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EXCEL - IDEA: XBRL DOCUMENT - CTPARTNERS EXECUTIVE SEARCH INC. | Financial_Report.xls |
EX-32.2 - EX-32.2 - CTPARTNERS EXECUTIVE SEARCH INC. | l42723exv32w2.htm |
EX-31.2 - EX-31.2 - CTPARTNERS EXECUTIVE SEARCH INC. | l42723exv31w2.htm |
EX-32.1 - EX-32.1 - CTPARTNERS EXECUTIVE SEARCH INC. | l42723exv32w1.htm |
EX-31.1 - EX-31.1 - CTPARTNERS EXECUTIVE SEARCH INC. | l42723exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended June 30, 2011
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 001-34993
CTPARTNERS EXECUTIVE SEARCH INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 52-2404079 | |
(State or other Jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1166 Avenue of the Americas, 3rd Fl., New York, NY | 10036 | |
(Address of principal executive offices) | (Zip Code) |
(212) 588-3500
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | ||
Common Stock, par value $0.001 per share | NYSE AMEX | |
(Title of each Class) | (Name of each exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and
post such files). þ Yes o No
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definition of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one)
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o | Smaller Reporting Company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). o Yes þ No
The number of the registrants common shares outstanding as of June 30, 2011 was 7,202,371.
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
Table of Contents
Item # | Description | Page | ||||||
PART I. Financial Information | ||||||||
Condensed Consolidated Financial Statements | ||||||||
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010 (unaudited) | 1 | |||||||
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010 (unaudited) | 2 | |||||||
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (unaudited) | 3 | |||||||
Notes to Condensed Consolidated Financial Statements (unaudited) | 4-8 | |||||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | 9-13 | |||||||
Controls and Procedures | 13 | |||||||
Part II. Other Information | ||||||||
Unregistered Sales of Equity Securities and Use of Proceeds | 13-14 | |||||||
Exhibits | 14 | |||||||
Signatures | 14 | |||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
Table of Contents
PART I. Financial Information
Item 1. Condensed Consolidated Financial Statements
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Current Assets |
||||||||
Cash |
$ | 18,955,122 | $ | 24,030,543 | ||||
Accounts receivable, net |
27,691,621 | 21,197,842 | ||||||
Other receivables |
633,876 | 326,542 | ||||||
Prepaid expenses |
3,219,435 | 2,430,879 | ||||||
Deferred income taxes |
229,200 | 1,219,024 | ||||||
Other |
2,313,686 | 1,003,051 | ||||||
Total current assets |
53,042,940 | 50,207,881 | ||||||
Leasehold Improvements and Equipment, net |
4,094,854 | 3,147,192 | ||||||
Other Assets |
1,618,629 | 1,393,823 | ||||||
Deferred income taxes |
808,747 | 346,026 | ||||||
$ | 59,565,170 | $ | 55,094,922 | |||||
Liabilities and Stockholders Equity |
||||||||
Current Liabilities |
||||||||
Current portion of long-term debt |
$ | 153,279 | $ | 181,962 | ||||
Accounts payable |
829,843 | 1,574,493 | ||||||
Accrued compensation |
23,230,178 | 18,132,980 | ||||||
Accrued business taxes |
1,261,848 | 1,419,338 | ||||||
Income taxes payable |
| 1,172,649 | ||||||
Accrued expenses |
2,794,172 | 3,845,685 | ||||||
Total current liabilities |
28,269,320 | 26,327,107 | ||||||
Long-Term Liabilities |
||||||||
Long-term debt, less current maturities |
545,746 | 622,929 | ||||||
Deferred rent, less current maturities |
1,864,467 | 1,667,473 | ||||||
Total long-term liabilities |
2,410,213 | 2,290,402 | ||||||
Stockholders Equity |
||||||||
Preferred stock: 1,000,000 shares
authorized, no shares issued and
outstanding |
| | ||||||
Common stock: $0.001 par value, 30,000,000
shares authorized; issued and outstanding
June 30, 2011, 7,202,371; December 31, 2010, 7,176,920 |
7,202 | 7,177 | ||||||
Additional paid-in capital |
34,697,568 | 33,622,796 | ||||||
Accumulated deficit |
(4,532,740 | ) | (5,791,728 | ) | ||||
Accumulated other comprehensive loss |
(1,286,393 | ) | (1,360,832 | ) | ||||
28,885,637 | 26,477,413 | |||||||
$ | 59,565,170 | $ | 55,094,922 | |||||
See Notes to Condensed Consolidated Financial Statements.
1
Table of Contents
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||
Net revenue |
$ | 33,084,669 | $ | 29,804,993 | $ | 63,565,860 | $ | 55,579,718 | ||||||||
Reimbursable expenses |
1,321,617 | 1,004,430 | 2,436,323 | 1,836,331 | ||||||||||||
Total revenue |
34,406,286 | 30,809,423 | 66,002,183 | 57,416,049 | ||||||||||||
Operating Expenses |
||||||||||||||||
Compensation and benefits |
25,548,189 | 21,653,528 | 48,906,941 | 39,278,177 | ||||||||||||
General and administrative |
6,514,538 | 5,494,580 | 12,570,645 | 10,620,897 | ||||||||||||
Reimbursable expenses |
1,284,869 | 1,123,521 | 2,512,832 | 1,932,445 | ||||||||||||
33,347,596 | 28,271,629 | 63,990,418 | 51,831,519 | |||||||||||||
Operating income |
1,058,690 | 2,537,794 | 2,011,765 | 5,584,530 | ||||||||||||
Interest
income (expense), net |
6,919 | (59,816 | ) | (3,466 | ) | (140,609 | ) | |||||||||
Income before income taxes |
1,065,609 | 2,477,978 | 2,008,299 | 5,443,921 | ||||||||||||
Income tax expense |
(412,126 | ) | (111,332 | ) | (749,312 | ) | (220,816 | ) | ||||||||
Net income |
$ | 653,483 | $ | 2,366,646 | $ | 1,258,987 | $ | 5,223,105 | ||||||||
Basic income per common share |
$ | 0.09 | $ | 0.18 | ||||||||||||
Diluted income per common share |
$ | 0.09 | $ | 0.17 | ||||||||||||
Basic weighted-average common shares |
7,183,163 | 7,180,957 | ||||||||||||||
Diluted weighted-average common shares |
7,551,020 | 7,548,814 |
See Notes to Condensed Consolidated Financial Statements.
2
Table of Contents
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months | ||||||||
Ended June 30, | ||||||||
2011 | 2010 | |||||||
Successor | Predecessor | |||||||
Cash Flows From Operating Activities |
||||||||
Net income |
$ | 1,258,987 | $ | 5,223,105 | ||||
Adjustments to reconcile net income to net cash (used in)
provided by operating activities |
||||||||
Depreciation and amortization |
603,752 | 577,208 | ||||||
Share/Equity-based compensation |
1,042,289 | 434,510 | ||||||
Deferred income taxes |
527,101 | | ||||||
Change in fair value of mandatorily redeemable member units |
| 397,073 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(5,841,145 | ) | (7,056,743 | ) | ||||
Prepaid expenses |
(715,286 | ) | (404,267 | ) | ||||
Other assets |
(1,766,347 | ) | (577,641 | ) | ||||
Accounts payables |
(780,957 | ) | 172,280 | |||||
Accrued compensation |
4,706,041 | 11,526,123 | ||||||
Accrued business taxes |
(250,373 | ) | 253,672 | |||||
Income taxes payable |
(1,172,649 | ) | | |||||
Accrued expenses |
(1,050,258 | ) | 608,201 | |||||
Deferred rent |
159,343 | (86,154 | ) | |||||
Pension liability |
| (569,005 | ) | |||||
Net cash (used in) provided by operating activities |
(3,279,502 | ) | 10,498,362 | |||||
Cash Flows From Investing Activities |
||||||||
Purchase of leasehold improvements and equipment |
(1,476,568 | ) | (191,826 | ) | ||||
Cash Flows From Financing Activities |
||||||||
Payments on long-term debt |
(105,866 | ) | (340,354 | ) | ||||
Net payments on revolving credit facility |
| (4,660,027 | ) | |||||
Payments received on members notes receivable |
| 21,606 | ||||||
Redemptions of convertible promissory notes |
| (50,000 | ) | |||||
Net cash (used in) provided by financing activities |
(105,866 | ) | (5,028,775 | ) | ||||
Net (decrease) increase in cash |
(4,861,936 | ) | 5,277,761 | |||||
Effect of foreign currency on cash |
(213,485 | ) | (164,714 | ) | ||||
Cash: |
||||||||
Beginning |
24,030,543 | 5,093,700 | ||||||
Ending |
$ | 18,955,122 | $ | 10,206,747 | ||||
See Notes to Condensed Consolidated Financial Statements.
3
Table of Contents
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation
CTPartners Executive Search Inc., along with its subsidiaries (collectively, CTPartners or the
Company), is a retained executive search firm with global executive search capabilities. The
Company operates in the Americas, Europe, the Middle East and Asia Pacific. The Company also has a
licensing arrangement with its associated offices in Latin America.
On December 1, 2010 (the Conversion Date), in anticipation of the Companys initial public
offering, the Company converted from a limited liability company to a corporation. Accordingly, the
Company recapitalized its members equity to additional paid-in capital on the Conversion Date. On
December 7, the Company became a public entity, subject to the rules and regulations of the United
States Securities and Exchange Commission (the SEC), and the relevant provisions of the
Securities Acts of 1933, as amended, and the Securities Act of 1934, as amended. The Companys
common stock trades on the NYSE AMEX exchange under the symbol CTP.
Reference to Successor in this document refers to our financial condition and results of
operations for periods beginning December 1, 2010, subsequent to the conversion to a corporation.
Reference to Predecessor in this document refers to our financial condition and results of
operations for periods ended before December 1, 2010, prior to the conversion to a corporation.
The accompanying unaudited condensed consolidated financial statements include the accounts of
CTPartners Executive Search Inc., together with its subsidiaries (together CTPartners or the
Company) and have been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information, and with the instructions to Form 10-Q and the
requirements of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United States of America for
complete financial statement presentation.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the six months ended
June 30, 2011 are not necessarily indicative of the results that may be expected for the year ended
December 31, 2011.
The balance sheet at December 31, 2010 has been derived from the audited financial statements at
that date but does not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The interim financial statements contained in this report should be read in conjunction with the
audited consolidated financial statements and footnotes presented in our Form 10-K filing for the
year ended December 31, 2010, filed with the SEC on March 24, 2011.
Note 2. Accounts Receivable
The allowance for doubtful accounts and reserve for billing adjustments at June 30, 2011 and
December 31, 2010 was approximately $1,254,000 and $1,244,000, respectively.
4
Table of Contents
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3. Basic and Diluted Earnings Per Share
Basic earnings per common share is computed by dividing net income by weighted average common
shares outstanding for the reporting period. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or
converted. Common equivalent shares are excluded from the determination of diluted earnings per
share in periods in which they have an anti-dilutive effect. Potentially dilutive common shares,
subject to vesting, not included in basic earnings per share were 367,857.
Note 4. Leasehold Improvements and Equipment
The components of the leasehold improvements and equipment as of June 30, 2011 and December 31,
2010 are as follows:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Leasehold improvements |
$ | 3,429,194 | $ | 2,723,762 | ||||
Office furniture, fixtures, and equipment |
2,866,973 | 2,268,582 | ||||||
Computer equipment and software |
4,346,437 | 4,017,124 | ||||||
10,642,604 | 9,009,468 | |||||||
Accumulated depreciation and amortization |
(6,547,750 | ) | (5,862,276 | ) | ||||
$ | 4,094,854 | $ | 3,147,192 | |||||
Depreciation and amortization expense for the three and six months ended June 30, 2011 was $309,920
and $603,752 respectively, and for the three and six months ended June 30, 2010 was $155,762 and
$577,208 respectively.
Note 5. Line of Credit
The Company, under the terms of its revolving credit facility, may borrow an amount equal to the
lesser of $10 million or the Borrowing Base (the Companys eligible accounts receivable as
defined in the revolving credit facility), with interest calculated at 325 basis points above the
LIBOR rate as defined in the revolving credit agreement (the adjusted LIBOR rate), which was
0.1853% at June 30, 2011. The Company had no outstanding balances under the revolving credit
facility at June 30, 2011 or December 31, 2010. Additionally, the Company had issued letters of
credit related to certain office lease agreements secured by the revolving credit facility of
approximately $3,200,000 as of June 30, 2011 and $3,000,000 as of December 31, 2010. Available
borrowings under the revolving credit facility were approximately $10,000,000 at June 30, 2011.
Note 6. Equity Incentive Plan
The purpose of the 2010 equity incentive plan is to promote the interests of the Company and our
stockholders by (i) attracting, retaining and motivating employees, non-employee directors and
independent contractors (including prospective employees), (ii) motivating such individuals to
achieve long-term Company goals and to further align their interest with those of the Companys
stockholders by providing incentive compensation opportunities tied to the performance of the
common stock of the Company and (iii) promoting increased ownership of our common stock by such
individuals.
5
Table of Contents
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Equity Incentive Plan (continued)
Subject to adjustment for changes in capitalization, the maximum aggregate number of shares of our
common stock that may be delivered pursuant to awards granted under the 2010 equity incentive plan
is 1,000,000.
A summary of the Companys common stock subject to vesting provisions for the six months ended June
30, 2011, is presented below:
Weighted- | ||||||||
Average | ||||||||
Common | Grant-Date | |||||||
Non-Vested Common Stock | Stock | Fair Value | ||||||
Total non-vested common stock at December 31, 2010 |
250,768 | $ | 13.00 | |||||
Granted |
146,913 | 13.59 | ||||||
Vested |
(25,451 | ) | 13.00 | |||||
Forfeited |
(4,373 | ) | 13.00 | |||||
Total non-vested common stock at June 30, 2011 |
367,857 | $ | 13.24 | |||||
Total share/equity-based compensation expense related to vested shares for the three and six months
ended June 30, 2011 was $388,716 and $719,587 respectively, and for the three and six months ended
June 30, 2010 was $102,604 and $111,073 respectively. As of June 30, 2011 there was approximately
$2.8 million of unrecognized compensation expense related to shares subject to vesting provisions
granted under the plan. This expense is expected to be recognized over a weighted-average period of
2.4 years.
A summary of the status of the Companys shares subject to clawback provisions for the six months
ended June 30, 2011, is presented below:
Weighted- | ||||||||
Average | ||||||||
Grant-Date | ||||||||
Common Stock Subject to Clawback | Shares | Fair Value | ||||||
Shares subject to clawback at December 31, 2010 |
57,105 | $ | 13.00 | |||||
Granted |
| | ||||||
Expiration of clawback provisions |
(5,269 | ) | 13.00 | |||||
Forfeited |
| | ||||||
Shares subject to clawback at June 30, 2011 |
51,836 | $ | 13.00 | |||||
Total share/equity-based compensation expense subject to clawback provisions for the three and six
months ended June 30, 2011 was $157,854 and $322,702 respectively, and for the three and six months
ended June 30, 2010 was $105,680 and $323,437 respectively.
As of June 30, 2011, there was approximately $244,000 of unrecognized compensation expense related
to shares subject to clawback provisions granted under the plan. This expense is expected to be
recognized over a weighted-average period of 1.4 years.
6
Table of Contents
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7. Enterprise Geographic Concentrations
The Company operates in four principal geographic regions: the Americas, Europe, Asia Pacific and
the Middle East. The revenue, operating income (loss), depreciation and amortization, and capital
expenditures, by region, for the three and six months ended June 30, 2011 and 2010 are as follows:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Americas |
22,019,433 | $ | 16,902,510 | $ | 40,661,679 | $ | 33,157,468 | |||||||||
Europe |
8,366,653 | 9,421,878 | 16,741,049 | 15,426,388 | ||||||||||||
Asia Pacific |
2,686,580 | 3,480,605 | 6,062,600 | 6,995,862 | ||||||||||||
Middle East |
12,003 | | 100,532 | | ||||||||||||
Net revenue before reimbursements |
33,084,669 | 29,804,993 | 63,565,860 | 55,579,718 | ||||||||||||
Reimbursements |
1,321,617 | 1,004,430 | 2,436,323 | 1,836,331 | ||||||||||||
Total regions |
$ | 34,406,286 | $ | 30,809,423 | $ | 66,002,183 | 57,416,049 | |||||||||
Operating income (loss): |
||||||||||||||||
Americas |
2,328,452 | 1,474,717 | 2,810,398 | 3,572,385 | ||||||||||||
Europe |
(510,823 | ) | 580,969 | 221,633 | 672,628 | |||||||||||
Asia Pacific |
(437,029 | ) | 482,108 | (357,235 | ) | 1,339,517 | ||||||||||
Middle East |
(321,910 | ) | | (663,031 | ) | | ||||||||||
Total |
$ | 1,058,690 | $ | 2,537,794 | $ | 2,011,765 | $ | 5,584,530 | ||||||||
Depreciation and amortization: |
||||||||||||||||
Americas |
188,999 | 35,305 | 371,379 | 336,467 | ||||||||||||
Europe |
85,156 | 92,178 | 167,881 | 189,977 | ||||||||||||
Asia Pacific |
32,450 | 28,279 | 60,257 | 50,764 | ||||||||||||
Middle East |
3,315 | | 4,235 | | ||||||||||||
Total |
$ | 309,920 | $ | 155,762 | $ | 603,752 | $ | 577,208 | ||||||||
Capital expenditures: |
||||||||||||||||
Americas |
143,951 | 57,628 | 1,181,116 | 66,174 | ||||||||||||
Europe |
40,059 | 6,731 | 80,203 | 6,438 | ||||||||||||
Asia Pacific |
77,376 | 3,564 | 126,488 | 119,214 | ||||||||||||
Middle East |
30,886 | | 88,761 | |||||||||||||
Total |
$ | 292,272 | $ | 67,923 | $ | 1,476,568 | $ | 191,826 | ||||||||
7
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CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 7. Enterprise Geographic Concentrations (continued)
Identifiable assets by geographic concentrations are as follows:
June 30, 2011 | December 31, 2010 | |||||||
Identifiable assets: |
||||||||
Americas |
$ | 37,034,322 | $ | 36,543,510 | ||||
Europe |
15,664,504 | 12,760,043 | ||||||
Asia Pacific |
6,435,429 | 5,791,369 | ||||||
Middle East |
430,915 | | ||||||
Total regions |
$ | 59,565,170 | $ | 55,094,922 | ||||
8
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Statements
Managements Discussion and Analysis of Financial Condition and Results of Operations as well
as other sections of this quarterly report on Form 10-Q contain forward-looking statements. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. The forward-looking statements are based on current expectations, estimates, forecasts
and projections about the industry in which we operate and managements beliefs and assumptions.
Forward-looking statements may be identified by the use of words such as expects, anticipates,
intends, plans, believes, seeks, estimates, projects, forecasts, and similar
expressions. Forward-looking statements are not guarantees of future performance and involve
certain known and unknown risks, uncertainties and assumptions that are difficult to predict.
Actual outcomes and results may differ materially from what is expressed, forecasted or implied in
the forward-looking statements. Factors that may affect the outcome of the forward-looking
statements include, among other things, our expectations regarding our revenues, expenses and
operations and our ability to sustain profitability; our ability to recruit and retain qualified
executive search consultants to staff our operations appropriately; our ability to expand our
customer base and relationships, especially given the off-limit arrangements we are required to
enter into with certain of our clients; further declines in the global economy and our ability to
execute successfully through business cycles; our anticipated cash needs; our anticipated growth
strategies and sources of new revenues; unanticipated trends and challenges in our business and the
markets in which we operate; social or political instability in markets where we operate; the
impact of foreign currency exchange rate fluctuations; price competition; the ability to forecast,
on a quarterly basis, variable compensation accruals that ultimately are determined based on the
achievement of annual results; the mix of profit and loss by country; and our ability to estimate
accurately for purposes of preparing our consolidated financial statements. For more information on
the factors that could affect the outcome of forward-looking statements, see Risk Factors in Item
1A of our annual report on Form 10-K which was filed with the Securities and Exchange Commission on
March 24, 2011. We caution the reader that the list of factors may not be exhaustive. We undertake
no obligation to update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Overview
For the three month period ended June 30, 2011, we were engaged to perform 385 searches,
including 287 performed directly by us and 98 performed by our associated offices in Latin America.
For the three month period ended June 30, 2010, we were engaged to perform 385 searches, including
279 performed directly by us and 106 performed by our associated offices in Latin America. For the
three month period ended June 30, 2011, we placed candidates in 133 U.S. searches and 86 non-U.S.
searches. Our Latin America affiliate placed 80 candidates during the three month period ended June
30, 2011. For the three month period ended June 30, 2010, we placed candidates in 132 U.S.
searches and 47 non-U.S. searches. Our Latin America affiliate placed 61 candidates during the
three month period ended June 30, 2010.
Net revenue increased $3.3 million, or 11.0%, to $33.1 million for the three-month period
ended June 30, 2011 compared to $29.8 million for the three-month period ended June 30, 2010.
The increase in net revenue was the result of an increase in the number of search assignments on
which we were engaged and an increase in the number of executive search consultants employed by us.
For the six month period ended June 30, 2011, we were engaged to perform 783 searches,
including 587 performed directly by us and 196 performed by our associated offices in Latin
America. For the six month period ended June 30, 2010, we were engaged to perform 700 searches,
including 535 performed directly by us and 165 performed by our associated offices in Latin
America. For the six month period ended June 30, 2011, we placed candidates in 239 U.S. searches
and 181 non-U.S. searches. Our Latin America affiliate placed 144 candidates during the six month
period ended June 30, 2011. For the six month period ended June 30, 2010, we placed candidates in
201 U.S. searches and 139 non-U.S. searches. Our Latin America affiliate placed 107 candidates
during the three month period ended June 30, 2010.
Net revenue increased $8.0 million, or 14.4%, to $63.6 million for the six-month period ended
June 30, 2011 compared to $55.6 million for the six-month period ended June 30, 2010. The increase
in net revenue was the result of an increase in the number of search assignments on which we were
engaged and an increase in the number of executive search consultants employed by us.
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Relevant data is set forth below (this data excludes the operations of our associated offices in
Latin America):
Percentage | Percentage | |||||||||||||||||||||||||||||||
Three Months Ended June 30, | Increase/ | Increase/ | Six Months Ended June 30, | Increase/ | Increase/ | |||||||||||||||||||||||||||
Performance Metrics | 2011 | 2010 | (Decrease) | 2011 | 2011 | 2010 | (Decrease) | (Decrease) | ||||||||||||||||||||||||
Number of new
search assignments |
287 | 279 | 8 | 2.9 | % | 587 | 535 | 52 | 9.7 | % | ||||||||||||||||||||||
Number of executive
search consultants
(as of period end) |
99 | 78 | 21 | 26.9 | % | 99 | 78 | 21 | 26.9 | % | ||||||||||||||||||||||
Productivity, as
measured by average
annualized net
revenue per
executive search
consultant |
$ | 1,336,754 | $ | 1,528,461 | $ | (191,707 | ) | (12.5 | )% | $ | 1,284,160 | $ | 1,425,121 | $ | (140,961 | ) | (9.9 | )% | ||||||||||||||
Average revenue per
executive search |
$ | 111,950 | $ | 100,520 | $ | 11,430 | 11.4 | % | $ | 105,900 | $ | 103,610 | $ | 2,290 | 2.2 | % |
Operating income decreased $1.4 million to $1.1 million for the three-month period
ended June 30, 2011, compared to operating income of $2.5 million for the three-month period ended
June 30, 2010. The decrease primarily reflects an increase in net revenues of $3.3 million offset
by a $3.9 million increase in compensation and benefits expense and a $1.0 million increase in
general and administrative expenses.
Operating income decreased $3.6 million to $2.0 million for the six month period ended June
30, 2011, compared to operating income of $5.6 million for the six month period ended June 30,
2010. The decrease primarily reflects an increase in net revenues of $8.0 million offset by a $9.6
million increase in compensation and benefits expense and a $2.0 million increase in general and
administrative expenses.
Results of Operations
The following table summarizes, for the periods indicated, our results of operations as a
percentage of net revenue:
Three Months Ending | Six Months Ending | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Net revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Reimbursable expenses |
4.0 | 3.4 | 3.8 | 3.3 | ||||||||||||
Total revenue |
104.0 | 103.4 | 103.8 | 103.3 | ||||||||||||
Operating Expenses: |
||||||||||||||||
Compensation and benefits |
77.2 | 72.7 | 76.9 | 70.7 | ||||||||||||
General and administrative |
19.7 | 18.4 | 19.8 | 19.1 | ||||||||||||
Reimbursable expenses |
3.9 | 3.8 | 3.9 | 3.5 | ||||||||||||
Total operating expenses |
100.8 | 94.9 | 100.6 | 93.3 | ||||||||||||
Operating income (loss) |
3.2 | 8.5 | 3.2 | 10.0 | ||||||||||||
Net interest expense |
0.0 | (0.2 | ) | 0.0 | (0.2 | ) | ||||||||||
Income (loss) before income taxes |
3.2 | 8.3 | 3.2 | 9.8 | ||||||||||||
Income tax expense |
(1.2 | ) | (0.4 | ) | (1.2 | ) | (0.4 | ) | ||||||||
Net income (loss) |
2.0 | % | 7.9 | % | 2.0 | % | 9.4 | % | ||||||||
Three Month Period Ended June 30, 2011 Compared to Three Month Period Ended June 30, 2010
Net Revenue. Net revenue increased $3.3 million, or 11.0% to $33.1 million for the three-month
period ended June 30, 2011 compared to $29.8 million for the three-month period ended June 30,
2010. Included in net revenue for the three-month period ended June 30, 2011 and June 30, 2010, was
$150,000 and $71,000 in license fees from our associated offices in Latin America. The increase in
net revenue was the result of an increase in the number of search assignments on which we were
engaged and an increase in the number of executive search consultants employed by us.
Compensation and Benefits Expenses. Compensation and employee benefits expense increased $3.9
million, or 18.0%, to $25.5 million for the three-month period
ended June 30, 2011 from $21.6
million for the three-month period ended June 30, 2010. As a percentage of net revenue,
compensation and benefits increased to 77.2% for the three-month period ended June 30, 2011
compared to 72.7% for the three-month period ended June 30, 2010. The increase in compensation and
benefits expense was primarily the result of (i) approximately $1.5 million in connection with
equity based grants,
guaranteed compensation and signing bonuses made to newly hired executive search consultants; (ii)
$1.3 million in additional non-consultant compensation costs primarily related to the addition of
48 support staff in recruiting, research
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and administration; and (iii) $900,000 increase in bonus compensation for executive search
consultants which was the direct result of higher consolidated net revenues for the three-month
period ended June 30, 2011 as compared to the three-month period ended June 30, 2010.
General and Administrative Expenses. General and administrative expenses increased to $6.5
million, or 19.7% of net revenue for the three-month period ended June 30, 2011, from $5.5 million,
or 18.4% of net revenue for the three-month period ended June 30, 2010. We experienced a $400,000
increase in our occupancy costs due to the addition of new offices in Dallas, Dubai
and Toronto and expanded offices in Singapore, Paris and Chicago. In addition, we incurred a $300,000
increase in business development expense which is a direct result of an increase in
the number of executive search consultants. We also incurred an additional $100,000 in
professional fees principally reflecting the costs of being a public company.
Operating
Income. Operating income decreased $1.4 million to $1.1 million for the three-month
period ended June 30, 2011, compared to operating income of $2.5 million for the three-month
period ended June 30, 2010. The decrease primarily reflects an increase in net revenues of $3.3
million offset by a $3.9 million increase in compensation and benefits expense and a $1.0 million
increase in general and administrative expenses.
Net Interest Expense. Net interest income increased $67,000, to $7,000 of interest income for
the three month period ended June 30, 2011 from $60,000 of interest expense for the three month
period ended June 30, 2010. The increase in net interest income is due to a reduction of interest
bearing debt to $700,000 at June 30, 2011 compared to $6.6 million at June 30, 2010.
Income Before Taxes and Income Tax Expense. For the three-month period ended June 30, 2011, we
reported income before taxes of $1.1 million and recorded income tax expense of $400,000, as
compared to income before taxes of $2.5 million and income tax expense of $100,000 for the
three-month period ended June 30, 2010. The increase in income tax expense was primarily due to an
increase in federal income taxes in the three-month period ended June 30, 2011.
During the first six months of 2010 we were not subject to United States federal income taxes
because we were taxed as a partnership under federal tax law. Accordingly, no provision or
liability for income taxes was recorded for federal income taxes for such period in our
consolidated financial statements since any income or loss for such period was included in the tax
returns of our members. The income tax expense recorded during the three months ended June 30, 2011
includes federal, state and local income taxes. The income tax expense recorded during the three
month period ended June 30, 2010 represents state and local taxes in those jurisdictions that do not
recognize entities taxed as a partnership. The Companys subsidiaries are subject to entity-level
income taxes in their respective foreign jurisdictions.
Six Month Period Ended June 30, 2011 Compared to Six Month Period Ended June 30, 2010
Net Revenue. Net revenue increased $8.0 million, or 14.4%, to $63.6 million for the six-month
period ended June 30, 2011 compared to $55.6 million for the six-month period ended June 30, 2010.
Included in net revenue for the six-month period ended June 30, 2011 and June 30, 2010, was
$307,000 and $106,000 in license fees from our associated offices in Latin America. The increase in
net revenue was the result of an increase in the number of search assignments on which we were
engaged and an increase in the number of executive search consultants employed by us.
Compensation and Benefits Expenses. Compensation and employee benefits expense increased $9.6
million, or 24.5%, to $48.9 million for the six-month period ended June 30, 2011 from $39.3 million
for the six-month period ended June 30, 2010. As a percentage of net revenue, compensation and
benefits increased to 76.9% for the six-month period ended June 30, 2011 compared to 70.7% for the
six-month period ended June 30, 2010. The increase in compensation and benefits expense was
primarily the result of (i) a $3.2 million increase in bonus compensation and related costs for
executive search consultants for the six-month period ended June 30, 2011, which was the direct
result of higher consolidated net revenue for the six-month period ended June 30, 2011 as compared
to the six-month period ended June 30, 2010; (ii) approximately $3.2 million in additional
non-consultant compensation costs primarily related to the addition of 48 support staff in
recruiting, research and administration; (iii) approximately $1.7 million in connection with equity
based grants, guaranteed compensation and signing bonuses made to newly hired executive search
consultants;
and (iv) $900,000 in related employee benefits and payroll taxes.
General and Administrative Expenses. General and administrative expenses were $12.6 million,
or 19.8% of net revenue for the six-month period ended June 30, 2011 compared to $10.6 million, or 19.1% of net
revenue for the six-month period ended June 30, 2010. The increase was partially due to a $600,000
increase in business development expense which is a direct result of an increase in the
number of executive search consultants. We also experienced a $500,000 increase in our
occupancy costs due to the addition of new offices in Dallas, Dubai and Toronto and expanded
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offices in Singapore, Paris and Chicago. We also incurred an additional $400,000 in professional
fees principally reflecting the costs of being a public company.
Operating Income. Operating income decreased $3.6 million to $2.0 million for the six-month
period ended June 30, 2011, compared to operating income of $5.6 million for the six-month period
ended June 30, 2010. The decrease primarily reflects an increase in net revenues of $8.0 million
offset by a $9.6 million increase in compensation and benefits expense and a $2.0 million increase
in general and administrative expenses.
Net Interest Expense. Net interest expense decreased $138,000 or 97.5%, to $3,000 for the
six-month period ended June 30, 2011 from $141,000 for the six-month period ended June 30, 2010.
The decrease in net interest expense is due to a reduction in the balance owed on interest bearing debt to $700,000 at June 30, 2011 compared to $6.6 million at June 30, 2010.
Income Before Taxes and Income Tax Expense. For the six-month period ended June 30, 2011, we
reported income before taxes of $2.0 million and recorded income tax expense of $700,000, as
compared to income before taxes of $5.4 million and income tax expense of $200,000 for the
six-month period ended June 30, 2010. The increase in income tax expense was primarily due to an
increase in federal income taxes due in the six-month period ended June 30, 2011. Federal income
taxes, as described herein, were not applicable to the firm prior to December 1, 2010.
The income tax expense recorded during the six-month period ended June 30, 2011 includes federal,
state and local income taxes. The income tax expense recorded during the six-month period ended
June 30 2010 represents state and local taxes in those jurisdictions that do not recognize entities
taxed as a partnership. The Companys subsidiaries are subject to entity-level income taxes in
their respective foreign jurisdictions.
Liquidity and Capital Resources
General. Our primary sources of liquidity are cash, cash flow from operations and borrowing
availability under our revolving credit facility. We continually evaluate our liquidity
requirements, capital needs and availability of capital resources based on our operating needs. We
believe that our existing cash balances together with the funds expected to be generated from
operations and funds available under our committed revolving credit facility will be sufficient to
finance our operations for the foreseeable future.
The following table summarizes our cash flow for the periods shown:
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Net cash
(used in) provided by operating activities |
$ | (3,279,502 | ) | $ | 10,498,362 | |||
Net cash (used in) investing activities |
(1,476,568 | ) | (191,826 | ) | ||||
Net cash (used in) financing activities |
(105,866 | ) | (5,028,775 | ) | ||||
Net (decrease)/increase in cash |
$ | (4,861,936 | ) | $ | 5,277,761 | |||
Cash. Cash at June 30, 2011 was $19.0 million, as compared to $10.2 million at June 30, 2010.
The increase in cash reflects the closing of our initial public offering in December 2010 as we
received net proceeds of $24.4 million.
Cash Flow from Operating Activities. Cash used in operating activities was $3.3 million in the
six-month period ended June 30, 2011, compared to cash provided by operating activities of $10.5
million in the six-month period ended June 30, 2010. The increase in cash used in operating
activities is due to a decrease in net income of $4.0 million, a decrease in accrued compensation
of $6.8 million and a decrease in accrued expenses of $1.7 million.
Cash from Investing Activities. For the six-month period ended June 30, 2011, cash used in
investing activities was $1.5 million compared to $200,000 for the six-month period ended June
30, 2010. These cash outflows were mainly for capital expenditures.
Cash from Financing Activities. For the six-month period ended June 30, 2011, cash used in
financing activity was $105,000 solely as a result of payments made on long-term debt. Cash used
in financing activities for the six-month period ended June 30, 2010 was $5.0 million primarily
resulting from payments made on our credit facility, and by payments made on long-term debt. We
have had a committed revolving credit facility under which we may borrow U.S. dollars at LIBOR plus
3.25%. A facility fee is charged even if no portion of the credit facility is used. Our credit
facility expires on April 30, 2012. There were no borrowings outstanding under our credit facility
at June 30, 2011 and June 30, 2010, respectively. As of June 30, 2011, we had approximately $10
million available to borrow. The facility is secured by principally by accounts receivable and
equipment. Additionally, the Company is required to maintain
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specified leverage and fixed charge coverage ratios as defined in the Credit Agreement. The Credit
Agreement also requires the Company to maintain a minimum net worth based on a formula in the
Credit Agreement.
Off-Balance Sheet Arrangements. We do not have off-balance sheet arrangements, special purpose
entities, trading activities or non-exchange traded contracts.
Application of Critical Accounting Policies and Estimates
In addition to the critical accounting policies contained in our annual report on Form 10-K,
filed on March 24, 2011, the following accounting policy is critical with regard to the preparation
of our unaudited quarterly condensed consolidated financial statements:
Annual Incentive Compensation. Each quarter, management records its best estimate of its
annual incentive compensation, which on a quarterly basis requires management to project annual
consultant productivity, as measured by engagement fees billed and collected by that consultant. At
the end of each fiscal year, bonuses expensed reflect final individual consultant productivity.
Changes in any of the assumptions underlying the quarterly bonus accrual may significantly impact
the compensation liability on our balance sheet and related compensation cost on our statement of
operations. Differences between the assumptions used each quarter to estimate annual incentive
compensation and actual cash payments made could materially impact the carrying amount of the
liability and our operating results.
Recently Adopted Financial Accounting Standards
None
Item 4. Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be
disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (Exchange
Act) is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be
disclosed in the reports filed under the Exchange Act is accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.
As of June 30, 2011, we carried out an evaluation, under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that information required to be
disclosed in the reports we file, or submit, under the Exchange Act is recorded, processed,
summarized and reported as and when required.
There were no changes in our internal control over financial reporting identified in the
evaluation described in the preceding paragraph that occurred during the second quarter of 2011
that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATIONI
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Use of Proceeds from Registered Securities
As of June 30, 2011, we had used the net proceeds from our initial public offering (which were
registered under the Securities Act of 1933, as amended, pursuant to a registration statement on
Form S-1 (File No. 333-169224), which was declared effective by the Securities and Exchange
Commission on December 7, 2010) as follows:
| approximately $4.7 million of cash, including the related payroll taxes, was used to pay out the value of performance units granted to certain of our executive search consultants (including payments of $207,679 to Brian M. Sullivan, our chief executive officer, $197,602 to David C. Nocifora, our chief operating and chief financial officer); | ||
| approximately $1.9 million to prepay in full a promissory note issued by the Company to the former chief executive officer of the Company and his family trust; | ||
| approximately $1.6 million to prepay certain convertible promissory notes with certain employees (including a payment of $453,400 to Brian M. Sullivan, our chief executive officer); and |
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| Approximately $1.5 million to pay estimated federal income taxes related to the conversion to a corporation. |
There has been no material change in the planned use of the net proceeds from that described
in the prospectus included in our registration statement.
Item 6. Exhibits
Exhibit No. | Description | |
*31.1
|
Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act. | |
*31.2
|
Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act. | |
*32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | |
*32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
**101
|
The following financial information from CTPartners Executive Search Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 formatted in Extensible Business Reporting Language (XBRL) and furnished electronically herewith: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Cash Flows; and (iv) related Footnotes to the Condensed Consolidated Financial Statements, tagged as blocks of text. |
* | Filed herewith. | |
** | Pursuant to Rule 406T of Regulations S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CTPartners Executive Search Inc. | ||||||
By: | /s/ David C. Nocifora
|
|||||
Chief Operating Officer and Chief Financial Officer |
Date:
August 10, 2011
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