Heidrick & Struggles Reports 2009 Second Quarter Financial Results

CHICAGO, July 28, 2009 (GLOBE NEWSWIRE) -- Heidrick & Struggles International,
Inc. (Nasdaq:HSII), the world's premier executive search and leadership
consulting firm, today announced financial results for the second quarter ended
June 30, 2009.

Consolidated net revenue of $93.1 million declined 45.1 percent from $169.5
million in the 2008 second quarter, or approximately 41 percent on a constant
currency basis. Net revenue declined 44.4 percent in the Americas, 48.5 percent
in Europe (approximately 39 percent on a constant currency basis), and 40.7
percent in the Asia Pacific region (approximately 36 percent on a constant
currency basis).

The number of executive search confirmations in the quarter decreased 37.1
percent compared to the 2008 second quarter and was essentially the same as in
the 2009 first quarter. The number of consultants at June 30, 2009 was 380,
compared to 408 at June 30, 2008, and 403 at March 31, 2009. Productivity, as
measured by annualized net revenue per consultant, was $0.9 million compared to
$1.7 million in the 2008 second quarter. The average revenue per executive
search was $102,700 compared to $122,200 in last year's second quarter.

Commenting on the second quarter results Chief Executive Officer L. Kevin Kelly
said, "Year-over-year comparisons reflect the severity of this historic
recession on our business, but the results also reflect the positive impact of
strategic actions we have taken over the last several quarters to better
position the company to weather the downturn and capitalize on the recovery.
Measures taken to better align our cost structure with first quarter
confirmation levels resulted in a small operating profit in the second quarter,
excluding restructuring and impairment charges. There were also some encouraging
improvements in the business as compared to the first quarter including an
increase in net revenue, driven by the Americas and Asia Pacific, and stability
in the level of search confirmations."

Consolidated salaries and employee benefits declined 44.9 percent to $64.6
million, from $117.3 million in the comparable quarter of 2008. This decrease
mostly reflects a reduction in bonus expense associated with the decline in
revenue, and a decline in base salaries resulting from the company's workforce
reductions in January and May 2009. Salaries and employee benefits as a
percentage of net revenue were 69.4 percent for the quarter, compared to 69.2
percent in the 2008 second quarter.

Consolidated general and administrative expenses were $28.0 million, down 16.5
percent from $33.5 million reported in the comparable prior-year period. The
decline reflects the positive impact of various cost savings initiatives. As a
percentage of net revenue, consolidated general and administrative expenses were
30.1 percent, compared to 19.8 percent in the 2008 second quarter, reflecting
the decline in revenue.

The reported operating loss in the 2009 second quarter of $11.6 million compares
to operating income in the 2008 second quarter of $18.7 million. The reported
net loss in the 2009 second quarter was $15.8 million and the net loss per share
was $0.93. The effective tax rate in the quarter was 5.7 percent which reflects
an adjusted full-year expected annualized tax benefit rate of approximately 27
percent, down from approximately 42 percent benefit rate in the first quarter.
The lower expected annualized tax rate is a result of a change in the projection
and mix of income or loss worldwide including additional unbenefitted foreign
losses, and the recording of a valuation allowance on certain deferred tax
assets. In the 2008 second quarter net income was $12.7 million and diluted
earnings per share were $0.72, which reflected an effective tax rate in the
quarter of 38.0 percent.

Excluding restructuring and impairment charges of $12.1 million, which
management believes more appropriately reflects core operations, 2009 second
quarter operating income was $0.5 million, the net loss was $3.0 million, and
the net loss per share was $0.18 (applying the reported tax rate.) Restructuring
charges of $8.3 million were mostly comprised of cash charges related to
severance expense, and the balance represents a non-cash charge of $3.8 million
related to the impairment of an intangible asset associated with a prior
acquisition.

Net cash used by operating activities was $18.9 million, compared to net cash
generated of $37.4 million in the 2008 second quarter. Reflecting the impact of
the company's cost savings initiatives, June represented the first month in 2009
of positive operating cash flow. Cash and cash equivalents at June 30, 2009 were
$64.6 million, compared to $96.4 million at March 31, 2009 and $146.1 million at
June 30, 2008.

Regional Review

$ in millions 2Q 09 2Q 08 Change 2Q 09 1Q 09 Change
---------------------- ----------------------
Americas
--------
Net revenue $ 48.3 $ 87.0 $(38.7) $ 48.3 $ 46.4 $ 1.9
Operating income $ 5.1 $ 12.6 $ (7.5) $ 5.1 $ (7.5) $ 12.6
Consultants 178 213 (35) 178 188 (10)

Europe
------
Net revenue $ 27.5 $ 53.3 $(25.9) $ 27.5 $ 28.1 $ (0.6)
Operating income $ 1.4 $ 7.7 $ (6.3) $ 1.4 $ (2.6) $ 4.1
Consultants 122 120 2 122 128 (6)

Asia Pacific
------------
Net revenue $ 17.3 $ 29.2 $(11.9) $ 17.3 $ 14.7 $ 2.6
Operating income $ 2.2 $ 6.6 $ (4.4) $ 2.2 $ (1.1) $ 3.3
Consultants 80 75 5 80 87 (7)

Corporate $ (8.2) $ (8.2) $ (0.0) $ (8.2) $ (7.8) $ (0.4)
Restructuring &
impairment
charges $(12.1) $ -- $(12.1) $(12.1) $(13.4) $ 1.3
---------------------- ----------------------
Operating income
(loss) $(11.6) $ 18.7 $(30.2) $(11.6) $(32.4) $ 20.8
---------------------- ----------------------
In the 2009 second quarter, all regions reported year-over-year declines in net
revenue and operating income. All of the industry practice groups in each region
experienced declines. Compared to the 2009 first quarter, the Americas achieved
an increase in net revenue driven by improvements in the Consumer,
Education/Nonprofit, Industrial, and Business & Professional Services practices,
as well as Leadership Consulting Services. Asia Pacific also achieved a
sequential increase in net revenue as driven by improvements in the Consumer,
Financial Services, Life Sciences, Education/Nonprofit, and Business &
Professional Services practices, as well as Leadership Consulting Services. In
Europe, the Financial Services, Life Sciences, and Technology practices all
achieved sequential growth in net revenue, but this was offset by declines in
the other practices and in Leadership Consulting Services. All three regions
realized improvements in operating income compared to the first quarter.

Six Months Results

For the six months ended June 30, 2009, consolidated net revenue of $182.3
million declined 43.5 percent from $322.7 million in the first six months of
2008, or approximately 38 percent on a constant currency basis. The number of
executive searches confirmed in the first six months of 2009 declined 37.7
percent compared to the first six months of 2008. The reported operating loss of
$43.9 million compares to operating income of $29.5 million for the first six
months of 2008. The reported net loss for the first six months of 2009 was $34.7
million and the net loss per share was $2.07, reflecting an effective tax
benefit rate of 27.0 percent. Net income for the first six months of 2008 was
$19.8 million and diluted earnings per share were $1.10, which reflected an
effective tax rate of 38.8 percent. Excluding restructuring and impairment
charges of $25.4 million, which management believes more appropriately reflects
core operations, the operating loss for the first six months of 2009 was $18.5
million, the net loss was $16.1 million and the net loss per share was $0.96
(applying the reported tax rate.)

2009 Outlook

Kelly added, "Although we remain optimistic about an improvement in our business
in the later half of the year, it will be weaker than we had previously
expected. Market conditions remain volatile and uncertain and this is impacting
our ability to accurately forecast. We have better aligned our cost structure
with lower revenue levels, and expect significant operating leverage in our
business when the economy improves. I am confident that as a result of the
decisions we have made to retain our key talent while implementing other cost
cutting initiatives, Heidrick & Struggles will emerge from the economic downturn
stronger, more competitive, and more profitable."

Quarterly Conference Call

Executives of Heidrick & Struggles will host a conference call to review 2009
second quarter results today, July 28, at 9:00 am central time. Participants may
access the company's call and supporting slides through the internet at
www.heidrick.com. For those unable to participate on the live call, a webcast
and copy of the slides will be archived at www.heidrick.com and available for up
to 30 days following the investor call.

About Heidrick & Struggles International, Inc.

Heidrick & Struggles International, Inc. is the world's premier provider of
senior-level executive search and leadership consulting services, including
succession planning, executive assessment, talent retention management,
executive development, transition consulting for newly appointed executives, and
M&A human capital integration consulting. For more than 55 years, we have
focused on quality service and built strong leadership teams through our
relationships with clients and individuals worldwide. Today, Heidrick &
Struggles leadership experts operate from principal business centers in North
America, Latin America, Europe and Asia Pacific. For more information about
Heidrick & Struggles, please visit www.heidrick.com.

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures. A "non-GAAP
financial measure" is defined as a numerical measure of a company's financial
performance that excludes or includes amounts different than the most directly
comparable measure calculated and presented in accordance with GAAP in the
statements of income, balance sheets or statements of cash flow of the company.
Pursuant to the requirements of Regulation G, the Corporation has provided a
reconciliation of non-GAAP financial measures to the most directly comparable
GAAP financial measure.

The non-GAAP financial measures used within this earnings release are: operating
income (loss), net income (loss), net income (loss) per share (i.e., EPS), and
excluding restructuring and impairment charges. These measures are presented
because management uses this information to monitor and evaluate financial
results and trends. Management believes this information is also useful for
investors.

Safe Harbor Statement

This press release contains forward-looking statements. The forward-looking
statements are based on current expectations, estimates, forecasts and
projections about the industry in which we operate and management's beliefs and
assumptions. Forward-looking statements may be identified by the use of words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "projects," "forecasts," and similar expressions. Forward-looking
statements are not guarantees of future performance and involve certain known
and unknown risks, uncertainties and assumptions that are difficult to predict.
Actual outcomes and results may differ materially from what is expressed,
forecasted or implied in the forward-looking statements. Factors that may affect
the outcome of the forward-looking statements include, among other things: our
ability to attract and retain qualified executive search consultants; further
declines in the global economy and our ability to execute successfully through
business cycles; the timing, speed or robustness of any future economic
recovery; social or political instability in markets where we operate; the
impact of foreign currency exchange rate fluctuations; price competition; the
ability to forecast, on a quarterly basis, variable compensation accruals that
ultimately are determined based on the achievement of annual results; our
ability to realize our tax loss carryforwards; the timing of the establishment
or reversal of valuation allowance on deferred tax assets; the mix of profit and
loss by country; an impairment of our goodwill and other intangible assets;
delays in the development and/or implementation of new technology and systems;
and, the ability to meet and achieve the expected savings resulting from
cost-reduction initiatives and restructuring activities. Our reports filed with
the U.S. Securities and Exchange Commission also include information on factors
that may affect the outcome of forward-looking statements. We undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.

Heidrick & Struggles International, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three Months Ended
June 30,
--------------------
2009 2008 $ Change % Change
--------- --------- ---------- --------
Revenue:
Revenue before
reimbursements
(net revenue) $ 93,115 $ 169,518 $ (76,403) -45.1%
Reimbursements 4,507 8,297 (3,790) -45.7%
--------- --------- ----------
Total revenue 97,622 177,815 (80,193) -45.1%

Operating expenses:
Salaries and
employee benefits 64,586 117,318 (52,732) -44.9%
General and
administrative
expenses 28,005 33,533 (5,528) -16.5%
Reimbursed expenses 4,507 8,297 (3,790) -45.7%
Restructuring and
impairment charges 12,077 -- 12,077
--------- --------- ----------
Total operating
expenses 109,175 159,148 (49,973) -31.4%
--------- --------- ----------
Operating income
(loss) (11,553) 18,667 (30,220) -161.9%

Non-operating income
(expense):
Interest income, net 179 905
Other, net (3,538) 982
--------- ---------
Net non-operating
income (expense) (3,359) 1,887

Income (loss) before
income taxes (14,912) 20,554

Provision for income
taxes 855 7,810
--------- ---------

Net income (loss) $ (15,767) $ 12,744
========= =========

Basic weighted
average common
shares outstanding 16,981 16,884
Diluted weighted
average common
shares outstanding 16,981 17,672
Basic earnings (loss)
per common share $ (0.93) $ 0.75
Diluted earnings
(loss) per common
share $ (0.93) $ 0.72
Salaries and employee
benefits as a
percentage of
net revenue 69.4% 69.2%
General and
administrative
expense as a
percentage of
net revenue 30.1% 19.8%
Operating income
as a percentage
of net revenue n/a 11.0%
Effective tax rate -5.7% 38.0%

Heidrick & Struggles International, Inc.
Segment Information
(In thousands)

Three Months Ended June 30,
---------------------------------------------------
2009 2008
2009 2008 $ Change % Change Margin* Margin*
-------- -------- -------- -------- ------- -------
Revenue:
Americas $ 48,333 $ 87,002 $(38,669) -44.4%
Europe 27,490 53,344 (25,854) -48.5%
Asia Pacific 17,292 29,172 (11,880) -40.7%
-------- -------- --------
Revenue
before
reimbursements
(net revenue) 93,115 169,518 (76,403) -45.1%
Reimbursements 4,507 8,297 (3,790) -45.7%
-------- -------- --------
Total revenue $ 97,622 $177,815 $(80,193) -45.1%
======== ======== ========

Operating
income (loss):
Americas $ 5,107 $ 12,558 $ (7,451) -59.3% 10.6% 14.4%
Europe 1,426 7,680 (6,254) -81.4% 5.2% 14.4%
Asia Pacific 2,217 6,619 (4,402) -66.5% 12.8% 22.7%
-------- -------- --------
Total regions 8,750 26,857 (18,107) -67.4% 9.4% 15.8%
Corporate (8,226) (8,190) (36) -0.4%
-------- -------- --------
Operating
income
before
restructuring
and impairment
charges 524 18,667 (18,143) -97.2% 0.6% 11.0%
Restructuring
and impairment
charges (12,077) -- (12,077)
-------- -------- --------
Operating
income
(loss) $(11,553)$ 18,667 $(30,220) -161.9% 11.0%
======== ======== ========

*Margin based on revenue before reimbursements (net revenue).

Heidrick & Struggles International, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Six Months Ended
June 30,
--------------------
2009 2008 $ Change % Change
--------- --------- ---------- --------
Revenue:
Revenue before
reimbursements
(net revenue) $ 182,256 $ 322,657 $ (140,401) -43.5%
Reimbursements 9,065 15,099 (6,034) -40.0%
--------- --------- ----------
Total revenue 191,321 337,756 (146,435) -43.4%

Operating expenses:
Salaries and
employee benefits 143,926 227,924 (83,998) -36.9%
General and
administrative
expenses 56,824 65,190 (8,366) -12.8%
Reimbursed expenses 9,065 15,099 (6,034) -40.0%
Restructuring and
impairment charges 25,439 -- 25,439
--------- --------- ----------
Total operating
expenses 235,254 308,213 (72,959) -23.7%
--------- --------- ----------
Operating income (loss) (43,933) 29,543 (73,476) -248.7%

Non-operating
income (expense):
Interest income, net 848 2,946
Other, net (4,444) (105)
--------- ---------
Net non-operating
income (expense) (3,596) 2,841

Income (loss) before
income taxes (47,529) 32,384

Provision for (benefit
from) income taxes (12,835) 12,572
--------- ---------

Net income (loss) $ (34,694) $ 19,812
========= =========

Basic weighted average
common shares outstanding 16,751 17,090
Diluted weighted average
common shares outstanding 16,751 18,066
Basic earnings (loss) per
common share $ (2.07) $ 1.16
Diluted earnings (loss) per
common share $ (2.07) $ 1.10
Salaries and employee
benefits as a percentage
of net revenue 79.0% 70.6%
General and administrative
expense as a percentage
of net revenue 31.2% 20.2%
Operating income (loss) as
a percentage of net revenue n/a 9.2%
Effective tax rate 27.0% 38.8%

Heidrick & Struggles International, Inc.
Segment Information
(In thousands)

Six Months Ended June 30,
-----------------------------------------------------
2009 2008
2009 2008 $ Change %Change Margin* Margin*
-------- -------- --------- ------- ------- -------

Revenue:
Americas $ 94,720 $164,339 $ (69,619) -42.4%
Europe 55,562 106,210 (50,648) -47.7%
Asia Pacific 31,974 52,108 (20,134) -38.6%
-------- -------- ---------
Revenue
before
reimburse-
ments
(net
revenue) 182,256 322,657 (140,401) -43.5%
Reimbursements 9,065 15,099 (6,034) -40.0%
-------- -------- ---------
Total
revenue $191,321 $337,756 $(146,435) -43.4%
======== ======== =========

Operating
income (loss):
Americas $ (2,367) $ 24,282 $ (26,649) -109.7% 14.8%
Europe (1,208) 12,941 (14,149) -109.3% 12.2%
Asia Pacific 1,150 9,341 (8,191) -87.7% 3.6% 17.9%
-------- -------- ---------
Total
regions (2,425) 46,564 (48,989) -105.2% 14.4%
Corporate (16,069) (17,021) 952 5.6%
-------- -------- ---------
Operating
income (loss)
before
restructuring
and impairment
charges (18,494) 29,543 (48,037) -162.6% 9.2%
Restructuring
and impairment
charges (25,439) -- (25,439)
-------- -------- ---------
Operating
income
(loss) $(43,933) $ 29,543 $ (73,476) -248.7% 9.2%
======== ======== =========

*Margin based on revenue before reimbursements (net revenue).

Heidrick & Struggles International, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

June 30, December 31,
2009 2008
--------- ---------
(Unaudited)
Current assets:
Cash and cash equivalents $ 64,628 $ 234,531
Accounts receivable, net 65,399 68,233
Other receivables 5,467 8,586
Prepaid expenses 21,941 19,520
Other current assets 1,372 1,788
Income taxes recoverable, net 21,420 7,719
Deferred income taxes, net 13,498 13,893
--------- ---------
Total current assets 193,725 354,270
--------- ---------

Non-current assets:
Property and equipment, net 27,565 28,172
Restricted cash 9,489 9,655
Assets designated for retirement and
pension plans 25,073 24,973
Investments 9,694 12,594
Other non-current assets 8,650 7,203
Goodwill 107,373 101,234
Other intangible assets, net 9,394 13,543
Deferred income taxes, net 33,630 35,313
--------- ---------
Total non-current assets 230,868 232,687
--------- ---------

Total assets $ 424,593 $ 586,957
--------- ---------

Current liabilities:
Accounts payable $ 5,645 $ 11,977
Accrued salaries and employee benefits 51,616 163,695
Other current liabilities 34,175 49,443
Current portion of accrued restructuring
charges 9,366 2,280
--------- ---------
Total current liabilities 100,802 227,395
--------- ---------

Non-current liabilities:
Retirement and pension plans 28,148 27,503
Other non-current liabilities 25,831 25,755
--------- ---------
Total non-current liabilities 53,979 53,258
--------- ---------

Stockholders' equity 269,812 306,304
--------- ---------

Total liabilities and stockholders' equity $ 424,593 $ 586,957
--------- ---------

Heidrick & Struggles International, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Three Months Ended
June 30,
--------------------
2009 2008
--------- ---------

Cash flows from operating activities:
Net income (loss) $ (15,767) $ 12,744
Adjustments to reconcile net income (loss)
to net cash used in operating activities: -- --
Depreciation and amortization 2,925 2,653
Write-off of investment 2,977 --
Deferred income taxes (3,746) 3,457
Net realized and unrealized (gains)
losses on investments 327 (22)
Stock-based compensation expense, net 4,643 5,920
Impairment charge 3,849 --
Restructuring charges 8,228 --
Cash paid for restructuring charges (9,419) (681)
Changes in assets and liabilities,
net of effects of acquisitions: 0
Trade and other receivables (2,731) (7,346)
Accounts payable (1,698) 668
Accrued expenses (12,878) 28,664
Income taxes (recoverable) payable, net 1,010 (4,319)
Retirement and pension assets and
liabilities 2,347 10
Prepayments, net 1,683 (1,970)
Other assets and liabilities, net (682) (2,351)
--------- ---------
Net cash provided by (used in)
operating activities (18,932) 37,427
--------- ---------

Cash flows from investing activities:
Restricted cash 51 (53)
Acquisition of businesses, net of cash
acquired (11,625) (10,874)
Capital expenditures (1,222) (1,616)
Proceeds from sales of equity securities 6 346
Payments to consultants related to sales
of equity securities -- (151)
Proceeds from sale of a business -- 1,559
Other, net 10 8
--------- ---------
Net cash used in investing activities (12,780) (10,781)
--------- ---------

Cash flows from financing activities:
Proceeds from stock options exercised 563 249
Purchases of treasury stock -- (23,974)
Cash dividends paid (2,336) (2,235)
Payment of employee tax withholdings on
equity transactions (490) (1,402)
--------- ---------
Net cash used in financing activities (2,263) (27,362)
--------- ---------

Effect of exchange rate fluctuations on cash
and cash equivalents 2,231 3,967
--------- ---------

Net increase (decrease) in cash and cash
equivalents (31,744) 3,251
Cash and cash equivalents at beginning
of period 96,372 142,823
========= =========
Cash and cash equivalents at end of period $ 64,628 $ 146,074
========= =========

Supplemental schedule of noncash financing
activities:
Beginning of period - Accrued treasury
stock purchases $ -- $ 2,847
Treasury stock purchases -- 21,833
Cash paid for treasury stock purchases -- (23,974)
--------- ---------
Accrued treasury stock purchases $ -- $ 706
========= =========

Heidrick & Struggles International, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Six Months Ended
June 30,
--------------------
2009 2008
--------- ---------

Cash flows from operating activities:
Net income (loss) $ (34,694) $ 19,812
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 5,583 5,360
Write-off of investment 2,977 --
Deferred income taxes (3,719) 4,975
Net realized and unrealized losses on
investments 344 2
Stock-based compensation expense, net 10,670 12,569
Impairment charge 3,849 --
Restructuring charges 21,590 --
Cash paid for restructuring charges (16,977) (1,405)
Changes in assets and liabilities, net
of effects of acquisitions:
Trade and other receivables 7,579 (33,783)
Accounts payable (842) 361
Accrued expenses (112,238) (68,712)
Income taxes recoverable, net (13,679) (7,093)
Retirement and pension assets and
liabilities 548 (206)
Prepayments, net (1,952) (5,972)
Other assets and liabilities, net (1,218) (1,315)
--------- ---------
Net cash used in operating activities (132,179) (75,407)
--------- ---------

Cash flows from investing activities:
Restricted cash 159 138
Acquisition of businesses, net of cash
acquired (15,453) (11,045)
Capital expenditures (9,463) (5,168)
Purchases of equity method investments (1,300) --
Proceeds from sales of equity securities 6 426
Payments to consultants related to sales
of equity securities -- (169)
Proceeds from sales of short-term
investments -- 22,275
Proceeds from sale of a business -- 1,559
Other, net 10 8
--------- ---------
Net cash provided by (used in)
investing activities (26,041) 8,024
--------- ---------

Cash flows from financing activities:
Proceeds from stock options exercised 1,238 580
Purchases of treasury stock -- (41,987)
Cash dividends paid (4,832) (4,481)
Payment of employee tax withholdings
on equity transactions (3,065) (8,123)
--------- ---------
Net cash used in financing activities (6,659) (54,011)
--------- ---------

Effect of exchange rate fluctuations on cash
and cash equivalents (5,024) 6,888
--------- ---------

Net decrease in cash and cash equivalents (169,903) (114,506)
Cash and cash equivalents at beginning
of period 234,531 260,580
========= =========
Cash and cash equivalents at end of period $ 64,628 $ 146,074
========= =========

Supplemental schedule of noncash financing
activities:
Beginning of period - Accrued treasury
stock purchases $ -- $ 1,605
Treasury stock purchases -- 41,088
Cash paid for treasury stock purchases -- (41,987)
--------- ---------
Accrued treasury stock purchases $ -- $ 706
========= =========
-0-
CONTACT: Heidrick & Struggles International, Inc.
Investors & Analysts:
Julie Creed, VP, Investor Relations
+1 312 496 1774
jcreed@heidrick.com