Korn Ferry

BE

MORE
THAN

2018 ANNUAL REPORT

2
0
1
8
A
n
n
u
a
l

R
e
p
o
r
t

 
 
While most organizations can develop a sound strategy,  
they often struggle to make it stick. 

That’s where we come in.

We synchronize an organization’s strategy with its talent to drive 
superior performance. We help companies design their organization—
the structure, roles, and responsibilities—to seize these opportunities. As 
importantly, we help organizations select and hire the talent they need 
to execute their strategy—and show them the best way to compensate, 
develop, and motivate their people.

That’s what makes us unique. As an organizational consulting firm, we 
look at talent and strategy together. To inspire and excite people, teams, 
and entire organizations. To unite boardrooms and workforces. To 
unlock potential, realize ambitions, and change lives.

Strategy without talent is hopeless.

Talent without strategy is helpless.

We connect the dots.

2

3

THE 
SYNCHRONIZATION
OF TALENT AND 
STRATEGY

We know what good looks like: we have the industry knowledge, assessments, 
and data to benchmark clients against the best. We offer a complete view of the 
talent they need and the talent they have. We know if their rewards are fair and 
effective. And we align their structures, role profiles, and people to support the 
strategy. So clients know where to focus their efforts to create lasting change in 
the organization.

Organizational 
Strategy

Assessment & 
Succession

Talent 
Acquisition

Leadership 
Development

Rewards & 
Benefits

4

2018 
PERFORMANCE 
HIGHLIGHTS 

65% 

SHARE PRICE 
APPRECIATION** 

$273.8M  

ADJUSTED  
EBITDA*

$1.76B

FEE REVENUE

* EBITDA refers to earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA further adjusts EBITDA to exclude restructuring 

charges, integration/acquisition costs, certain separation costs, and certain non-cash charges (goodwill, intangible asset, and other temporary 
impairment). EBITDA and Adjusted EBITDA are non-GAAP financial measures. See page F-38 of the accompanying Form 10-K for the fiscal year 
ended April 30, 2018 for a presentation of the most directly comparable GAAP measures and reconciliations to those measures.

** Comparison of closing price on last trading day of FY18 v FY17.

5

DEAR STOCKHOLDERS

Korn Ferry has an 
unrelenting drive to 
make tomorrow better 
than today.

Reflecting on the past fiscal year, 
Korn Ferry made today better 
than yesterday—for clients, for 
colleagues, and for stockholders.  

 ƒ We reached record revenue 

and profits.

 ƒ We returned capital to our 

stockholders.

 ƒ Korn Ferry shares appreciated 
about 65 percent over the 
fiscal year.

 ƒ We continued to reshape our 

workforce:

 • About 70 percent of Korn 
Ferry colleagues today 
work outside the United 
States

 •

 •

 •

53 percent are Millennials

14 percent are Baby 
Boomers

61 percent are women

 • And, during the year, 
nearly 1,000 of these 
colleagues were promoted.

 ƒ We extended the breadth 

and depth of our global client 
offerings. Approximately 
100,000 people participated 
in our leadership programs 

each month, and we 
partnered with 98 percent of 
the Fortune 100.

While we’ve come a long way on 
our journey, there is significant 
opportunity ahead. Looking to 
tomorrow, we will take the next 
step in our transformation by 
officially moving to one brand, 
Korn Ferry. We’re sunsetting 
our legacy brands to achieve a 
more unified approach to the 
marketplace. Today, 60 percent 
of our revenue is derived from 
multi-solution clients, yet this 
represents less than 20 percent 
of our total clients. This move is 
all about seizing the opportunity 
to make the whole of Korn Ferry 
greater than the sum of its parts. 

TODAY, WE ARE A GLOBAL 
ORGANIZATIONAL CONSULTING  
FIRM WITH 7,500 COLLEAGUES 
COMMITTED TO:

THE WHY
Enabling people and organizations to 
exceed their potential, while... 

THE WHAT
Synchronizing every client’s strategy, 
organization, and people to drive  
superior business performance. 

6

Ultimately, our success, like 
our clients’, will not be tied to 
strategy, structure, or process. 
It’s people—all anchored in a 
common purpose. I’d like to thank 
our colleagues around the globe 
who remind me every day what 
purpose and opportunity are all 
about. I am also thankful to our 
leadership team and board of 
directors for their unwavering 
commitment to the success of 
others.

I’ve been asked many times how 
is it possible that Korn Ferry’s 
purpose is to enable people 
and organizations to exceed 
their potential—how can one 
exceed potential? It’s never a 
question of potential—it’s about 
an abundance of opportunity—
because people will never 
discover their potential until they 
are provided opportunity. 

Korn Ferry champions tomorrow’s 
opportunities! 

Regards,

Gary D. Burnison

As we embark on fiscal year 2019, 
we will also: 

 ƒ Drive an integrated, 

enterprise-wide go-to-market 
strategy, including a focus on 
marquee clients in which we 
have a continued opportunity 
to positively impact their 
performance.

 ƒ

 ƒ

 ƒ

 ƒ

Evolve towards even more 
of a solution and industry 
orientation. For example, 
we will continue to make 
targeted investments in 
organizational strategy, 
leadership development, 
and rewards and benefits. 
These are large, growing, 
and fragmented market 
opportunities.

Innovate and productize our 
intellectual property (IP) 
for sustaining client impact. 
We have the world’s leading 
IP on how to synchronize 
business strategy with 
the proper organizational 
atmosphere to drive superior 
performance for our clients. 
Yet, our productized revenue 
is approximately 15 percent 
of our top line. We will 
continue to invest in an 
integrated, IP-based talent 
platform that clients can 
license for assessing, hiring, 
engaging, compensating, and 
developing their people.

Invest in our talent to create 
lifetime career opportunities.

Pursue transformational 
M&A opportunities at the 
intersection of talent and 
strategy.

7

7

TODAY, WE ARE A GLOBAL 

ORGANIZATIONAL CONSULTING  

FIRM WITH 7,500 COLLEAGUES 

COMMITTED TO:

THE WHY

THE WHAT

Enabling people and organizations to 

Synchronizing every client’s strategy, 

exceed their potential, while... 

organization, and people to drive  

superior business performance. 

BOARD OF 
DIRECTORS

GARY BURNISON

Chief Executive Officer

GEORGE SHAHEEN

Non-Executive Chair

DOYLE BENEBY

Former Chief Executive Officer, CPS Energy

WILLIAM FLOYD

Former Chairman, Buffet Holdings, Inc. 

CHRISTINA GOLD 

Former Chief Executive Officer, The Western Union 
Company

JERRY LEAMON

Former Global Managing Director, Deloitte & Touche LLP

ANGEL MARTINEZ

Former Chairman and Chief Executive Officer, Deckers 
Brands (formerly known as Deckers Outdoor Corporation) 

DEBRA PERRY

Former Senior Managing Director, Moody’s Corporation

8

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2018

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

Commission File Number 001-14505

KORN/FERRY INTERNATIONAL
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

95-2623879
(I.R.S. Employer Identification Number)

1900 Avenue of the Stars, Suite 2600, Los Angeles, California
(Address of principal executive offices)

90067
(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
Common Stock, par value $0.01 per share

Name of Each Exchange on Which Registered
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes Í 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 Í
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes Í No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File
required 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
shorter period that the registrant was required to submit and post such files).
Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, 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 any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Í

Accelerated filer ‘ Non-accelerated filer ‘

Smaller reporting company ‘

Emerging growth company ‘

(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No Í
The number of shares outstanding of our common stock as of June 21, 2018 was 56,521,614 shares. The aggregate market value of the registrant’s
voting and non-voting common stock held by non-affiliates of the registrant on October 31, 2017, the last business day of the registrant’s most recently
completed second fiscal quarter, (assuming that the registrant’s only affiliates are its officers, directors and 10% or greater stockholders) was
approximately $2,140,950,087 based upon the closing market price of $41.83 on that date of a share of common stock as reported on the New York
Stock Exchange.

Documents incorporated by reference
Portions of the registrant’s definitive Proxy Statement for its 2018 Annual Meeting of Stockholders scheduled to be held on September 26, 2018 are
incorporated by reference into Part III of this Form 10-K.

KORN/FERRY INTERNATIONAL

Index to Annual Report on Form 10-K for the Fiscal Year Ended April 30, 2018

Item #

Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4

Item 5

Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B

Item 10
Item 11
Item 12

Item 13
Item 14

Item 15
Item 16

Description

Part I.

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers

Part II.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

Part III.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Part IV.

Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
Financial Statements and Financial Statement Schedules

Page

1
13
26
26
26
26
26

28

31
32
57
58
58
58
58

60
60
60

60
60

61
64
65
F-1

PART I.

Item 1. Business

About Korn Ferry

Korn/Ferry International (referred to herein as the “Company,” “Korn Ferry,” or in the first person notations “we,”
“our,” and “us”) is a global organizational consulting firm. We opened our first office in Los Angeles in 1969 and
currently operate in 106 offices in 52 countries. We deliver our solutions on a global basis, wherever our clients do
business. As of April 30, 2018, we had 7,643 full-time employees, including 1,392 consultants (541 Executive
Search, 577 Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”) which was combined
with HG (Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015), and 274 Futurestep) who are primarily
responsible for client services. Our clients include many of the world’s largest and most prestigious public and
private companies, middle market and emerging growth companies, as well as government and nonprofit
organizations. We have built strong client loyalty with 88% of our assignments performed during fiscal 2018 on
behalf of clients for whom we had conducted assignments in the previous three fiscal years. We have made
significant investments in our business that have strengthened our intellectual property, enhanced our
geographical presence, added complementary offerings to deepen client relationships and broadened our
capabilities around talent strategy, assessment, development and rewards. We were originally formed as a
California corporation in November 1969 and reincorporated as a Delaware corporation in fiscal 2000.

On June 12, 2018, the Company’s Board of Directors approved a plan (the “Plan”) to go to market under a single,
master brand architecture and to simplify the Company’s organizational structure by eliminating and/or
consolidating certain legal entities and implementing a rebranding of the Company to offer the Company’s current
products and services using the “Korn Ferry” name, branding and trademarks. In connection with the Plan, the
Company intends to sunset all sub-brands, including Futurestep, Hay Group and Lominger, among others. The
Company is harmonizing under one brand to help accelerate the firm’s positioning as the preeminent
organizational consultancy and bring more client awareness to its broad range of talent management solutions.
While the rebranding will not impact the Company’s segment financial reporting, starting in the first quarter of fiscal
2019, the Company will rename its Hay Group segment as “Korn Ferry Advisory” and its Futurestep segment as
“Korn Ferry RPO and Professional Search.” The Company’s Executive Search segment will remain unchanged. In
connection with the Plan, the Company also intends to pursue a holding company reorganization as discussed in
further detail below under “KF Merger.” Unless otherwise noted, the following discussion of the Company’s
business in this Item 1 describes the Company’s business as currently operated and does not give effect to any
changes that may be implemented as a result of the rebranding plan. The Company intends to update this
discussion in its 2019 Annual Report on Form 10-K to reflect any changes implemented as of such time as a result
of the Plan.

The Korn Ferry Opportunity

Rallied around our vision to be the preeminent organizational consulting firm, at Korn Ferry, we are pursuing an
ambitious strategy that will help us to focus relentlessly on clients and collaborate intensively across the
organization. This approach builds on the best of our past and gives us a clear path to the future with focused
initiatives to increase our client and commercial impact.

Korn Ferry is transforming how clients address their spectrum of talent management needs. We have evolved from
a mono-line business to a global organizational consulting firm and in the process are giving our consultants more
opportunities to engage with clients—beyond our iconic talent acquisition offering.

The essence of our belief is that both Korn Ferry and our clients can be more than. We view it as a state of mind,
an attitude, for how we live and interact with each other and our clients every day. Being more than makes a
difference—to us, and more importantly, to our clients. More than reflects the vast expertise we bring to our clients.
This is the opportunity to bring our services, solutions and products backed by rich intellectual property to our
clients, inspiring and motivating individuals, teams, even entire organizations. This is how we bring companies’
strategies to life, unite boardrooms and workforces, unlock potential, realize ambitions and change lives.

1

While most organizations can develop a sound strategy, they often struggle with how to make it stick. That is
where we come in: synchronizing an organization’s strategy with its talent to drive superior performance. We help
companies design their organization—the structure, roles and responsibilities—to seize these opportunities. As
important, we help organizations select and hire the talent they need to execute their strategy—and show them the
best way to compensate, develop and motivate their people.

We do this through our five solution sets:

Organizational Strategy

Assessment and Succession

Talent Acquisition

Leadership Development

Rewards and Benefits

We map talent strategy to business strategy by designing operating models
and organizational structures that align to them, helping organizations put
their plans into action. We make sure they have the right people, in the
right roles, engaged and enabled to do the right things.

We provide actionable, research-backed insights that allow organizations
to understand the true capabilities of their people so they can make
decisions that ensure the right leaders are ready—when and where they
are needed—in the future.

From executive search to recruitment process outsourcing, we integrate
scientific research with our practical experience and industry-specific
expertise to recruit professionals of all levels and functions for client
organizations.

We activate purpose, vision and strategy through leaders at all levels and
organizations. We combine expertise, science and proven techniques with
forward thinking and creativity to build leadership experiences that help
entry to senior level leaders grow and deliver superior results.

We help organizations align reward with strategy. We help them pay their
people fairly for doing the right things—with rewards they value—at a cost
the organization can afford.

About Our Intellectual Property and Technology

At the core of our service, solution and product delivery is deep intellectual property (“IP”) and research that allows
us to deliver meaningful business outcomes for our clients.

The Korn Ferry Institute, our research and analytics arm, unites three areas: agile client execution; applied
research and analytics; and breakthrough innovation. These teams work together to help business and public-
sector leaders understand the key trends and drivers of human and organizational performance, so that they make
better, science-based decisions on critical leadership, people, management and policy issues.

The Korn Ferry Institute’s core IP data and assets include proprietary leadership assessment, recruitment and
development models, emotional and social competencies, human motives and values, job grading, engagement
and rewards systems. We integrate and build upon our unique data sets using advanced modeling and artificial
intelligence (“AI”) to produce unique, predictive insights and deliver demonstrable client impact.

Our analytics are based on industry leading data sets which include six million assessments, profiles of eight
million candidates, compensation data on twenty million professionals and engagement data on more than six
million professionals.

At the highest level, the Korn Ferry Institute explores three themes:

1. People, organization and technology innovation;
2. Data analytics for human and business performance; and
3. New demographic trends.

In the fiscal year ahead, we will continue to integrate, harmonize and simplify our IP for greater leverage and
business impact, with the goal of having one science-based engine underlying and empowering all our products
and solutions.

2

About Our Business Segments

Korn Ferry services, solutions, and products are delivered through the following business segments:

Executive Search: Korn Ferry Executive Search helps clients attract and hire leaders who fit in with their
organization and make it stand out. The business is managed by geographical region leaders with a focus on
recruiting board-level, chief executive and other senior executive positions for clients predominantly in the
consumer, financial services, industrial, life sciences/healthcare provider, technology and educational/not-for-profit
market sectors. We also have centers of functional expertise; our Board & CEO Services group, for example,
focuses exclusively on placing CEOs and board of directors in organizations around the world. The relationships
established by Executive Search allow us to add incremental value to our clients through the delivery of our other
organizational consulting services and solutions.

Our Executive Search services concentrate on searches for positions with annual cash compensation of $300,000
or more, or comparable compensation in foreign locations. The industry is comprised of retained and contingency
recruitment firms. Retained firms, such as Korn Ferry, typically charge a fee for their services equal to
approximately one-third of the first-year annual cash compensation for the position being filled regardless of
whether the position is filled. Contingency firms generally work on a non-exclusive basis and are compensated
only upon successfully placing a recommended candidate.

Hay Group: Korn Ferry Hay Group is comprised of 3,454 of the world’s top leadership and organizational advisory
consultants and thought leaders. Through our talented colleagues, robust solutions and world-class intellectual
property that people use every day, our consultants are able to solve the most disruptive and challenging
organizational and talent problems facing clients.

As a recognized advisory leader, we partner with many of the world’s most admired organizations because of our
track record delivering successful outcomes, our ability to listen, and our insistence on putting our clients first.
They depend on our products and platforms every day to connect our solutions to their business challenges. In
essence, we help clients design their organization—the structure, roles and responsibilities—and show them the
best way to compensate, develop and motivate their people. We deliver this through a combination of solutions
consulting and product services that addresses how people work and shows how to nurture them so that
strategies succeed. We capitalize on the breadth of our IP, service offerings and expertise to do what is right for
the client. Services are delivered by an experienced team of consultants and include one of the richest and most
comprehensive people data sets.

Futurestep: Korn Ferry Futurestep uses data-backed insight and IP, matched with strategic collaboration and
innovative technology, to meet people challenges head-on—and succeed. Our solutions span all aspects of
Recruitment Process Outsourcing (“RPO”), Professional Search and Project Recruitment.

Our scalable, best-in-class approach to RPO allows our clients to attract top people while reducing expenses and
time to hire. To us, RPO is more than just handing off the responsibilities of recruitment. It’s about building a
partnership, often through a co-sourced recruitment model, to discover and deliver the talent that will have the
greatest impact on our clients’ business.

Korn Ferry Futurestep offers proven RPO services that are backed by years of experience and award-winning IP.
Using a variety of tools, we look closely at each candidate, combining data from multiple recruitment systems to
determine which candidates have the potential to match both a particular organization and a specific role. Our
customizable end-to-end solutions combine recruiting expertise with state-of-the-art technology platforms and
sophisticated methodologies to help clients streamline recruitment processes, enhance candidate experience, and
improve quality of hire, ultimately impacting the long-term success of an organization. We see talent acquisition as
a critical function of the business, one that impacts not just the bottom line but one that can also drive top line
growth. Korn Ferry Futurestep also undertakes Project Recruitment. This solution focuses not on a single hire, nor
on filling high-volume roles, but instead the area in between. Project recruitment addresses a specific talent
acquisition need at a certain point in time.

Through our Professional Search capabilities, Korn Ferry Futurestep is uniquely positioned to help organizations
identify and attract professionals at the middle to upper levels of management, in single-search engagements.

3

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, as amended (the “Exchange
Act”). You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at
100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-732-0330. Our reports, proxy statements and other documents filed
electronically with the SEC are available at the website maintained by the SEC at www.sec.gov.

We also make available, free of charge on the Investor Relations portion of our website at http://ir.kornferry.com,
our annual, quarterly, and current reports, and, if applicable, amendments to those reports, filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically
file such reports with, or furnish them to, the SEC at www.sec.gov.

We also make available on the Investor Relations portion of our website at http://ir.kornferry.com earnings
presentations and other important information, which we encourage you to review.

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of the Audit
Committee, Compensation and Personnel Committee, and Nominating and Corporate Governance Committee of
our Board of Directors are also posted on the Investor Relations portion of 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, California 90067.

Industry Trends

In this competitive global economic environment, our clients are seeking new pathways to drive sustainable
profitable growth. CEOs are increasingly demanding an agile workforce that can innovate and drive growth across
borders. We believe Korn Ferry is uniquely positioned to help organizations synchronize their strategy with their
talent to drive superior performance.

Consolidation of Solution Providers—In choosing recruitment and human resource service providers, we believe
and see evidence to support that:

▪

▪

▪

Companies are actively in search of preferred providers in order to create efficiencies and consolidate
vendor relationships;
Providers that can offer a full suite of organizational consulting products and solutions are becoming
increasingly attractive; and
Clients seek trusted advisors who understand their business and unique organizational culture in order to
manage the multiple needs of their business 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 management levels, 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 adapt the lessons learned from previous experiences, solve complex
problems, manage amid ambiguity 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 to secure a competitive advantage.

Human Capital is One of the Top CEO Challenges—Human capital challenges are found in all industries and
sectors, among large and small companies, including those that are taking on the planet’s most pressing
problems: sustainability, security, the environment, energy, transportation, food supply, clean water, and more.
Tackling world-changing challenges requires far more than just best-in-class research and development and
efficient production processes. More than ever, organizations need world-class talent motivated by a bigger vision.
The people, the minds, the alliances and the culture that can create and then nurture innovative ideas are seen as
central to the modern CEO agenda. In fact, according to The Conference Board, attracting and retaining talent is
the single biggest challenge facing CEOs in 2018.

Talent Analytics—Companies are increasingly leveraging big data and predictive analytics to measure the
influence of activities across all aspects of their business, including Human Resources (“HR”). They expect their

4

service providers to deliver superior metrics and better ways of communicating results. The Korn Ferry Institute’s
core IP, data and assets allow us to determine the true drivers of leadership, performance and monitor how any
individual or organization measures up. We possess several of the most robust HR databases in the world. These
databases enable our clients to benchmark salaries, leadership potential, employee engagement, organizational
culture and review other HR data by industry and by position at a global and country level.

Increased Outsourcing of Talent Acquisition Functions—More companies are focusing on their core competencies
and choosing to outsource non-core functions to providers who can offer efficient, high-quality services. Third-
party providers can apply immediate and long-term approaches for improving all 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 allow clients to fulfill positions on a 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 proprietary IP; 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 on our industry:

▪

▪
▪
▪

▪
▪

▪
▪

▪

Increasing demand for professionals with not just the right technical skills, but also the right leadership
style, values and motivation to meet the specific 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-driven development;
Increasing importance of talent mobility in engaging and developing people within an organization;
Increased attention to succession planning due to heightened scrutiny on CEOs, pressure to generate
growth, shorter CEO tenures and the emphasis being placed on making succession planning a systemic
governance process within global organizations;
Executive pay and governance practices under more scrutiny than ever;
The high turnover rate and varying high volume hiring needs commonly associated with the new shared
economy; and
Increasing focus on gender pay gap and the lack of women in senior roles.

Growth Strategy

Our objective is to expand our position as the preeminent organizational consulting firm. In order to meet this
objective, we will continue to pursue our strategy:

Drive an Integrated, Solutions-Based Go-to-Market Strategy

Our synergistic go-to-market strategy, bringing together all three of our business segments, is driving more
integrated, scalable client relationships. This is evidenced by the fact that approximately 62% of our revenues
come from clients that utilize multiple lines of business. To better compete in the market, we will evolve over time
from our traditional line of business segmentation to integrated solutions and industries.

In an effort to gain operational efficiencies and drive superior performance, we expect that multinational clients will
increasingly turn to strategic partners such as Korn Ferry that can manage their needs on a centralized basis. This
will require vendors with a global network of offices and technological support systems to manage engagements
across geographical regions. We established our Marquee Accounts program to act as a catalyst for change as we
transform our Company from individual operators to an integrated solutions provider, in an effort to drive major
global and regional strategic account development, as well as to provide a framework for all our client
development activities.

5

Our Marquee Accounts program now comprises 20% of our global fee revenues. A number of our Marquee
accounts are managed by our newly hired account managers—18 at April 30, 2018. In the year ahead, we will
continue to grow and expand our account management activities. This includes driving consistent account
selection, assignment, planning and execution; implementing account-based marketing efforts; optimizing the
pipeline and opportunity process; and hiring additional dedicated account leaders.

Deliver Unparalleled Client Excellence

Korn Ferry continues to scale and more deeply embed our industry-leading IP within the talent management
processes of our global clients. In addition to technology-enabled insights for our clients, we also continue to invest
in productivity enhancers for our own colleagues, recognizing that as the way they work changes and becomes
more global, we need to make them productive wherever they are and however they work. We are focused on the
following key areas to drive our technology plan:

Innovation—Human capital management is quickly evolving, thanks to people with new profiles, new technologies
and new organizational and working contracts. Korn Ferry is actively investing in some of these developments and
closely monitors others to align our business models, capture significant growth opportunities and ultimately help
shape the future of work.

Market innovations contribute to more accurate, faster, cost-effective and impactful business and human
decisions. Our firm is well-positioned in that context. We have a unique set of assets that are critical to such
decisions: deep science on organization and human motivation, data on talent, work and rewards, and proven
products and solutions.

We are integrating these assets and combining them with enhanced computing and analytical power to remain a
cutting-edge organizational consulting firm. Some key innovation initiatives include:

▪

▪

▪

Core IP: Integration of talent and work IP into a single, science-based framework organized along “identity”
(the deepest drivers of human behaviors), “capabilities” (what people know), and “accountabilities” (what
characteristics of roles, responsibilities and outcomes). We expect to position this model to be a market
“gold-standard” associated with individual and collective performance in traditional organizations as well as
in open talent networks. This model will also fuel our advisory solutions such as mergers and acquisitions
(M&A), diversity and inclusion (D&I) and digital transformation.
Client analytics: Historically, Korn Ferry has developed solid—yet traditional—talent analytics for Marquee
clients. We are now developing better correlations between human and business performance for more
systematic monetization of client analytics and introduction to new clients.
Advanced analytics: We are organizing our data and reports into “always-on” blended dashboards that will
help clients make better decisions. We are also strengthening our AI-machine learning (AI-ML) capacity,
initially to optimize recruitment (e.g., sourcing and matching of jobs and talents) and to scale pay-related
demographics and data points. We will then use AI-ML to complement our science on individuals, teams
and work, and identify the variables that best help transformation and predict talent and organizational
results.

IP Driven Tools and Services—We are leveraging all IP and technology and combining into a unified single
platform to deliver assessments that allow clients to make faster, better talent decisions.

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
subscription services delivered online help us generate long-term relationships with our clients through large scale
and technology-based HR programs on an annuity basis. We continue to seek ways to further scale our product
offering to our global clients.

Within Executive Search our databases contain profiles of approximately five million executives to assist in
identifying individuals with the right background, cultural fit and abilities. Through the search process, we leverage
proprietary tools such as our Four Dimensional Executive Assessment and Executive Snapshot (incorporating Hay
Group’s industry standard job grading, job description and salary benchmark methodologies).

6

Within Korn Ferry Hay Group, enhancements to our PayNet database and the launch of the new Korn Ferry
Assessment Platform will allow us to embed analytics directly into our clients’ user experience, providing
actionable insights.

New Offerings—More than 150,000 consumers have visited Korn Ferry Advance, our new business-to-consumer
offering, since it launched in the United States (the “U.S.”) in July 2017. We are expanding and enhancing the
offering to provide more focused assistance to people looking to make their next career move, as well as to
provide tailored career services to an organization’s people. Korn Ferry Advance will continue to leverage cutting-
edge technology as well as the greatest asset we have—our consultants.

In addition, we launched Korn Ferry Direct, our Client Platform Services product tailored for small and mid-sized
businesses, and Consent Manager, a new enterprise tool to help clients manage their increasing responsibility for
employee and candidate data privacy.

Productivity Enhancements—We will make further investments into our global SAP platform, which was put in
service in the early 2000s and configured to support an executive search business. As we grow and evolve the
Company to a solution and industry orientation, we will ensure that we have the proper infrastructure and
technology to deliver the appropriate data and information to efficiently and effectively manage the enterprise.

Extend the Korn Ferry Brand

Next to our people, the Korn Ferry brand is the strongest asset of the Company.

Positioning Korn Ferry as the preeminent global organizational consultancy and demonstrating our unique ability to
drive business performance through people remains a key tenet of our global marketing program. Our objective is
to improve awareness and perceptions of the evolved Korn Ferry across our key buyer segments (Board Directors,
CEOs, Chief Human Resource Officers (“CHRO”) and the C-suite) and investor base. We are also extending our
presence to a professional-level audience focused on advancing their careers. We have significantly enhanced our
thought leadership and digital presence in support of these goals.

As we increasingly extend our brand, broaden our solutions and attract top talent to the firm, Korn Ferry is well
positioned for the future.

Advance Korn Ferry as a Premier Career Destination

We continue to invest in building a world-class organization that is aligned to our strategy and is staffed by a
capable, motivated and agile workforce. A few key initiatives in this area include:

▪

▪

▪

▪

Career Paths and Mobility—We have architected and will implement the new Korn Ferry career model
across the entire business to define career paths, as well as to encourage talent mobility and self-directed
development.
Onboarding—Our workforce has nearly doubled since fiscal 2015 and must continue to grow to deliver on
our growth. To support this, we are providing a standardized, global onboarding experience for all Korn
Ferry new hires using a common platform, materials and resources to ensure all new hires are effectively
integrated into the Company with reduced ramp-up time to full productivity.
Korn Ferry Academy—Our growth plans require a learning, agile organization. In fiscal 2018, we launched
a new learning management system (The Korn Ferry Academy) to serve as a Center of Excellence
focused on the growth and development of our colleagues through rich, personalized content.
Succession and Development—We are working on aligning and building capabilities for our future needs.
The process was initiated with the senior leadership team and we are now cascading it to additional levels
of the Company, including emerging talent.

Pursue Transformational Opportunities at the Intersection of Talent and Strategy

We have developed a core competency in identifying, acquiring and integrating M&A targets that have the
potential to further our strategic objectives and enhance shareholder value. Our disciplined approach to M&A will
continue to play a critical role in the ongoing evolution of Korn Ferry into an industry specialized, business
outcomes oriented solutions provider at the intersection of talent and strategy. While we will continue to execute

7

on our targeted organic growth pathways, M&A will be a vital component of our future growth and capital
deployment strategies.

Our Services and Organization

Organization

The Company operates through its three global business segments: Executive Search, Hay Group, and
Futurestep. Our Executive Search business is managed on a geographic basis throughout four regions: North
America, Europe, the Middle East and Africa (“EMEA”), Asia Pacific and Latin America. Hay Group and Futurestep
are managed on a global basis with operations in North America, EMEA, Asia Pacific and Latin America.

We address our clients’ needs through our three business segments:

Executive Search

Overview—Korn Ferry Executive Search helps clients attract and hire leaders who fit with their organization and
make it stand out. Our services are typically used to fill executive-level positions, such as board directors, chief
executive officers, chief financial officers, chief operating officers, chief information officers, chief human resource
officers and other senior executive officers.

As part of being retained by a client to conduct a search, we assemble a team of consultants with appropriate
geographic, industry and functional expertise. We utilize a standardized and differentiated approach to placing
talent that integrates our research-based IP with our practical experience. Our search consultants serve as
management advisors who work closely with the client in identifying, assessing and placing qualified candidates.
In fiscal 2018, we executed 6,325 new executive search assignments.

Industry Specialization—Consultants in our five global markets and regional specialty practice groups bring an
in-depth understanding of the market conditions and strategic management issues faced by clients within their
specific industries and geographies. We are continually looking to expand our specialized expertise through
internal development and strategic hiring in targeted growth areas.

Percentage of Fiscal 2018 Assignments Opened by Industry Specialization

Global Markets:

Industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life Sciences/Healthcare Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31%
19%
17%
16%
12%

Regional Specialties (United States):

Education/Not-for-Profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5%

Functional Expertise—We have organized executive search centers of functional expertise, composed of
consultants who have extensive backgrounds 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 ranks of the Company. Their work is with CEOs and in the boardroom, and their expertise is organizational
leadership and governance. They conduct hundreds of engagements every year, tapping talent from every corner
of the globe. This work spans all ranges of organizational scale and purpose. Members of functional groups are
located throughout our regions and across our industry groups.

8

Percentage of Fiscal 2018 Assignments Opened by Functional Expertise

Board Level/CEO/CFO/Senior Executive and General Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69%
9%
Marketing and Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9%
Finance and Control
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6%
Information Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4%
Manufacturing/Engineering/Research and Development/Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3%
Human Resources and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regions

North America—As of April 30, 2018, we had operations in 20 cities throughout the United States and Canada. In
fiscal 2018, the region generated fee revenue of $408.1 million and opened 2,665 new engagements with an
average of 248 consultants.

EMEA—As of April 30, 2018, we had operations in 24 cities in 19 countries throughout the region. In fiscal 2018,
the region generated fee revenue of $173.7 million and opened 1,849 new engagements with an average of 154
consultants.

Asia Pacific—As of April 30, 2018, we had operations in 18 cities in 10 countries throughout the region. In fiscal
2018, the region generated fee revenue of $96.6 million and opened 1,132 new engagements with an average of
95 consultants.

Latin America—As of April 30, 2018, we had operations in 9 cities in 7 countries covering the entire Latin America
region. In fiscal 2018, the region generated fee revenue of $30.6 million in fiscal 2018 and opened 679 new
engagements with an average of 33 consultants.

Client Base—Our 3,773 Search engagement clients in fiscal 2018 include many of the world’s largest and most
prestigious public and private companies.

Competition—Other multinational executive search firms include Egon Zehnder, Heidrick & Struggles International,
Inc., Russell Reynolds Associates and Spencer Stuart. Although these firms are our largest competitors in
executive search, we also compete with smaller boutique firms that specialize in specific regional, industry or
functional searches. We believe our brand name, differentiated business model, systematic approach to client
service, cutting-edge technology, unique IP, global network, prestigious clientele, strong specialty practices and
high-caliber colleagues are recognized worldwide. We also believe our long-term incentive compensation
arrangements, as well as other executive benefits, distinguish us from most of our competitors and are important
in attracting and retaining our key consultants.

Hay Group

Overview—Korn Ferry Hay Group helps clients design their organization—the structure, roles and
responsibilities—and shows them the best way to compensate, develop and motivate their people. Our focus is on
making change happen and helping people and organizations realize their potential.

Korn Ferry Hay Group is known for creating and owning the most widely used job evaluation methodology in the
world. We have helped clients assess, select and develop hundreds of thousands of managers and executives. In
addition, we have built the richest and most comprehensive database of organizational management information in
the world, enabling our clients to benchmark themselves against the best performers in their industries.

We deliver a combination of solutions consulting and product services that address how people work, and how to
nurture them so that business strategies succeed. We capitalize on the breadth of our IP, service offerings and
expertise to do what is right for the client—transforming ideas into actionable insights. Services are delivered by an
experienced team of consultants and include one of the richest and most comprehensive people data sets. We
have over 3,450 employees working in 88 cities in 50 countries. Our consultants are predominately recruited from
local markets, so they are sensitive to local issues and have a deep understanding of them, but are also trained
and work together in international teams to offer a truly global perspective.

9

Hay Group has multiple offerings across assessment and succession, leadership development, organizational
strategy, and rewards and benefits, which are enhanced, enabled and optimized through various products.

Assessment and Succession: We provide actionable, research-backed insight and products that allow
organizations to understand the talent they have, benchmarked against the talent they need to deliver on the
business strategy.

▪

By tapping into our vast talent database, we isolate the vital leadership attributes needed to succeed by
industry, business function, job level, business challenge, strategy, or geographic market.

▪ World-class assessment tools deliver deep insights on how individuals and the enterprise-wide talent

pipeline compare with best-in-class profiles.

▪ We draw on the full breadth of Korn Ferry’s people and organizational capabilities to close any gaps.

Leadership Development: We develop leaders at every stage of the leadership journey, from first time manager to
CEO, with leadership development experiences that are tightly aligned with succession and talent processes.

Our solutions are backed by world-class tools and techniques and delivered by hundreds of dedicated leadership
development experts across the globe.

Organizational Strategy: Korn Ferry provides end-to-end support to organizations that want to transform their
business. Strategy becomes operationalized by aligning the tangible elements of the organization—people,
structure and process—and the intangible elements—motivations, relationships and culture.

Rewards and Benefits: We help organizations align reward with strategy, to pay their people fairly for doing the
right things—with rewards they value—at a cost the organization can afford. Our advice is backed by the quality
and quantity of our pay data and a robust and widely used job evaluation methodology.

Solutions consulting fee revenue was $540.5 million, $497.7 million and $351.2 million in fiscal 2018, 2017 and
2016, respectively. Solutions consulting fee revenue represented 31%, 32% and 27% of the Company’s total fee
revenue in fiscal 2018, 2017 and 2016, respectively.

Regions—As of April 30, 2018, we had Hay Group operations in 22 cities in North America, 36 in EMEA, 21 in
Asia Pacific, and 9 in Latin America.

Client Base—During fiscal 2018, Hay Group partnered with approximately 11,000 clients across the globe and
16% of Hay Group’s fiscal 2018 fee revenue was referred from Korn Ferry’s Executive Search and Futurestep
segments. Our clients come from the private, public and not-for-profit sectors, across every major industry and
represent diverse business challenges.

Competition—Our main competitors include firms like Aon Hewitt, Willis Towers Watson, Deloitte, McKinsey,
Boston Consulting Group, Development Dimensions International, Center for Creative Leadership, Right
Management, Mercer and CEB. Although these firms are our largest competitors, we also compete with smaller
boutique firms that specialize in specific regional, industry or functional aspects of leadership and organizational
consulting services.

Futurestep

Overview—Korn Ferry Futurestep uses data-backed insight and IP, matched with strategic collaboration and
innovative technology to deliver solutions spanning all aspects of RPO, Professional Search and Project
Recruitment.

RPO: In fiscal 2018, Korn Ferry Futurestep was recognized as a top five RPO provider in the 2017 Baker’s Dozen
list, marking its 11th consecutive year on the list. Through decades of experience, we have honed and refined our
RPO solution to be as efficient as possible, keeping costs low and allowing clients to meet target time-to-hire goals
without compromising on quality of candidate.

Through innovative sourcing and employer brand strategies, as well as the ability to leverage the Korn Ferry talent
pool and comprehensive job market mapping, Korn Ferry Futurestep’s RPO solution is equipped to source
candidates from a broader network. Combined with our best-in-class assessments and behavior interviewing

10

techniques, we can then determine which qualified candidates will be a culture fit for an organization. Futurestep
combines traditional recruitment expertise with a multi-tiered portfolio of talent acquisition solutions. Futurestep
consultants, based in 30 countries, have access to our databases of pre-screened, mid-level professionals. Our
global candidate pool complements our international presence and multi-channel sourcing strategy to provide
speed, efficiency and quality service for clients worldwide.

Futurestep Professional Search: We are uniquely positioned to help organizations identify and attract
professionals at the middle to upper levels of management in single-search engagements. We focus on:

▪ Consumer
▪
▪
▪
▪

Financial Services
Industrial
Life Sciences/Healthcare
Technology

▪ Education/Not-for-Profit
▪ Finance & Accounting
▪ Human Resources
▪ Sales, Marketing & Digital
▪ Supply Chain Management

Futurestep Project Recruitment: Korn Ferry Futurestep’s Project Recruitment Solution delivers the right talent in
the right numbers through a process that is seamless, stress-free and aligned with the broader talent acquisition
strategy. We work closely with the organization’s talent acquisition function to develop a recruitment strategy that
is tailored to meet the needs of the business and designed to complement its culture. Our teams rely on proactive
targeted sourcing, taking a direct approach with suitable candidates, and employing high-touch, in-depth candidate
assessment and selection to deliver top talent on a timely basis, without compromising quality or efficiency.

Regions—As of April 30, 2018, we had Futurestep operations in 13 cities in North America, 13 in EMEA, 18 in Asia
Pacific, and 9 in Latin America.

Client Base—During fiscal 2018, Futurestep partnered with 1,903 clients across the globe and 42% of Futurestep’s
fiscal 2018 fee revenue was referred from Korn Ferry’s Executive Search and Hay Group segments.

Competition—Futurestep primarily competes for business with other RPO providers such as Cielo Talent,
Alexander Mann Solutions, Hays, Kenexa, Spherion, KellyOCG and ADP, and competes for search assignments
with regional contingency recruitment firms and large national retained recruitment firms.

Professional Staff and Employees

We have assembled a wealth of talent that is rewarded based on performance. 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
diverse organization. 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 have people who are able to challenge convention, offer unique
perspectives, and generate innovative ideas. Equally important, it means we can think and act globally—just like
our clients.

As of April 30, 2018, we had a total of 7,643 full-time employees. Of this, 1,865 were Executive Search employees
consisting of 541 consultants and 1,324 associates, researchers, administrative and support staff. Hay Group had
3,454 employees as of April 30, 2018, consisting of 577 consultants and 2,877 associates, researchers,
administrative and support staff. Futurestep had 2,188 employees as of April 30, 2018, consisting of 274
consultants and 1,914 administrative and support staff. Corporate had 136 professionals as of April 30, 2018. We
are not party to a collective bargaining agreement and consider our relations with our employees to be good. Korn
Ferry is an equal opportunity employer.

11

The following table provides information relating to each of our business segments for fiscal 2018. Financial
information regarding our business segments for fiscal 2017 and 2016 and additional information for fiscal 2018 is
contained in Note 11—Business Segments, in the Notes to our Consolidated Financial Statements included in this
Annual Report on Form 10-K, which is incorporated herein by reference.

Fee Revenue

Operating
Income
(Loss)

Number of
Consultants
as of
April 30,
2018

(dollars in thousands)

Executive Search:

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total Executive Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

408,098
173,725
96,595
30,624

709,042
785,013
273,162
—

100,037
26,768
18,425
4,022

149,252
100,939
39,363
(85,670)

254
163
92
32

541
577
274
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,767,217

$

203,884

1,392

The following table provides information on fee revenues for each of the last three fiscal years attributable to the
regions in which the Company operates:

Year Ended April 30,

2018

2017

2016 (1)

(in thousands)

Fee Revenue:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

778,470
69,699
537,654
292,823
88,571

$

728,871
57,640
445,681
249,077
84,252

669,585
40,401
343,460
187,631
51,035

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,767,217

$ 1,565,521

$ 1,292,112

(1) Fee revenue from Legacy Hay was $186.8 million for the period from December 1, 2015, the effective date of the

acquisition to April 30, 2016.

Additional financial information regarding the regions in which the Company operates can be found in Note 11—
Business Segments, in the Notes to our Consolidated Financial Statements included in this Annual Report on
Form 10-K.

KF Merger

As discussed above, in connection with the Plan, the Company intends to pursue a holding company
reorganization (the “KF Merger”), after which a new public holding company, Korn Ferry, will own all of the stock of
the Company. The Company will initially form Korn Ferry as a direct, wholly-owned subsidiary of the Company.
Then, pursuant to the KF Merger, the Company will merge with and into another newly formed entity—Merger
Sub, a Delaware corporation, and a direct, wholly-owned subsidiary of Korn Ferry and indirect, wholly-owned
subsidiary of the Company—with the Company surviving as a direct, wholly-owned subsidiary of Korn Ferry and
operating under the legal name “Korn Ferry US.” Each share of Company stock issued and outstanding
immediately prior to the KF Merger will be converted into an equivalent corresponding share of Korn Ferry stock,
having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions as
the corresponding share of Company stock being converted. The Company’s current stockholders will become
stockholders of Korn Ferry upon the consummation of the KF Merger and will not recognize gain or loss for U.S.
federal income tax purposes upon the conversion of their shares.

12

The Company plans to conduct the KF Merger pursuant to Section 251(g) of the Delaware General Corporation
Law (“DGCL”), which permits the creation of a holding company through a merger with a direct or indirect wholly-
owned subsidiary of the constituent corporation without stockholder approval, to create a parent company holding
structure. The Company will adopt an amended and restated certificate of incorporation and amended and
restated bylaws upon the consummation of the KF Merger, which will also reflect the change of the name of the
corporation to Korn Ferry US, as permitted by Section 251(g) of the DGCL. Following the consummation of the KF
Merger and as part of the Plan, the Company intends to merge certain of its subsidiaries organized in the U.S. with
and into Korn Ferry US.

Item 1A. Risk Factors

The risks described below are the material risks facing our Company. Additional risks not presently known to us or
that we currently deem immaterial may also impair our business operations. Our business, financial condition or
results of operations could be materially adversely affected by any of these risks.

Competition in our industries could result in our losing market share and/or require us to charge lower
prices for services, which could reduce our revenue.

We compete for executive search business with numerous executive search firms and businesses that provide job
placement services, including other large global executive search firms, smaller specialty firms and web-based
firms. In recent years, we have also begun facing increased competition from sole proprietors and in-house human
resource professionals whose ability to provide job placement services has been enhanced by professional
profiles made available on the internet and enhanced social media-based search tools. The continued growth of
the shared economy and related freelancing platform sites may also negatively impact demand for our services by
allowing employers seeking services to connect with employees in real time and without any significant cost.
Traditional executive search competitors include Egon Zehnder, Heidrick & Struggles International, Inc., Russell
Reynolds Associates and Spencer Stuart. In each of our markets, one or more of our competitors may possess
greater resources, greater name recognition, lower overhead or other costs and longer operating histories than we
do, which may give them an advantage in obtaining future clients, capitalizing on new technology and attracting
qualified professionals in these markets. Additionally, specialty firms 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 fewer
off-limits arrangements. There are no extensive barriers to entry into the executive search 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
recruiting capabilities. Competitors in these fields include SMASHFLY, iCIMS, Yello, Indeed, Google for Jobs and
Jobvite. As these providers continue to evolve, they may develop offerings similar to or more expansive than ours,
thereby increasing competition for our services or more broadly causing disruption in the executive search
industry. Further, as technology continues to develop and the shared economy continues to grow, we expect that
the use of freelancing platform sites will become more prevalent. As a result, companies may turn to such sites for
their talent needs, which could negatively impact demand for the services we offer.

The human resource consulting business has been traditionally fragmented and a number of large consulting
firms, such as Ernst and Young, McKinsey, Willis Towers Watson and Deloitte are building businesses in human
resource management consulting to serve these needs. These companies are significantly larger than Korn Ferry
and have considerable resources at their disposal, allowing for potentially significant investment to grow their
human resource consulting business. Increased competition, whether as a result of professional and social
networking website providers, traditional executive search firms, sole proprietors and in-house human resource
professionals (as noted above) or larger consulting firms building human resources consulting businesses, may
lead to pricing pressures that could negatively impact our business. For example, increased competition could
require us to charge lower prices, and/or cause us to lose market share, each of which could reduce our fee
revenue.

The talent acquisition business, including RPO, project recruitment, professional search, talent consulting and
employee communications is a highly competitive and developing industry with numerous specialists. Our
Futurestep division primarily competes for business with other RPO providers such as Cielo, Alexander Mann

13

Solutions, Kenexa, Spherion, and Kelly Services, and competes for mid-level professional search assignments
with regional contingency recruitment firms and large national retained recruitment firms. In addition, some
organizations have developed or may develop internal solutions to address talent acquisition that may be
competitive with our solutions. To compete successfully and achieve our growth targets for our talent acquisition
business, we must continue to support and develop assessment and analytics solutions, maintain and grow our
proprietary database, deliver demonstrable return on investment to clients, support our products and services
globally, and continue to provide consulting and training to support our assessment products. Our failure to
compete effectively with our competitors could adversely affect our operating results and future growth.

Consolidation in the industries that we serve could harm our business.

Companies in the industries that we serve may seek to achieve economies of scale and other synergies by
combining with or acquiring other companies. If two or more of our clients merge or consolidate and combine their
operations, we may experience a decrease in the amount of services we perform for 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
from that client or lose the opportunity to gain additional work. The increased market power of larger companies
could also increase pricing and competitive pressures on us. Any of these possible results of industry
consolidation could harm our business, results of operations and financial condition.

If we fail to attract and retain qualified and experienced consultants, our revenue could decline and our
business could be harmed.

We compete with other executive and professional search and consulting firms for qualified and experienced
consultants. These other firms may be able to offer greater compensation and benefits or more attractive lifestyle
choices, career paths or geographic locations than we do. Attracting and retaining consultants in our industry is
particularly important because, generally, a small number of consultants have primary responsibility for a client
relationship. Because client responsibility is so concentrated, the loss of key consultants may lead to the loss of
client relationships. In fiscal 2018, for example, our top three Executive Search and Hay Group consultants had
primary responsibility for generating business equal to approximately 1% and 2% of our fee revenues,
respectively, and our top ten Executive Search and Hay Group consultants had primary responsibility for
generating business equal to approximately 3% and 4% of our fee revenues, respectively. This risk is heightened
due to the general portability of a consultant’s business: consultants have in the past, and will in the future,
terminate their employment with our Company. Any decrease in the quality of our reputation, reduction in our
compensation levels relative to our peers or restructuring of our compensation program, whether as a result of
insufficient revenue, a decline in the market price of our common stock or for any other reason, could impair our
ability to retain existing consultants or attract additional qualified consultants with the requisite experience, skills
and established client relationships. Our failure to retain our most productive consultants, whether in Executive
Search, Hay Group or Futurestep, or maintain the quality of service to which our clients are accustomed as well as
the ability of a departing consultant to 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 be harmed. We may also lose clients if
the departing Executive Search, Hay Group or Futurestep consultant has widespread name recognition or a
reputation as a specialist 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 the departing Executive Search, Hay Group or Futurestep
consultant at another executive search or consulting firm. If we fail to limit departing consultants from moving
business or recruiting our consultants to a competitor, our business, financial condition and results of operations
could be adversely affected.

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 our business.

Either by agreement with clients, or for client relations or marketing purposes, we sometimes refrain from, for a
specified period of time, recruiting candidates from a client when conducting searches on behalf of other clients.
These off-limit agreements can generally remain in effect for up to two years following the completion of an
assignment. The duration and scope of the off-limit agreement, including whether it covers all operations of the
client and its affiliates 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 and complexity of the client’s business, the length of the client

14

relationship and the frequency with which we have been engaged to perform executive searches for 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 it difficult 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-limit
agreements will not impede our growth or our ability to attract and serve new clients, or otherwise harm our
business.

We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and
to grow.

We may pay hiring bonuses and annual retention bonuses to secure the services of new hires and retain our
professional employees. Those payments have taken the form of long-term deferred compensation, restricted
stock, and unsecured cash payments in the form of promissory notes. The aggregate amount of these awards to
employees is significant and we expect to continue issuing these types of long-term incentive awards.

If we are unable to retain our executive officers and key personnel or integrate new members of our senior
management who are critical to our business, we may not be able to successfully manage our business in
the future.

Our future success depends upon the continued service of our executive officers and other key management
personnel. Competition for qualified personnel 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 or more of our executives or key
employees, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with
us, or if we are 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 or achieve our business objectives.

If we are unable to maintain our professional reputation and brand name, our business will be harmed.

We depend on our overall reputation and brand name recognition to secure new engagements and to hire
qualified professionals. Our success also depends on the individual reputations of our professionals. We obtain a
majority of our new engagements from existing clients or from referrals by those clients. 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 competing successfully for both new engagements and qualified consultants. Failing to
maintain our professional reputation and the goodwill associated with our brand name could seriously harm our
business.

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 client solutions, the demands on our business and our operating
risks may 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 of a policy, program, project or initiative, and we are regularly searching 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 new geographic locations. As we focus on developing new services, clients, practice areas and
lines of business; open new offices; and engage in business in new geographic locations, our operations may be
exposed to additional as well as enhanced risks.

In particular, our growth efforts place substantial additional demands on our management and staff, as well as on
our information, financial, administrative and operational 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 people and 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 exceed the benefits of such growth, and our operating results may suffer, at least in the short-
term, and perhaps in the long-term.

15

Efforts involving a different focus, new services, new clients, new practice areas, new lines of business, new
offices and new geographic locations entail inherent risks associated with our inexperience and competition from
mature participants in those areas. Our inexperience may result in costly decisions that could harm our profit and
operating results. In particular, new or improved services often relate to the development, implementation and
improvement of critical 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 these services, our clients could incur significant costs and
losses for which they could seek compensation from us. Finally, as our business continues to evolve and we
provide a wider range of services, we will become increasingly dependent upon our employees, particularly those
operating in business environments less familiar to us. Failure to identify, hire, train and retain talented employees
who share our values could have a negative effect on our reputation and our business.

Our rebranding plan may take a significant amount of time and involve substantial costs and may not be
favorably received by our clients.

On June 12, 2018, the Company’s Board of Directors voted to approve a rebranding plan for the Company. This
plan includes going to market under a single, master brand architecture, solely as Korn Ferry and sunsetting of all
the Company’s sub-brands, including Futurestep, Hay Group and Lominger, among others. The Company is
harmonizing under one brand to help accelerate the firm’s positioning as the preeminent organizational
consultancy and bring more client awareness to its broad range of talent management solutions

We may incur substantial costs as a result of rebranding our products and services and may not be able to
achieve or maintain brand name recognition or status that is comparable to the recognition and status previously
enjoyed by certain of our sub-brands. The failure of our rebranding initiatives could adversely affect our ability to
attract and retain clients, which could cause us not to realize some or all of the anticipated benefits contemplated
by the rebranding.

We are subject to potential legal liability from clients, employees and candidates for employment.
Insurance coverage may not be available to cover all of our potential liability and available coverage may
not be sufficient to cover all claims that we may incur.

Our ability to obtain liability insurance, its coverage levels, deductibles and premiums, are all dependent on market
factors, our loss history and insurers’ perception of our overall risk profile. We are exposed to potential claims with
respect to the executive search process and the consulting services performed by Hay Group. For example, a
client could assert a claim for matters such as breach of an off-limit agreement or recommending a candidate who
subsequently proves to be unsuitable for the position 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 employee could assert an action against us for alleged discrimination, violations of labor and employment law or
other matters. Also, in various countries, we are subject to data protection laws impacting the processing of
candidate information and other regulatory requirements that could give rise to liabilities/claims. The client may
not be satisfied with the consulting services provided by our Hay Group consultants that may lead to claims
against us.

Additionally, as part of our Hay Group services, we often send a team of leadership consultants to our clients’
workplaces. Such consultants generally have access to client information systems and confidential information. An
inherent risk of such activity includes possible claims of misuse or misappropriation of client IP, confidential
information, funds or other property, as well as harassment, criminal activity, torts, or other claims. Such claims
may result in negative publicity, injunctive relief, criminal investigations and/or charges, payment by us of monetary
damages or fines, or other material adverse effects on our business.

We cannot ensure that our insurance will cover all claims or that insurance coverage will be available at
economically acceptable rates. Our insurance may also require us to meet a deductible. Significant uninsured
liabilities could have a material adverse effect on our business, financial condition and results of operations.

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 be available 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 the current realities of our markets. If actual or projected fee revenues are

16

negatively impacted by weakening customer demand, we may find it necessary to take cost 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 such measures will properly align our cost structure to our revenue level. Any failure to maintain a
balance between our cost structure and our revenue could adversely affect our business, financial condition, and
results of operations and lead to negative cash flows, which in turn might require us to obtain additional financing
to meet our capital needs. If we are unable to secure such additional financing on favorable terms, or at all, our
ability to fund our operations could be impaired, which could have a material adverse effect on our results of
operations.

Our financial results could suffer if we are unable to achieve or maintain adequate utilization and suitable
billing rates for our consultants.

Our profitability depends, to a large extent, on the utilization and billing rates of our professionals. Utilization of our
professionals is affected by a number of factors, including:

▪
▪

▪
▪

▪
▪

▪

the number and size of client engagements;
the timing of the commencement, completion and termination of engagements (for example, the
commencement or termination of multiple RPO engagements could have a significant impact on our
business, including significant fluctuations in our fee revenue, since these types of engagements are
generally larger, in terms of both staffing and fee revenue generated, than our other engagements);
our ability to transition our consultants efficiently from completed engagements to new engagements;
the hiring of additional consultants because there is generally a transition period for new consultants that
results in a temporary drop in our utilization rate;
unanticipated changes in the scope of client engagements;
our ability to forecast demand for our services and thereby maintain an appropriate level of consultants;
and
conditions affecting the industries in which we practice as well as general economic conditions.

The billing rates of our consultants that we are able to charge are also affected by a number of factors, including:

▪
▪
▪
▪
▪
▪

our clients’ perception of our ability to add value through our services;
the market demand for the services we provide;
an increase in the number of clients in the government sector in the industries we serve;
the introduction of new services by us or our competitors;
our competition and the pricing policies of our competitors; and
current economic conditions.

If we are unable to achieve and maintain adequate overall utilization, as well as maintain or increase the billing
rates for our consultants, our financial results could materially suffer. In addition, our consultants oftentimes
perform services at the physical locations of our clients. If there are natural disasters, disruptions to travel and
transportation or problems with communications systems, our ability to perform services for, and interact with, our
clients at their physical locations may be negatively impacted, which could have an adverse effect on our business
and results of operations.

The profitability of our fixed-fee engagements with clients may not meet our expectations if we
underestimate the cost of these engagements.

When making proposals for fixed-fee engagements, we estimate the costs and timing for completing the
engagements. These estimates reflect our best judgment regarding the efficiencies of our methodologies and
consultants as we plan to deploy them on engagements. Any increased or unexpected costs or unanticipated
delays in connection with the performance of fixed-fee engagements, including delays caused by factors outside
our control, could make these contracts less profitable or unprofitable, which would have an adverse effect on our
profit margin. For the years ended April 30, 2018, 2017, and 2016, fixed-fee engagements represented 28%, 29%,
and 24% of our revenues, respectively.

17

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 accounting principles require us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our
financial statements. We are also required to make certain judgments that affect the reported amounts of revenues
and expenses during each reporting period. We periodically evaluate our estimates and assumptions including
those relating to revenue recognition, restructuring, deferred compensation, goodwill and other intangible assets,
contingent consideration, annual performance-related bonuses, allowance for doubtful accounts, share-based
payments and deferred income taxes. Actual results could differ from the estimates we make based on historical
experience and various assumptions believed to be reasonable based on specific circumstances, and changes in
accounting standards could have an adverse impact on our future financial position and results of operations.

Foreign currency exchange rate risks may adversely affect our results of operations.

A material portion of our revenue and expenses are generated by our operations in foreign countries, and we
expect that our foreign operations will account for a material portion of our revenue and expenses in the future.
Most of our international expenses and revenue are denominated in foreign currencies. As a result, our financial
results could be affected by changes in foreign currency exchange rates or weak economic conditions in foreign
markets in which we have operations, among other factors. Fluctuations in the value of those currencies in relation
to the U.S. dollar have caused and will continue to cause dollar-translated amounts to vary from one period to
another. Given the volatility of exchange rates, we may not be able to manage effectively our currency translation
or transaction risks, which may adversely affect our financial condition and results of operations.

Unfavorable tax laws, tax law changes and tax authority rulings may adversely affect results.

We are subject to income taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax
liabilities are subject to the allocation of income among various tax jurisdictions. Our effective tax rate could be
adversely affected by changes in the mix of earnings among countries with differing statutory tax rates or changes
in tax laws. The amount of income taxes and other taxes are subject to ongoing audits by U.S. federal, state and
local tax authorities and by non-U.S. authorities. If these audits result in assessments different from estimated
amounts recorded, future financial results may include unfavorable tax adjustments.

The effects of the Tax Cuts and Jobs Act on our business and our company have not yet been fully
analyzed and the final impacts could be materially different from our current estimates.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, making significant
changes to the taxation of U.S. business entities. The most significant impacts of the Tax Act on the Company
include (1) a reduction in the U.S. corporate federal statutory income tax rate from 35.0% to 21.0% effective
January 1, 2018, and (2) a one-time tax on accumulated foreign earnings (the “Transition Tax”), which is
applicable at a rate of 15.5% on cash and other specified assets and 8% on other residual earnings. We have
recorded in our consolidated financial statements provisional amounts based on our current estimates of the
effects of the Tax Act in accordance with our current understanding of the Tax Act and currently available
guidance. For additional information regarding the Tax Act and the provisional tax amounts recorded in our
consolidated financial statements, see Note 8—Income Taxes. The final amounts may be significantly affected by
regulations and interpretive guidance expected to be issued by the tax authorities, clarifications of the accounting
treatment of various items, our additional analysis, and our refinement of our estimates of the effects of the Tax
Act and, therefore, such final amounts could be materially different than our current provisional amounts, which
could materially affect our tax obligations and effective tax rate.

We have deferred tax assets that we may not be able to use under certain circumstances.

If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant
change in the time period within which the 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

18

statutory tax rates may also change our deferred tax assets or liability balances, with either a favorable or
unfavorable impact on our effective tax rate. Our deferred tax assets may also be impacted by new legislation or
regulation.

Our indebtedness could impair our financial condition and reduce funds available to us for other purposes
and our failure to comply with the covenants contained in our debt instruments could result in an event of
default that could adversely affect our operating results.

On June 15, 2016, the Company entered into a senior secured $400 million Credit Agreement with a syndicate of
banks made up of a $275 million term loan and $125 million of secured revolving loans. As of April 30, 2018,
$238.9 million was outstanding under the term loan, and there is no outstanding balance under the revolving
loans.

If we do not generate sufficient cash flow from operations to satisfy our debt obligations, we may have to
undertake alternative financing plans. We cannot ensure that we will be able to refinance our debt or enter into
alternative financing plans in adequate amounts on commercially reasonable terms, terms acceptable to us or at
all, or that such plans guarantee that we would be able to meet our debt obligations.

Our existing debt agreements contain financial and restrictive covenants that limit the total amount of debt that we
may incur and may limit our ability to engage in other activities that we may believe are in our long-term best
interests, including the disposition or acquisition of assets or other companies or the payment of dividends to our
stockholders. Our failure to comply with these covenants may result in an event of default, which, if not cured or
waived, could accelerate the maturity of our indebtedness or prevent us from accessing additional funds under our
revolving credit facility. If the maturity of our indebtedness is accelerated, we may not have sufficient cash
resources to satisfy our debt obligations, and we may not be able to continue our operations as planned.

The expansion of social media platforms presents new risks and challenges that can cause damage to our
brand and reputation.

There has been a marked increase in the use of social media platforms, including weblogs (or blogs), social media
websites and other forms of Internet-based communications, which allow individuals access to a broad audience
of consumers and other interested persons. The inappropriate and/or unauthorized use of such media vehicles by
our clients or employees could increase our costs, cause damage to our brand, lead to litigation or result in
information leakage, including the improper collection and/or dissemination of personally identifiable information of
candidates and clients. In addition, negative or inaccurate posts or comments about us on any social networking
platforms could damage our reputation, brand image and goodwill.

Technological advances may significantly disrupt the labor market and weaken demand for human capital
at a rapid rate.

Our success is directly dependent on our customers’ demands for talent. As technology continues to evolve, more
tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial
intelligence and other technological advances outside of our control. This trend poses a risk to the human resource
industry as a whole, particularly in lower-skill job categories that may be more susceptible to such replacement.

Limited protection of our intellectual property could harm our business, and we face the risk that our
services or products may infringe upon the intellectual property rights of others.

We cannot guarantee that trade secrets, trademark and copyright law protections are adequate to deter
misappropriation of our IP (which has become an important part of our business). Existing laws of some countries
in which we provide services or products may offer only limited protection of our IP rights. Redressing
infringements may consume significant management time and financial resources. Also, we may be unable to
detect the unauthorized use of our IP and take the necessary steps to enforce our rights, which may have a
material adverse impact on our business, financial condition or results of operations. We cannot be sure that our
services and products, or the products of others that we offer to our clients, do not infringe on the IP rights of third
parties, and we may have infringement claims asserted against us or our clients. These claims may harm our
reputation, result in financial liability and prevent us from offering some services or products.

19

We have invested in specialized technology and other intellectual property for which we may fail to fully
recover our investment or which may become obsolete.

We have invested in developing specialized technology and IP, including proprietary systems, processes and
methodologies, such as Searcher Express and KF Insight, that we believe provide us a competitive advantage in
serving our current clients and winning new engagements. Many of our service and product offerings rely on
specialized technology or IP that is subject to rapid change, and to the extent that this technology and IP is
rendered obsolete and of no further use to us or our clients, our ability to continue offering these services, and
grow our revenues, could be adversely affected. There is no assurance that we will be able to develop new,
innovative or improved technology or IP or that our technology and IP will effectively compete with the IP
developed by our competitors. If we are unable to develop new technology and IP or if our competitors develop
better technology or IP, our revenues and results of operations could be adversely affected.

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 our strategic objectives and to remain competitive, we must continue to
develop and enhance our information systems. This may require the acquisition of equipment and software and
the development of new proprietary software, either internally or through independent consultants. If we are unable
to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the
capabilities necessary for us to compete effectively, or for any reason any interruption or loss of our information
processing capabilities occurs, this could harm our business, results of operations and financial condition. We
cannot be sure that our insurance against the effects of a disaster regarding our information technology or our
disaster recovery procedures currently in place will continue to be available at reasonable prices, cover all our
losses or compensate us for the possible loss of clients occurring during any period that we are unable to provide
business services.

We are subject to risk as it relates to software that we license from third parties.

We license software from third parties, much of which is integral to our systems and our business. The licenses
are generally terminable if we breach our obligations under the license agreements. If any of these relationships
were terminated or if any of these parties were to cease doing business or cease to support the applications we
currently utilize, we may be forced to spend significant time and money to replace the licensed software. However,
we cannot assure you that the necessary replacements will be available on reasonable terms, if at all.

We are increasingly dependent on third parties for the execution of critical functions.

We do not maintain all of our technology infrastructure, and we have outsourced certain other critical applications
or business processes to external providers, including cloud-based services. The failure or inability to perform on
the part of one or more of these critical suppliers or partners could cause significant disruptions and increased
costs.

Cyber security vulnerabilities and incidents could lead to the improper disclosure of information obtained
from our clients, candidates and employees that could result in liability and harm to 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 that is increasingly hostile to information security.
This environment demands that we continuously improve our design and coordination of security controls across
our business groups and geographies in order to protect information that we develop or that is obtained from our
clients, candidates and employees. Despite these efforts, given the ongoing and increasingly sophisticated
attempts to access the information of entities, our security controls over this information, our training of employees,
and other practices we follow may not prevent the improper disclosure of such information. Our efforts and the
costs incurred to bolster our security against attacks cannot provide absolute assurance that future data breaches
will not occur. We depend on our overall reputation and brand name recognition to secure new engagements.
Perceptions that we do not adequately protect the privacy of information could inhibit attaining new engagements,
qualified consultants and could potentially damage currently existing client relationships.

20

Data security, data privacy and data protection laws such as the European Union General Data Protection
Regulation, and other evolving regulations and cross-border data transfer restrictions, may limit the use
of our services and adversely affect our business.

We are or may become subject to a variety of laws and regulations in the European Union (the “E.U.”) (including
the E.U. General Data Protection Act and the General Data Protection Regulation, which became effective in May
2018), U.S. and abroad regarding data privacy, protection and security. As these laws continue to evolve, we may
be required to make changes to our services, solutions and/or products so as to enable the Company and/or our
clients to meet the new legal requirements, including by taking on more onerous obligations in our contracts,
limiting our storage, transfer and processing of data and, in some cases, limiting our service and/or solution
offerings in certain locations. Changes in these laws may also increase our potential exposure through significantly
higher potential penalties for non-compliance. The costs of compliance with, and other burdens imposed by, such
laws and regulations and client demand in this area may limit the use of, or demand for, our services, solutions
and/or products, make it more difficult and costly to meet client expectations, or lead to significant fines, penalties
or liabilities for noncompliance, any of which could harm our business.

In addition, due to the uncertainty and potentially conflicting interpretations of these laws, it is possible that such
laws and regulations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to
another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with
applicable laws or satisfactorily protect personal information could result in governmental enforcement actions,
litigation, or negative publicity, any of which could inhibit sales of our services, solutions and/or products.

Acquisitions, or our inability to effect acquisitions, may have an adverse effect on our business.

We have completed several strategic acquisitions of businesses in the last several years, including our
acquisitions of Legacy Hay in fiscal 2016 and PDI and Global Novations in fiscal 2013. Targeted acquisitions have
been part of our growth strategy, and we may in the future selectively acquire businesses that are complementary
to our existing service offerings. However, we cannot be certain that we will be able to continue to identify
appropriate acquisition candidates or acquire them on satisfactory terms. Our ability to consummate such
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 the issuance of equity. Our credit agreement dated as of June 15, 2016 limits us from
consummating permitted acquisitions unless we are in compliance with our pro forma financial covenants, our pro
forma leverage ratio is no greater than 2.50 to 1.00, and domestic liquidity after giving effect to the acquisition is at
least $50.0 million. If we are required to incur substantial indebtedness in connection with an acquisition, and the
results of the acquisition are not favorable, the increased indebtedness could decrease the value of our equity. In
addition, 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, it may impede the growth of our business, which could adversely impact our
profitability and our stock price.

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 be acquired in a transaction that is not approved by our Board of Directors. Some
of the provisions in our Certificate of Incorporation and Bylaws include:

▪

limitations on stockholder actions;

21

▪

▪

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 market price for the common stock.

We may not be able to successfully integrate or realize the expected benefits from our acquisitions.

Our future success may depend in part on our ability to complete the integration of acquisition targets successfully
into our operations. The process of integrating 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.

Further, we cannot assure that acquisitions will result in the financial, operational or other benefits that we
anticipate. Some acquisitions may not be immediately accretive to earnings and some expansion may result in
significant expenditures.

Businesses we acquire may have liabilities or adverse operating issues which could harm our operating
results.

Businesses we acquire may have liabilities or adverse operating issues, or both, that we either fail to discover
through due diligence or underestimate prior to the consummation of the acquisition. These liabilities and/or issues
may include the acquired business’ failure to comply with, or other violations of, applicable laws, rules or
regulations or contractual or other obligations or liabilities. As the successor owner, we may be financially
responsible for, and may suffer harm to our reputation or otherwise be adversely affected by, such liabilities and/or
issues. An acquired business also may have problems with internal controls over financial reporting, which could in
turn cause us to have significant deficiencies or material weaknesses in our own internal controls over financial
reporting. These and any other costs, liabilities, issues, and/or disruptions associated with any past or future
acquisitions, and the related integration, could harm our operating results.

As a result of our acquisitions, we have substantial amounts of goodwill and intangible assets, and
changes in business conditions could cause these assets to become impaired, requiring write-downs that
would adversely affect our operating results.

All of our acquisitions have been accounted for as purchases and involved purchase prices well in excess of
tangible asset values, resulting in the creation of a significant amount of goodwill and other intangible assets. As of
April 30, 2018, goodwill and purchased intangibles accounted for approximately 26% and 9%, respectively, of our
total assets. Under U.S. GAAP, we do not amortize goodwill and intangible assets acquired in a purchase
business combination that are determined to have indefinite useful lives, but instead review them annually (or
more frequently if impairment indicators arise) for impairment. As discussed above, in connection with the Plan,
the Company intends to offer all of the Company’s current products and services using the “Korn Ferry” name,
branding and trademarks, and sunset all sub-brands, including Futurestep, Hay Group and Lominger, among
others. The Hay Group and Lominger brands came to the Company through acquisitions and, in connection with

22

the accounting for those acquisitions, $106 million of the purchase price was allocated to indefinite lived
tradename intangible assets. On June 12, 2018, the Company concluded that as a result of the decision to
discontinue the use of such sub-brands in the near term, the Company will be required under U.S. generally
accepted accounting principles to record in the first quarter of fiscal 2019 a one-time, non-cash intangible asset
impairment charge of $106 million, or $79 million on an after-tax basis. The discontinuation of such brands and
resulting impairment charge could adversely affect our business. Further, although we have to date determined
that none of our other assets have been impaired, future events or changes in circumstances that result in an
impairment of goodwill or other intangible assets would have a negative impact on our profitability and operating
results.

An impairment in the carrying value of goodwill and other intangible assets could negatively impact our
consolidated results of operations and net worth.

Goodwill is initially recorded as the excess of amounts paid over the fair value of net assets acquired. While
goodwill is not amortized, it is reviewed for impairment at least annually or more frequently if impairment indicators
are present. In assessing the carrying value of goodwill, we make qualitative and quantitative assumptions and
estimates about revenues, operating margins, growth rates and discount rates based on our business plans,
economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related
to these factors and management’s judgment in applying these factors. Goodwill valuations have been calculated
using an income approach based on the present value of future cash flows of each reporting unit and a market
approach. We could be required to evaluate the carrying value of goodwill prior to the annual assessment if we
experience unexpected, significant declines in operating results or sustained market capitalization declines. These
types of events and the resulting analyses could result in goodwill impairment charges in the future. Impairment
charges, such as the impairment charge that we will be required to record in the first quarter of fiscal 2019 related
to the discontinuation of the Hay Group and Lominger brands, could substantially affect our results of operations
and net worth in the periods of such charges.

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 industries in which we operate. When conditions in the global economy, including the
credit markets deteriorate, or economic activity slows, many companies hire fewer permanent employees and
some companies, as a cost-saving measure, choose to rely on their own human resources departments rather
than third-party search firms to find talent, and under these conditions, companies may cut back on human
resource initiatives, all of which negatively affects our financial condition and results of operations. We may also
experience more competitive pricing pressure during periods of economic decline. If the geopolitical uncertainties
result in a reduction in business confidence, if the national or global economy or credit market conditions in
general deteriorate, or if the unemployment rate increases, such uncertainty or changes could put negative
pressure on demand for our services and our pricing, resulting in lower cash flows and a negative effect on our
business, financial condition and results of operations. In addition, some of our clients may experience reduced
access to credit and lower revenues resulting in their inability to meet their payment obligations to us.

We face risks associated with social and political instability, legal requirements and economic conditions
in our international operations.

We operate in 52 countries and, during the year ended April 30, 2018, generated 56% of our fee revenue from
operations outside of the U.S. We are exposed to the risk of changes in social, political, legal and economic
conditions inherent in international operations. Examples of risks inherent in transacting business worldwide that
we are exposed to include:

▪

▪

uncertainties and instability in economic and market conditions caused by the United Kingdom’s (the
“U.K.”) vote to exit the E.U. (“Brexit”);
uncertainty regarding how the U.K.’s access to the E.U. Single Market and the wider trading, legal,
regulatory and labor environments, especially in the U.K. and E.U., will be impacted by Brexit, including
the resulting impact on our business and that of our clients;

23

▪

▪

▪
▪
▪
▪
▪
▪
▪
▪
▪

▪

changes in and compliance with applicable laws and regulatory requirements, including U.S. laws affecting
the activities of U.S. companies abroad, including the Foreign Corrupt Practices Act of 1977 and sanctions
programs administered by the U.S. Department of the Treasury Office of Foreign Assets Control, and
similar foreign laws such as the U.K. Bribery Act, as well as the fact that many countries have legal
systems, local laws 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;
statutory equity requirements;
differences in accounting and reporting requirements;
repatriation controls;
differences in labor and market conditions;
potential adverse tax consequences;
multiple regulations concerning pay rates, benefits, vacation, statutory holiday pay, workers’
compensation, union membership, termination pay, the termination of employment, and other employment
laws; and
the introduction of greater uncertainty with respect to trade policies, tariffs and government regulation
affecting trade between the U.S. and other countries.

We cannot ensure that one or more of these factors will not harm our business, financial condition or 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 an intention to distribute to our stockholders a regular quarterly cash dividend of
$0.10 per share of common stock. Although the Company paid our first dividend under this program on April 9,
2015 and has declared a quarterly dividend every quarter since the adoption of the dividend policy, the declaration
and payment of all future dividends to holders of our common stock are subject to the discretion of 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 cash dividends 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 the level 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 less cash and/or borrowing capacity
available for future dividends and other purposes, which could negatively affect our financial condition, our results
of operations, 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 of Operations—Liquidity and Capital Resources,” where we describe the terms of
our indebtedness, including provisions limiting our ability 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 agreement or otherwise
obtain a waiver from our lenders. In addition, as a result of general economic conditions, conditions in the lending
markets, the results of our business or for any other reason, we may elect or be required to amend or refinance

24

our senior credit facility, at or prior to maturity, or enter into additional agreements for indebtedness. Any such
amendment, refinancing or additional agreement may contain covenants which could limit in a significant manner
or entirely our ability to pay dividends to you.

Additionally, under the DGCL, our Board of Directors may not authorize payment of a dividend unless it is either
paid out of surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, out of net profits for
the fiscal year in which the dividend 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, of our 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 growth opportunities, 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 material expansion
of our business, including through acquisitions, increased capital spending or other increases of our expenditures,
will depend more than it otherwise 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 acceptable cost. If we are unable to take timely advantage of
growth opportunities, our future financial condition and competitive position may be harmed, which in turn may
adversely affect the market price of our common stock.

We may be subject to the actions of activist shareholders.

Our Board of Directors and management team are committed to acting in the best interest of all of our
shareholders. We value constructive input from investors and regularly engage in dialogue with our shareholders
regarding strategy and performance. Activist shareholders who disagree with the composition of the Board of
Directors, our strategy or the way the Company is managed may seek to effect change through various strategies
and channels. Responding to shareholder activism can be costly and time-consuming, disrupt our operations, and
divert the attention of management and our employees from our strategic initiatives. Activist campaigns can create
perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential
business opportunities, harm our ability to attract new employees, investors, and customers, and cause our stock
price to experience periods of volatility or stagnation.

Our business could be disrupted as a result of actions of certain stockholders.

If any of our stockholders commence a proxy contest, advocate for change, make public statements critical of our
performance or business, or engage in other similar activities, then our business could be adversely affected
because we may have difficulty attracting and retaining clients due to perceived uncertainties as to our future
direction and negative public statements about our business; responding to proxy contests and other similar
actions by stockholders is likely to result in us incurring substantial additional costs and significantly divert the
attention of management and our employees; and, if individuals are elected to our Board with a specific agenda,
the execution of our strategic plan may be disrupted or a new strategic plan altogether may be implemented, which
could have a material adverse impact on our business, financial condition or results of operations. Further, any of
these matters or any such actions by stockholders may impact and result in volatility of the price of our common
stock.

Our inability to successfully recover should we experience a disaster or other business continuity
problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm
or legal liability.

Should we experience a disaster or other business continuity problem, such as an earthquake, hurricane, terrorist
attack, pandemic, security breach, power loss, telecommunications failure or other natural or man-made disaster,
our continued success will depend, in part, on the availability of our personnel, our office facilities, and the proper
functioning of our computer, telecommunication and other related systems and operations. In such an event, we

25

could experience near-term operational challenges with regard to particular areas of our operations. In particular,
our ability to recover from any disaster or other business continuity problem will depend on our ability to protect our
technology infrastructure against damage from business continuity events that could have a significant disruptive
effect on our operations. We could potentially lose client data or experience material adverse interruptions to our
operations or delivery of services to our clients in a disaster. A disaster on a significant scale or affecting certain of
our key operating areas within or across regions, or our inability to successfully recover should we experience a
disaster or other business continuity problem, could materially interrupt our business operations and cause
material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships or
legal liability.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our corporate office is located in Los Angeles, California. We lease our corporate office and all 105 of our
Executive Search, Hay Group, and Futurestep offices located in North America, EMEA, Asia Pacific and Latin
America. As of April 30, 2018, we leased an aggregate of approximately 1.3 million square feet of office space.
The leases generally have remaining terms of one to 12 years and contain customary terms and conditions. We
believe that our facilities are adequate for our current needs and we do not anticipate any difficulty replacing such
facilities or locating additional facilities to accommodate any future growth.

Item 3. Legal Proceedings

From 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 this report, 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 Disclosures

Not applicable.

Executive Officers of the Registrant

Name

Gary D. Burnison
Robert P. Rozek
Mark Arian
Byrne Mulrooney

Age as of
April 30,
2018

Position

57
57
57
57

President and Chief Executive Officer
Executive Vice President, Chief Financial Officer and Chief Corporate Officer
Chief Executive Officer, Hay Group
Chief Executive Officer, Futurestep

Our executive officers serve at the discretion of our Board of Directors. There is no family relationship between any
executive officer or director. The following 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 from March 2002 until June 30, 2007 and Chief Operating Officer from
November 2003 until June 30, 2007. Prior to joining Korn Ferry, Mr. Burnison was Principal and Chief Financial
Officer of Guidance Solutions, a privately held consulting firm, from 1999 to 2001. Prior to that, he served as an
executive officer 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 and in December 2015 also became our Chief Corporate Officer. Prior to joining Korn Ferry, he served as
Executive Vice President and Chief Financial Officer of Cushman & Wakefield, Inc., a privately held commercial

26

real estate services firm, from June 2008 to February 2012. Prior to joining Cushman & Wakefield, Inc., Mr. Rozek
served as Senior Vice President and Chief Financial Officer of Las Vegas Sands Corp., a leading global developer
of destination properties (integrated resorts) that feature premium accommodations, world-class gaming and
entertainment, convention and exhibition facilities and many other amenities, from 2006 to 2008. Prior to that,
Mr. Rozek held senior leadership positions at Eastman Kodak, and spent five years as a Partner with
PricewaterhouseCoopers LLP.

Mark Arian joined the Company as Chief Executive Officer of Korn Ferry’s Hay Group segment in April 2017. Prior
to Korn Ferry, Mr. Arian served as a Managing Principal at Ernst and Young LLP, a multinational professional
services firm that provides audit, tax, business risk, technology and security risk services, and human capital
services worldwide, from March 2014 until March of 2017. In that capacity, he led the People Advisory Services—
Financial Services Sector, and his responsibilities included commercial, people and key account leadership.
Between 2008 and 2014, Mr. Arian held various leadership positions at AON and AON Hewitt, a provider of
insurance, reinsurance, human capital and management consulting services, serving as an Executive Vice
President and leading its strategic Mergers and Acquisitions (“M&A”) and business transformation offering globally.
Mr. Arian has also held various leadership positions at Towers Perrin (now Wills Towers Watson) including serving
as the Global M&A and Global Change Management leader, and Hewitt Associates, where Mr. Arian built and led
the Corporate Restructuring and Change Practice. Mr. Arian is a graduate of Duke University and holds a juris
doctorate from Columbia University.

Byrne Mulrooney joined the Company in April 2010 as Chief Executive Officer of Futurestep. Prior to joining Korn
Ferry, he was President and Chief Operating Officer of Flynn Transportation Services, a third-party logistics
company, from 2007 to 2010. Prior to that, he led Spherion’s workforce solutions business in North America, which
provides workforce solutions in professional services and general staffing, including recruitment process
outsourcing and managed services, from 2003 to 2007. Mr. Mulrooney held executive positions for almost 20
years at EDS and IBM in client services, sales, marketing and operations. Mr. Mulrooney is a graduate of Villanova
University in Pennsylvania. He holds a master’s degree in management from Northwestern University’s J.L.
Kellogg Graduate School of Management.

27

PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

Common Stock

Our 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 per share of the common stock for the periods indicated, as reported on the New
York Stock Exchange:

Fiscal Year Ended April 30, 2018

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended April 30, 2017

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High

Low

$
$
$
$

$
$
$
$

36.07
42.34
45.26
55.45

30.78
24.85
31.53
33.14

$
$
$
$

$
$
$
$

31.19
31.53
39.93
38.53

18.57
19.94
19.95
27.47

On June 21, 2018, the last reported sales price on the New York Stock Exchange for the Company’s common
stock, was $63.94 per share and there were approximately 18,525 beneficial stockholders of the Company’s
common stock.

Performance Graph

We have presented below a graph comparing the cumulative total stockholder return on the Company’s shares
with the cumulative total stockholder return 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 the performance graph is
measured assuming an initial investment of $100 on April 30, 2013 and the reinvestment of any dividends paid by
the Company and any company in the peer group on the date the dividends were paid.

Our peer group is comprised of a broad number of publicly traded companies, which are principally or in significant
part involved in either professional staffing or consulting. The peer group is comprised of the following 14
companies: CBIZ, Inc. (CBZ), FTI Consulting, Inc. (FCN), Heidrick & Struggles International, Inc. (HSII), Huron
Consulting Group Inc. (HURN), ICF International, 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 Dun & Bradstreet Corporation (DNB), Willis Towers Watson (WLTW) and TrueBlue,
Inc. (TBI). We believe this group of professional services firms, is reflective of similar sized companies in terms of
our market capitalization, revenue or profitability, and therefore provides a more meaningful comparison of stock
performance. The returns of each company have been weighted according to their respective stock market
capitalization at the beginning of each measurement period for purposes of arriving at a peer group average.

The stock price performance depicted in this graph is not necessarily indicative of future price performance. This
graph will not be deemed to be incorporated by reference by any general statement incorporating this Annual
Report on Form 10-K into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed
soliciting material or deemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

28

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(*)

Among Korn/Ferry International, the S&P 500 Index, and a Peer Group

$400
$350
$300
$250
$200
$150
$100
$50
$0

4/13 7/13 10/13 1/14 4/14 7/14 10/14 1/15 4/15 7/15 10/15 1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18

Korn/Ferry International

S&P 500

Peer Group

Copyright© 2018 Standard & Poor’s, a division of S&P Global. All rights reserved.

(*)

$100 invested on April 30, 2013 in stock or index, including reinvestment of dividends. Fiscal year ended April 30, 2018.

Capital Allocation Approach

The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s first
priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and
derivative products and services, and the investment in synergistic accretive M&A transactions that earn a return
superior to the Company’s cost of capital. Next, the Company’s capital allocation approach contemplates the
planned return of a portion of excess capital to stockholders, in the form of a regular quarterly dividend, subject to
the factors discussed below under “Dividends” and in more detail in the “Risk Factors” section of this Annual
Report on Form 10-K. Additionally, the Company considers share repurchases on an opportunistic basis and
subject to the terms of our credit agreement.

Dividends

On December 8, 2014, the Board of Directors adopted a dividend policy, reflecting an intention to distribute to our
stockholders a regular quarterly cash dividend of $0.10 per share. In fiscal 2017, the Board of Directors declared
the following dividends:

Declaration Date

Dividend Per Share

Record Date

June 15, 2016

September 7, 2016

December 6, 2016

March 6, 2017

$0.10

$0.10

$0.10

$0.10

June 27, 2016

September 26, 2016

December 20, 2016

March 23, 2017

Total Amount
(in thousands)

$5,909

$5,841

$5,796

$5,772

Payment Date

July 15, 2016

October 14, 2016

January 17, 2017

April 14, 2017

29

In fiscal 2018, the Board of Directors declared the following dividends:

Declaration Date

Dividend Per Share

Record Date

June 20, 2017

September 5, 2017

December 6, 2017

March 5, 2018

$0.10

$0.10

$0.10

$0.10

June 30, 2017

September 27, 2017

December 20, 2017

March 26, 2018

Total Amount
(in thousands)

$5,823

$5,714

$5,705

$5,713

Payment Date

July 14, 2017

October 13, 2017

January 12, 2018

April 13, 2018

The declaration and payment 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 of Directors may
deem to be relevant. The Board of Directors may amend, revoke or suspend the dividend policy at any time and
for any reason.

Our senior secured revolving credit agreement, dated June 15, 2016, permits us to pay dividends to our
stockholders and make share repurchases so long as our pro forma leverage ratio, defined as, the ratio of
consolidated funded indebtedness to consolidated Adjusted EBITDA, is no greater than 2.50 to 1.00, and our pro
forma domestic liquidity is at least $50.0 million.

Stock Repurchase Program

On December 8, 2014, the Board of Directors 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 market conditions and other factors.
During the second quarter of fiscal 2017, the Company began to repurchase shares through this program. The
Company repurchased approximately $33.1 million and $28.8 million of the Company’s common stock during
fiscal 2018 and 2017, respectively. Any decision to execute on our stock repurchase program will depend on our
earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors.
Our credit agreement permits us to pay dividends to our stockholders and make share repurchases so long as our
pro forma leverage ratio is no greater than 2.50 to 1.00, and our pro forma domestic liquidity is at least
$50.0 million, including undrawn amounts on our revolving credit facility.

Issuer Purchases of Equity Securities

The following table summarizes common stock repurchased by us during the fourth quarter of fiscal 2018:

Shares
Purchased (1)

Average
Price Paid
Per Share

February 1, 2018 — February 28, 2018 . . . . . . . . . . . . . .
March 1, 2018 — March 31, 2018 . . . . . . . . . . . . . . . . . .
April 1, 2018 — April 30, 2018 . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $
$
$

2,168
10,897

13,065

$

—
41.85
50.46

49.04

Approximate
Dollar Value of
Shares that
May Yet be
Purchased
under the
Programs (2)

$88.6 million
$88.6 million
$88.1 million

Shares
Purchased
as Part of
Publicly-
Announced
Programs (2)

—
—
10,000

10,000

(1) Represents withholding of a portion of restricted shares to cover taxes on vested restricted shares and shares purchased as

part of our publicly announced programs.

(2) On December 8, 2014, the Board of Directors 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. We repurchased approximately $0.5 million of the Company’s common stock
under the program during the fourth quarter of fiscal 2018.

30

Item 6. Selected Financial Data

The following selected financial data are qualified by reference to, and should be read together with, our “Audited
Consolidated Financial Statements and Notes to Consolidated Financial Statements” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual
Report on Form 10-K. The selected statements of income data set forth below for the fiscal years ended April 30,
2018, 2017 and 2016 and the selected balance sheets data as of April 30, 2018 and 2017 are derived from our
audited consolidated financial statements, appearing elsewhere in this Annual Report on Form 10-K. The selected
balance sheets data as of April 30, 2016, 2015 and 2014 and the selected statements of income data set forth
below for the fiscal years ended April 30, 2015 and 2014 are derived from audited consolidated financial
statements and notes thereto which are not included in this Annual Report on Form 10-K.

Year Ended April 30,

2018

2017

2016 (1)

2015 (2)

2014

(in thousands, except per share data and other operating data)

Selected Consolidated Statements of Income Data:
Fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,767,217 $ 1,565,521 $ 1,292,112 $ 1,028,152 $
Reimbursed out-of-pocket engagement expenses . . . .

37,914

52,302

54,602

56,148

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . .
Reimbursed expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net (3) . . . . . . . . . . . . . . . . . . . . .

1,819,519
1,203,619
237,390
52,302
73,658
48,588
78

1,621,669
1,071,507
226,232
56,148
71,482
47,260
34,600

1,346,714
897,345
213,018
54,602
59,824
36,220
33,013

1,066,066
691,450
145,917
37,914
39,692
27,597
9,468

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . .

1,615,635

1,507,229

1,294,022

952,038

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest (expense) income, net
. . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated subsidiaries,

net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
Net income attributable to noncontrolling interest

203,884
11,525
(9,676)

297
70,133

135,897
(2,118)

114,440
11,820
(10,251)

333
29,104

87,238
(3,057)

52,692
(4,167)
237

1,631
18,960

31,433
(520)

114,028
7,458
(1,784)

2,181
33,526

88,357
—

960,301
35,258

995,559
646,889
152,040
35,258
39,910
26,172
3,682

903,951

91,608
9,769
(2,363)

2,169
28,492

72,691
—

Net income attributable to Korn/Ferry International . . . . $

133,779 $

84,181 $

30,913 $

88,357 $

72,691

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $
Basic weighted average common shares

2.39 $
2.35 $

1.48 $
1.47 $

0.58 $
0.58 $

1.78 $
1.76 $

1.51
1.48

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,426

56,205

52,372

49,052

48,162

Diluted weighted average common shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per common share . . . . . . . . . $
Other Operating Data:
Fee revenue by business segment:
Executive search:

56,254

56,900

52,929

49,766

0.40 $

0.40 $

0.40 $

0.10 $

49,145
—

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

408,098 $
173,725
96,595
30,624

356,625 $
146,506
80,169
34,376

371,345 $
144,319
80,506
26,744

330,634 $
153,465
84,148
29,160

Total executive search . . . . . . . . . . . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

709,042
785,013
273,162

617,676
724,186
223,659

622,914
471,145
198,053

597,407
267,018
163,727

306,768
147,917
84,816
29,374

568,875
254,636
136,790

Total fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,767,217 $ 1,565,521 $ 1,292,112 $ 1,028,152 $

960,301

31

Number of offices (at period end) (4)
. . . . . . . . . . . . . . .
Number of consultants (at period end) . . . . . . . . . . . . . .
Number of new engagements opened . . . . . . . . . . . . . .
Number of full-time employees:

Executive search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total full-time employees . . . . . . . . . . . . . . . . . . . . .

Selected Consolidated Balance Sheets Data as of

April 30:

Year Ended April 30,

2018

2017

2016 (1)

2015 (2)

2014

(in thousands, except per share data and other operating data)

106
1,392
9,307

1,865
3,454
2,188
136

7,643

114
1,330
8,126

1,791
3,598
1,710
133

7,232

150
1,164
7,430

1,682
3,626
1,530
109

6,947

78
694
6,755

1,562
894
1,147
84

3,687

84
646
6,483

1,566
794
958
78

3,396

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $
Marketable securities (5) . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .

520,848 $
137,085
455,799
2,287,914
509,839
1,219,615

410,882 $
119,937
385,095
2,062,898
517,271
1,087,048

273,252 $
141,430
188,010
1,898,600
375,035
1,047,301

380,838 $
144,576
331,148
1,317,801
196,542
815,249

333,717
134,559
270,535
1,233,666
191,197
755,536

(1) Due to the acquisition of Legacy Hay on December 1, 2015, which accounted for $186.8 million and $740.2 million of fee
revenue and total assets, respectively, during fiscal 2016, financial data trends for fiscal 2016 are not comparable to prior
periods. See Note 12—Acquisitions, in the Notes to our Consolidated Financial Statements in this Annual Report on Form
10-K for discussion of fiscal 2016 acquisitions.

(2) Due to the acquisition of Pivot Leadership on March 1, 2015, which accounted for $3.7 million and $20.0 million of fee

revenue and total assets, respectively, during fiscal 2015, financial data trends for fiscal 2015 are not comparable to the
prior period.

(3) During fiscal 2018 and 2017, the Company continued to implement the fiscal 2016 restructuring plan in order to integrate
the Hay Group entities that were acquired in fiscal 2016 by eliminating redundant positions and operational, general and
administrative expenses and consolidating office space. This resulted in restructuring charges of $0.1 million and
$34.6 million in fiscal 2018 and 2017, respectively. Of the amount recorded in restructuring charges in fiscal 2017,
$16.0 million related to severance and $18.6 million related to consolidation of office spaces. In fiscal 2016, the Company
implemented a restructuring plan in order to rationalize its cost structure by eliminating redundant positions and
consolidating office space due to the acquisition of Legacy Hay on December 1, 2015. As a result, we recorded
$33.0 million in restructuring charges, of which $32.1 million related to severance and $0.9 million related to consolidation
and abandonment of premises. In fiscal 2015, the Company took actions to rationalize its cost structure as a result of
efficiencies obtained from prior year technology investments that enabled further integration of the legacy business and the
acquisitions (PDI and Global Novations), as well as other cost saving initiatives. As a result, we recorded $9.2 million of
severance and $0.3 million relating to the consolidation/abandonment of premises. In fiscal 2014, the Company continued
the implementation of the fiscal 2013 restructuring plan in order to integrate the prior year acquisitions by consolidating and
eliminating certain redundant office space around the world and by continuing to consolidate certain overhead functions. As
a result, we recorded $0.8 million of severance and $2.9 million related to the consolidation of premises.

(4) The number of offices decreased by eight as of April 30, 2018 compared to April 30, 2017 and 36 as of April 30, 2017

compared to April 30, 2016, due to the continued implementation of the 2016 restructuring plan.

(5) As of April 30, 2018, 2017, 2016, 2015, and 2014, the Company’s marketable securities included $137.1 million,

$119.9 million, $141.4 million, $131.4 million, and $116.2 million, respectively, held in trust for settlement of the Company’s
obligations under certain of its deferred compensation plans. See Note 5—Financial Instruments in the Notes to the
Consolidated Financial Statements in this Annual Report on Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

This 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, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking

32

statements generally can be identified by use of statements that include phrases such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “foresee,” “may,” “will,” “likely,” “estimates,” “potential,” “continue” or other similar
words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking
statements. All of these forward-looking statements are subject to risks and uncertainties that could cause our
actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal
risk factors that could cause actual performance and future actions to differ materially from the forward-looking
statements include, but are not limited to, changes in demand for our services as a result of automation,
dependence on attracting and retaining qualified and experienced consultants, maintaining our relationships with
customers and suppliers and retaining key employees, maintaining our brand name and professional reputation,
the expected timing of the consummation of the Plan and the KF Merger, the impact of the rebranding on the
Company’s products and services, the costs of the Plan and the KF Merger, potential legal liability and regulatory
developments, portability of client relationships, global and local political or economic developments in or affecting
countries where we have operations, currency fluctuations in our international operations, risks related to growth,
restrictions imposed by off-limits agreements, competition, consolidation in industries, reliance on information
processing systems, cyber security vulnerabilities, changes to data security, data privacy, and data protection
laws, limited protection of our IP, our ability to enhance and develop new technology, our ability to successfully
recover from a disaster or business continuity problems, employment liability risk, an impairment in the carrying
value of goodwill and other intangible assets, the effects of the Tax Cuts and Jobs Act (the “Tax Act”) on our
business and our company, deferred tax assets that we may not be able to use, our ability to develop new
products and services, changes in our accounting estimates and assumptions, alignment of our cost structure,
risks related to the integration of recently acquired businesses, the utilization and billing rates of our consultants,
seasonality and the matters disclosed under the heading “Risk Factors” in the Company’s Exchange Act reports,
including Item 1A included in this Annual Report on Form 10-K. Readers are urged to consider these factors
carefully in evaluating the forward-looking statements. The forward-looking statements included in this Annual
Report on Form 10-K are made only as of the date of this Annual Report on Form 10-K and we undertake no
obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

The following presentation of management’s discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements and related notes included in this
Annual Report on Form 10-K.

Executive Summary

Korn/Ferry International (referred to herein as the “Company,” “Korn Ferry,” or in the first person notations “we,”
“our,” and “us”) is a global organizational consulting firm. Our services include Executive Search, advisory
solutions and products through Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”)
which was combined with HG (Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015) and recruitment for
non-executive professionals and recruitment process outsourcing (“RPO”) through Futurestep. The Company also
operates a Corporate segment to record global expenses of the Company. Approximately 69% of the executive
searches we performed in fiscal 2018 were for board level, chief executive and other senior executive and general
management positions. Our 3,773 search engagement clients in fiscal 2018 included many of the world’s largest
and most prestigious public and private companies. We have built strong client loyalty, with 88% of assignments
performed during fiscal 2018 having been on behalf of clients for whom we had conducted assignments in the
previous three fiscal years. Approximately 62% of our revenues were generated from clients that utilize multiple
lines of business.

33

Superior performance comes from having the right conditions for success in two key areas—the organization and
its people. Organizational conditions encourage people to put forth their best effort and invest their energy towards
achieving the organization’s purpose. We can help operationalize a client’s complete strategy or address any
combination of five broad categories:

Organizational Strategy

Assessment and Succession

Talent Acquisition

Leadership Development

Rewards and Benefits

We map talent strategy to business strategy by designing operating models and
organizational structures that align to them, helping organizations put their plans into
action. We make sure they have the right people, in the right roles, engaged and
enabled to do the right things.

We provide actionable, research-backed insights that allow organizations to
understand the true capabilities of their people so they can make decisions that
ensure the right leaders are ready—when and where they are needed—in the future.

From executive search to recruitment process outsourcing, we integrate scientific
research with our practical experience and industry-specific expertise to recruit
professionals of all levels and functions for client organizations.

We activate purpose, vision and strategy through leaders at all levels and
organizations. We combine expertise, science and proven techniques with forward
thinking and creativity to build leadership experiences that help entry- to senior-level
leaders grow and deliver superior results.

We help organizations align reward with strategy. We help them pay their people
fairly for doing the right things—with rewards they value—at a cost the organization
can afford.

The Company currently operates through three business segments: Executive Search, Hay Group and Futurestep.
See Note 11—Business Segments, in the Notes to our Consolidated Financial Statements in this Annual Report on
Form 10-K, for discussion of the Company’s global business segments. The Company evaluates performance and
allocates resources based on the chief operating decision maker’s review of (1) fee revenue and (2) adjusted
earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). To the extent that such charges
occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and
certain non-cash charges (goodwill, intangible asset and other than temporary impairment). For fiscal 2017 and
2016, Adjusted EBITDA includes a deferred revenue adjustment related to the Legacy Hay acquisition, reflecting
revenue that Hay Group would have realized if not for business combination accounting that requires a company to
record the acquisition balance sheet at fair value and write-off deferred revenue where no future services are
required to be performed to earn that revenue. For fiscal 2018, management no longer has adjusted fee revenue.

EBITDA and Adjusted EBITDA are non-GAAP financial measures. They have limitations as analytical tools, should
not be viewed as a substitute for financial information determined in accordance with United States (“U.S.”)
generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for
analysis of the Company’s results as reported under GAAP. In addition, they may not necessarily be comparable
to non-GAAP performance measures that may be presented by other companies.

Management believes the presentation of these non-GAAP financial measures provides meaningful supplemental
information regarding Korn Ferry’s performance by excluding certain charges, items of income and other items that
may not be indicative of Korn Ferry’s ongoing operating results. The use of these non-GAAP financial measures
facilitates comparisons to Korn Ferry’s historical performance and identification of operating trends that may
otherwise be distorted by certain charges and other items that may not be indicative of Korn Ferry’s ongoing
operating results. Korn Ferry includes these non-GAAP financial measures because management believes it is
useful to investors in allowing for greater transparency with respect to supplemental information used by
management in its evaluation of Korn Ferry’s ongoing operations and financial and operational decision-making.
The accounting policies for the reportable segments are the same as those described in the summary of significant
accounting policies in the accompanying consolidated financial statements, except that the above noted items are
excluded from EBITDA to arrive at Adjusted EBITDA. Management further believes that EBITDA is useful to
investors because it is frequently used by investors and other interested parties to measure operating performance
among companies with different capital structures, effective tax rates and tax attributes and capitalized asset
values, all of which can vary substantially from company to company.

34

Similarly, adjusted fee revenue, which includes revenue that Hay Group would have realized over the ensuing year
after the acquisition if not for business combination accounting that requires a company to record the acquisition
balance sheet at fair value and write-off deferred revenue where no future services are required to be performed to
earn that revenue, is a non-GAAP financial measure. Adjusted fee revenue is not a measure that substitutes an
individually tailored revenue recognition or measurement method for those of GAAP; rather, it is an adjustment for
a short period of time that will provide better comparability in the current and future periods. Management believes
the presentation of adjusted fee revenue assists management in its evaluation of ongoing operations and provides
useful information to investors because it allows investors to make more meaningful period-to-period comparisons
of the Company’s operating results, to better identify operating trends that may otherwise be distorted by write-offs
required under business combination accounting and to perform related trend analysis and provides a higher
degree of transparency of information used by management in its evaluation of Korn Ferry’s ongoing operations
and financial and operational decision-making.

Fee revenue was $1,767.2 million during fiscal 2018, an increase of $201.7 million, or 13%, compared to
$1,565.5 million in fiscal 2017, with increases in fee revenue in all business segments. During fiscal 2018, we
recorded operating income of $203.9 million with Executive Search, Hay Group and Futurestep segments
contributing $149.3 million, $100.9 million and $39.4 million, respectively, offset by Corporate expenses of
$85.7 million. Net income attributable to Korn Ferry increased $49.6 million during fiscal 2018 to $133.8 million
from $84.2 million in fiscal 2017. Adjusted EBITDA was $273.8 million, an increase of $38.8 million during fiscal
2018, from Adjusted EBITDA of $235.0 million in the year-ago period. During fiscal 2018, Executive Search, Hay
Group and Futurestep segments contributed $158.9 million, $142.0 million and $42.6 million, respectively, offset
by Corporate expenses net of other income of $69.7 million.

Our cash, cash equivalents and marketable securities increased $127.1 million to $657.9 million at April 30, 2018,
compared to $530.8 million at April 30, 2017. This increase was mainly due to cash provided by operating
activities, offset by bonuses earned in fiscal 2017 and paid during fiscal 2018, sign-on and retention payments,
stock repurchases in the open market, payments for the purchase of property and equipment, dividends paid
during fiscal 2018 and principal payments on our term loan. As of April 30, 2018, we held marketable securities to
settle obligations under our Executive Capital Accumulation Plan (“ECAP”) with a cost value of $127.1 million and
a fair value of $137.1 million. Our vested obligations for which these assets were held in trust totaled
$118.2 million as of April 30, 2018 and our unvested obligations totaled $29.5 million.

Our working capital increased by $70.7 million to $455.8 million in fiscal 2018. We believe that cash on hand and
funds from operations and other forms of liquidity will be sufficient to meet our anticipated working capital, capital
expenditures, general corporate requirements, repayment of the debt obligations incurred in connection with the
Legacy Hay acquisition, the retention pool obligations pursuant to the Legacy Hay acquisition and dividend
payments under our dividend policy in the next twelve months. We had no outstanding borrowings under our
revolving credit facility at April 30, 2018 and 2017. As of April 30, 2018 and 2017, there was $2.9 million and
$3.0 million, respectively, of standby letters of credit issued under our long-term debt arrangements. We had a
total of $7.4 million and $8.1 million of standby letters of credits with other financial institutions as of April 30, 2018
and 2017, respectively.

On June 12, 2018, the Company’s Board of Directors approved a plan (the “Plan”) to go to market under a single,
master brand architecture and to simplify the Company’s organizational structure by eliminating and/or
consolidating certain of the Company’s legal entities and implementing a rebranding of the Company to offer the
Company’s current products and services using the “Korn Ferry” name, branding and trademarks. In connection
with the Plan, the Company intends to sunset all sub-brands, including Futurestep, Hay Group and Lominger,
among others. The Company is harmonizing under one brand to help accelerate the firm’s positioning as the
preeminent organizational consultancy and bring more client awareness to its broad range of talent management
solutions. The Hay Group back office was fully integrated as of the beginning of fiscal 2018 and the Company then
focused on its integrated go-to-market activities. This integrated go-to-market approach was a key driver in the
13% fee revenue growth in fiscal 2018, which led to the decision to further integrate our go-to-market activities
under one master brand – Korn Ferry. In the near term the Company will discontinue the use of all sub-brands.
While the rebranding will not impact the Company’s segment financial reporting, starting in the first quarter of fiscal

35

2019, the Company will rename its Hay Group segment as “Korn Ferry Advisory“ and its Futurestep segment as
“Korn Ferry RPO and Professional Search.” The Company’s Executive Search segment will remain unchanged. In
connection with the Plan, the Company also intends to pursue a holding company reorganization which is
discussed in further detail in Item 1. Business in this Annual Report on Form 10-K.

Critical Accounting Policies

The 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 of contingent assets and
liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates and assumptions and changes in the estimates
are reported in current operations as new information is learned or upon the amounts becoming fixed and
determinable. In preparing our consolidated financial statements and accounting for the underlying transactions
and balances, we apply our accounting policies as disclosed in the notes to our consolidated financial statements.
We consider the policies discussed below as critical to an understanding of our consolidated financial statements
because their application places the most significant demands on management’s judgment and estimates. Specific
risks for these critical accounting policies are described in the following paragraphs. Senior management has
discussed the development, selection and key assumptions of the critical accounting estimates with the Audit
Committee of the Board of Directors.

Revenue Recognition. Substantially all fee revenue is derived from fees for professional services related to
executive search performed on a retained basis, recruitment for non-executive professionals, recruitment process
outsourcing, people and organizational advisory services and the sale of product services. Fee revenue from
executive search activities and recruitment for non-executive professionals is generally one-third of the estimated
first year compensation of the placed executive or non-executive professional, as applicable, plus a percentage of
the fee to cover indirect engagement related expenses. We generally recognize such revenue on a straight-line
basis over a three-month period, commencing upon client acceptance, as this is the period over which the
recruitment services are performed. Fees earned in excess of the initial contract amount are recognized upon
completion of the engagement, which reflect the difference between the final actual compensation of the placed
executive and the estimate used for purposes of the previous billings. Since the initial contract fees are typically
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. Any revenues associated with services that are provided on a contingent basis are
recognized once the contingency is resolved. In addition to recruitment for non-executive professionals, Futurestep
provides recruitment process outsourcing services and fee revenue is recognized as services are rendered and/or
as milestones are achieved. Fee revenue from Hay Group is recognized as services are rendered for consulting
engagements and other time-based services, measured by total hours incurred to the total estimated hours at
completion. It is possible that 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, we accrue or defer revenue as appropriate. Hay Group revenue is also derived from the sale of
product services, which includes revenue from licenses and from the sale of products. Revenue from licenses is
recognized using a straight-line method over the term of the contract (generally 12 months). Under the fixed term
licenses, we are obligated to provide the licensee with access to any updates to the underlying intellectual property
(“IP”) that are made by us during the term of the license. Once the term of the agreement expires, the client’s right
to access or use the IP expires and we have no further obligations to the client under the license agreement.
Revenue from perpetual licenses is recognized when the license is sold since our only obligation is to provide the
client access to the IP but is not obligated to provide maintenance, support, updates or upgrades. Products sold by
us mainly consist of books and automated services covering a variety of topics including performance
management, team effectiveness, and coaching and development. We recognize revenue for products when the
product has been sold or shipped in the case of books. Furthermore, a provision for doubtful accounts on
recognized revenue is established with a charge to general and administrative expenses based on historical loss
experience, assessment of the collectability of specific accounts, as well as expectations of future collections
based upon trends and the type of work for which services are rendered.

36

Annual Performance Related Bonuses. 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 other performance/profitability metrics for Hay Group and Futurestep consultants), the level of engagements
referred by a consultant in one line of business to a different line of business, our performance including
profitability, competitive forces and future economic conditions and their impact on our results. At the end of each
fiscal year, annual performance related bonuses take into account final individual consultant productivity (including
referred work), Company/line of business results including profitability, the achievement of strategic objectives and
the results of individual performance appraisals, and the current economic landscape. Accordingly, each quarter
we reevaluate the assumptions used to estimate annual performance related bonus liability and adjust the carrying
amount of the liability recorded on the consolidated balance sheets and report any changes in the estimate in
current operations. Because annual performance-based bonuses are communicated and paid only after we report
our full fiscal year results, actual performance-based bonus payments may differ from the prior year’s estimate.
Such changes in the bonus estimate historically have been immaterial and are recorded 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 to participants and the discount rate. Changes in these assumptions could
significantly impact the liability and related cost on our consolidated balance sheets and statements of income,
respectively. For certain deferred compensation plans, management engages an independent actuary to
periodically review these assumptions in order to confirm that they reflect the population and economics of our
deferred compensation plans in all material respects and to assist us in estimating our deferred compensation
liability and the related cost. The actuarial assumptions we use may differ from actual results due to changing
market conditions or changes in the participant population. These differences could have a significant impact on
our deferred compensation liability and the related cost.

Carrying Values. Valuations are required under GAAP to determine the carrying value of various assets. Our most
significant assets for which management is required to prepare valuations are carrying value of receivables,
goodwill, intangible assets, fair value of contingent consideration and recoverability of deferred income taxes.
Management must identify whether events have occurred that may impact the carrying value of these assets and
make assumptions regarding future events, such as cash flows and profitability. Differences between the
assumptions used to prepare these valuations and actual results could materially impact the carrying amount of
these assets and our operating results.

Of the assets mentioned above, goodwill is the largest asset requiring a valuation. Fair value of goodwill for
purposes of the goodwill impairment test is determined utilizing (1) a discounted cash flow analysis based on
forecasted cash flows (including estimated underlying revenue and operating income growth rates) discounted
using an estimated weighted-average cost of capital for market participants and (2) a market approach, utilizing
observable market data such as 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). We also reconcile 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 goodwill impairment in conjunction with our annual goodwill impairment assessment
performed as of January 31, 2018. While historical performance and current expectations 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
an impairment 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 charge would 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 predictions of 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 the impairment test. As a result, no
impairment charge was recognized. There was also no indication of potential impairment during the fourth quarter
of fiscal 2018 that would have required further testing.

37

Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key
assumptions and ultimately impact the estimated 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 Operations

The following table summarizes the results of our operations as a percentage of fee revenue:

Year Ended April 30,

2018

2017

2016

Fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursed out-of-pocket engagement expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100.0%
3.0

100.0%
3.6

100.0%
4.2

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursed expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to Korn/Ferry International

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

103.0
68.1
13.4
3.0
4.2
2.8
—

11.5

7.7%

7.6%

103.6
68.4
14.5
3.6
4.6
3.0
2.2

104.2
69.4
16.5
4.2
4.6
2.8
2.6

7.3

5.6%

5.4%

4.1

2.4%

2.4%

The following tables summarize the results of our operations by business segment:

(Numbers may not total exactly due to rounding)

Year Ended April 30,

2018

2017

2016

Dollars

%

Dollars

%

Dollars

%

(dollars in thousands)

Fee revenue
Executive Search:

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 408,098
173,725
96,595
30,624

23.1% $ 356,625
146,506
80,169
34,376

9.8
5.5
1.7

22.8% $ 371,345
144,319
80,506
26,744

9.4
5.1
2.2

Total Executive Search . . . . . . . . . . . . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

709,042
785,013
273,162

40.1
44.4
15.5

617,676
724,186
223,659

39.5
46.3
14.3

622,914
471,145
198,053

28.7%
11.2
6.2
2.1

48.2
36.5
15.3

Total fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,767,217

100.0% 1,565,521

100.0% 1,292,112

100.0%

Reimbursed out-of-pocket engagement expense . . . . . . . .

52,302

56,148

54,602

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,819,519

$1,621,669

$1,346,714

38

Year Ended April 30,

2018

2017

2016

Dollars

Margin(1)

Dollars

Margin(1)

Dollars

Margin(1)

(dollars in thousands)

Operating income (loss)
Executive Search:

North America . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . .

$ 100,037
26,768
18,425
4,022

Total Executive Search . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

149,252
100,939
39,363
(85,670)

24.5% $ 81,550
27,854
15.4
8,580
19.1
6,268
13.1

21.0
12.9
14.4

124,252
47,302
29,986
(87,100)

22.9% $ 100,381
20,607
19.0
12,572
10.7
(1,854)
18.2

20.1
6.5
13.4

131,706
(3,415)
26,702
(102,301)

27.0%
14.3
15.6
(6.9)

21.1
(0.7)
13.5

Total operating income . . . . . . . . . . . . .

$ 203,884

11.5% $ 114,440

7.3% $ 52,692

4.1%

(1) Margin calculated as a percentage of fee revenue by business segment.

Year Ended April 30, 2018

Executive Search

North
America

EMEA

Asia
Pacific

Latin
America

Subtotal Hay Group

Futurestep Corporate Consolidated

(in thousands)

Fee revenue . . . . . . . . .
Total revenue . . . . . . . .

$408,098
$421,260

$173,725
$177,234

$96,595
$98,062

$30,624
$30,717

$709,042
$727,273

$785,013
$801,005

$273,162
$291,241

$
$

— $
— $

1,767,217
1,819,519

Net income attributable

to Korn/Ferry
International

. . . . . . .
Net income attributable
to noncontrolling
interest

. . . . . . . . . . .
. . . .

Other income, net
Interest expense,

net . . . . . . . . . . . . . . .

Equity in earnings of
unconsolidated
subsidiaries, net . . . .
Income tax provision . .

Operating income

$

133,779

2,118
(11,525)

9,676

(297)
70,133

(loss) . . . . . . . . . . . . .

$100,037

$ 26,768

$18,425

$ 4,022

$149,252

$100,939

$ 39,363

$ (85,670) $

203,884

Depreciation and

amortization . . . . . . .
. . . .

Other income, net
Equity in earnings of
unconsolidated
subsidiaries, net . . . .

3,930
845

1,689
168

1,408
373

455
181

7,482
1,567

31,527
599

3,054
152

6,525
9,207

48,588
11,525

297

—

—

—

297

—

—

—

297

EBITDA . . . . . . . . . . . . .

105,109

28,625

20,206

4,658

158,598

133,065

42,569

(69,938)

264,294

Restructuring charges,

net . . . . . . . . . . . . . . .

Integration/acquisition

costs . . . . . . . . . . . . .

—

—

—

—

313

—

—

—

313

—

(241)

9,151

6

—

—

279

78

9,430

Adjusted EBITDA . . . . .

$105,109

$ 28,625

$20,519

$ 4,658

$158,911

$141,975

$ 42,575

$(69,659)

$

273,802

Operating margin . . . . .

24.5%

15.4%

19.1%

13.1%

21.0%

12.9%

14.4%

Adjusted EBITDA

margin . . . . . . . . . . . .

25.8%

16.5%

21.2%

15.2%

22.4%

18.1%

15.6%

11.5%

15.5%

39

Year Ended April 30, 2017

Executive Search

North
America

EMEA

Asia
Pacific

Latin
America

Subtotal

Hay Group

Futurestep Corporate Consolidated

(in thousands)

Fee revenue . . . . . . . . . $ 356,625 $ 146,506 $ 80,169 $
Deferred revenue

34,376 $ 617,676 $ 724,186 $

223,659 $

— $ 1,565,521

adjustment due to
acquisition . . . . . . . . .

—

—

—

—

—

3,535

—

—

3,535

Adjusted fee revenue . . $ 356,625 $ 146,506 $ 80,169 $

34,376 $ 617,676 $ 727,721 $

223,659 $

— $ 1,569,056

Total revenue . . . . . . . . $ 369,803 $ 150,113 $ 81,744 $

34,533 $ 636,193 $ 741,533 $

243,943 $

— $ 1,621,669

Net income attributable

to Korn/Ferry
International . . . . . . . .

Net income attributable
to noncontrolling
interest . . . . . . . . . . . .
Other income, net . . . . .
Interest expense, net
. .
Equity in earnings of
unconsolidated
subsidiaries, net

. . . .
Income tax provision . . .

Operating income

$

84,181

3,057
(11,820)
10,251

(333)
29,104

(loss) . . . . . . . . . . . . . . $

81,550 $

27,854 $

8,580 $

6,268 $ 124,252 $

47,302 $

29,986 $ (87,100) $

114,440

Depreciation and

amortization . . . . . . . .

3,812

1,030

1,060

Other income (loss),

net . . . . . . . . . . . . . . . .

844

(15)

300

483

684

6,385

32,262

2,818

5,795

47,260

1,813

341

(91)

9,757

11,820

Equity in earnings of
unconsolidated
subsidiaries, net

. . . .

333

—

—

—

333

—

—

—

333

EBITDA . . . . . . . . . . . . .

86,539

28,869

9,940

7,435

132,783

79,905

32,713

(71,548)

173,853

Restructuring charges,

net . . . . . . . . . . . . . . . .

1,719

629

1,495

773

4,616

29,663

101

220

34,600

Integration/acquisition

costs . . . . . . . . . . . . . .

Deferred revenue

adjustment due to
acquisition . . . . . . . . .
Separation costs . . . . . .

—

—
—

—

—
—

—

—
—

—

—
—

—

—
—

14,440

3,535
609

—

—
—

7,939

22,379

—
—

3,535
609

Adjusted EBITDA . . . . . $

88,258 $

29,498 $ 11,435 $

8,208 $ 137,399 $ 128,152 $

32,814 $ (63,389) $

234,976

Operating margin . . . . .

22.9%

19.0%

10.7%

18.2%

20.1%

6.5%

13.4%

Adjusted EBITDA

margin . . . . . . . . . . . .

24.7%

20.1%

14.3%

23.9%

22.2%

17.6%

14.7%

7.3%

15.0%

40

Executive Search

North
America

EMEA

Asia
Pacific

Latin
America

Subtotal

Hay Group

Futurestep Corporate Consolidated

Year Ended April 30, 2016

Fee revenue . . . . . . . . . $ 371,345 $ 144,319 $ 80,506 $
Deferred revenue

(in thousands)

26,744

$ 622,914 $ 471,145

$

198,053 $

— $

1,292,112

adjustment due to
acquisition . . . . . . . . .

Adjusted fee

—

—

—

—

—

10,967

—

—

10,967

revenue . . . . . . . . . . . $ 371,345 $ 144,319 $ 80,506 $

26,744

$ 622,914 $ 482,112

Total revenue . . . . . . . . $ 386,256 $ 148,285 $ 83,206 $

26,781

$ 644,528 $ 488,217

$

$

198,053 $

— $

1,303,079

213,969 $

— $

1,346,714

Net income attributable

to Korn/Ferry
International

. . . . . . .
Net income attributable
to noncontrolling
interest . . . . . . . . . . . .
. . . . . . .
. . .

Other loss, net
Interest income, net
Equity in earnings of
unconsolidated
subsidiaries, net

. . . .
Income tax provision . .

$

30,913

520
4,167
(237)

(1,631)
18,960

Operating income

(loss) . . . . . . . . . . . . . $ 100,381 $

20,607 $ 12,572 $

(1,854) $ 131,706 $

(3,415) $

26,702 $ (102,301) $

52,692

(147)

433

941

21

312

312

5,549

21,854

2,386

6,431

36,220

619

(868)

364

(4,282)

(4,167)

Depreciation and

amortization . . . . . . . .

3,267

1,029

Other (loss) income,

net

. . . . . . . . . . . . . . .

Equity in earnings of
unconsolidated
subsidiaries, net

. . . .

1,631

86,376

437

—

—

—

437

—

—

1,194

EBITDA . . . . . . . . . . . . .

103,938

22,069

13,534

(1,230)

138,311

17,571

29,452

(98,958)

Restructuring charges,

net

. . . . . . . . . . . . . . .

Integration/acquisition

costs . . . . . . . . . . . . .

Venezuelan foreign

currency loss . . . . . . .

Deferred revenue

adjustment due to
acquisition . . . . . . . . .
Separation costs . . . . . .

499

5,807

577

—

—

—
—

—

—

—
—

—

—

—
—

322

—

7,205

25,682

—

17,607

6,635

6,635

7,085

—
—

—
—

10,967
—

49

—

—

—
—

77

33,013

27,802

45,409

—

13,720

—
744

10,967
744

Adjusted EBITDA . . . . . $ 104,437 $

27,876 $ 14,111 $

5,727

$ 152,151 $

78,912

$

29,501 $

(70,335) $

190,229

Operating margin . . . . .

27.0%

14.3%

15.6%

(6.9)%

21.1%

(0.7)%

13.5%

Adjusted EBITDA

margin . . . . . . . . . . . .

28.1%

19.3%

17.5%

21.4%

24.4%

16.4%

14.9%

4.1%

14.6%

Fiscal 2018 Compared to Fiscal 2017

Fee Revenue

Fee Revenue. Fee revenue went up by $201.7 million, or 13%, to $1,767.2 million in fiscal 2018 compared to
$1,565.5 million in fiscal 2017. Exchange rates favorably impacted fee revenue by $35.3 million, or 2%, in fiscal 2018
compared to the year-ago period. The higher fee revenue was attributable to organic growth in all lines of business.

Executive Search. Executive Search reported fee revenue of $709.0 million, an increase of $91.3 million, or 15%, in
fiscal 2018 compared to $617.7 million in the year-ago period. As detailed below, Executive Search fee revenue was

41

higher in North America, EMEA and Asia Pacific, partially offset by lower fee revenue in the Latin America region
in fiscal 2018 as compared to fiscal 2017. The higher fee revenue in Executive Search was mainly due to a 9%
increase in the number of engagements billed and a 3% increase in the weighted-average fees billed per
engagement (calculated using local currency) during fiscal 2018 compared to the year-ago period. Exchange rates
favorably impacted fee revenue by $12.3 million, or 2%, in fiscal 2018, compared to the year-ago period.

North America reported fee revenue of $408.1 million, an increase of $51.5 million, or 14%, in fiscal 2018
compared to $356.6 million in the year-ago period. North America’s fee revenue was higher due to an 11%
increase in the number of engagements billed and a 3% increase in the weighted-average fees billed per
engagement (calculated using local currency) during fiscal 2018 compared to the year-ago period. All business
sectors contributed to the growth in fee revenue in fiscal 2018 as compared to fiscal 2017, with industrial,
technology and financial services contributing the most. The effect of exchange rates on fee revenue was minimal
in fiscal 2018, compared to the year-ago period.

EMEA reported fee revenue of $173.7 million, an increase of $27.2 million, or 19%, in fiscal 2018 compared to
$146.5 million in fiscal 2017. The favorable effect of exchange rates on fee revenue was $8.8 million, or 6%, in
fiscal 2018, compared to the year-ago period. The increase in fee revenue was due to a 10% increase in the
number of engagements billed, partially offset by a 2% decrease in the weighted-average fees billed per
engagement (calculated using local currency) during fiscal 2018 compared to the year-ago period. The
performance in the United Kingdom, Germany, and France were the primary contributors to the increase in fee
revenue in fiscal 2018 compared to the year-ago period. All business sectors contributed to the growth in fee
revenue in fiscal 2018 as compared to the year-ago period, with industrial, financial services and consumer goods
contributing the most.

Asia Pacific reported fee revenue of $96.6 million, an increase of $16.4 million, or 20%, in fiscal 2018 compared to
$80.2 million in fiscal 2017. The increase in fee revenue was due to an 8% increase in the number of
engagements billed and an 8% increase in the weighted-average fees billed per engagement (calculated using
local currency) in fiscal 2018 compared to the year-ago period. The performance in China, Australia, Singapore,
and Japan were the primary contributors to the increase in fee revenue in fiscal 2018 compared to the year-ago
period, partially offset by a decrease in fee revenue in New Zealand. All business sectors contributed to the growth
in fee revenue in fiscal 2018 as compared to the year-ago period, with financial services, life sciences/healthcare,
and technology contributing the most. The favorable effect of exchange rates on fee revenue was $2.3 million, or
3%, compared to the year-ago period.

Latin America reported fee revenue of $30.6 million, a decrease of $3.8 million, or 11%, in fiscal 2018 compared to
$34.4 million in fiscal 2017. The decrease in fee revenue was due to lower fee revenue in Mexico in fiscal 2018,
compared to the year-ago period, partially offset by higher fee revenue in Argentina. Financial services and
consumer goods were the main sectors contributing to the decline in fee revenue in fiscal 2018, compared to the
year-ago period. The effect of exchange rates on fee revenue was minimal.

Hay Group. Hay Group reported fee revenue of $785.0 million, an increase of $60.8 million, or 8%, in fiscal 2018
compared to $724.2 million in fiscal 2017. Exchange rates favorably impacted fee revenue by $17.4 million, or 2%,
compared to the year-ago period. Fee revenue from consulting services was higher by $42.8 million in fiscal 2018
compared to the year-ago period, with the remaining increase of $18.0 million generated by our products business.

Futurestep. Futurestep reported fee revenue of $273.2 million, an increase of $49.5 million, or 22%, in fiscal 2018
compared to $223.7 million in fiscal 2017. Higher fee revenues in RPO and professional search of $33.3 million
and $18.1 million, respectively, drove the increase in fee revenue. Exchange rates favorably impacted fee revenue
by $5.6 million, or 3%, compared to the year-ago period.

Compensation and Benefits

Compensation and benefits expense increased $132.1 million, or 12%, to $1,203.6 million in fiscal 2018 from
$1,071.5 million in fiscal 2017. Exchange rates unfavorably impacted compensation and benefits expenses by
$23.0 million, or 2%, in fiscal 2018 compared to the year-ago period. The increase in compensation and benefits
was primarily due to a 9% increase in the average consultant headcount, which contributed $80.4 million in higher
salaries and related payroll taxes, $8.1 million more in expenses associated with our deferred compensation and

42

retirement plans (includes the increases in the fair value of participants’ accounts) and an increase of $5.8 million
in employer insurance costs in fiscal 2018 compared to the year-ago period. The rest of the change was due to
$40.8 million increase in performance-related bonus expense mainly due to the increase in fee revenue and
$11.3 million increase in amortization of long term incentive awards, offset by a $9.8 million decrease in integration
costs and $2.9 million from the change in the cash surrender value (“CSV”) of company owned life insurance
(“COLI”) in fiscal 2018 compared to the year-ago period. The change in the CSV of COLI decreased compensation
and benefits expense in fiscal 2018 compared to fiscal 2017 due to larger increases in the market value of the
underlying investments due to market changes. COLI is held to fund other deferred compensation retirement plans
(See Note 6—Deferred Compensation and Retirement Plans, included in the notes to our Consolidated Financial
Statements). Compensation and benefits expense, as a percentage of fee revenue, was 68% in both fiscal 2018
and 2017.

Executive Search compensation and benefits expense increased by $60.0 million, or 15%, to $469.0 million in
fiscal 2018 compared to $409.0 million in fiscal 2017. The increase was primarily due to higher salary cost and
related payroll taxes of $24.8 million due to a 5% increase in average headcount reflecting our continued growth-
related investment back into the business. Also contributing to the increase in compensation and benefits expense
was a $17.1 million increase in performance related bonus expense compared to the year-ago period, an
$8.4 million increase in amortization of long-term incentive awards, and an increase of $4.9 million in expenses
associated with our deferred compensation and retirement plans (includes the increases in the fair value of
participants’ accounts). The increase in performance related bonus expense was due to a 15% increase in fee
revenue in fiscal 2018 compared to the year-ago period. Executive Search compensation and benefits expense,
as a percentage of fee revenue, was 66% in both fiscal 2018 and 2017.

Hay Group compensation and benefits expense increased $34.8 million, or 8%, to $496.9 million in fiscal 2018
from $462.1 million in fiscal 2017. The change was primarily due to increases in salaries and related payroll taxes
of $25.3 million and $4.1 million increase in expenses associated with our deferred compensation and retirement
plans (includes the increases in the fair value of participants’ accounts). Also contributing to the increase in
compensation and benefits expense was an increase of $10.5 million in performance related bonus expense and
$2.8 million more in employer insurance costs, offset by a decrease in integration costs of $6.3 million compared
to year-ago period. Hay Group compensation and benefits expense, as a percentage of fee revenue, was 63% in
fiscal 2018 compared to 64% in the year-ago period.

Futurestep compensation and benefits expense increased $38.4 million, or 25%, to $193.2 million in fiscal 2018
from $154.8 million in fiscal 2017. The increase was due to higher salaries and related payroll taxes of
$26.8 million due to a 20% increase in the average headcount in fiscal 2018 compared to the year-ago period. The
higher average headcount was primarily driven by the need to service an increase in fee revenue in both the
professional search and RPO businesses. Also contributing to the increase in compensation and benefits expense
was an increase of $11.3 million in performance related bonus expense due to a 22% increase in fee revenue in
fiscal 2018 compared to the year-ago period. Futurestep compensation and benefits expense, as a percentage of
fee revenue, was 71% in fiscal 2018 compared to 69% in the year-ago period.

Corporate compensation and benefits expense decreased by $1.0 million, or 2%, to $44.6 million in fiscal 2018
from $45.6 million in fiscal 2017. This change was mainly due to a decrease of $3.5 million in integration costs in
fiscal 2018 compared to the year-ago period and $2.9 million from the change in the CSV of COLI that decreased
compensation and benefits expense in fiscal 2018 compared to fiscal 2017 due to larger increases in the market
value of the underlying investments due to market changes. These decreases in compensation and benefit
expense were partially offset by $3.5 million in higher salaries and related taxes in order to support the overall
growth in the entire business.

General and Administrative Expenses

General and administrative expenses increased $11.2 million, or 5%, to $237.4 million in fiscal 2018 compared to
$226.2 million in fiscal 2017. The increase in general and administrative expenses was due to increases of
$6.2 million and $2.2 million in legal and other professional fees and premise and office expenses, respectively,
offset by a decline of $3.8 million in integration costs during fiscal 2018 compared to the year-ago period. The rest
of the change was primarily due to generating foreign exchange loss of $3.3 million during fiscal 2018 compared to

43

a foreign exchange gain of $0.3 million in fiscal 2017. General and administrative expenses, as a percentage of
fee revenue, was 13% in fiscal 2018 compared to 14% in fiscal 2017. Exchange rates unfavorably impacted
general and administrative expenses by $3.7 million, or 2%, during fiscal 2018 compared to the year-ago period.

Executive Search general and administrative expenses increased $8.0 million, or 11%, to $77.7 million in fiscal
2018 from $69.7 million in fiscal 2017. General and administrative expenses increased due to generating foreign
exchange losses of $1.2 million during fiscal 2018 compared to a foreign exchange gain of $1.3 million during the
year-ago period and an increase in legal and other professional fees of $0.9 million. The rest of the change was
due to an increase in $0.8 million in marketing and business development expenses to support the higher fee
revenues generated in fiscal 2018 compared to the year-ago period, $0.7 million increase in premise and office
expenses, and an increase in bad debt expense of $0.6 million. Executive Search general and administrative
expenses, as a percentage of fee revenue, was 11% in both fiscal 2018 and 2017.

Hay Group general and administrative expenses increased $1.3 million to $98.4 million in fiscal 2018 compared to
$97.1 million in the year-ago period. General and administrative expenses increased due to a foreign exchange
loss of $1.1 million during fiscal 2018 compared to a foreign exchange gain of $0.2 million in fiscal 2017. Hay
Group general and administrative expenses, as a percentage of fee revenue, was 13% in both fiscal 2018 and
2017.

Futurestep general and administrative expenses increased $2.8 million, or 12%, to $26.7 million in fiscal 2018 from
$23.9 million in fiscal 2017. The increase was due primarily to increases in premise and office expenses, bad debt
expense and legal and other professional fees of $1.2 million, $1.0 million and $0.4 million, respectively, in fiscal
2018 compared to the year-ago period. Futurestep general and administrative expenses, as a percentage of fee
revenue, was 10% in fiscal 2018 compared to 11% in fiscal 2017.

Corporate general and administrative expenses decreased $0.9 million, or 3%, to $34.6 million in fiscal 2018
compared to $35.5 million in fiscal 2017. The decrease in general and administrative expenses was due to a
decrease of $4.2 million in integration costs associated with the Legacy Hay acquisition and $0.8 million in
business development expenses, offset by an increase in legal and other professional fees of $4.3 million during
fiscal 2018 compared to fiscal 2017.

Cost of Services Expense

Cost of services expense consists primarily of non-billable contractor and product costs related to the delivery of
various services and products, primarily in Futurestep and Hay Group. Cost of services expense was $73.7 million
in fiscal 2018 compared to $71.5 million in fiscal 2017. Cost of services expense, as a percentage of fee revenue,
was 4% in fiscal 2018 as compared to 5% in the year-ago period.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $48.6 million, an increase of $1.3 million, in fiscal 2018 compared to
$47.3 million in fiscal 2017. The increase relates primarily to technology investments made in the current and prior
year in software and computer equipment, in addition to increases in leasehold improvements and furniture and
fixtures.

Restructuring Charges, Net

The Company continued the implementation of the fiscal 2016 restructuring plan in fiscal 2017 in order to integrate
the Hay Group entities that were acquired in fiscal 2016 by eliminating redundant positions and operational,
general and administrative expenses and consolidating premises. This resulted in restructuring charges of
$34.6 million in fiscal 2017, of which $16.0 million related to severance and $18.6 million related to consolidation of
premises. Fiscal 2018 restructuring charges were minimal.

Operating Income

Operating income was $203.9 million, an increase of $89.5 million, in fiscal 2018 as compared to $114.4 million in
fiscal 2017. This increase in operating income resulted from higher fee revenue of $201.7 million and a decrease
in restructuring charges, net of $34.5 million, offset by increases of $132.1 million in compensation and benefits

44

expense, $11.2 million in general and administrative expenses, $2.2 million in cost of services expense, and
$1.3 million in depreciation and amortization expenses.

Executive Search operating income increased $25.0 million, or 20%, to $149.3 million in fiscal 2018 as compared
to $124.3 million in fiscal 2017. The increase in Executive Search operating income was driven by increases in
higher fee revenue of $91.3 million and a decrease in restructuring charges, net of $4.3 million, offset by increases
in compensation and benefits expense, general and administrative expenses, cost of services expense and
depreciation and amortization expenses of $60.0 million, $8.0 million, $1.6 million and $1.1 million, respectively.
Executive Search operating income, as a percentage of fee revenue, was 21% in fiscal 2018 as compared to 20%
in the year-ago period.

Hay Group operating income was $100.9 million, an increase of $53.6 million, or 113%, in fiscal 2018 as
compared to operating income of $47.3 million in fiscal 2017. The increase was primarily driven by an increase in
fee revenue of $60.8 million and a decrease in restructuring charges, net of $29.9 million, offset by an increase of
$34.8 million in compensation and benefits expense, $1.8 million in cost of services expense, and $1.3 million in
general and administrative expenses in fiscal 2018 compared to the year-ago period. Hay Group operating
income, as a percentage of fee revenue, was 13% in fiscal 2018 compared to 7% in the year-ago period.

Futurestep operating income was $39.4 million, an increase of $9.4 million, in fiscal 2018 as compared to
$30.0 million in fiscal 2017. The increase in operating income was driven by higher fee revenue of $49.5 million,
offset by an increase in compensation and benefits expense of $38.4 million and general and administrative
expenses of $2.8 million. Futurestep operating income, as a percentage of fee revenue, was 14% in fiscal 2018
compared to 13% in the year-ago period.

Net Income Attributable to Korn Ferry

Net income attributable to Korn Ferry increased by $49.6 million to $133.8 million in fiscal 2018 compared to
$84.2 million in fiscal 2017. The increase was due to higher total revenue of $197.8 million, offset by higher
operating expenses of $108.4 million and an increase in income tax provision of $41.0 million partially due to the
enactment of the Tax Act compared to the year-ago period. Net income attributable to Korn Ferry, as a percentage
of fee revenue, was 8% in fiscal 2018 as compared to 5% in the year-ago period.

Adjusted EBITDA

Adjusted EBITDA increased by $38.8 million, or 17% to $273.8 million in fiscal 2018 as compared to $235.0 million
in fiscal 2017. This increase was driven by higher adjusted fee revenue of $198.1 million, offset by increases of
$141.9 million in compensation and benefits expense (excluding integration costs), $14.9 million in general and
administrative expenses (excluding integration costs) and $2.2 million in cost of services expense compared to the
year-ago period. Adjusted EBITDA, as a percentage of adjusted fee revenue, was 15% in both fiscal 2018 and
2017.

Executive Search Adjusted EBITDA increased $21.5 million, or 16%, to $158.9 million in fiscal 2018 as compared
to $137.4 million in fiscal 2017. The increase was driven by higher fee revenue of $91.3 million, offset by increases
of $60.0 million in compensation and benefits expense, $8.0 million in general and administrative expenses, and
an increase in cost of services expense of $1.6 million during fiscal 2018 compared to the year-ago period.
Executive Search Adjusted EBITDA, as a percentage of fee revenue, was 22% in both fiscal 2018 and 2017.

Hay Group Adjusted EBITDA was $142.0 million, an increase of $13.8 million, or 11%, in fiscal 2018 as compared
to $128.2 million in fiscal 2017. The increase was driven by higher adjusted fee revenue of $57.3 million, offset by
increases of $41.1 million in compensation and benefits expense (excluding integration costs), $0.9 million in
general and administrative expenses (excluding integration costs), and an increase in cost of services expense of
$1.8 million during fiscal 2018 compared to the year-ago period. Hay Group Adjusted EBITDA, as a percentage of
adjusted fee revenue, was 18% in both fiscal 2018 and 2017.

Futurestep Adjusted EBITDA was $42.6 million in fiscal 2018, an increase of $9.8 million, or 30%, as compared to
$32.8 million in fiscal 2017. The increase was driven by higher fee revenue of $49.5 million, offset by increases of
$38.4 million in compensation and benefits expense and $2.8 million in general and administrative expenses

45

during fiscal 2018 compared to the year-ago period. Futurestep Adjusted EBITDA, as a percentage of fee revenue,
was 16% in fiscal 2018 compared to 15% in the year-ago period.

Other Income (Loss), Net

Other income, net was $11.5 million in fiscal 2018 as compared to $11.8 million in fiscal 2017. The decrease was
primarily due to the change in the fair value of our marketable securities, where there was a smaller gain during
fiscal 2018 compared to the year-ago period.

Interest (Expense) Income, Net

Interest (expense) income, net primarily relates to our term loan facility and borrowings under our COLI policies,
which was partially offset by interest earned on cash and cash equivalent balances. Interest expense, net was
$9.7 million in fiscal 2018 as compared to $10.3 million in fiscal 2017.

Income Tax Provision

The provision for income tax was $70.1 million in fiscal 2018 compared to $29.1 million in the year-ago period.
This reflects a 34% and 25% effective tax rate for fiscal 2018 and 2017, respectively. In fiscal 2018 the effective
tax rate was significantly impacted by the December 22, 2017 enactment of the Tax Act as a result of which, Korn
Ferry recorded a provisional tax charge of $18.4 million as a one-time tax on accumulated foreign earnings (the
“Transition Tax”), and a provisional tax benefit of $5.9 million from the remeasurement of our U.S. federal deferred
tax assets and liabilities. Korn Ferry will continue to appropriately refine these amounts within the measurement
period allowed by SAB No.118, which will be completed no later than December 22, 2018.

Net Income Attributable to Noncontrolling Interest

Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are
attributable to shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of
operations. Net income attributable to noncontrolling interest for fiscal 2018 and 2017 was $2.1 million compared
to $3.1 million, respectively.

Fiscal 2017 Compared to Fiscal 2016

Fee Revenue

Fee Revenue. Fee revenue increased $273.4 million, or 21%, to $1,565.5 million in fiscal 2017 compared to
$1,292.1 million in fiscal 2016. Exchange rates unfavorably impacted fee revenue by $27.9 million, or 2%, in fiscal
2017. The higher fee revenue was attributable to growth in Hay Group and Futurestep, offset by a decrease in
Executive Search. The increase in Hay Group was primarily due to the Legacy Hay acquisition that was completed
on December 1, 2015.

Executive Search. Executive Search reported fee revenue of $617.7 million, a decrease of $5.2 million, or 1%, in
fiscal 2017 compared to $622.9 million in fiscal 2016. As detailed below, Executive Search fee revenue was lower
in North America and Asia Pacific regions, offset by higher fee revenue in the Latin America and EMEA regions in
fiscal 2017 as compared to fiscal 2016. Exchange rates unfavorably impacted fee revenue by $12.3 million, or 2%,
in fiscal 2017.

North America reported fee revenue of $356.6 million, a decrease of $14.8 million, or 4%, in fiscal 2017 compared
to $371.4 million in fiscal 2016. North America’s decrease in fee revenue is primarily due a 3% decrease in the
weighted-average fees billed per engagement (calculated using local currency) and 1% decrease in the number of
engagements billed during fiscal 2017 as compared to fiscal 2016. The overall decrease in fee revenue was driven
by a decline in the life sciences/healthcare, education/non-profit and financial services sectors as compared to the
year-ago period, partially offset by an increase in the industrial sector. Exchange rates did not impact fee revenue
in fiscal 2017 when compared to the year-ago period.

EMEA reported fee revenue of $146.5 million, an increase of $2.2 million, or 2%, in fiscal 2017 compared to
$144.3 million in fiscal 2016. The increase in fee revenue was due to a 6% increase in the number of
engagements billed and a 2% increase in the weighted-average fees billed per engagement (calculated using local

46

currency) during fiscal 2017 as compared to fiscal 2016. This was offset by unfavorable exchange rates which
impacted fee revenue by $10.0 million, or 7%, in fiscal 2017 compared to fiscal 2016. The performance in existing
offices in Germany, United Arab Emirates and Denmark were the primary contributors to the increase in fee
revenue in fiscal 2017 compared to fiscal 2016, offset by a decrease in fee revenue in United Kingdom, France
and Switzerland. In terms of business sectors, the technology and industrial sectors had the largest increase in fee
revenue in fiscal 2017 as compared to fiscal 2016, partially offset by a decrease in fee revenue in the financial
services, consumer goods and life sciences/healthcare sectors.

Asia Pacific reported fee revenue of $80.2 million in fiscal 2017, essentially flat with the $80.5 million in fiscal 2016.
Exchange rates unfavorably impacted fee revenue by $0.5 million in fiscal 2017 when compared to the year-ago
period. There were decreases in Hong Kong and Australia which were offset by an increase in fee revenue in
China and Taiwan. Fee revenue in the technology, financial services and education/non-profit sectors decreased
in fiscal 2017 as compared to fiscal 2016, offset by an increase in fee revenue in the consumer goods and
industrial sectors.

Latin America reported fee revenue of $34.4 million, an increase of $7.7 million, or 29%, in fiscal 2017 compared
to $26.7 million in fiscal 2016. Exchange rates unfavorably impacted fee revenue in Latin America by $1.7 million,
or 6%, in fiscal 2017 compared to fiscal 2016. The increase is due to $11.0 million in fee revenue from our Mexico
subsidiary that we began consolidating in the fourth quarter of 2016 as a result of obtaining control of the entity.
The rest of the change primarily relates to a decrease in fee revenue in Venezuela caused by currency
devaluation, offset by higher fee revenues in Brazil in fiscal 2017 compared to fiscal 2016. Industrial, life sciences/
healthcare and financial services were the main sectors contributing to the growth in fee revenue in fiscal 2017
compared to fiscal 2016, offset by a decrease in fee revenue in the consumer goods sector.

Hay Group. Hay Group reported fee revenue of $724.2 million, an increase of $253.1 million, or 54%, in fiscal
2017 compared to $471.1 million in fiscal 2016. Exchange rates unfavorably impacted fee revenue by
$11.0 million, or 2%, in fiscal 2017. The increase in fee revenue was primarily due to the Legacy Hay acquisition
that was completed on December 1, 2015. As a result of the Legacy Hay acquisition, consulting fee revenue was
higher by $146.5 million in fiscal 2017 compared to fiscal 2016, with the remaining increase of $106.6 million
generated by higher fee revenue from our products business.

Futurestep. Futurestep reported fee revenue of $223.7 million, an increase of $25.6 million, or 13%, in fiscal 2017
compared to $198.1 million in fiscal 2016. Exchange rates unfavorably impacted fee revenue by $4.6 million, or
2%, in fiscal 2017. Higher fee revenues in RPO and professional search of $13.6 million and $12.2 million,
respectively, drove the increase in fee revenue.

Compensation and Benefits

Compensation and benefits expense increased $174.1 million, or 19%, to $1,071.5 million in fiscal 2017 from
$897.4 million in fiscal 2016. Exchange rates favorably impacted compensation and benefits expense by
$17.2 million, or 2%, during fiscal 2017 compared to fiscal 2016. The Legacy Hay acquisition was the main factor
that contributed to the increase in compensation and benefits expense. Given the size of the Legacy Hay
acquisition, all components of compensation and benefits expense increased with salaries and related payroll
taxes, insurance costs and deferred compensation seeing the largest increases. Compensation and benefits
expense, as a percentage of fee revenue, was 68% in fiscal 2017 compared to 69% in fiscal 2016.

Executive Search compensation and benefits expense increased $8.1 million, or 2%, to $409.0 million in fiscal
2017 compared to $400.9 million in fiscal 2016. This increase was primarily due to an increase in the fair value of
amounts owed under certain deferred compensation plans of $10.3 million and higher salaries and related payroll
expense of $10.9 million due to a 7% increase in average consultant headcount reflecting our continued growth-
related investments back into the business in fiscal 2017 compared to the year-ago period. The rest of the change
was due to an increase of $6.7 million in the amortization of long-term incentive awards, offset by lower
performance related bonus expense of $15.6 million during fiscal 2017 compared to fiscal 2016. The decrease in
performance related bonus expense was primarily due to lower fee revenue and profitability. Executive Search
compensation and benefits expense as a percentage of fee revenue decreased to 66% in fiscal 2017 compared to
64% in fiscal 2016.

47

Hay Group compensation and benefits expense increased $146.9 million, or 47%, to $462.1 million in fiscal 2017
from $315.2 million in fiscal 2016. The increase in compensation and benefits was primarily due to the Legacy Hay
acquisition, which increased our average headcount during fiscal 2017 compared to fiscal 2016, resulting in higher
salaries and related payroll taxes, performance related bonus expense, insurance costs, retirement plans and
recruiting costs of $101.8 million, $15.1 million, $6.7 million, $6.5 million and $4.2 million, respectively. Hay Group
compensation and benefits expense, as a percentage of fee revenue, decreased to 64% in fiscal 2017 from 67%
in the year-ago period.

Futurestep compensation and benefits expense increased $18.7 million, or 14%, to $154.8 million in fiscal 2017
from $136.1 million in fiscal 2016. The increase was due to a 21% increase in the average headcount in fiscal
2017 compared to the year-ago period that resulted in higher salaries and related payroll taxes and insurance
costs of $19.8 million and $1.9 million, respectively, partially offset by lower performance related bonus expense.
The higher average headcount was primarily driven by the need to service an increase in fee revenue in both the
professional search and RPO businesses. Futurestep compensation and benefits expense as a percentage of fee
revenue was 69% in both fiscal 2017 and 2016.

Corporate compensation and benefits expense increased $0.4 million, or 1%, to $45.6 million in fiscal 2017 from
$45.2 million in fiscal 2016. This increase was mainly due to $1.6 million in higher outside contractor costs and a
change in the fair value of vested amounts owed under certain deferred compensation plans of $1.5 million in
fiscal 2017 compared to the year-ago period. Offsetting these increases in compensation and benefit expense was
a decline in integration/acquisition costs and certain separation costs of $2.2 million in fiscal 2017 as compared to
the year-ago period.

General and Administrative Expenses

General and administrative expenses increased $13.2 million, or 6%, to $226.2 million in fiscal 2017 compared to
$213.0 million in fiscal 2016. Exchange rates favorably impacted general and administrative expenses by
$5.2 million, or 2%, during fiscal 2017. The increase in general and administrative expenses was primarily due to
the Legacy Hay acquisition that took place in fiscal 2016, partially offset by a decrease of $20.3 million in
integration/acquisition costs and $13.7 million of Venezuelan foreign currency loss compared to the year-ago
period. The Legacy Hay acquisition was the main factor that contributed to increases of $27.0 million, $8.4 million,
$5.3 million and $4.4 million, in premise and office expenses, marketing and business development expenses,
travel-related expenses, and bad debt expense, respectively. General and administration expenses as a
percentage of fee revenue was 14% in fiscal 2017 compared to 16% in fiscal 2016.

Executive Search general and administrative expenses decreased $5.6 million, or 7%, to $69.7 million in fiscal
2017 from $75.3 million in fiscal 2016. The decrease was due to the $6.6 million in Venezuelan foreign currency
loss incurred in fiscal 2016, offset by higher bad debt expense of $1.5 million in fiscal 2017 compared to the
year-ago period. Executive Search general and administrative expenses as a percentage of fee revenue was 11%
in fiscal 2017 compared to 12% in fiscal 2016.

Hay Group general and administrative expenses increased $31.5 million, or 48%, to $97.1 million in fiscal 2017
from $65.6 million in fiscal 2016. The increase in general and administrative expenses was primarily due to the
Legacy Hay acquisition that took place in fiscal 2016, partially offset by a decrease of $1.8 million in integration/
acquisition costs and $7.1 million of Venezuelan foreign currency loss compared to the year-ago period. The
acquisition of Legacy Hay was the main factor for increases of $24.0 million, $4.7 million, $4.2 million, $2.5 million
and $1.6 million in premise and office expenses, marketing and business development expenses, travel-related
expenses, bad debt expense and legal and other professional fees, respectively. Hay Group general and
administrative expenses as a percentage of fee revenue was 13% in fiscal 2017 compared to 14% in fiscal 2016.

Futurestep general and administrative expenses increased $2.5 million, or 12%, to $23.9 million in fiscal 2017
compared to $21.4 million in fiscal 2016. General and administrative expenses increased $1.4 million, $0.4 million
and $0.4 million in premise and office expenses, marketing and business development expenses and bad debt
expense, respectively, during fiscal 2017 compared to the year-ago period due in large part to an increase in fee
revenue. Futurestep general and administrative expenses as a percentage of fee revenue was 11% in both fiscal
2017 and 2016.

48

Corporate general and administrative expenses decreased $15.2 million, or 30%, to $35.5 million in fiscal 2017
compared to $50.7 million in fiscal 2016. General and administrative expenses decreased due to a decline of
$18.4 million in integration/acquisition costs, offset by increases of $3.2 million in marketing and business
development expenses in fiscal 2017 compared to the year-ago period.

Cost of Services Expense

Cost of services expense consist primarily of non-billable contractor and product costs related to the delivery of
various services and products, primarily in Futurestep and Hay Group. Cost of services expense increased
$11.7 million, or 20%, to $71.5 million in fiscal 2017 compared to $59.8 million in fiscal 2016. The increase is
mainly due to higher fee revenue in Hay Group due to the Legacy Hay acquisition. Cost of services expense as a
percentage of fee revenue was 5% in both fiscal 2017 and 2016.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $47.3 million in fiscal 2017, an increase of $11.1 million compared
to $36.2 million in fiscal 2016. The increase is mainly due to the Legacy Hay acquisition. The increase relates
primarily to technology investments that were made in the current and prior year in software and computer
equipment, in addition to increases in leasehold improvements, furniture and fixtures (associated with our office
co-location) and intangible assets.

Restructuring Charges, Net

We continued the implementation of the fiscal 2016 restructuring plan in order to integrate the Hay Group entities
that were acquired in the prior year by eliminating redundant positions and operational, general and administrative
expenses and consolidation of office space. As a result, we recorded $34.6 million of restructuring charges in fiscal
2017, of which $16.0 million related to severance costs and $18.6 million related to the consolidation of office
space.

During fiscal 2016, we implemented a restructuring plan in order to rationalize our cost structure in order to
eliminate redundant positions and consolidation of office space that were created due to the acquisition of Legacy
Hay. As a result, we recorded $33.0 million of restructuring charges, with $32.1 million of severance and
$0.9 million relating to the consolidation/abandonment of premises during fiscal 2016.

Operating Income

Operating income increased $61.7 million, or 117%, to $114.4 million in fiscal 2017 compared to $52.7 million in
fiscal 2016. This increase in operating income resulted from $273.4 million in higher fee revenue, offset by an
increase of $174.1 million in compensation and benefits expense. The rest of the change was due to increases of
$13.2 million in general and administrative expenses, $11.7 million in cost of services expense, and $11.1 million
of depreciation and amortization expenses during fiscal 2017 compared to fiscal 2016. Operating income as a
percentage of fee revenue was 7% in fiscal 2017 compared to 4% in fiscal 2016.

Executive Search operating income was $124.3 million, a decrease of $7.4 million, or 6%, in fiscal 2017 compared
to $131.7 million in fiscal 2016. The decrease in Executive Search operating income was driven by lower fee
revenue of $5.2 million and higher compensation and benefits expense of $8.1 million, offset by a decrease in
general and administrative expenses of $5.6 million. Executive Search operating income as a percentage of fee
revenue was 20% in fiscal 2017 compared to 21% in fiscal 2016.

Hay Group operating income increased by $50.7 million to $47.3 million in fiscal 2017 compared to operating loss
of $3.4 million in fiscal 2016. The change was primarily driven by the Legacy Hay acquisition resulting in an
increase in fee revenue of $253.1 million, offset by increases in compensation and benefits expense, general and
administrative expenses, depreciation and amortization expenses, cost of services expense and restructuring
charges, net of $146.9 million, $31.5 million, $10.4 million, $9.5 million and $4.0 million, respectively in fiscal 2017
compared to 2016. Hay Group operating income as a percentage of fee revenue was 7% in fiscal 2017 compared
to operating loss as a percentage of fee revenue of 1% in fiscal 2016.

Futurestep operating income increased by $3.3 million to $30.0 million in fiscal 2017 from $26.7 million in fiscal
2016. The increase in Futurestep operating income was primarily due to higher fee revenues of $25.6 million,

49

partially offset by increases of $18.7 million in compensation and benefits expense and $2.5 million in general and
administrative expenses. Futurestep operating income, as a percentage of fee revenue, was 13% in both fiscal
2017 and 2016.

Net Income Attributable to Korn Ferry

Net income attributable to Korn Ferry increased $53.3 million, or 172%, to $84.2 million in fiscal 2017 compared to
$30.9 million in fiscal 2016. The increase was due primarily to higher total revenue of $275.0 million, offset by
higher operating expenses of $213.2 million and an increase in income tax provision of $10.1 million. Net income
attributable to Korn Ferry, as a percentage of fee revenue, was 5% during fiscal 2017 as compared to 2% in the
year-ago period.

Adjusted EBITDA

Adjusted EBITDA increased $44.8 million, or 24%, to $235.0 million in fiscal 2017 compared to $190.2 million in
fiscal 2016. This increase was driven by higher adjusted fee revenue of $266.0 million, and an increase in other
income, net due to the change in fair value of our marketable securities of $16.0 million in fiscal 2017 compared to
the year-ago period, offset by increases of $177.0 million, $47.2 million and $11.7 million in compensation and
benefits expense, general and administrative expenses and cost of services expense, respectively. Adjusted
EBITDA as a percentage of fee revenue was 15% in both fiscal 2017 and 2016.

Executive Search Adjusted EBITDA was $137.4 million, a decrease of $14.8 million, or 10%, in fiscal 2017
compared to $152.2 million in fiscal 2016. This decrease was due to lower fee revenue of $5.2 million and higher
compensation and benefits expense and general and administrative expenses of $8.1 million and $1.0 million,
respectively. Executive Search Adjusted EBITDA as a percentage of fee revenue was 22% in fiscal 2017 as
compared to 24% in fiscal 2016.

Hay Group Adjusted EBITDA increased by $49.3 million to $128.2 million in fiscal 2017 compared to $78.9 million
in fiscal 2016. This increase was due to higher adjusted fee revenue of $245.6 million, offset by an increase in
compensation and benefit expense, general and administrative expenses and cost of services expense of
$147.6 million, $40.5 million and $9.5 million, respectively. The higher compensation and benefit expense was
driven mainly by increases in salaries and related payroll taxes due to an increase in average headcount and an
increase in performance related bonus expense. Hay Group Adjusted EBITDA as a percentage of fee revenue
was 18% in fiscal 2017 compared to 16% in fiscal 2016.

Futurestep Adjusted EBITDA increased by $3.3 million to $32.8 million in fiscal 2017 compared to $29.5 million in
fiscal 2016. The increase in Futurestep Adjusted EBITDA was primarily due to higher fee revenue of $25.6 million,
offset by an increase in compensation and benefits expense and in general and administrative expenses of
$18.7 million and $2.5 million, respectively, during fiscal 2017 as compared to fiscal 2016. The increase in
compensation and benefits expense was primarily driven by higher salaries and related payroll taxes due to an
increase in average headcount. Futurestep Adjusted EBITDA as a percentage of fee revenue was 15% in both
fiscal 2017 and 2016.

Other Income (Loss), Net

Other income, net was $11.8 million in fiscal 2017 as compared to other loss, net of $4.2 million in fiscal 2016. The
change in other income (loss), net is primarily due to the increase in the fair value of our marketable securities,
held in trust for settlement of our obligations under certain deferred compensation plans, during fiscal 2017
compared to the decrease in the fair value of our marketable securities in the year-ago period.

Interest (Expense) Income, Net

Interest (expense) income, net primarily relates to our term loan facility that we entered into in the current fiscal
year to provide enhanced financial flexibility and in recognition of the accelerated pace of the Legacy Hay
integration. It also includes interest on our borrowings under our COLI policies and interest earned on cash and
cash equivalent balances. Interest expense, net was $10.3 million in fiscal 2017 compared to interest income, net
of $0.3 million in fiscal 2016.

50

Equity in Earnings of Unconsolidated Subsidiaries

Equity in earnings of unconsolidated subsidiaries is comprised of our less than 50% interest in IGroup, LLC, which
is engaged in organizing, planning and conducting conferences and training programs throughout the world for
directors, chief executive officers, other senior level executives and also includes earnings of our Mexico
subsidiary for the first nine months in fiscal 2016. In the fourth quarter of fiscal 2016, we obtained control of our
Mexico subsidiary and began to consolidate the operations. Equity in earnings was $0.3 million in fiscal 2017 as
compared to $1.6 million in fiscal 2016. The decrease is due to the consolidation of our Mexico subsidiary in fiscal
2017, which is now included in operations.

Income Tax Provision

The provision for income taxes was $29.1 million in fiscal 2017 compared to $19.0 million in fiscal 2016, reflecting
a 25% and 39% effective tax rate, respectively. The lower effective tax rate in fiscal 2017 was due primarily to a
higher percentage of taxable income arising in jurisdictions outside of the U.S. with lower statutory tax rates. The
effective tax rate in fiscal 2016 was higher largely due to the impact of non-deductible expenses incurred in
connection with the acquisition of Legacy Hay and non-deductible charges related to the devaluation of the
Venezuelan currency.

Net Income Attributable to Noncontrolling Interest

Net income attributable to noncontrolling interest represents the portion of a subsidiary’s net earnings that are
attributable to shares of such subsidiary not held by Korn Ferry that are included in the consolidated results of
operations. In the fourth quarter of fiscal 2016, we obtained control of our Mexico subsidiary and began to
consolidate the operations. Net income attributable to noncontrolling interest in fiscal 2017 was $3.1 million
compared to $0.5 million in fiscal 2016.

Liquidity and Capital Resources

The Company and its Board of Directors endorse a balanced approach to capital allocation. The Company’s
priority is to invest in growth initiatives, such as the hiring of consultants, the continued development of IP and
derivative products and services, and the investment in synergistic, accretive merger and acquisition transactions
that earn a return that is superior to the Company’s cost of capital. Next, the Company’s capital allocation
approach contemplates the return of a portion of excess capital to stockholders, in the form of a regular quarterly
dividend, subject to the factors discussed below and in the “Risk Factors” section of this Annual Report on Form
10-K. Additionally, the Company considers share repurchases on an opportunistic basis and subject to the terms
of our credit agreement.

On June 15, 2016, we entered into a senior secured $400 million Credit Agreement with a syndicate of banks and
Wells Fargo Bank, National Association as administrative agent, to provide for enhanced financial flexibility and in
recognition of the accelerated pace of the Legacy Hay integration. See Note 10—Long-Term Debt for a description
of the credit facility. In anticipation of the Plan, on June 8, 2018, we entered into an amendment (the
“Amendment”) to the Credit Agreement. The Amendment permits the KF Merger, and will become effective when
certain conditions set forth therein, including consummation of the KF Merger, are satisfied. We drew down
$275 million on the term loan and used $140 million of the proceeds to pay-off the term loan that was outstanding
as of April 30, 2016. We had $2.9 million and $3.0 million standby letters of credit issued under our long-term debt
arrangements as of April 30, 2018 and 2017, respectively. We had a total of $7.4 million and $8.1 million of
standby letters of credits with other financial institutions as of April 30, 2018 and 2017, respectively. The standby
letters of credits were generally issued as a result of entering into office premise leases.

As part of the Legacy Hay acquisition, the Company has committed to a $40 million retention pool (of which
$23.5 million has been paid) for certain employees of Legacy Hay subject to certain circumstances. The remaining
balance will be payable within 45 days after November 30, 2018.

On December 8, 2014, the Board of Directors adopted a dividend policy to distribute, to our stockholders, a regular
quarterly cash dividend of $0.10 per share. Every quarter since the adoption of the dividend policy, the Company
has declared a quarterly dividend. The declaration and payment of future dividends under the quarterly dividend

51

program will be at the discretion of the Board of Directors and will depend upon many factors, including our
earnings, capital requirements, financial conditions, the terms of our indebtedness and 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 any time 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 market conditions and other factors. We
repurchased approximately $33.1 million and $28.8 million of the Company’s common stock during fiscal 2018 and
2017, respectively. As of April 30, 2018, $88.1 million remained available for common stock repurchases under our
stock repurchase program. Any decision to continue to execute our currently outstanding share repurchase
program will depend on our earnings, capital requirements, financial condition and other factors considered
relevant by our Board of Directors. Our senior secured credit agreement requires that our pro forma leverage ratio,
defined as the ratio of consolidated funded indebtedness to consolidated Adjusted EBITDA, is no greater than 2.50
to 1.00, and our pro forma domestic liquidity is at least $50.0 million, including undrawn amounts on our revolving
credit facility as a condition to consummating permitted acquisitions, paying dividends to our stockholders and
share repurchases of our common stock.

Our performance is subject to the general level of economic activity in the geographic regions and the industries
which we service. We believe, based on current economic conditions, that our cash on hand and funds from
operations and the Credit Agreement we entered into on June 15, 2016 will be sufficient to meet anticipated
working capital, capital expenditures, general corporate requirements, repayment of the debt incurred in
connection with the Legacy Hay acquisition, the retention pool obligations in connection with the Legacy Hay
acquisition, shares repurchases and dividend payments under our dividend policy during the next twelve months.
However, if the national or global economy, credit market conditions and/or labor markets were to deteriorate in
the future, such changes could put negative pressure on demand for our services and affect our operating cash
flows. If these conditions were to persist 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 capital needs and/or discontinue our share
repurchases and dividend policy.

Cash and cash equivalents and marketable securities were $657.9 million and $530.8 million as of April 30, 2018
and 2017, respectively. Net of amounts held in trust for deferred compensation plans and accrued bonuses, cash
and marketable securities were $312.4 million and $245.1 million at April 30, 2018 and 2017, respectively. As of
April 30, 2018 and 2017, we held $207.6 million and $165.8 million, respectively of cash and cash equivalents in
foreign locations, net of amounts held in trust for deferred compensation plans and to pay fiscal 2018 and 2017
annual bonuses. We have not provided deferred income taxes on approximately $492.3 million of undistributed
earnings from our foreign subsidiaries as such earnings are intended to be reinvested indefinitely. If a distribution
of these earnings was to be made, we may be subject to state income and foreign withholding taxes. An estimate
of such taxes, however, is not practicable. Cash and cash equivalents consist of cash and highly liquid
investments purchased with original maturities of three months or less. Marketable securities consist of mutual
funds. The primary objectives of our investment in mutual funds are to meet the obligations under certain of our
deferred compensation plans.

As of April 30, 2018 and 2017, marketable securities of $137.1 million (net of gross unrealized gains of
$11.0 million and gross unrealized losses of $1.0 million) and $119.9 million (net of gross unrealized gains of
$6.7 million and gross unrealized losses of $0.6 million), respectively, were held in trust for settlement of our
obligations under certain deferred compensation plans, of which $122.8 million and $115.6 million, respectively,
are classified as non-current. These marketable securities were held to satisfy vested obligations totaling
$118.2 million and $99.5 million as of April 30, 2018 and 2017, respectively. Unvested obligations under the
deferred compensation plans totaled $29.5 million and $37.6 million as of April 30, 2018 and 2017, respectively.

The net increase in our working capital of $70.7 million as of April 30, 2018 compared to April 30, 2017 is primarily
attributable to an increase in cash and cash equivalents and accounts receivable, offset by an increase in
compensation and benefits payable. The increase in cash and cash equivalents is due to cash provided by
operations. Accounts receivable and compensation and benefits payable increased due an increase in fee

52

revenue and overall profitability of the Company. Cash provided by operating activities was $219.1 million in fiscal
2018, an increase of $113.0 million, compared to $106.1 million in fiscal 2017.

Cash used in investing activities was $44.8 million in fiscal 2018, an increase of $24.2 million, compared to
$20.6 million in the year-ago period. Cash used in investing activities was higher due to a decrease in proceeds
from sales/maturities of marketable securities, offset by less cash used for the purchases of property and
equipment and higher proceeds from life insurance policies in fiscal 2018 compared to fiscal 2017.

Cash used in financing activities was $77.3 million in fiscal 2018 compared to cash provided by financing activities
of $64.4 million in fiscal 2017. The change from cash provided by financing activities to cash used in financing
activities was primarily due to a decrease of $135.0 million in proceeds from our term loan facility net of pay-off of
the term loan that was outstanding as of April 30, 2016, and an increase of shares repurchased under the stock
repurchase program of $4.3 million in fiscal 2018 compared to the year-ago period.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated,
special purpose entities.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties and
exclude contingent liabilities for which we cannot reasonably predict future payment. The following table
represents our contractual obligations as of April 30, 2018:

Note (1)

Total

Less Than
1 Year

Payments Due in:

1-3 Years
(in thousands)

3-5 Years

More Than
5 Years

Operating lease commitments . . . . . . . . . . . . .
Accrued restructuring charges (2) . . . . . . . . . .
Interest payments on COLI loans (3) . . . . . . .
Retention awards . . . . . . . . . . . . . . . . . . . . . . .
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated interest on term loan (4) . . . . . . . . .

14
7
10
12
10
—

$

$

392,824
3,760
36,699
16,500
238,906
19,867

$

66,071
2,436
3,776
16,500
25,781
7,277

$

118,939
1,324
7,551
—
55,000
11,953

$

91,628
—
7,432
—
158,125
637

116,186
—
17,940
—
—
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

708,556

$

121,841

$

194,767

$

257,822

$

134,126

(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 from 4.76% to 8.00% with total death benefits payable, net of loans under COLI contracts of
$226.0 million at April 30, 2018.
Interest rate used is the variable rate per the credit agreement as of April 30, 2018 for outstanding balance on the term loan.

(4)

In addition to the contractual obligations above, we have liabilities related to certain employee benefit plans. These
liabilities are recorded in our Consolidated Balance Sheets. The obligations related to these employee benefit
plans are described in Note 6—Deferred Compensation and Retirement Plans, 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, as described 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 Loans

The Company purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in
the deferred compensation and pension plans as a means of funding benefits under such plans. As of April 30,
2018 and 2017, we held contracts with gross CSV of $186.8 million and $180.3 million, respectively. Total
outstanding borrowings against the CSV of COLI contracts were $66.7 million and $67.2 million as of April 30,
2018 and 2017, respectively. Such borrowings do not require annual principal repayments, bear interest primarily

53

at variable rates and are secured by the CSV of COLI contracts. At April 30, 2018 and 2017, the net cash value of
these policies was $120.1 million and $113.1 million, respectively. Total death benefits payable, net of loans under
COLI contracts, were $226.0 million and $220.6 million at April 30, 2018 and 2017, respectively.

Long-Term Debt

On June 15, 2016, we entered into a senior secured $400 million Credit Agreement (the “Credit Agreement”) with
a syndicate of banks and Wells Fargo Bank, National Association as administrative agent. On June 8, 2018, in
anticipation of the Plan, we entered into an amendment (the “Amendment”) to the Credit Agreement. The
Amendment permits the KF Merger, and will become effective when certain conditions set forth therein, including
consummation of the KF Merger, are satisfied. The Credit Agreement provides for, among other things: (a) a
senior secured term loan facility in an aggregate principal amount of $275 million (the “ Term Facility”), (b) a senior
secured revolving credit facility (the “Revolver” and together with the Term Facility, the “Credit Facilities”) in an
aggregate principal amount of $125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0% and
10.0%, with the remaining principal due at maturity, (d) certain customary affirmative and negative covenants,
including a maximum consolidated total leverage ratio (as defined below) and a minimum interest coverage ratio
and (e) an expanded definition of permitted add-backs to Adjusted EBITDA in recognition of the accelerated
integration actions. Our credit agreement permits payment of dividends to stockholders and share repurchases so
long as the pro forma leverage ratio is no greater than 2.50 to 1.00, and the pro forma domestic liquidity is at least
$50.0 million. We drew down $275 million on the term loan and used $140 million of the proceeds to pay-off the
term loan that was outstanding as of April 30, 2016.

At our option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate,
in each case plus the applicable interest rate margin. The interest rate applicable to loans outstanding under the
Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the
case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum and the alternate base rate
plus 1.00% per annum, in the alternative), based upon our total funded debt to Adjusted EBITDA ratio (as set forth
in the Credit Agreement, the “consolidated leverage ratio”) at such time. In addition, we will be required to pay to
the lenders a quarterly fee ranging from 0.20% to 0.35% per annum on the average daily unused amount of the
Term Facility, based upon our consolidated leverage ratio at such time and fees relating to the issuance of letters
of credit. During fiscal 2018 and 2017, the average rate on the Term Facility was 2.60% and 2.23%, respectively.

Both the Revolver and the Term Facility mature on June 15, 2021 and may be prepaid and terminated early by us
at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility is payable
in quarterly installments with principal payments totalling $20.6 million and $15.5 million made during fiscal 2018
and 2017, respectively. As of April 30, 2018 and 2017, $238.9 million and $259.5 million were outstanding under
the Term Facility, respectively. The current and long-term portion of unamortized debt issuance costs associated
with the long-term debt, was $2.7 million and $3.5 million as of April 30, 2018 and 2017, respectively. The fair
value of our Term Facility is based on borrowing rates currently required of loans with similar terms, maturity and
credit risk. The carrying amount of the Term Facility approximates fair value because the base interest rate
charged varies with market conditions and the credit spread is commensurate with current market spreads for
issuers of similar risk. The fair value of the Term Facility is classified as a Level 2 liability in the fair value
hierarchy. As of April 30, 2018, we were in compliance with our debt covenants.

As of April 30, 2018 and 2017, we had no borrowings under the Revolver. The Company had a total of
$122.1 million and $122.0 million available under the Revolver after $2.9 million and $3.0 million standby letters of
credit were issued as of April 30, 2018 and 2017, respectively. We had a total of $7.4 million and $8.1 million of
standby letters of credits with other financial institutions as of April 30, 2018 and 2017, respectively. The standby
letters of credits were generally issued as a result of entering into office premise leases.

We are not aware of any other trends, demands or commitments that would materially affect liquidity or those that
relate to our resources.

54

Accounting Developments

Recently Adopted Accounting Standards

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance on accounting for certain
aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax
deficiencies to be recorded in the income statement when the awards vest or are settled. Furthermore, cash flows
related to excess tax benefits will no longer be separately classified as a financing activity apart from other income
tax cash flows. The guidance also allows companies to repurchase more of an employee’s shares for tax
withholding purposes without triggering liability accounting, clarifying that all cash payments made on an
employee’s behalf for withheld shares should be presented as a financing activity in the consolidated statements
of cash flows and provides an accounting policy election to account for forfeitures as they occur. The provisions of
the guidance are effective for fiscal years beginning after December 15, 2016 and were adopted by us effective
May 1, 2017. The primary impact of the adoption was the recognition of excess tax benefits in our provision for
income taxes in the current year compared to recording it previously as a component of equity. Additional
amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no
impact to retained earnings, where the cumulative effect of these changes are required to be recorded. We elected
to apply the presentation for cash flows related to excess tax benefits retrospectively for all periods presented
which resulted in an increase to cash provided by operations and decrease in cash provided by financing activities
of $0.1 million and $4.9 million for fiscal 2017 and 2016, respectively. The presentation requirements for cash
flows related to employee taxes paid for withheld shares had no impact on any of the periods presented on our
consolidated cash flows statements since such cash flows have historically been presented as a financing activity.
We elected to account for forfeitures as they occur, rather than estimating the expected forfeitures over the vesting
period. This election did not have an impact on our financial statements.

In March 2018, the FASB issued guidance amending accounting for the tax effects of the Tax Act. The new
guidance allows companies to complete the accounting under ASC 740 within a one-year measurement period
from the Tax Act enactment date. This update was effective upon issuance. The amounts recorded as a result of
the enactment of the Tax Act, specifically the impact of the Transition Tax and the remeasurement of deferred tax
balances, are provisional estimates. We will continue to appropriately refine these amounts within the
measurement period, which will be completed no later than December 22, 2018.

Recently Issued Accounting Standards—Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, which superseded revenue recognition requirements regarding contracts
with customers to transfer goods or services or for the transfer of nonfinancial assets. Under this new guidance, entities
are required to recognize revenue that depicts the transfer of promised goods 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
transfer is considered to occur when the customer obtains control of the goods or services delivered. The guidance
provides a five-step analysis to be performed on transactions to determine when and how revenue is recognized. The
new guidance is effective for fiscal years and interim periods within those annual years beginning after December 15,
2017. We will adopt this guidance in our fiscal year beginning May 1, 2018.

We organized a team and developed a project plan to guide the implementation. The project plan included working
sessions to review, evaluate and document the arrangements with customers under our various reporting units to
identify potential differences that would result from applying the requirements of the new standard.

We completed our evaluation of the impact of ASU 2014-09 for all our revenue streams and selected the modified
retrospective method as the transition method, which will include a cumulative-effect adjustment as of the date of
adoption. The impact to recruitment process outsourcing, advisory and products revenue is not material, although
there will be minor process changes to comply with ASU 2014-09. As to executive search and recruitment for
non-executive professionals, the implementation of ASU 2014-09 will result in timing differences in the recognition
of uptick revenue (uptick revenue occurs when a placement’s actual compensation is higher than the original
estimated compensation). Currently we recognize uptick revenue as the amount becomes fixed and determinable.
Under ASU 2014-09, however, upticks are considered variable consideration and we will be required to estimate
upticks at contract inception and recognize the revenue over the service period.

55

In February 2016, the FASB issued guidance on accounting for leases that generally requires all leases to be
recognized on the consolidated balance sheet. The provisions of the guidance are effective for fiscal years
beginning after December 15, 2018 and early adoption is permitted. We plan to adopt this guidance in fiscal year
beginning May 1, 2019. The provisions of the guidance are to be applied using a modified retrospective approach.
We are still evaluating the effect this guidance will have on the consolidated financial statements. Based on our
initial assessment, we expect that upon adoption we will report an increase in assets and liabilities on our
consolidated balance sheet as a result of recognizing right-of-use assets and lease liabilities related to lease
agreements.

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments in the
statement of cash flows. The new guidance provides clarification on specific cash flow issues regarding
presentation and classification in the statement of cash flows with the objective of reducing the existing diversity in
practice. The amendments in this update are effective for reporting periods beginning after December 15, 2017,
with early adoption permitted. We plan to adopt this guidance in our fiscal year beginning May 1, 2018. The
provisions of the guidance are to be applied using a retrospective transition method. The adoption of this guidance
is not anticipated to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued guidance that clarifies the definition of a business. The new guidance assists a
company when evaluating whether transactions should be accounted for as acquisitions (disposals) of assets or
businesses. The provisions of the guidance require that if the fair value of the gross assets acquired (or disposed
of) is substantially concentrated in a single identifiable asset or a group of similar identifiable assets, then it is not a
business. The provisions of the guidance are effective for annual years beginning after December 15, 2017,
including interim periods, with early adoption permitted. We plan to adopt this guidance in our fiscal year beginning
May 1, 2018. The provisions of the guidance are to be applied prospectively. The adoption of this guidance is not
anticipated to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued guidance simplifying the test for goodwill impairment. The new guidance
simplifies the test for goodwill impairment by removing Step 2 from the goodwill impairment test. Companies will
now perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount,
recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to
perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is
necessary. The amendments of this standard are effective for goodwill impairment tests in fiscal years beginning
after December 15, 2019, with early adoption permitted for goodwill impairment tests performed after January 1,
2017. We are evaluating the adoption timeline and the effects that the standard will have on the consolidated
financial statements.

In March 2017, the FASB issued guidance that changes the presentation of net periodic pension cost and net
periodic postretirement benefit cost. The new guidance will change the presentation of net periodic benefit cost
related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be
included within the same income statement line item as other compensation costs arising from services rendered
during the period, while other components of net periodic benefit pension cost will be presented separately outside
of operating income. Additionally, only service costs may be capitalized in assets. The amendments of this
standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those
years. We will adopt this guidance in our fiscal year beginning May 1, 2018. The adoption of this standard is not
anticipated to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued guidance clarifying the scope of modification accounting for stock compensation.
The new standard provides guidance about which changes to the terms or conditions of a share-based payment
award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual
reporting periods beginning after December 15, 2017, but early adoption is permitted. We will adopt this guidance
in our fiscal year beginning May 1, 2018. The adoption of this guidance is not anticipated to have a material impact
on the consolidated financial statements.

In August 2017, the FASB issued guidance amending and simplifying accounting for hedging activities. The new
guidance will refine and expand strategies that qualify for hedge accounting and simplify the application of hedge

56

accounting in certain situations. The amendments of this standard are effective for fiscal years beginning after
December 15, 2018. We will adopt this guidance in our fiscal year beginning May 1, 2019. We are currently
evaluating the impact of adopting this guidance.

In February 2018, the FASB issued guidance that provides companies the option to reclassify stranded tax effects
within accumulated other comprehensive income (loss), net to retained earnings resulting from the Tax Act. The
new guidance requires companies to disclose whether they decided to reclassify the income tax effects of the Tax
Act from accumulated other comprehensive income (loss), net to retained earnings and to disclose a policy for
releasing the income tax effects from accumulated other comprehensive income (loss), net. The guidance is
effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. If
companies elect to reclassify the stranded tax effects the guidance allows it to be recorded in the period of
adoption or retrospectively to each period in which the effect of the Tax Act is recognized. We are currently
evaluating the impact of adopting this guidance.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a result of our global operating activities, we are exposed to certain market risks, including foreign currency
exchange fluctuations and fluctuations in interest rates. We manage our exposure to these risks in the normal
course of our business as described below.

Foreign Currency Risk

Substantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities
are translated into U.S. dollars at the rates of exchange in effect at the end of each reporting period and revenue
and expenses are translated at average rates of exchange during the reporting period. Resulting translation
adjustments are reported as a component of accumulated other comprehensive loss, net on our consolidated
balance sheets.

Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to
foreign currency gains or losses that impact our results of operations. Historically, we have not realized significant
foreign currency gains or losses on such transactions. Foreign currency losses, on an after-tax basis, included in
net income were $2.2 million and $8.7 million in fiscal 2018 and 2016, respectively. Foreign currency gains, on an
after-tax basis, included in net income were $0.2 million in fiscal 2017.

Our exposure to foreign currency exchange rates is primarily driven by fluctuations involving the following
currencies—U.S. Dollar, Canadian Dollar, Euro, Pound Sterling, Swiss Franc, Korean Won, Brazilian Real,
Singapore Dollar, Mexican Peso, Indonesian Rupiah and Indian Rupee. Based on balances exposed to fluctuation
in exchange rates between these currencies as of April 30, 2018, a 10% increase or decrease equally in the value
of these currencies could result in a foreign exchange gain or loss of $9.7 million. We have a program that
primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign
currency exposures. These foreign currency forward contracts are neither used for trading purposes nor are they
designated as hedging instruments pursuant to Accounting Standards Codification 815, Derivatives and Hedging.

Interest Rate Risk

Our exposure to interest rate risk is limited to our Term Facility and borrowings against the CSV of COLI contracts.
As of April 30, 2018, there was $238.9 million outstanding under the Term Facility. At our option, loans issued
under the Credit Facilities bear interest at either LIBOR or an alternate base rate, in each case plus the applicable
interest rate margin. The interest rate applicable to loans outstanding under the Credit Facilities may fluctuate
between LIBOR plus 1.25% per annum to LIBOR plus 2.00% per annum, in the case of LIBOR borrowings (or
between the alternate base rate plus 0.25% per annum and the alternate base rate plus 1.00% per annum, in the
alternative), based upon our total funded debt to Adjusted EBITDA ratio (as set forth in the Credit Agreement, the
“consolidated leverage ratio”) at such time. In addition, we are required to pay the lenders a quarterly fee ranging
from 0.20% to 0.35% per annum on the average daily unused amount of the Term Facility, based upon our
consolidated leverage ratio at such time and fees relating to the issuance of letters of credit. A 100 basis point
increase in LIBOR rates would have increased our interest expense by approximately $2.5 million for fiscal 2018.

57

During fiscal 2018, the average interest rate on the term loan was 2.60%. We had no borrowings under the
Revolver as of April 30, 2018.

To mitigate the interest rate risk on our Term Facility, we entered into an interest rate swap contract with an initial
notional amount of $129.8 million to hedge the variability to changes in cash flows attributable to interest rate risks
caused by changes in interest rates related to our variable rate debt. We have designated the swap as a cash flow
hedge. The notional amount is amortized so that the amount is always 50% of the principal balance of the debt
outstanding. As of April 30, 2018, the notional amount was $119.5 million. The interest rate swap agreement
matures on June 15, 2021 and locks the interest rates on 50% of our outstanding debt at 1.919%, exclusive of the
credit spread on the debt.

We had $66.7 million and $67.2 million of borrowings against the CSV of COLI contracts as of April 30, 2018 and
2017, respectively, bearing interest primarily at variable rates. The risk of fluctuations in these variable rates is
minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate which has
the effect of increasing the CSV on our COLI contracts.

Item 8. Financial Statements and Supplementary Data

See 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 Consolidated Financial Statements in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

Not applicable.

Item 9A. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this Annual Report on Form 10-K, management, our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure
controls and procedures and internal controls over financial reporting. Based on their evaluation of our
disclosure controls and procedures conducted as of the end of the period covered by this Annual Report on
Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (the “Exchange
Act”)) are effective.

b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting during the fourth fiscal quarter that have
materially affected or are reasonably likely to materially affect our internal control over financial reporting. See
Management’s Report on Internal Control Over Financial Reporting 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 Information

On June 25, 2018, Korn/Ferry International (the “Company”) filed a Certificate of Amendment to its Restated
Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to
implement amendments approved at the Company’s 2017 Annual Meeting of Stockholders that remove the
supermajority voting standard for future amendments to the Bylaws approved by the stockholders and the
supermajority voting standard to amend action by written consent right. The Certificate of Amendment became
effective immediately upon filing.

Upon the effectiveness of the Certificate of Amendment on June 25, 2018, the Restated Certificate of
Incorporation (the “Restated Certificate”) was further restated to reflect the Certificate of Amendment, a conforming
amendment to the Company’s Fourth Amended and Restated Bylaws (the “Bylaws”) became effective, and the

58

Bylaws were restated as the Fifth Amended and Restated Bylaws to reflect the conforming amendment. The
conforming amendment was to Article V, Section 7 of the Bylaws, and provides that in order for stockholders to
alter, amend or repeal the Bylaws, such action must be approved by the affirmative vote of at least the majority
vote standard set forth in Article VI of the Certificate, instead of two-thirds of the voting power of the Company’s
outstanding shares.

59

PART III.

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item will be included under the captions “The Board of Directors” and
“Section 16(a) Beneficial Ownership Reporting Compliance” and elsewhere in our 2018 Proxy Statement, and is
incorporated herein by reference. The information under the heading “Executive Officers 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,” that applies to all of our directors, officers and
employees, including our principal executive officer (who is our Chief Executive Officer), principal financial officer,
and principal accounting officer (who is our Chief Financial Officer) and senior financial officers, or persons
performing similar functions. The Code of Business Conduct and Ethics is available on the Investor Relations
portion of our website at http://ir.kornferry.com. We intend to disclose future amendments to certain provisions of
the Code of Business Conduct and Ethics and waivers of the Code of Business Conduct and Ethics granted to
executive officers and directors on our website within four business days following the date of the amendment or
waiver.

Item 11. Executive Compensation

The information required by this Item will be included under the captions “Compensation Discussion and Analysis”
and “Compensation of Executive Officers and Directors” and elsewhere in our 2018 Proxy Statement, and is
incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

The information required by this Item will be included under the caption “Security Ownership of Certain Beneficial
Owners and Management” and elsewhere in our 2018 Proxy Statement, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item will be included under the caption “Certain Relationships and Related
Transactions” and elsewhere in our 2018 Proxy Statement, and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information required by this Item will be included under the captions “Fees Paid to Ernst & Young LLP,” and
“Audit Committee Pre-Approval Policies and Procedures,” and elsewhere in our 2018 Proxy Statement, and is
incorporated herein by reference.

60

PART IV.

Item 15. Exhibits, Financial Statement Schedules

Financial Statements.

(a) The following documents are filed as part of this report:

1.

Index to Financial Statements:

See Consolidated Financial Statements included as part of this Annual Report on Form 10-K and Schedule II —
Valuation and Qualifying Accounts. Pursuant to Rule 7-05 of Regulation S-X, the other schedules have been
omitted as the information to be set forth therein is included in the notes of the audited consolidated financial
statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-1

Exhibits:

Exhibit
Number

2.1**+

Description

Agreement and Plan of Merger, dated as of December 5, 2012, by and among Korn/Ferry International, Unity
Sub, Inc., Personnel Decisions International Corporation, all of the stockholders of Personnel Decisions
International Corporation, and PDI Stockholder Representative, LLC, filed as Exhibit 2.1 to the Company’s
Current Report on Form 8-K, filed on December 6, 2012.

2.2**+

Stock Purchase Agreement by and between HG (Bermuda) Limited and Korn/Ferry International, dated as of
September 23, 2015, filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed September 24,
2015.

2.3+

2.4

3.1+

3.2

3.3

3.4

4.1+

10.1*+

10.2*+

10.3*+

10.4*+

10.5*+

10.6*+

10.7*+

10.8*+

Letter Agreement dated November 30, 2015, by and between Korn/Ferry International and HG (Bermuda)
Limited, filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed December 2, 2015.

Letter Agreement dated April 19, 2018, by and between Korn/Ferry International and HG (Bermuda) Limited.

Restated Certificate of Incorporation of the Company, dated September 27, 2013, filed as Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q, filed December 9, 2013.

Certificate of Amendment dated June 25, 2018, to the Restated Certificate of Incorporation of the Company,
dated September 27, 2013.

Restated Certificate of Incorporation of the Company dated June 25, 2018.

Fifth Amended and Restated Bylaws of the Company.

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.

Form of Indemnification Agreement between the Company and some of its executive officers and directors,
filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1/A (No. 333-61697), filed
December 24, 1998.

Form of U.S. and International Worldwide Executive Benefit Retirement Plan, filed as Exhibit 10.3 to the
Company’s Registration Statement on Form S-1/A (No. 333-61697), filed September 4, 1998.

Form of U.S. and International Worldwide Executive Benefit Life Insurance Plan, filed as Exhibit 10.4 to the
Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.

Worldwide Executive Benefit Disability Plan (in the form of Long-Term Disability Insurance Policy), filed as
Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.

Form of U.S. and International Enhanced Executive Benefit and Wealth Accumulation Plan, filed as Exhibit 10.6
to the Company’s Registration Statement on Form S-1 (No. 333-61697), filed September 4, 1998.

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), filed September 4, 1998.

Executive Salary Continuation Plan, filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1
(No. 333-61697), filed September 4, 1998.

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), filed September 4, 1998.

61

Exhibit
Number
10.9*+

10.10*+

10.11*+

10.12*+

10.13*+

10.14*+

10.15*+

10.16*+

10.17*+

10.18*+

10.19*+

10.20*+

10.21*+

10.22*+

10.23*+

10.24*+

10.25*+

10.26*+

10.27*+

10.28*+

10.29*+

10.30+

10.31+

Description

Form of Standard Employment Agreement, filed as Exhibit 10.11 to the Company’s Registration Statement on
Form S-1 (No. 333-61697), filed September 4, 1998.

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), filed September 4, 1998.

Korn/Ferry International Second Amended and Restated Performance Award Plan, filed as Appendix A to the
Company’s Definitive Proxy Statement, filed August 12, 2004.

Form of Indemnification Agreement between the Company and some of its executive officers and directors,
filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed March 12, 2004.

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.

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.

Employment Agreement between the Company and Gary Burnison, dated April 24, 2007, filed as Exhibit 10.41
to the Company’s Annual Report on Form 10-K, filed June 29, 2007.

Form of Restricted Stock Unit Award Agreement to Directors Under the Performance Award Plan, filed as
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed December 10, 2007.

Form of Stock Option Agreement to Employees and Non-Employee Directors Under the Korn/Ferry
International 2008 Stock Incentive Plan, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K,
filed June 12, 2009.

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.

Letter Agreement between the Company and Gary D. Burnison dated June 25, 2009, filed as Exhibit 10.51 to
the Company’s Annual Report on Form 10-K, filed June 29, 2009.

Letter Agreement between the Company and Byrne Mulrooney dated March 5, 2010, filed as Exhibit 10.40 to
the Company’s Annual Report on Form 10-K, filed June 29, 2010.

Korn/Ferry International Amended and Restated Employee Stock Purchase Plan, filed as Exhibit 99.1 to the
Company’s Registration Statement on Form S-8 (No. 333-200840), filed December 10, 2014.

Employment Agreement between the Company and Robert Rozek, filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K, filed February 21, 2012.

Second Amended and Restated Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed October 2, 2012.

Form of Restricted Stock Unit Award Agreement to Non-Employee Directors Under the 2008 Stock Incentive
Plan, filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K, filed June 25, 2013.

Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as
Exhibit 10.39 to the Company’s Annual Report on Form 10-K, filed June 25, 2013.

Letter Agreement between the Company and Byrne Mulrooney dated June 26, 2014, filed as Exhibit 10.33 to
the Company’s Annual Report on Form 10-K, filed June 27, 2014.

Amended and Restated Employment Agreement dated July 25, 2014 between Korn/Ferry International and
Gary Burnison, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed August 1, 2014.

Amended and Restated Korn/Ferry International Executive Capital Accumulation Plan, as of August 13, 2014,
filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed December 10, 2014.

Form of Indemnification Agreement between the Company and some of its directors and executive officers,
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 15, 2015.

Credit Agreement with Wells Fargo Bank, National Association, as lender, dated January 18, 2013, filed as
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed September 9, 2015.

Amendment No. 1 to Credit Agreement with Wells Fargo Bank, National Association, as lender, dated
December 12, 2014, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed September 9,
2015.

62

Exhibit
Number
10.32^+

10.33+

10.34+

10.35*+

10.36+

10.37*+

10.38*+

10.39*+

10.40*+

10.41*+

10.42*+

10.43*+

10.44*+

10.45*+

10.46*+

21.1

23.1

24.1

31.1

31.2

32.1

Description

Amendment No. 2 to Credit Agreement with Wells Fargo Bank, National Association, as lender, dated June 3,
2015, filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed September 9, 2015.

Amendment No. 3 to Credit Agreement with Wells Fargo Bank, National Association, as lender, dated
September 23, 2015, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed September 24,
2015.

Amendment No. 4 to Credit Agreement with Wells Fargo Bank, National Association, as lender, dated
November 20, 2015, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed December 10,
2015.

Amendment to Employment Agreement dated December 28, 2015 between the Company and Robert Rozek,
filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed March 10, 2016.

Credit Agreement dated June 15, 2016, with Wells Fargo Bank, National Association, as administrative agent
and other lender parties, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 17,
2016.

Korn/Ferry International Long Term Performance Unit Plan, filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed July 14, 2016.

Korn/Ferry International Long Term Performance Unit Plan Form of Unit Award Agreement, filed as Exhibit 10.2
to the Company’s Current Report on Form 8-K, filed July 14, 2016.

Third Amended and Restated Korn/Ferry International 2008 Stock Incentive Plan, filed as Exhibit 10.1 to the
Company’s Form 8-K filed on October 12, 2016.

Summary of Non-Employee Director Compensation Program Effective December 7, 2016, filed as Exhibit 10.1
to the Company’s 10-Q, filed March 10, 2017.

Letter Agreement between the Company and Mark Arian, dated March 17, 2017, filed as Exhibit 10.48 to the
Company’s Annual Report on Form 10-K, filed June 28, 2017.

Form of Restricted Stock Unit Award Agreement to Non-Employee Directors Under the 2008 Stock Incentive
Plan, filed as Exhibit 10.50 to the Company’s Annual Report on Form 10-K.

Form of Performance Restricted Stock Unit Award Agreement Under the 2008 Stock Incentive Plan, filed as
Exhibit 10.51 to the Company’s Annual Report on Form 10-K, filed June 28, 2017.

Form of Restricted Stock Unit Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as
Exhibit 10.52 to the Company’s Annual Report on Form 10-K, filed June 28, 2017.

Form of Restricted Stock Award Agreement to Employees Under the 2008 Stock Incentive Plan, filed as Exhibit
10.53 to the Company’s Annual Report on Form 10-K, filed June 28, 2017.

Amended and Restated Employment Agreement dated March 30, 2018 between the Company and Gary
Burnison, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 4, 2018.

Subsidiaries of Korn/Ferry International.

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

Power of Attorney (contained on signature page).

Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.

Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.

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.

63

*

**

^

+

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 the Securities and Exchange Commission upon request.

Confidential treatment was granted for portions of this exhibit which have been filed separately with the Securities and
Exchange Commission.

Incorporated herein by reference.

Item 16. Form 10-K Summary

None

64

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

By: /s/ Robert P. Rozek
Robert P. Rozek
Executive Vice President, Chief Financial Officer and Chief Corporate Officer

Korn/Ferry International

Date: June 28, 2018

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of the registrant
hereby constitutes and appoints Jonathan 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 substitution and 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 Exchange Commission under the Securities Exchange Act of 1934, as amended, any and all amendments,
supplements and exhibits to this report and any and all other documents in connection therewith, hereby granting
unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and
thing necessary or desirable to be done in order to effectuate the same as fully and to all intents and purposes as
each of the undersigned might or could 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 or cause 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 behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ GEORGE T. SHAHEEN
George T. Shaheen
/s/ GARY D. BURNISON
Gary D. Burnison
/s/ ROBERT P. ROZEK
Robert P. Rozek

/s/ DOYLE N. BENEBY
Doyle N. Beneby
/s/ WILLIAM R. FLOYD
William R. Floyd
/s/ CHRISTINA A. GOLD
Christina A. Gold
/s/ JERRY LEAMON
Jerry Leamon
/s/ ANGEL MARTINEZ
Angel Martinez
/s/ DEBRA J. PERRY
Debra J. Perry

Chairman of the Board and Director

June 28, 2018

June 28, 2018

June 28, 2018

June 28, 2018

June 28, 2018

June 28, 2018

June 28, 2018

June 28, 2018

June 28, 2018

President & Chief Executive Officer
(Principal Executive Officer) and Director

Executive Vice President, Chief Financial Officer and
Chief Corporate Officer
(Principal Financial Officer and Principal Accounting Officer)

Director

Director

Director

Director

Director

Director

65

[THIS PAGE INTENTIONALLY LEFT BLANK]

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2018

Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting . . . . . . . . . . . .

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets as of April 30, 2018 and 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income for the years ended April 30, 2018, 2017 and 2016 . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income for the years ended April 30, 2018, 2017 and 2016 . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the years ended April 30, 2018, 2017 and 2016 . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the years ended April 30, 2018, 2017 and 2016 . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Statements Schedule II – Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-2

F-3

F-4

F-5

F-6

F-7

F-8

F-9

F-10

F-47

F-1

MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Korn/Ferry International (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting 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, and effected
by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and 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 records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts 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 could
have 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 of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with 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 the effectiveness of the Company’s internal control over financial reporting as of
April 30, 2018 based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an
evaluation of the design of the Company’s internal control over financial reporting and testing of the operational
effectiveness of the Company’s internal control over financial reporting.

Based on this assessment, management did not identify any material weakness in the Company’s internal control
over financial reporting, and management has concluded that the Company’s internal control over financial
reporting was effective as of April 30, 2018.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial
statements for the year ended April 30, 2018 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 reporting as of April 30, 2018, a copy of
which is included in this Annual Report on Form 10-K.

June 28, 2018

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Stockholders and Board of Directors of Korn/Ferry International
Opinion on Internal Control over Financial Reporting

We have audited Korn/Ferry International and subsidiaries’ internal control over financial reporting as of April 30,
2018, based on criteria established in Internal Control— Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion,
Korn/Ferry International and subsidiaries (the Company) maintained, in all material respects, effective internal
control over financial reporting as of April 30, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of April 30, 2018 and 2017, 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, 2018 and the related notes and the financial statement schedule
listed in the index at Item 15(a) and our report dated June 28, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal 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 as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/Ernst & Young LLP

Los Angeles, California

June 28, 2018

F-3

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Korn/Ferry International

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Korn/Ferry International and subsidiaries (the
“Company”) as of April 30, 2018 and 2017, 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, 2018 and the related
notes and the financial statement schedule listed in the index at Item 15(a) (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at April 30, 2018 and 2017, and the results of their
operations and their cash flows for each of the three years in the period ended April 30, 2018, in conformity with
U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of April 30, 2018, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated June 28, 2018 expressed an
unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.

/s/Ernst & Young LLP

We have served as the Company’s auditor since 2002

Los Angeles, California

June 28, 2018

F-4

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

April 30,

2018

2017

(in thousands,
except per share data)

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables due from clients, net of allowance for doubtful accounts of $17,845 and $15,455,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash surrender value of company owned life insurance policies, net of loans . . . . . . . . . . . . . .
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

520,848 $
14,293

384,996
29,089
65,033

1,014,259
122,792
119,901
120,087
25,520
584,222
203,216
97,917

410,882
4,363

345,314
31,573
51,542

843,674
115,574
109,567
113,067
20,175
576,865
217,319
66,657

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2,287,914 $

2,062,898

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation and benefits payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and other retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan, non-current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35,196 $
23,034
304,980
24,911
170,339

558,460
227,729
211,311
9,105
61,694

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,068,299

37,481
4,526
248,354
19,754
148,464

458,579
219,905
236,222
7,014
54,130

975,850

Commitments and contingencies

Stockholders’ equity:
Common stock: $0.01 par value, 150,000 shares authorized, 71,631 and 70,811 shares

issued at April 30, 2018 and 2017, respectively, and 56,517 and 56,938 shares outstanding
at April 30, 2018 and 2017, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

683,942
572,800
(40,135)

692,527
461,976
(71,064)

Total Korn/Ferry International stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,216,607
3,008

1,083,439
3,609

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,219,615

1,087,048

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2,287,914 $

2,062,898

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

F-5

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Year Ended April 30,

2018

2017

2016

(in thousands, except per share data)

Fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reimbursed out-of-pocket engagement expenses . . . . . . . . . . . . . . . . .

1,767,217 $
52,302

1,565,521 $
56,148

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,819,519

1,621,669

Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursed expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest (expense) income, net

Income before provision for income taxes and

equity in earnings of unconsolidated subsidiaries . . . . . . . . . . . . . .
Equity in earnings of unconsolidated subsidiaries, net
. . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interest . . . . . . . . . . . . . . . .

1,203,619
237,390
52,302
73,658
48,588
78

1,615,635

203,884
11,525
(9,676)

205,733
297
70,133

135,897
(2,118)

Net income attributable to Korn/Ferry International . . . . . . . . . . . . . . . . . $

133,779 $

1,071,507
226,232
56,148
71,482
47,260
34,600

1,507,229

114,440
11,820
(10,251)

116,009
333
29,104

87,238
(3,057)

84,181 $

Earnings per common share attributable to Korn/Ferry International:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2.39 $

2.35 $

1.48 $

1.47 $

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,426

56,254

56,205

56,900

1,292,112
54,602

1,346,714

897,345
213,018
54,602
59,824
36,220
33,013

1,294,022

52,692
(4,167)
237

48,762
1,631
18,960

31,433
(520)

30,913

0.58

0.58

52,372

52,929

Cash dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.40 $

0.40 $

0.40

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

F-6

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended April 30,

2018

2017

2016

(in thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

135,897 $

87,238 $

31,433

Other comprehensive income:

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and pension plan adjustments, net of tax . . . . . . . . . . . .
Unrealized losses on marketable securities, net of tax . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain (loss) on interest rate swap, net of tax . . . . . . . . . . . . . . . . . .

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .

Less: comprehensive income attributable to noncontrolling interest

22,900
6,054
—
1,915

166,766
(2,058)

(19,266)
6,445
—
(578)

73,839
(2,811)

(15,428)
(1,864)
(4)
—

14,137
(512)

Comprehensive income attributable to Korn/Ferry International

. . . . . . . . . . . . . . . $

164,708 $

71,028 $

13,625

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

F-7

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Shares

Amount

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss)
Income, Net

Total
Korn/Ferry
International
Stockholders’
Equity

(in thousands)

Noncontrolling
Interest

Total

50,573 $ 463,839 $

392,033 $

(40,623) $

815,249 $

— $

815,249

—
—

—
—

—
30,913

—
(17,288)

1,489
512

1,489
14,137

—
—
—
—

—

(21,833)
(7,410)
222,456
18,305

4,908

2,001
2,811

1,047,301
73,839

—

(23,318)

(1,203)
—
—
—

(1,203)
(33,579)
5,886
18,045

—

3,609
2,058

77

1,087,048
166,766

—

(22,955)

(2,659)
—
—
—

(2,659)
(36,865)
7,998
20,282

Balance at May 1, 2015 . . . . .
Acquisition of noncontrolling

interest in Mexico . . . . . . . . .
Comprehensive income . . . . . .
Dividends paid to

shareholders . . . . . . . . . . . . .
Purchase of stock . . . . . . . . . . .
Issuance of stock . . . . . . . . . . .
Stock-based compensation . . .
Tax benefit from exercise of

stock options and vesting of
restricted stock . . . . . . . . . . .

Balance at April 30, 2016 . . . .
Comprehensive income . . . . . .
Dividends paid to

—
(215)
6,914
—

—
(7,410)
222,456
18,305

(21,833)
—
—
—

—

4,908

57,272
—

702,098
—

—

401,113
84,181

shareholders . . . . . . . . . . . . .

—

—

(23,318)

Dividends paid to

noncontrolling interest

. . . . .
Purchase of stock . . . . . . . . . . .
Issuance of stock . . . . . . . . . . .
Stock-based compensation . . .
Tax benefit from exercise of

stock options and vesting of
restricted stock . . . . . . . . . . .

Balance at April 30, 2017 . . . .
Comprehensive income . . . . . .
Dividends paid to

—
(1,346)
1,012
—

—
(33,579)
5,886
18,045

—

56,938
—

77

692,527
—

—
—
—
—

—

—
13,625

(21,833)
(7,410)
222,456
18,305

4,908

1,045,300
71,028

(23,318)

—
(33,579)
5,886
18,045

77

—
—
—
—

—

(57,911)
(13,153)

—

—
—
—
—

—

461,976
133,779

(71,064)
30,929

1,083,439
164,708

shareholders . . . . . . . . . . . . .

—

—

(22,955)

Dividends paid to

noncontrolling interest

. . . . .
Purchase of stock . . . . . . . . . . .
Issuance of stock . . . . . . . . . . .
Stock-based compensation . . .

—
(1,092)
671
—

—
(36,865)
7,998
20,282

—
—
—
—

—

—
—
—
—

(22,955)

—
(36,865)
7,998
20,282

Balance at April 30, 2018 . . . .

56,517 $ 683,942 $

572,800 $

(40,135) $

1,216,607 $

3,008 $ 1,219,615

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

F-8

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on cash surrender value of life insurance policies . . . . . . . . . . . . . . . . . . . .
(Gain) loss on marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in other assets and liabilities, net of effect of acquisitions:

Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables due from clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from investing activities:

Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales/maturities of marketable securities . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisitions, net of cash acquired and earnout . . . . . . . . . . . . . . . . .
Acquisition of Mexico subsidiary, net of cash acquired . . . . . . . . . . . . . . . . . . . . . .
Premiums on company-owned life insurance policies . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from life insurance policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received from unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:

Proceeds from term loan facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payment on term loan facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of contingent consideration from acquisition . . . . . . . . . . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of tax withholdings on restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock upon exercise of employee stock
options and in connection with an employee stock purchase plan . . . . . . . . . . . . .
Dividends – noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on life insurance policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Year Ended April 30,

2018

2017

2016

(in thousands)

135,897 $

87,238 $

31,433

48,588
21,469
13,675
(7,776)
(10,278)
(6,564)

27,660
(53,357)
2,093
(13,491)
(297)
32,439
66,081
(37,014)
219,125

(42,000)
(9,462)
2,642
—
—
(1,614)
5,355
240
(44,839)

—
(20,625)
(485)
(33,071)
(3,794)

6,885
(2,659)
(22,955)
(554)
(77,258)
12,938
109,966
410,882
520,848 $

47,260
18,958
12,987
(4,918)
(10,842)
6,589

6,868
(42,326)
(10,177)
(8,485)
(333)
205
5,420
(2,303)
106,141

(50,088)
(10,536)
42,815
(2,880)
—
(1,597)
1,117
564
(20,605)

275,000
(155,469)
(1,070)
(28,821)
(4,758)

5,121
(1,203)
(23,318)
(1,117)
64,365
(12,271)
137,630
273,252
410,882 $

36,220
18,895
8,570
(3,984)
3,333
(13,792)

(4,605)
(16,622)
(191)
(6,310)
(1,631)
686
18,862
(1,875)
68,989

(26,144)
(30,397)
30,066
(256,082)
3,973
(1,623)
3,256
2,373
(274,578)

150,000
(10,000)
—
—
(7,410)

4,038
—
(21,833)
(1,251)
113,544
(15,541)
(107,586)
380,838
273,252

Supplemental cash flow information:

Cash used to pay interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

11,946 $

10,882 $

5,154

Cash used to pay income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . $

37,486 $

32,458 $

33,189

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

F-9

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018

1. Organization and Summary of Significant Accounting Policies

Nature of Business

Korn/Ferry International, a Delaware corporation (the “Company”), and its subsidiaries are engaged in the
business of providing talent management solutions, including executive search on a retained basis, recruitment for
non-executive professionals, recruitment process outsourcing (“RPO”) and leadership & talent consulting services.

Basis of Consolidation and Presentation

The consolidated financial statements include the accounts of the Company and its wholly and majority owned/
controlled domestic and international subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation. The preparation of the consolidated financial statements conform with United States
(“U.S.”) generally accepted accounting principles (“GAAP”). The consolidated financial statements include all
adjustments, consisting of normal recurring accruals and any other adjustments that management considers
necessary for a fair 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, are accounted for using the equity method. Dividends received from our unconsolidated
subsidiaries were approximately $0.2 million, $0.6 million and $2.4 million during fiscal 2018, 2017 and 2016,
respectively.

In the fourth quarter of fiscal 2016, we obtained control of our Mexico subsidiary and began to consolidate the
operations. Noncontrolling interest in our Mexico subsidiary is reflected on the Company’s consolidated financial
statements for fiscal 2018, 2017 and 2016.

The Company considers events or transactions that occur after the balance sheet date but before the consolidated
financial statements are issued to provide additional evidence relative to certain estimates or to identify matters
that require additional disclosures.

Use of Estimates and Uncertainties

The preparation of the consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these estimates, and changes in estimates
are reported in current operations as new information is learned or upon the amounts becoming fixed and
determinable. The most significant areas that require management judgment are revenue recognition,
restructuring, deferred compensation, annual performance related bonuses, evaluation of the carrying value of
receivables, goodwill and other intangible assets, fair value of contingent consideration, share-based payments
and the recoverability of deferred income taxes.

Revenue Recognition

Substantially all fee revenue is derived from fees for professional services related to executive search performed
on a retained basis, recruitment for non-executive professionals, recruitment process outsourcing, people and
organizational advisory services and the sale of product services. Fee revenue from executive search activities
and recruitment for non-executive professionals is generally one-third of the estimated first year compensation of
the placed executive or non-executive professional, as applicable, plus a percentage of the fee to cover indirect
engagement related expenses. The Company generally recognizes such revenue on a straight-line basis over a
three-month period, commencing upon client acceptance, as this is the period over which the recruitment services
are performed. Fees earned in excess of the initial contract amount are recognized upon completion of the

F-10

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

engagement, which reflect the difference between the final actual compensation of the placed executive and the
estimate used for purposes of the previous billings. Since the initial contract fees are typically 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. Any revenues associated with services that are provided on a contingent basis are recognized once the
contingency is resolved. In addition to recruitment for non-executive professionals, Futurestep provides RPO
services and fee revenue is recognized as services are rendered and/or as milestones are achieved. Fee revenue
from Hay Group (formerly known as Leadership & Talent Consulting (“Legacy LTC”) which was combined with HG
(Luxembourg) S.à.r.l (“Legacy Hay”) in December 2015) is recognized as services are rendered for consulting
engagements and other time-based services, measured by total hours incurred to the total estimated hours at
completion. It is possible that 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. Hay Group revenue is also derived
from the sale of product services, which includes revenue from licenses and from the sale of products. Revenue
from licenses is recognized using a straight-line method over the term of the contract (generally 12 months). Under
the fixed term licenses, the Company is obligated to provide the licensee with access to any updates to the
underlying intellectual property (“IP”) that are made by the Company during the term of the license. Once the term
of the agreement expires, the client’s right to access or use the IP expires and the Company has no further
obligations to the client under the license agreement. Revenue from perpetual licenses is recognized when the
license is sold since the Company’s only obligation is to provide the client access to the IP but is not obligated to
provide maintenance, support, updates or upgrades. 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 case of books. As of April 30, 2018 and 2017, the Company included deferred revenue of
$120.1 million and $95.8 million, respectively, in other accrued liabilities.

Reimbursements

The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as
revenue in its consolidated statements of income.

Allowance for Doubtful Accounts

An allowance is established for doubtful accounts by taking a charge to general and administrative expenses. The
amount of the allowance is based on historical loss experience, assessment of the collectability of specific
accounts, as well as expectations of future collections based upon trends and the type of work for which services
are rendered. After the Company exhausts all collection efforts, the amount of the allowance is reduced for
balances identified as uncollectible.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash
equivalents. As of April 30, 2018 and 2017, the Company’s investments in cash equivalents, consist of money
market funds for which market prices are readily available.

Marketable Securities

The Company currently has investments in mutual funds that are classified as trading securities based upon
management’s intent and ability to hold, sell or trade such securities. The classification of the investments in
mutual funds is assessed upon purchase and reassessed at each reporting period. The investments in mutual
funds (for which market prices are readily available) are held in trust to satisfy obligations under the Company’s
deferred compensation plans. 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 a pre-determined set of securities and the Company invests in marketable securities to mirror these
elections. These investments are recorded at fair value and are classified as marketable securities in the

F-11

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

accompanying consolidated balance sheets. The investments that the Company may sell within the next twelve
months are carried as current assets. Realized gains (losses) on marketable securities are determined by specific
identification. Interest is recognized on an accrual basis, dividends are recorded as earned on the ex-dividend
date. Interest, dividend income and the changes in fair value in trading securities are recorded in the
accompanying consolidated statements of income in other income (loss), net.

Fair Value of Financial Instruments

Fair value is the price the Company would receive to sell an asset or transfer a liability (exit price) in an orderly
transaction between market participants. For those assets and liabilities recorded or disclosed at fair value, the
Company determines the fair value based upon the quoted market price, if available. If 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
values are 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.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar 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, 2018 and 2017, 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, marketable securities and foreign
currency forward contracts and an interest rate swap. The carrying amount of cash, cash equivalents and
accounts receivable approximates fair value due to the short maturity of these instruments. The fair values of
marketable securities classified as trading are obtained from quoted market prices, and the fair values of foreign
currency forward contracts or the interest rate swap are obtained from a third party, which are based on quoted
prices or market prices for similar assets and financial instruments.

Derivative Financial Instruments

The Company is exposed to interest rate risk due to the outstanding senior secured credit agreement entered on
June 15, 2016. The Company entered into an interest rate swap agreement to effectively convert its variable debt
to a fixed-rate basis. The principal objective of this contract is to eliminate or reduce the variability of the cash
flows in interest payments associated with the Company’s long-term debt, thus reducing the impact of interest rate
changes on future interest payment cash flows. The Company has determined that the interest rate swap qualifies
as a cash flow hedge in accordance with Accounting Standards Codification 815, Derivatives and Hedging.
Changes in the fair value of an interest rate swap agreement designated as a cash flow hedge are recorded as a
component of accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ equity and are
amortized to interest expense over the term of the related debt.

Foreign Currency Forward Contracts Not Designated as Hedges

The Company has established a program that primarily utilizes foreign currency forward contracts to offset the
risks associated with the effects of certain foreign currency exposures primarily originating from intercompany
balances due to cross border work performed in the ordinary course of business. These foreign currency forward
contracts are neither used for trading purposes nor are they designated as hedging instruments pursuant to
Accounting Standards Codification 815, Derivatives and Hedging. Accordingly, the fair value of these contracts is
recorded as of the end of the reporting period in the accompanying consolidated balance sheets, while the change
in fair value is recorded to the accompanying consolidated statements of income.

Business Acquisitions

Business 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 noncontrolling interest in the acquired entity, and recognize and

F-12

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated
financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair
values and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value
of the assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded.
Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not
longer than twelve months). The acquisition method also requires that acquisition-related transaction and post-
acquisition restructuring costs be charged to expense as committed and requires the Company to recognize and
measure certain assets and liabilities including those arising from contingencies and contingent consideration in a
business combination.

Property and Equipment, Net

Property and equipment is carried at cost less accumulated depreciation. Leasehold improvements are amortized
on a straight-line basis over the estimated 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 and
equipment 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 may not be recoverable. In fiscal 2018, 2017 and 2016, there were no such
impairment charges recorded.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill
impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the
carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered
impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is
compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same
manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting
unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal
to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using
a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the
discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable
market data such as 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). Results of the annual impairment test performed as of
January 31, 2018, indicated that 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, no impairment charge was recognized. There
was also no indication of potential impairment during the fourth quarter of fiscal 2018 that would have required
further testing.

Intangible assets primarily consist of customer lists, non-compete agreements, proprietary databases, IP and
trademarks and are recorded 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 reliably determined 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 the intangible assets is considered not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from use of the asset. Intangible assets with indefinite lives are not
amortized but are reviewed annually for impairment or more frequently whenever events or changes in
circumstances indicate that the fair value of the asset may be less than its carrying amount. As of April 30, 2018
and 2017, there were no indicators of impairment with respect to the Company’s intangible assets.

Compensation and Benefits Expense

Compensation 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

F-13

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

administrative and support personnel. The most significant portions of this expense are salaries and the amounts
paid under the annual performance related bonus plan to employees. The portion of the expense applicable to
salaries is comprised of amounts earned by employees during a reporting period. The portion of the expenses
applicable to annual performance related bonuses refers to the Company’s annual employee performance related
bonus with respect to a fiscal year, the amount of which is communicated and paid to each eligible employee
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 other performance/profitability metrics for
Hay Group and Futurestep consultants), the level of engagements referred by a consultant in one line of business
to a different line of business, Company performance including profitability, competitive forces and future economic
conditions and their impact on the Company’s results. At the end of each fiscal year, annual performance related
bonuses take into account final individual consultant productivity (including referred work), Company/line of
business results including profitability, the achievement of strategic objectives and the results of individual
performance appraisals, and the current economic landscape. Accordingly, each quarter the Company reevaluates
the assumptions used to estimate annual performance related bonus liability and adjusts the carrying 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
changes in the bonus estimate historically have been immaterial and are recorded in current operations in the
period in which they are determined. The performance related bonus expense was $220.4 million, $179.6 million
and $186.5 million for the years ended April 30, 2018, 2017 and 2016, 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 in cash surrender value (‘CSV’) of company owned life insurance (“COLI”)
contracts, amortization of stock compensation awards, payroll taxes and employee insurance benefits.
Investments and other assets include long-term retention awards that are generally amortized over four to five
years.

Deferred Compensation and Pension Plans

For financial accounting purposes, the Company estimates the present value of the future benefits payable under
the deferred compensation and pension plans as of the estimated payment commencement date. The Company
also estimates the remaining number of years a participant will be employed by the Company. Then, each year
during the period of estimated employment, the Company accrues a liability and recognizes expense for a portion
of the future benefit using the unit credit cost method for Senior Executive Incentive Plan (“SEIP”), Wealth
Accumulation Plan (“WAP”), Enhanced Wealth Accumulation Plan (“EWAP”) and the Worldwide Executive Benefit
Plan (“WEB”) and the pension plan acquired under Legacy Hay, while the medical and life insurance plan and
Long Term Performance Unit Plan (“LTPU Plan”) uses the projected unit credit cost method. The amounts charged
to operations are made up of service and interest costs and the expected return on plan assets. Actuarial gains
and losses are initially recorded in accumulated other comprehensive income (loss). The actuarial gains/losses
included in accumulated other comprehensive income are amortized to the consolidated statements of income, if
at the beginning of the year, the amount exceeds 10% of the greater of the projected benefit obligation and
market-related plan assets. The amortization included in periodic benefit cost is divided by the average remaining
service of inactive plan participants, or the period for which benefits will be paid, if shorter. The expected return on
plan assets takes into account the current fair value of plan assets and reflects the Company’s estimate for trust
asset returns given the current asset allocation and any expected changes to the asset allocation and current and
future market conditions.

In calculating the accrual for future benefit payments, management has made assumptions regarding employee
turnover, participant vesting, violation of non-competition provisions and the discount rate. Management

F-14

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

periodically reevaluates all assumptions. If assumptions change in future reporting periods, the changes may
impact the measurement and recognition of benefit liabilities and related compensation expense.

Executive Capital Accumulation Plan

The Company, under the ECAP makes discretionary contributions and such contributions may be granted to key
employees annually 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 to five-year period. The amounts that are expected to be paid to
employees over the next 12 months are classified as a current liability included in compensation and benefits
payable in the accompanying consolidated balance sheets.

The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants
are adjusted with a corresponding charge (or credit) to compensation and benefits costs.

Cash Surrender Value of Life Insurance

The Company purchased COLI policies or contracts insuring the lives of certain employees eligible to participate in
certain of the deferred compensation and pension plans as a means of funding benefits under such plans. The
Company purchased both fixed and variable life insurance contracts and does not purchase “split-dollar” life
insurance policy contracts. The Company historically has had both contracts or policies that provide for a fixed or
guaranteed rate of return and a variable rate of return depending on the return of the policies’ investment in their
underlying portfolio in equities and bonds. Beginning in fiscal 2017 the Company currently only holds contracts or
policies that provide for a fixed or guaranteed rate of return. The CSV of these COLI contracts are carried at the
amounts that would be realized if the contract were surrendered at the balance sheet date, net of the outstanding
loans from the insurer. The Company has the intention and ability to continue to hold these COLI policies 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 the loans outstanding on these policies until death benefits under the
policy have been realized. Accordingly, the investment in COLI is classified as long-term in the accompanying
consolidated balance sheets.

The change in the CSV of COLI contracts, net of insurance premiums paid and gains realized, is reported in
compensation and benefits expense. As of April 30, 2018 and 2017, the Company held contracts with gross CSV
of $186.8 million and $180.3 million, offset by outstanding policy loans of $66.7 million and $67.2 million,
respectively. If the issuing insurance companies were to become insolvent, the Company would be considered a
general creditor for $120.1 million and $61.3 million of net CSV as of April 30, 2018 and 2017, 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, Net

The Company accounts for its restructuring charges as a liability when the obligations are incurred and records
such charges at fair value. Such charges include one-time employee termination benefits and cost to terminate
leases, including remaining lease payments. Changes in the estimates of the restructuring charges are recorded in
the period the change is determined.

Stock-Based Compensation

The Company has employee compensation plans under which various types of stock-based instruments are
granted. These instruments principally include restricted stock units, restricted stock and an Employee Stock
Purchase Plan (“ESPP”). The Company recognizes compensation expense related to restricted stock units,
restricted stock and the estimated fair value of stock purchases under the ESPP on a straight-line basis over the
service period for the entire award.

Translation of Foreign Currencies

Generally, financial results of the Company’s foreign subsidiaries are measured in their local currencies. Assets
and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while revenue

F-15

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

and expenses are translated at weighted-average exchange rates during the fiscal year. Resulting translation
adjustments are recorded as a component of accumulated comprehensive income. Gains and losses from foreign
currency transactions of the Company’s foreign subsidiaries and the translation of the financial results of
subsidiaries operating in highly inflationary economies are included in general and administrative expense in the
period incurred. Foreign currency losses, on an after-tax basis, included in net income were $2.2 million and
$8.7 million during fiscal 2018 and 2016, respectively. Foreign currency gains, on an after-tax basis, included in
net income were $0.2 million during fiscal 2017.

On February 17, 2016, the Venezuelan government announced a devaluation of the Bolivar, from the official
exchange rate of 6.3 Bolivars per USD to 10.0 Bolivars per USD and streamlined the previous three-tiered
currency exchange mechanism into a dual currency exchange mechanism. The weaker of the two rates is a free-
floating exchange rate that at the time of its introduction, sold dollars at approximately 200 Bolivars per USD. The
economic and political environment in Venezuela has continued to deteriorate and the currency exchange
restrictions have become more onerous. The Company had used the previously prevailing official exchange rate of
6.3 Bolivars per USD to re-measure our Venezuelan subsidiary’s financial statements in previous periods, but after
careful consideration, at the time of the devaluation, the Company decided to adopt the free-floating exchange rate
during the fourth quarter of fiscal 2016 as it more appropriately reflects the ability to convert Bolivars to U.S. dollars
given the deteriorating environment in Venezuela. The devaluation of the Bolivar to approximately 260 Bolivars per
USD resulted in a pre-tax charge of $13.7 million, or diluted loss per share of $0.26 during fiscal 2016. In fiscal
2018 and 2017, the Bolivar continued to weaken but did not materially impact our results of operations.

Income Taxes

There are two components of income tax expense: current and deferred. Current income tax expense (benefit)
approximates taxes to be paid or refunded for the current period. Deferred income tax expense (benefit) results
from changes in deferred tax assets and liabilities between periods. These gross deferred tax assets and liabilities
represent decreases or increases in taxes expected to be paid in the future because of future reversals of
temporary differences in the basis of assets and liabilities as measured by tax laws and their basis as reported in
the consolidated financial statements. Deferred tax assets are also recognized for tax attributes such as net
operating loss carryforwards and tax credit carryforwards. Deferred tax assets and deferred tax liabilities are
presented net on the consolidated balance sheets by tax jurisdiction. Valuation allowances are then recorded to
reduce deferred tax assets to the amounts management concludes are more likely than not to be realized.

Income tax benefits are recognized and measured based upon a two-step model: (1) a tax position must be more-
likely-than-not to be sustained based solely 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 as an unrecognized tax benefit. The Company records income tax related interest and penalties within income
tax expense.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of
cash, cash equivalents, investments, foreign currency forward contracts, interest rate swap, receivables due from
clients and net CSV due from insurance companies, which are discussed above. Cash equivalents include
investments in money market securities while investments include mutual funds. Investments are diversified
throughout many industries and geographic regions. The Company conducts periodic reviews of its customers’
financial condition and customer payment practices to minimize collection risk on accounts receivable. At April 30,
2018 and 2017, the Company had no other significant credit concentrations.

Recently Adopted Accounting Standards

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance on accounting for certain
aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax
deficiencies to be recorded in the income statement when the awards vest or are settled. Furthermore, cash flows

F-16

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

related to excess tax benefits will no longer be separately classified as a financing activity apart from other income
tax cash flows. The guidance also allows companies to repurchase more of an employee’s shares for tax
withholding purposes without triggering liability accounting, clarifying that all cash payments made on an
employee’s behalf for withheld shares should be presented as a financing activity in the consolidated statements
of cash flows and provides an accounting policy election to account for forfeitures as they occur. The provisions of
the guidance are effective for fiscal years beginning after December 15, 2016 and were adopted by the Company
effective May 1, 2017. The primary impact of the adoption was the recognition of excess tax benefits in our
provision for income taxes in the current year compared to recording it previously as a component of equity.
Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements
had no impact to retained earnings, where the cumulative effect of these changes are required to be recorded. The
Company elected to apply the presentation for cash flows related to excess tax benefits retrospectively for all
periods presented which resulted in an increase to cash provided by operations and decrease in cash provided by
financing activities of $0.1 million and $4.9 million for fiscal 2017 and 2016, respectively. The presentation
requirements for cash flows related to employee taxes paid for withheld shares had no impact on any of the
periods presented on our consolidated cash flows statements since such cash flows have historically been
presented as a financing activity. The Company elected to account for forfeitures as they occur, rather than
estimating the expected forfeitures over the vesting period. This election did not have an impact on the Company’s
financial statements.

In March 2018, the FASB issued Staff Accounting Bulletin (“SAB”) No. 118 amending accounting for the tax effects
of the Tax Cuts and Jobs Act (the “Tax Act”). The new guidance allows companies to complete the accounting
under ASC 740 within a one-year measurement period from the Tax Act enactment date. This update was
effective upon issuance. The amounts recorded as a result of the enactment of the Tax Act, specifically the impact
of the Transition Tax and the remeasurement of deferred tax balances, are provisional estimates. The Company
will continue to appropriately refine these amounts within the measurement period, which will be completed no
later than December 22, 2018.

Recently Issued Accounting Standards - Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, which superseded revenue recognition requirements regarding
contracts with customers to transfer goods or services or for the transfer of nonfinancial assets. Under this new
guidance, entities are required to recognize revenue that depicts the transfer of promised goods 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 transfer is considered to occur when the customer obtains control of the goods or
services delivered. The guidance provides a five-step analysis to be performed on transactions to determine when
and how revenue is recognized. The new guidance is effective for fiscal years and interim periods within those
annual years beginning after December 15, 2017. The Company will adopt this guidance in its fiscal year
beginning May 1, 2018.

The Company organized a team and developed a project plan to guide the implementation. The project plan
included working sessions to review, evaluate and document the arrangements with customers under our various
reporting units to identify potential differences that would result from applying the requirements of the new
standard.

The Company completed its evaluation of the impact of ASU 2014-09 for all its revenue streams and selected the
modified retrospective method as the transition method, which will include a cumulative-effect adjustment as of the
date of adoption. The impact to recruitment process outsourcing, advisory and products revenue is not material,
although there will be minor process changes to comply with ASU 2014-09. As to executive search and
recruitment for non-executive professionals, the implementation of ASU 2014-09 will result in timing differences in
the recognition of uptick revenue (uptick revenue occurs when a placement’s actual compensation is higher than
the original estimated compensation). Currently the Company recognizes uptick revenue as the amount becomes
fixed and determinable. Under ASU 2014-09, however, upticks are considered variable consideration and the
Company will be required to estimate upticks at contract inception and recognize the revenue over the service
period.

F-17

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

In February 2016, the FASB issued guidance on accounting for leases that generally requires all leases to be
recognized on the consolidated balance sheet. The provisions of the guidance are effective for fiscal years
beginning after December 15, 2018 and early adoption is permitted. The Company plans to adopt this guidance in
fiscal year beginning May 1, 2019. The provisions of the guidance are to be applied using a modified retrospective
approach. The Company is still evaluating the effect this guidance will have on the consolidated financial
statements. Based on our initial assessment, the Company expects that upon adoption it will report an increase in
assets and liabilities on our consolidated balance sheet as a result of recognizing right-of-use assets and lease
liabilities related to lease agreements.

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments in the
statement of cash flows. The new guidance provides clarification on specific cash flow issues regarding
presentation and classification in the statement of cash flows with the objective of reducing the existing diversity in
practice. The amendments in this update are effective for reporting periods beginning after December 15, 2017,
with early adoption permitted. The Company plans to adopt this guidance in its fiscal year beginning May 1, 2018.
The provisions of the guidance are to be applied using a retrospective transition method. The adoption of this
guidance is not anticipated to have a material impact on the consolidated financial statements.

In January 2017, the FASB issued guidance that clarifies the definition of a business. The new guidance assists a
company when evaluating whether transactions should be accounted for as acquisitions (disposals) of assets or
businesses. The provisions of the guidance require that if the fair value of the gross assets acquired (or disposed
of) is substantially concentrated in a single identifiable asset or a group of similar identifiable assets, then it is not a
business. The provisions of the guidance are effective for annual years beginning after December 15, 2017,
including interim periods, with early adoption permitted. The Company plans to adopt this guidance in its fiscal
year beginning May 1, 2018. The provisions of the guidance are to be applied prospectively. The adoption of this
guidance is not anticipated to have a material impact on the consolidated financial statements.

In January 2017, the FASB issued guidance simplifying the test for goodwill impairment. The new guidance
simplifies the test for goodwill impairment by removing Step 2 from the goodwill impairment test. Companies will
now perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount,
recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to
perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is
necessary. The amendments of this standard are effective for goodwill impairment tests in fiscal years beginning
after December 15, 2019, with early adoption permitted for goodwill impairment tests performed after January 1,
2017. The Company is evaluating the adoption timeline and the effects that the standard will have on the
consolidated financial statements.

In March 2017, the FASB issued guidance that changes the presentation of net periodic pension cost and net
periodic postretirement benefit cost. The new guidance will change the presentation of net periodic benefit cost
related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be
included within the same income statement line item as other compensation costs arising from services rendered
during the period, while other components of net periodic benefit pension cost will be presented separately outside
of operating income. Additionally, only service costs may be capitalized in assets. The amendments of this
standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those
years. The Company will adopt this guidance in its fiscal year beginning May 1, 2018. The adoption of this
standard is not anticipated to have a material impact on the consolidated financial statements.

In May 2017, the FASB issued guidance clarifying the scope of modification accounting for stock compensation.
The new standard provides guidance about which changes to the terms or conditions of a share-based payment
award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual
reporting periods beginning after December 15, 2017, but early adoption is permitted. The Company will adopt this
guidance in its fiscal year beginning May 1, 2018. The adoption of this guidance is not anticipated to have a
material impact on the consolidated financial statements.

F-18

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

In August 2017, the FASB issued guidance amending and simplifying accounting for hedging activities. The new
guidance will refine and expand strategies that qualify for hedge accounting and simplify the application of hedge
accounting in certain situations. The amendments of this standard are effective for fiscal years beginning after
December 15, 2018. The Company will adopt this guidance in its fiscal year beginning May 1, 2019. The Company
is currently evaluating the impact of adopting this guidance.

In February 2018, the FASB issued guidance that provides companies the option to reclassify stranded tax effects
within accumulated other comprehensive income (loss), net to retained earnings resulting from the Tax Act. The
new guidance requires companies to disclose whether they decided to reclassify the income tax effects of the Tax
Act from accumulated other comprehensive income (loss), net to retained earnings and to disclose a policy for
releasing the income tax effects from accumulated other comprehensive income (loss), net. The guidance is
effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted. If
companies elect to reclassify the stranded tax effects the guidance allows it to be recorded in the period of
adoption or retrospectively to each period in which the effect of the Tax Act is recognized. The Company is
currently evaluating the impact of adopting this guidance.

2. Basic and Diluted Earnings Per Share

Accounting 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 to grant to certain employees under our
restricted stock agreements, 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 an earnings allocation formula that determines
earnings per share for each class of common stock and participating security according to dividends declared (or
accumulated) and participation rights in undistributed earnings. The dilutive effect of participating securities is
calculated using the more dilutive of the treasury 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 the weighted-average number of common shares outstanding. Diluted
earnings per common share was computed using the two-class method by dividing diluted net 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 or converted. Financial instruments that are not in
the form of common stock, but when converted into common stock increase earnings per share, are anti-dilutive
and are not included in the computation of diluted earnings per share.

During fiscal 2018, 2017 and 2016, restricted stock awards of 0.6 million shares, 0.5 million shares and 0.6 million
shares, respectively, were outstanding but not included in the computation of diluted earnings per share because
they were anti-dilutive.

F-19

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

The following table summarizes basic and diluted earnings per common share attributable to common
stockholders:

Year Ended April 30,

2018

2017

2016

(in thousands, except per share data)

Net income attributable to Korn/Ferry International . . . . . . . . . . . . . . . . . . . . . . $

133,779 $

84,181 $

30,913

Less: distributed and undistributed earnings to nonvested restricted

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net earnings attributable to common stockholders . . . . . . . . . . . . . . . .
Add: undistributed earnings to nonvested restricted stockholders . . . . . . . . . . . .
Less: reallocation of undistributed earnings to nonvested restricted

1,426

132,353
1,187

765

83,416
560

280

30,633
82

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net earnings attributable to common stockholders . . . . . . . . . . . . . . . $

1,169

553

81

132,371 $

83,423 $

30,634

Weighted-average common shares outstanding:

Basic weighted-average number of common shares outstanding . . . . . . . . . . . .

55,426

56,205

52,372

Effect of dilutive securities:

Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

822
5
1

646
24
25

487
50
20

Diluted weighted-average number of common shares outstanding . . . . . . . . . . .

56,254

56,900

52,929

Net earnings per common share:

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2.39 $

2.35 $

1.48 $

1.47 $

0.58

0.58

3. Comprehensive Income

Comprehensive income is comprised of net income and all changes to stockholders’ equity, except those changes
resulting from investments by stockholders (changes in paid-in capital) and distributions to stockholders
(dividends) and is reported in the accompanying consolidated statements of comprehensive 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:

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and pension plan adjustments, net of taxes . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap unrealized gain (loss), net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(32,399) $
(9,073)
1,337

(55,359)
(15,127)
(578)

Accumulated other comprehensive loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(40,135) $

(71,064)

April 30,

2018

2017

(in thousands)

F-20

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

The following table summarizes the changes in each component of accumulated other comprehensive (loss)
income:

Foreign
Currency
Translation

Deferred
Compensation
and Pension
Plan (1)

Unrealized
Gains
(Losses) on
Marketable
Securities

Unrealized
(losses) gains
on interest
rate swap (2)

Accumulated
Other
Comprehensive
Income (Loss)

Balance as of May 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrealized losses arising during the period . . . . . . . . . . . . . . . .
Reclassification of realized net losses to net income . . . . . . . .

(20,919) $
(15,420)
—

Balance as of April 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized (losses) gains arising during the period . . . . . . . . .
Reclassification of realized net losses to net income . . . . . . . .

Balance as of April 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains arising during the period . . . . . . . . . . . . . . . . .
Reclassification of realized net losses to net income . . . . . . . .

(36,339)
(19,020)
—

(55,359)
22,960
—

(19,708)$
(3,653)
1,789

(21,572)
4,584
1,861

(15,127)
4,813
1,241

4 $
(4)
—

—
—
—

—
—
—

— $
—
—

—
(635)
57

(578)
1,465
450

Balance as of April 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(32,399) $

(9,073)$

— $

1,337 $

(40,623)
(19,077)
1,789

(57,911)
(15,071)
1,918

(71,064)
29,238
1,691

(40,135)

(1) The tax effects on unrealized gains (losses) were $2.5 million, $1.9 million and $(2.3) million as of April 30, 2018, 2017 and
2016, respectively. The tax effects on reclassifications of realized net losses were $0.8 million, $1.2 million and $1.1 million
as of April 30, 2018, 2017 and 2016, respectively.

(2) The tax effects on unrealized gains (losses) were $0.8 million and $(0.4) million as of April 30, 2018 and 2017, respectively.

The tax effect on the reclassification of realized net losses to net income was $0.3 million as of April 30, 2018.

4. Employee Stock Plans

Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense recognized in the
Company’s consolidated statements of income for the periods indicated:

Year Ended April 30,

2018

2017

2016

(in thousands)

Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total stock-based compensation expense, pre-tax . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .

20,282 $
1,187
—

21,469
(7,319)

18,045 $
913
—

18,958
(4,756)

18,288
590
17

18,895
(7,347)

Total stock-based compensation expense, net of tax . . . . . . . . . . . . . . . . . . . . . . . $

14,150 $

14,202 $

11,548

Stock Incentive Plan

At the Company’s 2016 Annual Meeting of Stockholders, held on October 6, 2016, the Company’s stockholders
approved an amendment and restatement to the Korn/Ferry International Amended and Restated 2008 Stock
Incentive Plan (the 2016 amendment and restatement being “The Third A&R 2008 Plan”), which among other
things, increased the number of shares under the plan by 5,500,000, increasing the current maximum number of
shares that may be issued under the plan to 11,200,000 shares, subject to certain changes in the Company’s
capital structure and other extraordinary events. The Third A&R 2008 Plan provides for the grant of awards to
eligible participants, designated as either nonqualified or incentive stock options, restricted stock and restricted
stock units, any of which may be performance-based or market-based, and incentive bonuses, which may be paid
in cash or stock or a combination thereof. Under the Third A&R 2008 Plan, the ability to issue full-value awards is
limited by requiring full-value stock awards to count 2.3 times as much as stock options.

F-21

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Restricted Stock

The Company grants time-based restricted stock awards to executive officers and other senior employees
generally vesting over a four-year period. In addition, certain key management members typically receive time-
based restricted stock awards upon commencement of employment and may receive 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 companies in its selected peer group.
The fair value of these market-based restricted stock units are determined by using extensive market data that is
based on historical Company and peer group information. The Company recognizes compensation expense for
market-based restricted stock units on a straight-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 the restricted stock unit is issued. Performance-based restricted stock units 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. At the end of each reporting period, the Company estimates the number of restricted stock
units expected to vest, based on the probability that certain performance objectives will be met, exceeded, or fall
below target levels, and the Company takes into account these estimates when calculating the expense for the
period.

Restricted stock activity is summarized below:

2018

Weighted-
Average
Grant Date
Fair Value

Shares

April 30,

2017

Weighted-
Average
Grant Date
Fair Value

Shares

2016

Weighted-
Average
Grant Date
Fair Value

Shares

(in thousands, except per share data)

Non-vested, beginning of year . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested, end of year . . . . . . . . . . . . . . .

$
1,581
650
$
(431) $
(70) $

1,730

$

29.74
37.60
26.13
33.26

33.45

1,506 $
852 $
(751) $
(26) $

1,581 $

34.12
17.43
24.15
26.80

29.74

1,560 $
784 $
(809)$
(29)$

1,506 $

22.15
39.19
16.35
23.38

34.12

As of April 30, 2018, there were 0.7 million shares and 0.2 million non-vested shares outstanding relating to
market-based and performance-based restricted stock units, respectively, with total unrecognized compensation
totaling $8.3 million and $3.0 million, respectively.

As of April 30, 2018, there was $30.8 million of total unrecognized compensation cost related to all non-vested
awards of restricted stock, which is expected to be recognized over a weighted-average period of 2.3 years.
During fiscal 2018 and 2017, 108,089 shares and 205,440 shares of restricted stock totaling $3.8 million and
$4.8 million, respectively, were repurchased by the Company, at the option of the employee, to pay for taxes
related to vesting of restricted stock.

Employee Stock Purchase Plan

The Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible
employees to authorize payroll deductions 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 last day of the enrollment period.
Employees may not purchase more than $25,000 in stock during any calendar year. The maximum number of
shares that may be issued under the ESPP is 3.0 million shares. During fiscal 2018, 2017 and 2016, employees

F-22

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

purchased 198,749 shares at $31.77 per share, 207,141 shares at $20.93 per share and 95,135 shares at $28.83
per share, respectively. As of April 30, 2018, the ESPP had approximately 1.1 million shares remaining available
for future issuance.

Common Stock

During fiscal 2018, 2017, and 2016, the Company issued 41,075 shares, 53,955 shares and 87,648 shares of
common stock, respectively, as a result of the exercise of stock options, with cash proceeds from the exercise of
$0.6 million, $0.8 million and $1.3 million, respectively.

During fiscal 2018 and 2017, the Company repurchased (on the open market) 984,079 shares and 1,140,576
shares, respectively, of the Company’s common stock for $33.1 million and $28.8 million, respectively. No shares
were repurchased during fiscal 2016, other than to satisfy minimum tax withholding requirements upon the vesting
of restricted stock as described above.

5. Financial Instruments

The following tables show the Company’s financial instruments and balance sheet classification as of April 30,
2018 and 2017:

April 30, 2018

Fair Value Measurement

Balance Sheet Classification

Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Cash and
Cash
Equivalents

Marketable
Securities,
Current

Marketable
Securities,
Non-current

Income
Taxes &
Other
Receivables

Other
Accrued
Liabilities

(in thousands)

Level 1:

Cash . . . . . . . . $ 519,818 $
Money market
funds . . . . . . . .
Mutual funds (1)

1,030
127,077

— $

— $ 519,818 $

519,818 $

— $

— $

— $

—
11,040

—
(1,032)

1,030
137,085

1,030
—

—
14,293

—
122,792

—
—

Total

. . . . . . $ 647,925 $

11,040 $ (1,032) $ 657,933 $

520,848 $

14,293 $

122,792 $

— $

Level 2:

Foreign currency

forward
contracts . . . $

Interest rate

swap . . . . . . $

— $

— $

1,778 $ (1,025) $

753 $

2,076 $ — $

2,076 $

— $

— $

— $

— $

— $

753 $

— $

2,076 $

Fair Value Measurement

Balance Sheet Classification

April 30, 2017

—

—
—

—

—

—

Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Cash and
Cash
Equivalents

Marketable
Securities,
Current

Marketable
Securities,
Non-current

Income
Taxes &
Other
Receivables

Other
Accrued
Liabilities

(in thousands)

Level 1:

Cash . . . . . . . . . . $ 409,824 $
Money market
funds . . . . . . . . . .
Mutual funds (1) .

1,058
113,818

— $

— $ 409,824 $

409,824 $

— $

— $

— $

—
6,697

—
(578)

1,058
119,937

1,058
—

—
4,363

—
115,574

—
—

Total . . . . . . . . . $ 524,700 $

6,697 $

(578) $ 530,819 $

410,882 $

4,363 $ 115,574

$

— $

—

—
—

—

Level 2:

Foreign currency
forward contracts $
Interest rate
swap . . . . . . . . . . $

— $

— $

129 $

(846) $

(717) $

— $

(947) $

(947) $

— $

— $

— $

— $

— $

— $

(717)

— $

— $

(947)

F-23

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

(1)

These investments are held in trust for settlement of the Company’s vested obligations of $118.2 million and $99.5 million
as of April 30, 2018 and 2017, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement
Plans). During fiscal 2018 and 2017, the fair value of the investments increased; therefore, the Company recognized
income of $10.3 million and $10.8 million, respectively which was recorded in other income (loss), net. During fiscal 2016,
the fair value of the investments decreased; therefore, the Company recognized a loss of $3.3 million, which was recorded
in other income (loss), net.

Investments in marketable securities classified as trading are based upon employee elections from a
pre-determined set of securities in the ECAP and the Company invests in marketable securities to mirror these
elections. As of April 30, 2018 and 2017, the Company’s investments in marketable securities classified as trading
consist of mutual funds for which market prices are readily available. Investments in marketable securities
classified as available-for-sale securities are made based on the Company’s investment policy, which restricts the
types of investments that can be made. As of April 30, 2018 and April 30, 2017, the Company does not hold
marketable securities classified as available-for-sale. During fiscal 2016, the Company received $13.1 million in
proceeds from maturities of available-for-sale marketable securities.

Designated Derivatives—Interest Rate Swap Agreement

In March 2017, the Company entered into an interest rate swap contract with a notional amount of $129.8 million
to hedge the variability to changes in cash flows attributable to interest rate risks caused by changes in interest
rates related to its variable rate debt. The Company has designated the swap as a cash flow hedge. The notional
amount will be amortized so that the amount is always half of the principal balance of the debt outstanding. As of
April 30, 2018, the notional amount was $119.5 million. The interest rate swap agreement matures on June 15,
2021 and locks the interest rates on half the debt outstanding at 1.919%, exclusive of the credit spread on the
debt.

The fair value of the derivative designated as a cash flow hedge instrument is as follows:

Derivative asset:

Interest rate swap contract

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative liability:

Interest rate swap contract

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

April 30,

2018

2017

(in thousands)

$

$

2,076

$

—

— $

947

During fiscal 2018 and 2017, the Company recognized the following gains and losses on the interest rate swap:

Year Ended April 30,
2017
2018

(in thousands)

Gains (Losses) recognized in other comprehensive income (net of tax effects of $828 and
($406), respectively)
Losses reclassified from accumulated other comprehensive income into interest (expense)
income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

1,465

$

(635)

(730) $

(94)

As the critical terms of the hedging instrument and the hedged forecasted transaction are the same, the Company
has concluded the changes in the fair value or cash flows attributable to the risk being hedged are expected to
completely offset at inception and on an ongoing basis.

We estimate that $0.4 million of derivative gains included in AOCI as of April 30, 2018 will be reclassified into
interest (expense) income, net within the following 12 months. The cash flows related to interest rate swap
contracts are included in net cash provided by operating activities.

F-24

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Foreign Currency Forward Contracts Not Designated as Hedges

The fair value of derivatives not designated as hedge instruments are as follows:

Derivative assets:

Foreign currency forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative liabilities:

Foreign currency forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

April 30,

2018

2017

(in thousands)

$

$

1,778

1,025

$

$

129

846

As of April 30, 2018, the total notional amounts of the forward contracts purchased and sold were $80.8 million
and $78.5 million, respectively. As of April 30, 2017, the total notional amounts of the forward contracts purchased
and sold were $19.4 million and $70.0 million, respectively. The Company recognizes forward contracts as a net
asset or net liability on the consolidated balance sheets as such contracts are covered by master netting
agreements. During fiscal 2018 and 2016, the Company incurred losses of $3.7 million and $1.8 million,
respectively, related to forward contracts which is recorded in general and administrative expenses in the
accompanying consolidated statements of income. These losses offset foreign currency gains that result from
transactions denominated in a currency other than the Company’s functional currency. During fiscal 2017, the
Company incurred gains of $0.6 million related to forward contracts which is recorded in general and
administrative expenses in the accompanying consolidated statements of income. These gains offset foreign
currency losses that result from transactions denominated in a currency other than the Company’s functional
currency. The cash flows related to foreign currency forward contracts are included in cash flows from operating
activities in the accompanying statements of cash flow.

6. Deferred Compensation and Retirement Plans

The Company has several deferred compensation and retirement plans for eligible consultants and vice presidents
that provide defined benefits to participants based on the deferral of current compensation or contributions made
by the Company subject to vesting and retirement or termination provisions.

The total benefit obligations for these plans were as follows:

Deferred compensation and pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical and Life Insurance plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Capital Accumulation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion of benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended April 30,

2018

2017

(in thousands)

$

100,404
7,157
13,729
128,430

249,720
(21,991)

95,596
12,147
12,021
111,584

231,348
(11,443)

Non-current benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

227,729

$

219,905

Deferred Compensation and Pension Plans

The Enhanced Wealth Accumulation Plan (“EWAP”) was established in fiscal 1994, which replaced the Wealth
Accumulation Plan (“WAP”). Certain vice presidents elected to participate in a “deferral unit” that required the
participant to contribute a portion of their compensation for an eight year period, or in some cases, make an
after-tax contribution, in return for defined benefit payments from the Company over a fifteen year period at
retirement age of 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 units into the EWAP continue to be covered under the earlier
version in which participants generally vest and commence receipt of benefit payments at retirement age of 65. In

F-25

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

June 2003, the Company amended the EWAP and WAP, so as not to allow new participants or the purchase of
additional deferral units by existing participants.

The Company also maintains a Senior Executive Incentive Plan (“SEIP”) for participants approved by the Board.
Generally, to be eligible, the vice president must be participating in the EWAP. Participation in the SEIP 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 a defined 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 the participant. In June 2003, the Company
amended the SEIP, so as not to allow new participants or the purchase of additional deferral units by existing
participants.

The Company has a defined benefit pension plan, referred to as the Worldwide Executive Benefit (“WEB”),
covering certain executives in the U.S. and foreign countries. The WEB is designed to integrate with government
sponsored and local benefits and provide a monthly benefit to vice presidents upon retirement from the Company.
Each year a plan participant accrued and was fully vested in one-twentieth of the targeted benefits expressed as a
percentage set by the Company for that year. Upon retirement, a participant receives a monthly benefit payment
equal to the sum of the percentages accrued over such participant’s term of employment, up to a maximum of
20 years, multiplied by the participant’s highest average monthly salary during the 36 consecutive months 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 new participants, future accruals and future salary increases.

In conjunction with the acquisition of Legacy Hay on December 1, 2015, the Company acquired multiple pension
and savings plans covering certain of its employees worldwide. Among these plans is a defined benefit pension
plan for certain employees in the United States. The assets of this plan are held separately from the assets of the
sponsors in self-administered funds. The plan is funded consistent with local statutory requirements.

On July 8, 2016, the Company established the LTPU Plan in order to promote the success of the Company by
providing a select group of management and highly compensated employees with nonqualified supplemental
retirement benefits as an additional means to attract, motivate and retain such employee. A unit award has a base
value of $50,000 for the purpose of determining the payment that would be made upon early termination for a
partially vested unit awards. The units vest 25% on each anniversary date with the unit becoming fully vested on
the fourth anniversary of the grant date, subject to the participant’s continued service as of each anniversary date.
Each vested unit award will pay out an annual benefit of $25,000 for each of five years commencing on the
seventh anniversary of the grant date.

F-26

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Deferred Compensation and Pension Plans

The following tables reconcile the benefit obligation for the deferred compensation plans:

Change in benefit obligation:
Benefit obligation, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid from plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid from cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefit obligation, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in fair value of plan assets:
Fair value of plan assets, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid from plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of plan assets, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Funded status and balance, end of year (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended April 30,

2018

2017

(in thousands)

$

121,042
11,691
3,469
(1,574)
(166)
(1,833)
(6,135)

126,494

25,446
2,425
(1,833)
(166)
218

26,090

(100,404)

6,496
93,908

100,404

$

$

$

124,566
5,507
3,820
(4,791)
—
(1,884)
(6,176)

121,042

24,867
2,463
(1,884)
—
—

25,446

(95,596)

6,182
89,414

95,596

$

$

$

$

Plan Assets - weighted-average asset allocation:
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55%
44%
1%

100%

46%
54%
—%

100%

(1) The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the deferred

compensation and pension plans as a means of funding benefits under such plans. As of April 30, 2018 and 2017, the
Company held contracts with gross CSV of $186.8 million and $180.3 million, offset by outstanding policy loans of
$66.7 million and $67.2 million, respectively.

The fair value measurements of the defined benefit plan assets fall within the following levels of the fair value
hierarchy as of April 30, 2018 and 2017:

Level 1

Level 2

Level 3

Total

(in thousands)

April 30, 2018:
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

April 30, 2017:
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

$

— $

191

191

$

— $
—

— $

25,899
—

25,899

25,446
—

25,446

$

$

$

$

— $
—

— $

— $
—

— $

25,899
191

26,090

25,446
—

25,446

F-27

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification
and investment return over the long term. The investment goal is a return on assets that is at least equal to the
assumed actuarial rate of return over the long term within reasonable and prudent levels of risk. Investment
policies reflect the unique circumstances of the respective plans and include requirements designed to mitigate
risk including quality and diversification standards. Asset allocation targets are reviewed periodically with
investment advisors to determine the appropriate investment strategies for acceptable risk levels. Our target
allocation ranges are as follows: equity securities 40% to 50%, debt securities 45% to 55% and other assets of 5%
to 10%. We establish our estimated long-term return on plan assets considering various factors including the
targeted asset allocation percentages, historic returns and expected future returns. In fiscal 2017, the Company
changed the method of achieving the target allocation by investing in mutual funds that are only available to
institutional investors rather than owning specific equity and debt instruments as was done in previous years. The
mutual funds are valued at fair value as determined by the net asset value of shares held at year-end.

The components of net periodic benefits costs are as follows:

Year Ended April 30,

2018

2017

2016

(in thousands)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

11,691
3,469
2,308
(1,594)

5,507 $
3,820
3,051
(1,559)

—
3,423
2,924
(682)

Net periodic benefit cost

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

15,874

$

10,819 $

5,665

The weighted-average assumptions used in calculating the benefit obligations were as follows:

Discount rate, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rates of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . .

3.57%
3.93%
0.00%
6.25%

3.18%
3.57%
0.00%
6.50%

3.28%
3.18%
0.00%
6.50%

Year Ended April 30,

2018

2017

2016

At April 30, 2017, the Company elected to change the method it uses to estimate the interest and service
components of net periodic cost for its defined benefit pension and supplemental benefit plans, which impacted the
net periodic cost in fiscal 2018. The Company utilized a full yield curve approach in the estimation of these
components by applying the specific spot rates along the yield curve used in the determination of the benefit
obligation to the relevant projected cash flows. Previously, the Company estimated the interest and service cost
components utilizing a single weighted-average discount rate derived from the yield curve used to measure the
benefit obligation at the beginning of the period. This change compared to the previous method impacted the
interest and service components of net periodic cost in future periods. The Company made this change to provide
a more precise measurement of interest and service costs by improving the correlation between projected benefit
cash flows to the corresponding spot yield curve rates. This change did not affect the measurement of the total
benefit obligation as the change in the interest and service costs is offset in net actuarial gains and losses. The
impact to interest and service costs is not significant. The Company accounted for this change prospectively as a
change in accounting estimate.

F-28

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

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,

Deferred Retirement Plans

(in thousands)

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024-2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,463
9,552
9,252
9,179
9,061
58,903

During fiscal 2019, the Company expects to recognize $1.8 million in net periodic benefit expense from deferred
compensation and pension plans that will be transferred from accumulated other comprehensive income through
the amortization of actuarial losses in the consolidated statements of income.

Medical and Life Insurance Plan

In conjunction with the acquisition of Legacy Hay on December 1, 2015, the Company inherited a benefit plan
which offers medical and life insurance coverage to 128 participants. The Company amended the plan and
required any active participants that were not yet eligible for benefits to retire within a short time frame in order to
receive any benefits from the plan. As a result of the amendment, participants eligible to the plan declined and the
Company reduced the benefit obligation by $4.0 million against other comprehensive income (loss) during fiscal
2018. Medical and life insurance benefit plans are unfunded.

The following table reconciles the benefit obligation for the medical and life insurance plan:

Year End April 30,

2018

2017

(in thousands)

Change in benefit obligation:
Benefit obligation, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,147
(4,008)
94
366
(875)
(567)

Benefit obligation, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

7,157

Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

668
6,489

7,157

$

$

$

$

13,006
—
155
426
(833)
(607)

12,147

765
11,382

12,147

F-29

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

The components of net periodic benefits costs are as follows:

Year Ended April 30,

2018

2017

2016

(in thousands)

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic service credit amortization . . . . . . . . . . . . . . . . . . . . . . . . . .

Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

94
366
(308)

152

$

$

155
426
—

581

$

$

62
208
—

270

The weighted-average assumptions used in calculating the medical and life insurance plan were as follows:

Year Ended April 30,

2018

2017

2016

Discount rate, beginning of year or acquisition date . . . . . . . . . . . . . . . .
Discount rate, end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Healthcare care cost trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.75%
3.94%
7.00%

3.36%
3.75%
7.00%

4.10%
3.36%
7.00%

We anticipate that the health care cost trend rate assumption will be 5.0% by fiscal 2022. Increasing the assumed
health care cost trend rate by one-percentage point would increase the accumulated postretirement benefit
obligation for the medical and life insurance plan by less than $0.1 million. Decreasing the assumed health care
cost trend rate by one-percentage point would decrease the accumulated postretirement benefit obligation for the
medical and life insurance plan by less than $0.1 million.

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,

Medical and Life Insurance

(in thousands)

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024-2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

676
667
643
620
601
2,555

During fiscal 2019, the Company expects to recognize $0.3 million in net periodic benefit income from the medical
and life insurance plan that will be transferred from accumulated other comprehensive income through the
amortization of prior service credit in the consolidated statements of income.

International Retirement Plans

The Company also maintains various retirement plans and other miscellaneous deferred compensation
arrangements in 21 foreign jurisdictions. The aggregate of the long-term benefit obligation accrued at April 30,
2018 and 2017 is $13.7 million for 1,999 participants and $12.0 million for 1,710 participants, respectively. The
Company’s contribution to these plans was $10.7 million and $9.3 million in fiscal 2018 and 2017, respectively.

Executive Capital Accumulation Plan

The Company’s ECAP is intended to provide certain employees an opportunity to defer salary and/or bonus on a
pre-tax basis. In addition, the Company, as part of its compensation philosophy, makes discretionary contributions
into the ECAP and such contributions may be granted to key employees annually based on the employee’s
performance. Certain key management may also receive Company ECAP contributions upon commencement of
employment. The Company amortizes these contributions on a straight-line basis over the service period,

F-30

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

generally a four to five year period. Participants have the ability to allocate their deferrals among a number of
investment options and may receive their benefits at termination, retirement or ‘in service’ either in a lump sum or
in quarterly installments over one to 15 years. The ECAP amounts that are expected to be paid to employees over
the next 12 months are classified as a current liability included in compensation and benefits payable on the
accompanying consolidated balance sheets.

The Company issued ECAP awards during fiscal 2018, 2017 and 2016 of $6.2 million, $6.2 million and
$23.2 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 corresponding charge (or credit) to compensation and benefits costs. During fiscal 2018 and
2017, the deferred compensation liability increased; therefore, the Company recognized compensation expense of
$11.1 million and $10.6 million, respectively. Offsetting the increases in compensation and benefits liability was an
increase in the fair value of marketable securities classified as trading (held in trust to satisfy obligations of the
ECAP liabilities) of $10.3 million and $10.8 million in fiscal 2018 and 2017, respectively, recorded in other income
(loss), net on the consolidated statements of income. During fiscal 2016, the deferred compensation liability
decreased; therefore, the Company recognized a credit to compensation expense of $1.7 million, offset by a
decrease in the fair value of marketable securities classified as trading (held in trust to satisfy obligations of the
ECAP liabilities) of $3.3 million, recorded in other income (loss), net on the consolidated statements of income.

Changes in the ECAP liability were as follows:

Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Balance, end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended April 30,

2018

2017

(in thousands)

$

111,584
5,036
12,175
11,095
(11,923)
463

128,430
(14,827)

105,676
5,349
13,667
10,565
(23,044)
(629)

111,584
(4,496)

Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

113,603

$

107,088

As of April 30, 2018 and 2017, the unamortized portion of the Company contributions to the ECAP was
$19.2 million and $25.5 million, respectively.

Defined Contribution Plan

The Company has a defined contribution plan (“401(k) plan”) for eligible employees. Participants may contribute
up to 50% of their base compensation as defined in the plan agreement. In addition, the Company has the option
to make matching contributions. The Company intends to make matching contributions related to fiscal 2018 in
fiscal 2019. The Company made a $2.3 million matching contribution in fiscal 2018 related to contributions made
by employees in fiscal 2017 and a $1.8 million matching contribution in fiscal 2017 related to contributions made
by employees in fiscal 2016.

Company Owned Life Insurance

The Company purchased COLI contracts insuring the lives of certain employees eligible to participate in the
deferred compensation and pension plans as a means of funding benefits under such plans. The gross CSV of
these contracts of $186.8 million and $180.3 million as of April 30, 2018 and 2017, respectively, is offset by
outstanding policy loans of $66.7 million and $67.2 million in the accompanying consolidated balance sheets as of
April 30, 2018 and 2017, respectively. Total death benefits payable, net of loans under COLI contracts, were
$226.0 million and $220.6 million at April 30, 2018 and 2017, respectively. Management intends to use the future

F-31

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

death benefits from these insurance contracts to fund the deferred compensation and pension arrangements;
however, there may not be a direct correlation between the timing of the future cash receipts and disbursements
under these arrangements. The CSV value of the underlying COLI investments increased by $7.8 million,
$4.9 million and $4.0 million during fiscal 2018, 2017 and 2016, respectively, recorded as a decrease in
compensation and benefits expense. In addition, certain policies are held in trusts to provide additional benefit
security for the deferred compensation and pension plans. As of April 30, 2018, COLI contracts with a net CSV of
$81.5 million and death benefits, net of loans, of $150.4 million were held in trust for these purposes.

7. Restructuring Charges, Net

During fiscal 2016, the Company implemented a restructuring plan in order to rationalize its cost structure by
eliminating redundant positions and consolidating office space due to the acquisition of Legacy Hay on
December 1, 2015. This resulted in restructuring charges, net of $33.0 million in fiscal 2016, of which $32.1 million
related to severance and $0.9 million, related to consolidation/abandonment of premises.

The Company continued the implementation of the fiscal 2016 restructuring plan in fiscal 2017 and 2018 in order
to integrate the Hay Group entities that were acquired in fiscal 2016 by eliminating redundant positions and
operational, general and administrative expenses and consolidating premises. This resulted in restructuring
charges of $0.1 million in fiscal 2018 related to consolidation of premises and restructuring charges of
$34.6 million in fiscal 2017, of which $16.0 million related to severance and $18.6 million related to consolidation of
premises.

Changes in the restructuring liability were as follows:

Severance

Facilities

Total

(in thousands)

Liability as of April 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Liability as of April 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

5,293
15,963
(14,974)
—
(941)

5,341
—
(4,541)
251

$

669
18,637
(8,703)
(2,024)
(225)

8,354
78
(6,050)
563

5,962
34,600
(23,677)
(2,024)
(1,166)

13,695
78
(10,591)
814

Liability as of April 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,051

$

2,945

$

3,996

As of April 30, 2018 and 2017, the restructuring liability is included in the current portion of other accrued liabilities
on the consolidated balance sheets, except for $1.0 million and $4.6 million, respectively, of facilities costs which
primarily relate to commitments under operating leases, net of estimated sublease income, which are included in
other long-term liabilities.

The restructuring liability by segment is summarized below:

April 30, 2018

Severance

Facilities

Total

(in thousands)

Executive Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

— $
—

$

254
6

Total Executive Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
1,051
—

260
2,602
83

Liability as of April 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,051

$

2,945

$

254
6

260
3,653
83

3,996

F-32

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

April 30, 2017

Severance

Facilities

Total

(in thousands)

Executive Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe, Middle East and Africa (“EMEA”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total Executive Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futurestep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

134
393
—
—

527
4,814
—

$

250
—
6
87

343
7,879
132

384
393
6
87

870
12,693
132

Liability as of April 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

5,341

$

8,354

$

13,695

8. Income Taxes

The provision for income taxes is based on reported income before income taxes. Deferred income tax assets and
liabilities reflect the impact of temporary 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.

On December 22, 2017, the Tax Act was enacted and contains significant changes to U.S. income tax law. The
most significant impacts of the Tax Act on the Company’s current fiscal year include (1) a reduction in the U.S.
corporate federal statutory income tax rate from 35.0% to 21.0% effective January 1, 2018, and (2) a one-time tax
on accumulated foreign earnings (the “Transition Tax”), which is applicable at a rate of 15.5% on cash and other
specified assets and 8% on other residual earnings. Because of our April 30 fiscal year end, the Company’s fiscal
2018 statutory federal tax rate is 30.4%.

As a result of the enactment of the Tax Act, the Company recorded a provisional tax charge of $18.4 million for the
Transition Tax and a provisional tax benefit of $5.9 million from the remeasurement of our U.S. federal deferred
tax assets and liabilities at the rate at which we expect these deferred tax balances to be realized. The amounts
recorded as a result of the enactment of the Tax Act, specifically the impact of the Transition Tax and the
remeasurement of deferred tax balances, are provisional estimates. Additional information and analysis are
required to finalize the impact that the Tax Act will have on our financial results, including refinement of the
computation of foreign subsidiaries earnings and the final determination of deferred tax balances subject to
remeasurement. Additionally, anticipated future guidance from the Internal Revenue Service, state tax agencies,
the Financial Accounting Standards Board and the Securities and Exchange Commission could result in changes
to these provisional amounts. The Company will continue to appropriately refine these amounts within the
measurement period allowed by SAB No.118, which will be completed no later than December 22, 2018.

F-33

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

The provision (benefit) for domestic and foreign income taxes was as follows:

Year Ended April 30,

2018

2017

2016

(in thousands)

Current income taxes:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Current provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income taxes:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred (benefit) provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29,400
2,863
44,434

76,697

(3,530)
(317)
(2,717)

(6,564)

$

(2,026) $ 13,087
3,271
1,207
16,394
23,334

22,515

32,752

3,341
341
2,907

6,589

(5,334)
(1,838)
(6,620)

(13,792)

Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

70,133

$

29,104

$ 18,960

The domestic and foreign components of income from continuing operations before domestic and foreign income
and other taxes and equity in earnings of unconsolidated subsidiaries were as follows:

Year Ended April 30,

2018

2017

2016

(in thousands)

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

46,867
158,866

$

5,539
110,470

$

22,228
26,534

Income before provision for income taxes and

equity in earnings of unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .

$

205,733

$

116,009

$

48,762

The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:

U.S. federal statutory income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rates differential
COLI increase, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conclusion of U.S. federal tax audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transition tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax remeasurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Devaluation of Venezuelan currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign source income, net of credits generated . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended April 30,

2018

2017

2016

30.4%
—
(2.3)
(1.2)
—
9.0
(2.4)
0.3
—
(2.3)
0.9
(0.1)
1.8

34.1%

35.0%
—
(9.1)
(1.5)
—
—
—
0.6
—
(3.1)
—
(0.1)
3.3

25.1%

35.0%
5.8
(2.8)
(2.9)
(4.4)
—
—
1.5
7.4
(6.2)
1.3
0.5
3.7

38.9%

The higher effective tax rate in fiscal 2018 was due primarily to the enactment of the Tax Act. Korn Ferry will
continue to appropriately refine these amounts within the measurement period allowed by SAB No.118, which will
be completed no later than December 22, 2018. The lower effective tax rate in fiscal 2017 was due primarily to a
higher percentage of taxable income arising in jurisdictions with lower statutory tax rates. In both fiscal 2018 and
2017, the Company recorded an income tax benefit from the reversal of valuation allowances previously recorded
against deferred tax assets, including net operating losses, of certain foreign subsidiaries that have returned to
profitability and are now more-likely-than-not to realize those deferred tax assets.

F-34

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Components of deferred tax assets and liabilities are as follows:

April 30,

2018

2017

(in thousands)

Deferred tax assets:

Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss and credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

67,852
22,297
13,945
6,827
1,793
2,296
982

92,043
32,854
14,095
9,797
2,434
1,705
3,041

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115,992

155,969

Deferred tax liabilities:

Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(57,046)
(5,000)
(19,123)
(2,726)

(83,895)

(15,682)

(90,214)
(11,507)
(17,324)
(2,485)

(121,530)

(21,278)

Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

16,415

$

13,161

Deferred tax assets are reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the
deferred tax asset will not be realized. Management believes uncertainty exists regarding the realizability of certain
operating losses and has, therefore, established a valuation allowance for this portion of the deferred tax asset.
Realization of the deferred tax asset is dependent on the Company generating sufficient taxable income of the
appropriate nature in future years. Although realization is not assured, management believes that it is more likely
than-not that the net deferred tax assets will be realized. Deferred tax assets and deferred tax liabilities are
presented net on the consolidated balance sheets by tax jurisdiction.

As of April 30, 2018, the Company had U.S. federal net operating loss carryforwards of $3.2 million, which the
Company anticipates will be fully utilized by fiscal 2028. The Company has state net operating loss carryforwards
of $61.2 million, which, if unutilized, will begin to expire in fiscal 2019. The Company also has foreign net operating
loss carryforwards of $87.8 million, which, if unutilized, will begin to expire in fiscal 2019.

The Company has not provided deferred income taxes on approximately $492.3 million of undistributed earnings
of its foreign subsidiaries as such earnings are intended to be reinvested indefinitely. If a distribution of these
earnings was to be made, the Company may be subject to state income and foreign withholding taxes. An
estimate of such taxes, however, is not practicable.

The Company and its subsidiaries file federal and state income tax returns in the U.S. as well as in foreign
jurisdictions. These income tax returns are subject to audit by the Internal Revenue Service (the ‘IRS’) and various
state and foreign tax authorities. The IRS is currently auditing the fiscal year 2016 federal tax return. The States of
California, Illinois, Minnesota, New York and the City of New York are currently auditing the Company’s state
income tax returns for various fiscal years. Outside the United States, income tax returns of the Company’s
subsidiaries are under audit in Canada, France and India. The Company’s income tax returns are not otherwise
under examination in any material jurisdictions. The statute of limitations varies by jurisdiction in which the
Company operates. With few exceptions, however, the Company’s tax returns for years prior to fiscal 2012 are no
longer open to examination by tax authorities (including U.S. federal, state and foreign).

Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected
to be taken, on a tax return and the amount of benefits recognized for financial reporting purposes. As of April 30,

F-35

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

2018, the Company had a liability of $3.7 million for unrecognized tax benefits. A reconciliation of the beginning
and ending balances of the unrecognized tax benefits is as follows:

Year Ended April 30,

2018

2017

2016

(in thousands)

Unrecognized tax benefits, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement with tax authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . .
Additions based on tax positions related to prior years . . . . . . . . . . . . . . . . . . .

Unrecognized tax benefits, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,478
(708)
1,116
788

$3,674

$2,095
—
383
—

$2,478

$ 2,423
(1,963)
1,305
330

$ 2,095

The liability for unrecognized tax benefits is included in income taxes payable in the consolidated balance sheets.
The full amount of unrecognized tax benefits would impact the effective tax rate if recognized. In the next twelve
months, it is reasonably possible that the Company’s unrecognized tax benefits could change due to resolution of
certain tax matters either because the tax position are sustained on audit or the Company agrees to their
disallowance. These resolutions could reduce the Company’s liability for unrecognized tax benefits by
approximately $3.1 million. The Company does not expect a change in the amount of unrecognized tax benefits to
have a material financial statement impact.

The Company classifies interest and penalties related to unrecognized tax benefits as a component of the
provision for income taxes. The Company accrued approximately $0.3 million and no accrual for interest related to
unrecognized tax benefits as of April 30, 2018 and April 30, 2017, respectively. The Company had no accrual for
penalties related to unrecognized tax benefits as of April 30, 2018 and April 30, 2017, respectively. The Company
accrued approximately $0.3 million of interest related to unrecognized tax benefits over the last three fiscal years.

9. Property and Equipment, Net

Property and equipment include the following:

April 30,

2018

2017

(in thousands)

Computer equipment and software (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

191,437
82,467
42,889
1,305

$ 160,399
75,921
39,848
1,956

Less: accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

318,098
(198,197)

278,124
(168,557)

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

119,901

$ 109,567

(1) Depreciation expense for capitalized software was $12.8 million, $12.6 million and $11.3 million during fiscal 2018, 2017

and 2016, respectively. The net book value of the Company’s computer software costs included in property and equipment,
net was $46.4 million and $33.2 million as of April 30, 2018 and 2017, respectively.

Depreciation expense for property and equipment was $33.8 million, $31.9 million and $24.5 million during fiscal
2018, 2017 and 2016, respectively.

10. Long-Term Debt

On June 15, 2016, the Company entered into a senior secured $400 million Credit Agreement (the “Credit
Agreement”) with a syndicate of banks and Wells Fargo Bank, National Association as administrative agent. On
June 8, 2018, the Company entered into an amendment to the Credit Agreement. See Note 16—Subsequent
Events. The Credit Agreement provides for, among other things: (a) a senior secured term loan facility in an
aggregate principal amount of $275 million (the “ Term Facility”), (b) a senior secured revolving credit facility (the

F-36

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

“Revolver” and together with the Term Facility, the “Credit Facilities”) in an aggregate principal amount of
$125 million, (c) annual term loan amortization of 7.5%, 7.5%, 10.0%, 10.0%, and 10.0%, with the remaining
principal due at maturity, (d) certain customary affirmative and negative covenants, including a maximum
consolidated total leverage ratio (as defined below) and a minimum interest coverage ratio, and (e) an expanded
definition of permitted add-backs to Adjusted EBITDA in recognition of the accelerated integration actions. The
Company’s credit agreement permits payment of dividends to stockholders and share repurchases so long as the
pro forma leverage ratio is no greater than 2.50 to 1.00, and the pro forma domestic liquidity is at least
$50.0 million. The Company drew down $275 million on the new term loan and used $140 million of the proceeds
to pay-off the term loan that was outstanding as of April 30, 2016. Principal payments under the term facility are as
follows:

Year Ending April 30,

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Principal Payments
on Term Loan

(in thousands)

$

$

25,781
27,500
27,500
158,125

238,906

At the Company’s option, loans issued under the Credit Agreement will bear interest at either LIBOR or an
alternate base rate, in each case plus the applicable interest rate margin. The interest rate applicable to loans
outstanding under the Credit Facilities may fluctuate between LIBOR plus 1.25% per annum to LIBOR plus
2.00% per annum, in the case of LIBOR borrowings (or between the alternate base rate plus 0.25% per annum
and the alternate base rate plus 1.00% per annum, in the alternative), based upon the Company’s total funded
debt to Adjusted EBITDA ratio (as set forth in the Credit Agreement, the “consolidated leverage ratio”) at such
time. In addition, the Company will be required to pay to the lenders a quarterly fee ranging from 0.20% to
0.35% per annum on the average daily unused amount of the Term Facility, based upon the Company’s
consolidated leverage ratio at such time, and fees relating to the issuance of letters of credit. During fiscal 2018
and 2017, the average rate on the Term Facility was 2.60% and 2.23%, respectively.

Both the Revolver and the Term Facility mature on June 15, 2021 and may be prepaid and terminated early by the
Company at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility
is payable in quarterly installments with principal payments totaling $20.6 million and $15.5 million made during
fiscal 2018 and 2017, respectively. As of April 30, 2018 and 2017, $238.9 million and $259.5 million were
outstanding under the Term Facility, respectively. The current and long-term portion of unamortized debt issuance
costs associated with the long-term debt, was $2.7 million and $3.5 million as of April 30, 2018 and 2017,
respectively. The fair value of the Company’s Term Facility is based on borrowing rates currently required of loans
with similar terms, maturity and credit risk. The carrying amount of the Term Facility approximates fair value
because the base interest rate charged varies with market conditions and the credit spread is commensurate with
current market spreads for issuers of similar risk. The fair value of the Term Facility is classified as a Level 2
liability in the fair value hierarchy. As of April 30, 2018, the Company was in compliance with its debt covenants.

As of April 30, 2018 and 2017, the Company had no borrowings under the Revolver. The Company had a total of
$122.1 million and $122.0 million available under the Revolver after $2.9 million and $3.0 million standby letters of
credit were issued as of April 30, 2018 and 2017, respectively. The Company had a total of $7.4 million and
$8.1 million of standby letters of credits with other financial institutions as of April 30, 2018 and 2017, respectively.
The standby letters of credits were generally issued as a result of entering into office premise leases.

The Company has outstanding borrowings against the CSV of COLI contracts of $66.7 million and $67.2 million at
April 30, 2018 and 2017, respectively. CSV reflected in the accompanying consolidated balance sheets is net of the
outstanding borrowings, which are secured by the CSV of the life insurance policies. Principal payments are not
scheduled and interest is payable at least annually at various fixed and variable rates ranging from 4.76% to 8.00%.

F-37

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

11. Business Segments

The Company currently operates through three business segments: Executive Search, Hay Group and Futurestep.
The Executive Search segment focuses on recruiting Board of Director and C-level positions, in addition to
research-based interviewing and onboarding solutions, for clients predominantly in the consumer, financial
services, industrial, life sciences/healthcare and technology industries. Hay Group assists clients with ongoing
assessment, compensation and development of their senior executives and management teams, and addresses
four fundamental needs: Talent Strategy, Succession Management, Leadership Development, and Rewards,
Motivation and Engagement, all underpinned by a comprehensive array of world-leading IP, products and tools.
Futurestep is a global industry leader in high-impact talent acquisition solutions. Its portfolio of services includes
global and regional RPO, project recruitment, individual professional search and consulting. The Executive Search
business segment is managed by geographic regional leaders and Hay Group and Futurestep worldwide
operations are managed by their Chief Executive Officers. The Executive Search geographic regional leaders and
the Chief Executive Officers of Hay Group and Futurestep report directly to the Chief Executive Officer of the
Company. The Company also operates a Corporate segment to record global expenses of the Company.

The Company evaluates performance and allocates resources based on the Company’s chief operating decision
maker’s (“CODM”) review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and
amortization (“Adjusted EBITDA”). To the extent that such charges occur, Adjusted EBITDA excludes restructuring
charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible
asset and other than temporary impairment). The accounting policies for the reportable segments are the same as
those described in the summary of significant accounting policies, except the items described above are excluded
from EBITDA to arrive at Adjusted EBITDA. For fiscal 2017 and 2016, Adjusted EBITDA includes deferred revenue
adjustment related to the Legacy Hay acquisition, reflecting revenue that the Hay Group would have realized if not
for business combination accounting that requires a company to record the acquisition balance sheet at fair value
and write-off deferred revenue where no future services are required to be performed to earn that revenue. The
accounting policies for the reportable segments are the same as those described in the summary of significant
accounting policies, except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA.

F-38

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Financial highlights by business segment are as follows:

Year Ended April 30, 2018

Executive Search

North

America EMEA Asia Pacific

Latin
America

Subtotal

Hay
Group

Futurestep Corporate Consolidated

(in thousands)

Fee revenue . . . . . . . . . . $ 408,098 $ 173,725 $
Total revenue . . . . . . . . . $ 421,260 $ 177,234 $

96,595 $
98,062 $

30,624 $
30,717 $

709,042 $
727,273 $

785,013 $ 273,162 $
801,005 $ 291,241 $

— $ 1,767,217
— $ 1,819,519

Net income attributable

to Korn/Ferry
International

. . . . . . . .

Net income attributable
to noncontrolling
interest

. . . . . . . . . . . .
Other income, net . . . . . .
Interest expense, net . . .
Equity in earnings of
unconsolidated
subsidiaries, net . . . . .
Income tax provision . . .

Operating income

$

133,779

2,118
(11,525)
9,676

(297)
70,133

(loss) . . . . . . . . . . . . . . $ 100,037 $ 26,768 $

18,425 $

4,022 $

149,252 $

100,939 $

39,363 $

(85,670) $

203,884

Depreciation and

amortization . . . . . . . .
Other income, net . . . . . .
Equity in earnings of
unconsolidated
subsidiaries, net . . . . .

EBITDA . . . . . . . . . . . . . .
Restructuring charges

(recoveries), net . . . . .

Integration/acquisition

cost

. . . . . . . . . . . . . . .

3,930
845

1,689
168

1,408
373

455
181

7,482
1,567

31,527
599

3,054
152

6,525
9,207

48,588
11,525

297

—

—

—

297

—

—

—

297

105,109

28,625

20,206

4,658

158,598

133,065

42,569

(69,938)

264,294

—

—

—

—

313

—

—

—

313

—

(241)

9,151

6

—

—

279

78

9,430

Adjusted EBITDA . . . . . . $ 105,109 $ 28,625 $

20,519 $

4,658 $

158,911 $

141,975 $

42,575 $

(69,659) $

273,802

732,593 $ 1,092,474 $ 144,160 $ 318,687 $ 2,287,914
119,901
584,222

42,605 $
458,169 $

23,038 $
— $

6,390 $
29,823 $

47,868 $
96,230 $

Identifiable assets (1) . . . $ 411,347 $ 198,815 $
Long-lived assets (1) . . . $ 22,813 $ 11,018 $
. . . . . . . . . . $ 47,757 $ 47,501 $
Goodwill (1)

98,599 $
10,834 $
972 $

23,832 $
3,203 $
— $

F-39

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Year Ended April 30, 2017

Executive Search

North
America

EMEA Asia Pacific

Latin
America

Hay
Group

Subtotal

(in thousands)

Futurestep Corporate Consolidated

Fee revenue . . . . . . . . . . . . $ 356,625 $ 146,506 $
Deferred revenue

80,169 $

34,376 $

617,676 $

724,186 $ 223,659 $

— $ 1,565,521

adjustment due to
acquisition . . . . . . . . . . . .

—

—

—

—

—

3,535

—

—

3,535

Adjusted fee revenue . . . . . $ 356,625 $ 146,506 $

80,169 $

34,376 $

617,676 $

727,721 $ 223,659 $

— $ 1,569,056

Total revenue . . . . . . . . . . . $ 369,803 $ 150,113 $

81,744 $

34,533 $

636,193 $

741,533 $ 243,943 $

— $ 1,621,669

Net income attributable to

Korn/Ferry
International

. . . . . . . . . .

Net income attributable to
. .
noncontrolling interest
Other income, net . . . . . . . .
Interest expense, net
. . . . .
Equity in earnings of
unconsolidated
subsidiaries, net

. . . . . . .
Income tax provision . . . . .

$

84,181

3,057
(11,820)
10,251

(333)
29,104

Operating income (loss) . . . $ 81,550 $ 27,854 $
Depreciation and

8,580 $

6,268 $

124,252 $

47,302 $

29,986 $

(87,100) $

114,440

amortization . . . . . . . . . . .
Other income (loss), net . . .
Equity in earnings of
unconsolidated
subsidiaries, net

. . . . . . .

EBITDA . . . . . . . . . . . . . . . .
Restructuring charges,

3,812
844

1,030
(15)

1,060
300

483
684

6,385
1,813

32,262
341

2,818
(91)

5,795
9,757

47,260
11,820

333

—

—

—

333

—

—

—

333

86,539

28,869

9,940

7,435

132,783

79,905

32,713

(71,548)

173,853

net

. . . . . . . . . . . . . . . . . .

1,719

629

1,495

773

4,616

29,663

101

220

34,600

Integration/acquisition

cost

. . . . . . . . . . . . . . . . .

Deferred revenue

adjustment due to
acquisition . . . . . . . . . . . .
Separation costs . . . . . . . . .

—

—
—

—

—
—

—

—
—

—

—
—

—

—
—

14,440

3,535
609

—

—
—

7,939

22,379

—
—

3,535
609

Adjusted EBITDA . . . . . . . . $ 88,258 $ 29,498 $

11,435 $

8,208 $

137,399 $

128,152 $

32,814 $

(63,389) $

234,976

613,738 $ 1,057,611 $ 116,717 $ 274,832 $ 2,062,898
109,567
576,865

37,846 $
457,241 $

18,560 $
— $

46,468 $
92,149 $

6,693 $
27,475 $

Identifiable assets (1) . . . . . $ 340,069 $ 158,927 $
Long-lived assets (1) . . . . . $ 23,746 $ 11,089 $
Goodwill (1) . . . . . . . . . . . . . $ 46,201 $ 44,976 $

87,845 $
8,371 $
972 $

26,897 $
3,262 $
— $

F-40

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Year Ended April 30, 2016

Executive Search

North
America

EMEA Asia Pacific

Latin
America

Hay
Group

Subtotal

(in thousands)

Futurestep Corporate Consolidated

Fee revenue . . . . . . . . . . . . . $ 371,345 $ 144,319 $
Deferred revenue

80,506 $

26,744 $ 622,914 $

471,145 $ 198,053 $

— $ 1,292,112

adjustment due to
acquisition . . . . . . . . . . . .

—

—

—

—

—

10,967

—

—

10,967

Adjusted fee revenue . . . . . $ 371,345 $ 144,319 $

80,506 $

26,744 $ 622,914 $

482,112 $ 198,053 $

— $ 1,303,079

Total revenue . . . . . . . . . . . . $ 386,256 $ 148,285 $

83,206 $

26,781 $ 644,528 $

488,217 $ 213,969 $

— $ 1,346,714

Net income attributable to

Korn/Ferry
International . . . . . . . . . . .

Net income attributable to

noncontrolling interest . . .
Other loss, net . . . . . . . . . . .
Interest income, net . . . . . . .
Equity in earnings of
unconsolidated
subsidiaries, net . . . . . . . .
Income tax provision . . . . . .

$

30,913

520
4,167
(237)

(1,631)
18,960

Operating income (loss) . . . $ 100,381 $ 20,607 $
Depreciation and

12,572 $

(1,854) $ 131,706 $

(3,415) $

26,702 $ (102,301) $

52,692

amortization . . . . . . . . . . .
Other (loss) income, net . . .
Equity in earnings of
unconsolidated
subsidiaries, net . . . . . . . .

EBITDA . . . . . . . . . . . . . . . .
Restructuring charges,

3,267
(147)

1,029
433

941
21

312
312

5,549
619

21,854
(868)

2,386
364

6,431
(4,282)

36,220
(4,167)

437

—

—

—

437

—

—

1,194

103,938

22,069

13,534

(1,230)

138,311

17,571

29,452

(98,958)

1,631

86,376

net . . . . . . . . . . . . . . . . . . .

499

5,807

577

322

7,205

25,682

Integration/acquisition

costs . . . . . . . . . . . . . . . . .

Venezuelan foreign

currency loss . . . . . . . . . .

Deferred revenue

adjustment due to
acquisition . . . . . . . . . . . .
Separation costs . . . . . . . . .

—

—

—
—

—

—

—
—

—

—

—
—

—

—

17,607

6,635

6,635

7,085

—
—

—
—

10,967
—

49

—

—

—
—

77

33,013

27,802

45,409

—

13,720

—
744

10,967
744

Adjusted EBITDA . . . . . . . . . $ 104,437 $ 27,876 $

14,111 $

5,727 $ 152,151 $

78,912 $

29,501 $

(70,335) $

190,229

Identifiable assets (1) . . . . . $ 227,228 $ 150,516 $
Long-lived assets (1) . . . . . . $ 19,044 $
4,817 $
Goodwill (1) . . . . . . . . . . . . . $ 48,320 $ 46,193 $

86,394 $
3,708 $
972 $

(1) As of the end of the fiscal year.

24,273 $ 488,411 $ 1,005,457 $ 104,396 $ 300,336 $ 1,898,600
95,436
590,072

42,974 $
465,937 $

18,779 $
— $

29,048 $
95,485 $

4,635 $
28,650 $

1,479 $
— $

F-41

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Fee revenue attributed to an individual customer or country, other than the U.S., did not account for more than
10% of the total fee revenue in fiscal 2018, 2017 or 2016. Fee revenue classified by country in which the Company
derives revenues are as follows:

Year Ended April 30,

2018

2017

2016

(in thousands)

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

778,470
988,747

1,767,217

$

$

728,871
836,650

1,565,521

$

$

669,585
622,527

1,292,112

Other than the U.S., no single country controlled over 10% of the total long-lived assets, excluding financial
instruments and tax assets. Long-lived assets, excluding financial instruments and tax assets, classified by
controlling country are as follows:

U.S. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1)

Includes Corporate long-lived assets

12. Acquisitions

Year Ended April 30,
2017

2018

2016

(in thousands)
70,949
$
38,618

80,424
39,477

119,901

$

109,567

$

$

$

$

64,525
30,911

95,436

The following is a summary of acquisitions the Company completed during the periods indicated (no acquisitions
were completed in fiscal 2018 or 2017:

Year Ended April 30,
2016 (1)

(in thousands)

Receivables due from clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and other retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Integration/acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill by segment – Hay Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

$

116,509
15,587
29,428
196,400
7,345
125,640
31,400
58,729
8,536

140,964
476,885

335,921

45,409

335,921

(1) On December 1, 2015, the Company completed its acquisition of Legacy Hay, a global leader in people

strategy and organizational performance, for $476.9 million, net of cash acquired. The purchase price
consisted of $259.0 million in cash ($54 million from foreign locations), net of estimated cash acquired and
5,922,136 shares of the Company’s common stock, par value $0.01 per share (the “Consideration Shares”),
representing an aggregate value of $217.9 million based on the closing price of the Company’s common stock
on The New York Stock Exchange on November 30, 2015. On November 23, 2015, the Company borrowed

F-42

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

$150 million from the Term Facility, to finance a portion of the Legacy Hay acquisition purchase price. As part
of the acquisition, the Company has committed to a $40 million retention pool (of which $14.5 million and
$9.0 million were paid in fiscal 2018 and 2017, respectively) for certain employees of Legacy Hay subject to
certain circumstances. The remaining balance will be payable within 45 days after November 30, 2018.

The acquisition strengthens the Company’s IP, enhances our geographical presence, adds complimentary
capabilities to further leverage search relationships and broadens capabilities for assessment and
development. It improves our ability to support the global business community not only in attracting top talent
and designing compensation and reward incentives, but also with an integrated approach to the entire
leadership and people continuum. Actual results of operations of Legacy Hay are included in the Company’s
consolidated financial statements from December 1, 2015, the effective date of the acquisition, and includes
$186.8 million, $740.2 million and $28.5 million in fee revenue, total assets and Adjusted EBITDA,
respectively, with an Adjusted EBITDA margin of 14.4%, during fiscal 2016. Legacy Hay is included in the Hay
Group segment.

The aggregate purchase price for Legacy Hay was allocated on a preliminary basis to the assets acquired and
liabilities assumed on their estimated fair values at the date of acquisition. During fiscal 2017, the Company
finalized the purchase price allocation by recording a decrease to goodwill of $8.2 million primarily as a result of
tax returns filed for periods prior to the acquisition and an increase in other assets.

Pro forma financial information (unaudited)

Unaudited pro forma consolidated fee revenue and unaudited pro forma net income for fiscal 2016 were
$1.6 billion and $23 million, respectively, as though the acquisition of Legacy Hay had occurred as of the
beginning of fiscal 2016. The unaudited pro forma financial information is for illustrative purposes and is not
indicative of the results of operations that would have been realized if the acquisition had been completed on the
date indicated, nor is it indicative of future operating results.

The unaudited pro forma results primarily include adjustments for amortization charges for acquired intangible
assets and property and equipment, compensation expense for retention awards and imputed interest expense on
Term Facility and the related tax effect on the aforementioned items.

13. Goodwill and Intangible Assets

Changes in the carrying value of goodwill by reportable segment were as follows. Also see Note 16—Subsequent
Events for information regarding an impairment charge that the Company will record in the first quarter of fiscal
2019:

Executive Search

North
America

EMEA

Asia Pacific

Subtotal

Hay Group Futurestep Consolidated

Balance as of May 1, 2016.

. . . . . . . . . . . $

Adjustments . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Exchange rate fluctuations.

Balance as of April 30, 2017. . . . . . . . . . .
. . . . . . . . .

Exchange rate fluctuations.

48,320 $
—
(2,119)

46,201
1,556

$

46,193
—
(1,217)

44,976
2,525

Balance as of April 30, 2018. . . . . . . . . . . $

47,757 $

47,501

$

972
—
—

972
—

972

(in thousands)

$

95,485 $ 465,937 $

—
(3,336)

92,149
4,081

(8,179)
(517)

457,241
928

28,650 $
—
(1,175)

27,475
2,348

$

96,230 $ 458,169 $

29,823 $

590,072
(8,179)
(5,028)

576,865
7,357

584,222

Tax deductible goodwill from the PIVOT Leadership acquisition was $7.0 million and $7.4 million as of April 30,
2018 and 2017, respectively.

F-43

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Intangible assets include the following:

Amortized intangible assets:

April 30, 2018

April 30, 2017

Gross

Accumulated
Amortization

(in thousands)

Net

Gross

Accumulated
Amortization

Net

Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Intellectual property . . . . . . . . . . . . . . . . . . . . . . . .
Proprietary databases . . . . . . . . . . . . . . . . . . . . . .
Non-compete agreements . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125,099 $
33,100
4,256
910
3,986

(42,248) $
(20,112)
(3,628)
(873)
(3,986)

82,851 $
12,988
628
37
—

125,099 $
33,100
4,256
910
3,986

(31,094) $
(16,994)
(3,202)
(833)
(3,986)

94,005
16,106
1,054
77
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

167,351 $

(70,847)

96,504 $

167,351 $

(56,109)

111,242

Unamortized intangible assets:

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,000
712

Total Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

203,216

106,000
77

$

217,319

Amortization expense for amortized intangible assets was $14.7 million, $15.4 million and $11.7 million during
fiscal 2018, 2017 and 2016, respectively. Estimated annual amortization expense related to amortizing intangible
assets is as follows:

Year Ending April 30,

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

Estimated Annual
Amortization
Expense

(in thousands)

$

$

13,487
13,204
13,071
13,060
11,208
32,474

96,504

All amortizable intangible assets will be fully amortized by the end of fiscal 2032.

14. Commitments and Contingencies

Lease Commitments

The Company leases office premises and certain office equipment under leases expiring at various dates through
2030. Total rental expense during fiscal 2018, 2017 and 2016 amounted to $57.6 million, $56.8 million and
$45.5 million, respectively.

Future minimum commitments under non-cancelable operating leases with lease terms in excess of one year
excluding commitments accrued in the restructuring liability are as follows:

Year Ending April 30,

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lease
Commitments

(in thousands)

$

$

66,071
62,305
56,634
49,322
42,306
116,186

392,824

F-44

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Employment Agreements

The Company has a policy of entering into offer letters of employment or letters of promotion with vice presidents
which provide for an annual base salary and discretionary and incentive bonus payments. Certain key vice
presidents who typically have been employed by the Company for several years may also have a standard form
employment agreement. Upon termination without cause, the Company is required to pay the amount of
severance due under the employment agreement, if any. The Company also requires its vice presidents to agree
in their employment letters and their employment agreement, if applicable, not to compete with the Company
during the term of their employment, and for a certain period after their employment ends.

Litigation

From 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 litigation which, if resolved adversely against the Company, would, in the opinion of
management, after consultation with legal counsel, have a material adverse effect on the Company’s business,
financial position or results of operations.

15. Quarterly Results (Unaudited)

The following table sets forth certain unaudited consolidated statements of income data for the quarters in fiscal
2018 and 2017. The unaudited quarterly information has been prepared on the same basis as the annual financial
statements and, in management’s opinion, includes all adjustments necessary to present fairly the information for
the quarters presented.

Fiscal 2018

Fiscal 2017

Quarters Ended

April 30 January 31 October 31

July 31 April 30 January 31 October 31

July 31

Fee revenue . . . . . . . . . . . . . $475,364
Operating income . . . . . . . . . $ 63,281
Net income . . . . . . . . . . . . . . . $ 42,309
Net income attributable to
Korn/Ferry International
Net earnings per common

. . $ 41,160

$447,581
$ 48,622
$ 27,427

(in thousands, except per share data)
$401,254 $406,065
$ 40,737 $ 32,834
$ 29,429 $ 27,736

$443,018
$ 51,244
$ 36,732

$381,918
$ 30,542
$ 24,378

$401,917
$ 46,548
$ 31,056

$375,621
4,516
$
4,068
$

$ 27,247

$ 36,331

$ 29,041 $ 26,924

$ 23,897

$ 30,152

$

3,208

share:
Basic. . . . . . . . . . . . . . . . . . $
Diluted. . . . . . . . . . . . . . . . . $

0.74
0.73

$
$

0.49
0.48

$
$

0.65
0.64

$
$

0.52 $
0.51 $

0.48
0.47

$
$

0.42
0.42

$
$

0.53
0.52

$
$

0.06
0.06

16. Subsequent Events

Credit Agreement Amendment

On June 8, 2018, in anticipation of the approval by the Board of Directors of the Company of a rebranding and
restructuring plan (which plan was approved on June 12, 2018), as discussed under “Impairment of Intangible
Asset”, the Company entered into an amendment to its Credit Agreement. The Amendment permits a holding
company reorganization (the “KF Merger”), after which a new public holding company, Korn Ferry, will own all of
the stock of the Company, and will become effective when certain conditions set forth therein, including
consummation of the KF Merger, are satisfied.

Quarterly Dividend Declaration

On June 12, 2018, the Board of Directors of the Company declared a cash dividend of $0.10 per share that will be
paid on July 13, 2018 to holders of the Company’s common stock of record at the close of business on June 26,
2018. The declaration and payment 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 of
Directors may deem to be relevant. The Board may amend, revoke or suspend the dividend policy at any time and
for any reason.

F-45

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2018 (continued)

Impairment of Intangible Asset

On June 12, 2018, the Company’s Board of Directors voted to approve a rebranding plan for the Company. This
plan includes going to market under a single, master brand architecture, solely as Korn Ferry and sunsetting of all
the Company’s sub-brands, including Futurestep, Hay Group and Lominger, among others. The Company is
harmonizing under one brand to help accelerate the firm’s positioning as the preeminent organizational
consultancy and bring more client awareness to its broad range of talent management solutions. The Hay Group
back office was fully integrated as of the beginning of FY’18 and the Company then focused on its integrated
go-to-market activities. This integrated go-to-market approach was a key driver in the 13% fee revenue growth in
FY’18, which led to the decision to further integrate our go-to-market activities under one master brand – Korn
Ferry. In the near term, the Company will discontinue the use of all sub-brands. Two of the Company’s
sub-brands, Hay Group and Lominger came to Korn Ferry through acquisitions. In connection with the accounting
for these acquisitions, $106 million of the purchase price was allocated to indefinite lived tradename intangible
assets. As a result of the decision to discontinue their use, the Company will take a one-time, non-cash intangible
asset impairment charge of $106 million, or $79 million on an after-tax basis in Q1 FY’19.

F-46

KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
April 30, 2018

Column A

Column B

Column C

Additions

Column D

Column E

Description

Balance at
Beginning
of Period

Charges to
Cost and
Expenses

Recoveries
(Charges)
to Other
Accounts (1)

Deductions (2)

Balance at
End of
Period

(in thousands)

Allowance for doubtful accounts:

Year Ended April 30, 2018 . . . . . . . . . . . . . . . . . . . .
Year Ended April 30, 2017 . . . . . . . . . . . . . . . . . . . .
Year Ended April 30, 2016 . . . . . . . . . . . . . . . . . . . .

Deferred tax asset valuation allowance:

Year Ended April 30, 2018 . . . . . . . . . . . . . . . . . . . .
Year Ended April 30, 2017 . . . . . . . . . . . . . . . . . . . .
Year Ended April 30, 2016 . . . . . . . . . . . . . . . . . . . .

$
$
$

$
$
$

15,455
11,292
9,958

21,278
22,030
21,608

$
$
$

$
$
$

13,675
12,987
8,570

3,421
7,931
18,993

$
$
$

$
$
$

$
551
(415) $
(270) $

— $
— $
— $

(11,836) $
(8,409) $
(6,966) $

(9,017) $
(8,683) $
(18,571) $

17,845
15,455
11,292

15,682
21,278
22,030

(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 valuation allowances.

F-47

[THIS PAGE INTENTIONALLY LEFT BLANK]

STOCK LISTING

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 26, 
2018, at:

InterContinental Century City 
2151 Avenue of the Stars 
Los Angeles, California 90067 
USA

REGISTRAR & 
TRANSFER AGENT

For address 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

CONTACTS

For investors:
Gregg Kvochak 
+1 310 556 8550

For media:
Dan Gugler 
+1 310 226 2645

GLOBAL LOCATIONS

Abu Dhabi
Almaty*
Amsterdam
Astana
Athens
Atlanta
Auckland
Bangalore
Bangkok
Barcelona
Beijing
Berlin
Bogota
Boston
Bratislava
Brisbane
Brussels
Bucharest

Budapest
Buenos Aires
Calgary
Cape Town
Chicago
Copenhagen
Dallas
Doha
Dubai
Dublin
Dusseldorf
Enschede
Frankfurt
Gothenburg
Guangzhou
Hamburg
Helsinki
Ho Chi Minh City

Hong Kong
Houston
Irvine
Istanbul
Jakarta
Johannesburg
Kansas City
Kiev
Kuala Lumpur
Lille
Lima
Lisbon
London
Los Angeles
Luxembourg
Lyon
Madrid
Manchester

Manila
Medellin
Melbourne
Mexico City
Miami
Milan
Minneapolis
Monterrey
Montreal
Moscow
Mumbai
Nairobi*
New Delhi
New York
Oslo
Ottawa
Paris
Perth

Philadelphia
Pilsen
Portland
Prague
Princeton
Pune
Quito
Regina
Reston
Rio De Janeiro
Riyadh
Rome
San Francisco
San Jose
Santiago
Sao Paulo
Scottsdale
Seoul

Shanghai
Shenzhen
Singapore
Stamford
Stockholm
Sydney
Taipei
Tel Aviv*
Thame
Tokyo
Toronto
Vancouver
Vienna
Vilnius
Warsaw
Washington, DC
Wellington
Zurich

*Alliance partner

2
0
1
8
A
n
n
u
a
l

R
e
p
o
r
t