Archives 2006

Hollywood to conquer Chinese home video market

Chinanews, Beijing, November 3 ¨C After its huge success in hitting box offices in China, Hollywood is ready to take Chinese home video market too.

Now Hollywood is working hard to release more DVDs in China. Currently at least 8,000 DVD shops have been set up in the country, and the number is likely to grow to 10,000 before 2007.

China¡¯s successful campaign against piracy has drawn Hollywood¡¯s attention and put its confidence back. Furthermore, the huge market needs for movies must be met after the eradication of pirated ones, thus it is a golden opportunity for copyrighted works to take their shares at reasonable prices.

Fortunately, Hollywood is determined to sell their DVDs at prices based on the consumption level in China, from 15 to 25 yuan.

Sound monetary policy remains key

China will continue to pursue a sound monetary policy, which will be more closely linked to its industry, taxation and foreign exchange policies, a top central bank official said Thursday.”

In order to maintain stable and healthy national economic growth, we will continue to stick to a sound monetary policy,” Su Ning, deputy governor of the People’s Bank of China, said yesterday.

“And we will seek more and effective co-ordination with industry, taxation and foreign exchange policies when drafting our monetary policies,” the deputy central bank governor said, without elaborating.

The central bank would continue, as it did before, to employ a host of measures to curb expansive money supply and credit growth.

The measures may include open market operations, as well as interest rate and bank reserve ratio adjustment, Su told the BusinessWeek CEO Forum in Beijing.

The central bank has so far raised the interest rate twice and bank reserve ratio deposits that commercial banks are required to make with the central bank once this year in a bid to cool the sizzling economy.

Su said that macroeconomic tightening measures had already succeeded in reining in red-hot economic growth.

The Chinese economy grew 10.9 per cent in the first half of this year, with this growth slowing to 10.4 per cent in the third quarter.

But the economy still faces several challenges if it is to maintain robust yet healthy growth, Su said, pointing to slumping consumption, the soaring trade surplus and escalating fixed-assets investment.

The overall proportion of consumer spending in the national economy has been on a downward spiral for some time, which may pose problems for economic development, Su told the forum.

The proportion, Su said, has slid from 62 per cent in the 1980s to 52 per cent last year.

Problems related to the international balance of payments remain serious, with the foreign trade surplus continuing to soar this year, he said.

And the risk still remains that fixed-assets investment, which is “still bigger than it should be,” may rebound again, as local governments and enterprises continue to invest more money in projects, the deputy central bank governor said.

China’s fixed-assets investment grew by a spectacular 29.8 per cent in the first half of this year and increased 27.3 per cent in the first nine months of 2006.

The central bank, Su said, will put expanding domestic consumption high on its policy agenda.

The bank will also work to improve the credit structure, Su said.

Google seen setting up China joint venture with Ganji.com by yrend – report

BEIJING (XFN-ASIA) – Google Inc is expected to set up a new China joint venture with Ganji.com by the end of the year, in order to qualify under Chinese rules governing Internet Content Provider (ICP) licensing, Sina.com reported, citing an unidentified source.

The two companies have already started recruiting staff for the joint venture, the report said.

The rules bar foreign companies from providing Internet services in China without an ICP license.

Google has a partnership with Ganji.com, using the latter’s ICP license to operate the Google.cn service in China.

Skilled labor shortage in China

U.S. companies in China continue to make some nice profits, but they are increasingly finding that it’s difficult to staff their operations there with qualified workers. Ruth Kirchner reports.

SCOTT JAGOW: U.S. companies in China have a staffing problem: They can’t find the right people to work for them. Ruth Kirchner reports from Beijing.

——————————————————————————–
RUTH KIRCHNER: For the first time in five years, the skills shortage has emerged as the No. 1 headache for companies doing business in China.

The American Chamber of Commerce says recruiting and retaining capable Chinese managers has become a real problem. Even finding suitable entry-level staff is difficult.

Most experts put the blame squarely on the Chinese education system which does not teach independent thinking or real-world skills.

Andrew Grant of McKinsey says China’s university system needs a radical overhaul .
ANDREW GRANT: “A lot of learning is very individual in the Chinese system. There’s not a lot of learning in teams, which again is much more akin to real life and what we particularly see in business where you’re solving problems in teams”.
Grant says the universities churn out millions of graduates every year, but only a tiny fraction has the skills to work for international companies.

In Beijing, I’m Ruth Kirchner for Marketplace.

Legal Manager

Company Introduction:
The Company is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, the company collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, the company can mobilize the right people, skills, and technologies to help clients improve their performance

Job Description:
The Legal and Commercial business practice provides and manages all legal advice and support to this company. Legal and Commercial aims to give objective, focused, practical advice and solutions based on an understanding of the law and X’s business, which is essential in a competitive marketplace. The Legal and Commercial teams work closely with each engagement to find ways to maximize revenue and manage risk and to ensure that the company complies with its contractual obligations.
The Field Operations and Contract Management teams work closely with the company operating and capability groups to obtain good commercial arrangements, review and counsel new offerings, support the company’s alliances and Business Process Outsourcing businesses, develop package knowledge and ensure contract agreements are upheld.

Responsibilities:
1.Representing company’s interests and interfacing directly with client counsel and negotiating teams;
2.Drafting, reviewing and negotiating a broad range of contracts for medium to complex engagements;
3.Strategizing with company executives prior to client negotiations;
4.Helping develop, and understand, risk mitigation strategies for contractual risks;
5.Structuring client transactions to be most advantageous from a legal and business perspective;
6.Counseling, advising, and consulting company executives based on accurate interpretation of contract documents and the facts of a business opportunity;
7.Developing internal guidelines, toolkits, and packaged knowledge on various legal and business issues;
8.Overseeing, counseling, guiding, training and supporting junior transactional lawyers if required;
9.Managing external legal support, if required;
10.Staying abreast of legal developments affecting the company, its clients, and industries and synthesizing the information to incorporate it into company’s transactional practices;
11.Educating company executives in regard to legal and risk management issues;
12.Developing subject matter expertise in one of more areas that benefit legal and commercial and/or our business (e.g., corporation law, competition law, employment law, data privacy, and service line expertise);
13.Supporting, promoting and implementing initiatives as part of Legal & Commercial executive team;
14.Escalating variances from contracting policy or unusual risks;

External Relationships:
1.Client Counsel, Client Executives, Outside Counsel;
2.5+ years transactional experience in relevant areas in roles with increasing responsibility, preferably in a law firm or in a fast-paced corporate/legal transaction group, ideally for an IT services vendor;
3.Sound knowledge of Chinese Law and a desirable LLM in a US or UK university;
4.Good business acumen;
5.Prior experience working in a fast-paced legal or corporate environment;
6.Ability to meet travel requirements, when applicable;
7.Good understanding of Finance and Accounting principles;
8.Capable of delivering good work product with supervision;
9.Committed with the company’s and L&C success.

Qualifications:
1.In-depth experience negotiating and resolving Intellectual Property and other complex commercial contractual issues;
2.Proven ability to efficiently manage a large volume of transactions;
3.Ability to be flexible and work in a problem-solving environment;
4.Excellent communication (written and oral) and interpersonal skills;
5.Strong organizational, multi-tasking, time-management and analytical skills;
6.Excellent negotiation, influence and collaboration skills;
7.Fluent in English.

* Please send us your complete resume (both in Chinese and in English) to: ‘topjob_oth024bj@dacare.com’

Airbus to hire 600 staff for new China plant

ZHUHAI • Airbus said yesterday it would hire 600 staff for its new assembly plant to be built in the north Chinese port city of Tianjin.

Speaking at a media briefing at Airshow China, the country’s only air show and exhibition, Laurence Barron, president of Airbus China, said staff would be trained on the existing production line in Hamburg, Germany.

Airbus announced last week that it would open an Airbus A320 assembly plant that would eventually make four planes a month, with the first expected to be completed in 2009.

Airbus will ship sections of aircraft from Hamburg to Tianjin for final assembly.

The construction of the plant, near Beijing, was announced last week, along with China’s purchase of 150 A320 aircraft in a deal worth about $10bn, with delivery expected from 2009, Barron said.

It brings the total order to 300, following China’s order last year of 150 Airbus planes.

Barron said some of the Chinese order would be made in Tianjin but some planes would also be made for the European market.

He would not reveal further details about the plant or its future development until it received final approval from the Chinese government, which was preparing a formal feasibility report.

However, Barron highlighted the importance of the fast-growing Chinese market.

“(China) is a very important market. With its air traffic doubling here every five years, it’s becoming or has already become a major market in the world. We are taking China extremely seriously,” he told reporters.

Airbus estimated that China would need around 1,790 planes over the next 20 years.

The European company is seeking to undercut US rival Boeing, which has about two-thirds of the lucrative Chinese civil aviation sector and says it is aiming for a 50 per cent market share.

Analysts said the latest developments could be significant in helping Airbus achieve its goal.

Recruitment firms boost investment in China

Recruitment companies have increased their investments in China, according to a new study by the1, merger and acquisition (M&A) specialists for the human capital sector. The study identified a cumulative total of 156 investments in China by 106 foreign recruitment or human-capital groups over a 20-year period.

China as a whole – including deals made in Hong Kong – has seen a steady rise in the number of investments over the years. It saw a 70% boost in investments, from 40 transactions in the 1995-99 period to 68 in the post-2000 period.

However, the growth was faster (132%) for investments in mainland China (58 post-2000 versus 25 in the prior period), the first empirical evidence that foreign human-capital companies have stepped up their investment on the mainland.

“China is the human-capital sector’s number [one] opportunity long-term,” said Mark Dixon, a director of the1. “With a population of 1.3 billion, you don’t have to be a rocket scientist to do the math. It’s a numbers game, with some very big numbers.”

Explaining this shift in investor attitude, Dixon said, “People have been aware of the potential of the Chinese job market but most viewed ‘M&A for people businesses’ as too theoretical – the country, the culture and the prospect of profits all being too far off.
“But now we now seem to have passed a tipping point. Although the Chinese recruitment industry is nascent and impeded by red tape, profits are already being made. This has negated the old excuse in the industry that China should be left as a challenge for the next generation.”

Commenting on the maturity of the investment flow, Dixon said, “We haven’t entered a land-grab phase yet. In coming years, investors will move on from toe-hold investments to building national brands and large office networks across China. We’ll see them pour in real capital.

“Larger recruitment groups are starting to feel pressure from clients, institutional investors and boardrooms,” he said. “The result is clear. The attitude to China is moving from opportunity to obligation. Obsession may not be far away.”

Hong Kong

Hong Kong, which saw most of the early investment, has been receiving less attention. It attracted 10 transactions post-2000, compared with the 58 on the mainland during the same period. Hong Kong now is viewed more as a market in its own right rather than as the gateway to China. Companies wanting to capitalize on “the China opportunity” are discovering they need to be in China proper.

Cumulatively, Hong Kong has received 51 deals, compared with 105 on the mainland. Before Britain handed Hong Kong back to China in July 1997, the small territory attracted more human-capital-sector investments (53%) than the entire mainland. It is no longer where the action is. After the handover, a period that coincided with an investment flow into China from many countries and industries, the balance has switched – mainland China has attracted 82% of all deals.

This move inland is even seen among the pre-handover investors in Hong Kong themselves, who made 35 deals. Some 77% of these groups have subsequently expanded into mainland China.

Commenting on this trend, Dixon said, “Hong Kong used to be King Kong – the 800-pound gorilla on the Chinese human-capital stage, a sort of bouncer standing outside the stage door of China. Kong has now gone, at least in that capacity.”

Legal structures used

A range of different legal structures is being used by investors to operate in China, some on a solo basis and some with partners.

More than half (55%) of the investments involve the foreign company setting up a new subsidiary in China. This compares with 28% of investments in the form of representative offices. Just 17% are new joint ventures with a local partner or the partial acquisition of an existing local company (which results in effect in a joint venture after the transaction).

Regulations have allowed 100% foreign ownership of some categories of human-capital investment, notably human-resources consulting, rather than headhunting or recruitment, which have found it difficult to get licenses at any level of ownership.

Since October 2000, rules have been loosened, allowing 49% foreign participation of all categories. Joint ventures are thus becoming more popular. Just 17% of the total investment count for all periods, joint ventures accounted for 35% of investments since 2002 compared with a negligible 9% prior.

Heidrick & Struggles Reports Third Quarter 2006 Financial Results

Consolidated net revenue of $124.6 million increased 13.7 percent from $109.6 million in the 2005 third quarter. The positive impact of changes in foreign currency exchange rates in the quarter, primarily in Europe, represented 1.8 percentage points of the growth. Net revenue grew 4.1 percent in the Americas, 23.4 percent in Europe (18.2 percent on a constant currency basis) and 42.8 percent in the Asia Pacific region. The total number of confirmed executive searches increased seven percent from the 2005 third quarter, and decreased seven percent sequentially, compared to the 2006 second quarter. The number of consultants increased to 343 as of September 30, 2006, compared to 335 at June 30, 2006, and 306 at September 30, 2005. Productivity, as measured by annualized revenue per executive search consultant, remained strong at $1.4 million and the average fee per executive search increased to $108,100.

Operating income was $17.6 million, representing an operating margin (measured as a percentage of net revenue) of 14.1 percent. This compares to operating income of $12.9 million in the 2005 third quarter. Excluding restructuring charges in both periods, which management believes more appropriately reflects core operations, operating income in the 2006 third quarter was $17.4 million and the operating margin was 14.0 percent, compared to 2005 third quarter operating income of $14.5 million and an operating margin of 13.3 percent. The year-over-year improvements in operating income and operating margin reflect continued efforts by the company to improve its operating cost structure, as well as the increase in operating leverage inherent in the company’s business model at higher net revenue levels.

Kevin Kelly, chief executive officer, said, “We are pleased with the solid results achieved in the third quarter and for the first nine months of 2006 and believe that we are in a good position to meet our objectives for revenue growth and profitability for 2006. We welcomed the employees of Highland Partners on October 2 and we are actively managing a comprehensive plan for their integration, where the focus is on realizing revenue and operating synergies.”

Net income in the 2006 third quarter was $11.2 million and diluted earnings per share were $0.60, reflecting an effective tax rate of 41.9 percent. Comparisons to third quarter 2005 net income of $30.4 million and diluted earnings per share of $1.58 are not meaningful as those results reflected a significant non-cash tax benefit as a result of reversing a portion of the valuation allowance on certain U.S. deferred tax assets.

Consolidated salaries and employee benefits expense was $83.7 million, an increase of 17.4 percent from $71.3 million in the comparable quarter of 2005. As a percentage of net revenue, salaries and employee benefits were 67.2 percent for the quarter, compared to 65.0 percent in the year-ago period. The increase in compensation-related expenses in the 2006 third quarter is primarily a function of an increase in the number of consultants added during the last year, and also reflects higher bonus accruals based on the year-over- year increase in net revenue levels. Total stock-based compensation expense was $7.1 million during the quarter, including $0.7 million in stock option expense, compared to $3.9 million in last year’s third quarter.

Consolidated general and administrative expenses were $23.5 million, down 0.9 percent from $23.7 million reported in the comparable prior year period. As a percentage of net revenue, consolidated general and administrative expenses declined to 18.9 percent from 21.7 percent in the 2005 third quarter. The improvement reflects a continued focus on cost control, and operating leverage from higher revenue levels.

The company was limited from repurchasing any of its common stock during the third quarter due to the discussions with Hudson Highland Group to acquire Highland Partners. As of September 30, 2006, $40.9 million remains authorized under the current $50 million stock repurchase program authorized in May 2006.

Regional Review for the 2006 Third Quarter

The Americas reported net revenue of $67.9 million, up 4.1 percent over the third quarter of 2005. The Consumer, Financial Services and Industrial groups were the largest contributors to revenue in this region. Operating income of $14.9 million was up 2.8 percent over last year’s third quarter. The 2006 third quarter operating margin was 22.0 percent compared to 22.3 percent last year, primarily reflecting higher fixed compensation cost related to increased consultant hiring in the last year. Consultant headcount in the Americas was 182 at September 30, 2006, an increase of 24 consultants since September 30, 2005.

In Europe, net revenue of $42.3 million increased 23.4 percent from the prior-year quarter, driven by strong performance in the Financial Services, Consumer and Industrial groups. On a constant currency basis, year-over-year net revenue growth in Europe would have been 18.2 percent. Operating income of $5.9 million increased 57.4 percent from last year’s third quarter and the operating margin improved to 13.8 percent from 10.9 percent in last year’s third quarter, reflecting continued cost containment initiatives and higher revenue levels. Consultant headcount in Europe was 121 at September 30, 2006, an increase of 14 consultants since September 30, 2005.

In Asia Pacific, record net revenue of $14.5 million increased 42.8 percent from the prior year quarter, driven by continued strong business across the region with especially strong growth in the Financial Services, Industrial, and Consumer industry groups. Operating income of $4.5 million was up 68.3 percent over last year’s third quarter and the operating margin of 30.7 percent increased from 26.1 percent in last year’s third quarter. Consultant headcount in the Asia Pacific region was 40 at September 30, 2006, compared to 41 consultants at September 30, 2005.

Nine Month Results

For the nine months ended September 30, 2006, net revenue was $346.3 million, an 11.1 percent increase from $311.6 million in the first nine months of 2005. The effect of changes in foreign currency exchange rates on nine-month revenue results was negligible. Operating income in the first nine months of 2006 was $41.5 million, representing an operating margin of 12.0 percent, compared to operating income in the first nine months of 2005 of $11.5 million. Excluding restructuring charges in both periods, operating income for the first nine months of 2006 was $41.9 million and the operating margin was 12.1 percent, compared to operating income of $33.9 million in the 2005 period with a 10.9 percent operating margin. Net income for the first nine months of 2006 was $27.5 million and diluted earnings per share were $1.45, reflecting an effective tax rate of 40.3 percent. For the comparable period of 2005 net income of $32.3 million and diluted earnings per share of $1.62 included $22.4 million in restructuring charges and a non-cash tax benefit resulting from the reversal of a portion of the company’s valuation allowance on certain U.S. deferred tax assets.

2006 Annual Outlook Reflects Acquisition of Highland Partners’ Assets

The company has revised its 2006 annual guidance to reflect the integration of Highland Partners’ operations. For 2006, the company expects net revenue of between $465 million and $475 million, representing growth over 2005 net revenue of between 12.8 percent and 15.2 percent. The company expects the 2006 full-year operating margin to be in the range of 11 percent and 12 percent, reflecting the timing of spending associated with the integration, and the amortization of cash and equity retention bonuses for the former Highland consultants. Net income and earnings per share are expected to reflect a full-year effective tax rate of approximately 40 percent. The quarterly and full-year tax rate estimates can be significantly impacted by country-level results and can vary significantly by reporting period, as well as by discrete items that require immediate recognition in a particular quarter.

Kelly added, “Looking beyond 2006, we are very excited about opportunities for accelerating profitable revenue growth. We have invested in the past year in strategic hiring and in our acquisition of Highland Partners, and we are committed to maximizing our return on those investments, which in turn should enhance our market leadership position around the world. In addition, we will be driven to find innovative ways to build upon our established executive search experience, to expand the distribution of our intellectual capital, to leverage our C-suite relationships through new partnerships, and to enhance our service offerings. Working closely together as one global firm, our common goal is to optimize how we service our clients in helping them to build world-class leadership teams.”

Quarterly Conference Call

About Heidrick & Struggles International, Inc.

Safe Harbor Statement

This press release contains forward-looking statements. The forward- looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management’s 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 ability to attract and retain qualified executive search consultants; the condition of the economies in the United States, Europe, or elsewhere; 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; delays or difficulties in integrating the Highland Partners search operations; an inability to achieve the planned cost savings from our cost-reduction initiatives; an inability to sublease or assign unused office space; our ability to realize our tax loss carryforwards; the timing of any deferred tax asset valuation allowance reversals; the mix of profit and loss by country; an impairment of our goodwill and other intangible assets; and delays in the development and/or implementation of new technology and systems. Our reports filed with the U.S. Securities and Exchange Commission also include information on factors that may affect the outcome of forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Heidrick & Struggles International, Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended September 30, 2006 2005 $ Change % Change Revenue: Revenue before reimbursements (net revenue) $124,636 $109,605 $15,031 13.7% Reimbursements 6,268 4,339 1,929 44.5% Total revenue 130,904 113,944 16,960 14.9% Operating expenses: Salaries and employee benefits 83,697 71,291 12,406 17.4% General and administrative expenses 23,525 23,732 (207) -0.9% Reimbursed expenses 6,268 4,393 1,875 42.7% Restructuring charges (149) 1,580 (1,729) Total operating expenses 113,341 100,996 12,345 12.2% Operating income 17,563 12,948 4,615 35.6% Non-operating income (expense): Interest income 1,412 1,539 Interest expense (18) (18) Net realized and unrealized gains on equity and warrant portfolio 319 426 Other, net (83) 43 Net non-operating income 1,630 1,990 Income before income taxes 19,193 14,938 Provision for (benefit from) income taxes 8,042 (15,458) Net income $11,151 $30,396 Basic earnings per common share $0.64 $1.63 $(0.99) NM Basic weighted average common shares outstanding 17,462 18,694 (1,232) -6.6% Diluted earnings per common share $0.60 $1.58 $(0.98) NM Diluted weighted average common shares outstanding 18,455 19,269 (814) -4.2% Salaries and employee benefits as a percentage of net revenue 67.2% 65.0% 2.2% General and administrative expense as a percentage of net revenue 18.9% 21.7% -2.8% Operating income as a percentage of net revenue 14.1% 11.8% 2.3% Operating income as a percentage of net revenue (excluding restructuring) 14.0% 13.3% 0.7% Effective tax rate 41.9% NM NM Heidrick & Struggles International, Inc. Segment Information (In thousands) Three Months Ended September 30, 2006 2005 Margin Margin 2006 2005 $ Change % Change * * Revenue: Americas $67,855 $65,181 $2,674 4.1% Europe 42,278 34,267 8,011 23.4% Asia Pacific 14,503 10,157 4,346 42.8% Revenue before reimbursements (net revenue) 124,636 109,605 15,031 13.7% Reimbursements 6,268 4,339 1,929 44.5% Total revenue $130,904 $113,944 $16,960 14.9% Operating Income: Americas $14,919 $14,511 $408 2.8% 22.0% 22.3% Europe 5,852 3,718 2,134 57.4% 13.8% 10.9% Asia Pacific 4,456 2,648 1,808 68.3% 30.7% 26.1% Total regions 25,227 20,877 4,350 20.8% 20.2% 19.0% Corporate (7,813) (6,349) (1,464) -23.1% Operating income before restructuring charges 17,414 14,528 2,886 19.9% 14.0% 13.3% Restructuring charges 149 (1,580) 1,729 Operating income $17,563 $12,948 $4,615 * Margin based on revenue before reimbursements (net revenue). Heidrick & Struggles International, Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Nine Months Ended September 30, 2006 2005 $ Change % Change Revenue: Revenue before reimbursements (net revenue) $346,290 $311,560 $34,730 11.1% Reimbursements 16,835 15,735 1,100 7.0% Total revenue 363,125 327,295 35,830 10.9% Operating expenses: Salaries and employee benefits 234,841 207,257 27,584 13.3% General and administrative expenses 69,529 70,375 (846) -1.2% Reimbursed expenses 16,835 15,735 1,100 7.0% Restructuring charges 406 22,417 (22,011) Total operating expenses 321,611 315,784 5,827 1.8% Operating income 41,514 11,511 30,003 260.6% Non-operating income (expense): Interest income 4,666 3,960 Interest expense (39) (359) Net realized and unrealized gains on equity and warrant portfolio 434 230 Other, net (534) 1,161 Net non-operating income 4,527 4,992 Income before income taxes 46,041 16,503 Provision for (benefit from) income taxes 18,574 (15,786) Net income $27,467 $32,289 Basic earnings per common share $1.52 $1.70 $(0.18) NM Basic weighted average common shares outstanding 18,024 18,957 (933) -4.9% Diluted earnings per common share $1.45 $1.62 $(0.17) NM Diluted weighted average common shares outstanding 18,957 19,886 (929) -4.7% Salaries and employee benefits as a percentage of net revenue 67.8% 66.5% 1.3% General and administrative expense as a percentage of net revenue 20.1% 22.6% -2.5% Operating income as a percentage of net revenue 12.0% 3.7% 8.3% Operating income as a percentage of net revenue (excluding restructuring) 12.1% 10.9% 1.2% Effective tax rate 40.3% NM NM Heidrick & Struggles International, Inc. Segment Information (In thousands) Nine Months Ended September 30, 2006 2005 Margin Margin 2006 2005 $ Change % Change * * Revenue: Americas $191,766 $179,060 $12,706 7.1% Europe 118,141 102,679 15,462 15.1% Asia Pacific 36,383 29,821 6,562 22.0% Revenue before reimbursements (net revenue) 346,290 311,560 34,730 11.1% Reimbursements 16,835 15,735 1,100 7.0% Total revenue $363,125 $327,295 $35,830 10.9% Operating Income: Americas $40,775 $39,174 $1,601 4.1% 21.3% 21.9% Europe 12,614 5,789 6,825 117.9% 10.7% 5.6% Asia Pacific 9,926 7,389 2,537 34.3% 27.3% 24.8% Total regions 63,315 52,352 10,963 20.9% 18.3% 16.8% Corporate (21,395) (18,424) (2,971) -16.1% Operating income before restructuring charges 41,920 33,928 7,992 23.6% 12.1% 10.9% Restructuring charges (406) (22,417) 22,011 Operating income $41,514 $11,511 $30,003 * Margin based on revenue before reimbursements (net revenue). Heidrick & Struggles International, Inc. Condensed Consolidated Balance Sheets (In thousands) September 30, December 31, 2006 2005 (Unaudited) Current assets: Cash and cash equivalents $137,399 $203,689 Short-term investments 60,000 – Accounts receivable, net of allowance for doubtful accounts 84,570 53,334 Other receivables 5,181 4,463 Prepaid expenses 10,614 8,178 Income taxes recoverable, net 5,777 3,536 Deferred income taxes, net 7,090 8,579 Total current assets 310,631 281,779 Non-current assets: Property and equipment, net 18,413 21,104 Assets designated for retirement and pension plans 29,807 26,727 Investments 3,173 1,839 Other non-current assets 6,465 5,216 Goodwill 47,717 46,655 Other intangible assets, net 5,831 6,239 Deferred income taxes, net 22,001 21,363 Total non-current assets 133,407 129,143 Total assets $444,038 $410,922 Current liabilities: Accounts payable $5,293 $6,019 Accrued salaries and employee benefits 111,516 84,169 Other accrued liabilities 28,996 25,314 Current portion of accrued restructuring charges 3,279 6,313 Total current liabilities 149,084 121,815 Non-current liabilities: Retirement and pension plans 35,442 31,446 Non-current portion of accrued restructuring charges 10,287 12,297 Other non-current liabilities 8,231 7,879 Total non-current liabilities 53,960 51,622 Stockholders’ equity 240,994 237,485 Total liabilities and stockholders’ equity $444,038 $410,922 Heidrick & Struggles International, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended September 30, 2006 2005 Cash flows from operating activities: Net income $11,151 $30,396 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,289 2,672 Deferred income taxes 303 (18,512) Net realized and unrealized gains on equity and warrant portfolio (319) (426) Stock-based compensation expense, net 7,100 3,947 Restructuring charges (149) 1,580 Cash paid for restructuring charges (1,006) (8,546) Changes in assets and liabilities: – Trade and other receivables (6,207) 850 Accounts payable 363 (548) Accrued expenses 29,760 27,308 Income taxes recoverable and payable, net 1,069 542 Other assets and liabilities, net (52) (975) Net cash provided by operating activities 44,302 38,288 Cash flows from investing activities: Capital expenditures (2,229) (1,343) Proceeds from sales of equity securities 532 456 Payments to consultants related to sales of equity securities (413) (198) Proceeds from sales of short-term investments 12,501 20,050 Purchases of short-term investments (22,501) (10,050) Other, net 17 71 Net cash provided by (used in) investing activities (12,093) 8,986 Cash flows from financing activities: Proceeds from stock options exercised 1,239 2,590 Purchases of treasury stock (3,924) – Excess tax benefits and accruals related to stock-based compensation 507 – Other (68) – Net cash provided by (used in) financing activities (2,246) 2,590 Effect of foreign currency exchange rates on cash and cash equivalents (2,329) 371 Net increase in cash and cash equivalents 27,634 50,235 Cash and cash equivalents: Beginning of period 109,765 83,676 End of period $137,399 $133,911 Supplemental schedule of noncash financing activities: Total value of treasury stock purchases $- $- Cash paid for treasury stock purchases (3,924) – Change in accrued treasury stock purchases $(3,924) $- Heidrick & Struggles International, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended September 30, 2006 2005 Cash flows from operating activities: Net income $27,467 $32,289 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,361 8,628 Deferred income taxes 850 (16,366) Net realized and unrealized gains on equity and warrant portfolio (434) (230) Stock-based compensation expense, net 18,271 10,074 Restructuring charges 406 22,417 Cash paid for restructuring charges (5,450) (28,625) Changes in assets and liabilities: Trade and other receivables (29,932) (23,680) Accounts payable (849) (5,182) Accrued expenses 25,485 31,188 Income taxes recoverable and payable, net (2,393) (11,485) Other assets and liabilities, net (1,409) (5,043) Net cash provided by operating activities 39,373 13,985 Cash flows from investing activities: Capital expenditures (3,556) (4,468) Proceeds from sales of equity securities 929 1,769 Payments to consultants related to sales of equity securities (625) (18,202) Proceeds from sales of short-term investments 72,500 176,925 Purchases of short-term investments (132,500) (112,600) Other, net 64 112 Net cash provided by (used in) investing activities (63,188) 43,536 Cash flows from financing activities: Proceeds from stock options exercised 4,023 8,050 Purchases of treasury stock (49,460) (27,498) Excess tax benefits and accruals related to stock-based compensation 2,289 – Other 247 – Net cash used in financing activities (42,901) (19,448) Effect of foreign currency exchange rates on cash and cash equivalents 426 (2,590) Net increase (decrease) in cash and cash equivalents (66,290) 35,483 Cash and cash equivalents: Beginning of period 203,689 98,428 End of period $137,399 $133,911

Heidrick & Struggles International, Inc.

Most migrant workers find cities friendly

According to the ¡°Report on Migrant Workers¡¯ Life in Cities¡± by National Statistics Bureau, more than 70% of them find cities friendly, and over 50% want to stay.

Over 40% of migrant workers believe their working conditions are improving. About 40% find life in cities expensive, and their lack of training adds to their difficulties. Nearly 20% wish to enjoy social security benefits and housing allowances.

The great population shift from rural areas to cities is unavoidable in China¡¯s industrialization and urbanization, and migrant workers (especially migrant industrial workers) play an irreplaceable part in accelerating this process.

China’s GDP to grow by 7.5 pct annually

China’s gross domestic product (GDP) is expected to grow by about 7.5 percent annually in the next five years, said Ma Kai, Minister of the National Development and Reform Commission (NDRC), on Monday.

Ma told the World Industrial and Commercial Organizations Forum in Beijing that GDP would reach 3.2 trillion U.S. dollars under the current foreign exchange rate.

He said the macro-control policies had started to take effect this year, while the consumer price index (CPI) remained very low.

In the first nine months, GDP grew at 10.7 percent, down 0.2 of a percentage point from the first half, and CPI stood at 1.3 percent, down 0.7 of a percentage point from the previous year.

Ma said the government would further strengthen macro-control efforts by implementing more stringent financial and monetary policies and using administrative means.

“China will strive to make its economy to grow in a more healthy way by focusing on reining in the fast growing investment, loans and trade surplus.”

He also said the booming economy would create new jobs for 45 million urban people and migrant workers between 2006 and 2010.

The government would further strive to reduce the widening income gap. The per capita net income of urban people would rise to 13,390 yuan (1,699 U.S. dollars) in 2010 from 10,493 yuan (1,332 U.S. dollars) in 2005, while that of rural people would rise to 4,150 yuan (527 U.S. dollars) from 3,255 yuan (413 U.S. dollars).