What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-06-28 compared with 2020-07-15 · 408 added, 387 removed, 1251 unchanged (39% of the section changed)

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Other Information

Not applicable.

Named Executive Officer Employment Agreements

On June 28, 2021, the Company entered into (1) an amended and restated employment agreement with Gary Burnison (the “Burnison Agreement”), (2) an amended and restated employment agreement with Robert Rozek (the “Rozek Agreement”), (3) an employment agreement with Byrne Mulrooney (the “Mulrooney Agreement”) and (4) an employment agreement with Mark Arian (the “Arian Agreement” and collectively, the “NEO Agreements” and each, an “NEO Agreement”).

Each NEO Agreement supersedes the executive’s prior employment agreement or letter, as the case may be.

The NEO Agreements are terminable on notice by either party (on ninety days’ notice if by the executive or 30 days’ notice in the case of termination for “Good Reason”, as defined in the applicable NEO Agreement).

The NEO Agreements provide for the following annual compensation:

(1) an annual base salary, effective July 1, 2021, of $1,000,000 for Mr.

Burnison, $625,000 for Mr.

Rozek and $550,000 for each of Messrs.

Mulrooney and Arian;

(2) participation in the Company’s annual cash incentive plan with an annual target award of 150% of annual base salary for Mr.

Burnison, 120% of annual base salary for Mr.

Rozek and 100% of annual base salary for Messrs.

Mulrooney and Arian, and the ability to earn additional amounts up to a maximum cash award of 200% of the applicable target bonus opportunity for each executive;

and (3) subject to approval of the Compensation and Personnel Committee of the Board of Directors, participation in the Company’s equity incentive program.

In addition, the executives are eligible to participate in employee benefit plans, arrangements and programs maintained from time to time by the Company for the benefit of senior executives.

The Burnison Agreement provides for continuation of the Retention Award originally granted under his previous employment agreement with the Company dated March 30, 2018 in the amount of $5 million, which cliff vests on March 30, 2022 (the “Retention Vesting Date”).

Under the Burnison Agreement, interest will accrue on the Retention Award from March 30, 2022 until Mr.

Burnison’s termination of employment at 120% of the long-term Applicable Federal Rate as in effect from time to time.

The Retention Award, together with accrued interest, will be paid in equal monthly installments in cash (without further interest) over twelve months following Mr.

Burnison’s termination of employment for any reason (other than termination by the Company for “Cause”, as defined in the Burnison Agreement) on or after the Retention Vesting Date.

Payment of the Retention Award will be conditioned on Mr.

Burnison’s execution and delivery of a general release of claims and his compliance with restrictive covenants relating to confidentiality, nonsolicitation and noncompetition.

Upon any termination of Mr.

Burnison’s employment on or after the Retention Vesting Date (other than by the Company for Cause or due to death or Disability (as defined in the NEO Agreements)), all unvested equity awards granted on or after March 30, 2018 (and at least 90 days prior to such termination, other than with respect to a termination by the Company without Cause or a termination by Mr.

Burnison for Good Reason (as defined in the Burnison Agreement) (an “Involuntary Termination”) during such 90-day period, in which case, there shall be no such 90-day requirement) will continue to vest in accordance with their terms, disregarding such termination.

Such continued vesting will be conditioned on Mr.

Burnison’s execution and delivery of a general release of claims and his compliance with restrictive covenants relating to confidentiality,

nonsolicitation and noncompetition.

As an exception, the post-Change in Control double trigger equity severance vesting rules described below would continue to apply in the event of an Involuntary Termination within 24 months after a Change in Control (as defined in the NEO Agreements).

Under each NEO Agreement, if the executive’s employment terminates due to death or Disability, then he, or his legal representatives, would receive:

(1) all accrued compensation as of the date of termination;

(2) full vesting of all outstanding stock options, other equity-type incentives (excluding performance shares) and benefits under the Executive Capital Accumulation Plan (“ECAP”);

(3) a pro rata portion of his target annual cash incentive award for the fiscal year in which his employment terminated;

(4) the number of performance shares that would have been earned if he had served the Company for the entire performance period and the target performance had been achieved;

and (5) reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA.

In addition, for Mr.

Burnison, any unvested amount of the Retention Award would vest.

If the Company terminates the executive’s employment for Cause at any time or he voluntarily terminates his employment without Good Reason, then the Company would pay him accrued compensation through the date of termination.

If the executive’s employment is Involuntarily Terminated prior to a Change in Control or more than 24 months after a Change in Control, then he will be entitled to the following:

(1) his accrued compensation;

(2) a pro rata portion of his annual cash incentive award, based on actual Company performance, for the year in which his employment terminated;

(3) in the case of Mr.

Burnison, solely if such termination occurs prior to the Retention Vesting Date, cash payments equal to the greater of (i) the sum of one and one-half times his then current annual base salary and one and one-half times his target annual cash incentive award, or (ii) the prorated amount of the Retention Award based on days worked from March 30, 2018 until the date of termination;

and in the case of the other executives, cash payments equal to one and one-half times his then current annual base salary and one and one-quarter times his target annual cash incentive award;

(4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA;

(5) in the case of Mr.

Burnison, solely if such termination occurs prior to the Retention Vesting Date, and Mr.

Rozek, all outstanding stock options, other equity-type incentives, other long term awards and all benefits held under the ECAP (excluding performance awards) (collectively, the “Time Vested Awards”) will continue to vest in accordance with their terms (disregarding such termination) and, in the case of Messrs.

Mulrooney and Arian, the Time Vested Awards that would have vested within 12 months of termination will become fully vested as of the date of such termination;

and (6) in the case of Mr.

Burnison, solely if such termination occurs prior to the Retention Vesting Date, and Mr.

Rozek, the performance awards will vest based on actual performance through the entire performance period and, in the case of Messrs.

Mulrooney and Arian, a pro rata portion of the performance awards will vest based on actual performance during the entire performance period and the number of days the executive was employed during the performance period plus an additional year (provided this number of days does not exceed the number of days in the performance period).

If the executive’s employment is Involuntarily Terminated within 24 months following a Change in Control, then he will be entitled to the following:

(1) his accrued compensation;

(2) a pro rata portion of his target annual cash incentive award;

(3) in the case of Mr.

Burnison, cash payments equal to three times his current annual base salary, three times his target annual cash incentive award and the amount of the Retention Award (to the extent not yet paid) and, in the case of Messrs.

Rozek, Mulrooney and Arian, cash payments equal to two and one-half times the executive’s current annual base salary and two and one-half times the executive’s target annual cash incentive award;

(4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for him and his dependents for so long as such coverage is available under COBRA and for six months thereafter, reimbursement of a portion of the cost of healthcare coverage for him and his dependents;

(5) vesting on the date of termination of all outstanding Time Vesting Awards;

and (6) a number of performance awards equal to the greater of (i) the performance awards that would have been earned if the executive had served for the Company for the entirety of any open performance period and the Company’s performance during such period had been the Company’s actual performance through the date of the Change in Control and at the target level for the period subsequent to the Change in Control and (ii) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been at the target level of performance for the entire performance period.

Rozek terminates his employment due to Retirement (as defined in the Rozek Agreement), he will be entitled to the following:

(1) his accrued compensation;

(2) Time Vested Awards that have been outstanding for more than 90 days will continue to vest in accordance with their terms (disregarding such termination);

and (3) performance awards that have been outstanding for more than 90 days will vest based on actual performance through the entire performance period.

Rozek is required to provide six months’ notice prior to terminating his employment due to Retirement.

Under the NEO Agreements, the severance benefits described above are conditioned on the executive’s execution and delivery of a general release and compliance with covenants relating to confidentiality, nonsolicitation and noncompetition.

In addition, in the event of a Change in Control, the NEO Agreements provide that any payments contingent on a Change in Control that would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code will be reduced by an amount equal to the smallest amount possible such that no payment would be subject to such excise tax;

provided that if, without any reduction in payments, the net amount retained by the executive, after subtracting all taxes imposed thereon, would exceed the after-tax amount that would be retained by him after the reduction described above, then no reduction in payments will be made.

The NEO Agreements also provide for indemnification of the executives to the fullest extent permitted by applicable law and the Company’s governing instruments in connection with suits or proceedings arising by reason of the fact that he is or was a director, officer or employee of the Company.

A copy of the NEO Agreements are attached as Exhibits 10.53, 10.54, 10.55 and 10.56 to this Annual Report.

Long-Term Performance Unit Plan and Executive Capital Accumulation Plan

On June 24, 2021, the Compensation and Personnel Committee (the “Committee”) of the Board of Directors of the Company amended and restated the Company’s Long-Term Performance Unit Plan (the “LTPUP”) and Executive Capital Accumulation Plan (the “ECAP”), effective as of July 1, 2021.

The Committee amended and restated the LTPUP to provide that unit awards made thereunder on or after July 1, 2021 will have a total value upon becoming fully vested of $62,500, generally payable over five years in equal annual installments subject to the terms and conditions of the LTPUP, including the alternate payment provisions provided therein.

The Committee amended and restated both the LTPUP and the ECAP to provide that, following the occurrence of a Change in Control Event (as defined in the applicable plan), a participant’s rights with respect to vested benefits under the plans may not be terminated due to the participant engaging in Detrimental Activity (as defined in the applicable plan).

In addition, under the ECAP, if a participant’s employment is terminated on or following a Change in Control Event by the Company for any reason (other than for Cause, as defined in the ECAP) or due to the Participant’s retirement on or after attaining age 65, then the participant will become 100% vested in all amounts under the ECAP.

A copy of the ECAP and the LTPUP are attached as Exhibits 10.50 and 10.51 to this Annual Report.

Directors, Executive Officers and Corporate Governance

The information required by this Item will be included under the captions “The Board of Directors” and

“Delinquent Section 16(a) Reports” and elsewhere in our 2020 Proxy Statement and is incorporated herein by reference.

The information required by this Item will be included under the captions “The Board of Directors” and, when applicable, “Delinquent Section 16(a) Reports” and elsewhere in our 2021 Proxy Statement and is incorporated herein by reference.

The information under the heading “Information about our Executive Officers” in Part I of this Annual Report on Form 10-K is also incorporated by reference in this section.

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Amendment to Employment Letter dated March 17,2017 between the Company and Mark Arian, filed as Exhibit 10.4 to the Company’s Form 8-K, filed April 17, 2020.

Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective June 1, 2020.

Korn Ferry Amended and Restated Employee Stock Purchase Plan, effective July 1, 2020.

Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective June 1, 2020, filed as Exhibit 10.44 to the Company’s Annual Report on Form 10-K, filed July 15, 2020.

Korn Ferry Amended and Restated Employee Stock Purchase Plan, effective July 1, 2020, filed as Exhibit 10.45 to the Company’s Annual Report on Form 10-K, filed July 15, 2020.

Amendment to Amended and Restated Employment Agreement dated March 30, 2018 between the Company and Gary Burnison and the Letter Agreement dated April 14, 2020, filed as Exhibit 10.1 to the Company’s Form 8-K, filed July 10, 2020 .

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Amendment to Employment Letter dated March 17, 2017 between the Company and Mark Arian and the Letter Agreement dated as of April 14, 2020, filed as Exhibit 10.4 to the Company’s Form 8-K, filed July 10, 2020.

Amended and Restated Korn Ferry Executive Capital Accumulation Plan, effective July 1, 2021.

Amended and Restated Korn Ferry Long Term Performance Unit Plan, effective July 1, 2021.

Form of Unit Award Agreement under Amended and Restated Korn Ferry Long Term Performance Unit Plan.

Amended and Restated Employment Agreement dated June 28, 2021 between the Company and Gary Burnison.

Amended and Restated Employment Agreement dated June 28, 2021 between the Company and Robert Rozek.

Employment Agreement dated June 28, 2021 between the Company and Byrne Mulrooney.

Employment Agreement dated June 28, 2021 between the Company and Mark Arian.

Subsidiaries of Korn Ferry.

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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

This cover page from the Company’s Annual Report on Form 10-K for the year ended April 30, 2021, had been formatted in Inline XBRL and included as Exhibit 101.

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Executive Vice President, Chief Financial Officer and Chief Corporate Officer

July 15, 2020

June 28, 2021

POWER OF ATTORNEY

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Chairman of the Board and Director

July 15, 2020

June 28, 2021

President & Chief Executive Officer

(Principal Executive Officer) and Director

July 15, 2020

June 28, 2021

/s/ ROBERT P.

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(Principal Financial Officer and Principal Accounting Officer)

July 15, 2020

June 28, 2021

/s/ J ERRY LEAMON

July 15, 2020

June 28, 2021

/s/ A NGEL MARTINEZ

Angel Martinez

July 15, 2020

June 28, 2021

/s/ D EBRA J.

July 15, 2020

June 28, 2021

/s/ L ORI ROBINSON

Lori Robinson

July 15, 2020

June 28, 2021

/s/ G EORGE T.

July 15, 2020

June 28, 2021

KORN FERRY AND SUBSIDIARIES

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Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial statements for the year ended April 30, 2021 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, 2021, a copy of which is included in this Annual Report on Form 10-K.

July 15, 2020

June 28, 2021

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

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In our opinion, Korn Ferry and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of April 30, 2021, 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, 2020 and 2019, 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, 2020 and the related notes and the financial statement schedule listed in the index at Item 15(a) and our report dated July 15, 2020 expressed an unqualified opinion thereon.

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, 2021 and 2020, 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, 2021 and the related notes and the financial statement schedule listed in the index at Item 15(a) and our report dated June 28, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Los Angeles, California

July 15, 2020

June 28, 2021

REPORT OF INDEPEN DENT REGISTERED

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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, 2020, 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 July 15, 2020 expressed an unqualified opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in fiscal year 2020 due to the adoption of the new leasing standard.

The Company adopted the new leasing standard using the modified retrospective approach.

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, 2021, 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, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition

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Auditing revenue recognition was complex due to the volume of transactions within the various revenue streams with each revenue stream representing a different pattern of revenue recognition.

Auditing revenue recognition also incorporates testing the underlying data

supporting management estimates mentioned above that are used in recognizing revenues under Search and Consulting contracts.

Auditing revenue recognition also incorporates testing the underlying data supporting management estimates mentioned above that are used in recognizing revenues under Search and Consulting contracts.

How We Addressed the Matter in Our Audit

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We also performed analysis over contracts completed during the year to determine whether there are significant changes in the estimate from initiation to completion of contracts.

Goodwill - Consulting Reporting Unit

Description of the Matter

At April 30, 2020, the goodwill recorded in the Consulting reporting unit was $173 million.

As discussed in Note 1 to the consolidated financial statements, goodwill is tested by the Company’s management for impairment at least annually at the reporting unit level and more frequently when indicators of potential impairment are identified.

During the fourth quarter of fiscal 2020, management performed a quantitative impairment test of goodwill due to the identification of potential COVID-19 related impairment indicators.

Auditing the Company’s annual goodwill impairment test was complex due to the significant judgment in estimating the fair value of the reporting units when the fair value is at or near carrying value.

In particular, the Consulting reporting unit’s fair value estimate was sensitive to assumptions including the discount rate and revenue growth rates which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process.

This includes controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the Company’s Consulting reporting unit, we performed audit procedures with the assistance of our valuation specialists that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We compared the significant assumptions used by management to current industry and economic trends.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the Consulting reporting unit that would result from changes in the assumptions.

/s/ Ernst & Young LLP

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Los Angeles, California

July 15, 2020

June 28, 2021

KORN FERRY AND SUBSIDIARIES

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Operating income

Other (loss) income, net

Other income (loss), net

Interest expense, net

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(in thousands)

Other comprehensive (loss) income:

Other comprehensive income:

Foreign currency translation adjustments

Deferred compensation and pension plan adjustments, net of tax

Net unrealized gain on marketable securities, net of tax

Net unrealized (loss) gain on interest rate swap, net of tax

Net unrealized (loss) gain on marketable securities, net of tax

Net unrealized loss on interest rate swap, net of tax

Comprehensive income

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Comprehensive

(Loss) Income,

Stockholders'

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Balance at May 1, 2018

Other comprehensive income (loss)

Other comprehensive loss

Effect of adoption of accounting standards

Dividends paid to shareholders

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Other comprehensive loss

Effect of adoption of accounting standards

Dividends paid to shareholders

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Balance at April 30, 2020

Other comprehensive loss

Other comprehensive income

Dividends paid to shareholders

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Gain on cash surrender value of life insurance policies

Loss (gain) on marketable securities

(Gain) loss on marketable securities

Deferred income taxes

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Proceeds from sales/maturities of marketable securities

Cash paid for acquisition, net of cash acquired

Cash paid for acquisitions, net of cash acquired

Premium on company-owned life insurance policies

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Cash flows from financing activities:

Proceeds from long term debt

Principal payments on long term debt

Payment of debt issuance costs

Repurchases of common stock

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Dividends paid to shareholders

Dividends - noncontrolling interest

Dividends paid to noncontrolling interest

Proceeds from long term debt

Principal payments on long term debt

Payment of debt issuance costs

Payment of contingent consideration from acquisitions

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

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The Company is pursuing a strategy that will help Korn Ferry to focus on clients and collaborate intensively across the organization.

This approach builds on the best of our past and gives the Company a clear path to the future with focused initiatives to increase our client and commercial impact.

This approach builds on the best of the Company’s past and gives the Company a clear path to the future with focused initiatives to increase its client and commercial impact.

Korn Ferry is transforming how clients address their talent management needs.

The Company has evolved from a mono-line to a diversified business, giving our consultants more frequent and expanded opportunities to engage with clients.

The Company operates through four global segments:

Consulting helps clients synchronize their strategy and their talent by addressing four fundamental needs:

Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Rewards and Benefits.

This work is supported and underpinned by a comprehensive range of some of the world’s leading intellectual property (“lP”) and data.

Digital leverages an artificial intelligence powered platform to identify structure, roles, capabilities and behaviours needed to drive business forward.

This end to end system gives clients one enterprise-wide talent framework and delivers an achievable blueprint for success along with the guidance and tools to deliver it.

The Company has evolved from a mono-line to a diversified business, giving its consultants more frequent and expanded opportunities to engage with clients.

The Company has seven reportable segments that operate through the following four lines of business:

Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs:

Organizational Strategy, Assessment and Succession, Leadership and Professional Development and Total Rewards.

This work is supported by a comprehensive range of some of the world’s leading intellectual property (“lP”) and data.

Digital leverages an artificial intelligence powered machine-learning platform to identify structure, roles, capabilities and behaviours needed to drive business forward.

This end-to-end system combines Korn Ferry proprietary data, client data, and external market data to generate insight and recommend action.

Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent.

Behavioral interviewing and proprietary assessments are used to determine ideal organizational fit, and salary benchmarking builds appropriate frameworks for compensation and retention.

This business is managed and reported on a geographic basis and represents four of the Company’s reportable segments (Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific and Executive Search Latin America).

Recruitment Process Outsourcing (“RPO”) and Professional Search combines people, process expertise and IP-enabled technology to deliver enterprise talent acquisition solutions to clients.

Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.

Consulting and Digital are new reporting segments.

Previously, these were tracked and reported together, as Korn Ferry Advisory (“Advisory”).

Basis of Consolidation and Presentation

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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 $ 0.3 million, $ 0.1 million and $ 0.2 million during fiscal 2020, 2019 and 2018, respectively.

The Company has control of a Mexican subsidiary and consolidates the operations of this subsidiary.

Noncontrolling interest, which represents the Mexican partners’ 51 % interest in the Mexican subsidiary, is reflected on the Company’s consolidated financial statements.

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.

KORN FERRY AND SUBSIDIARIES

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April 30, 2021 (continued)

Use of Estimates and Uncertainties

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Revenue is recognized when control of the goods and services are transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services.

Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standard Codification 606 (“ASC 606”):

Revenue contracts with customers are evaluated based on the five-step model outlined in Accounting Standard Codification (“ASC”) 606 (“ASC 606”):

1) identify the contract with a customer;

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and 5) recognize revenue when (or as) each performance obligation is satisfied.

Consulting fee revenue is primarily recognized as services is rendered, measured by total hours incurred as a percentage of the total estimated hours at completion.

Consulting fee revenue is primarily recognized as services are rendered, measured by total hours incurred as a percentage of the total estimated hours at completion.

It is possible that updated estimates for consulting engagements 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.

Digital revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting engagement.

Digital fee revenue is generated from IP platforms enabling large-scale, technology-based talent programs for pay, talent development, engagement, and assessment and is consumed directly by an end user or indirectly through a consulting engagement.

Revenue is recognized as services are delivered and the Company has a legally enforceable right to payment.

Revenue also comes from the sale of our proprietary IP subscriptions, which are considered symbolic IP due to the dynamic nature of the content.

Revenue also comes from the sale of the Company’s proprietary IP subscriptions, which are considered symbolic IP due to the dynamic nature of the content.

As a result, revenue is recognized over the term of the contract.

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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 and 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.

The Company’s expected credit loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivable.

Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience.

When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions.

The Company generally assesses future economic condition for a period of sixty to ninety days, which corresponds with the contractual life of its accounts receivables.

After the Company exhausts all collection efforts, the amount of the allowance is reduced for balances written off as uncollectible.

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The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents.

As of April 30, 2020, the Company’s investments in cash equivalents consisted of money market funds, commercial paper and corporate notes/bonds with initial maturity of less than 90 days for which market prices are readily available.

As of April 30, 2019, cash equivalents consisted of money market funds for which market prices are readily available.

As of April 30, 2021 and 2020, the Company’s investments in cash equivalents consisted of money market funds, and commercial paper and as of April 30, 2020 also includes corporate notes/bonds with initial maturity of less than 90 days for which market prices are readily available.

Marketable Securities

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These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets.

The investments that the Company may sell within the next twelve months are carried as current assets.

The investments that the Company may sell within the next 12 months are carried as current assets.

The Company invests in mutual funds (for which market prices are readily available) that are held in trust to satisfy obligations under the Company’s deferred compensation plans.

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dividends are recorded as earned on the ex-dividend date.

Interest, dividend income and the changes in fair value in marketable securities are recorded in the accompanying consolidated statements of income in other (loss) income, net.

Interest, dividend income and the changes in fair value in marketable securities are recorded in the accompanying consolidated statements of income in other income (loss), net.

The Company also invests cash in excess of its daily operating requirements and capital needs primarily in marketable fixed income (debt) securities in accordance with the Company’s investment policy, which restricts the type of investments that can be made.

The Company’s investment portfolio includes commercial paper and corporate notes/ bonds.

The Company’s investment portfolio includes commercial paper, corporate notes/bonds and US Treasury and Agency securities.

These marketable fixed income (debt) securities are classified as available-for-sale securities based on management’s decision, at the date such securities are acquired, not to hold these securities to maturity or actively trade them.

The Company carries these marketable debt securities at fair value based on the market prices for these marketable debt securities or similar debt securities whose prices are readily available.

The changes in fair values, net of applicable taxes, are recorded as unrealized gains or losses as a component of comprehensive income.

When, in the opinion of management, a decline in the fair value of an investment below its amortized cost is considered to be “other-than-temporary,” a credit loss is recorded in the statement of income in other (loss) income, net;

The changes in fair values, net of applicable taxes, are recorded as unrealized gains or losses as a component of comprehensive income unless the change is due to credit loss.

A credit loss is recorded in the statement of income in other income (loss), net;

any amount in excess of the credit loss is recorded as unrealized gains or losses as a component of comprehensive income.

1 unchanged sentence

a credit loss is the difference between the discounted expected future cash flows to be collected from the debt security and the cost or amortized cost of the debt security.

The determination of the other-than-temporary decline includes, in addition to other relevant factors, a presumption that if the market value is below cost by a significant amount for a period, a write-down may be necessary.

During fiscal 2020, 2019 and 2018, no other-than-temporary impairment was recognized.

During fiscal 2021, 2020 and 2019, no amount was recognized as a credit loss for the Company’s available for sales debt securities.

KORN FERRY AND SUBSIDIARIES

11 unchanged sentences

As of April 30, 2021 and 2020, 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, foreign currency forward contracts and an interest rate swap.

These included cash, cash equivalents, accounts receivable, marketable securities and foreign currency forward contracts.

The carrying amount of cash, cash equivalents and accounts receivable approximates fair value due to the short-term maturity of these instruments.

The fair values of marketable securities classified as equity securities are obtained from quoted market prices, and the fair values of marketable securities classified as available-for-sale, foreign currency forward contracts and interest rate swap are obtained from a third party, which are based on quoted prices or market prices for similar assets and financial instruments.

The fair values of marketable securities classified as equity securities are obtained from quoted market prices, and the fair values of marketable securities classified as available-for-sale and foreign currency forward contracts are obtained from a third party, which are based on quoted prices or market prices for similar assets and financial instruments.

Derivative Financial Instruments

2 unchanged sentences

The principal objective was 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 determined that the interest rate swap qualified as a cash flow hedge in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”).

The Company determined that the interest rate swap qualified as a cash flow hedge in accordance with ASC 815.

Changes in the fair value of an interest rate swap agreement designated as a cash flow hedge were recorded as a component of accumulated other comprehensive loss within stockholders’ equity and were amortized to interest expense over the term of the related debt.

8 unchanged sentences

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).

Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than 12 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.

During fiscal 2021, the Company recorded an adjustment of $ 2.6 million to increase goodwill as a result of additional tax liabilities from the Miller Heiman Group, Achieve Forum and Strategy Execution (the “Acquired Companies”) acquisition completed on November 1, 2019.

The measurement period for the Acquired Companies is closed.

KORN FERRY AND SUBSIDIARIES

5 unchanged sentences

ROU assets represent the Company's right to use an underlying asset for the lease term, and the lease liabilities represent the Company's obligation to make lease payments arising from the lease.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date.

As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

7 unchanged sentences

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 .

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 ten 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 .

1 unchanged sentence

Long-lived assets include property, equipment, ROU assets and software developed or obtained for internal use.

In accordance with Accounting Standard Codification 360, Property, Plant and Equipment (“ASC 360”), management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.

In accordance with ASC 360, Property, Plant and Equipment, management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.

Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period.

1 unchanged sentence

If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset.

During fiscal 2020, the Company decided that it would exit 16 office leases as part of the integration of the acquisition of Miller Heiman Group, AchieveForum and Strategy Execution (“Acquired Companies”).

This resulted in an impairment charge of the ROU asset of $ 2.3 million and an impairment charge of leasehold improvements and furniture and fixtures of $ 0.4 million, both recorded in the consolidated statements of income in general and administrative expenses.

In both fiscal 2019 and 2018, there were no such impairment charges recorded.

During fiscal 2020, the Company decided that it would exit 16 office leases as part of the integration of the Acquired Companies.

This resulted in an impairment charge of the ROU asset of $ 2.3 million and impairment of leasehold improvements and furniture and fixtures of $ 0.4 million, both recorded in the consolidated statements of income in general and administrative expenses in the Digital reportable segment.

During fiscal 2021 and 2019, there were no impairment charges recorded.

Goodwill and Intangible Assets

3 unchanged sentences

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.

If the carrying amount of a reporting unit’s goodwill exceeds the 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).

The Company performs an impairment test annually as of January 31, or more frequently if impairment indicators arise.

The qualitative test performed as of January 31, 2020 did not indicate any impairment.

Goodwill is tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

Results of the annual impairment test performed as of January 31, 2021, indicated that the fair value of each of the reporting units 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 2021 that would require further testing.

KORN FERRY AND SUBSIDIARIES

1 unchanged sentence

April 30, 2021 (continued)

During the fourth quarter of fiscal 2020, t he rapid and severe impacts of the global coronavirus pandemic (“COVID-19”) , and more specifically the need to support global social distancing efforts, mitigating the spread of the virus, and compl ying with restrictions put in place by various governmental entities, led to a decline for our products and services.

These actions ha ve a material impact on our business.

Therefore, we performed a quantitative review as of March 31, 2020, to assess whether t hese actions caused the fair value of any of our reporting units to fall below its carrying value.

This quantitative review included sensitivity analyses o f each reporting unit’s discounted cash flow models considering updated discount rates, financial results and forecasts, market multiples and terminal value revenue growth rates.

While fair value exceeded carrying value for all reporting units the excess of the fair value over carrying value of the Consulting segment had the smallest buffer.

As of April 30, 2020, goodwill in the Consulting segment was $ 173.0 million.

The conclusion for all reporting units was that no impairment e xisted as of March 31, 2020.

As of April 30, 2020, there were no further indicators of impairment with respect to the Company’s goodwill.

We are unable to predict how long COVID-19 will impact our operations or what additional restrictions may be imposed by governments in the regions the Company operates .

Significant variations from current expectations could impact future assessments and result in an impairment charge.

Intangible assets primarily consist of customer lists, non-compete agreements, proprietary databases and IP.

2 unchanged sentences

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.

As noted above COVID-19 impacted the Company’s fourth quarter business and will impact the business going forward.

The Company reviewed its intangible assets and noted no impairment as of April 30, 2020.

As of April 30, 2019, there were no further indicators of impairment with respect to the Company’s intangible assets.

The coronavirus pandemic (“COVID-19”) impacted the Company’s fourth quarter of fiscal 2020 business, as well as the business during fiscal 2021.

The Company reviewed its intangible assets and noted no impairment as of April 30, 2021 and 2020.

On June 12, 2018, the Company’s Board of Directors voted to approve a 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.

11 unchanged sentences

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.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

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.

3 unchanged sentences

Unearned compensation on the consolidated balance sheets includes long-term retention awards that are generally amortized over four-to- five years .

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Deferred Compensation and Pension Plans

3 unchanged sentences

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).

Actuarial gains and losses are initially recorded in accumulated other comprehensive 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.

7 unchanged sentences

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 Company amortizes these contributions on a straight-line basis as they vest, generally over a 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.

8 unchanged sentences

Accordingly, the investment in COLI is classified as long-term in the accompanying consolidated balance sheets.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

The change in the CSV of COLI contracts, net of insurance premiums paid and gains realized, is reported net in compensation and benefits expense.

6 unchanged sentences

Changes in the estimates of the restructuring charges are recorded in the period the change is determined.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Stock-Based Compensation

23 unchanged sentences

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, investments, foreign currency forward contracts, receivables due from clients and net CSV due from insurance companies, which are discussed above.

Cash equivalents include investments in money market securities, commercial papers and corporate notes/bonds while investments include mutual funds, commercial papers and corporate notes/bonds.

Cash equivalents include investments in money market securities, commercial papers and corporate notes/bonds while investments include mutual funds, commercial papers, corporate notes/bonds and US Treasury and Agency securities.

Investments are diversified throughout many industries and geographic regions.

1 unchanged sentence

At April 30, 2021 and 2020, the Company had no other significant credit concentrations.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

Reclassifications

Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation.

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance (Accounting Standard Codification 842 – Leases ) on accounting for leases that generally requires all leases to be recognized on the consolidated balance sheet.

The guidance is effective for fiscal years beginning after December 15, 2018.

On July 30, 2018, the FASB issued an amendment that allows entities to apply the provisions at the effective date without adjusting comparative periods.

The Company adopted this guidance as of May 1, 2019 using a modified retrospective approach without restatement of comparative periods.

As such, periods prior to the date of adoption are presented in accordance with Accounting Standard Codification 840 - Leases .

The FASB also issued subsequent related Accounting Standards Updates (“ASUs”), which detail amendments to the ASU, implementation considerations, narrow-scope improvements and practical expedients.

The Company elected to apply the group of practical expedients which allows the Company to carry forward its identification of contracts that are or contain leases, its historical lease classification and its initial direct costs for existing leases.

The Company has also elected to combine lease and non-lease components for all asset classes and recognize leases with an initial term of 12 months or less on a straight-line basis without recognizing a ROU asset or operating lease liability.

The adoption of this standard had a material impact on the consolidated balance sheet as of May 1, 2019 due to the recognition of ROU assets and operating lease liabilities, but an immaterial impact on the Company’s consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of stockholders’ equity, and consolidated statements of cash flows.

Upon adoption the Company recognized total ROU assets of $ 236.1 million with a corresponding liability of $ 272.3 million.

The ROU asset balance was adjusted by the reclassification of pre-existing prepaid expenses and other assets and deferred rent balances of $ 5.1 million and $ 41.3 million, respectively.

In August 2017, the FASB issued guidance amending and simplifying accounting for hedging activities.

The guidance refined and expanded strategies that qualify for hedge accounting and simplified the application of hedge accounting in certain situations.

The guidance is effective for fiscal years beginning after December 15, 2018.

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance on accounting for measurement of credit losses on financial instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables.

The standard became effective for fiscal years beginning after December 15, 2019.

The Company adopted this guidance as of May 1, 2020 .

The adoption of this guidance did not have an impact on the consolidated financial statements .

Recently Proposed Accounting Standards - Not Yet Adopted

In June 2016, the FASB issued guidance on accounting for measurement of credit losses on financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables.

The standard is effective for fiscal years beginning after December 15, 2019.

The Company will adopt this guidance in its fiscal year beginning May 1, 2020.

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 will adopt this guidance in its fiscal year beginning May 1, 2020.

The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.

The adoption of this guidance did not have a material impact on the consolidated financial statements.

KORN FERRY AND SUBSIDIARIES

1 unchanged sentence

April 30, 2021 (continued)

In August 2018, the FASB issued guidance amending the disclosure requirements for fair value measurements.

The amendment removes and modifies disclosures that are currently required and adds additional disclosures that are deemed relevant.

The amendments of this standard are effective for fiscal years beginning after December 15, 2019.

The Company will adopt this guidance in its fiscal year beginning May 1, 2020.

The Company is currently evaluating the impact of adopting this guidance and doesn’t anticipate the guidance to have a material impact on the consolidated financial statements.

In August 2018, the FASB issued guidance amending accounting for internal-use software.

The new guidance will align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with developing or obtaining internal-use software.

In January 2017, FASB issued guidance simplifying the test for goodwill impairment.

The new guidance simplified the test for goodwill impairment by removing Step 2 from the goodwill impairment test.

Companies 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 became effective for goodwill impairment tests in fiscal years beginning after December 15, 2019.

The Company adopted this guidance as of May 1, 2020 .

The adoption of this guidance did not have a material impact on the consolidated financial statements.

In August 2018, FASB issued guidance amending the disclosure requirements for fair value measurements.

The amendment removed and modified disclosures that are currently required and added additional disclosures that are deemed relevant.

The amendments of this standard became effective for fiscal years beginning after December 15, 2019.

The Company adopted this guidance as of May 1, 2020 .

The adoption of this guidance did not have a material impact on the consolidated financial statements.

In August 2018, FASB also issued guidance amending accounting for internal-use software.

The new guidance aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with developing or obtaining internal-use software.

The amendments of this standard became effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company adopted this guidance as of May 1, 2020 .

The adoption of this guidance did not have a material impact on the consolidated financial statements.

In December 2019, FASB issued guidance on Simplifying the Accounting for Income Taxes.

This update eliminated certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The update also simplified aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarified the accounting for transactions that result in a step-up in the tax basis of goodwill.

The amendments of this standard are effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company will adopt this guidance in its fiscal year beginning May 1, 2020.

The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.

In December 2019, the FASB issued guidance on Simplifying the Accounting for Income Taxes.

This update eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The update also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The amendments of this standard are effective for fiscal year beginning after December 15, 2020, with early adoption permitted.

The Company will adopt this guidance in its fiscal year beginning May 1, 2021.

The adoption of this guidance is not anticipated to have a material impact on the consolidated financial statements.

The Company early adopted this guidance in its fiscal year beginning May 1, 2020 .

The adoption of this guidance did not have a material impact on the consolidated financial statements.

Recently Proposed Accounting Standards - Not Yet Adopted

In March 2020, FASB issued guidance on Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This guidance provides optional expedients and exceptions to the guidance on contract modifications and hedge accounting related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative rates.

Entities can elect to adopt this guidance as of any date within an interim period that includes or is subsequent to March 12, 2020 and can adopt it for new contracts and contract modifications entered into through December 31, 2022.

The Company will adopt this guidance in its fiscal year beginning May 1, 2021 and the Company may elect to apply the amendments prospectively through December 12, 2022.

The Company is currently evaluating the impact of this accounting guidance but does not anticipate that it will have a material impact on the consolidated financial statements.

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.

ASC 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.

The Company has granted and expects to continue to grant to certain employees under its restricted stock agreements, grants that contain non-forfeitable rights to dividends.

3 unchanged sentences

The dilutive effect of participating securities is calculated using the more dilutive of the treasury method or the two-class method.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

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.

3 unchanged sentences

During fiscal 2021, 2020 and 2019, restricted stock awards of 1.3 million shares, 0.7 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.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

The following table summarizes basic and diluted earnings per common share attributable to common stockholders:

18 unchanged sentences

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 other comprehensive income (loss), net of taxes, is recorded as a component of stockholders’ equity.

The components of accumulated other comprehensive income (loss) were as follows:

Accumulated other comprehensive loss, net of taxes, is recorded as a component of stockholders’ equity.

The components of accumulated other comprehensive loss, net were as follows:

(in thousands)

1 unchanged sentence

Deferred compensation and pension plan adjustments, net of taxes

Marketable securities unrealized gain, net of tax

Interest rate swap unrealized gain, net of taxes

Marketable securities unrealized (loss) gain, net of tax

Accumulated other comprehensive loss, net

2 unchanged sentences

April 30, 2021 (continued)

The following table summarizes the changes in each component of accumulated other comprehensive income (loss):

Unrealized Gain on Marketable Securities

The following table summarizes the changes in each component of accumulated other comprehensive loss, net:

Unrealized Gains (Losses) on Marketable Securities

Interest Rate

Comprehensive

Income (Loss)

(in thousands)

Balance as of May 1, 2018

Unrealized gains arising during the period

Reclassification of realized net losses to net income

Balance as of April 30, 2018

Unrealized losses arising during the period

5 unchanged sentences

Balance as of April 30, 2020

The tax effects on unrealized (losses) gains were $( 3.1 ) million, $( 2.3 ) million and $ 2.5 million as of April 30, 2020, 2019 and 2018, respectively.

Unrealized gains (losses) arising during the period

Reclassification of realized net losses to net income

Balance as of April 30, 2021

The tax effects on unrealized gains (losses) were $ 1.1 million, $( 3.1 ) million and $( 2.3 ) million as of April 30, 2021, 2020 and 2019, respectively.

The tax effects on reclassifications of realized net losses were $ 1.0 million, $ 0.8 million and $ 0.4 million as of April 30, 2021, 2020 and 2019, respectively.

The tax effects on unrealized (losses) gains were $( 0.2 ) million, $( 0.3 ) million and $ 0.8 million as of April 30, 2020, 2019 and 2018, respectively.

The tax effect on the reclassification of realized net (losses) gains to net income was $( 0.1 ) million, $ 0.1 million and $( 0.3 ) million as of April 30, 2020 2019 and 2018, respectively.

The tax effects on unrealized (losses) gains were $( 0.2 ) million and $( 0.3 ) million as of 2020 and 2019, respectively.

The tax effects on the reclassification of realized net (losses) gains to net income was $( 0.1 ) million and $ 0.1 million as of 2020 and 2019, respectively.

Employee Stock Plans

4 unchanged sentences

Restricted stock

Total stock-based compensation expense, pre-tax

Tax benefit from stock-based compensation expense

Total stock-based compensation expense, net of tax

Total stock-based compensation expense

Stock Incentive Plan

9 unchanged sentences

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 Company also grants market-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.

1 unchanged sentence

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.

As of April 30, 2020 and 2019, no performance-based shares were outstanding.

Restricted stock activity is summarized below:

6 unchanged sentences

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.

On June 3, 2020, the Company amended the plan so that the purchase price of the shares purchased could not be less than 85 %, or more than 100 % of the fair market price of the common stock on the last day of the enrollment period.

This amendment became effective July 1, 2020.

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 2020, 2019, and 2018, employees purchased 220,161 shares at $ 34.90 per share, 169,299 shares at $ 42.05 per share and 198,749 shares at $ 31.77 per share, respectively.

During fiscal 2021, 2020, and 2019, employees purchased 188,608 shares at an average price of $ 30.25 per share, 220,161 shares at an average price of $ 34.90 per share and 169,299 shares at an average price of $ 42.05 per share, respectively.

As of April 30, 2021, the ESPP had approximately 0.5 million shares remaining available for future issuance.

During fiscal 2021, 2020 and 2019, the Company repurchased (on the open market or privately negotiated transactions) 973,451 shares, 2,606,861 shares and 809,074 shares, respectively, of the Company’s common stock for $ 30.4 million, $ 92.4 million and $ 37.4 million, respectively.

KORN FERRY AND SUBSIDIARIES

1 unchanged sentence

April 30, 2021 (continued)

During fiscal 2020, there were no stock options exercised.

During fiscal 2019 and 2018, the Company issued 6,720 shares and 41,075 shares of common stock, respectively, because of the exercise of stock options, with cash proceeds from the exercise of $ 0.2 million and $ 0.6 million, respectively.

During fiscal 2020, 2019 and 2018, the Company repurchased (on the open market or privately negotiated transactions) 2,606,861 shares, 809,074 shares and 984,079 shares, respectively, of the Company’s common stock for $ 92.4 million $ 37.4 million and $ 33.1 million, respectively.

Financial Instruments

3 unchanged sentences

Balance Sheet Classification

Other Accrued Liabilities

(in thousands)

3 unchanged sentences

Corporate notes/bonds

Treasury and Agency Securities

Total debt investments

4 unchanged sentences

Foreign currency forward contracts

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

April 30, 2020

4 unchanged sentences

Other Comprehensive Income

Interest rate swap

Commercial paper

Corporate notes/bonds

Total debt investments

Changes in Fair Value Recorded in

3 unchanged sentences

Foreign currency forward contracts

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

These investments are held in trust for settlement of the Company’s vested obligations of $ 157.3 million and $ 124.6 million as of April 30, 2021 and 2020, respectively, under the ECAP (see Note 6 — Deferred Compensation and Retirement Plans ).

Unvested obligations under the deferred compensation plans totaled $ 26.5 million and $ 21.7 million as of April 30, 2021 and 2020, respectively.

During fiscal 2020, the fair value of the investments decreased;

therefore, the Company recognized loss of $ 1.8 million, which was recorded in other (loss) income, net.

During fiscal 2021 and 2019, the fair value of the investments increased;

therefore, the Company recognized income of $ 8.1 million, and $ 10.3 million, respectively, which was recorded in other (loss) income, net.

therefore, the Company recognized income of $ 38.5 million and $ 8.1 million, respectively, which was recorded in other income (loss), net.

During fiscal 2020, the fair value of the investments decreased;

therefore, the Company recognized a loss of $ 1.8 million which was recorded in other income (loss), net.

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, 2020, marketable securities classified as available-for-sale consisted of commercial paper and corporate notes/bonds for which market prices for similar assets are readily available.

As of April 30, 2021 and 2020, marketable securities classified as available-for-sale consisted of both commercial paper and corporate notes/bonds and on April 30, 2021 also consisted of US Treasury and Agency securities for which market prices for similar assets are readily available.

Investments that have an original maturity of 90 days or less and are considered highly liquid investments are classified as cash equivalents.

As of April 30, 2020, available-for-sale marketable securities had remaining maturities ranging from one to twelve months .

During fiscal 2020, there were $ 4.8 million in sales/maturities of available-for-sale marketable securities.

As of April 30, 2021, available-for-sale marketable securities had remaining maturities ranging from one to twenty-one months .

During fiscal 2021 and 2020, there were $ 60.6 million and $ 4.8 million in sales/maturities of available-for-sale marketable securities, respectively.

Investments in marketable securities that are held in trust for settlement of the Company’s vested obligations under the ECAP are equity securities and are based upon the investment selections the employee elects from a pre-determined set of securities in the ECAP and the Company invests in equity securities to mirror these elections.

As of April 30, 2021 and 2020, the Company’s investments in equity securities consisted of mutual funds for which market prices are readily available.

Unrealized loss that relates to equity securities still held as of April 30, 2020 and 2019 was $ 8.2 million and $ 4.7 million, respectively.

Unrealized gains that relates to equity securities still held as April 30, 2018 was $ 3.9 million.

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 interest rate swap agreement locked the interest rates on a portion of the debt outstanding at 1.919 %, exclusive of the credit spread on the debt.

The Company designated the swap as a cash flow hedge.

On December 16, 2019, in conjunction with the payoff of the credit facility, the Company terminated the interest rate swap and recorded $ 0.5 million in interest expense, net.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

The fair value of the derivative designated as a cash flow hedge instrument is as follows:

(in thousands)

Derivative asset:

Interest rate swap contract

During fiscal 2020, 2019 and 2018, the Company recognized the following gains and losses on the interest rate swap:

Year Ended April 30,

(in thousands)

(Losses) gains recognized in other comprehensive income (net of tax effects of $( 238 ), $( 281 ), and $ 828 , respectively)

(Losses) gains reclassified from accumulated other comprehensive income into interest (expense) income, net

The cash flows related to interest rate swap contracts are included in net cash provided by operating activities.

Unrealized gains that relate to equity securities still held as of April 30, 2021, was $ 32.7 million while unrealized losses that relate to equity securities held as of April 30, 2020 and 2019 was $ 8.2 million and $ 4.7 million, respectively.

Foreign Currency Forward Contracts Not Designated as Hedges

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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 2020 and 2018, the Company incurred losses of $ 0.3 million and $ 3.7 million, respectively, related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of income.

These foreign currency losses offset foreign currency gains that result from transactions denominated in a currency other than the Company’s functional currency.

During fiscal 2019, the Company incurred gains of $ 1.2 million, related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of income.

During fiscal 2021 and 2019 the Company incurred gains of $ 2.7 million and $ 1.2 million, respectively, related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of income.

These foreign currency gains offset foreign currency losses that result from transactions denominated in a currency other than the Company’s functional currency.

During fiscal 2020, the Company incurred losses of $ 0.3 million, related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of income.

These foreign currency losses offset foreign currency gains 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.

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Non-current benefit obligation

(1) Current portion of benefit obligation is included in Compensation and benefits payable in the consolidated balance sheet .

Deferred Compensation and Pension Plans

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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.

In response to the impact of COVID-19, the Company will take advantage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act’).

Under the CARES Act, minimum required contributions for Hay qualified pension plans, including quarterly contributions, that are otherwise due during calendar year 2020 are instead deferred until January 1, 2021.

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 employees.

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Interest cost

Actuarial loss

Actuarial (gain) loss

Administrative expenses paid

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Equity securities

The Company amended the Hay Group qualified plan in fiscal 2020 to allow participants that have yet not received benefits to elect a lump-sum payment rather than an annuity payment.

As a result of this plan amendment the benefits paid from plan assets include $ 2.0 million in payments related to participants making this election.

The plan amendment also reduced the Company’s benefit obligation by $ 0.6 million against other comprehensive income.

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 the COLI contracts are held in trust and are not separated from our general corporate assets, they are not included in the funded status.

As of April 30, 2021 and 2020, the Company held contracts with gross CSV of $ 241.3 million and $ 238.7 million, offset by outstanding policy loans of $ 80.0 million and $ 92.3 million, respectively .

The pension obligation in fiscal 2021 increased compared to fiscal 2020 due to the ongoing accruals for the LTPU Plan for additional awards issued in fiscal 2021.

The increase in pension benefit obligations was partially offset by a change in the mortality assumption.

The mortality assumption was updated from the MP-2019 projection scale to the MP-2020 mortality projection scale which improved our funded position.

Also improving the funded position was the actual return on plan assets that was greater than expected.

The fair value measurements of the defined benefit plan assets fall within the following levels of the fair value hierarchy as of April 30, 2021 and 2020:

KORN FERRY AND SUBSIDIARIES

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April 30, 2021 (continued)

Significant changes affecting pension benefit obligations in fiscal 20 20 compared to fiscal 20 19 primarily included actuarial loss in 20 20 due to a decrease in discount rates, partially offset by an update of census data and change in the mortality assumption that affect the assumptions used to value liabilities.

The mortality assumption reflects a change from the use of the MP-201 8 improvement scale to MP-201 9 improvement scale, a change from RP-2006 base mortality table to Pri-2012 base mortality, and a change from the use of “top quartile” to white-collar base tables for some of our plans .

The fair value measurements of the defined benefit plan assets fall within the following levels of the fair value hierarchy as of April 30, 2020 and 2019 :

(in thousands)

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Our target allocation ranges are as follows:

equity securities 50 % to 60 %, debt securities 35 % to 45 % and other assets of 1 % to 11 %.

equity securities 50 % to 70 % and debt securities 30 % to 50 %.

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.

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Net periodic benefit cost (1)

The service cost, interest cost and other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other (loss) income, net, respectively, on the consolidated statements of income.

The service cost, interest cost and other components of net periodic benefit costs are included in compensation and benefits expense, interest expense, net and other income (loss), net, respectively, on the consolidated statements of income.

The weighted-average assumptions used in calculating the benefit obligations were as follows:

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Expected long-term rates of return on plan assets

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as follows:

2 unchanged sentences

(in thousands)

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Medical and Life Insurance Plan

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Interest cost

Actuarial loss

Actuarial (gain) loss

Benefits paid

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Healthcare care cost trend rate

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as follows:

2 unchanged sentences

(in thousands)

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

International Retirement Plans

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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, generally a four-to- five year period.

The Company amortizes these contributions on a straight-line basis over the service period, generally a 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.

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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 both fiscal 2021 and fiscal 2019, the deferred compensation liability increased;

therefore, the Company recognized compensation expense of $ 37.3 million and $ 8.7 million, respectively.

During fiscal 2020, deferred compensation liability decreased;

therefore, the Company recognized a reduction in compensation expense of $ 0.8 million.

During both fiscal 2019 and 2018, the deferred compensation liability increased;

therefore, the Company recognized compensation expense of $ 8.7 million and $ 11.1 million, respectively.

Offsetting the decrease in compensation and benefits expense in fiscal 2020 was a decrease in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $ 1.8 million in fiscal 2020, recorded in other (loss) income, net on the consolidated statement of income.

Offsetting the increases in compensation and benefits expense in both fiscal 2019 and 2018 was increases in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $ 8.1 million and $ 10.3 million in fiscal 2019 and 2018, respectively, recorded in other (loss) income, net on the consolidated statements of income.

Offsetting the increases in compensation and benefits expense in fiscal 2021 and 2019 was increases in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) of $ 38.5 million and $ 8.1 million in fiscal 2021 and 2019, respectively, recorded in other income (loss), net on the consolidated statements of income.

Offsetting the decrease in compensation and benefits expense in fiscal 2020 was a decrease in the fair value of marketable securities (held in trust to satisfy obligations of the ECAP liabilities) $ 1.8 million in fiscal 2020, recorded in other income (loss), net on the consolidated statement of income.

Changes in ECAP liability were as follows:

4 unchanged sentences

Amortization of employer contributions

(Loss) gain on investment

Gain (loss) on investment

Employee distributions

3 unchanged sentences

Non-current portion

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

As of April 30, 2021 and 2020, the unamortized portion of the Company contributions to the ECAP was $ 20.2 million and $ 17.0 million, respectively.

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In addition, the Company has the option to make matching contributions.

Due to the impact of COVID-19, the Company has temporarily suspended matching contributions related to fiscal 2020.

The Company made a $ 3.0 million matching contribution in fiscal 2020 related to contributions made by employees in fiscal 2019 and a $ 2.7 million matching contribution in fiscal 2019 related to contributions made by employees in fiscal 2018.

The Company intends to make matching contributions related to fiscal 2021 in fiscal 2022, which are accrued in compensation and benefits payable on the consolidated balance sheet.

Due to the impact of COVID-19, the Company suspended matching contributions related to fiscal 2020.

The Company made a $ 3.0 million matching contribution in fiscal 2020 related to contributions made by employees in fiscal 2019.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Company Owned Life Insurance

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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 $ 6.6 million, $ 6.2 million and $ 7.8 million during fiscal 2020, 2019 and 2018, respectively, recorded as a decrease in compensation and benefits expense.

The CSV of the underlying COLI investments increased by $ 13.0 million, $ 6.6 million and $ 6.2 million during fiscal 2021, 2020 and 2019, 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, 2021, COLI contracts with a net CSV of $ 145.1 million and death benefits, net of loans, of $ 398.9 million were held in trust for these purposes.

Total death benefits increased in fiscal 2020 as compared to fiscal 2019 as we entered into additional insurance policies in order to fund future obligations under certain deferred compensation plans.

Contract Balances

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Contract liabilities-deferred revenue

During the year ended April 30, 2020 and 2019, we recognized revenue of $ 94.1 million and $ 97.0 million, respectively, that were included in the contract liabilities balance at the beginning of the period.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

During fiscal 2021, 2020 and 2019 we recognized revenue of $ 92.4 million, $ 94.1 million and $ 97.0 million, respectively, that were included in the contract liabilities balance at the beginning of the period.

Performance Obligations

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The following table provides further disaggregation of fee revenue by industry:

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Year Ended April 30,

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Education/Non – Profit/General

Income (loss) from continuing operations before provision for income taxes was as follows:

Credit Losses

The Company is exposed to credit losses primarily through the provision of its Executive Search, Consulting and Digital services.

Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is primarily based on historical loss-rate experience.

When required, the Company adjusts the loss-rate methodology to account for current conditions and reasonable and supportable expectations of future economic and market conditions.

The Company generally assesses future economic conditions for a period of sixty to ninety days, which corresponds with the contractual life of its accounts receivables.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible.

The Company considered the current and expected future economic and market conditions surrounding COVID-19 as of the end of the fiscal year and determined that the estimate of credit losses was not significantly impacted as of that date.

The activity in the allowance for credit losses on the Company's trade receivables is as follows:

(in thousands)

Balance at April 30, 2018

Provision for credit losses

Recoveries of amounts previously written off

Foreign currency translation

Balance at April 30, 2019

Provision for credit losses

Recoveries of amounts previously written off

Foreign currency translation

Balance at April 30, 2020

Provision for credit losses

Recoveries of amounts previously written off

Foreign currency translation

Balance at April 30, 2021

The fair value and unrealized losses on available for sale debt securities, aggregated by investment category and the length of time the security has been in an unrealized loss position, are as follows:

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Less Than 12 Months

Balance Sheet Classification

Unrealized Loss

Cash and Cash

Marketable Securities, Current

Marketable Securities, Non-Current

Balance at April 30, 2021

(in thousands)

Commercial paper

Corporate notes/bonds

The unrealized losses on 18 investments in Commercial paper securities and 15 investments in Corporate notes/bonds were caused by fluctuations in market interest rates.

The Company only purchases high grade bonds that have a maturity from the date of purchase of no more than two years.

The Company monitors the credit worthiness of its investments on a quarterly basis.

The Company does not intend to sell the investments and does not believe it will be required to sell the investments before the investments mature and therefore recover the amortized cost basis.

Income from continuing operations before provision for income taxes was as follows:

Year Ended April 30,

1 unchanged sentence

Income before provision for income taxes

The provision (benefit) for domestic and foreign income taxes was as follows:

The provision for domestic and foreign income taxes was as follows:

Year Ended April 30,

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Total provision for income taxes

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:

3 unchanged sentences

Foreign tax rates differential

Transition tax

Deferred tax remeasurement

Non-deductible officers compensation

Excess tax benefit on stock-based compensation

Excess tax expense (benefit) on stock-based compensation

Change in valuation allowance

COLI increase, net

Change in uncertain tax positions

Effective income tax rate

The 21 % corporate income tax rate enacted as part of the 2017 Tax Cuts and Jobs Act (the “Tax Act”) went fully into effect in our fiscal 2019.

In fiscal 2018, the Company was subject to a federal blended rate of 30.4 % ( 35 % in the eight months prior to enactment and 21 % in the four months after).

Our higher effective tax rate in fiscal 2020 as compared to fiscal 2019 is partially attributable to state income tax on higher domestic income and a lower tax benefit recorded in connection with stock-based compensation.

Also, in fiscal 2019 and 2018, 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 had returned to profitability and were more-likely-than-not to realize those deferred tax assets.

In fiscal 2018, the Company recorded a provisional tax charge of $ 18.4 million for the 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 at the rate at which we expected these deferred tax balances to be realized.

In accordance with Staff Accounting Bulletin No.

118 (“SAB 118”), we finalized our computation of the Transition Tax and remeasurement of deferred tax balances in fiscal 2019 and determined that the provisional estimates recorded in the fiscal 2018 do not require adjustment.

Although the SAB 118 measurement period has closed, and the Company did not make any adjustments to its provisional estimates recorded in prior periods, further technical guidance on a broad range of topics related to the Tax Act is expected.

When applicable, we will recognize the effects of such guidance in the period in which it is issued.

The Tax Act also introduced a tax on Global Intangible Low-Taxed Income (“GILTI”) which first became effective in fiscal 2019.

The Company elected to treat taxes due on future U.S.

inclusions in taxable income related to GILTI as an expense when incurred (the “period cost method”) as opposed to factoring such amounts in the Company’s measurement of its deferred taxes (the “deferred method”).

KORN FERRY AND SUBSIDIARIES

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Reserves and accruals

Deferred rent

Deferred revenue

Allowance for doubtful accounts

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Prepaid expenses

Marketable Securities

Gross deferred tax liabilities

3 unchanged sentences

Management believes uncertainty exists regarding the realizability of certain deferred tax assets and has, therefore, established a valuation allowance for deferred tax assets that are not more-likely-than-not to be realized.

The increase in valuation allowance from fiscal 2019 to fiscal 2020 is largely attributable to the valuation allowance recorded against deferred tax assets of the Acquired Companies which management believes are not more-likely-than-not to be realized.

As such, this increase in valuation allowance did not impact the fiscal 2020 provision for income taxes.

Realization of the deferred tax asset is dependent on the Company generating enough taxable income of the appropriate nature in future years.

9 unchanged sentences

state income taxes.

The Company elected to treat taxes due on future U.S.

inclusions in taxable income related to Global Intangible Low-Taxed Income as an expense when incurred (the “period cost method”) as opposed to factoring such amounts in the Company’s measurement of its deferred taxes (the “deferred method”).

The Company and its subsidiaries file federal and state income tax returns in the U.S.

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These income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities.

In fiscal 2019, the IRS concluded its audit of our fiscal year 2016 federal tax return.

In fiscal 2020, the State of New York and the City of New York concluded their audits of the Company’s income tax returns resulting in an immaterial amount of additional tax.

Outside the U.S., income tax returns of the Company’s subsidiaries are under audit in India.

Currently, income tax returns of the Company’s subsidiaries are under audit in Brazil, Germany, Switzerland, Japan and India.

The Company’s income tax returns are not otherwise under examination in any material jurisdictions.

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The Company had accruals of $ 0.9 million, $ 0.6 million, and $ 0.4 million for interest related to unrecognized tax benefits as of April 30, 2021, 2020, and 2019 respectively.

The Company had no accrual for fiscal 2020, 2019 and 2018 for penalties related to unrecognized tax benefits.

The Company recognized interest expense of $ 0.4 million, $ 0.1 million, and $ 0.3 million during the years ended April 30, 2020, 2019, and 2018, respectively.

The Company had an accrual of $ 0.5 million as of April 30, 2021, for penalties related to unrecognized tax benefits and no accrual for penalties related to unrecognized tax benefits in fiscal 2020 and 2019.

The Company recognized tax expense of $ 0.8 million, $ 0.2 million, and $ 0.1 million for interest and penalties related to unrecognized tax benefits during fiscal 2021, 2020, and 2019, respectively.

Property and Equipment, Net

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At any time prior to December 15, 2022, the Company may use the proceeds of certain equity offerings to redeem up to 35 % of the aggregate principal amount of the Notes, including any permitted additional notes, at a redemption price equal to 104.625 % of the principal amount and accrued and unpaid interest.

At any time and from time to time on or after December 15, 2022, the Company may redeem the Notes at the applicable redemption prices set forth in the table below, plus accrued and unpaid interest, if redeemed during the twelve-month period beginning on December 15 of each of the years indicated:

At any time and from time to time on or after December 15, 2022, the Company may redeem the Notes at the applicable redemption prices set forth in the table below, plus accrued and unpaid interest, if redeemed during the 12-month period beginning on December 15 of each of the years indicated:

2024 and thereafter

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The indenture governing the Notes requires that, upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the indenture), the Company shall make an offer to purchase all of the Notes at 101 % of their principal amount and accrued and unpaid interest.

The Company used the proceeds from the offering of the Notes to repay $ 276.9 million outstanding under the Company’s prior revolving credit facility (the “Prior Credit Agreement”) and to pay expenses and fees in connection therewith.

The remainder of the proceeds will be used for general corporate requirements.

The Company used the proceeds from the offering of the Notes to repay $ 276.9 million outstanding under the Company’s prior revolving credit facility and to pay expenses and fees in connection therewith.

The remainder of the proceeds were used for general corporate requirements.

The effective interest rate on the Notes is 4.86 %.

As of April 30, 2020, the fair value of the Notes was $ 372.5 million, based on borrowing rates then required of notes with similar terms, maturity and credit risk.

As of April 30, 2021 and 2020, the fair value of the Notes was $ 416.5 million and $ 372.5 million, respectively, based on borrowing rates then required of notes with similar terms, maturity and credit risk.

The fair value of the Notes was classified as a Level 2 measurement in the fair value hierarchy.

8 unchanged sentences

The Credit Agreement provides for a $ 650.0 million five-year senior secured revolving credit facility (the “Revolver”), and contains certain customary affirmative and negative covenants, including a maximum consolidated net leverage ratio, a maximum consolidated secured net leverage ratio and a minimum interest coverage ratio.

The Credit Agreement permits the payment of dividends to stockholders and Company share repurchases so long as there is no default under the Credit Agreement, the consolidated net leverage ratio, which uses adjusted EBITDA is no greater than 4.25 to 1.00, and the pro forma liquidity is at least $ 50.0 million.

The payoff of the term loan under the Prior Credit Agreement is considered a debt modification and therefore, the previously incurred unamortized and current debt issuance costs will be amortized over the life of the new issuance.

The Credit Agreement permits the payment of dividends to stockholders and Company share repurchases so long as there is no default under the Credit Agreement, the total funded debt to adjusted EBITDA ratio (as set forth in the credit agreement, the “consolidated net leverage ratio”), is no greater than 4.00 to 1.00, and the pro forma liquidity is at least $ 50.0 million.

KORN FERRY AND SUBSIDIARIES

7 unchanged sentences

In addition, the Company will be required to pay to the lenders a quarterly commitment fee ranging from 0.175 % to 0.35 % per annum on the average daily unused amount of the Revolver, based upon the Company’s consolidated net leverage ratio at such time, and fees relating to the issuance of letters of credit.

During fiscal 2020 the average interest rate incurred on the current and previous term loans was 3.34 %.

The average interest rate on our previous term loan for 2019 and 2018 was 3.50 % and 2.60 %, respectively.

As of April 30, 2020, there was no outstanding liability under the Revolver compared to $ 226.9 million as of April 30, 2019 under the prior revolver.

The unamortized debt issuance costs associated with the Credit Agreement was $ 4.2 million as of April 30, 2020 and $ 4.0 million under the Prior Credit Agreement as of April 30, 2019.

As of April 30, 2020, debt issuance costs were included in other current assets and other non-current assets on the balance sheet.

The average interest rate on our current and previous term loan for fiscal 2020 and 2019 was 3.34 % and 3.50 %, respectively.

As of April 30, 2021 and 2020, there was no outstanding liability under the Revolver.

The unamortized debt issuance costs associated with the Credit Agreement was $ 3.3 million and $ 4.2 million as of April 30, 2021 and 2020, respectively.

The debt issuance costs were included in other current assets and other non-current assets on the consolidated balance sheets.

As of April 30, 2021, the Company was in compliance with its debt covenants.

The Company had a total of $ 646.0 million available under the Revolver after $ 4.0 million of standby letters of credit were issued as of April 30, 2020.

The Company had a total of $ 420.2 million available under the prior revolver after the Company drew down $ 226.9 million and after $ 2.9 million of standby letters of credit had been issued as of April 30, 2019.

The Company had a total of $ 646.0 million available under the Revolver after $ 4.0 million of standby letters of credit have been issued as of April 30, 2021 and 2020.

The Company had a total of $ 11.0 million and $ 11.3 million of standby letters with other financial institutions as of April 30, 2021 and 2020, respectively.

The standby letters of credits were generally issued as a result of entering into office premise leases.

The standby letters of credit were generally issued as a result of entering into office premise leases.

The Company has outstanding borrowings against the CSV of COLI contracts of $ 80.0 million and $ 92.3 million at April 30, 2021 and 2020, respectively.

1 unchanged sentence

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 %.

Over the past year the Company invested in its digital business in order to digitize and harmonize the structure of its IP content and data and to build a technology platform for the efficient delivery of these assets directly to an end consumer or indirectly through a consulting engagement.

These investments combined with the recent acquisition of the Acquired Companies resulted in reassessing how the Company manages its Advisory business.

Given the Company’s strategy and development of financial and operational metrics for the Consulting and Digital businesses the Company’s chief operating decision maker (“CODM”) had begun to make resource allocation decisions and assess performance separately between Consulting and Digital.

Therefore, on November 1, 2019, the Company changed the composition of its global segments, and under the new reporting format, the Advisory segment was separated into two segments, Consulting and Digital.

Revenues are directly attributed to a segment and expenses not directly associated with a specific segment are allocated based on the most relevant measures applicable, including revenues, headcount and other factors.

Due to this change, the Company completed a qualitative assessment for any potential goodwill impairment both prior and immediately subsequent to the aforementioned change and determined that no impairment indicators were present.

Operating results by segment prior to November 1, 2019 have been recast to conform to the new segment reporting.

The Company operates through four global segments:

Consulting helps clients synchronize their strategy and their talent by addressing four fundamental needs:

Organizational Strategy, Assessment and Succession, Leadership and Professional Development, and Rewards and Benefits.

This work is supported and underpinned by a comprehensive range of some of the world’s leading lP and data.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

Digital leverages an artificial intelligence powered platform to identify structure, roles, capabilities and behaviours needed to drive business forward.

This end to end system gives clients one enterprise-wide talent framework and delivers an achievable blueprint for success along with the guidance and tools to deliver it.

The Company has seven reportable segments:

Consulting, Digital, Executive Search North America, Executive Search EMEA, Executive Search Asia Pacific, Executive Search Latin America and RPO & Professional Search.

Revenues are directly attributed to a reportable segment and expenses not directly associated with a specific segment are allocated based on the most relevant measures applicable, including revenues, headcount and other factors.

The Company’s seven reportable segments operate through the following four lines of business:

Consulting aligns organization structure, culture, performance and people to drive sustainable growth by addressing four fundamental needs:

Organizational Strategy, Assessment and Succession, Leadership and Professional Development and Total Rewards.

This work is supported by a comprehensive range of some of the world’s leading lP and data.

Digital leverages an artificial intelligence powered, machine-learning platform to identify structure, roles, capabilities and behaviours needed to drive business forward.

This end-to-end system combines Korn Ferry proprietary data, client data, and external market data to generate insight and recommend action.

Executive Search helps organizations recruit board level, chief executive and other senior executive and general management talent.

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Transaction sizes range from single professional searches to team, department and line of business projects, and global outsource recruiting solutions.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Executive Search is managed by geographic regional leaders .

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The Executive Search geographic regional leaders and the Chief Executive Officers of Consulting, Digital, and RPO & Professional Search report directly to the Chief Executive Officer of the Company.

The Company also operates a Corporate segment to record global expenses.

The Company evaluates performance and allocates resources based on the 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 in Note 1— Organization and Summary of Significant Accounting Policies , except the items described above are excluded from EBITDA to arrive at Adjusted EBITDA.

The Company also operates Corporate to record global expenses.

The Company evaluates performance and allocates resources based on the Company’s chief operating decision maker (“CODM”) review of (1) fee revenue and (2) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”).

To the extent that such costs or charges occur, Adjusted EBITDA excludes restructuring charges, integration/acquisition costs, certain separation costs and certain non-cash charges (goodwill, intangible asset and other impairment charges).

The CODM is not provided asset information by reportable segment.

Financial highlights by operating segment are as follows:

Financial highlights by reportable segments are as follows:

Year Ended April 30, 2021

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Net income attributable to noncontrolling interest

Other loss, net

Other income, net

Interest expense, net

Income tax provision

Operating income (loss)

Operating income

Depreciation and amortization

Other income (loss), net

Other income, net

Integration/acquisition costs

Restructuring charges, net

Separation costs

Adjusted EBITDA (1)

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition and net restructuring charges.

Year Ended April 30, 2020

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Net income attributable to noncontrolling interest

Other income, net

Other loss, net

Interest expense, net

Income tax provision

Operating (loss) income

Operating income

Depreciation and amortization

Other income (loss), net

Other loss, net

Integration/acquisition costs

Tradename write-offs

Restructuring charges, net

Separation costs

Adjusted EBITDA (1)

Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes integration/acquisition costs, net restructuring charges and separation costs.

KORN FERRY AND SUBSIDIARIES

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Income tax provision

Operating income (loss)

Operating income

Depreciation and amortization

Other income, net

Restructuring (recoveries) charges, net

Integration/acquisition costs

Tradename write-offs

Adjusted EBITDA (1)

Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization and further excludes, integration/acquisition costs and tradename write-offs .

Fee revenue attributed to an individual customer or country, other than the U.S.

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Restructuring Charges, Net

On April 20, 2020, in light of the continuing uncertainty in worldwide economic conditions caused by the COVID-19 pandemic and, as part of a broader program aimed at further enhancing Korn Ferry’s strong balance sheet and liquidity position, the Company adopted a restructuring plan intended to adjust its cost base to the current economic environment and to position the Company to invest into the recovery.

This resulted in restructuring charges, net of $ 40.5 million across all lines of business relating to severance for positions that have been eliminated.

On April 20, 2020, in light of the uncertainty in worldwide economic conditions caused by the COVID-19 pandemic and, as part of a broader program aimed at further enhancing Korn Ferry’s strong balance sheet and liquidity position, the Company adopted a restructuring plan intended to adjust its cost base to the current economic environment and to position the Company to invest into the recovery.

The Company continued the implementation of this plan in the first quarter of fiscal 2021.

There were no new such actions in the rest of fiscal 2021.

Rather, the Company completed the actions initiated in prior quarters and made adjustments to previously recorded restructuring accruals resulting in restructuring charges, net of $ 30.7 million and $ 40.5 million during fiscal 2021 and 2020, respectively, across all lines of business relating to severance for eliminated positions.

KORN FERRY AND SUBSIDIARIES

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April 30, 2021 (continued)

Earlier in fiscal 2020, the Company had also adopted a restructuring plan to rationalize its cost structure to realize the efficiencies and operational improvement that the investments in the Digital business, as discussed in Note 11— Segments , have enabled, or position us to realize.

The restructuring plan impacts both the Consulting and Digital segments and includes the elimination of redundant positions, which resulted in restructuring charges, net of $ 18.1 million in fiscal 2020, relating to severance for positions that have been eliminated.

In the third quarter of fiscal 2020, the Company adopted a restructuring plan to rationalize its cost structure to realize the efficiencies and operational improvement that the investments in the Digital business, as discussed in Note 12— Segments , have enabled, or position us to realize.

The restructuring plan impacted both the Consulting and Digital segments and included the elimination of redundant positions, which resulted in restructuring charges, net of $ 18.1 million in fiscal 2020, relating to severance for eliminated positions.

Changes in the restructuring liability were as follows:

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Balance as of April 30, 2021

Tax deductible goodwill from the Miller Heiman acquisition was $ 34.9 million as of April 30, 2020.

Tax deductible goodwill from the Miller Heiman acquisition was $ 24.5 million and $ 34.9 million as of April 30, 2021 and 2020, respectively.

Tax deductible goodwill from the PIVOT Leadership acquisition was $ 6.6 million and $ 7.2 million as of April 30, 2021 and 2020, respectively.

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Two of the Company’s sub-brands, Hay Group and Lominger, were acquired by Korn Ferry through acquisitions.

As a result of the decision to discontinue their use, the Company took a non-cash intangible asset impairment charge of $ 106.6 million during the year ended April 30, 2019, recorded in general and administrative expenses on the accompanying statement of income.

As a result of the decision to discontinue their use, the Company took a non-cash intangible asset impairment charge of $ 106.6 million during fiscal 2019, recorded in general and administrative expenses on the accompanying statement of income, of which $ 77.0 million was recorded in the Consulting reportable segment and $ 29.6 million in the Digital reportable segment.

Amortization expense for amortized intangible assets was $ 19.2 million, $ 16.3 million and $ 13.5 million during fiscal 2021, 2020 and 2019, respectively.

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Operating leases contain both office and equipment leases and have remaining terms that range from less than one year to 11 years, some of which also include options to extend or terminate the lease.

Finance leases are comprised of equipment leases and have remaining terms that range from less than one year to 5 years.

Finance leases are comprised of equipment leases and have remaining terms that range from less than one year to almost 5 years.

Finance lease assets are included in property and equipment, net while finance lease liabilities are included in other accrued liabilities and other liabilities.

As a result of the acquisition of the Acquired Companies, the Company recognized ROU assets of $ 3.2 million with a corresponding liability of $ 6.7 million.

As a result of the acquisition of the Acquired Companies in fiscal 2020, the Company recognized ROU assets of $ 3.2 million with a corresponding liability of $ 6.7 million.

The ROU asset balance was adjusted by reclassification of pre-existing prepaid expenses, restructuring liabilities and deferred rent totaling $ 3.5 million.

As part of the plan for integrating the Acquired Companies, the Company decided to exit 16 office leases and as a result, recorded an impairment charge of the ROU assets of $ 2.3 million recorded in the consolidated statement of income.

The components of lease expense were as follows:

April 30, 2020

Year Ended April 30,

(in thousands)

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Total lease cost

Rent expense, as previously defined under ASC 840, which includes the Company leased office premises and certain office equipment leases for the years ended April 30, 2019, and 2018, was $ 58.2 million and $ 57.6 million, respectively.

Rent expense, as previously defined under ASC 840, which includes the Company leased office premises and certain office equipment leases for fiscal 2019 was $ 58.2 million.

Supplemental cash flow information related to leases was as follows:

April 30, 2020

Year Ended April 30,

(in thousands)

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Supplemental balance sheet information related to leases was as follows:

April 30, 2020

Year Ended April 30,

(in thousands)

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imputed interest

Future minimum commitments under non-cancelable operating leases with lease terms in excess of one year, excluding commitments accrued in the restructuring liability under ASC 840 at April 30, 2019, are as follows:

Year Ending April 30,

(in thousands)

On November 1, 2019, the Company completed its acquisition of the Acquired Companies for $ 108.6 million, net of cash acquired.

The Acquired Companies contributed a world-class portfolio of learning, development and performance improvement offerings and expertise to Korn Ferry and bolster the Company’s substantial leadership development capabilities.

These companies are included in the Digital segment which, working closely with the Consulting segment, provides clients with direct access to data, insights and analytics from one of the world’s most comprehensive people and organizational databases.

The addition of the Acquired Companies further expanded Korn Ferry’s vast IP and content and leveraged the firm’s digital delivery platforms.

Actual results of operations of the Acquired Companies are included in the Company’s consolidated financial statements from November 1, 2019, the effective date of the acquisition.

KORN FERRY AND SUBSIDIARIES

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April 30, 2021 (continued)

On November 1, 2019, the Company completed its acquisition of the Acquired Companies for $ 108.6 million, net of cash acquired.

The Acquired Companies contribute a world-class portfolio of learning, development and performance improvement offerings and expertise to Korn Ferry and bolster the Company’s substantial leadership development capabilities.

These companies are included in the new Digital segment which, working closely with the new Consulting segment, will provide clients with direct access to data, insights and analytics from one of the world’s most comprehensive people and organizational databases.

The addition of the Acquired Companies further expands Korn Ferry’s vast IP and content and leverages the firm’s digital delivery platforms.

Actual results of operations of the Acquired Companies are included in the Company’s consolidated financial statements from November 1, 2019, the effective date of the acquisition.

The following table provides a summary of the net assets acquired in fiscal 2020 (as no acquisitions were completed in fiscal 2021 or 2019):

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The aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed on their estimated fair values at the date of acquisition.

As of April 30, 2020, these allocations remained preliminary with regard to income taxes.

The measurement period for purchase price allocation ends as soon as information on the facts and circumstances becomes available, not to exceed 12 months.

During fiscal 2021, the Company finalized the purchase price allocation by recording an increase in goodwill of $ 2.6 million as a result of additional tax liabilities.

Commitments and Contingencies

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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.

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2020 (continued)

From time to time, the Company has been and is involved in litigation incidental to its business.

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Operating income (loss)

Net (loss) income

Net (loss) income attributable to Korn Ferry

Net (loss) earnings per common share:

Net income (loss)

Net income (loss) attributable to Korn Ferry

Net earnings (loss) per common share:

KORN FERRY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2021 (continued)

Subsequent Event

Quarterly Dividend Declaration

On July 1, 2020 , the Board of Directors of the Company declared a cash dividend of $ 0.10 per share with a payment date of July 31, 2020 to holders of the Company’s common stock of record at the close of business on July 15, 2020 .

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.

On June 21, 2021 , the Board of Directors of the Company approved an increase of 20 % in the Company’s quarterly dividend policy to $ 0.12 per share and declared a cash dividend of $ 0.12 per share with a payment date of July 30, 2021 to holders of the Company’s common stock of record at the close of business on July 6, 2021 .

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 condition, 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.

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April 30, 2021

Deductions (2)

(in thousands)

Allowance for doubtful accounts:

Year Ended April 30, 2020

Year Ended April 30, 2019

Year Ended April 30, 2018

Deferred tax asset valuation allowance:

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Year Ended April 30, 2019

Exchange rate fluctuations and for Deferred tax asset includes amount acquired from Acquired Companies.

Allowance for doubtful accounts represents accounts written-off, net of recoveries and deferred tax asset valuation represents release of prior valuation allowances.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures