SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 2001.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from __________ to __________.
Commission file number 000-25837
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
HEIDRICK & STRUGGLES, INC.
401(k) PROFIT SHARING AND RETIREMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
HEIDRICK & STRUGGLES INTERNATIONAL, INC.
233 South Wacker Drive
Suite 4200
Chicago, Illinois 60606
312-496-1200
HEIDRICK & STRUGGLES, INC.
401(k) PROFIT SHARING AND RETIREMENT PLAN
Table of Contents
Page
Independent Auditors' Reports 1
Financial Statements:
Statements of Net Assets Available for Benefits,
December 31, 2001 and 2000 4
Statement of Changes in Net Assets Available for Benefits,
Year ended December 31, 2001 5
Notes to Financial Statements 6
Supplemental Schedule
1 Schedule H, Line 4i - Schedule of Assets
(Held at End of Year) December 31, 2001 11
Exhibits:
Exhibit 23 Independent Auditors' Consent 13
HEIDRICK & STRUGGLES, INC.
401(k) PROFIT SHARING AND RETIREMENT PLAN
We have not been able to obtain, after reasonable efforts, the written consent
of Arthur Andersen LLP to our incorporation by reference in the Registration
Statement (Form S-8 No. 333-58118) pertaining to the Heidrick & Struggles, Inc.
401(k) Profit Sharing and Retirement Plan of their report dated September 6,
2001 with respect to the financial statements and the supplemental schedule of
the Heidrick & Struggles, Inc. 401(k) Profit Sharing and Retirement Plan
included in this Annual Report on Form 11-K for the year ended December 31,
2000, as required by Section 7 of the Securities Act of 1933, as amended (the
Securities Act). Accordingly, you will not be able to sue Arthur Andersen LLP
pursuant to Section 11(a)(4) of the Securities Act and therefore your right of
recovery under that section may be limited as a result of the lack of consent.
1
Independent Auditors' Report
The Administrative Committee
Heidrick & Struggles, Inc. 401(k) Profit Sharing and Retirement Plan:
We have audited the accompanying statement of net assets available for benefits
of Heidrick & Struggles, Inc. 401(k) Profit Sharing and Retirement Plan (the
Plan) as of December 31, 2001, and the related statement of changes in net
assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits as of December 31,
2001, and the changes in net assets available for benefits for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
Chicago, Illinois
June 25, 2002
2
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Heidrick & Struggles, Inc.
401(k) Profit Sharing and Retirement Plan Committee:
We have audited the accompanying statements of net assets available for benefits
of HEIDRICK & STRUGGLES, INC. 401(k) PROFIT SHARING AND RETIREMENT PLAN as of
December 31, 2000 and 1999, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2000. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Heidrick &
Struggles, Inc. 401(k) Profit Sharing and Retirement Plan as of December 31,
2000 and 1999, and the changes in net assets available for benefits for the year
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at year-end is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois
September 6, 2001
3
HEIDRICK & STRUGGLES, INC.
401(k) PROFIT SHARING AND RETIREMENT PLAN
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
------------ ------------
Assets:
Investments, at fair value:
Mutual funds $ 79,586,481 $ 64,099,809
Heidrick & Struggles International, Inc. stock funds 35,608,455 179,361,230
Participant loans 398,392 457,880
------------ ------------
Total investments 115,593,328 243,918,919
------------ ------------
Receivables:
Company contribution 901,329 3,514,965
Participant contributions -- 914,288
------------ ------------
Total receivables 901,329 4,429,253
------------ ------------
Net assets available for benefits $116,494,657 $248,348,172
============ ============
See accompanying notes to financial statements.
4
HEIDRICK & STRUGGLES, INC.
401(k) PROFIT SHARING AND RETIREMENT PLAN
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2001
Additions to net assets attributed to:
Interest and dividend income $ 2,371,043
Interest on participant loans 39,559
Contributions - Company 901,329
Contributions - participant 5,830,630
Contributions - participant rollovers 1,504,619
------------
Total additions 10,647,180
------------
Deductions from net assets attributed to:
Net depreciation in fair value of investments 87,869,287
Benefits paid to participants 54,614,918
Administrative expenses 16,490
------------
Total deductions 142,500,695
------------
Net decrease (131,853,515)
Net assets available for benefits:
Beginning of year 248,348,172
------------
End of year $116,494,657
============
See accompanying notes to financial statements.
5
(1) Description of Plan
The following description of the Heidrick & Struggles, Inc. 401(k) Profit
Sharing and Retirement Plan (the Plan) provides only general information.
Participants should refer to the plan document for a more complete
description of the Plan's provisions.
General
The Plan was established as of January 1, 1989, as the result of the
merger of the Heidrick & Struggles 401(k) Profit Sharing Plan and the
Heidrick & Struggles, Inc. Pension Plan. The plan sponsor is Heidrick
& Struggles, Inc. (the Company), a wholly owned subsidiary of Heidrick
& Struggles International, Inc. (HSII). The Plan is a defined
contribution plan established for the benefit of the Company's
eligible employees and the eligible employees of any other
organization designated by HSII's Board of Directors.
The Plan provides for elective contributions on the part of the
participating employees and for employer matching contributions. The
Plan extends coverage to each employee of the participating employers
who have completed three months of service and attained age 21. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA), as amended, and provisions of the
Internal Revenue Code of 1986 as it pertains to plans intended to
qualify under Section 401(a) of that Code.
Vanguard Fiduciary Trust Company (VFTC) is the trustee of the Plan
under a contractual agreement with the Company. VFTC maintains all
records of the Plan and assumes responsibility for proper allocation
of income among all participants' accounts in the Plan. The Plan is
administered by an Administrative Committee, which is appointed by
HSII's Board of Directors.
Contributions
After completing three months of service and attaining age 21,
participants may contribute up to 15% of their eligible compensation
up to the maximum allowed by the Internal Revenue Code (IRC). For 2001
and 2000, the Company matched contributions of those employees with
one year of service on a two-for-one basis up to a maximum Company
contribution of $2,000 per participant. Additionally, the Company has
the option of making discretionary contributions to participants with
one year of service. This discretionary amount is determined each year
by the Company. For the 2001 plan year, the Company elected not to
make a discretionary contribution. For the 2000 plan year, the Company
elected to contribute to each eligible participant a sum equal to
3.03% of the participant's total compensation (as defined in the plan
document) and an additional 3.03% of the participant's compensation
above the Social Security taxable wage base ($76,200 for 2000).
Vesting and Forfeitures
Participants are immediately vested in their voluntary contributions
as well as in their employer's matching contributions and earnings
thereon. Vesting in the Company's discretionary contributions and
earnings thereon commences after three years of service (at least
1,000 hours per year) according to the following schedule: 20% vested
after three years of service, 40% vested after four years of service,
60% vested after five years of service, 80% vested after six years of
service, and 100% vested after seven years of service. Nonvested
portions of Company discretionary contributions are forfeited as of a
participant's termination date and are offset against the Company's
contribution. For the 2001 plan year, forfeitures, and earnings
thereon, applied to the Company's contribution totaled $272,682.
6 (Continued)
In Addendums to the Plan dated June 18, 2001 and October 29, 2001 the
Plan was amended to permit certain participants to receive accelerated
vesting on any unvested portions of their account so long as they
satisfied certain conditions of eligibility.
Participant Accounts
Participants may direct their account balance among the various
investment options offered by the Plan. Each participant's account is
credited with the participant's contributions, the Company's matching
contributions, and an allocation of the Company's discretionary
contribution and plan earnings. Allocations are based on participant
earnings or account balances, as defined in the plan document. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
Payment of Benefits
When a participant terminates his/her employment with the Company and
elects to receive a distribution, the participant's vested account may
(a) be distributed as a lump-sum amount, (b) be applied toward the
purchase of various types of annuities, or (c) be distributed in equal
monthly or annual installments over a period not to exceed the life
expectancy of the participant. If a participant's vested account is
less than $5,000 upon termination, the participant's vested account
will automatically be distributed as a lump-sum amount.
Loans to Participants
Participants may borrow the lesser of $50,000 or one-half of their
vested account balance in the Plan, exclusive of the Heidrick &
Struggles International, Inc. Stock Fund, with a minimum loan amount
of $1,000. Loans are repayable through payroll deductions over periods
ranging up to 60 months. Loans are secured by the balance in the
participant's account and bear interest at the prime rate plus 1%.
Principal and interest are paid ratably through payroll deductions.
Plan Termination
Although it has not expressed an interest to do so, the Company has
the right under the Plan to discontinue its contributions at any time
and to terminate the Plan subject to the provisions of ERISA. In the
event of plan termination, participants will become 100% vested in
their accounts.
(2) Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared using the
accrual basis of accounting in accordance with accounting principles
generally accepted in the United States of America.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of additions to and deductions from net assets
available for benefits during the reporting period. Actual results
could differ from those estimates.
7 (Continued)
Valuation of Investments
Shares of registered investment companies are valued at quoted market
prices, which represent the net asset value of shares held by the Plan
at year-end. Heidrick & Struggles International, Inc. common stock is
valued at its year-end closing share price (comprised of year-end
market price plus uninvested cash position). Other equity securities
are valued at the last quoted sales price as of the close of trading
at year-end; such securities not traded on the year-end date are
valued at the last quoted bid prices. Fixed income securities are
valued using the last quoted bid price. Participant loans are valued
at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded as earned and dividends are recorded on
the ex-dividend date. Capital gain distributions are included in
dividend income.
Payments of Benefits
Benefits are recorded when paid.
(3) Investments
The following presents investments that represent 5% or more of the Plan's
net assets at December 31, 2001 and 2000, respectively.
2001 2000
----------- ------------
Vanguard Total Bond Market Index Fund $10,915,888 $ N/A
Vanguard Windsor II Fund Investor Shares 8,308,168 N/A
Heidrick & Struggles Pre-IPO Stock Fund 35,587,286 179,361,230
Vanguard Prime Money Market Fund 22,716,654 17,676,863
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value as follows:
Mutual funds $ (4,190,446)
Heidrick & Struggles International, Inc. stock funds (83,678,841)
------------
$(87,869,287)
============
The Plan provides for investments in common stock and mutual funds that, in
general, are exposed to various risks, such as interest rate, credit, and
overall market volatility risks. Due to the level of risk associated with
certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that
such changes could materially affect the amounts reported in the statements
of net assets available for benefits.
(4) Party-in-Interest Transactions
Certain Plan investments are shares of mutual funds managed by Vanguard
Group, an affiliate of VFTC. VFTC is the trustee as defined by the Plan
and, therefore, these transactions qualify as party-in-interest
transactions.
Administrative and trustee fees related to the general administration of
the Plan are paid by the Plan. The Company provides certain administrative
services to the Plan and pays substantially all other expenses of the Plan.
8 (Continued)
As of December 31, 2001, the Plan held 1,960,732 shares of HSII common
stock with a cost of $3,919,670 and a current value of $35,587,286. This
represents 11% of HSII's outstanding stock at December 31, 2001. During the
year ended December 31, 2001, 1,103,298 shares were sold at an average
weighted price of $24.30 per share, for total sales of $26,809,323 (see
Note 6). There were 1,200,130 shares distributed to participants during the
year ended December 31, 2001. As of December 31, 2000, the Plan held
4,264,160 shares of HSII common stock with a cost of $7,995,713 and a
current value of $179,361,230. This represents 22% of HSII's outstanding
stock at December 31, 2000.
(5) Tax Status
The Internal Revenue Service (IRS) has determined and informed the Company
by a letter dated July 7, 1998, that the Plan and related trust, as amended
and restated effective January 1, 1997, are designed in accordance with the
applicable sections of the IRC. The Plan has been amended since receiving
the determination letter, and the IRS has determined and informed the
Company by a letter dated May 5, 2000, that the amendments do not affect
the qualified status of the Plan. Therefore, the plan administrator
believes that the Plan was qualified and the related trust was tax-exempt
as of the financial statement dates.
(6) Initial Public Offering
On April 27, 1999 an initial public offering of HSII common stock was
completed, at $14.00 per share, resulting in a valuation of the Plan's
investment in HSII of $73,300,612 and a 34.5% ownership of HSII stock. A
two-year lock-up on the sale of HSII was in effect from the initial public
offering date. On April 27, 2001 the two-year lock-up expired and
participants were no longer precluded from transferring out of the HSII
common stock and into the other available funds. On May 1, 2001, certain
plan participants were involved in a block trade of HSII stock arranged by
the Company with Robinson-Humphrey Company, LLC. The Plan sold a total of
252,400 shares at $24.50 per share for aggregate proceeds of $6,183,800.
9 (Continued)
(7) Subsequent Events
On February 22, 2002 the Company adopted the amended and restated Heidrick
& Struggles, Inc. 401(k) Profit Sharing and Retirement Plan, generally
effective as of January 1, 2002. The amendment and restatement of the Plan
was adopted to comply with the provisions of the General Agreement on
Tariffs and Trade/Uruguay Round Agreements Act, the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal
Revenue Service Restructuring and Reform Act of 1998, the Community Renewal
Tax Relief Act of 2000, the Economic Growth and Tax Relief Reconciliation
Act, and such other issues identified by the Company and necessary to
comply with regulatory regulations. In connection with the amendment and
restatement of the Plan, the Company filed for an IRS determination of the
qualified status of the Plan on February 28, 2002 and has received
confirmation from the IRS that the request was received and is in process.
The plan administrator believes that the Plan is currently designed and
being operated in compliance with the applicable requirements of the IRC.
10
Schedule 1
HEIDRICK & STRUGGLES, INC.
401(k) PROFIT SHARING AND RETIREMENT PLAN
Schedule 4, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001
Identity of issuer, Description of investment including,
borrower, lessor, maturity date, rate of interest, Current
or similar party collateral, par, or maturity value value
----------------------------------------- ------------------------------------------------------------- --------------
Alliance Capital Funds Alliance Premier Growth Fund $ 17,938
American Century Investments American Century Equity Income 114,572
Davis Funds Davis New York Venture Fund 192,172
Fidelity Investments Fidelity MidCap Stock Fund 177,091
Fidelity Investments Fidelity Equity Income Fund 50,467
Fidelity Investments Fidelity Low Price Stock Fund 126,889
Oakmark Funds Oakmark Select Fund 328,021
MFS Funds MFS Mass Investors Growth Stock Fund 108,526
Franklin Templeton Investments Templeton Foreign Fund 50,999
Managers Funds Managers Special Equity Fund 30,881
*Vanguard Group Vanguard 500 Index Fund Investor Shares 566,484
*Vanguard Group Vanguard Balanced Index Fund Investor Shares 32,246
*Vanguard Group Vanguard Explorer Fund 102,773
*Vanguard Group Vanguard Growth Index Fund Investor Shares 54,214
*Vanguard Group Vanguard International Growth Fund 3,381,468
*Vanguard Group Vanguard LifeStrategy Conservative Growth Fund 22,289
*Vanguard Group Vanguard LifeStrategy Growth Fund 176,240
*Vanguard Group Vanguard LifeStrategy Income Fund 172,062
*Vanguard Group Vanguard LifeStrategy Moderate Growth Fund 82,681
*Vanguard Group Vanguard Mid-Cap Index Fund 40,424
*Vanguard Group Vanguard Prime Money Market Fund 22,716,654
*Vanguard Group Vanguard Small-Cap Index Fund Investor Shares 4,507,940
*Vanguard Group Vanguard Strategic Equity Fund 5,712,012
*Vanguard Group Vanguard Total Bond Market Index Fund 10,915,888
*Vanguard Group Vanguard Total International Stock Index Fund 98,161
*Vanguard Group Vanguard Total Stock Market Index Fund Investor Shares 11,431,253
*Vanguard Group Vanguard U.S. Growth Fund 3,325,834
*Vanguard Group Vanguard Value Index Fund Investor Shares 152,593
*Vanguard Group Vanguard Wellington Fund Investor Shares 5,655,119
*Vanguard Group Vanguard Windsor II Fund Investor Shares 8,308,168
*Vanguard Group Vanguard Brokerage Option 934,422
*Heidrick & Struggles International, Inc. Heidrick & Struggles Pre-IPO Stock Fund 35,587,286
*Heidrick & Struggles International, Inc. HSII Company Stock Fund 21,169
Plan participants Participant Loan Fund; interest rates range from 6.0% - 10.5% 398,392
--------------
Total investments $ 115,593,328
==============
* Represents a party-in-interest to the Plan.
See accompanying independent auditors' report.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 27, 2002 Heidrick & Struggles, Inc.
401(k) Profit Sharing and Retirement Plan
By: /s/ Robert Sloan
Authorized signatory for the
Administrative Committee
12