Korn/Ferry Says Losses to Continue

Korn/Ferry International Inc., the largest executive-search firm, had a fiscal second-quarter loss and will have a wider-than-expected third-quarter loss as companies added fewer managers because of the weakened economy.

The loss for the period ended Oct. 31 was $30.9 million, or 82 cents a share, compared with net income of $6.1 million, or 16 cents, a year earlier. Revenue fell 37% to $108.9 million from $173.6 million, the Los Angeles-based company said.

While the U.S. economy is showing signs of stabilizing, weakness in Europe may lead to a third-quarter loss of 10 cents to 15 cents a share, Korn/Ferry said during a conference call.

The projected loss would be wider than the 3-cent average loss estimate of six analysts in a Thomson Financial/First Call survey.

Third-quarter revenue is likely to be less than in the second quarter, and could lag by 10% to 15%, Chief Financial Officer Elizabeth Murray said during the call.

Korn/Ferry shares fell 41 cents to $9.65 on the New York Stock Exchange. They have fallen 54.6% this year.

Korn/Ferry is in default on two covenants in its $100-million line of credit with Bank of America Corp., Murray said. The company is in negotiations with the bank, and has no plans to borrow more money from the credit line or make more acquisitions, Murray said.