4.	Employee Stock Plans

Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of income for the periods indicated:


	Year Ended April 30,
	2012			2011			2010
	(in thousands)
Restricted stock	$	12,381		$	14,090		$	16,470
Stock options and SARs		933			1,028			853
ESPP		85			429			406

Total stock-based compensation expense, pre-tax		13,399			15,547			17,729
Tax benefit from stock-based compensation expense		(4,701	)		(5,675	)		(6,471	)

Total stock-based compensation expense, net of tax	$	8,698		$	9,872		$	11,258

The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options. The expected volatility reflects consideration of the historical volatility in the Company’s publicly traded instruments during the period the option is granted. The Company believes historical volatility in these instruments is more indicative of expected future volatility than the implied volatility in the price of the Company’s common stock. The expected life of each option is estimated using historical data. The risk-free interest rate is based on the U.S. Treasury zero-coupon issue with a remaining term approximating the expected term of the option. The Company uses historical data to estimate forfeiture rates applied to the gross amount of expense determined using the option valuation model.

The weighted-average assumptions used to estimate the fair value of each employee stock option and SARs were as follows:


	Year Ended April 30,
	2012			2011			2010
Expected volatility		47.07	%		47.67	%		48.91	%
Risk-free interest rate		1.47	%		1.83	%		2.53	%
Expected option life (in years)		5.00			5.00			5.00
Expected dividend yield		0.00	%		0.00	%		0.00	%

The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options. The assumptions used in option valuation models are highly subjective, particularly the expected stock price volatility of the underlying stock.

Stock Incentive Plan

The Company maintains a stock incentive plan known as the Korn/Ferry International Amended and Restated 2008 Stock Incentive Plan, (the “2008 Plan”). The 2008 Plan provides for the grant of awards to eligible participants, designated as either nonqualified or incentive stock options, SARs, restricted stock and restricted stock units, any of which may be performance-based, and incentive bonuses, which may be paid in cash or a combination thereof. The maximum number of shares of common stock that may be issued under the 2008 Plan is 3,980,000 shares, subject to adjustment for certain changes in the Company’s capital structure and other extraordinary events. As of April 30, 2012, the maximum number of shares of common stock available for issuance under the 2008 Plan is 1,500,000 shares.

Options granted to officers, non-employee directors and other key employees generally vest over a three to four year period and generally expire seven to ten years from the date of grant. Stock options are granted at a price equal to the fair market value of the common stock on the date of grant. Key employees are eligible to receive a grant of stock options annually with the number of options determined by the employee’s performance level. In addition, certain key management members typically receive stock option grants upon commencement of employment.

Stock Options and SARs

Stock options and SAR transactions under the Company’s 2008 Plan were as follows:


	April 30,
	2012					2011					2010
	Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price
	(in thousands, except per share data)
Outstanding, beginning of year		1,833		$	13.78		2,723		$	14.72		3,113		$	14.83
Granted		48		$	22.71		211		$	13.97		621		$	11.26
Exercised		(235	)	$	12.76		(625	)	$	12.81		(531	)	$	8.21
Forfeited/expired		(154	)	$	15.63		(476	)	$	20.55		(480	)	$	18.14

Outstanding, end of year		1,492		$	14.00		1,833		$	13.78		2,723		$	14.72

Exercisable, end of year		1,061		$	14.33		1,219		$	14.64		2,142		$	15.68

As of April 30, 2012, the aggregate intrinsic value of options outstanding and options exercisable were $5.0 million and $3.4 million, respectively.

As of April 30, 2012, there was $1.9 million of total unrecognized compensation cost related to non-vested awards of stock options and SARs. That cost is expected to be recognized over a weighted-average period of 1.1 years. For stock option awards subject to graded vesting, the Company recognizes the total compensation cost on a straight-line basis over the service period for the entire award.

Outstanding stock options and SARs:


	April 30, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Shares		Weighted- Average Remaining Contractual Life (in years)		Weighted- Average Exercise Price		Shares		Weighted- Average Remaining Contractual Life (in years)		Weighted- Average Exercise Price
	(in thousands, except per share data)
$ 6.26 - $ 9.55		312		0.9	$	7.89		312		0.9	$	7.89
$ 9.56 - $13.90		463		4.4	$	11.23		148		4.1	$	10.80
$13.91 - $17.97		352		3.5	$	16.79		282		3.2	$	17.26
$17.98 - $24.08		365		2.9	$	20.02		319		2.5	$	19.66

		1,492		3.1	$	14.00		1,061		2.4	$	14.33

Additional information pertaining to stock options and SARs:


	Year Ended April 30,
	2012		2011		2010
	(in thousands, except per share data)
Weighted-average fair value per share of stock options granted	$	9.61	$	6.07	$	5.07
Total fair value of stock options and SARs vested	$	1,065	$	747	$	612
Total intrinsic value of stock options exercised	$	1,485	$	5,164	$	2,631
Total intrinsic value of SARs paid	$	45	$	178	$	75

Restricted Stock

The Company grants time-based restricted stock to executive officers and other senior employees generally vesting over a three to four year period. Time-based restricted stock is granted at a price equal to fair value, which is determined based on the closing price of the Company’s common stock on the grant date. The Company also grants market-based restricted stock to executive officers and other senior employees. These market-based shares vest after three years depending upon the Company’s total stockholder return over the three-year performance period relative to other companies in its selected peer group. The fair value of these market-based restricted stock awards was determined by a third-party valuation using extensive market data. Employees may receive restricted stock annually in conjunction with the Company’s performance review as well as upon commencement of employment.

Restricted stock activity is summarized below:


	April 30,
	2012					2011					2010
	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
	(in thousands, except per share data)
Non-vested, beginning of year		2,007		$	8.64		2,480		$	9.93		2,387		$	15.50
Granted		687		$	21.46		562		$	15.12		1,017		$	10.57
Vested		(794	)	$	15.58		(920	)	$	15.32		(754	)	$	20.43
Forfeited/expired		(119	)	$	18.19		(115	)	$	14.83		(170	)	$	17.91

Non-vested, end of year		1,781		$	9.85		2,007		$	8.64		2,480		$	9.93

As of April 30, 2012, there was $17.5 million of total unrecognized compensation cost related to non-vested awards of restricted stock, which is expected to be recognized over a weighted-average period of 1.9 years. For restricted stock awards subject to graded vesting, the Company recognizes the total compensation cost on a straight-line basis over the service period for the entire award. During fiscal 2012 and fiscal 2011, 190,141 shares and 211,315 shares of restricted stock totaling $4.2 million and $3.2 million, respectively, were repurchased by the Company, at the option of the employee, to pay for taxes related to vesting of restricted stock.

Employee Stock Purchase Plan

The Company has an ESPP that, in accordance with Section 423 of the Internal Revenue Code, allows eligible employees to authorize payroll deductions of up to 15% of their salary, or $25,000 annually, to purchase shares of the Company’s common stock at 85% of the fair market price of the common stock on the last day of the enrollment period. At the Company’s 2011 Annual Meeting of Stockholders, held on September 28, 2011, the Company’s stockholders approved an amendment and restatement of the ESPP, which among other things, increased the maximum number of shares that may be issued under the ESPP from 1.5 million shares to 3.0 million shares. During fiscal 2012, 2011 and 2010, employees purchased 76,909 shares at $18.69 per share, 153,913 shares at $14.13 per share and 209,840 shares at $10.66 per share, respectively. The ESPP was temporarily suspended during the second half of fiscal 2012. At April 30, 2012, the ESPP had approximately 1.6 million shares remaining available for future issuance.

Common Stock

During fiscal 2012 and 2011, the Company issued 228,835 shares and 611,621 shares of common stock, respectively, as a result of the exercise of stock options, with cash proceeds from the exercise of $2.9 million and $7.9 million, respectively.

During fiscal 2011, the Company repurchased 724,064 shares of the Company’s common stock for $10.6 million. No shares were repurchased during fiscal 2012 other than to satisfy tax withholding requirements upon the vesting of restricted stock as described above.

In June 2002, the Company issued warrants to purchase 274,207 shares of its common stock at an exercise price of $11.94, subject to anti-dilution provisions. During fiscal 2011, these warrants were exercised for 274,207 shares of common stock in exchange for $3.0 million in cash.