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Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Ladies and gentlemen, thank you for standing by and welcome to the Korn/Ferry International conference call.
At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference is being recorded.
Before I turn the call over to your host, Mr. Paul C. Reilly, Chairman and CEO, let me first read the cautionary statement to investors.
Certain statements made in the presentation today will constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements.
Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties which are beyond the Company's control. Additional information concerning such risks and uncertainties can be found in the Company's Annual Report for fiscal 2005.
With that, I'll turn the call over to Mr. Reilly. Please go ahead, Mr. Reilly.
PAUL REILLY, CHAIRMAN, CEO, KORN/FERRY INTERNATIONAL: Thank you, Julie, and good morning, everyone and thank you for joining us a little earlier this time as we report from our board meeting here in Chicago.
Last year at this time, I had the opportunity to tell you that Korn/Ferry had just completed an impressive fourth quarter and for the year had obtained the highest profits in our firm's history. Today I'm pleased to report that once again we have surpassed our records from last year and have reached a new level of profitability.
Unquestionably, fiscal year '06 was a strong year for Korn/Ferry. In terms of revenue, our performance improved 15.6% above last year at 523 million.
I'm further pleased to say that we recorded 76 million in operating earnings with an EPS of $1.09 which excludes the one-time benefits, we achieved a 21% improvement in profitability over last year and have obtained the highest level of net profits in the firm's 36.5-year history.
Over the past several months, we have made significant progress against our $50 million stock repurchase program. Moving forward, we will continue to create further positive shareholder value in addition to remaining financially sound. Gary Burnison will go in further detail on our repurchase program in his remarks.
In terms of the fourth quarter, fee revenue reached an impressive 145.3 million up, 12% sequentially. Operating earnings in the core business surged, totaled 29.4 million and despite commentary to the contrary, we have once again improved our margins to a near record 23.2%.
We are, however, disappointed to report that after 11 quarters of consecutive revenue and seven straight quarters of profitability, Futurestep posted a $1.4 million loss in the fourth quarter due primarily to several one-time write-offs of receivables as well as personnel costs and continued infrastructure investments. Futurestep did grow 30% for the year and turned a profit the full-year.
With the outsourcing trend still in high demand, Futurestep continues to hold enormous promise going forward. I am confident that Futurestep will continue to be a significant, profitable engine for the firm in 2007.
Despite the FutureStep loss, quarterly EPS came in at a record $0.31, up $0.04 from the third quarter.
Fiscal '06 was a terrific year of growth across each of our seven major executive search industry sectors, with three markets posting double-digit growth rates. Resulting from heavy demand from manufacturing, energy, defense and others our industrial market led the way at 29% over last year.
Financial services recorded an impressive 23% improvement fueled in large part by commercial investment banking, asset management and wealth and insurance and risk management. Life sciences was up 13%.
From a geographical perspective we experienced significant growth across every region. The demand for talent was driven by strong North American activity up 15%, Asia-Pacific grew 13%, and Latin America posted an amazing 45% year-over-year improvement.
Strong fourth quarter confirmations and overall positive year-end uptick activity helped drive our record performance.
In addition, many of our internal key metrics also rose during the year. Most notably partner recruitment and productivity significantly. Gary Burnison will add more color in his comments.
For the coming year, we are looking for continued growth in Asia and all of our regions. Asia is currently operating at all-time highs. We expect that China and India will remain strong and continue to drive the region.
Due to the combination of long-term demographic trends, along with the robust economy, we believe that the cycle for global organizational expansion, retention and development will continue for the foreseeable future.
Now at three [three] straight months of U.S. job growth, the U.S. economy has added over 5.3 million jobs. Unemployment has fallen from 6.1% to 4.6 in the U.S. during this period. The demand for talent is rapidly approaching levels not seen since the dot com days.
Talent issues are the top of mind with CEOs I speak to every day. Attracting and developing people is what keeps them up at night, more so than attracting new companies or developing new products.
With the Fortune 500 anticipating they will lose half of their senior management to retirement in the next five years, we are extremely well positioned to help clients not only obtain new talent, but through Leadership Development Solutions also help clients develop and retain their workforces.
During fiscal '06, we made significant investment in our Leadership Development Solutions. In recent months, we have spent a good deal of time recruiting highly specialized consultants with niche [inaudible] backgrounds in organizational development, executive compensation and HR consoling.
As of today we now have 37 …