsProfessional Staff and EmployeesWe have a wealth of talent at our disposal. Our Company brings together the best and brightest from a wide range of disciplines and professions —everything from academic research and technology development to executive recruiting, consulting, and business leadership. We are also a culturally diverseorganization. Our people come from all over the world and speak a multitude of languages. For us, this diversity is a key source of strength. It means we havepeople who are able to challenge convention, offer unique perspectives, and generate innovative ideas. Equally important, it means we can think and actglobally — just like our clients.As of April 30, 2015, we had a total of 3,687 full-time employees. Of this, 1,562 were executive recruitment employees consisting of 452 consultantsand 1,110 associates, researchers, administrative and support staff. LTC had 894 employees as of April 30, 2015, consisting of 164 consultants and 730associates, researchers, administrative and support staff. Futurestep had 1,147 employees as of April 30, 2015, consisting of 78 consultants and 1,069administrative and support staff. Corporate had 84 professionals at April 30, 2015. We are not party to a collective bargaining agreement and consider ourrelations 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 andidentification, but do not generally lead assignments. These colleagues are developed through our training and professional development programs.Promotion to senior client partner is based on a variety of factors, including demonstrated superior execution and business development skills, the ability toidentify solutions to complex issues, personal and professional ethics, a thorough understanding of the market and the ability to develop and help buildeffective teams. In addition, 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 2015. Financial information regarding our businesssegments for fiscal 2014 and 2013 and additional information for fiscal 2015 is contained in Note 11 — Business Segments, in the Notes to our ConsolidatedFinancial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference. FeeRevenue OperatingIncome(Loss) Number ofOffices as ofApril 30, 2015 Number ofConsultants as ofApril 30, 2015 (dollars in thousands) Executive Recruitment: North America $330,634 $80,818 20 214 EMEA 153,465 18,867 19 129 Asia Pacific 84,148 14,631 16 87 South America 29,160 4,704 7 22 Total Executive Recruitment (1) 597,407 119,020 62 452 LTC (2) 267,018 28,175 7 164 Futurestep (3) 163,727 19,940 9 78 Corporate — (53,107) — — Total$1,028,152 $114,028 78 694 (1)Executive Recruitment partially occupies 2 of Futurestep offices globally in 2 countries and 1 LTC office globally in 1 country. (2)Leadership & Talent Consulting partially occupies 38 of the executive recruitment offices globally in 23 countries. (3)Futurestep partially occupies 30 of the executive recruitment offices globally in 16 countries. 12Table of ContentsThe following table provides information on fee revenues for each of the last three fiscal years attributable to the regions in which the Companyoperates: Year Ended April 30, 2015 2014 2013 (in thousands) Fee Revenue: United States $557,024 $507,280 $416,987 Canada 39,252 38,113 42,263 EMEA 248,865 232,329 192,242 Asia Pacific 145,625 145,452 124,720 South America 37,386 37,127 36,619 Total$1,028,152 $960,301 $812,831 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 deem immaterialmay also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of theserisks.Competition in our industries could result in our losing market share and/or require us to charge lower prices for services, which could reduce ourrevenue.We compete for executive recruitment business with numerous executive recruitment firms and businesses that provide job placement services,including other large global executive search firms, smaller specialty firms and web-based firms. Traditional executive recruitment competitors include EgonZehnder International, Heidrick & Struggles International, Inc., Russell Reynolds Associates and Spencer Stuart. In each of our markets, one or more of ourcompetitors may possess greater resources, greater name recognition, lower overhead or other costs and longer operating histories than we do, which may givethem an advantage in obtaining future clients, capitalizing on new technology and attracting qualified professionals in these markets. Additionally, specialtyfirms can focus on regional or functional markets or on particular industries and executive search firms that have a smaller client base may be subject to feweroff-limits arrangements. There are no extensive barriers to entry into the executive recruitment industry and new recruiting firms continue to enter the market.We believe the continuing development and increased availability of information technology will continue to attract new competitors, especially web-enabled professional and social networking website providers and these providers may be facilitating a company’s ability to insource their recruitingcapabilities. As these providers continue to evolve, they may develop offerings similar to or more expansive than ours, thereby increasing competition for ourservices or more broadly causing disruption in the executive recruitment industry. The human resource consulting business has been traditionally fragmentedand a number of large consulting firms, such as Accenture, Aon Hewitt and Towers Watson are building businesses in human resource managementconsulting to serve these needs. Increased competition, whether as a result of these professional and social networking website providers or traditionalexecutive recruitment firms, may lead to pricing pressures that could negatively impact our business. For example, increased competition could require us tocharge lower prices, and/or cause us to lose market share, each of which could reduce our fee revenue. 13Table of ContentsIf 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 consultantsin our industry is particularly important because, generally, a small number of consultants have primary responsibility for a client relationship. Because clientresponsibility is so concentrated, the loss of key consultants may lead to the loss of client relationships. In 2015, for example, our top three executive searchconsultants had primary responsibility for generating business equal to approximately 1% of our net revenues, and our top ten executive search consultantshad primary responsibility for generating business equal to approximately 4% of our net revenues. This risk is heightened due to the general portability of aconsultant’s business; consultants have in the past, and will in the future, terminate their employment with our Company. Any decrease in the quality of ourreputation, reduction in our compensation levels relative to our peers or restructuring of our compensation program, whether as a result of insufficientrevenue, a decline in the market price of our common stock or for any other reason, could impair our ability to retain existing consultants or attract additionalqualified consultants with the requisite experience, skills and established client relationships. Our failure to retain our most productive consultants, whetherin Executive Recruitment, LTC or Futurestep, or maintain the quality of service to which our clients are accustomed and the ability of a departing consultantto move business 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 beharmed. We may also lose clients if the departing executive search, LTC or Futurestep consultant has widespread name recognition or a reputation as aspecialist in his or her line of business in a specific industry or management function. We could also lose additional consultants if they choose to join thedeparting executive search consultant at another executive search or consulting firm. If we fail to limit departing consultants from moving business orrecruiting our consultants to a competitor, our business, financial condition and results of operations could be adversely affected.Acquisitions, or our inability to effect acquisitions, may have an adverse effect on our business.As part of our growth strategy, we have completed strategic acquisitions of businesses in the last several years, including our acquisitions of PivotLeadership in fiscal 2015 and PDI and Global Novations in fiscal 2013. While we may pursue additional acquisitions in the future, our ability to consummatesuch acquisitions on satisfactory terms will depend on: • the extent to which acquisition opportunities become available; • our success in bidding for the opportunities that do become available; • negotiating terms that we believe are reasonable; and • regulatory approval, if required.Our ability to make strategic acquisitions may also be conditioned on our ability to fund such acquisitions through the incurrence of debt or theissuance of equity. Our senior unsecured revolving credit agreement, as amended as of June 3, 2015, limits us from consummating permitted acquisitions,paying dividends to our stockholders and making share repurchases in any fiscal year to a cumulative total of $125.0 million. The senior unsecuredrevolving credit agreement also limits the amount of consideration paid with respect to acquisitions to $100.0 million in any fiscal year, which amount isfurther limited by any shares repurchased and dividends paid to stockholders, as discussed above. If we are required to incur substantial indebtedness inconnection with an acquisition, and the results of the acquisition are not favorable, the increased indebtedness could decrease the value of our equity. Inaddition, if we need to issue additional equity to consummate an acquisition, doing so would cause dilution to existing stockholders.If we are unable to make strategic acquisitions, or the acquisitions we do make are not on terms favorable to us or not effected in a timely manner, itmay impede the growth of our business, which could adversely impact our profitability and our stock price. 14Table of ContentsOur ability to integrate future acquisitions, if any, could negatively affect our business and profitability.Our future success may depend in part on our ability to complete the integration of acquisition targets successfully into our operations. The process ofintegrating an acquired business 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 businesses resulting in operating inefficiencies; • inability to establish uniform standards, disclosure controls and procedures, internal control over financial reporting and other systems,procedures and 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.We are a cyclical Company whose performance is tied to local and global economic conditions.Demand for our services is affected by global economic conditions and the general level of economic activity in the geographic regions and industriesin which we operate. When conditions in the global economy, including the credit markets, deteriorate, or economic activity slows, many companies hirefewer permanent employees and some companies, as a cost-saving measure, choose to rely on their own human resources departments rather than third-partysearch firms to find talent, which negatively affects our financial condition and results of operations, as evidenced by our results of operations during theGreat Recession of 2008 and 2009 that continued to impact our results of operations through fiscal 2010. We may also experience more competitive pricingpressure during periods of economic decline. While the economic activity in the regions and industries in which we operate has shown improvement, generalmarket uncertainty continues to exist. If such uncertainty persists, if the national or global economy or credit market conditions in general deteriorate, or ifthe unemployment rate increases, such uncertainty or changes could put negative pressure on demand for our services and our pricing, resulting in lower cashflows and a negative effect on our business, financial condition and results of operations. In addition, some of our clients may experience reduced access tocredit and lower revenues resulting in their inability to meet their payment obligations to us.If we are unable to retain our executive officers and key personnel, or integrate new members of our senior management who are critical to ourbusiness, 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 weare unable 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. 15Table of ContentsIf 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.The expansion of social media platforms presents new risks and challenges that can cause damage to our brand and reputation.The inappropriate and/or unauthorized use of certain media vehicles could cause damage to our brand or information leakage that could lead to legalimplications, including improper collection and/or dissemination of personally identifiable information of candidates and clients. In addition, negative orinaccurate posts or comments about us on any social networking website could damage our reputation, brand image and goodwill.We are subject to potential legal liability from clients, employees and candidates for employment. Insurance coverage may not be available to cover allof 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 clientcould assert a claim for matters such as breach of an off-limit agreement or recommending a candidate who subsequently proves to be unsuitable for theposition filled. Further, the current employer of a candidate whom we placed could file a claim against us alleging interference with an employment contract,a candidate could assert an action against us for failure to maintain the confidentiality of the candidate’s employment search, and a candidate or employeecould assert an action against us for alleged discrimination, violations of labor and employment law or other matters. Also, in various countries, we aresubject to data 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 be harmed.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 16Table of Contentsunable to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to competeeffectively, or for any reason any interruption or loss of our information processing capabilities occurs, this could harm our business, results of operations andfinancial condition. Although we have disaster recovery procedures in place and insurance to protect against the effects of a disaster on our informationtechnology, we cannot be sure that insurance or these services will continue to be available at reasonable prices, cover all our losses or compensate us for thepossible loss of clients occurring 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 could result inliability 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.The continued occurrence of high-profile data breaches against various entities and organizations provides evidence of an external environment increasinglyhostile to information security. This environment demands that we continuously improve our design and coordination of security controls across ourbusiness groups and geographies in order to protect information that we develop or that is obtained from our clients, candidates and employees. Despite theseefforts, given the ongoing and increasingly sophisticated attempts to access the information of entities, our security controls over this information, ourtraining of employees, and other practices we follow may not prevent the improper disclosure of such information. In fiscal 2013, we discovered that ourcomputer network was the target of a criminal data breach that accessed certain such information obtained from our clients, candidates and employees. Theinformation we collected about this breach suggests that the intrusion falls within the category of an “Advanced Persistent Threat”, which is activityconsistent with state sponsored cyber criminals. Although this data breach was limited in scope, and as such, did not have a material adverse effect on ouroperations or financial reporting capabilities, future breaches of this nature as well as any other security breach or other misuse of our data could lead toimproper 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 expenses due to the employment of consultants and third partyexperts and the purchase of additional infrastructure, and/or subject us to liability, resulting in increased costs and loss of revenue. More specifically, sincefiscal 2013, we have incurred such costs to bolster our security against future attacks; such efforts and expenditures, however, cannot provide absoluteassurance that future data breaches will not occur. We depend on our overall reputation and brand name recognition to secure new engagements. Perceptionsthat we do not adequately protect the privacy of information could inhibit attaining new engagements and qualified consultants, and could potentiallydamage currently existing client relationships.Limited protection of our intellectual property could harm our business, and we face the risk that our services or products may infringe upon theintellectual property rights of others.We cannot guarantee that trade secret, trademark and copyright law protections are adequate to deter misappropriation of our intellectual property(which has become an increasingly important part of our business). Existing laws of some countries in which we provide services or products may offer onlylimited protection of our intellectual property rights. Redressing infringements may consume significant management time and financial resources. Also, wemay be unable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our rights, which may have a materialadverse impact on our business, financial condition or results of operations. We cannot be sure that our services and products, or the products of others thatwe offer to our clients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or ourclients. These claims may harm our reputation, result in financial liability and prevent us from offering some services or products. 17Table of ContentsWe have invested in specialized technology and other intellectual property for which we may fail to fully recover our investment or which may becomeobsolete.We have invested in developing specialized technology and intellectual property, including proprietary systems, processes and methodologies, suchas Searcher Express and KF Insight, that we believe provide us a competitive advantage in serving our current clients and winning new engagements. Manyof our service and product offerings rely on specialized technology or intellectual property that is subject to rapid change, and to the extent that thistechnology and intellectual property is rendered obsolete and of no further use to us or our clients, our ability to continue offering these services, and growour revenues, could be adversely affected. There is no assurance that we will be able to develop new, innovative or improved technology or intellectualproperty or that our technology and intellectual property will effectively compete with the intellectual property developed by our competitors. If we areunable to develop new technology and intellectual property or if our competitors develop better technology or intellectual property, our revenues and resultsof operations could be adversely affected.We face risks associated with social and political instability, legal requirements, economic conditions and currency fluctuations in our internationaloperations.We operate in 37 countries and during the year ended April 30, 2015, generated 46% of our fee revenue from operations outside of the United States.We are 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. companiesabroad, including the Foreign Corrupt Practices Act of 1977 and sanctions programs administered by the U.S. Department of the Treasury Officeof Foreign Assets Control, and similar foreign laws such as the U.K. Bribery Act, as well the fact that many countries have legal systems, locallaws and trade practices 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; • 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 couldimpact our global results of operations. We cannot ensure that one or more of these factors will not harm our business, financial condition or results ofoperations. 18Table of ContentsForeign 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 foreigncurrencies. As a result, our financial results could be affected by factors, such as changes in foreign currency exchange rates or weak economic conditions inforeign 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 manageeffectively our 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 candidates from our clients and we could lose those opportunities to our competition, which could harm ourbusiness.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 searchesfor the client. If a prospective client believes that we are overly restricted by these off-limit agreements from recruiting employees of our existing clients,these prospective clients may not engage us to perform their executive searches. Therefore, our inability to recruit candidates from these clients may make itdifficult for 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 othercompanies. If two or more of our clients merge or consolidate and combine their operations, we may experience a decrease in the amount of services weperform for these clients. If one of our clients merges or consolidates with a company that relies on another provider for its services, we may lose work fromthat client or lose the opportunity to gain additional work. The increased market power of larger companies could also increase pricing and competitivepressures on us. Any of these possible results 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: • 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. 19Table of ContentsUnfavorable 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 countrieswith differing 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,state and local tax authorities and by non-United States authorities. If these audits result in assessments different from estimated amounts recorded, futurefinancial results 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 whichthe underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets.This would 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 mayalso change our deferred tax assets or liability balances, with either a favorable or unfavorable impact on our effective tax rate. Our deferred tax assets mayalso be impacted 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 and networth.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 reviewedfor impairment 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.We may not be able to align our cost structure with our revenue level which in turn may require additional financing in the future that may not beavailable at all or may be available only on unfavorable terms.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 revenues 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. If we are unable to secure additional financing on favorable terms, or at all, our ability to fund our operationscould be impaired, which could have a material adverse effect on our results of operations. 20Table of ContentsWe invest in marketable securities classified as trading and available for sale and if the market value of these securities declines materially, they couldhave 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 availablefor general 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 ofhuman 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 reported amounts of assets and liabilities, and the disclosure of contingent assets andliabilities at the date of our financial statements. We are also required to make certain judgments that affect the reported amounts of revenues and expensesduring each reporting period. We periodically evaluate our estimates and assumptions including those relating to revenue recognition, restructuring, deferredcompensation, goodwill and other intangible assets, contingencies, annual performance related bonuses, allowance for doubtful accounts, marketablesecurities, share-based payments and deferred income taxes. We base our estimates on historical experience and various assumptions that we believe to bereasonable based on specific circumstances. Actual results could differ from these estimates, and changes in accounting standards could have an adverseimpact on our future financial position and results of operations.You may not receive the level of dividends provided for in the dividend policy our Board of Directors has adopted or any dividends at all.We are not obligated to pay dividends on our common stock. Our Board of Directors adopted a dividend policy on December 8, 2014, that reflects anintention to distribute to our stockholders a regular quarterly cash dividend of $0.10 per share of common stock. We paid our first dividend under thisprogram on April 9, 2015. The declaration and payment of all future dividends to holders of our common stock are subject to the discretion 21Table of Contentsof our Board of Directors, which may amend, revoke or suspend our dividend policy at any time and for any reason, including, earnings, capital requirements,financial conditions, and other factors our Board of Directors may deem relevant. The terms of our indebtedness may also restrict us from paying cashdividends on our common stock under certain circumstances. See below “— Our ability to pay dividends will be restricted by agreements governing our debt,including our credit agreement, and by Delaware law.”Over time, our capital and other cash needs may change significantly from our current needs, which could affect whether we pay dividends and thelevel of any dividends we may pay in the future. If we were to use borrowings under our credit facility to fund our payment of dividends, we would have lesscash and/or borrowing capacity available for future dividends and other purposes, which could negatively affect our financial condition, our results ofoperations, our liquidity and our ability to maintain and expand our business. Accordingly, you may not receive dividends in the intended amounts, or at all.Any reduction or elimination of dividends may negatively affect the market price of our common stock.Our ability to pay dividends will be restricted by agreements governing our debt, including our credit agreement, and by Delaware law.Our credit agreement restricts our ability to pay dividends. See “Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Liquidity and Capital Resources — Long-Term Debt” where we describe the terms of our indebtedness, including provisions limiting ourability to declare and pay dividends. As a result of such restrictions, we may be limited in our ability to pay dividends unless we amend our credit agreementor otherwise obtain a waiver from our lenders. In addition, as a result of general economic conditions, conditions in the lending markets, the results of ourbusiness or for any other reason, we may elect or be required to amend or refinance our senior credit facility, at or prior to maturity, or enter into additionalagreements for indebtedness. Any such amendment, refinancing or additional agreement may contain covenants which could limit in a significant manner orentirely our ability to pay dividends to you.Additionally, under the Delaware General Corporation Law (“DGCL”), our Board of Directors may not authorize payment of a dividend unless it iseither paid out of surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, it is paid out of net profits for the fiscal year in which thedividend is declared and/or the preceding fiscal year.If, as a result of these restrictions, we are required to reduce or eliminate the payment of dividends, a decline in the market price or liquidity, or both, ofour common stock could result. This may in turn result in losses by you.Our dividend policy may limit our ability to pursue growth opportunities.If we pay dividends at the level currently anticipated under our dividend policy, we may not retain a sufficient amount of cash to finance growthopportunities, meet any large unanticipated liquidity requirements or fund our operations in the event of a significant business downturn. In addition,because a portion of cash available will be distributed to holders of our common stock under our dividend policy, our ability to pursue any materialexpansion of our business, including through acquisitions, increased capital spending or other increases of our expenditures, will depend more than itotherwise would on our ability to obtain third party financing. We cannot assure you that such financing will be available to us at all, or at an acceptablecost. If we are unable to take timely advantage of growth opportunities, our future financial condition and competitive position may be harmed, which in turnmay adversely affect the market price of our common stock.As we develop new services, clients and practices, enter new lines of business, and focus more of our business on providing a full range of clientsolutions, our operating risks increase.As part of our corporate strategy, we are attempting to leverage our research and advisory services to sell a full range of services across the life cycle ofa policy, program, project, or initiative, and we are regularly 22Table of Contentssearching for ways to provide new services to clients. In addition, we plan to extend our services to new clients, into new lines of business, and into newgeographic locations. As we focus on developing new services, clients, practice areas and lines of business; open new offices; and do business in newgeographic locations, those efforts could be unsuccessful and adversely affect our results of operations.Such growth efforts place substantial additional demands on our management and staff, as well as on our information, financial, administrative andoperational systems. We may not be able to manage these demands successfully. Growth may require increased recruiting efforts, opening new offices,increased business development, selling, marketing and other actions that are expensive and entail increased risk. We may need to invest more in our peopleand systems, controls, compliance efforts, policies and procedures than we anticipate. Therefore, even if we do grow, the demands on our people and systems,controls, compliance efforts, policies and procedures may be sufficiently great that the quality of our work, our operating margins, and our operating resultssuffer, at least in the short-term, and perhaps in the long-term.Efforts involving a different focus, new services, new clients, new practice areas, new lines of business, new offices and new geographic locations entailinherent risks associated with our inexperience and competition from mature participants in those areas. Our inexperience may result in costly decisions thatcould harm our profit and operating results. In particular, new or improved services often relate to the development, implementation and improvement ofcritical infrastructure or operating systems that our clients may view as “mission critical,” and if we fail to satisfy the needs of our clients in providing theseservices, our clients could incur significant costs and losses for which they could seek compensation from us. Finally, as our business continues to evolve andwe provide a wider range of services, we will become increasingly dependent upon our employees, particularly those operating in business environments lessfamiliar to us. Failure to identify, hire, train and retain talented employees who share our values could have a negative effect on our reputation and ourbusiness. Item 1B.Unresolved Staff CommentsNot applicable. Item 2.PropertiesOur corporate office is located in Los Angeles, California. We lease all 78 of our Executive Recruitment, Leadership & Talent Consulting, andFuturestep offices located in North America, EMEA, Asia Pacific and South America. As of April 30, 2015, we leased an aggregate of approximately853,906 square feet of office space. The leases generally are for terms of one to 11 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 accommodateany future growth. Item 3.Legal ProceedingsFrom time to time, we are involved in litigation both as a plaintiff and a defendant, relating to claims arising out of our operations. As of the date of thisreport, we are not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business,financial condition or results of operations. Item 4.Mine Safety DisclosuresNot applicable. 23Table of ContentsExecutive Officers of the Registrant Name Age PositionGary D. Burnison 54 President and Chief Executive OfficerRobert P. Rozek 54 Executive Vice President and Chief Financial OfficerMatthew Reilly 46 Chief Executive Officer of Leadership & Talent ConsultingByrne Mulrooney 54 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, Inc., the principal operating subsidiary of Jefferies Group, Inc. from 1995 to 1999.Earlier, Mr. Burnison was 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, from June2008 to February 2012. Prior to joining Cushman & Wakefield, Inc., Mr. Rozek served as Senior Vice President and Chief Financial Officer of Las VegasSands Corp, a leading global developer of destination properties (integrated resorts) that feature premium accommodations, world-class gaming andentertainment, convention and exhibition facilities and many other amenities, from 2006 to 2008. Prior to that, Mr. Rozek held senior leadership positions atEastman Kodak, and spent five years as a partner with PricewaterhouseCoopers LLP.Matthew Reilly was appointed Chief Executive Officer of Leadership & Talent Consulting in May 2015. He is responsible for driving the globalgrowth of our Leadership & Talent Consulting services. Prior to joining Korn Ferry, he led numerous operating divisions for organizations such as Accenture,a multinational management consulting, technology services, and outsourcing firm, and held the Chief Executive role at the George Group, a globaloperations and strategy firm. Mr. Reilly served as Global Industry Managing Director: Auto, Industrial, Infrastructure, Travel & Transportation at Accenturefrom October 2014 until May 2015, and as Accenture’s Head of Management Consulting, North America from 2011 to October 2014. Prior to that, he heldseveral positions at George Group, which was acquired by Accenture in September 2007, including Chief Executive and Global Managing Partner from 2008to 2011, Managing Partner, North America and Latin America Business from 2005 to 2007 and Managing Partner, Operations Strategy Business from 2004 to2005. Previously, he was a strategy consultant with A.T. Kearney from 2000 to 2004.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 held executive positions for almost 20 years at EDS and IBM in client services, sales, marketing andoperations. Mr. Mulrooney is a graduate of Villanova University in Pennsylvania. He holds a master’s degree in management from Northwestern University’sJ.L. Kellogg Graduate School of Management. 24Table of ContentsPART 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, 2015 First Quarter $32.78 $27.55 Second Quarter $31.78 $24.13 Third Quarter $29.85 $25.57 Fourth Quarter $33.72 $27.89 Fiscal Year Ended April 30, 2014 First Quarter $20.66 $15.73 Second Quarter $24.05 $17.48 Third Quarter $26.58 $22.21 Fourth Quarter $30.75 $21.89 On June 19, 2015, the last reported sales price on the New York Stock Exchange for the Company’s common stock, was $35.14 per share and there wereapproximately 14,900 beneficial stockholders of the Company’s common stock.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, 2010 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), Resources Connection,Inc. (RECN), Robert Half International Inc. (RHI), The Corporate Executive Board Company (CEB), The Dun & Bradstreet Corporation (DNB), TowersWatson & Co. (TW) and TrueBlue, Inc. (TBI). We believe this group of professional services firms, is reflective of similar sized companies in terms of ourmarket capitalization, revenue or profitability, and therefore provides a more meaningful comparison of stock performance. The returns of each companyhave been weighted according to their respective stock market capitalization at the beginning of each measurement period for purposes of arriving at a peergroup average. 25Table of ContentsThe 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. *$100 invested on 4/30/10 in stock or index, including reinvestment of dividends. Fiscal year ending April 30, 2015.Copyright © 2015, S&P, a division of McGraw-Hill Financial. All rights reserved.DividendsOn December 8, 2014, the Board of Directors adopted a dividend policy, reflecting an intention to distribute to our stockholders a regular quarterlycash dividends of $0.10 per share. On March 4, 2015, the Board of Directors of the Company declared its first ever quarterly cash dividend under this policyof $0.10 per share, which was paid on April 9, 2015 to stockholders of record on March 25, 2015. Except for such dividend, the Company did not declare anydividends during fiscal 2015 or fiscal 2014.On June 10, 2015, in accordance with the dividend policy, the Board of Directors of the Company declared a cash dividend of $0.10 per share, payableon July 15, 2015 to stockholders of record on June 25, 2015. The declaration and payment of future dividends under the quarterly dividend policy will be atthe discretion of the Board of Directors and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions, theterms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant. The Board may amend, revoke or suspend thedividend policy at any time and for any reason.Our senior unsecured revolving credit agreement, as amended as of June 3, 2015, limits us to consummating permitted acquisitions, paying dividendsto our stockholders and making share repurchases in any fiscal year to a cumulative total of $125.0 million. Subject to the foregoing, pursuant to our seniorunsecured revolving credit agreement, we are permitted to pay up to $75.0 million in dividends and share repurchases, in the aggregate, in any fiscal year(subject to the satisfaction of certain conditions). 26Table of ContentsStock Repurchase ProgramOn December 8, 2014, the Board of Directors approved an increase in the Company’s stock repurchase program to an aggregate of $150 million.Common stock may be repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion subject to marketconditions and other factors. As of April 30, 2015, no shares have been repurchased under this program. Our dividend policy as well as any decision toexecute on our currently outstanding issuer repurchase program will depend on our earnings, capital requirements, financial condition and other factorsconsidered relevant by our Board of Directors. Our senior unsecured revolving credit agreement, as amended as of June 3, 2015, limits us to consummatingpermitted acquisitions, paying dividends to our stockholders and making share repurchases in any fiscal year to a cumulative total of $125.0 million. Subjectto the foregoing, pursuant to our senior unsecured revolving credit agreement, we are permitted to make up to $75.0 million in share repurchases anddividend payments, in the aggregate, in any fiscal year (subject to the satisfaction of certain conditions).Issuer Purchases of Equity SecuritiesThe following table summarizes common stock repurchased by us during the fourth quarter of fiscal 2015: SharesPurchased (1) AveragePrice PaidPer Share Shares Purchasedas Part ofPublicly-AnnouncedPrograms (2) ApproximateDollar Value ofShares thatMay Yet bePurchasedunder thePrograms (2) February 1, 2015 — February 28, 2015 6,036 $30.52 — $150.0 million March 1, 2015 — March 31, 2015 368 $31.09 — $150.0 million April 1, 2015 — April 30, 2015 — $— — $150.0 million Total 6,404 $30.55 — $150.0 million (1)Represents withholding of a portion of restricted shares to cover taxes upon vesting of restricted shares. (2)On December 8, 2014, the Board of Directors also approved an increase in the Company’s stock repurchase program to an aggregate of $150.0 million.The shares can be repurchased in open market transactions or privately negotiated transactions at the Company’s discretion. 27Table of ContentsItem 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, 2015, 2014 and2013 and the selected balance sheet data as of April 30, 2015 and 2014 are derived from our consolidated financial statements, audited by Ernst & YoungLLP, appearing elsewhere in this Form 10-K. The selected balance sheet data as of April 30, 2013, 2012 and 2011 and the selected statement of income dataset forth below for the fiscal years ended April 30, 2012 and 2011 are derived from consolidated financial statements and notes thereto which are notincluded in this Form 10-K report and were audited by Ernst & Young LLP. Year Ended April 30, 2015 (1) 2014 2013 (2) 2012 2011 (in thousands, except per share data and other operatingdata) Selected Statement of Income Data: Fee revenue $1,028,152 $960,301 $812,831 $790,505 $744,249 Reimbursed out-of-pocket engagement expenses 37,914 35,258 36,870 36,254 32,002 Total revenue 1,066,066 995,559 849,701 826,759 776,251 Compensation and benefits 691,450 646,889 555,346 534,186 507,405 General and administrative expenses 145,917 152,040 142,771 138,872 116,494 Reimbursed expenses 37,914 35,258 36,870 36,254 32,002 Cost of services 39,692 39,910 28,977 19,635 19,764 Depreciation and amortization 27,597 26,172 19,004 14,017 12,671 Restructuring charges, net (3) 9,468 3,682 22,857 929 2,130 Total operating expenses 952,038 903,951 805,825 743,893 690,466 Operating income 114,028 91,608 43,876 82,866 85,785 Other income (loss), net 7,458 9,769 6,309 (271) 6,454 Interest expense, net (1,784) (2,363) (2,365) (1,791) (2,535) Equity in earnings of unconsolidated subsidiaries, net 2,181 2,169 2,110 1,850 1,862 Provision for income taxes 33,526 28,492 16,637 28,351 32,692 Net income$88,357 $72,691 $33,293 $54,303 $58,874 Basic earnings per share$1.78 $1.51 $0.71 $1.17 $1.30 Diluted earnings per share$1.76 $1.48 $0.70 $1.15 $1.27 Basic weighted average common shares outstanding 49,052 48,162 47,224 46,397 45,205 Diluted weighted average common shares outstanding 49,766 49,145 47,883 47,261 46,280 Cash dividends declared per common share$0.10 $— $— $— $— Other Operating Data:Fee revenue by business segment:Executive recruitment:North America$330,634 $306,768 $290,317 $305,717 $306,180 EMEA 153,465 147,917 128,807 141,409 137,398 Asia Pacific 84,148 84,816 73,221 82,230 81,951 South America 29,160 29,374 30,134 31,846 29,177 Total executive recruitment 597,407 568,875 522,479 561,202 554,706 Leadership & Talent Consulting 267,018 254,636 168,115 115,407 99,352 Futurestep 163,727 136,790 122,237 113,896 90,191 Total fee revenue$1,028,152 $960,301 $812,831 $790,505 $744,249 28Table of Contents Year Ended April 30, 2015 (1) 2014 2013 (2) 2012 2011 (in thousands, except per share data and other operating data) Number of offices (at period end) (4) 78 84 87 76 76 Number of consultants (at period end) 694 646 607 522 562 Number of new engagements opened 7,307 7,479 7,058 7,672 8,215 Number of full-time employees: Executive recruitment 1,562 1,566 1,471 1,471 1,494 Leadership & Talent Consulting 894 794 886 291 280 Futurestep 1,147 958 835 826 628 Corporate 84 78 80 66 61 Total full-time employees 3,687 3,396 3,272 2,654 2,463 Selected Balance Sheet Data as of April 30:Cash and cash equivalents$380,838 $333,717 $224,066 $282,005 $246,856 Marketable securities (5) 144,576 134,559 141,916 135,734 122,231 Working capital 334,975 275,021 178,549 278,343 207,731 Total assets 1,317,801 1,233,666 1,115,229 1,014,689 971,680 Long-term obligations 196,542 191,197 182,210 163,489 159,477 Total stockholders’ equity 815,249 755,536 664,468 629,476 578,337 (1)Due to the acquisition of Pivot Leadership, which accounted for $3.7 million and $20.0 million of fee revenue and total assets, respectively, during fiscal 2015, financial datatrends for fiscal 2015 are not comparative to prior periods. See Note 12 — Acquisitions, in the Notes to our Consolidated Financial Statements in this Annual Report on Form10-K for discussion of fiscal 2015 acquisitions. (2)Due to the acquisitions of PDI and Global Novations, which collectively accounted for $45.6 million and $162.4 million of fee revenue and total assets, respectively, duringfiscal 2013, financial data trends for fiscal years 2015, 2014 and 2013 are not comparative to prior periods. See Note 12 — Acquisitions, in the Notes to our ConsolidatedFinancial Statements in this Annual Report on Form 10-K for discussion of fiscal 2013 acquisitions. (3)During fiscal 2015, the Company took actions to rationalize its cost structure as a result of efficiencies obtained from prior year technology investments that enabled furtherintegration of the legacy business and the recent acquisitions (PDI and Global Novations), as well as other cost saving initiatives. As a result, we recorded $9.2 million ofseverance and $0.3 million relating to the consolidation/abandonment of premises. In fiscal 2014, the Company continued the implementation of the fiscal 2013 restructuringplan in order to integrate the prior year acquisitions by consolidating and eliminating certain redundant office space around the world and by continuing to consolidate certainoverhead functions. As a result, we recorded $0.8 million and $16.3 million of severance during fiscal 2014 and 2013, respectively, and $2.9 million and $6.5 million relatingto the consolidation of premises during fiscal 2014 and 2013, respectively. During fiscal 2012 and 2011, we increased our previously recorded restructuring charges by $0.9million and $2.1 million, respectively, primarily related to the inability to sublease space, which was included in the original estimate. (4)The number of offices declined by 6 as of April 30, 2015 compared to 2014, due to the consolidation/abandonment of premises in fiscal 2015. (5)As of April 30, 2015, 2014, 2013, 2012 and 2011, the Company’s marketable securities included $131.4 million, $116.2 million, $98.0 million, $82.2 million, and $71.4million, respectively, held in trust for settlement of the Company’s obligations under certain of its deferred compensation plans. See Note 5 — Marketable Securities in theNotes to the Consolidated Financial Statements in this Annual Report on Form 10-K. 29Table of ContentsItem 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 statementsgenerally 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 our objectives, plans or goals also areforward-looking statements. All of these forward-looking statements are subject to risks and uncertainties that could cause our actual results to differmaterially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and futureactions to differ materially from the forward-looking statements include, but are not limited to, dependence on attracting and retaining qualified andexperienced consultants, maintaining our brand name and professional reputation, potential legal liability and regulatory developments, portability ofclient relationships, global and local political or economic developments in or affecting countries where we have operations, currency fluctuations in ourinternational 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 to enhance and develop new technology, our ability to successfullyrecover from a disaster or business continuity problems, employment liability risk, an impairment in the carrying value of goodwill and other intangibleassets, deferred tax assets that we may not be able to use, our ability to develop new products and services, changes in our accounting estimates andassumptions, alignment of our cost structure, risks related to the integration of recently acquired businesses, seasonality and the matters disclosed under theheading “Risk Factors” in the Company’s Exchange Act reports, including Item 1A included in this Annual Report. Readers are urged to consider thesefactors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Annual Report on Form 10-K are made onlyas of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update these forward-looking statements to reflectsubsequent events or circumstances.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 talent strategies as well as assist them in the execution of building and attracting theirtalent. We are a premier provider of executive recruitment, leadership and talent consulting and talent acquisition solutions with the broadest global presencein the recruitment industry. Our services include Executive Recruitment, consulting and solutions services through Leadership & Talent Consulting (“LTC”)and recruitment for non-executive professionals and recruitment process outsourcing (“RPO”) through Futurestep. Approximately 72% of the executiverecruitment searches we performed in fiscal 2015 were for board level, chief executive and other senior executive and general management positions. Our5,350 clients in fiscal 2015 included many of the world’s largest and most prestigious public and private companies, including approximately 56% of theFORTUNE 500, middle market and emerging growth companies, as well as government and nonprofit organizations. We have built strong client loyalty, with79% of assignments performed during fiscal 2015 having been on behalf of clients for whom we had conducted assignments in the previous three fiscal years.Approximately 60% of our revenues were generated from clients that utilize multiple lines of business.In an effort to maintain our long-term strategy of being the leading provider of talent management solutions, our strategic focus for fiscal 2016 centersupon enhancing the integration of our multi-service strategy. In fiscal 2015, we undertook an effort to bring together all our internally developed andacquired intellectual property in Korn Ferry Four Dimension of Leadership Talent (“KF4D”), our newest and most robust assessment for 30Table of ContentsExecutive Recruitment, LTC and Futurestep. We have identified four crucial areas that matter most for individual and organizational success. The analyticswe collect enable us to help organizations accentuate strengths and identify areas to develop, as well as understand how they stack up against theircompetition: • Competencies – the skills and behaviors required for success that can be observed. • Experiences – assignments or roles that prepare a person for future opportunities. • Traits – inclinations, aptitudes and natural tendencies a person leans toward, including personality and intellectual capacity. • Drivers – values and interests that influence a person’s career path, motivation, and engagement.Leveraging KF4D, we plan to continue to address areas of increasing client demand including LTC and RPO. We further plan to explore new productsand services, continue to pursue a disciplined acquisition strategy, enhance our technology and processes and aggressively leverage our brand throughthought leadership and intellectual capital projects as a means of delivering world-class service to our clients.During fiscal 2015, the Company took actions to rationalize its cost structure as a result of efficiencies obtained from prior year technologyinvestments that enabled further integration of the legacy business and recent acquisitions as well as other cost saving initiatives. As a result, we recorded$9.5 million in restructuring charges, net in fiscal 2015, of which $9.2 million relates to severance and $0.3 million related to consolidation/abandonment ofpremises. During fiscal 2014, we progressed the restructuring plan that we implemented in fiscal 2013 which focused on realizing the planned synergiesassociated with prior year acquisitions and recorded $3.7 million of restructuring charges, net, of which $2.9 million was for facility costs in order to integratePDI Ninth House (“PDI”) by consolidating and eliminating redundant office space around the world and of $0.8 million of which was for severance costs toconsolidate certain overhead functions.The Company currently operates in three global business segments: Executive Recruitment, LTC and Futurestep. See Note 11 — Business Segments, inthe Notes to our Consolidated Financial Statements in this Annual Report on Form 10-K, for discussion of the Company’s global business segments. TheCompany evaluates performance and allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) adjusted earningsbefore interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuringcharges, integration and acquisition costs and certain separation costs and certain non-cash charges (goodwill, intangible asset and other than temporaryimpairment). Adjusted EBITDA is a non-GAAP financial measure. It has limitations as an analytical tool, should not be viewed as a substitute for financialinformation determined in accordance with U.S. generally accepted accounting principles (“GAAP”), and should not be considered in isolation or as asubstitute for analysis of the Company’s results as reported under GAAP. In addition, it may not necessarily be comparable to non-GAAP performancemeasures that may be presented by other companies. Management believes the presentation of this non-GAAP financial measure provides meaningfulsupplemental information regarding Korn Ferry’s performance by excluding certain charges and other items that may not be indicative of Korn Ferry’songoing operating results. The use of this non-GAAP financial measure facilitates comparisons to Korn Ferry’s historical performance. Korn Ferry includesthis non-GAAP financial measure because management believes it is useful to investors in allowing for greater transparency with respect to supplementalinformation used by management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making. The accountingpolicies for the reportable segments are the same as those described in the summary of significant accounting policies in the accompanying consolidatedfinancial statements, except that the above noted items are excluded from EBITDA to arrive at Adjusted EBITDA.Fee revenue increased $67.9 million, or 7% in fiscal 2015 to $1,028.2 million compared to $960.3 million in fiscal 2014, with increases in fee revenuein all business segments. During fiscal 2015, we recorded operating income of $114.0 million with Executive Recruitment, LTC and Futurestep segmentscontributing $119.0 million, $28.2 million and $19.9 million, respectively, offset by corporate expenses of $53.1 million. Net income 31Table of Contentsfor fiscal 2015 and 2014 was $88.4 million and $72.7 million, respectively. Adjusted EBITDA during fiscal 2015 was $161.7 million with ExecutiveRecruitment, LTC and Futurestep segments contributing $132.4 million, $44.4 million, and $23.0 million, respectively, offset by corporate expenses of$38.1 million. Adjusted EBITDA increased $23.4 million in fiscal 2015 to $161.7 million from Adjusted EBITDA of $138.3 million in fiscal 2014.Our cash, cash equivalents and marketable securities increased $57.1 million, or 12%, to $525.4 million at April 30, 2015, compared to $468.3 millionat April 30, 2014. This increase is mainly due to cash provided by operations, partially offset by bonuses earned in fiscal 2014 and paid during the firstquarter of fiscal 2015, $15.3 million for the acquisition of Pivot Leadership and $5.1 million for dividends paid during fiscal 2015. As of April 30, 2015, weheld marketable securities to settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $123.3 million and a fair valueof $131.4 million. Our vested and unvested obligations for which these assets were held in trust totaled $129.1 million as of April 30, 2015. Our workingcapital increased by $60.0 million to $335.0 million in fiscal 2015. We believe that cash on hand and funds from operations will be sufficient to meet ouranticipated working capital, capital expenditures, general corporate requirements and dividend payments under our dividend policy, in the next twelvemonths. We had no long-term debt or any outstanding borrowings under our credit facility at April 30, 2015 or 2014. There is no restricted cash requirementunder our current senior unsecured revolving credit agreement. As of April 30, 2015 and 2014, there was $2.8 million of standby letters of credit issued underour long-term debt arrangements. We have a total of $1.6 million and $1.5 million of standby letters of credits with other financial institutions as of April 30,2015 and 2014, respectively.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’sjudgment and estimates. Specific risks for these critical accounting policies are described in the following paragraphs. Senior management has discussed thedevelopment, selection and key assumptions of the critical accounting estimates with the Audit Committee of the Board of Directors.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 performed on aretained basis, recruitment for non-executive professionals, recruitment process outsourcing and leadership & talent consulting services. Fee revenue fromexecutive recruitment activities and recruitment for non-executive professionals is generally one-third of the estimated first year cash compensation of theplaced executive or non-executive professional, as applicable, plus a percentage of the fee to cover indirect engagement related expenses. The Companygenerally recognizes revenue on a straight-line basis over a three-month period, commencing upon client acceptance, as this is the period over which therecruitment services are performed. Fees earned in excess of the initial contract amount are recognized upon completion of the engagement, which reflect thedifference between the final actual compensation of the placed executive and the estimate used for purposes of the previous billings. Since the initial fees aretypically not contingent upon placement of a candidate, our assumptions primarily relate to establishing the period over which such service is performed.These assumptions determine the timing of revenue recognition and profitability for the reported period. If these assumptions do not accurately reflect theperiod over which revenue is earned, revenue and profit could differ. Any revenue associated with services that are provided on a 32Table of Contentscontingent basis are recognized once the contingency is resolved. In addition to recruitment for non-executive professionals, Futurestep provides RPOservices and fee revenue is recognized as services are rendered and/or as milestones are achieved. Fee revenue from LTC services is recognized as services arerendered for consulting engagements and other time based services, measured by total hours incurred to the total estimated hours at completion. It is possiblethat updated estimates for the consulting engagement may vary from initial estimates with such updates being recognized in the period of determination.Depending on the timing of billings and services rendered, the Company accrues or defers revenue as appropriate. LTC revenue is also derived from the saleof solution services, which includes revenue from licenses and from the sale of products. Revenue from licenses is recognized using a straight-line methodover the term of the contract (generally 12 months). Under the fixed term licenses, the Company is obligated to provide the licensee with access to anyupdates to the underlying intellectual property that are made by the Company during the term of the license. Once the term of the agreement expires, theclient’s right to access or use the intellectual property expires and the Company has no further obligations to the client under the license agreement. Revenuefrom perpetual licenses is recognized when the license is sold since the Company’s only obligation is to provide the client access to the intellectual propertybut is not obligated to provide maintenance, support, updates or upgrades. Products sold by the Company mainly consist of books and automated servicescovering a variety of topics including performance management, team effectiveness and coaching and development. The Company recognizes revenue for itsproducts when the product has been sold or shipped in the case of books. Furthermore, a provision for doubtful accounts on recognized revenue is establishedwith a charge to general and administrative expenses based on historical loss experience, assessment of the collectability of specific accounts, as well asexpectations of future collections based upon trends and the type of work for which services are rendered.Annual Performance Related Bonuses. Each quarter, management makes its best estimate of its annual performance related bonuses, which requiresmanagement to, among other things, project annual consultant productivity (as measured by engagement fees billed and collected by executive recruitmentconsultants and revenue and other performance metrics for LTC and Futurestep consultants), the level of engagements referred by a fee earner in one line ofbusiness to a different line of business, Company performance including profitability, competitive forces and future economic conditions and their impact onour results. At the end of each fiscal year, annual performance related bonuses take into account final individual consultant productivity (including referredwork), Company results including profitability, the achievement of strategic objectives, the results of individual performance appraisals, and the currenteconomic landscape. Because annual performance-based bonuses are communicated and paid only after the Company reports its full fiscal year results, actualperformance-based bonus payments may differ from the prior year’s estimate. Such changes in the bonus estimate historically have been immaterial and arerecorded 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 could significantly impact the liability and related cost on our consolidated balance sheetand statement of income, respectively. For certain deferred compensation plans, management engages an independent actuary to periodically review theseassumptions in order to confirm that they reflect the population and economics of our deferred compensation plans in all material respects and to assist us inestimating our deferred compensation liability and the related cost. The actuarial assumptions we use may differ from actual results due to changing marketconditions or changes in the participant population. These differences could have a significant impact on our deferred compensation liability and the relatedcost.Carrying Values. Valuations are required under GAAP to determine the carrying value of various assets. Our most significant assets for whichmanagement is required to prepare valuations are carrying value of receivables, goodwill, intangible assets, fair value of contingent consideration, andrecoverability of deferred income taxes. Management must identify whether events have occurred that may impact the carrying value of these assets andmake assumptions regarding future events, such as cash flows and profitability. Differences between the assumptions used to prepare these valuations andactual results could materially impact the carrying amount of these assets and our operating results. 33Table of ContentsOf 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 1) a discounted cash flow analysis based on forecast cash flows (including estimated underlying revenue and operating income growthrates) discounted using an estimated weighted-average cost of capital for market participants and 2) a market approach, utilizing observable market data suchas comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). TheCompany also reconciles the results of these analyses to its market capitalization. If the carrying amount of a reporting unit exceeds its estimated fair value,goodwill is considered potentially impaired and further tests are performed to measure the amount of impairment loss, if any. We recorded no goodwillimpairment in conjunction with our annual goodwill impairment assessment performed as of January 31, 2015. While historical performance and currentexpectations have resulted in fair values of goodwill in excess of carrying values, if our assumptions are not realized, it is possible that in the future animpairment charge may need to be recorded. However, it is not possible at this time to determine if an impairment charge would result or if such a chargewould be material. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result,there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be accurate predictionsof the future. As of our testing date, the fair value of each reporting unit exceeded its carrying amount and no reporting units were at risk of failing theimpairment test. As a result, no impairment charge was recognized. There was also no indication of potential impairment during the fourth quarter of fiscal2015 that would have required further testing.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; • An economic climate that significantly differs from our future profitability assumptions in timing or degree; • The deterioration of the labor markets; 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, 2015 2014 2013 Fee revenue 100.0% 100.0% 100.0% Reimbursed out-of-pocket engagement expenses 3.7 3.7 4.5 Total revenue 103.7 103.7 104.5 Compensation and benefits 67.2 67.4 68.3 General and administrative expenses 14.2 15.8 17.6 Reimbursed expenses 3.7 3.7 4.5 Cost of services 3.9 4.2 3.6 Depreciation and amortization 2.7 2.7 2.3 Restructuring charges, net 0.9 0.4 2.8 Operating income 11.1 9.5 5.4 Net income 8.6% 7.6% 4.1% 34Table of ContentsThe following tables summarize the results of our operations by business segment: Year Ended April 30, 2015 2014 2013 Dollars % Dollars % Dollars % (dollars in thousands) Fee revenue Executive Recruitment: North America $330,634 32.2% $306,768 31.9% $290,317 35.7% EMEA 153,465 14.9 147,917 15.4 128,807 15.9 Asia Pacific 84,148 8.2 84,816 8.8 73,221 9.0 South America 29,160 2.8 29,374 3.1 30,134 3.7 Total Executive Recruitment 597,407 58.1 568,875 59.2 522,479 64.3 LTC 267,018 26.0 254,636 26.5 168,115 20.7 Futurestep 163,727 15.9 136,790 14.3 122,237 15.0 Total fee revenue 1,028,152 100.0% 960,301 100.0% 812,831 100.0% Reimbursed out-of-pocket engagement expense 37,914 35,258 36,870 Total revenue$1,066,066 $995,559 $849,701 Year Ended April 30, 2015 2014 2013 Dollars Margin (1) Dollars Margin (1) Dollars Margin (1) (dollars in thousands) Operating income (loss) Executive Recruitment: North America $80,818 24.4% $70,256 22.9% $58,832 20.3% EMEA 18,867 12.3 23,168 15.7 9,173 7.1 Asia Pacific 14,631 17.4 17,274 20.4 6,973 9.5 South America 4,704 16.1 5,654 19.2 5,987 19.9 Total Executive Recruitment 119,020 19.9 116,352 20.5 80,965 15.5 LTC 28,175 10.6 23,847 9.4 6,424 3.8 Futurestep 19,940 12.2 13,352 9.8 10,975 9.0 Corporate (53,107) (61,943) (54,488) Total operating income (loss)$114,028 11.1% $91,608 9.5% $43,876 5.4% (1)Margin calculated as a percentage of fee revenue by business segment. 35Table of Contents Year Ended April 30, 2015 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Fee revenue $330,634 $153,465 $84,148 $29,160 $597,407 $267,018 $163,727 $— $1,028,152 Total revenue $344,913 $158,052 $87,142 $29,218 $619,325 $275,220 $171,521 $— $1,066,066 Net income $88,357 Other income, net (7,458) Interest expense, net 1,784 Equity in earnings of unconsolidated subsidiaries, net (2,181) Income tax provision 33,526 Operating income (loss) $80,818 $18,867 $14,631 $4,704 $119,020 $28,175 $19,940 $(53,107) 114,028 Depreciation and amortization 3,515 1,764 1,045 350 6,674 13,427 1,882 5,614 27,597 Other income (loss), net 288 83 369 109 849 (22) 54 6,577 7,458 Equity in earnings of unconsolidated subsidiaries, net 426 — — — 426 — — 1,755 2,181 EBITDA 85,047 20,714 16,045 5,163 126,969 41,580 21,876 (39,161) 151,264 Restructuring charges, net 1,151 3,987 17 229 5,384 2,758 1,154 172 9,468 Acquisition costs — — — — — — — 959 959 Adjusted EBITDA $86,198 $24,701 $16,062 $5,392 $132,353 $44,338 $23,030 $(38,030) $161,691 Adjusted EBITDA margin 26.1% 16.1% 19.1% 18.5% 22.2% 16.6% 14.1% 15.7% Year Ended April 30, 2014 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Fee revenue $306,768 $147,917 $84,816 $29,374 $568,875 $254,636 $136,790 $— $960,301 Total revenue $321,473 $152,525 $87,606 $29,586 $591,190 $262,962 $141,407 $— $995,559 Net income $72,691 Other income, net (9,769) Interest expense, net 2,363 Equity in earnings of unconsolidated subsidiaries, net (2,169) Income tax provision 28,492 Operating income (loss) $70,256 $23,168 $17,274 $5,654 $116,352 $23,847 $13,352 $(61,943) $91,608 Depreciation and amortization 3,579 2,727 1,383 323 8,012 12,491 1,797 3,872 26,172 Other income, net 631 632 203 303 1,769 106 583 7,311 9,769 Equity in earnings of unconsolidated subsidiaries, net 383 — — — 383 — — 1,786 2,169 EBITDA 74,849 26,527 18,860 6,280 126,516 36,444 15,732 (48,974) 129,718 Restructuring charges, net 816 460 60 — 1,336 1,149 1,134 63 3,682 Separation costs — — — — — — — 4,500 4,500 Integration costs — — — — — — — 394 394 Adjusted EBITDA $75,665 $26,987 $18,920 $6,280 $127,852 $37,593 $16,866 $(44,017) $138,294 Adjusted EBITDA margin 24.7% 18.2% 22.3% 21.4% 22.5% 14.8% 12.3% 14.4% 36Table of Contents 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 Equity in earnings of unconsolidated subsidiaries, net (2,110) Income tax provision 16,637 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 unconsolidated 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% Fiscal 2015 Compared to Fiscal 2014Fee RevenueFee Revenue. Fee revenue went up by $67.9 million, or 7%, to $1,028.2 million in fiscal 2015 compared to $960.3 million in fiscal 2014. This increasewas attributable to higher fee revenue in Executive Recruitment, Futurestep and LTC. Exchange rates unfavorably impacted fee revenue by $23.9 million or2% in fiscal 2015, when compared to fiscal 2014.Executive Recruitment. Executive Recruitment reported fee revenue of $597.4 million, an increase of $28.5 million, or 5%, in fiscal 2015 compared to$568.9 million in fiscal 2014. As detailed below, Executive Recruitment fee revenue was higher in the North America and EMEA regions, partially offset bysmall decreases in fee revenue in Asia Pacific and South America regions in fiscal 2015 as compared to fiscal 2014. The higher fee revenue in ExecutiveRecruitment was mainly due to a 4% increase in the number of Executive Recruitment engagements billed and a 1% increase in the weighted-average feesbilled per engagement during fiscal 2015 as compared to the prior year. Exchange rates unfavorably impacted fee revenue by $15.0 million, or 3%, in fiscal2015, when comparing to fiscal 2014.North America reported fee revenue of $330.6 million, an increase of $23.8 million, or 8%, in fiscal 2015 compared to $306.8 million in fiscal 2014.North America’s fee revenue was higher primarily due to a 4% increase in both the number of engagements billed and in the weighted-average fees billed perengagement during fiscal 2015 compared to fiscal 2014. The overall increase in fee revenue was driven by growth in the consumer goods, industrial, lifesciences/healthcare, and financial services sectors as compared to fiscal 2014, partially offset by a decline in the technology and education/non-profit sectors.Exchange rates unfavorably impacted fee revenue by $2.1 million, or 1%, in fiscal 2015, when compared to fiscal 2014. 37Table of ContentsEMEA reported fee revenue of $153.5 million, an increase of $5.6 million, or 4%, in fiscal 2015 compared to $147.9 million in fiscal 2014. Exchangerates unfavorably impacted fee revenue by $7.1 million, or 5%, in fiscal 2015, when compared to fiscal 2014. The higher fee revenue was primarily driven bya 5% increase in the number of engagements billed, offset by a 1% decline in weighted-average fees billed per engagement in fiscal 2015 as compared tofiscal 2014. The performance in existing offices in the Sweden, Switzerland, France, United Kingdom, and Spain were the primary contributors to the increasein fee revenue in fiscal 2015 compared to fiscal 2014, partially offset by a decrease in fee revenue in Germany, Belgium, and the Netherlands. In terms ofbusiness sectors, industrial, financial services, and life sciences/healthcare experienced the largest growth in fee revenue in fiscal 2015 as compared to fiscal2014, partially offset by a decrease in the consumer goods and technology sectors.Asia Pacific reported fee revenue of $84.1 million, a slight decrease of $0.7 million, or 1%, in fiscal 2015 compared to $84.8 million in fiscal 2014.Exchange rates unfavorably impacted fee revenue by $2.6 million, or 3%, in fiscal 2015, when compared to fiscal 2014. The decline in fee revenue wasmainly due to a 7% decrease in weighted-average fees billed per engagement, partially offset by a 6% increase in the number of engagements billed in fiscal2015 compared to fiscal 2014. The performance in Singapore and Japan were the primary contributors to the decrease in fee revenue in fiscal 2015 comparedto fiscal 2014, partially offset by an increase in fee revenue in Hong Kong, China, and India. Life sciences/healthcare and consumer goods were the mainsectors contributing to the decrease in fee revenue in fiscal 2015 as compared to fiscal 2014, partially offset by an increase in fee revenue in the financialservices sector.South America reported fee revenue of $29.2 million, a slight decrease of $0.2 million, or 1%, in fiscal 2015 compared to $29.4 million in fiscal 2014.Exchange rates unfavorably impacted fee revenue for South America by $3.2 million, or 11%, in fiscal 2015, when compared to fiscal 2014. The decline infee revenue was mainly due to a 1% decrease in weighted-average fees billed per engagement in fiscal 2015 compared to fiscal 2014. The performance inBrazil was the primary contributor to lower fee revenue in fiscal 2015 compared to fiscal 2014, partially offset by growth in Venezuela and Colombia.Technology and consumer goods were the main sectors contributing to the decline in fee revenue in fiscal 2015 compared to fiscal 2014, partially offset byan increase in fee revenue in the industrial and financial services sectors during the same period.Leadership & Talent Consulting. LTC reported fee revenue of $267.1 million, an increase of $12.5 million, or 5%, in fiscal 2015 compared to $254.6million in fiscal 2014. Fee revenue increased due to higher consulting fee revenue of $8.4 million, or 4%, in fiscal 2015 compared to the year-ago period, andan increase in product revenue of $4.1 million, or 7%, compared to fiscal 2014. The increase in consulting fee revenue includes $3.7 million of fee revenuegenerated from the acquisition of Pivot Leadership on March 1, 2015. Exchange rates unfavorably impacted fee revenue by $4.3 million, or 2%, in fiscal2015.Futurestep. Futurestep reported fee revenue of $163.7 million, an increase of $26.9 million, or 20%, in fiscal 2015 compared to $136.8 million in fiscal2014. The increase in Futurestep’s fee revenue was due to an 18% increase in the weighted-average fees billed per engagement and a 2% increase in thenumber of engagements billed in fiscal 2015 compared to the year-ago period. The increase in the weighted-average fees billed was driven by a 25% increasein fee revenue from recruitment process outsourcing and a 22% increase in professional recruitment, as these tend to generate higher fees per engagementthan other services performed by Futurestep. Exchange rates unfavorably impacted fee revenue by $4.6 million, or 3%, in fiscal 2015.Compensation and BenefitsCompensation and benefits expense increased $44.6 million, or 7%, to $691.5 million in fiscal 2015 from $646.9 million in fiscal 2014. This increasewas due in large part to higher performance related bonus expense of $21.0 million and an increase of $16.1 million, $4.9 million, $3.3 million, $2.2 millionand $1.8 million in salaries and related payroll taxes, outside contractors, employee insurance cost, recruitment expense and stock based compensation,respectively. These increases in compensation and benefits expense were partially offset by management separation charges of $4.5 million recorded in fiscal2014 with no such charge in fiscal 2015. The 38Table of Contentsincrease in performance related bonus expense was due to an increase in fee revenue and profitability due to the continued adoption of our strategy,including referrals between lines of business and an increase in average headcount. The higher level of salaries and related payroll expense and employeeinsurance costs, were due to an increase in average headcount for Executive Recruitment and Futurestep. The increase in headcount, recruiting expense andstock based compensation reflects our continued growth-related investments back into the business. Exchange rates favorably impacted compensation andbenefits expenses by $16.2 million, or 3%, in fiscal 2015.Executive Recruitment compensation and benefits expense went up by $18.6 million, or 5%, to $393.3 million in fiscal 2015 compared to $374.7million in fiscal 2014. This increase was primarily due to an increase of $11.1 million in salaries and related payroll taxes and higher employee insurancecost of $1.5 million due to a 3% increase in the average headcount. In addition, performance related bonus expense was higher by $4.9 million due to higherrevenue and profitability from the continued adoption of our strategy. These changes were offset by a decrease in expense from certain deferred compensationplans during fiscal 2015 compared to fiscal 2014. Executive Recruitment compensation and benefits expense as a percentage of fee revenue was 66% in bothfiscal 2015 and 2014.LTC compensation and benefits expense increased $9.7 million, or 7%, to $158.9 million in fiscal 2015 from $149.2 million in fiscal 2014. Thechange was driven by higher performance related bonus expense of $8.0 million primarily associated with an increase in fee revenue, profitability, andreferrals between lines of business during fiscal 2015 compared to fiscal 2014. The rest of the change was due to increases in outside contractors of $1.2million and recruitment expenses of $1.1 million, both as a result of supporting higher level of fee revenue. LTC compensation and benefits expense as apercentage of fee revenue increased to 60% in fiscal 2015 from 59% in fiscal 2014.Futurestep compensation and benefits expense increased $18.0 million, or 19%, to $111.8 million in fiscal 2015 from $93.8 million in fiscal 2014. Theincrease was primarily driven by an increase of $7.3 million in performance related bonus expense due to a higher level of fee revenue, profitability, andreferrals between lines of business and an increase in average headcount. The rest of the change was due to higher salaries and related payroll taxes of $5.4million and $3.8 million in outside contractors. The increase in salaries and related payroll taxes was due to a 17% increase in the average headcount and theincrease in the use of outside contractors was primarily associated with the increase in staffing to accommodate the increase in fee revenue from our RPObusiness. Futurestep compensation and benefits expense as a percentage of fee revenue was 68% in fiscal 2015 compared to 69% in fiscal 2014.Corporate compensation and benefits expense decreased by $1.7 million, or 6%, to $27.5 million in fiscal 2015 from $29.2 million in fiscal 2014mainly due to management separation charges of $4.5 million recorded in fiscal 2014 with no such charge in fiscal 2015, offset with higher salaries andrelated payroll taxes of $2.2 million and $1.2 million more in stock based compensation due to overall profitability of the Company.General and Administrative ExpensesGeneral and administrative expenses decreased by $6.1 million, or 4%, to $145.9 million in fiscal 2015 compared to $152.0 million in fiscal 2014.General and administrative expenses as a percentage of fee revenue was 14% in fiscal 2015 compared to 16% in fiscal 2014. The decrease is attributable to a$7.2 million decline in legal and other professional fees and a decline in marketing and business development expense of $3.5 million in fiscal 2015compared to fiscal 2014. The lower legal and other professional fees are primarily due to a $6.2 million insurance reimbursement for previously incurred legalfees while the decrease in business development expense is due to ongoing cost control initiatives and higher than normal costs in fiscal 2014 related to theintegration of the PDI and Global Novation acquisitions into the LTC business without such costs being incurred in fiscal 2015. This decrease in general andadministrative expenses was partially offset by an increase in our foreign currency loss of $3.7 million in fiscal 2015 compared to fiscal 2014 and an increasein premise and office expense of $1.0 million. Exchange rates favorably impacted general and administrative expenses by $4.8 million, or 3% during fiscal2015. 39Table of ContentsExecutive Recruitment general and administrative expenses increased $3.7 million, or 5%, to $71.5 million in fiscal 2015 from $67.8 million in fiscal2014. General and administrative expenses increased due to higher foreign exchange loss recognized of $2.5 million in fiscal 2015 compared to fiscal 2014.The remaining change was due to higher premise and office expense of $0.9 million. Executive Recruitment general and administrative expenses as apercentage of fee revenue was 12% in both fiscal 2015 and 2014.LTC general and administrative expenses declined by $0.5 million, or 1%, to $35.3 million in fiscal 2015 from $35.8 million in fiscal 2014. Thedecrease is attributable to lower marketing and business development expenses and other general and administrative expenses of $2.3 million, offset by anincrease in foreign exchange loss of $1.8 million in fiscal 2015 compared to fiscal 2014. The decrease in marketing and business development expense is dueto higher than normal costs in fiscal 2014 related to the integration of the PDI and Global Novation acquisitions into the LTC business. LTC general andadministrative expenses as a percentage of fee revenue was 13% in fiscal 2015 compared to 14% in fiscal 2014.Futurestep general and administrative expenses decreased $0.3 million, or 2%, to $19.3 million in fiscal 2015 compared to $19.6 million in fiscal2014. Futurestep general and administrative expenses as a percentage of fee revenue was 12% in fiscal 2015 compared to 14% in fiscal 2014.Corporate general and administrative expenses decreased $9.0 million, or 31%, to $19.8 million in fiscal 2015 compared to $28.8 million in fiscal2014. The decrease in general and administrative expenses was driven by $8.5 million in lower legal fees and other professional fees, primarily related to a$6.2 million insurance reimbursement for previously incurred legal fees and a decline in other legal fees during fiscal 2015 compared to fiscal 2014. The restof the change was due to lower business development expenses of $1.2 million resulting from our ongoing cost control initiatives.Cost of Services ExpenseCost of services expense consist primarily of non-billable contractor and product costs related to the delivery of various services and products. Cost ofservices expense decreased $0.2 million, or 1%, to $39.7 million in fiscal 2015 compared to $39.9 million in fiscal 2014. Cost of services expense as apercentage of fee revenue was 4% in both fiscal 2015 and 2014.Depreciation and Amortization ExpensesDepreciation and amortization expenses were $27.6 million, an increase of $1.4 million in fiscal 2015 compared to $26.2 million in fiscal 2014. Theincrease relates primarily to technology investments that were made in the current and prior year. This expense relates mainly to computer equipment,software, furniture and fixtures, leasehold improvements, and intangible assets.Restructuring Charges, NetDuring fiscal 2015, we took actions to rationalize our cost structure as a result of efficiencies obtained from prior year technology investments thatenabled further integration of the legacy business and recent acquisitions, as well as other cost saving initiatives. As a result, we recorded $9.5 million inrestructuring charges, net in fiscal 2015, of which $9.2 million relates to severance and $0.3 million relates to consolidation/abandonment of premises.During fiscal 2014, as part of the integration of PDI, we recorded $3.7 million of restructuring charges, net, of which $2.9 million related to consolidation ofpremises and $0.8 million related to severance.Operating IncomeOperating income increased $22.4 million to $114.0 million in fiscal 2015 as compared to $91.6 million in fiscal 2014. This increase in operatingincome resulted from an increase of $67.9 million in fee revenue and a 40Table of Contentsdecrease of $6.1 million in general and administrative expenses. These changes were offset by higher compensation and benefits expense of $44.6 million,restructuring charges, net of $5.8 million, and $1.4 million in depreciation and amortization expenses during fiscal 2015 as compared to fiscal 2014.Executive Recruitment operating income increased $2.6 million to $119.0 million in fiscal 2015 as compared to $116.4 million in fiscal 2014. Theincrease in Executive Recruitment operating income was driven by higher fee revenue of $28.5 million and decline in depreciation and amortization expenseof $1.3 million offset by increases in compensation and benefits expense of $18.6 million, general and administrative expenses of $3.7 million andrestructuring charges, net of $4.1 million. The increase in compensation and benefits expense was due in part to investments in headcount to grow thebusiness (an increase in the average headcount of 45 positions), as well as higher incentive compensation tied to referrals between Executive Recruitment,LTC and Futurestep resulting from continued adoption of our strategy. Executive Recruitment operating income as a percentage of fee revenue was 20% inboth fiscal 2015 and 2014.LTC operating income increased $4.4 million to $28.2 million in fiscal 2015 as compared to $23.8 million in fiscal 2014. The increase in LTCoperating income was primarily due to a $12.5 million increase in fee revenue and a decline of $3.8 million in cost of services expense, partially offset byhigher compensation and benefit expense of $9.7 million and restructuring charges, net of $1.6 million. LTC operating income as a percentage of fee revenuewas 11% in fiscal 2015 compared to 9% in fiscal 2014.Futurestep operating income increased by $6.6 million to $19.9 million in fiscal 2015 from $13.3 million in fiscal 2014. The increase in Futurestepoperating income was primarily due to $26.9 million in higher fee revenue and a decline in general and administrative expenses of $0.3 million, partiallyoffset by an increase of $18.0 million in compensation and benefits expense and $2.6 million in cost of services expense in fiscal 2015 compared to fiscal2014. Futurestep operating income as a percentage of fee revenue was 12% in fiscal 2015 as compared to 10% in fiscal 2014.Adjusted EBITDAAdjusted EBITDA increased $23.4 million to $161.7 million in fiscal 2015 as compared to $138.3 million in fiscal 2014. This increase was driven byhigher fee revenue of $67.9 million and a decrease of $6.6 million in general and administrative expenses (excluding integration/acquisition costs).Offsetting these changes in Adjusted EBITDA was higher compensation and benefits expense (excluding certain separation costs) of $49.1 million and adecrease in other income, net of $2.3 million during fiscal 2015 compared to fiscal 2014. Adjusted EBITDA as a percentage of fee revenue was 16% in fiscal2015 as compared to 14% in fiscal 2014.Executive Recruitment Adjusted EBITDA was $132.4 million and $127.8 million in fiscal 2015 and 2014, respectively. Adjusted EBITDA increased$4.6 million in fiscal 2015 as compared to fiscal 2014 due to higher fee revenue of $28.5 million, offset by increases of $18.6 million in compensation andbenefits expense and $3.7 million in general and administrative expenses and a decline in other income, net of $1.0 million. The increase in compensationand benefits expense was due in part to investments in headcount to grow the business, as well as higher incentive compensation tied to referrals betweenExecutive Recruitment, LTC and Futurestep resulting from continued adoption of our strategy. The increase in general and administrative expenses waspartially due to increased levels of business activity as well as other increases such as foreign exchange loss. Executive Recruitment Adjusted EBITDA as apercentage of fee revenue was 22% in both fiscal 2015 and 2014.LTC Adjusted EBITDA increased by $6.8 million to $44.4 million in fiscal 2015 as compared to $37.6 million in fiscal 2014. This increase was due tohigher fee revenue of $12.5 million and a decline in cost of services of $3.8 million, offset by an increase in compensation and benefit expense of $9.7million. The decrease in cost of services primarily relates to an increased focus on the utilization of internal resources versus outside contractors as evidencedby the 400 basis points increase in our staff utilization to a rate of 71% during fiscal 2015. The increase in compensation and benefit expenses was due to anincrease in performance related bonus 41Table of Contentsexpense resulting from higher fee revenue and the continued adoption of the Company’s integrated go to market strategy across all three of our lines ofbusinesses. LTC Adjusted EBITDA as a percentage of fee revenue was 17% in fiscal 2015 as compared to 15% in fiscal 2014.Futurestep Adjusted EBITDA increased by $6.1 million to $23.0 million in fiscal 2015 as compared to $16.9 million in fiscal 2014. The increase inFuturestep Adjusted EBITDA was primarily due to an increase in fee revenue of $26.9 million, offset by an increase of $18.0 million in compensation andbenefits expense and $2.6 million in cost of services expense during fiscal 2015 as compared to fiscal 2014. The increase in compensation and benefitsexpense was primarily driven by higher performance related bonus expense due to a higher level of fee revenue and higher salaries and related payroll taxesdue to an increase in average headcount. Futurestep Adjusted EBITDA as a percentage of fee revenue was 14% in fiscal 2015 as compared to 12% in fiscal2014.Other Income, NetOther income, net decreased by $2.3 million, to $7.5 million in fiscal 2015 as compared to $9.8 million in fiscal 2014. The decrease in other income,net is due to a smaller increase in the fair value of our marketable securities during fiscal 2015 compared to fiscal 2014.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 2015 as compared to $2.4 million in fiscal 2014.Equity in Earnings of Unconsolidated SubsidiariesEquity in earnings of unconsolidated subsidiaries is comprised of our less than 50% interest in our Mexican subsidiary and IGroup, LLC. We report ourinterest in earnings or loss of our Mexican subsidiary and IGroup, LLC on the equity basis as a one-line adjustment to net income. Equity in earnings was$2.2 million in both fiscal 2015 and 2014.Income Tax ProvisionThe provision for income taxes was $33.5 million in fiscal 2015 compared to $28.5 million in fiscal 2014. The provision for income taxes in fiscal2015 and 2014 reflects a 28% and 29% effective tax rate, respectively.Fiscal 2014 Compared to Fiscal 2013Fee RevenueFee Revenue. Fee revenue increased $147.5 million, or 18%, to $960.3 million in fiscal 2014 compared to $812.8 million in fiscal 2013. Adjusting forthe prior year acquisitions, fee revenue increased $75.6 million as compared to the year-ago period. This increase in fee revenue was primarily attributable toan increase in fee revenue in Executive Recruitment, and to a lesser extent, an increase in LTC and Futurestep fee revenue. Exchange rates unfavorablyimpacted fee revenue by $7.5 million or 1% in fiscal 2014.Executive Recruitment. Executive Recruitment reported fee revenue of $568.9 million, an increase of $46.4 million, or 9%, in fiscal 2014 compared to$522.5 million in fiscal 2013. As detailed below, Executive Recruitment fee revenue increased in North America, EMEA and Asia Pacific offset by a decreasein fee revenue in South America in fiscal 2014 compared to fiscal 2013. The increase in Executive Recruitment fee revenue was mainly due to an 8% increasein the number of Executive Recruitment engagements billed in fiscal 2014 compared to fiscal 2013 and a 1% increase in the weighted-average fees billed perengagement during the same period. Exchange rates unfavorably impacted fee revenue by $5.3 million or 1% in fiscal 2014. 42Table of ContentsNorth America reported fee revenue of $306.8 million, an increase of $16.5 million, or 6%, in fiscal 2014 compared to $290.3 million in fiscal 2013.North America’s increase in fee revenue was primarily due to a 3% increase in the number of engagements billed and a 2% increase in the weighted-averagefees billed per engagement during fiscal 2014 compared to fiscal 2013. The overall increase in fee revenue was primarily driven by increases in fee revenue inthe life sciences/healthcare, financial services, technology and education/non-profit sectors, partially offset by a decline in the industrial sector. Exchangerates unfavorably impacted fee revenue by $1.7 million or 1% in fiscal 2014.EMEA reported fee revenue of $147.9 million, an increase of $19.1 million, or 15%, in fiscal 2014 compared to $128.8 million in fiscal 2013. EMEA’sincrease in fee revenue was primarily driven by an 11% increase in the number of engagements billed and a 3% increase in the weighted-average fees billedper engagement in fiscal 2014 compared to fiscal 2013. The increase in performance in the United Kingdom, France, Netherlands, Belgium and Germanywere the primary contributors to the increase in fee revenue in fiscal 2014 compared to fiscal 2013. In terms of business sectors, industrial, financial services,life sciences/healthcare, consumer goods and technology experienced the largest increases in fee revenue in fiscal 2014 compared to the prior year. Exchangerates favorably impacted fee revenue by $3.8 million or 3% in fiscal 2014.Asia Pacific reported fee revenue of $84.8 million, an increase of $11.6 million, or 16%, in fiscal 2014 compared to $73.2 million in fiscal 2013. Theincrease in fee revenue was mainly due to a 15% increase in the number of engagements billed and a 1% increase in weighted-average fees billed perengagement in fiscal 2014 compared to fiscal 2013. The increase in performance in Australia, Singapore and China were the primary contributors to theincrease in fee revenue. The largest increases in fee revenue were experienced in the life sciences/healthcare, financial services, industrial and consumergoods sectors in fiscal 2014 compared to the prior year, partially offset by a decrease in the technology sector. Exchange rates unfavorably impacted feerevenue by $4.3 million or 6% in fiscal 2014.South America reported fee revenue of $29.4 million, a decrease of $0.8 million, or 3%, in fiscal 2014 compared to $30.2 million in fiscal 2013. Thedecrease in fee revenue was mainly due to a 7% decrease (a 2% increase on a constant currency basis) in the weighted-average fees billed per engagement,offset by a 5% increase in the number of engagements billed in fiscal 2014 compared to fiscal 2013. The decrease in performance in Peru, Colombia andChile were the primary contributors to the decrease in fee revenue, offset by an increase in fee revenue in Venezuela and Brazil. In terms of business sectors,industrial and education/non-profit sectors were the main sectors contributing to the decrease in fee revenue in fiscal 2014 compared to the prior year,partially offset by an increase in fee revenue in the life sciences/healthcare and consumer goods sectors during the same period. Exchange rates unfavorablyimpacted fee revenue for South America by $3.1 million or 10% in fiscal 2014.Leadership & Talent Consulting. LTC reported fee revenue of $254.6 million, an increase of $86.5 million, or 51%, in fiscal 2014 compared to $168.1million in fiscal 2013. Adjusting for the two prior year acquisitions, fee revenue increased $14.6 million, or 9%, as compared to the prior year. Fee revenueincreased due to an increase in consulting fee revenue of $11.2 million, or 8%, in fiscal 2014 compared to fiscal 2013, and an increase in product revenue of$3.4 million during the same period. Exchange rates unfavorably impacted fee revenue by $0.8 million in fiscal 2014.Futurestep. Futurestep reported fee revenue of $136.8 million, an increase of $14.6 million, or 12%, in fiscal 2014 compared to $122.2 million in fiscal2013. Improvement in Futurestep fee revenue was primarily driven by increases in recruitment process outsourcing and non-executive and other professionalrecruitment. The increase in Futurestep’s fee revenue was due to a 6% increase in the weighted-average fees billed per engagement and a 6% increase in thenumber of engagements billed in fiscal 2014 compared to the prior year. Exchange rates unfavorably impacted fee revenue by $1.4 million or 1% in fiscal2014. 43Table of ContentsCompensation and BenefitsCompensation and benefits expense increased $91.6 million, or 16%, to $646.9 million in fiscal 2014 from $555.3 million in fiscal 2013. Adjusting forthe prior year acquisitions, compensation and benefits increased $50.2 million as compared to fiscal 2013. Contributing to the increase in compensation andbenefits expense was an increase in performance related bonus expense of $29.9 million due to the mix in pre-bonus earnings before restructuring charges byoperating segment and an increase in fee revenue for fiscal 2014 compared to the prior year. In addition, there was an increase of $15.0 million in salaries andrelated payroll taxes, $5.4 million increase in deferred compensation ($3.2 million was related to amortization of amounts contributed by the Company and$2.2 million to the increase in fair value of the underlying investments that contributions are allocated to) and $2.3 million in separation costs, offset by adecrease in employee insurance costs of $3.2 million and a change in the cash surrender value of the company owned life insurance that decreasedcompensation and benefits expense by $1.7 million more in fiscal 2014 compared to the prior year. The increase in salaries and related payroll taxes was dueto a 12% increase in the average headcount for fiscal 2014 compared to fiscal 2013. Exchange rates favorably impacted compensation and benefits expensesby $5.2 million or 1% during fiscal 2014.The changes in the fair value of vested amounts owed under certain deferred compensation plans increased compensation and benefits expense by $7.8million in fiscal 2014 compared to $5.6 million in fiscal 2013. Offsetting these increases in compensation and benefits expense was an increase in the fairvalue of marketable securities classified as trading (held in trust to satisfy obligations under certain deferred compensation plan liabilities) of $9.5 millionand $7.6 million in fiscal 2014 and 2013, respectively, recorded in other income (loss), net on the consolidated statements of income.Executive Recruitment compensation and benefits expense increased $20.6 million, or 6%, to $374.7 million in fiscal 2014 compared to $354.1million in fiscal 2013. This increase was primarily due to an increase of $20.4 million in performance related bonus expense due to the increase in pre-bonusearnings before restructuring. The rest of the increase was due to an increase in salaries and related payroll taxes of $2.2 million, an increase in theamortization of certain deferred compensation plans of $1.5 million and a $1.2 million increase in the fair value of vested amounts owed under certaindeferred compensation plans, offset by a decrease in employee insurance costs of $2.7 million and a decrease in separation costs of $1.7 million. The increasein salaries and related payroll taxes was due to an increase in the average headcount for fiscal 2014 compared to fiscal 2013. Executive Recruitmentcompensation and benefits expense decreased as a percentage of fee revenue to 66% in fiscal 2014 from 68% in fiscal 2013.LTC compensation and benefits expense increased $53.4 million, or 56%, to $149.2 million in fiscal 2014 from $95.8 million in fiscal 2013. Adjustingfor the prior year acquisitions, compensation and benefits increased $12.0 million as compared to fiscal 2013. The change was driven by increases in bothperformance related bonus expense of $5.6 million and $5.0 million in salaries and related payroll taxes, both due to a 43% increase in the averageheadcount (excluding prior year acquisitions) during fiscal 2014 compared to fiscal 2013. LTC compensation and benefits expense as a percentage of feerevenue was 59% in fiscal 2014 compared to 57% in fiscal 2013.Futurestep compensation and benefits expense increased $11.0 million, or 13%, to $93.8 million in fiscal 2014 from $82.8 million in fiscal 2013. Thechange was driven by increases in both salaries and related payroll taxes and temporary contractors of $4.9 million and $1.9 million, respectively. Theincrease in salaries and related payroll taxes was due to a 8% increase in the average headcount and the increase in the use of temporary contractors wasprimarily associated with an increase in staffing to accommodate a number of larger RPO contracts won by the Company in fiscal 2014 and for whichdelivery began in the last two quarters of fiscal 2014 and will continue in subsequent periods. Also contributing to an increase in compensation and benefitsexpense was a $1.5 million increase in performance related bonus expense due to the increase in pre-bonus earnings before restructuring and an increase inthe fair value of vested amounts owed under certain deferred compensation plans of $0.5 million. Futurestep compensation and benefits expense as apercentage of fee revenue was 69% in fiscal 2014 compared to 68% in fiscal 2013. 44Table of ContentsCorporate compensation and benefits expense increased $6.6 million, or 29%, to $29.2 million in fiscal 2014 from $22.6 million in fiscal 2013 mainlydue to an increase of $4.2 million in separation charges and $2.4 million increase in performance related bonus expense. The increases in performance relatedbonus expense was due to the increase in the Company’s overall profitability. Also contributing to an increase in compensation and benefits expense was anincrease in the fair value of vested amounts owed under certain deferred compensation plans of $0.5 million, offset by the change in the CSV of COLI. Thechange in CSV of COLI reduced compensation and benefits expense by $8.2 million and $6.5 million in fiscal 2014 and 2013, respectively. The largerincrease in CSV of COLI in fiscal 2014 was due to a larger increase in the underlying investments due to market changes. COLI is held to fund certaindeferred compensation retirement plans.General and Administrative ExpensesGeneral and administrative expenses increased $9.2 million, or 6%, to $152.0 million in fiscal 2014 compared to $142.8 million in fiscal 2013.Adjusting for the prior year acquisitions, general and administrative expenses decreased by $1.1 million as compared to fiscal 2013. The decrease in generaland administrative expenses was due to a favorable foreign exchange rate that resulted in a foreign exchange gain of $1.4 million in fiscal 2014 compared toforeign exchange loss of $0.8 million during fiscal 2013 and a decrease in premise and office expenses of $1.1 million due to savings obtained from therestructuring associated with the consolidation of premises in prior periods. Offsetting the decrease in general and administrative expenses was an increase intravel and business development related expenses and bad debt expense of $1.7 million and $0.6 million, respectively. General and administrative expensesas a percentage of fee revenue was 16% in fiscal 2014 compared to 18% in fiscal 2013. Exchange rates favorably impacted general and administrativeexpenses by $1.6 million or 1% during fiscal 2014.Executive Recruitment general and administrative expenses decreased $2.1 million, or 3%, to $67.8 million in fiscal 2014 from $69.9 million in fiscal2013. The decrease in general and administrative expenses was driven by favorable foreign exchange rates, resulting in a gain of $1.8 million in fiscal 2014compared to a foreign exchange loss of $0.3 million in fiscal 2013, a decrease in premise and office expenses and legal and other professional services of $1.6million and $0.7 million, respectively, offset by an increase in travel and business development related expenses of $1.4 million and an increase in bad debtexpense of $0.8 million. The decrease in premise and office expenses was due to LTC occupying more office space leased by Executive Recruitment due tothe implementation of the restructuring plans in fiscal 2013. Executive Recruitment general and administrative expenses as a percentage of fee revenue was12% in fiscal 2014 compared to 13% in fiscal 2013.LTC general and administrative expenses increased $10.0 million, or 39%, to $35.8 million in fiscal 2014 from $25.8 million in fiscal 2013. Adjustingfor the prior year acquisitions, general and administrative expenses decreased $0.3 million as compared to the prior year. Contributing to the decrease ingeneral and administrative expenses was a decrease in premise and office expenses of $1.0 million due to sharing more office space with ExecutiveRecruitment and favorable foreign exchange rates, resulting in a decrease in the foreign exchange loss from $0.6 million in fiscal 2013 to $0.1 million infiscal 2014, offset by an increase of $0.5 million in business development expenses and an increase in legal and other professional services expenses of $0.5million. The increase in business development expenses was due to marketing events that LTC participated in order to support the business. LTC general andadministrative expenses as a percentage of fee revenue was 14% in fiscal 2014 compared to 15% in fiscal 2013.Futurestep general and administrative expenses increased $0.6 million, or 3%, to $19.6 million in fiscal 2014 compared to $19.0 million in fiscal 2013.The increase in general and administrative expense was due to an increase in premise and office expense of $0.5 million and an increase in legal and otherprofessional services expenses of $0.4 million, offset by a decrease in business development expenses of $0.2 million in fiscal 2014 compared to the prioryear. Futurestep general and administrative expenses as a percentage of fee revenue was 14% in fiscal 2014 compared to 16% in fiscal 2013. 45Table of ContentsCorporate general and administrative expenses increased $0.7 million, or 2%, to $28.8 million in fiscal 2014 compared to $28.1 million in fiscal 2013.The increase in general and administrative expenses was driven by an increase of $2.7 million in legal and other professional services expenses and anincrease of $1.1 million in premise and office expenses, offset by a decrease in integration/acquisition costs as a result of the PDI acquisition of $2.7 millionand a decrease in travel expenses of $0.4 million in fiscal 2014 compared to fiscal 2013.Cost of Services ExpenseCost of services expense consist primarily of non-billable contractor and product costs related to the delivery of various services and products. Cost ofservices expense increased $10.9 million, or 38%, to $39.9 million in fiscal 2014 compared to $29.0 million in fiscal 2013. Adjusting for the prior yearacquisitions, cost of services expense increased $1.9 million as compared to the prior year. The increase came from Futurestep in order to support the largeRPO contracts won by the Company in fiscal 2014 for which delivery began in the last two quarters of fiscal 2014 and will continue in subsequent periods.Cost of services expense as a percentage of fee revenue was 4% in both fiscal 2014 and 2013.Depreciation and Amortization ExpensesDepreciation and amortization expenses were $26.2 million, an increase of $7.2 million in fiscal 2014 compared to $19.0 million in fiscal 2013.Adjusting for the prior year acquisitions, depreciation and amortization expenses increased $2.1 million as compared to the year-ago period. This expenserelates mainly to computer equipment, software, furniture and fixtures, leasehold improvements and intangible assets.Restructuring Charges, NetWe continued the implementation of the fiscal 2013 restructuring plan during fiscal 2014 in order to integrate the prior year acquisitions byconsolidating and eliminating certain redundant office space around the world and by continuing to consolidate certain overhead functions. As a result, werecorded $3.7 million in restructuring charges, net in fiscal 2014, of which $2.9 million relates to consolidation of premise and $0.8 million relates toseverance. During fiscal 2013, we implemented restructuring plans in order to rationalize our cost structure in response to anticipated revenue levels and inorder to eliminate redundant positions that were created due to the prior year acquisitions. As a result, we recorded $22.8 million of restructuring charges, netwith $16.3 million of severance costs to align our work force to current levels of business activities and to eliminate redundant positions due to theintegration of the prior year acquisitions and $6.5 million relating to the consolidation of premises during fiscal 2013.Operating IncomeOperating income increased $47.7 million to $91.6 million in fiscal 2014 as compared to $43.9 million in fiscal 2013. This increase in operatingincome resulted from an increase in fee revenue of $147.5 million and a reduction in restructuring expenses of $19.1 million, offset by an increase incompensation and benefits expense of $91.6 million, an increase in general and administrative expenses of $9.2 million, an increase in cost of servicesexpense of $10.9 million, and an increase in depreciation and amortization expenses of $7.2 million in fiscal 2014 as compared to fiscal 2013.Executive Recruitment operating income increased $35.4 million to $116.4 million in fiscal 2014 as compared to $81.0 million in fiscal 2013. Theincrease in Executive Recruitment operating income is attributable to an increase of $46.4 million in fee revenue and a decrease of $6.8 million, $2.1 millionand $1.0 million in restructuring charges, general and administrative expenses and depreciation and amortization expenses, respectively, offset by anincrease of $20.6 million in compensation and benefits expense during fiscal 2014 compared to the prior year. Executive Recruitment operating income as apercentage of fee revenue was 20% in fiscal 2014 as compared to 16% in fiscal 2013. 46Table of ContentsLTC operating income increased $17.4 million to $23.8 million in fiscal 2014 as compared to $6.4 million in fiscal 2013. The change in LTCoperating income was primarily due to an increase of $86.5 million in fee revenue, offset by an increase in operating expenses of $69.1 million during fiscal2014 compared to the prior year. LTC operating income as a percentage of fee revenue was 9% in fiscal 2014 as compared to 4% in fiscal 2013.Futurestep operating income increased by $2.3 million to $13.3 million in fiscal 2014 from $11.0 million in fiscal 2013. The increase in Futurestepoperating income was primarily due to an increase in fee revenue of $14.6 million and a reduction in restructuring charges of $2.3 million, offset by anincrease of $11.0 million in compensation and benefits expense, an increase in cost of services expense of $2.3 million, an increase in general andadministrative expenses of $0.6 million and an increase in depreciation and amortization expenses of $0.6 million during fiscal 2014 compared to the prioryear. Futurestep operating income as a percentage of fee revenue was 10% in fiscal 2014 as compared to 9% in fiscal 2013.Adjusted EBITDAAdjusted EBITDA increased $40.5 million to $138.3 million in fiscal 2014 as compared to $97.8 million in fiscal 2013. This increase in AdjustedEBITDA resulted from an increase of $147.5 million in fee revenue and an increase of $3.5 million in other income, mainly due to an increase in the marketvalue of mutual funds held in trust for settlement of our obligations under certain deferred compensation plans during fiscal 2014 compared to the prior year.Offsetting these increases was an increase in compensation and benefits expense (excluding certain separation costs), general and administrative expenses(excluding integration/acquisition costs), and cost of services expense of $87.7 million, $11.9 million and $10.9 million, respectively. Adjusted EBITDA as apercentage of fee revenue was 14% in fiscal 2014 as compared to 12% in fiscal 2013.Executive Recruitment Adjusted EBITDA increased $27.9 million to $127.8 million in fiscal 2014 as compared to $99.9 million in fiscal 2013. Theincrease in Executive Recruitment Adjusted EBITDA is attributable to an increase of $46.4 million in fee revenue, an increase of $1.0 million in otherincome, mainly due to an increase in the market value of mutual funds held in trust for settlement of our obligations under certain deferred compensationplans and a decrease of $2.1 million in general and administrative expenses, offset by an increase of $21.2 million in compensation and benefits expenseduring fiscal 2014 compared to the prior year. Executive Recruitment Adjusted EBITDA as a percentage of fee revenue was 22% in fiscal 2014 as comparedto 19% in fiscal 2013.LTC Adjusted EBITDA increased by $15.0 million to $37.6 million in fiscal 2014 as compared to $22.6 million in fiscal 2013. The increase in LTCAdjusted EBITDA is primarily due to an increase of $86.5 million in fee revenue, offset by an increase of $53.4 million, $10.0 million and $8.4 million incompensation and benefits expense, general and administrative expenses and cost of service expenses, respectively, during fiscal 2014 compared to the prioryear. LTC Adjusted EBITDA as a percentage of fee revenue was 15% in fiscal 2014 and 13% in fiscal 2013.Futurestep Adjusted EBITDA increased by $1.2 million to $16.9 million in fiscal 2014 as compared to $15.7 million in fiscal 2013. The increase inFuturestep Adjusted EBITDA was primarily due to an increase in fee revenue of $14.6 million and an increase in other income of $0.5 million, offset by anincrease of $11.0 million, $2.3 million and $0.6 million in compensation and benefits expense, cost of services expenses and general and administrativeexpenses, respectively, during fiscal 2014 compared to the prior year. Futurestep Adjusted EBITDA as a percentage of fee revenue was 12% in fiscal 2014and 13% in fiscal 2013.Other Income, NetOther income, net increased by $3.5 million to $9.8 million in fiscal 2014 as compared to $6.3 million in fiscal 2013. The increase in other income, netreflects an increase in the market value of mutual funds held in trust for settlement of our obligations under certain deferred compensation plans (see Note 6— Deferred 47Table of ContentsCompensation and Retirement Plans, in the Notes to our Consolidated Financial Statements in this Annual Report on Form 10-K) during fiscal 2014 of $9.5million compared to $7.6 million in the prior year. Offsetting this increase in other income, net was an increase in certain deferred compensation retirementplan liabilities (see Note 6 — Deferred Compensation and Retirement Plans, in the Notes to our Consolidated Financial Statements in this Annual Report onForm 10-K) in fiscal 2014 of $7.8 million compared to $5.6 million in fiscal 2013, which resulted in an increase in 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 $2.4 million in fiscal 2014 as compared to $2.3 million in fiscal 2013.Income Tax ProvisionThe provision for income taxes was $28.5 million in fiscal 2014 compared to $16.7 million in fiscal 2013. The provision for income taxes in fiscal2014 and 2013 reflects a 29% and 35% effective tax rate, respectively. The decrease in the effective tax rate for fiscal 2014 is due to a tax benefit arising inconnection with the conclusion of the IRS examination of the Company’s U.S. federal income tax returns for the tax years ended April 30, 2010 and 2011, ahigher percentage of taxable income arising in jurisdictions with lower statutory tax rates and the reversal of valuation allowance previously recorded againstdeferred tax assets, including net operating losses of certain foreign subsidiaries that have returned to profitability and are now more-likely-than-not torealize those deferred tax assets.Equity in Earnings of Unconsolidated SubsidiariesEquity in earnings of unconsolidated subsidiaries is comprised of our less than 50% interest in our Mexican subsidiary and IGroup, LLC. We report ourinterest in earnings or loss of our Mexican subsidiary and IGroup, LLC on the equity basis as a one-line adjustment to net income. Equity in earnings was$2.2 million in fiscal 2014 compared to $2.1 million in fiscal 2013.Liquidity and Capital ResourcesThe Company and its Board of Directors endorse a balanced approach to capital allocation by utilizing capital for investment in the Company’sconsultants and intellectual property, as well as the strategic acquisition of businesses.In addition, on December 8, 2014, the Board of Directors adopted a dividend policy to distribute, to our stockholders, a regular quarterly cash dividendof $0.10 per share. On March 4, 2015, the Company declared its first ever quarterly dividend under this policy of $0.10 per share, which was paid on April 9,2015 to stockholders of record on March 25, 2015. On June 10, 2015, the Company declared a dividend of $0.10 per share, payable on July 15, 2015 tostockholders of record on June 25, 2015. The declaration and payment of future dividends under the quarterly dividend program will be at the discretion ofthe Board of Directors and will depend upon many factors, including our earnings, capital requirements, financial conditions, the terms of our indebtednessand other factors our Board of Directors may deem to be relevant. Our Board of Directors may, however, amend, revoke or suspend our dividend policy at anytime and for any reason.On December 8, 2014, the Board of Directors also approved an increase in the Company’s stock repurchase program to an aggregate of $150.0 million.Common stock may be repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion subject to marketconditions and other factors.Our performance is subject to the general level of economic activity in the geographic regions and the industries which we service. We believe, basedon current economic conditions, that our cash on hand and funds 48Table of Contentsfrom operations will be sufficient to meet anticipated working capital, capital expenditures, general corporate requirements and dividend payments under ourdividend policy during the next twelve months. However, if the national or global economy, credit market conditions, and/or labor markets were todeteriorate in the future, such changes would put negative pressure on demand for our services and affect our operating cash flows. If these conditions were topersist over an extended period of time, we may incur negative cash flows, and it might require us to access our existing credit facility to meet our capitalneeds and/or discontinue our dividend policy.Cash and cash equivalents and marketable securities were $525.4 million and $468.3 million as of April 30, 2015 and 2014, respectively. Net ofamounts held in trust for deferred compensation plans and to pay fiscal 2015 bonuses, cash and marketable securities were $235.6 million and $211.1 millionat April 30, 2015 and 2014, respectively. As of April 30, 2015 and 2014, we held $143.4 million and $136.3 million, respectively of cash and cashequivalents in foreign locations, net of amounts held in trust for deferred compensation plans and to pay fiscal 2015 and fiscal 2014 bonuses. If theseamounts were distributed to the United States, in the form of dividends, we would be subject to additional U.S. income taxes. The Company has a plan todistribute a small portion of the cash held in foreign locations to the United States. No deferred tax liability has been recorded because no additional taxeswould arise in connection with such distributions. Cash and cash equivalents consist of cash and highly liquid investments purchased with originalmaturities of three months or less. Marketable securities consist of mutual funds and investments in corporate bonds. The primary objectives of ourinvestment in mutual funds are to meet the obligations under certain of our deferred compensation plans, while the corporate bonds and other securities areavailable for general corporate purposes.As of April 30, 2015 and 2014, marketable securities of $144.6 million and $134.6 million, respectively, included trading securities of $131.4 million(net of gross unrealized gains of $8.3 million and gross unrealized losses of $0.2 million) and $116.2 million (net of gross unrealized gains of $9.2 millionand gross unrealized losses of $0.7 million), respectively, held in trust for settlement of our obligations under certain deferred compensation plans, of which$118.8 million and $111.7 million, respectively, are classified as non-current. Our vested and unvested obligations for which these assets were held in trusttotaled $129.1 million and $117.6 million as of April 30, 2015 and 2014, respectively. As of April 30, 2015 and 2014, we had marketable securities classifiedas available-for-sale with a balance of $13.2 million and $18.4 million, respectively.The net increase in our working capital of $60.0 million as of April 30, 2015 compared to April 30, 2014 is primarily attributable to increases in cashand cash equivalents, accounts receivable and marketable securities, partially offset by an increase in compensation and benefits payable. The change in cashand cash equivalents was due to an increase in profitability during fiscal 2015 compared to fiscal 2014 while accounts receivable went up due to an increasein total revenue. The increase in marketable securities was due to a rise in the current portion of marketable securities due to the expectation that theseinvestments will be sold in the next twelve months to pay for deferred compensation benefits that come due and an increase in the current portion of ourcorporate bonds that will mature within a year that we account for as available for sale securities. Compensation and benefits payable went up due to a higheramount of performance related bonuses as profitability and average headcount increased and a rise in the amount expected to be paid on our deferredcompensation plans in the next fiscal year. Cash provided by operating activities was $107.3 million in fiscal 2015, a decrease of $22.2 million, from cashprovided by operating activities of $129.5 million in fiscal 2014. The decrease in cash provided in operating activities is primarily because fiscal 2014bonuses paid in fiscal 2015 were higher than fiscal 2013 bonuses paid in fiscal 2014, offset by an increase in cash provided by operations due to an increasein profitability.Cash used in investing activities was $30.6 million in fiscal 2015, an increase of $7.0 million from cash used in investing activities of $23.6 million infiscal 2014. The cash used in investing activities was higher primarily due to an increase of $17.8 million in the net purchase and sales/maturities ofmarketable securities, payment of $15.3 million made for the acquisition of Pivot Leadership and $2.9 million in restricted cash that became unrestrictedduring fiscal year 2014. These increases in cash used in investing activities were offset by a 49Table of Contents$15.0 million contingent consideration payment made to the selling stockholders of PDI in fiscal 2014, an increase in death benefits proceeds received fromlife insurance policies of $7.7 million in fiscal 2015 compared to fiscal 2014 and a decrease of $6.7 million in cash used to purchase property and equipment.Cash used by financing activities was $7.9 million in fiscal 2015 compared to cash provided by financing activities of $5.6 million in fiscal 2014.Cash used in financing activities increased primarily due to cash dividends paid to stockholders in fiscal 2015 of $5.1 million, lower cash proceeds from theexercise of employee stock options of $3.7 million, and an increase of $2.9 million paid on life insurance policy loans in fiscal 2015 compared to fiscal 2014.The rest of the change is an increase of $1.8 million in cash used to repurchase shares of common stock to satisfy tax withholding requirements upon thevesting of restricted stock. As of April 30, 2015, $150.0 million remained available for common stock repurchases under our stock repurchase program.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, 2015: Payments Due in: Note (1) Total Less Than1 Year 1-3 Years 3-5 Years More Than5 Years (in thousands) Operating lease commitments 14 $317,416 $41,624 $75,500 $62,841 $137,451 Accrued restructuring charges (2) 7 1,135 753 382 — — Interest payments on COLI loans (3) 10 44,659 3,928 7,855 7,838 25,038 Total$363,210 $46,305 $83,737 $70,679 $162,489 (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% with total death benefits payable, net of loans under COLI contracts of $216.5 million at April 30, 2015.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 in this Annual Report on Form 10-K.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 in this Annual Report on Form 10-K.Cash Surrender Value of Company Owned Life Insurance Policies, Net of LoansThe Company purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in the deferred compensation andpension plans as a means of funding benefits under such plans. As of April 30, 2015 and 2014, we held contracts with gross CSV of $172.3 million and$167.2 million, 50Table of Contentsrespectively. In fiscal 2015 and 2014, we paid our premiums under our COLI contracts from operating cash, and in prior years, we generally borrowed underour COLI contracts to pay related premiums. Such borrowings do not require annual principal repayments, bear interest primarily at variable rates and aresecured by the CSV of COLI contracts. Total outstanding borrowings against the CSV of COLI contracts were $69.6 million and $72.9 million as of April 30,2015 and 2014, respectively. At April 30, 2015 and 2014, the net cash value of these policies was $102.7 million and $94.3 million, respectively. Total deathbenefits payable, net of loans under COLI contracts, were $216.5 million and $214.2 million at April 30, 2015 and 2014, respectively.Long-Term DebtOriginal Credit AgreementAs of April 30, 2015, the Company had a senior unsecured revolving credit facility pursuant to the credit agreement with Wells Fargo Bank, NationalAssociation, as lender (the “Lender”), dated January 18, 2013, as amended by Amendment No. 1, dated December 12, 2014 (the “Original CreditAgreement”). The Original Credit Agreement provided for an aggregate availability up to $75.0 million with an option to increase the facility by anadditional $50.0 million, subject to the Lender’s consent, and a $15.0 million sub-limit for letters of credit. The Original Credit Agreement had an originalmaturity date of January 18, 2018. Borrowings under the Original Credit Agreement bore interest, at our election, at the adjusted London Interbank OfferedRate (“LIBOR”) plus the applicable margin or at the base rate plus the applicable margin. The base rate is the highest of (i) the published prime rate, (ii) thefederal funds rate plus 1.50%, and (iii) one month LIBOR plus 1.50%. Under the Original Credit Agreement, the applicable margin was based on a percentageper annum determined in accordance with a specified pricing grid based on the Company’s total funded debt to adjusted EBITDA ratio. For LIBOR loans, theapplicable margin under the Original Credit Agreement ranged from 0.50% to 1.50% per annum, while for base rate loans, the applicable margin ranged from0.00% to 0.25% per annum. We were required to pay a quarterly commitment fee of 0.25% to 0.35% on the facility’s average daily unused commitmentsbased on the Company’s total funded debt to adjusted EBITDA ratio. The financial covenants under the Original Credit Agreement included a maximumtotal funded debt to adjusted EBITDA ratio, and a minimum adjusted EBITDA, each as defined in the Original Credit Agreement. As of April 30, 2015, wecomplied with the financial covenants under the Original Credit Agreement. In addition, the Original Credit Agreement imposed a domestic liquidityrequirement that we maintain at least $50.0 million in unrestricted cash and/or marketable securities (excluding any marketable securities that are held intrust for the settlement of our obligations under certain deferred compensation plans) as a condition to consummating permitted acquisitions, payingdividends to our stockholders and making repurchases of our common stock. Under the Original Credit Agreement, we were limited to consummatingpermitted acquisitions, paying dividends to our stockholders and making share repurchases of our common stock in any fiscal year to a cumulative total of$125.0 million. Subject to the foregoing, we were permitted to pay up to $50.0 million in dividends in any fiscal year (subject to the satisfaction of certainconditions). The Original Credit Agreement also contained other usual and customary affirmative and negative covenants, which included limitations onadditional indebtedness, guaranties, pledge of assets, investments, and asset sales and mergers. The credit facility was jointly and severally guaranteed by theCompany’s existing and future subsidiaries (other than immaterial subsidiaries, non-tax preferred subsidiaries, and certain foreign subsidiaries) (the“guarantors”), and could be prepaid and early terminated by the Company at any time without premium or penalty (subject to customary LIBOR breakagefees).The Original Credit Agreement contained usual and customary events of default which included: non-payment of principal, interest, fees and otheramounts; material breach of a representation or warranty; non-performance of covenants and obligations; default on other material debt; material judgments;bankruptcy or insolvency; and change of control. The occurrence of a non-bankruptcy event of default under the Original Credit Agreement could result, atthe Lender’s option, in the termination of the credit facility and the acceleration of the Company’s repayment obligations thereunder. The occurrence of abankruptcy event of default would automatically result in the termination of the credit facility and the acceleration of the Company’s repayment obligationsthereunder. 51Table of ContentsAs of April 30, 2015 and 2014, the Company had no borrowings under its long-term debt arrangements. At April 30, 2015 and 2014, there was $2.8million of standby letters of credit issued under its long-term debt arrangements. The Company has a total of $1.6 million and $1.5 million of standby lettersof credits with other financial institutions as of April 30, 2015 and 2014, respectively.Amended Credit AgreementOn June 3, 2015, we entered into Amendment No. 2 to the Original Credit Agreement which became effective as of June 5, 2015 (the “AmendmentNo. 2”), in order to amend certain terms of the Original Credit Agreement (as amended pursuant to Amendment No. 2, the “Amended Credit Agreement”).Amendment No. 2, among other things, (i) increased the aggregate amount available under our revolving credit facility to $150.0 million, whichincludes a $15.0 million sub-limit for letters of credit, with an option to increase the credit facility by an additional $50.0 million prior to December 3, 2019,subject to the Lender’s consent and the satisfaction of certain conditions (including the requirement, if the Lender acting in its sole discretion so elects, thatthe credit facility under the Amended Credit Agreement become secured at such time by substantially all the assets of the Company and the guarantors);(ii) extended the maturity date to June 3, 2020, (iii) amended the financial covenants so as to require the Company to maintain a minimum adjusted EBITDAand a maximum total funded debt to adjusted EBITDA ratio; (iv) amended the pricing applicable to borrowings under the Amended Credit Agreement, asdescribed below; (v) amended certain covenants relating to permitted acquisitions, dividends and share repurchases, including increasing the amount ofdividends permitted to be paid in any fiscal year up to $75.0 million; (vi) amended the definition of “domestic liquidity” to include amounts available to beborrowed under the increased credit facility; and (vii) effected certain technical and conforming changes.As of June 5, 2015, borrowings under the Amended Credit Agreement will bear interest, at our election, at the adjusted LIBOR plus the applicablemargin or at the base rate plus the applicable margin. The applicable margin is based on a percentage per annum determined in accordance with a specifiedpricing grid based on the Company’s total funded debt to adjusted EBITDA ratio. For LIBOR loans, the applicable margin will range from 0.875% to1.75% per annum, while for base rate loans, the applicable margin will range from 0.00% to 0.75% per annum. As of June 5, 2015, we are required to pay aquarterly commitment fee of 0.25% to 0.40% on the revolving credit facility’s average daily unused commitments based on the Company’s total funded debtto adjusted EBITDA ratio. The definition of domestic liquidity requirement under the Amended Credit Agreement requires that we maintain at least $50.0million in unrestricted cash and/or marketable securities (excluding any marketable securities that are held in trust for the settlement of our obligations undercertain deferred compensation plans) as a condition to consummating permitted acquisitions, paying dividends to our stockholders and making sharerepurchases of our common stock. Undrawn amounts on our line of credit may be used to calculate domestic liquidity. We are limited in consummatingpermitted acquisitions, paying dividends to our stockholders and making share repurchases of our common stock to a cumulative total of $125.0 million inany fiscal year. We are permitted to pay up to $75.0 million in dividends and share repurchases, in aggregate, in any fiscal year (subject to the satisfaction ofcertain conditions), which amount is further limited by any consideration paid with respect to acquisitions during such fiscal year, as discussed above.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 March 2013, the Financial Accounting Standards Board (“FASB”) issued guidance on releasing cumulative translation adjustments when areporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within aforeign entity. In addition, 52Table of Contentsthese amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments and in stepacquisitions. This new guidance was effective on a prospective basis for fiscal years and interim reporting periods beginning after December 15, 2013. Theamendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted and earlyadoption is permitted. The Company adopted this guidance during fiscal 2015 and the adoption did not have an impact on the financial statements of theCompany.In June 2013, the FASB issued guidance on how a liability for an unrecognized tax benefit should be presented in the financial statements if theultimate settlement of such liability will not result in a cash payment to the tax authority but will, rather, reduce a deferred tax asset, a net operating loss ortax credit carryforward. The FASB concluded that, when settlement in such manner is available under tax law, the liability for an unrecognized tax benefitshould be presented as a reduction of the deferred tax asset associated with the net operating loss or tax credit carryforward. This new guidance was effectivefor fiscal years and interim periods within those years beginning after December 15, 2013. The Company adopted this guidance during fiscal 2015 and theadoption did not have an impact on the financial statements of the Company.Recently Proposed Accounting StandardsIn May 2014, the FASB issued guidance that supersedes revenue recognition requirements regarding contracts with customers to transfer goods orservices or for the transfer of nonfinancial assets. Under the new guidance, entities are required to recognize revenue in order to depict the transfer of promisedgoods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.The guidance provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. This new guidance is effectivefor fiscal years and interim periods within those annual years beginning after December 15, 2016. The Company will adopt this guidance in its fiscal yearbeginning May 1, 2017. The Company is currently evaluating the effect the guidance will have on our financial condition and results of operations. 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 instrumentsfor trading, 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 reportingperiod. 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 $1.6 million during fiscal 2015, compared to foreign currency gains, on an after tax basis, included in net incomewere $1.0 million during fiscal 2014. Foreign currency losses, on an after tax basis, included in net income were $0.5 million during fiscal 2013.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 53Table of ContentsPound Sterling, the Euro, the Canadian dollar, the Australian dollar and the Yen, our exchange loss or gain during fiscal 2015 would have been $1.8 million,$3.0 million and $4.2 million, respectively, based on outstanding balances at April 30, 2015.Interest Rate RiskWe primarily manage our exposure to fluctuations in interest rates through our regular financing activities, which are short term and provide forvariable market rates. As of April 30, 2015 and 2014, we had no outstanding borrowings under our Credit Agreement. We had $69.6 million and $72.9million of borrowings against the CSV of COLI contracts as of April 30, 2015 and 2014, respectively, bearing interest primarily at variable rates. The risk offluctuations in these variable rates is minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate which has theeffect of increasing 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 in this Annual Report on Form 10-K. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable. 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 onForm 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined inRules 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 arereasonably likely to materially affect our internal control over financial reporting. See Management’s Report on Internal Control Over FinancialReporting and Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting on pages F-2 and F-3,respectively.Item 9B. Other InformationNot applicable. 54Table of ContentsPART 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 OwnershipReporting Compliance” and elsewhere in our 2015 Proxy Statement, and is incorporated herein by reference. The information under the heading “ExecutiveOfficers of the 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 2015 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 2015 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 2015Proxy 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 2015 Proxy Statement, and is incorporated herein by reference. 55Table of ContentsPART 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 toRule 7-05 of Regulation S-X, the other schedules have been omitted as the information to be set forth therein is included in the notes of theaudited 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+ Restated Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filedDecember 9, 2013. 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+ Fourth Amended and Restated Bylaws of the Company, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed October 7,2014. 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. 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 RegistrationStatement on 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 theCompany’s Registration 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. 56Table of ContentsExhibitNumber Description 10.7*+ Executive Salary Continuation Plan, filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (No. 333-61697),effective February 10, 1999. 10.8*+ 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 Second Amended and Restated Performance Award Plan, filed as Appendix A to the Company’s Definitive ProxyStatement, filed August 12, 2004. 10.12*+ 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. 10.13+ Summary of Non-Employee Director Compensation, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filedSeptember 10, 2012. 10.14*+ Form of Restricted Stock Award Agreement to Employees Under the Performance Award Plan filed as Exhibit 10.1 to the Company’sCurrent Report on Form 8-K, filed June 29, 2006. 10.15*+ 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. 10.16*+ 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. 10.17*+ 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. 10.18*+ 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. 10.19*+ 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. 10.20*+ 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. 10.21*+ 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. 10.22*+ 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. 10.23*+ 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. 10.24*+ 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. 10.25*+ Korn/Ferry International Amended and Restated Employee Stock Purchase Plan, filed as Exhibit 99.1 to the Company’s RegistrationStatement on Form S-8, filed December 10, 2014. 57Table of ContentsExhibitNumber Description 10.26*+ 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. 10.27*+ Separation and General Release Agreement, between Michael DiGregorio and Korn/Ferry International, dated as of February 17, 2012,filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 21, 2012. 10.28*+ 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. 10.29*+ Form of Restricted Stock Unit Award Agreement to Non-Employee Directors Under the 2008 Stock Incentive Plan, filed as Exhibit 10.38to the Company’s Annual Report on Form 10-K, filed June 25, 2013. 10.30*+ Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as Exhibit 10.39 to theCompany’s Annual Report on Form 10-K, filed June 25, 2013. 10.31*+ Letter Agreement between the Company and R.J. Heckman, Ph.D., dated December 4, 2012, filed as Exhibit 10.40 to the Company’sAnnual Report on Form 10-K, filed June 25, 2013. 10.32*+ Employment Agreement between the Company and Byrne Mulrooney dated June 26, 2014, filed as Exhibit 10.33 to the Company’sAnnual Report on Form 10-K, filed June 27, 2014. 10.33*+ Amended and Restated Employment agreement dated July 25, 2014 between Korn/Ferry International and Gary Burnison, filed as Exhibit10.1 to the Company’s Current Report on Form 8-K, filed August 1, 2014. 10.34*+ Amended and Restated Korn/Ferry International Executive Capital Accumulation Plan, as of August 13, 2014, filed as Exhibit 10.1 to theCompany’s Quarterly Report on Form 10-Q, filed December 10, 2014. 10.35*+ Summary of Non-Employee Director Compensation Program, effective October 1, 2014, filed as Exhibit 10.2 to the Company’s QuarterlyReport on Form 10-Q, filed December 10, 2014. 10.36*+ Form of Indemnification Agreement between the Company and some of its directors and executive officers, filed as Exhibit 10.1 to theCompany’s Current Report on Form 8-K, filed June 15, 2015. 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 1350.101.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. 58Table of Contents *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. 59Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. KORN/FERRY INTERNATIONALBy: /s/ Robert P. Rozek Robert P. Rozek Executive Vice President and Chief Financial OfficerDate: June 26, 2015POWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of the registrant hereby constitutes and appointsJonathan M. Kuai and Gary D. Burnison, and each of them, as lawful attorney-in-fact and agent for each of the undersigned (with full power of substitutionand resubstitution, 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 orcould do 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. SHAHEENGeorge T. Shaheen Chairman of the Board and Director June 26, 2015/S/ GARY D. BURNISONGary D. Burnison President & Chief Executive Officer(Principal Executive Officer) and Director June 26, 2015/S/ ROBERT P. ROZEKRobert P. Rozek Executive Vice President and Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer) June 26, 2015/S/ WILLIAM R. FLOYDWilliam R. Floyd Director June 26, 2015/S/ CHRISTINA A. GOLDChristina A. Gold Director June 26, 2015/S/ JERRY LEAMONJerry Leamon Director June 26, 2015 60Table of ContentsSignature Title Date/S/ EDWARD D. MILLEREdward D. Miller Director June 26, 2015/S/ DEBRA J. PERRYDebra J. Perry Director June 26, 2015/S/ HARRY L. YOUHarry L. You Director June 26, 2015 61Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTSAPRIL 30, 2015 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-4 Consolidated Balance Sheets as of April 30, 2015 and 2014 F-5 Consolidated Statements of Income for the years ended April 30, 2015, 2014 and 2013 F-6 Consolidated Statements of Comprehensive Income for the years ended April 30, 2015, 2014 and 2013 F-7 Consolidated Statements of Stockholders’ Equity for the years ended April 30, 2015, 2014 and 2013 F-8 Consolidated Statements of Cash Flows for the years ended April 30, 2015, 2014 and 2013 F-9 Notes to Consolidated Financial Statements F-10 Financial Statements Schedule II — Valuation and Qualifying Accounts F-44 F-1Table of ContentsMANAGEMENT’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 reportingand the 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, 2015 based on criteria established in Internal Control — IntegratedFramework (2013) 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 2015 acquisition of Pivot Leadershipwhich is included in the 2015 consolidated financial statements of the Company and constituted 2% and 3% of total and net assets, respectively, as ofApril 30, 2015 and less than 1% of fee revenues, for the year then ended. We did not assess the effectiveness of internal control over financial reporting at thisnewly acquired entity due to the insufficient time between the date acquired and year-end.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, 2015.Ernst & Young, LLP, the independent registered public accounting firm that audited the Company’s financial statements for the year ended April 30,2015 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, 2015, a copy of which is included in this Annual Report on Form 10-K.June 26, 2015 F-2Table of ContentsREPORT 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, 2015 based oncriteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013framework) (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control overFinancial Reporting. Our responsibility 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 aswe considered 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 financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment and conclusion ofthe effectiveness of internal control over financial reporting did not include the internal controls of Pivot Leadership, which is included in the 2015consolidated financial statements of the Company and constituted 2% and 3% of total and net assets, respectively, as of April 30, 2015 and less than 1% offee revenues, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internalcontrol over financial reporting of Pivot Leadership.In our opinion, Korn/Ferry International and subsidiaries maintained, in all material respects, effective internal control over financial reporting as ofApril 30, 2015, based on the COSO criteria.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, 2015 and 2014, 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, 2015 and our report dated June 26, 2015, expressed anunqualified opinion thereon./s/ Ernst & Young LLPLos Angeles, CaliforniaJune 26, 2015 F-3Table of ContentsREPORT 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, 2015 and2014, 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, 2015. 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, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years inthe period ended April 30, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statementschedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forththerein.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, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework) and our report dated June 26, 2015, expressed an unqualified opinion thereon./s/ Ernst & Young LLPLos Angeles, CaliforniaJune 26, 2015 F-4Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS April 30, 2015 2014 (in thousands, except per share data) ASSETS Cash and cash equivalents $380,838 $333,717 Marketable securities 25,757 9,566 Receivables due from clients, net of allowance for doubtful accounts of $9,958 and $9,513, respectively 188,543 175,986 Income taxes and other receivables 10,966 8,244 Deferred income taxes 3,827 4,486 Prepaid expenses and other assets 31,054 29,955 Total current assets 640,985 561,954 Marketable securities, non-current 118,819 124,993 Property and equipment, net 62,088 60,434 Cash surrender value of company owned life insurance policies, net of loans 102,691 94,274 Deferred income taxes, net 56,014 55,039 Goodwill 254,440 257,582 Intangible assets, net 47,901 49,560 Investments and other assets 34,863 29,830 Total assets$1,317,801 $1,233,666 LIABILITIES AND STOCKHOLDERS’ EQUITYAccounts payable$19,238 $19,375 Income taxes payable 3,813 13,014 Compensation and benefits payable 219,364 192,035 Other accrued liabilities 63,595 62,509 Total current liabilities 306,010 286,933 Deferred compensation and other retirement plans 173,432 169,235 Other liabilities 23,110 21,962 Total liabilities 502,552 478,130 Commitments and contingenciesStockholders’ equity:Common stock: $0.01 par value, 150,000 shares authorized, 62,863 and 62,282 shares issued and 50,573and 49,811 shares outstanding, respectively 463,839 449,631 Retained earnings 392,033 308,781 Accumulated other comprehensive loss, net (40,623) (2,388) Stockholders’ equity 815,249 756,024 Less: notes receivable from stockholders — (488) Total stockholders’ equity 815,249 755,536 Total liabilities and stockholders’ equity$1,317,801 $1,233,666 The accompanying notes are an integral part of these consolidated financial statements. F-5Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME Year Ended April 30, 2015 2014 2013 (in thousands, except per share data) Fee revenue $1,028,152 $960,301 $812,831 Reimbursed out-of-pocket engagement expenses 37,914 35,258 36,870 Total revenue 1,066,066 995,559 849,701 Compensation and benefits 691,450 646,889 555,346 General and administrative expenses 145,917 152,040 142,771 Reimbursed expenses 37,914 35,258 36,870 Cost of services 39,692 39,910 28,977 Depreciation and amortization 27,597 26,172 19,004 Restructuring charges, net 9,468 3,682 22,857 Total operating expenses 952,038 903,951 805,825 Operating income 114,028 91,608 43,876 Other income, net 7,458 9,769 6,309 Interest expense, net (1,784) (2,363) (2,365) Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries 119,702 99,014 47,820 Equity in earnings of unconsolidated subsidiaries, net 2,181 2,169 2,110 Income tax provision 33,526 28,492 16,637 Net income$88,357 $72,691 $33,293 Earnings per common share:Basic$1.78 $1.51 $0.71 Diluted$1.76 $1.48 $0.70 Weighted-average common shares outstanding:Basic 49,052 48,162 47,224 Diluted 49,766 49,145 47,883 The accompanying notes are an integral part of these consolidated financial statements. F-6Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended April 30, 2015 2014 2013 (in thousands) Net income $88,357 $72,691 $33,293 Other comprehensive income: Foreign currency translation adjustments (36,523) (1,955) (5,254) Deferred compensation and pension plan adjustments, net of tax (1,702) 2,230 (4,578) Unrealized (losses) gains on marketable securities, net of tax (10) (32) 10 Comprehensive income$50,122 $72,934 $23,471 The accompanying notes are an integral part of these consolidated financial statements. F-7Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY RetainedEarnings AccumulatedOtherComprehensive(Loss)Income, Net Total Common Stock Shares Amount (in thousands) Balance at May 1, 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 Comprehensive income — — 72,691 243 72,934 Purchase of stock (113) (2,249) — — (2,249) Issuance of stock 1,190 8,805 — — 8,805 Stock-based compensation — 12,160 — — 12,160 Tax benefit from exercise of stock options — (593) — — (593) Balance at April 30, 2014 49,811 449,631 308,781 (2,388) 756,024 Comprehensive income — — 88,357 (38,235) 50,122 Dividends declared — — (5,105) — (5,105) Purchase of stock (122) (4,038) — — (4,038) Issuance of stock 884 2,993 — — 2,993 Stock-based compensation — 13,737 — — 13,737 Tax benefit from exercise of stock options — 1,516 — — 1,516 Balance at April 30, 2015 50,573 $463,839 $392,033 $(40,623) $815,249 The accompanying notes are an integral part of these consolidated financial statements. F-8Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended April 30, 2015 2014 2013 (in thousands) Cash flows from operating activities: Net income $88,357 $72,691 $33,293 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 27,597 26,172 19,004 Stock-based compensation expense 13,899 12,106 11,906 Provision for doubtful accounts 7,741 7,840 6,748 Gain on cash surrender value of life insurance policies (10,509) (8,242) (6,502) Gain on marketable securities (8,829) (9,498) (7,556) Deferred income taxes (316) 7,598 (176) Change in other assets and liabilities, net of effect of acquisitions: Deferred compensation 10,130 12,186 8,477 Receivables due from clients (17,213) (22,318) (16,011) Income taxes and other receivables 115 896 4,616 Prepaid expenses and other assets (1,145) (1,255) 750 Investment in unconsolidated subsidiaries (2,181) (2,169) (2,110) Income taxes payable (9,194) 7,533 (3,399) Accounts payable and accrued liabilities 17,790 29,104 8,494 Other (8,966) (3,162) 4,173 Net cash provided by operating activities 107,276 129,482 61,707 Cash flows from investing activities: Purchase of property and equipment (21,860) (28,559) (13,101) Cash paid for acquisitions, net of cash acquired and earnout (15,296) — (112,064) Purchase of marketable securities (22,843) (28,150) (50,437) Proceeds from sales/maturities of marketable securities 21,362 44,475 51,511 Change in restricted cash — 2,861 7,222 Payment of contingent consideration from acquisition — (15,000) — Premium on company-owned life insurance policies (1,676) (1,727) (1,739) Proceeds from life insurance policies 8,087 388 — Dividends received from unconsolidated subsidiaries 1,656 2,120 1,897 Net cash used in investing activities (30,570) (23,592) (116,711) Cash flows from financing activities: Payments on life insurance policy loans (3,301) (388) — Purchase of common stock (4,038) (2,249) (2,838) Proceeds from issuance of common stock upon exercise of employee stock options and in connection with an employee stockpurchase plan 2,993 8,805 2,134 Tax benefit from exercise of stock options 1,516 (593) 294 Dividends paid to shareholders (5,105) — — Net cash (used in) provided by financing activities (7,935) 5,575 (410) Effect of exchange rate changes on cash and cash equivalents (21,650) (1,814) (2,525) Net increase (decrease) in cash and cash equivalents 47,121 109,651 (57,939) Cash and cash equivalents at beginning of year 333,717 224,066 282,005 Cash and cash equivalents at end of year $380,838 $333,717 $224,066 Supplemental cash flow information: Cash used to pay interest $4,230 $4,229 $4,361 Cash used to pay income taxes, net of refunds $40,899 $15,604 $10,611 The accompanying notes are an integral part of these consolidated financial statements. F-9Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSApril 30, 20151. 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 for non-executive professionals, recruitment process outsourcing and leadership &talent consulting services. The Company’s worldwide network of 78 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.Investments in affiliated companies, which are 50% or less owned and where the Company exercises significant influence over operations, areaccounted for using the equity method. Dividends received from our unconsolidated subsidiaries were approximately $1.7 million, $2.1 million and $1.9million during fiscal 2015, 2014 and 2013, 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 reportedin current operations as new information is learned or upon the amounts becoming fixed and determinable. The most significant areas that requiremanagement judgment are revenue recognition, restructuring, deferred compensation, annual performance related bonuses, evaluation of the carrying valueof receivables, goodwill and other intangible assets, fair value of contingent consideration, share-based payments and the recoverability of deferred incometaxes.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 is generally one-third of the estimated first year cash compensation of the placedexecutive or non-executive professional, as applicable, plus a percentage of the fee to cover indirect engagement related expenses. The Company generallyrecognizes revenue on a straight-line basis over a three-month period, commencing upon client acceptance, as this is the period over which the recruitmentservices are F-10Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 performed. Fees earned in excess of the initial contract amount are recognized upon completion of the engagement, which reflect the difference between thefinal actual compensation of the placed executive and the estimate used for purposes of the previous billings. Since the initial contract fees are typically notcontingent upon placement of a candidate, our assumptions primarily relate to establishing the period over which such service is performed. Theseassumptions determine the timing of revenue recognition and profitability for the reported period. Any revenues associated with services that are provided ona contingent basis are recognized once the contingency is resolved. In addition to recruitment for non-executive professionals, Futurestep providesrecruitment process outsourcing (“RPO”) services and fee revenue is recognized as services are rendered and/or milestones are achieved. Fee revenue fromLeadership & Talent Consulting (“LTC”) services is recognized as services are rendered for consulting engagements and other time based services, measuredby total hours incurred to the total estimated hours at completion. It is possible that updated estimates for the consulting engagement may vary from initialestimates with such updates being recognized in the period of determination. Depending on the timing of billings and services rendered, the Companyaccrues or defers revenue as appropriate. 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). Under the fixed termlicenses, the Company is obligated to provide the licensee with access to any updates to the underlying intellectual property that are made by the Companyduring the term of the license. Once the term of the agreement expires, the client’s right to access or use the intellectual property expires and the Companyhas no further obligations to the client under the license agreement. Revenue from perpetual licenses is recognized when the license is sold since theCompany’s only obligation is to provide the client access to the intellectual property but is not obligated to provide maintenance, support, updates orupgrades. Products sold by the Company mainly consist of books and automated services covering a variety of topics including performance management,team effectiveness, and coaching and development. The Company recognizes revenue for its products when the product has been sold or shipped in the caseof books. As of April 30, 2015 and 2014, the Company included deferred revenue of $40.5 million and $36.8 million, respectively, in other accruedliabilities.ReimbursementsThe Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in its consolidatedstatements of 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. As of April 30, 2015 and2014, the Company’s investments in cash equivalents, consist of money market funds for which market prices are readily available. As of April 30, 2015 and2014, the Company had cash equivalents of $260.6 million and $186.6 million, respectively. F-11Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 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. Interest is recognized on an accrual basis, dividends arerecorded as earned on the ex-dividend date. Interest and dividend income are recorded in the accompanying consolidated statements of income in interestexpense, net.The Company invests in mutual funds, (for which market prices are readily available) that are held in trust to satisfy obligations under the Company’sdeferred compensation plans (see Note 5 — Marketable Securities) and are classified as trading securities. Such investments are based upon the employees’investment elections in their deemed accounts in the Executive Capital Accumulation Plan and similar plans in Asia Pacific and Canada (“ECAP”) from apre-determined set of securities and the Company invests in marketable securities to mirror these elections. The changes in fair value in trading securities arerecorded in the accompanying consolidated statements of income in other income, 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, which restricts the type of investments that can be made. The Company’s investment portfolio includescorporate bonds. 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, net; any amount in excess of the credit loss is recorded as unrealized gains or losses as a component of comprehensive income. Generally, the amountof 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 discounted expectedfuture 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-temporarydecline includes, in addition to other relevant factors, a presumption that if the market value is below cost by a significant amount for a period of time, awrite-down may be necessary. During fiscal 2015, 2014 and 2013, 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 marketparticipants. For those assets and liabilities recorded or disclosed at fair value, the Company determines the fair value based upon the quoted market price, ifavailable. If a quoted market price is not available for identical assets, the fair value is based upon the quoted market price of similar assets. The fair valuesare assigned a level 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-12Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 • 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, 2015 and 2014, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included cash,cash equivalents, accounts receivable and marketable securities. The carrying amount of cash, cash equivalents and accounts receivable approximates fairvalue due to the short maturity of these instruments. The fair values of marketable securities classified as trading are obtained from quoted market prices, andthe fair values of marketable securities classified as available-for-sale are obtained from a third party, which are based on quoted prices or market prices forsimilar 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 theacquired entity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidatedfinancial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase priceover the amounts assigned is recorded as goodwill, or if the fair value of the assets acquired exceeds the purchase price consideration, a bargain purchase gainis recorded. Adjustments to fair value assessments are recorded to goodwill over the measurement period (not longer than twelve months). The acquisitionmethod also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires theCompany to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a businesscombination. During fiscal 2014, the Company paid contingent consideration to the selling stockholders of PDI Ninth House (“PDI”) of $15 million, asrequired under the merger agreement, as a result of the achievement of certain pre-determined goals associated with expense synergies.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 incurred for internal use projects 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 andequipment is depreciated or amortized 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. In fiscal 2015, 2014 and 2013, there were no such impairment charges recorded.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 F-13Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwillrecognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairmentloss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using acombination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at eachreporting unit, a market approach, is utilized using observable market data such as comparable companies in similar lines of business that are publicly tradedor which are part of a public or private transaction (to the extent available). Results of the annual impairment test performed as of January 31, 2015, indicatedthat the fair value of each reporting unit exceeded its carrying amount and no reporting units were at risk of failing the impairment test. As a result, noimpairment charge was recognized. There was also no indication of potential impairment during the fourth quarter of fiscal 2015 that would have requiredfurther testing.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 one 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 theintangible assets is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use of the asset. Intangible assetswith indefinite lives are not amortized, but are reviewed annually for impairment or more frequently whenever events or changes in circumstances indicatethat the fair value of the asset may be less than its carrying amount. As of April 30, 2015 and 2014, there were no indicators of impairment with respect to theCompany’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 salariesand the amounts paid under the annual performance related bonus plan to employees. The portion of the expense applicable to salaries is comprised ofamounts earned by employees during a reporting period. The portion of the expenses applicable to annual performance related bonuses refers to theCompany’s annual employee performance related bonus with respect to a fiscal year, the amount of which is communicated and paid to each eligibleemployee following the 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 and otherperformance metrics for LTC and Futurestep consultants), the level of engagements referred by a fee earner in one line of business to a different line ofbusiness, Company performance including profitability, competitive forces and future economic conditions and their impact on the Company’s results. Atthe end of each fiscal year, annual performance related bonuses take into account final individual consultant productivity (including referred work),Company results including profitability, the achievement of strategic objectives, the results of individual performance appraisals, and the current economiclandscape. Accordingly, each quarter the Company reevaluates the assumptions used to estimate annual performance related bonus liability and adjusts thecarrying amount 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 F-14Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 changes in the bonus estimate historically have been immaterial and are recorded in current operations in the period in which they are determined. Theperformance related bonus expense was $166.7 million, $146.1 million and $114.1 million for the years ended April 30, 2015, 2014 and 2013, respectively,each of which was reduced by a change in the previous years’ estimate recorded in fiscal 2015, 2014 and 2013 of $0.3 million, $0.7 million and $0.2 million,respectively. This resulted in net bonus expense of $166.4 million, $145.4 million and $113.9 million for the years ended April 30, 2015, 2014 and 2013,respectively, included in compensation and benefits expense in the consolidated statements of income.Other expenses included in compensation and benefits expense are due to changes in deferred compensation and pension plan liabilities, changes incash surrender 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 andpension plans as of the estimated payment commencement date. The Company also estimates the remaining number of years a participant will be employedby the Company. Then, each year during the period of estimated employment, the Company accrues a liability and recognizes expense for a portion of thefuture benefit 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, violationof non-competition provisions and the discount rate. Management periodically reevaluates all assumptions. If assumptions change in future reportingperiods, the changes may impact the measurement and recognition of benefit liabilities and related compensation expense.Executive Capital Accumulation PlanThe Company, under its deferred compensation plans, makes discretionary contributions and such contributions may be granted to key employeesannually based on the employee’s performance. Certain key management may also receive Company contributions upon commencement of employment.The Company amortizes these contributions on a straight-line basis as they vest, generally over a four year period. The amounts that are expected to be paidto employees over the next 12 months are classified as a current liability included in compensation and benefits payable in the accompanying consolidatedbalance 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 the lives of certain employees eligible to participate in certain of the deferredcompensation and pension plans as a means of funding benefits under such plans. The Company purchased both fixed and variable life insurance contractsand does not purchase “split-dollar” life insurance policy contracts. The Company has both contracts or policies that provide for a fixed or guaranteed rate ofreturn and a variable rate of return depending on the return of the policies’ investment in their underlying portfolio in equities and bonds. The CSV of theseCOLI contracts are carried at the amounts that would be realized if the contract were surrendered at the balance sheet date, net of the outstanding loansborrowed from the insurer. The Company has the intention and ability to continue to hold these COLI policies F-15Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 and 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-termin the 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, 2015 and 2014, the Company held contracts with gross CSV of $172.3 million and $167.2 million, offset by outstanding policy loans of $69.6million and $72.9 million, respectively. If the issuing insurance companies were to become insolvent, the Company would be considered a general creditorfor $50.6 million and $45.9 million of net CSV as of April 30, 2015 and 2014, respectively; therefore, these assets are subject to credit risk. Management,together with its outside advisors, routinely monitors the claims paying abilities of these insurance companies.Restructuring Charges, NetThe 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 restricted stock units, restricted stock, stock options 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 thefiscal year. 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 was $1.6 million and $0.5 millionduring fiscal 2015 and 2013, respectively. Foreign currency gains, on an after tax basis, included in net income were $1.0 million during fiscal 2014.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) results from changes in deferred tax assets and liabilities between periods. These gross deferredtax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future reversals of temporary differences in thebasis of assets and liabilities as measured by tax laws and their basis as reported in the consolidated financial statements. Deferred tax assets are alsorecognized for tax attributes such as net operating loss carryforwards and tax credit carryforwards. Valuation allowances are then recorded to reduce deferredtax assets to the amounts management concludes are more likely than not to be realized. F-16Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 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 to be sustained upon settlement. The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred to asan unrecognized 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 inmoney market securities while investments include mutual funds and corporate bonds. Investments are diversified throughout many industries andgeographic regions. The Company conducts periodic reviews of its customers’ financial condition and customer payment practices to minimize collectionrisk on accounts receivable. At April 30, 2015 and 2014, the Company had no other significant credit concentrations.Recently Adopted Accounting StandardsIn March 2013, the Financial Accounting Standards Board (“FASB”) issued guidance on releasing cumulative translation adjustments when areporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within aforeign entity. In addition, these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity methodinvestments and in step acquisitions. This new guidance was effective on a prospective basis for fiscal years and interim reporting periods beginning afterDecember 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not beadjusted and early adoption is permitted. The Company adopted this guidance during fiscal 2015 and the adoption did not have an impact on the financialstatements of the Company.In June 2013, the FASB issued guidance on how a liability for an unrecognized tax benefit should be presented in the financial statements if theultimate settlement of such liability will not result in a cash payment to the tax authority but will, rather, reduce a deferred tax asset for a net operating loss ortax credit carryforward. The FASB concluded that, when settlement in such manner is available under tax law, the liability for an unrecognized tax benefitshould be presented as a reduction of the deferred tax asset associated with the net operating loss or tax credit carryforward. This new guidance was effectivefor fiscal years and interim periods within those years beginning after December 15, 2013. The Company adopted this guidance during fiscal 2015 and theadoption did not have an impact on the financial statements of the Company.Recently Proposed Accounting StandardsIn May 2014, the FASB issued guidance that supersedes revenue recognition requirements regarding contracts with customers to transfer goods orservices or for the transfer of nonfinancial assets. Under the new guidance, entities are required to recognize revenue in order to depict the transfer of promisedgoods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.The guidance provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. This new guidance is effectivefor fiscal years and interim periods within those annual years beginning after December 15, 2016. The Company will adopt this guidance in its fiscal yearbeginning May 1, 2017. The Company is currently evaluating the effect the guidance will have on our financial condition and results of operations. F-17Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 2. Basic and Diluted Earnings Per ShareAccounting Standards Codification 260, Earnings Per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends prior to vesting as a separate class of securities in calculating earnings per share. We have granted and expect to continue togrant to certain employees restricted stock grants that contain non-forfeitable rights to dividends. Such grants are considered participating securities.Therefore, we are required to apply the two-class method in calculating earnings per share. The two-class method of computing earnings per share is anearnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (oraccumulated) and participation rights in undistributed earnings. The dilutive effect of participating securities is calculated using the more dilutive of thetreasury method or the two-class method.Basic earnings per common share was computed using the two-class method by dividing basic net earnings attributable to common stockholders by theweighted-average number of common shares outstanding. Diluted earnings per common share was computed using the two-class method by dividing dilutednet earnings attributable to common stockholders by the weighted-average number of common shares outstanding plus dilutive common equivalent shares.Dilutive common equivalent shares include all in-the-money outstanding options or other contracts to issue common stock as if they were exercised orconverted. The application of the two-class method did not have a material impact on the earnings per share calculation for fiscal 2014 and 2013.During fiscal 2015, all shares of outstanding options were included in the computation of diluted earnings per share. During fiscal 2014 and 2013,options to purchase 0.04 million shares and 0.50 million shares, respectively, were outstanding but not included in the computation of diluted earnings pershare because they were anti-dilutive. During fiscal 2015, restricted stock awards of 0.5 million, were outstanding but not included in the computation ofdiluted earnings per share because they were anti-dilutive. F-18Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 The following table summarizes basic and diluted earnings per common share attributable to common stockholders: Year Ended April 30, 2015 2014 2013 (in thousands, except per share data) Net income $88,357 $72,691 $33,293 Less: distributed and undistributed earnings to nonvested restricted stockholders 860 — — Basic net earnings attributable to common stockholders 87,497 72,691 33,293 Add: undistributed earnings to nonvested restricted stockholders 815 — — Less: reallocation of undistributed earnings to nonvested restricted stockholders 804 — — Diluted net earnings attributable to common stockholders$87,508 $72,691 $33,293 Weighted-average common shares outstanding:Basic weighted-average number of common shares outstanding 49,052 48,162 47,224 Effect of dilutive securities:Restricted stock 605 789 485 Stock options 105 194 174 ESPP 4 — — Diluted weighted-average number of common shares outstanding 49,766 49,145 47,883 Net earnings per common share:Basic earnings per share$1.78 $1.51 $0.71 Diluted earnings per share$1.76 $1.48 $0.70 3. Comprehensive IncomeComprehensive 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, net of taxes, is recorded as a component of stockholders’ equity.The components of accumulated other comprehensive loss were as follows: April 30, 2015 2014 (in thousands) Foreign currency translation adjustments $(20,919) $15,604 Deferred compensation and pension plan adjustments, net of taxes (19,708) (18,006) Unrealized gains on marketable securities, net of taxes 4 14 Accumulated other comprehensive loss, net$(40,623) $(2,388) F-19Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 The following tables summarizes the changes in each component of accumulated other comprehensive income (loss): ForeignCurrencyTranslation DeferredCompensationand PensionPlan (1) UnrealizedGains(Losses) onMarketableSecurities AccumulatedOtherComprehensiveIncome (Loss) (in thousands) Balance as of May 1, 2012 $22,813 $(15,658) $36 $7,191 Unrealized (losses) gains arising during the period (5,254) (6,033) 13 (11,274) Reclassification of realized net losses (gains) to net income — 1,455 (3) 1,452 Balance as of April 30, 2013 17,559 (20,236) 46 (2,631) Unrealized (losses) gains arising during the period (1,955) 136 (64) (1,883) Reclassification of realized net losses to net income — 2,094 32 2,126 Balance as of April 30, 2014 15,604 (18,006) 14 (2,388) Unrealized losses arising during the period (36,523) (3,589) (10) (40,122) Reclassification of realized net losses to net income — 1,887 — 1,887 Balance as of April 30, 2015$(20,919) $(19,708) $4 $(40,623) (1)The tax effects on unrealized (losses) gains of $(2.3) million, $0.07 million and $(3.8) million as of April 30, 2015, 2014 and 2013, respectively. Thetax effects on reclassifications of realized net losses of $1.2 million, $1.0 million and $0.9 million as of April 30, 2015, 2014 and 2013, respectively.4. Employee Stock PlansStock-Based CompensationThe following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements ofincome for the periods indicated: Year Ended April 30, 2015 2014 2013 (in thousands) Restricted stock $13,602 $11,689 $11,001 ESPP 162 — — Stock options 135 417 905 Total stock-based compensation expense, pre-tax 13,899 12,106 11,906 Tax benefit from stock-based compensation expense (3,893) (3,484) (4,142) Total stock-based compensation expense, net of tax$10,006 $8,622 $7,764 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 commonstock. 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 aremaining term approximating the expected term of the option. The Company uses historical data to estimate forfeiture rates applied to the gross F-20Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 amount of expense determined using the option valuation model. The Black-Scholes option pricing model was developed for use in estimating the fair valueof traded options. The assumptions used in option valuation models are highly subjective, particularly the expected stock price volatility of the underlyingstock. The Company did not grant stock options in fiscal 2015, 2014 and 2013.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-basedor market-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 is limited by requiring full-value stock awards to count 1.91 times as much as stock options.Stock OptionsStock options transactions under the Company’s Second A&R 2008 Plan were as follows: April 30, 2015 2014 2013 Options Weighted-AverageExercisePrice Options Weighted-AverageExercisePrice Options Weighted-AverageExercisePrice (in thousands, except per share data) Outstanding, beginning of year 396 $16.23 1,100 $14.72 1,492 $14.00 Exercised (179) $16.99 (655) $13.88 (238) $9.32 Forfeited/expired (15) $17.72 (49) $13.42 (154) $16.87 Outstanding, end of year 202 $15.45 396 $16.23 1,100 $14.72 Exercisable, end of year 192 $15.07 337 $16.11 864 $15.01 As of April 30, 2015, the aggregate intrinsic value of both options outstanding and options exercisable was $3.2 million. F-21Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 Outstanding stock options: April 30, 2015 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) $9.75 — $ 13.82 48 1.3 $10.00 48 1.3 $10.00 $13.83 — $ 15.83 67 2.2 $13.94 67 2.2 $13.94 $15.84 — $ 19.88 50 0.3 $17.96 50 0.3 $17.96 $19.89 — $ 24.08 37 2.3 $21.87 27 1.9 $21.55 202 1.5 $15.45 192 1.4 $15.07 Additional information pertaining to stock options: Year Ended April 30, 2015 2014 2013 (in thousands, except per share data) Total fair value of stock options vested $334 $984 $1,001 Total intrinsic value of stock options exercised $2,425 $6,108 $1,547 Restricted StockThe Company grants time-based restricted stock awards to executive officers and other senior employees generally vesting over a three to four yearperiod. In addition, certain key management members typically receive time-based restricted stock awards upon commencement of employment and mayreceive them annually in conjunction with the Company’s performance review. Time-based restricted stock awards are granted at a price equal to fair value,which is determined based on the closing price of the Company’s common stock on the grant date. 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 and performance-based restricted stock units to executive officers and other senior employees. The market-based units vest after three years depending upon the Company’s total stockholder return over the three-year performance period relative to other companiesin its selected peer group. The fair value of these market-based restricted stock units are determined by a third-party valuation using extensive market datathat is based on historical Company and peer group information. The Company recognizes compensation expense for market-based restricted stock units on astraight-line basis over the vesting period.Performance-based restricted stock units vest after three years depending upon the Company meeting certain objectives that are set at the time therestricted stock unit is issued. Performance-based restricted stock units are granted at a price equal to the fair value, which is determined based on the closingprice of the Company’s common stock on the grant date. The Company recognizes compensation expense for performance-based restricted stock units on astraight-line basis over the vesting period. At the end of each reporting period, the Company estimates the number of restricted stock units expected to vestbased on the probability that certain performance objectives will be met, exceeded, or fall below target levels, and takes into account these estimates whencalculating the expense for the period. F-22Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 Restricted stock activity is summarized below: April 30, 2015 2014 2013 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 1,880 $18.95 1,810 $16.38 1,781 $16.76 Granted 438 $29.93 809 $21.32 889 $13.93 Vested (705) $18.52 (535) $14.54 (780) $14.99 Forfeited/expired (53) $21.13 (204) $17.19 (80) $16.43 Non-vested, end of year 1,560 $22.15 1,880 $18.95 1,810 $16.38 As of April 30, 2015, there were 0.3 million shares and 0.2 million shares outstanding relating to market-based and performance-based restricted stockunits, respectively, with total unrecognized compensation totaling $3.7 million and $2.4 million, respectively.As of April 30, 2015, there was $20.6 million of total unrecognized compensation cost related to all non-vested awards of restricted stock, which isexpected to be recognized over a weighted-average period of 2.2 years. During fiscal 2015 and fiscal 2014, 121,775 shares and 112,792 shares of restrictedstock totaling $4.0 million and $2.2 million, respectively, were repurchased by the Company, at the option of the employee, to pay for taxes related tovesting 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 payrolldeductions of up to 15% of their salary to purchase shares of the Company’s common stock at 85% of the fair market price of the common stock on the lastday of the enrollment period. Employees may not purchase more than $25,000 in stock during any calendar year. At the Company’s 2011 Annual Meeting ofStockholders, held on September 28, 2011, the Company’s stockholders approved an amendment and restatement of the ESPP, which among other things,increased the maximum number of shares that may be issued under the ESPP from 1.5 million shares to 3.0 million shares. The ESPP was suspended duringthe second half of fiscal 2012 and as a result, no shares were purchased during fiscal 2014 and 2013. Effective January 1, 2015, the Company has once againallowed employees to authorize payroll deductions under the ESPP with the purchase of shares expected to take place in the first quarter of fiscal 2016. As ofApril 30, 2015, the ESPP had approximately 1.6 million shares remaining available for future issuance.Common StockDuring fiscal 2015, 2014 and 2013, the Company issued 178,950 shares, 654,458 shares and 237,856 shares of common stock, respectively, as a resultof the exercise of stock options, with cash proceeds from the exercise of $3.0 million, $8.8 million and $2.1 million, respectively.No shares were repurchased during fiscal 2015, 2014 and 2013, other than to satisfy minimum tax withholding requirements upon the vesting ofrestricted stock as described above. F-23Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 5. Marketable SecuritiesAs of April 30, 2015, marketable securities consisted of the following: Trading(1)(2) Available-for-Sale (2) Total (in thousands) Mutual funds $131,399 $— $131,399 Corporate bonds — 13,177 13,177 Total 131,399 13,177 144,576 Less: current portion of marketable securities (12,580) (13,177) (25,757) Non-current marketable securities$118,819 $— $118,819 As of April 30, 2014, marketable securities consisted of the following: Trading(1)(2) Available-for-Sale (2) Total (in thousands) Mutual funds $116,207 $— $116,207 Corporate bonds — 18,352 18,352 Total 116,207 18,352 134,559 Less: current portion of marketable securities (4,510) (5,056) (9,566) Non-current marketable securities$111,697 $13,296 $124,993 (1)These investments are held in trust for settlement of the Company’s vested and unvested obligations of $129.1 million and $117.6 million as ofApril 30, 2015 and 2014, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans). During fiscal 2015, 2014 and2013, the fair value of the investments increased; therefore, the Company recognized income of $8.8 million, $9.5 million, and $7.6 million,respectively, which was recorded in other income, net. (2)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, 2015 and 2014, the Company had no investments classified as Level 3.The amortized cost and fair values of marketable securities classified as available-for-sale investments were as follows: April 30, 2015 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses (1) EstimatedFair Value (in thousands) Corporate bonds $13,167 $11 $(1) $13,177 April 30, 2014 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses (1) EstimatedFair Value (in thousands) Corporate bonds $18,325 $31 $(4) $18,352 (1)There are no marketable securities that have been in a continuous unrealized loss position for 12 months or more. F-24Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 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, 2015 and 2014, marketable securities classified as available-for-sale consist of corporate bonds forwhich market prices for similar assets are readily available. As of April 30, 2015, available-for-sale marketable securities have remaining maturities rangingfrom one month to eight months. During fiscal 2015 and 2014, the Company received $5.0 million and $33.3 million, respectively, in proceeds fromsales/maturities of available-for-sale marketable securities. Investments in marketable securities classified as trading are based upon investment elections theemployee makes from a pre-determined set of securities in the ECAP and the Company invests in marketable securities to mirror these elections. As ofApril 30, 2015 and 2014, the Company’s investments in marketable securities classified as trading consist of mutual funds for which market prices are readilyavailable.As of April 30, 2015 and 2014, the Company’s marketable securities classified as trading were $131.4 million (net of gross unrealized gains of $8.3million and $0.2 million of gross unrealized losses) and $116.2 million (net of gross unrealized gains of $9.2 million and $0.7 million of gross unrealizedlosses), 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 terminationprovisions.The total benefit obligations for these plans were as follows: Year Ended April 30, 2015 2014 (in thousands) Deferred compensation plans $83,876 $82,153 Pension plan 5,262 4,424 International retirement plans 2,847 3,727 Executive Capital Accumulation Plan 99,461 89,308 Total benefit obligations 191,446 179,612 Less: current portion of benefit obligation (18,014) (10,377) Non-current benefit obligation$173,432 $169,235 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, orin some cases, make an after tax contribution, in return for defined benefit payments from the Company over a fifteen year period generally at retirement ageof 65 or later. Participants were able to acquire additional “deferral units” every five years. Vice presidents who did not choose to roll over their WAP unitsinto the EWAP continue to be covered under the earlier version in which participants generally vest and commence receipt of benefit payments at retirementage of 65. 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 F-25Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 required the participant to contribute a portion of their compensation during a four-year period, or in some cases make an after tax contribution, in return for adefined benefit paid by the Company generally over a fifteen year period after ten years of participation in the plan or such later date as elected by theparticipant. In June 2003, the Company amended the SEIP plan, so as not to allow new participants or the purchase of additional deferral units by existingparticipants.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 percentageset by 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.Deferred Compensation PlansThe following tables reconcile the benefit obligation for the deferred compensation plans: Year Ended April 30, 2015 2014 2013 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $82,153 $85,562 $78,479 Interest cost 2,835 2,566 2,868 Actuarial loss (gain) 4,863 (294) 9,420 Benefits paid (5,975) (5,681) (5,205) Benefit obligation, end of year 83,876 82,153 85,562 Less: current portion of benefit obligation (5,554) (5,593) (5,182) Non-current benefit obligation$78,322 $76,560 $80,380 The components of net periodic benefits costs are as follows: Year Ended April 30, 2015 2014 2013 (in thousands) Interest cost $2,835 $2,566 $2,868 Amortization of actuarial loss 3,029 3,111 2,357 Net periodic benefit cost$5,864 $5,677 $5,225 F-26Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 The weighted-average assumptions used in calculating the benefit obligations were as follows: Year Ended April 30, 2015 2014 2013 Discount rate, beginning of year 3.60% 3.12% 3.79% Discount rate, end of year 3.28% 3.60% 3.12% Rate of compensation increase 0.00% 0.00% 0.00% Pension PlanThe following tables reconcile the benefit obligation for the pension plan: Year Ended April 30, 2015 2014 2013 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $4,424 $4,536 $4,214 Interest cost 154 137 154 Actuarial loss 1,001 92 426 Benefits paid (317) (341) (258) Benefit obligation, end of year 5,262 4,424 4,536 Less: current portion of benefit obligation (278) (274) (232) Non-current benefit obligation$4,984 $4,150 $4,304 The components of net periodic benefits costs are as follows: Year Ended April 30, 2015 2014 2013 (in thousands) Interest cost $154 $137 $154 Amortization of actuarial loss 21 8 18 Net periodic benefit cost$175 $145 $172 The weighted-average assumptions used in calculating the benefit obligations were as follows: Year Ended April 30, 2015 2014 2013 Discount rate, beginning of year 3.60% 3.12% 3.79% Discount rate, end of year 3.28% 3.60% 3.12% Rate of compensation increase 0.00% 0.00% 0.00% F-27Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 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) 2016 $6,487 $322 2017 6,418 328 2018 6,192 331 2019 6,096 327 2020 6,375 331 2021-2025 30,904 1,487 During fiscal 2016, the Company expects to recognize $2.9 million in net periodic benefit expense from deferred compensation and pension plans thatwill be transferred from accumulated other comprehensive income through the amortization of actuarial losses in the consolidated statements of income.International Retirement PlansThe Company also maintains various retirement plans and other miscellaneous deferred compensation arrangements in eight foreign jurisdictions. Theaggregate of the long-term benefit obligation accrued at April 30, 2015 and 2014 is $2.8 million for 393 participants and $3.7 million for 383 participants,respectively. The Company’s contribution to these plans was $0.5 million and $0.6 million in fiscal 2015 and 2014, respectively.Executive Capital Accumulation PlanThe Company’s ECAP is intended to provide certain employees an opportunity to defer salary and/or bonus on a pre-tax basis or make an after-taxcontribution. In addition, the Company, as part of its compensation philosophy, makes discretionary contributions into the ECAP and such contributionsmay be granted to key employees annually based on the employee’s performance. Certain key management may also receive Company ECAP contributionsupon commencement of employment. The Company amortizes these contributions on a straight-line basis over the service period, generally a four yearperiod. Participants have the ability to allocate their deferrals among a number of investment options and may receive their benefits at termination, retirementor “in service” either in a lump sum or in quarterly installments over five, ten or fifteen years. The ECAP amounts that are expected to be paid to employeesover the next 12 months are classified as a current liability included in compensation and benefits payable on the accompanying balance sheet.The Company made contributions to the ECAP during fiscal 2015, 2014 and 2013, of $19.1 million, $17.2 million and $20.0 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 2015, 2014 and 2013, the deferred compensation liability increased; therefore, theCompany recognized compensation expense of $5.9 million, $8.9 million and $6.3 million, respectively. Offsetting these increases in compensation andbenefits expense was an increase in the fair value of marketable securities classified as trading (held in trust to satisfy obligations under certain deferredcompensation plan liabilities) of $8.8 million, $9.5 million and $7.6 million in fiscal 2015, 2014 and 2013, respectively, recorded in other income, net on theconsolidated statements of income. F-28Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 Changes in the ECAP liability were as follows: Year Ended April 30, 2015 2014 (in thousands) Balance, beginning of year $89,308 $75,913 Employee contributions 3,048 2,748 Amortization of employer contributions 12,378 11,467 Gain on investment 5,871 8,884 Employee distributions (10,295) (9,044) Exchange rate fluctuations (849) (660) Balance, end of year 99,461 89,308 Less: current portion (12,182) (4,510) Non-current portion, end of year$87,279 $84,798 As of April 30, 2015 and 2014, the unamortized portion of the Company contributions to the ECAP was $29.7 million and $28.3 million, respectively.Defined Contribution PlanThe Company has a defined contribution plan (“401(k) plan”) for eligible employees. Participants may contribute up to 50% of their basecompensation as defined in the plan agreement. In addition, the Company has the option to make matching contributions. The Company intends to makematching contributions related to fiscal 2015 in fiscal 2016. The Company made a $1.6 million matching contribution in fiscal 2015 related to contributionsmade by employees in fiscal 2014 and a $1.2 million matching contribution in fiscal 2014 related to contributions made by employees in fiscal 2013. TheCompany made no contributions in fiscal 2013.Company Owned Life InsuranceThe Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred compensation and pension plansas a means of funding benefits under such plans. The gross CSV of these contracts of $172.3 million and $167.2 million is offset by outstanding policy loansof $69.6 million and $72.9 million in the accompanying consolidated balance sheets as of April 30, 2015 and 2014, respectively. Total death benefitspayable, net of loans under COLI contracts, were $216.5 million and $214.2 million at April 30, 2015 and 2014, respectively. Management intends to use thefuture death benefits from these insurance contracts to fund the deferred compensation and pension arrangements; however, there may not be a directcorrelation between the timing of the future cash receipts and disbursements under these arrangements. The CSV value of the underlying COLI investmentsincreased by $10.5 million, $8.2 million and $6.5 million during fiscal 2015, 2014 and 2013, respectively, recorded as a decrease in compensation andbenefits expense. In addition, certain policies are held in trusts to provide additional benefit security for the deferred compensation and pension plans,excluding the WEB. As of April 30, 2015, COLI contracts with a net CSV of $72.2 million and death benefits payable, net of loans, of $123.8 million wereheld in trust for these purposes.7. Restructuring Charges, NetThe Company took actions to rationalize its cost structure as a result of efficiencies obtained from prior year technology investments that enabledfurther integration of the legacy business and the recent acquisitions (PDI F-29Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 and Global Novations, LLC) as well as other cost saving initiatives. This resulted in restructuring charges, net of $9.5 million against operations in fiscal2015, of which $9.2 million relates to severance and $0.3 million, relates to consolidation/abandonment of premises.During fiscal 2014, the Company continued the implementation of the fiscal 2013 restructuring plan in order to integrate PDI by consolidating andeliminating certain redundant office space around the world and by continuing to consolidate certain overhead functions. This resulted in restructuringcharges of $3.7 million against operations in fiscal 2014, of which $0.8 million relates to severance and $2.9 million relates to consolidation of premises.During fiscal 2013, the Company implemented restructuring plans in order to align its cost structure to anticipated revenue levels and to integrate PDIin order to eliminate redundant positions and consolidate premises. This resulted in restructuring charges of $22.8 million against operations during fiscal2013 of which $16.3 million relates to severance and $6.5 million relates to consolidation of premises.Changes in the restructuring liability are as follows: Severance Facilities Total (in thousands) Liability as of April 30, 2013 $4,819 $6,729 $11,548 Restructuring charges, net 823 2,859 3,682 Reductions for cash payments (5,884) (6,821) (12,705) Exchange rate fluctuations 242 46 288 Liability as of April 30, 2014 — 2,813 2,813 Restructuring charges, net 9,224 244 9,468 Reductions for cash payments (8,396) (2,186) (10,582) Exchange rate fluctuations (453) (100) (553) Liability as of April 30, 2015$375 $771 $1,146 As of April 30, 2015 and 2014, the restructuring liability is included in the current portion of other accrued liabilities on the consolidated balancesheets, except for $0.3 million and $0.7 million, respectively, of facilities costs which primarily relate to commitments under operating leases, net of subleaseincome, which are included in other long-term liabilities and will be paid over the next three years.The restructuring liability by segment is summarized below: April 30, 2015 Severance Facilities Total (in thousands) Executive Recruitment North America $51 $— $51 Europe, Middle East and Africa (“EMEA”) 210 212 422 Total Executive Recruitment 261 212 473 LTC 58 320 378 Futurestep 52 239 291 Corporate 4 — 4 Liability as of April 30, 2015$375 $771 $1,146 F-30Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 April 30, 2014 Severance Facilities Total (in thousands) Executive Recruitment North America $— $193 $193 EMEA — 379 379 Total Executive Recruitment — 572 572 LTC — 1,587 1,587 Futurestep — 654 654 Liability as of April 30, 2014$— $2,813 $2,813 8. Income TaxesThe provision for income taxes is based on reported income before income taxes. Deferred income tax assets and liabilities reflect the impact oftemporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes,as measured by applying the currently enacted tax laws.The provision (benefit) for domestic and foreign income taxes was as follows: Year Ended April 30, 2015 2014 2013 (in thousands) Current income taxes: Federal $16,569 $6,982 $4,100 State 2,412 1,939 1,237 Foreign 13,650 15,502 8,759 Current provision for income taxes 32,631 24,423 14,096 Deferred income taxes:Federal 3,140 5,094 (423) State (239) 177 1,895 Foreign (2,006) (1,202) 1,069 Deferred provision for income taxes 895 4,069 2,541 Total provision for income taxes$33,526 $28,492 $16,637 The domestic and foreign components of income from continuing operations before domestic and foreign income and other taxes and equity inearnings of unconsolidated subsidiaries were as follows: Year Ended April 30, 2015 2014 2013 (in thousands) Domestic $65,885 $42,411 $15,915 Foreign 53,817 56,603 31,905 Income before provision for income taxes and equity in earnings of unconsolidatedsubsidiaries$119,702 $99,014 $47,820 F-31Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows: Year Ended April 30, 2015 2014 2013 U.S. federal statutory income tax rate 35.0% 35.0% 35.0% Foreign source income, net of credits generated 0.4 2.0 0.6 Foreign tax rates differential (4.2) (4.7) (3.7) COLI increase, net (3.1) (2.9) (4.8) Conclusion of U.S. federal tax audit — (2.7) — State income taxes, net of federal benefit 0.9 1.5 5.7 Change in uncertain tax positions (0.1) 1.1 1.9 Other (0.9) (0.5) 0.1 Effective income tax rate 28.0% 28.8% 34.8% In fiscal 2014, we recorded a tax benefit in connection with the conclusion of an IRS examination of the Company’s U.S. federal income tax returns fortax years ended April 30, 2010 and 2011. Subsequently, we filed amended state income tax returns to report the federal adjustments and, where permissible,combined certain of our subsidiaries that had previously filed separate tax returns into unitary filings that resulted in a state tax benefit in fiscal 2015.Components of deferred tax assets and liabilities are as follows: April 30, 2015 2014 (in thousands) Deferred tax assets: Deferred compensation $71,182 $66,359 Loss and credit carryforwards 26,211 35,177 Reserves and accruals 9,344 8,706 Deferred rent 6,432 5,575 Deferred revenue 277 1,672 Allowance for doubtful accounts 1,831 1,536 Other 6,629 6,531 Gross deferred tax assets 121,906 125,556 Deferred tax liabilities:Intangibles (20,828) (21,507) Property and equipment (6,289) (6,277) Prepaid expenses (7,687) (5,600) Other (5,653) (5,678) Gross deferred tax liabilities (40,457) (39,062) Valuation allowances (21,608) (26,969) Net deferred tax asset$59,841 $59,525 The decrease in the valuation allowance primarily reflects an offsetting decrease in foreign deferred tax assets, predominantly net operating losses, dueto exchange rates. F-32Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 The deferred tax amounts have been classified in the consolidated balance sheets as follows: April 30, 2015 2014 (in thousands) Current: Deferred tax assets $14,600 $15,591 Deferred tax liabilities (10,488) (10,813) Valuation allowance (285) (292) Current deferred tax asset 3,827 4,486 Non-current:Deferred tax asset 107,306 109,965 Deferred tax liabilities (29,969) (28,249) Valuation allowance (21,323) (26,677) Non-current deferred tax asset, net 56,014 55,039 Net deferred tax assets$59,841 $59,525 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 berealized. Management believes uncertainty exists regarding the realizability of certain operating losses and has, therefore, established a valuation allowancefor this portion of the deferred tax asset. Realization of the deferred income tax asset is dependent on the Company generating sufficient taxable income ofthe appropriate nature in future years. Although realization is not assured, management believes that it is more likely than not that the net deferred incometax assets will be realized.As of April 30, 2015 and 2014, the Company had U.S. federal net operating loss carryforwards of $5.0 million and $12.2 million, respectively, from theacquisition of PDI, which will begin to expire in 2028. The utilization of these losses is subject to an annual limitation as defined under Section 382 of theInternal Revenue Code. The Company has state net operating loss carryforwards of $21.8 million, which, if unutilized, will begin to expire in fiscal year2016. The Company also has foreign net operating loss carryforwards of $85.6 million, which, if unutilized, will begin to expire in fiscal year 2016.The Company has a plan to distribute a portion of the cash held in foreign locations to the U.S. These planned distributions will not give rise to anyadditional taxes. Other than these amounts, the Company has not provided for U.S. taxes or foreign withholding taxes on approximately $241.8 million ofundistributed earnings of its foreign subsidiaries as such earnings are intended to be reinvested indefinitely. If a distribution of these earnings were to bemade, the Company might be subject to both foreign withholding taxes and U.S. income taxes, net of any allowable foreign tax credits or deductions. Anestimate of these taxes, however, is not practicable.The Company or one of its subsidiaries files federal and state income tax returns in the U.S. as well as in foreign jurisdictions. These income tax returnsare subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities. In June 2014, the IRS commenced anexamination of the Company’s fiscal year 2013 U.S. federal income tax return. The Company’s income tax returns are not otherwise under examination inany material jurisdiction. The statute of limitations varies by jurisdiction in which the Company operates. With few exceptions, however, the Company’s taxreturns for years prior to fiscal year 2010 are no longer open to examination by tax authorities (including U.S. federal, state and foreign). F-33Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 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, 2015, the Company had a liability of $2.4 million for unrecognized taxbenefits. A reconciliation of the beginning and ending balances of the unrecognized tax benefits is as follows: Year Ended April 30, 2015 2014 2013 (in thousands) Unrecognized tax benefits, beginning of year $2,701 $3,400 $— Settlement with tax authority (497) (1,946) — Additions based on tax positions related to the current year 219 279 1,454 Additions based on tax positions related to prior years — 968 1,946 Unrecognized tax benefits, end of year$2,423 $2,701 $3,400 The liability for unrecognized tax benefits is included in income taxes payable in the consolidated balance sheets. The full amount of unrecognizedtax benefits would impact the effective tax rate if recognized. In the next twelve months, it is reasonably possible that the Company’s unrecognized taxbenefits could change due to resolution of certain tax matters, which could include payments on those tax matters. These resolutions and payments couldreduce the Company’s liability for unrecognized tax benefits balance by approximately $1.4 million.The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The Companyhad approximately $0.7 million in accrued interest and penalties related to unrecognized tax benefits as of April 30, 2015 and 2014. The Company accruedapproximately $0.1 million of interest related to unrecognized tax benefits in fiscal 2015 and fiscal 2014 and none in fiscal 2013.9. Property and EquipmentProperty and equipment include the following: April 30, 2015 2014 (in thousands) Computer equipment and software (1) $125,815 $113,941 Leasehold improvements 44,832 43,994 Furniture and fixtures 32,800 32,727 Automobiles 1,496 1,707 204,943 192,369 Less: accumulated depreciation and amortization (142,855) (131,935) Property and equipment, net$62,088 $60,434 (1)Depreciation expense for capitalized software was $9.0 million, $6.0 million and $4.0 million during fiscal 2015, 2014 and 2013, respectively. The netbook value of the Company’s computer software costs included in property and equipment, net was $28.7 million and $26.4 million as of April 30,2015 and 2014, respectively.Depreciation expense for property and equipment was $19.4 million, $17.5 million and $14.0 million during fiscal 2015, 2014 and 2013, respectively. F-34Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 10. Long-Term DebtThe Company’s senior unsecured revolving Credit Agreement with Wells Fargo Bank, National Association, as lender (the “Lender”) dated January 18,2013, as amended by Amendment No. 1, dated December 12, 2014 (the “Credit Agreement”), provides for an aggregate availability up to $75.0 million withan option to increase the facility by an additional $50.0 million, subject to the Lender’s consent, and a $15.0 million sub-limit for letters of credit. The CreditAgreement matures on January 18, 2018. Borrowings under the Credit Agreement bear interest, at the election of the Company, at the adjusted LondonInterbank Offered Rate (“LIBOR”) plus the applicable margin or at 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%, and (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 Company’s total funded debt to adjusted EBITDA ratio. For LIBOR loans, the applicablemargin will range 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. The Companyis required to pay a quarterly commitment fee of 0.25% to 0.35% on the facility’s average daily unused commitments based on the Company’s total fundeddebt to adjusted EBITDA ratio. The financial covenants include a maximum total funded debt to adjusted EBITDA ratio and a minimum adjusted EBITDA,each as defined in the Credit Agreement. As of April 30, 2015, the Company is in compliance with its financial covenants. In addition, there is a domesticliquidity requirement that the Company maintain $50.0 million in unrestricted cash and/or marketable securities (excluding any marketable securities thatare held in trust for the settlement of the Company’s obligation under certain deferred compensation plans) as a condition to consummating permittedacquisitions, paying dividends to our stockholders and share repurchases of our common stock. The Company is limited in consummating permittedacquisitions, paying dividends to our stockholders and making share repurchases of our common stock to a cumulative total of $125.0 million in any fiscalyear. Subject to the foregoing, we are permitted to pay up to $50.0 million in dividends in any fiscal year (subject to the satisfaction of certain conditions).The Credit Agreement also contains other usual and customary affirmative and negative covenants, which included limitations on additional indebtedness,guaranties, pledge of assets, investments, and asset sales and mergers. The credit facility was jointly and severally guaranteed by the Company’s existing andfuture subsidiaries (other than immaterial subsidiaries, non-tax preferred subsidiaries, and certain foreign subsidiaries) (the “guarantors”), and could beprepaid and early terminated by the Company at any time without premium or penalty (subject to customary LIBOR breakage fees).As of April 30, 2015 and 2014, the Company had no borrowings under its long-term debt arrangements. At April 30, 2015 and 2014, there was $2.8million of standby letters of credit issued under its long-term debt arrangements. The Company has a total of $1.6 million and $1.5 million of standby lettersof credits with other financial institutions as of April 30, 2015 and 2014, respectively.The Company has outstanding borrowings against the CSV of COLI contracts of $69.6 million and $72.9 million at April 30, 2015 and 2014,respectively. CSV reflected in the accompanying consolidated balance sheet is net of the outstanding borrowings, which are secured by the CSV of the lifeinsurance policies. Principal payments are not scheduled and interest is payable at least annually at various fixed and variable rates ranging from 4.76% to8.00%.11. Business SegmentsThe Company currently operates in three global businesses: Executive Recruitment, LTC and Futurestep. The Executive Recruitment segment focuseson recruiting Board of Director and C-level positions, in addition to research-based interviewing and onboarding solutions, for clients predominantly in theconsumer, financial F-35Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 services, industrial, life sciences/healthcare and technology industries. LTC assists clients with ongoing assessment and development of their seniorexecutives and management teams, and addresses three fundamental needs: Talent Strategy, Succession Management, and Leadership Development, allunderpinned by a comprehensive array of world-leading IP, products and tools. Futurestep is a global industry leader in high-impact talent acquisitionsolutions. Its portfolio of services includes global and regional RPO, project recruitment, individual professional search and consulting. The ExecutiveRecruitment business segment is managed by geographic regional leaders and LTC and Futurestep worldwide operations are managed by its President andChief Executive Officer, respectively. The Executive Recruitment geographic regional leaders, the president of LTC and Chief Executive Officer ofFuturestep report directly to the Chief Executive Officer of the Company. The Company also operates a Corporate segment to record global expenses of theCompany.The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker’s (“CODM”) review of (1) feerevenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges occur, AdjustedEBITDA excludes restructuring charges, integration and acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible assetand other than temporary impairment). The accounting policies for the reportable segments are the same as those described in the summary of significantaccounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA.Financial highlights by business segment are as follows: Year Ended April 30, 2015 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Fee revenue $330,634 $153,465 $84,148 $29,160 $597,407 $267,018 $163,727 $— $1,028,152 Total revenue $344,913 $158,052 $87,142 $29,218 $619,325 $275,220 $171,521 $— $1,066,066 Net income $88,357 Other income, net (7,458) Interest expense, net 1,784 Equity in earnings of unconsolidated subsidiaries,net (2,181) Income tax provision 33,526 Operating income (loss) $80,818 $18,867 $14,631 $4,704 $119,020 $28,175 $19,940 $(53,107) $114,028 Depreciation and amortization 3,515 1,764 1,045 350 6,674 13,427 1,882 5,614 27,597 Other income (loss), net 288 83 369 109 849 (22) 54 6,577 7,458 Equity in earnings of unconsolidated subsidiaries,net 426 — — — 426 — — 1,755 2,181 EBITDA 85,047 20,714 16,045 5,163 126,969 41,580 21,876 (39,161) 151,264 Restructuring charges, net 1,151 3,987 17 229 5,384 2,758 1,154 172 9,468 Acquisition costs — — — — — — — 959 959 Adjusted EBITDA $86,198 $24,701 $16,062 $5,392 $132,353 $44,338 $23,030 $(38,030) $161,691 Identifiable assets (1) $327,446 $156,072 $94,099 $25,328 $602,945 $265,546 $103,782 $345,528 $1,317,801 Long-lived assets (1) $17,271 $3,885 $4,235 $966 $26,357 $12,377 $4,204 $19,150 $62,088 Goodwill (1) $49,603 $45,922 $972 $— $96,497 $129,549 $28,394 $— $254,440 F-36Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 Year Ended April 30, 2014 Executive Recruitment NorthAmerica EMEA AsiaPacific SouthAmerica Subtotal LTC Futurestep Corporate Consolidated (in thousands) Fee revenue $306,768 $147,917 $84,816 $29,374 $568,875 $254,636 $136,790 $— $960,301 Total revenue $321,473 $152,525 $87,606 $29,586 $591,190 $262,962 $141,407 $— $995,559 Net income $72,691 Other income, net (9,769) Interest expense, net 2,363 Equity in earnings of unconsolidated subsidiaries, net (2,169) Income tax provision 28,492 Operating income (loss) $70,256 $23,168 $17,274 $5,654 $116,352 $23,847 $13,352 $(61,943) $91,608 Depreciation and amortization 3,579 2,727 1,383 323 8,012 12,491 1,797 3,872 26,172 Other income, net 631 632 203 303 1,769 106 583 7,311 9,769 Equity in earnings of unconsolidated subsidiaries, net 383 — — — 383 — — 1,786 2,169 EBITDA 74,849 26,527 18,860 6,280 126,516 36,444 15,732 (48,974) 129,718 Restructuring charges, net 816 460 60 — 1,336 1,149 1,134 63 3,682 Separation costs — — — — — — — 4,500 4,500 Integration costs — — — — — — — 394 394 Adjusted EBITDA $75,665 $26,987 $18,920 $6,280 $127,852 $37,593 $16,866 $(44,017) $138,294 Identifiable assets (1) $295,865 $157,610 $83,292 $25,587 $562,354 $255,590 $111,036 $304,686 $1,233,666 Long-lived assets (1) $18,647 $5,515 $2,978 $1,168 $28,308 $11,976 $2,550 $17,600 $60,434 Goodwill (1) $52,086 $51,557 $972 $— $104,615 $119,350 $33,617 $— $257,582 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 Equity in earnings of unconsolidated subsidiaries, net (2,110) Income tax provision 16,637 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 unconsolidated 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 Integration/acquisition 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 (1) $209,079 $148,491 $72,303 $23,616 $453,489 $248,611 $93,331 $319,798 $1,115,229 Long-lived assets (1) $19,167 $6,312 $2,784 $894 $29,157 $10,383 $2,523 $11,565 $53,628 Goodwill (1) $54,513 $50,264 $972 $— $105,749 $119,090 $32,454 $— $257,293 (1)As of the end of the fiscal year. F-37Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 Fee revenue attributed to an individual customer or country, other than the U.S., did not account for more than 10% of the total in fiscal year 2015,2014 or 2013. Fee revenue classified by country in which the Company derives revenues are as follows: Year Ended April 30, 2015 2014 2013 (in thousands) U.S. $557,024 $507,280 $416,987 Other countries 471,128 453,021 395,844 Total fee revenue$1,028,152 $960,301 $812,831 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, 2015 2014 2013 (in thousands) U.S. (1) $50,103 $47,411 $40,200 Other countries 11,985 13,023 13,428 Total long-lived assets$62,088 $60,434 $53,628 (1)Includes Corporate long-lived assets12. AcquisitionsFollowing is a summary of acquisitions the Company completed during the periods indicated (no acquisitions were completed in fiscal 2014): Year Ended April 30, 2015 (1) 2013 (2) (3) (in thousands) Assets acquired $3,361 $32,784 Intangibles acquired 6,600 42,800 Liabilities acquired 2,691 31,506 Net assets acquired 7,270 44,078 Purchase price 17,496 126,917 Goodwill$10,226 $82,839 Acquisition costs$501 $2,710 Goodwill by segment — LTC$10,226 $82,839 (1)On March 1, 2015, the Company acquired all outstanding membership interest of Pivot Leadership, a global provider of innovative, customized andscalable executive development programs, for $17.5 million, net of cash acquired, which includes $2.2 million in contingent consideration. As ofApril 30, 2015, the contingent consideration is included in other liabilities in the accompanying consolidated balance sheets. The contingentconsideration is based on the achievement of certain revenue targets and can be up to $6.5 million, payable in four installments in fiscal 2017 to 2020.The acquisition will allow us to integrate the Company’s talent management solution with Pivot’s executive learning capabilities. Actual results of F-38Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 operations of Pivot Leadership are included in the Company’s consolidated financial statements from March 1, 2015, the effective date of theacquisition, and include $3.7 million and $20.0 million in fee revenue and total assets, respectively, during fiscal 2015. (2)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. During fiscal 2014, the Company paid $15.0 million (includes the interest accreted since December 31,2012) in contingent consideration to the selling stockholders of PDI as a result of the achievement of certain pre-determined goals associated withexpense synergies. PDI has been in business for over 45 years and operates in more than 20 global locations. The acquisition strengthens and expandsthe Company’s talent management offerings through adding complementary product and service offerings and rich intellectual property. Actual resultsof operations of PDI are included in the Company’s consolidated financial statements from December 31, 2012, the effective date of the acquisition. (3)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 experienceand has 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 operationsof Global Novations are included in the Company’s consolidated financial statements from September 1, 2012, the effective date of the acquisition.The aggregate purchase price for Pivot Leadership was allocated on a preliminary basis to the assets acquired and liabilities assumed on their estimatedfair values at the date of acquisition. As of April 30, 2015, the allocations pertaining to the Pivot acquisition remain preliminary as it relates to, among otherthings, items such as income taxes. During fiscal 2014, adjustments to the preliminary purchase price allocation relating to the PDI acquisition, resulted in anincrease in the purchase price and goodwill of $0.2 million. Tax deductible goodwill from fiscal 2015 and 2013 acquisitions amounted to $8.0 million and$20.5 million, respectively.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, 2013 $54,513 $50,264 $972 $105,749 $119,090 $32,454 $257,293 Additions (1) — — — — 229 — 229 Exchange rate fluctuations (2,427) 1,293 — (1,134) 31 1,163 60 Balance as of April 30, 2014 52,086 51,557 972 104,615 119,350 33,617 257,582 Additions — — — — 10,226 — 10,226 Exchange rate fluctuations (2,483) (5,635) — (8,118) (27) (5,223) (13,368) Balance as of April 30, 2015$49,603 $45,922 $972 $96,497 $129,549 $28,394 $254,440 (1)During fiscal 2014, adjustments to the preliminary purchase accounting allocation relating to the PDI acquisition, resulted in an increase in goodwill(see Note 12 — Acquisitions). F-39Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 Intangible assets include the following: April 30, 2015 April 30, 2014 (in thousands) Amortized intangible assets: Gross AccumulatedAmortization Net Gross AccumulatedAmortization Net Customer lists $41,099 $(12,578) $28,521 $34,899 $(8,674) $26,225 Intellectual property 22,900 (10,130) 12,770 22,900 (7,009) 15,891 Proprietary databases 4,256 (2,351) 1,905 4,256 (1,925) 2,331 Trademarks 3,986 (3,291) 695 3,686 (2,559) 1,127 Non-compete agreements 910 (673) 237 810 (610) 200 Total$73,151 $(29,023) 44,128 $66,551 $(20,777) 45,774 Unamortized intangible assets:Trademarks 3,800 3,800 Exchange rate fluctuations (27) (14) Intangible assets $47,901 $49,560 Acquisition-related intangible assets acquired in fiscal 2015 include customer lists, trademarks, and non-compete agreements of $6.2 million, $0.3million, and $0.1 million, respectively. Customer lists, trademarks and non-compete agreements have a weighted-average useful lives from the date ofpurchase of ten years, one year, and five years, respectively.Amortization expense for amortized intangible assets was $8.2 million, $8.7 million and $5.0 million during fiscal 2015, 2014 and 2013, respectively.Estimated annual amortization expense related to amortizing intangible assets is as follows: Year Ending April 30, EstimatedAnnualAmortizationExpense (in thousands) 2016 $7,907 2017 6,332 2018 5,648 2019 4,394 2020 4,110 Thereafter 15,737 $44,128 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 duringfiscal 2015, 2014 and 2013 amounted to $38.0 million, $39.6 million and $38.4 million, respectively. F-40Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 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, LeaseCommitments (in thousands) 2016 $41,624 2017 39,542 2018 35,958 2019 32,126 2020 30,715 Thereafter 137,451 $317,416 Employment AgreementsThe 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 yearsmay also have a standard form employment agreement. Upon termination without cause, the Company is required to pay the amount of severance due underthe employment agreement, if any. The Company also requires its vice presidents to agree in their employment letters and their employment agreement, ifapplicable, 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.During fiscal 2014, in connection with an employment dispute, the Company recorded expenses in the amount of $4.5 million in compensation andbenefits expense. The Company settled the liability and as of April 30, 2015 and 2014, carries no liability regarding this matter. F-41Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 15. Quarterly Results (Unaudited)The following table sets forth certain unaudited consolidated statement of income data for the quarters in fiscal 2015 and 2014. The unauditedquarterly information has been prepared on the same basis as the annual financial statements and, in management’s opinion, includes all adjustmentsnecessary to present fairly the information for the quarters presented. Quarters Ended Fiscal 2015 Fiscal 2014 April 30 January 31 October 31 July 31 April 30 January 31 October 31 July 31 (in thousands, except per share data) Fee revenue $271,717 $249,545 $255,702 $251,188 $251,712 $242,184 $237,968 $228,437 Operating income $28,092 $32,927 $34,416 $18,593 $24,480 $27,302 $23,165 $16,661 Net income $25,482 $22,939 $25,403 $14,533 $21,211 $21,304 $18,759 $11,417 Net earnings per common share: Basic $0.51 $0.46 $0.52 $0.30 $0.44 $0.44 $0.39 $0.24 Diluted $0.51 $0.46 $0.51 $0.29 $0.43 $0.43 $0.38 $0.24 16. Subsequent EventsQuarterly Dividend DeclarationOn June 10, 2015, the Board of Directors of the Company declared a cash dividend under its recently adopted dividend policy. The dividend of $0.10per share will be paid on July 15, 2015 to holders of the Company’s common stock of record at the close of business on June 25, 2015. The declaration andpayment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon many factors,including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board ofDirectors may deem to be relevant. The Board may amend, revoke or suspend the dividend policy at any time and for any reason.Amendment to Credit AgreementOn June 3, 2015, we entered into Amendment No. 2 to the Credit Agreement which became effective as of June 5, 2015 (the “Amendment No. 2”), inorder to amend certain terms of the Credit Agreement (as amended pursuant to Amendment No. 2, the “Amended Credit Agreement”).Amendment No. 2, among other things, (i) increased the aggregate amount available under revolving credit facility to $150.0 million, which includes a$15.0 million sub-limit for letters of credit, with an option to increase the credit facility by an additional $50.0 million prior to December 3, 2019, subject tothe Lender’s consent and the satisfaction of certain conditions (including the requirement, if the Lender acting in its sole discretion so elects, that the creditfacility under the Amended Credit Agreement become secured at such time by substantially all the assets of the Company and the guarantors); (ii) extendedthe maturity date to June 3, 2020, (iii) amended the financial covenants so as to require the Company to maintain a minimum adjusted EBITDA and amaximum total funded debt to adjusted EBITDA ratio; (iv) amended the pricing applicable to borrowings under the Amended Credit Agreement, as describedbelow; (v) amended certain covenants relating to permitted acquisitions, dividends and share repurchases, including increasing the amount of dividendspermitted to be paid in any fiscal year to up to $75.0 million; (vi) amended the definition of “domestic liquidity” to include amounts available to beborrowed under the increased credit facility; and (vii) effected certain technical and conforming changes. F-42Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)April 30, 2015 As of June 5, 2015, borrowings under the Amended Credit Agreement will bear interest, at our election, at the adjusted LIBOR plus the applicablemargin or at the base rate plus the applicable margin. The applicable margin is based on a percentage per annum determined in accordance with a specifiedpricing grid based on the Company’s total funded debt to adjusted EBITDA ratio. For LIBOR loans, the applicable margin will range from 0.875% to1.75% per annum, while for base rate loans, the applicable margin will range from 0.00% to 0.75% per annum. As of June 5, 2015, we are required to pay aquarterly commitment fee of 0.25% to 0.40% on the revolving credit facility’s average daily unused commitments based on the Company’s total funded debtto adjusted EBITDA ratio. The definition of domestic liquidity requirement under the Amended Credit Agreement requires that we maintain at least $50.0million in unrestricted cash and/or marketable securities (excluding any marketable securities that are held in trust for the settlement of our obligations undercertain deferred compensation plans) as a condition to consummating permitted acquisitions, paying dividends to our stockholders and making sharerepurchases of our common stock. Undrawn amounts on our line of credit may be used to calculate domestic liquidity. The Company is limited inconsummating permitted acquisitions, paying dividends to our stockholders and making share repurchases of our common stock to a cumulative total of$125.0 million in any fiscal year. Subject to the foregoing, the Company is permitted to pay up to $75.0 million in dividends and share repurchases, inaggregate, in any fiscal year (subject to the satisfaction of certain conditions). F-43Table of ContentsKORN/FERRY INTERNATIONAL AND SUBSIDIARIESSCHEDULE II — VALUATION AND QUALIFYING ACCOUNTSApril 30, 2015 Column A Column B Column C Column D Column E Additions Description Balance atBeginningof Period Charges toCost andExpenses (Charges)Recoveriesto OtherAccounts(1) Deductions(2) Balance atEnd ofPeriod (in thousands) Allowance for doubtful accounts: Year Ended April 30, 2015 $9,513 $7,741 $(693) $(6,603) $9,958 Year Ended April 30, 2014 $9,097 $7,840 $291 $(7,715) $9,513 Year Ended April 30, 2013 $9,437 $6,748 $(118) $(6,970) $9,097 Deferred tax asset valuation allowance: Year Ended April 30, 2015 $26,969 $2,537 $— $(7,898) $21,608 Year Ended April 30, 2014 $27,731 $3,728 $— $(4,490) $26,969 Year Ended April 30, 2013 $25,089 $5,678 $— $(3,036) $27,731 (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-44EXHIBIT 21.1Note: Korn/Ferry International or one of its Subsidiaries has 100% ownership of the Subsidiaries listed below, except for Korn/Ferry International(M) Sdn. Bhd. (49%), Korn/Ferry International S.A. de C.V. (41.65%), Korn/Ferry Mexico S.C. (41.65%), Korn/Ferry International (H.K.) Limited (99% ownedby Korn/Ferry International; and 1% owned by Paul C. Reilly in trust for Korn/Ferry International). Subsidiaries Jurisdiction1. Korn Ferry International S.A. Argentina2. Korn Ferry Futurestep Argentina S.R.L. Argentina3. Korn/Ferry International Pty Limited Australia4. Futurestep (Australia) Pty Ltd Australia5. Korn/Ferry International GmbH Austria6. Korn/Ferry International Futurestep (Belgium) BVBA Belgium7. Personnel Decisions International Belgium, BVBA Belgium8. Korn/Ferry International Consultoria Ltda. Brazil9. Korn/Ferry Canada, Inc. Canada10. Korn/Ferry International Futurestep (Canada) Inc. Canada11. Korn/Ferry International S.A. Chile12. Korn/Ferry International Human Capital Consulting (Beijing) Limited Beijing, China13. Guangzhou Korn/Ferry Human Capital Company Ltd. Guangzhou, China14. Korn/Ferry (Shanghai) Human Capital Consulting Co., Ltd. Shanghai, China15. PuDe Management Consulting Co. Ltd. Shanghai, China16. Futurestep (Shanghai) Talent Consulting Company Limited China17. Korn/Ferry International — Colombia Colombia18. Korn/Ferry International A/S Denmark19. Korn/Ferry International S.N.C. France20. Korn/Ferry International Futurestep (France) SARL France21. Personnel Decisions International France SAS France22. Korn/Ferry International GmbH Germany23. Futurestep Germany GmbH Germany24. Korn/Ferry International SA Greece25. Korn/Ferry International (H.K.) Limited Hong Kong26. Futurestep (Hong Kong) Ltd. Hong Kong27. Korn/Ferry International Budapest Personnel Consulting and Service Ltd. Hungary28. PDI Hungary, Kft. Hungary29. Korn/Ferry International Private Limited India30. Futurestep Recruitment Services Private Limited. India31. Personnel Decisions International India Pvt. Limited India32. PT. Korn/Ferry International Indonesia33. Korn/Ferry International S.R.L. Italy34. Futurestep (Italia) S.r.l. Italy35. Nihon Korn/Ferry International K.K. Japan36. Futurestep (Japan) K.K. Japan37. Korn Ferry Consulting — Japan Japan38. Korn/Ferry International (Korea) Limited Korea39. Agensi Pekerjaan Futurestep Worldwide (M) Sdn. Bhd. Malaysia40. Korn/Ferry International (M) Sdn. Bhd. Malaysia41. Korn/Ferry Investment India Limited (Mauritius OCB) Mauritius42. Korn/Ferry Internacional S.A. de C.V. Mexico43. Korn/Ferry Mexico S.C. Mexico44. Korn Ferry International B.V. Netherlands45. Korn/Ferry International Futurestep (Holdings) B.V. Netherlands46. Korn Ferry International NZ Limited New Zealand47. Futurestep (New Zealand) Ltd. New Zealand48. Korn/Ferry International A/S Norway49. Korn/Ferry International — Peru S.A. Peru50. Korn/Ferry International Sp.z.o.o. PolandSubsidiaries Jurisdiction51. Korn/Ferry International Futurestep (POLSKA) Sp.z.o.o. Poland52. Korn/Ferry International Pte. Ltd. Singapore53. Futurestep (Singapore) Pte Limited Singapore54. PDI Slovensko, sro Slovakia55. Korn/Ferry International S.A. Spain56. Futurestep (Espana), S.L. Spain57. Korn/Ferry International AB Sweden58. Personnel Decisions International Scandinavia A.B. Sweden59. Korn-Ferry (Schweiz) AG Switzerland60. Korn/Ferry International (Taiwan) Co. Limited Taiwan61. Korn/Ferry International Musavirlik Limited Sirketi Turkey62. Futurestep (UK) Limited United Kingdom63. Korn/Ferry International Limited United Kingdom64. KFI (UK) Limited United Kingdom65. The Whitehead Mann Partnership LLP United Kingdom66. Whitehead Mann Limited United Kingdom67. Personnel Decisions International, Europe Limited United Kingdom68. Personnel Decisions International UK Ltd United Kingdom69. Korn Ferry Global Holdings (UK) Limited United Kingdom70. Korn Ferry GH1 Limited United Kingdom71. Pivot Learning, Limited United Kingdom72. Continental American Management Corp. United States, California73. Korn/Ferry International Holding India United States, California74. Korn/Ferry International Futurestep, Inc. United States, Delaware75. Korn/Ferry International Futurestep (Holdings) Inc. United States, Delaware76. Korn/Ferry International Worldwide, Inc. United States, Delaware77. K/FI Canada Holdings, LLC United States, Delaware78. Korn Ferry Leadership Consulting Corporation United States, Delaware79. Ninth House, Inc. United States, Delaware80. Korn Ferry Global Holdings, Inc. United States, Delaware81. Pivot Learning, LLC United States, Oregon82 Personnel Decisions International Greater China Corporation United States, Minnesota83. Personnel Decisions International Singapore Corporation United States, Minnesota84. Sensa Solutions, Inc. United States, Virginia85. Korn/Ferry International Consultores Asociados, C.A. VenezuelaEXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-3 No. 333-99429) of Korn/Ferry International and related Prospectus (2)Registration Statement (Form S-8 Nos. 333-161844, 333-159900, 333-158632, 333-49580, 333-73147, 333-111038, 333-146346, 333-108696,333-185438 and 333-200840) pertaining to the employee benefit plans of Korn/Ferry Internationalof our reports dated June 26, 2015, with respect to the consolidated financial statements and schedule of Korn/Ferry International and subsidiaries and theeffectiveness of internal control over financial reporting of Korn/Ferry International and subsidiaries included in this Annual Report (Form 10-K) ofKorn/Ferry International and subsidiaries for the year ended April 30, 2015./s/ Ernst & Young LLPLos Angeles, CaliforniaJune 26, 2015EXHIBIT 31.1CERTIFICATIONSI, Gary D. Burnison, certify that: 1.I have reviewed this annual report on Form 10-K of Korn/Ferry International; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. By: /s/ GARY D. BURNISON Name: Gary D. Burnison Title: Chief Executive Officer and PresidentDate: June 26, 2015EXHIBIT 31.2CERTIFICATIONSI, Robert P. Rozek, certify that: 1.I have reviewed this annual report on Form 10-K of Korn/Ferry International; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. By: /s/ ROBERT P. ROZEK Name: Robert P. Rozek Title: Executive Vice President and Chief Financial OfficerDate: June 26, 2015EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), theundersigned officers of Korn/Ferry International, a Delaware corporation (the “Company”), hereby certify that, to the best of their knowledge:(a) the Annual Report on Form 10-K for the year ended April 30, 2015 (the “Report”) of the Company fully complies with the requirements of section13(a) or 15(d) of the Securities Exchange Act of 1934; and(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Dated: June 26, 2015 By: /s/ GARY D. BURNISON Name: Gary D. Burnison Title: Chief Executive Officer and PresidentBy: /s/ ROBERT P. ROZEK Name: Robert P. Rozek Title: Executive Vice President and Chief Financial Officer5 Stock listing Korn Ferry International common stock is traded on the New York Stock Exchange under the symbol KFY. Annual meeting The annual meeting of stockholders will be held at 8:00 a.m. PDT, September 24, 2015, at: Hyatt Regency Century Plaza 2025 Avenue of the Stars Los Angeles, California 90067 USA Registrar & transfer agent For address and changes, account consolidation, registration changes, stock holdings, and lost stock certificates, please contact: Computershare 250 Royall Street Canton, Massachusetts 02021 USA +1 877 889 7584 www.computershare.com/investor Investor contact Gregg Kvochak +1 310 556 8550 Media contact Dan Gugler +1 310 226 2645 Our locations worldwide Korn Ferry Corporate Headquarters 1900 Avenue of the Stars, Suite 2600 Los Angeles, California 90067 USA Tel: +1 310 552 1834 www.kornferry.com Abu Dhabi** Almaty* Amsterdam Athens Atlanta Auckland Bangalore Beijing Bogotá Boston Bratislava Brisbane Brussels Budapest Buenos Aires Calgary Caracas Chicago Copenhagen Dallas Dubai Dusseldorf Frankfurt Geneva Gothenburg Guangzhou Hamburg Helsinki* Hong Kong Houston Irvine Istanbul Jakarta Johannesburg* Kiev* Kuala Lumpur Lima London Los Angeles Lyon Madrid McLean Medellin** Melbourne Mexico City Miami Milan Sydney Taipei Tel Aviv* Tokyo Toronto Vancouver Vienna Waltham Warsaw Minneapolis Washington, DC Wellington Zurich * Alliance partner ** Satellite office Monterrey Montreal Moscow* Mumbai Nairobi* New Delhi New York Oslo Paris Perth** Philadelphia Pittsburgh Portland Princeton Pune Quito Reston Rio de Janeiro** Riyadh** San Francisco Santiago São Paulo Scottsdale** Seoul Shanghai Singapore Stamford Stockholm © Korn Ferry 2015. ALL RIGHTS RESERVED. 

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