Compensation and Benefits. Compensation and benefits expense increased $73.1 million, or 23%, to $392.0 million in the nine months ended January 31, 2008 from $318.9 million in the nine months ended January 31, 2007. The increase in compensation and benefits expenses is primarily due to an 18% increase in global headcount compared to the same period last year, including a 20% increase in the average number of consultants, coupled with increased revenue-based awards. Exchange rates unfavorably impacted compensation and benefits expenses by $15.8 million during the nine months ended January 31, 2008.

Executive recruitment compensation and benefits costs of $319.8 million in the nine months ended January 31, 2008 increased $58.1 million, or 22%, compared to $261.7 million in the same period of prior year primarily due to consultants hired over the past year. During the nine months ended January 31, 2008, the average number of consultants increased by 43, or 9%, compared to the same period last year. Exchange rates impacted executive recruitment compensation and benefits expense unfavorably by $12.4 million. Executive recruitment compensation and benefits expenses as a percentage of fee revenue in the nine months ended January 31, 2008, was 64%, and similar to the same period last fiscal year.

Futurestep compensation and benefits expense increased $11.8 million, or 27%, to $54.9 million from $43.1 million in the same period in the prior year due to significant investments in our employees which increased Futurestep’s average consultant headcount by 84% during the nine months ended January 31, 2008 compared to the nine months ended January 31, 2007. Exchange rates unfavorably impacted Futurestep compensation and benefits expense by $3.4 million. Futurestep compensation and benefits expense, as a percentage of fee revenue, was 68% in the nine months ended January 31, 2008 and 2007.

Corporate compensation and benefits expense increased $3.3 million, or 24%, to $17.3 million, primarily from increases in recognition of unearned deferred compensation balances in the current year compared to the same period in the prior year.

General and Administrative Expenses. General and administrative expenses increased $21.8 million, or 27%, to $101.2 million in the nine months ended January 31, 2008 compared to $79.4 million in the nine months ended January 31, 2007. Exchange rates unfavorably impacted general and administrative expenses by $4.8 million in the nine months ended January 31, 2008.

Executive recruitment general and administrative expenses increased $14.8 million, or 25%, from $58.8 million during the nine months ended January 31, 2007 to $73.6 million in the current fiscal year. The increase was driven by increases in premise and office expense of $6.1 million, $3.7 million in business development expenses, $1.9 million in bad debt expense and $2.3 million in other types of general expenses including meetings and travel expense. Increased premise and office expense was attributable to all regions due to increased rent expense, total space leased and associated utility costs. Business development increased primarily due to the growth in the business. Bad debt expense increased in relation to an increase in the level of business and corresponding increase in revenues and accounts receivable balances. Executive recruitment general and administrative expenses, as a percentage of fee revenue, increased to 15% in the current year from 14% in the same period in the prior year.

Futurestep general and administrative expenses increased $4.8 million, or 39%, to $17.2 million, in the first nine months of fiscal year 2008 compared to the same period in fiscal year 2007, primarily due to an increase in premise and office expense of $1.6 million resulting from increases in rent expense noted across all regions and the opening of new offices in Europe and Asia. Other administrative expenses increased $1.1 million resulting from an increase in travel and meeting expenses. Bad debt expense increased $0.7 million in relation to an increase in revenues and accounts receivable balances. Futurestep general and administrative expenses, as a percentage of fee revenue, increased to 21% in the current year from 20% in the same period in the prior year.

Corporate general and administrative expenses increased $2.1 million, or 25%, to $10.4 million in the first nine months of fiscal year 2008 compared to the same period in fiscal year 2007, primarily due to increased professional fees, travel and meetings and premise and office expenses related to additional office space.

Out-of-Pocket Engagement Expenses. Out-of-pocket engagement expenses consist of expenses incurred by candidates and our consultants that are generally billed to clients. In the nine months ended January 31, 2008, out-of-pocket engagement expenses of $42.7 million represented an increase of $11.7 million, or 38%, over the same period in the prior year. Out-of-pocket engagement expenses, as a percentage of fee revenue, of 7% for the nine months ended January 31, 2008 remained constant compared to the nine months ended January 31, 2007.

Depreciation and Amortization Expenses. Depreciation and amortization expense of $7.7 million in the nine months ended January 31, 2008 increased $0.5 million, or 7%, from the same period in the prior year. Depreciation expense relates mainly to computer equipment, software, furniture and leasehold improvements. The increase in depreciation expenses is attributable to an increase in fixed asset balances primarily associated with furniture and fixtures and leasehold improvements related to business expansion, office build-out and amortization of software costs that added new functionality in our corporate and executive search segments.

Operating Income. Operating income increased $8.8 million, or 14%, to $71.7 million in the nine months ended January 31, 2008 compared to $62.9 million in the same period in the prior year, resulting from increased revenue of $115.8 million offset by a $107.0 million increase in operating expenses, primarily compensation and benefits and general and administrative expenses, in the current year.

Executive recruitment operating income increased $14.0 million, or 17%, to $94.6 million in the nine months ended January 31, 2008 compared to $80.6 million in the nine months ended January 31, 2007. The improvement in executive recruitment operating income is attributable to increased revenues offset by additional compensation expense relating to increased headcount and variable payouts, as discussed previously, as well as increased premise and other general administrative expense. The Lominger Entities contributed $3.3 million, or 24%, of the total increase for the segment during the current year. Executive recruitment operating income as a percentage of fee revenue was 19% in the nine months ended January 31, 2008 compared to 20% in the same period in the prior year.

Futurestep operating income increased by $0.5 million to $5.6 million in the nine months ended January 31, 2008 as compared to operating income of $5.1 million in the nine months ended January 31, 2007. The increase in Futurestep operating income is primarily due to a 40% increase in average fees during the nine months ended January 31, 2008 compared to the same period in fiscal year 2007. Futurestep operating income, as a percentage of fee revenue, was 7% in the nine months ended January 31, 2008 compared to 8% in the same period last year.

Interest Income and Other Income, Net. Interest income and other income, net increased by $2.4 million in the nine months ended January 31, 2008 from $7.4 million in the nine months ended January 31, 2007. Interest and dividend income increased as a result of higher yields on larger balances of funds available for investment compared to prior year.

Interest Expense. Interest expense, primarily related to borrowings under COLI and convertible securities, was $3.7 million in the nine months ended January 31, 2008 compared to $7.7 million during the nine months ended January 31, 2007. The decrease is primarily a result of interest expense on convertible securities in the nine months ended January 31, 2007 that was not present in the nine months ended January 31, 2008 as the securities were converted into shares of the Company’s common stock in the fourth quarter of fiscal year 2007.

Provision for Income Taxes. The provision for income taxes was $29.8 million in the nine months ended January 31, 2008 compared to $23.2 million in the nine months ended January 31, 2007. The provision for income taxes in the current year reflects a 38% effective tax rate. The provision for income taxes for the same period in prior year reflects a 37% effective tax rate.

Equity in Earnings of Unconsolidated Subsidiaries. Equity in earnings of unconsolidated subsidiaries is comprised of our less than 50% interest in our Mexican subsidiaries. We report our interest in earnings or loss of our Mexican subsidiaries on the equity basis as a one-line adjustment to net income, net of taxes. Equity in earnings was $2.5 million in the nine months ended January 31, 2008 and January 31, 2007.

Liquidity and Capital Resources

We believe that cash on hand, borrowings available under our credit facility and funds from operations will be sufficient to meet our anticipated working capital, debt service requirements, capital expenditures and general corporate requirements. However, adverse changes in our revenue could require us to cut costs and/or obtain financing to meet our cash needs.

As of January 31, 2008 we had $24.9 million of auction rate securities. Frequent auctions have historically provided a liquid market for our auction rate securities. However, in mid-February 2008, liquidity issues in the global credit markets caused auctions representing some of the auction rate securities we hold to fail because the amount of securities offered for sale exceeded the amount of bids. As a result, the liquidity of our remaining auction rate securities has diminished, and we expect that this decreased liquidity for our auction rate securities will continue as long as the present depressed global credit market environment persists, or until issuers refinance and replace these securities with other instruments. Despite the current auction market, we believe the credit quality of our auction rate securities remains high due to the creditworthiness of the issuers. We continue to collect interest when due and at this time we expect to continue to do so going forward. Additionally, we expect we will receive the principals through either future successful auctions, sales of these securities outside the auction process, the issuers’ establishment of different form of financing to replace these securities, or the maturing of the securities.

We are not aware of any trends, demands or commitments that would materially affect liquidity or those that relate to our resources.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, limited purpose entities.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

As a result of our global operating activities, we are exposed to certain market risks, including foreign currency exchange fluctuations and fluctuations in interest. We manage our exposure to these risks in the normal course of our business as described below. We have not utilized financial instruments for trading, hedging or other speculative purposes nor do we trade in derivative financial instruments.

Foreign Currency Risk

Substantially all our foreign subsidiaries’ operations are measured in their local currencies. Assets and liabilities are translated into U.S. dollars at the rates of exchange in effect at the end of each reporting period and revenue and expenses are translated at average rates of exchange during the reporting period. Resulting translation adjustments are reported as a component of comprehensive income on our consolidated Statement of Stockholders’ Equity and accumulated other comprehensive income on our consolidated Balance Sheets.

Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to transaction gains and losses that impact our results of operations. Historically, we have not realized significant foreign currency gains or losses on such transactions. In the three and nine months ended January 31, 2008, we recognized foreign currency losses, after income taxes, of $0.3 million and $0.8 million, respectively, primarily related to our North America operations.

Our primary exposure to exchange losses is based on outstanding intercompany loan balances denominated in U.S. dollars. If the U.S. dollar strengthened 15%, 25% and 35% against the Pound Sterling, the Euro, the Canadian dollar, the Australian dollar and the Yen, our exchange loss would have been $2.2 million, $3.6 million and $5.1 million, respectively, based on outstanding balances at January 31, 2008. If the U.S. dollar weakened by the same increments against the Pound Sterling, the Euro, the Canadian dollar, the Australian dollar and the Yen, our exchange gain would have been $2.2 million, $3.6 million and $5.1 million, respectively, based on outstanding balances at January 31, 2008.

Interest Rate Risk

We primarily manage our exposure to fluctuations in interest rates through our regular financing activities, which generally are short-term and provide for variable market rates. As of January 31, 2008, we had no outstanding balance on our credit facility. We have $60.4 million of borrowings against the cash surrender value of COLI contracts as of January 31, 2008 bearing interest primarily at variable rates. The risk of fluctuations in these variable rates is minimized by the fact that we receive a corresponding adjustment to our borrowed funds crediting rate on the cash surrender value on our COLI contracts.

As of February 29, 2008, we held approximately $23.4 million of marketable securities investments, classified as current assets, with an auction reset feature (“auction rate securities”) whose underlying assets are generally municipal notes or student loans which are substantially backed by the federal government. In mid-February 2008 liquidity issues in the global credit markets caused auctions for some of our auction rate securities to fail, and there is no assurance that currently successful auctions on the other auction rate securities in our investment portfolio will continue to succeed. As a result of the current situation in the auction markets, our ability to liquidate our investment in auction rate securities and fully recover the carrying value of our investment in the near term may be limited or impossible. An auction failure means that the parties wishing to sell securities cannot. If in the future the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may be required to record an impairment charge on these investments. We believe we will be able to liquidate our investment without significant loss within the next year, however, it could take until the final maturity of the underlying notes (up to 30 years) to realize our investments’ recorded value. Based on our expected operating cash flows, and our other sources of cash, we do not anticipate the potential lack of liquidity on these investments will affect our ability to execute our current business plan.

Item 4.		Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (“Exchange Act”), Rules 13a-15(e) and 15d-15(e) under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

(b) Changes in Internal Control over Financial Reporting.

During the fiscal quarter ended January 31, 2008, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings

From time to time, we are involved in litigation both as plaintiff and defendant, relating to claims arising out of our operations that is ordinary, routine litigation incidental to the business. As of the date of this report, we are not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or results of operations.

Item 1A.		Risk Factors

In the Annual Report Form 10-K for the period ended April 30, 2007, the Company described material risk factors facing the business. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. As of the date of this report, there have been no material changes to risk factors described in our Annual Report Form 10-K for fiscal 2007.

Item 2.		Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

During the three months ended January 31, 2008, the Company repurchased common stock under the common stock repurchase programs approved by the Board of Directors in November 2007. Pursuant to this program, shares can be repurchased in open market transactions or privately negotiated transactions at the Company’s discretion.

Approximate

Shares

Dollar Value of

Purchased

Shares that

Average

as Part of a

May Yet Be

Price

Publicly-

Purchased

Paid

Announced

Under the

Shares

Per

Program

Program

Purchased

Share

(1)

(1)

November 1, 2007 - November 30, 2007

295,000

$

16.92

295,000

$45.2million

December 1, 2007 - December 31, 2007

1,135

$

—

—

$45.2million

January 1, 2008 - January 31, 2008

104,400

$

14.29

104,400

$43.7million

Balance as of January 31, 2008

400,535

399,400

Item 3.		Defaults Upon Senior Securities

Not applicable.

Item 4.		Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the third quarter of fiscal year 2008.

Item 5.		Other Information

Not applicable.

Item 6.		Exhibits

Exhibit
Number				Description of Exhibit
	3.1			Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, dated December 15, 1999, and incorporated herein by reference.
	3.2			Certificate of Designations of 7.5% Convertible Preferred Stock, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated June 18, 2002, and incorporated herein by reference.
	3.3			Amended and Restated Bylaws of the Company, filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-K, dated July 29, 2002, and incorporated herein by reference.
	10.1			Offer of Employment Letter between the Company and Ana Dutra dated as of January 16, 2008.
	31.1			Certification by Chief Executive Office pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2			Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1			Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX

Exhibit
Number				Description of Exhibit
	3.1			Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, dated December 15, 1999, and incorporated herein by reference.
	3.2			Certificate of Designations of 7.5% Convertible Preferred Stock, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated June 18, 2002, and incorporated herein by reference.
	3.3			Amended and Restated Bylaws of the Company, filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-K, dated July 29, 2002, and incorporated herein by reference.
	10.1			Offer of Employment Letter between the Company and Ana Dutra dated as of January 16, 2008.
	31.1			Certification by Chief Executive Office pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2			Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1			Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.