HHGP Hudson Highland Grp., Inc. (MM)

Hudson Highland Group Reports 2005 Second Quarter and Six Month Results NEW YORK, July 26 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. (NASDAQ:HHGP), one of the world's leading providers of specialized professional staffing, retained executive search and human capital solutions, today announced financial results for the second quarter and six months ended June 30, 2005. 2005 Second Quarter Highlights * Revenue of $364.8 million, an increase of 18.7 percent from $307.4 million for the second quarter of 2004 * Gross margin of $141.2 million, or 38.7 percent of revenue, an increase of 19.1 percent from $118.5 million, or 38.5 percent of revenue, for the second quarter of 2004 * EBITDA of $11.0 million, an increase of 96.3 percent from $5.6 million for the second quarter of 2004 * Net income of $4.4 million or $0.21 per basic share and $0.20 per diluted share, compared to net income of $0.2 million or $0.01 per basic and diluted share for the second quarter of 2004 * Completed an offering of approximately 3.2 million shares of common stock, which closed in the third quarter, raising net proceeds of $45.1 million * Increased credit facility from $50 million to $75 million "The second quarter was characterized by solid progress toward our long- term target for operating profitability," said Jon Chait, chairman and chief executive officer of Hudson Highland Group. "Virtually all regional operating units contributed in the quarter -- Hudson Asia Pacific and North America as expected, and the results of Hudson Europe were encouraging given the weak regional economy." "Our restructured, more focused operation and greater cost efficiencies across the company's businesses are continuing to generate further operating leverage," said Richard W. Pehlke, Hudson Highland Group's executive vice president and chief financial officer. "Our guidance remains unchanged." Guidance Given the current economic environment, the company expects EBITDA as a percent of revenue to be 1.5 to 2 percent in 2005 and 3.5 to 4 percent in 2006. The company believes that an assumption of 12 to 15 percent revenue growth for 2005 is reasonable, resulting in a full-year EBITDA range of $22 to $29 million. This is based on expectations of constant currency revenue and gross margin growth of 30 to 35 percent in Hudson North America, 10 to 15 percent in Hudson Europe, and 0 to 5 percent in Hudson Asia Pacific and Highland Partners. 2005 Six Month Results For the first six months of 2005, Hudson Highland Group reported revenue of $717.7 million, up 20.2 percent from $597.2 million for the first half of last year. Net income was $0.2 million, or $0.01 per basic and diluted share compared with a net loss of $18.5 million, or $1.00 per basic and diluted share, for the same six-month period last year. Recent Developments On July 20, Hudson Highland Group announced that it signed a definitive agreement to acquire Balance Ervaring op Projectbasis B.V. (Balance), a leading professional contract staffing firm in the Netherlands. Balance provides specialized staffing and project management services to the technical, financial, legal and public sectors in the Netherlands. The transaction is expected to close August 17, 2005. Conference Call / Webcast Hudson Highland Group will conduct a conference call tomorrow Wednesday, July 27, 2005 at 9:00 AM EDT to discuss this announcement. Investors wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 7859158 at 8:50 AM EDT. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 7859158. Hudson Highland Group's quarterly conference call can also be accessed online through Yahoo! Finance at http://www.yahoo.com/ and the investor information section of the company's website at http://www.hhgroup.com/. Hudson Highland Group Hudson Highland Group is one of the world's leading professional staffing, retained executive search and human capital solution providers. We help our clients achieve greater organizational performance by attracting, selecting, engaging and developing the best and brightest people for their businesses. Our approximately 3,800 employees in more than 20 countries are dedicated to providing unparalleled service and value to our clients. More information about Hudson Highland Group is available at http://www.hhgroup.com/. Safe Harbor Statement This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward- looking statements. These factors include, but are not limited to, the impact of global economic fluctuations on temporary contracting operations; the cyclical nature of the company's executive search and mid-market professional staffing businesses; the company's ability to manage its growth and fund working capital associated therewith; risks associated with expansion; the company's reliance on information systems and technology; competition; fluctuations in operating results; risks relating to foreign operations, including foreign currency fluctuations; dependence on highly skilled professionals and key management personnel; the impact of employees departing with existing executive search clients; risks maintaining professional reputation and brand name; restrictions imposed by blocking arrangements; exposure to employment-related claims, and limits on insurance coverage related thereto; government regulations; the company's ability to successfully operate as an independent company and the level of costs associated therewith; and restrictions on the company's operating flexibility due to the terms of its credit facility. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this press release. The company assumes no obligation, and expressly disclaims any obligation, to review or confirm analysts' expectations or estimates or to update any forward-looking statements, whether as a result of new information, future events or otherwise. HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Revenue $364,835 $307,431 $717,704 $597,235 Direct costs 223,668 188,942 448,330 372,355 Gross margin 141,167 118,489 269,374 224,880 Selling, general and administrative expenses 130,416 112,818 255,315 230,414 Depreciation and amortization 4,626 4,915 9,483 9,994 Business reorganization expenses (recoveries) (238) 76 291 136 Merger and integration expenses (recoveries) 8 - (35) (37) Operating income (loss) 6,355 680 4,320 (15,627) Other income (expense): Other income (expense), net 271 (290) (5) (1,887) Interest income (expense), net (495) 145 (921) (256) Income (loss) before provision for (benefit of) income taxes 6,131 535 3,394 (17,770) Provision for (benefit of) income taxes 1,766 318 3,166 721 Net income (loss) $4,365 $217 $228 $(18,491) Basic and diluted income (loss) per share: Basic earnings income (loss) $0.21 $0.01 $0.01 $(1.00) Diluted earnings income (loss) $0.20 $0.01 $0.01 $(1.00) Weighted average shares outstanding: Basic 20,642,000 19,901,000 20,574,000 18,566,000 Diluted 21,635,000 20,872,000 21,639,000 18,566,000 HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except share and per share amounts) June 30, December 31, 2005 2004 (unaudited) ASSETS Current assets: Cash and cash equivalents $21,687 $21,064 Accounts receivable, net 222,688 197,582 Other current assets 13,433 14,187 Total current assets 257,808 232,833 Property and equipment, net 33,368 36,360 Intangibles, net 7,467 6,104 Other assets 6,348 6,081 $304,991 $281,378 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $31,711 $27,023 Accrued expenses and other current liabilities 140,740 140,903 Short-term borrowings and current portion of long-term debt 25,930 4,066 Accrued business reorganization expenses 5,962 8,930 Accrued merger and integration expenses 1,542 1,872 Total current liabilities 205,885 182,794 Accrued business reorganization expenses, non-current 5,187 6,832 Accrued merger and integration expenses, non-current 2,490 3,329 Other non-current liabilities 2,459 2,648 Long-term debt, less current portion 2,448 2,041 Total liabilities 218,469 197,644 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued or outstanding - - Common stock, $0.001 par value, 100,000,000 shares authorized; issued: 20,806,596 and 20,612,966 shares, respectively 21 21 Additional paid-in capital 357,772 353,825 Accumulated deficit (311,348) (311,576) Accumulated other comprehensive income - translation adjustments 40,307 41,694 Treasury stock, 15,798 shares (230) (230) Total stockholders' equity 86,522 83,734 $304,991 $281,378 HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Ended June 30, 2005 Corporate Americas Europe Asia Pac & Other Total Revenue Hudson $107,594 $124,657 $116,325 $219 $348,795 Highland 11,902 3,234 904 - 16,040 $119,496 $127,891 $117,229 $219 $364,835 Gross Margin Hudson $27,476 $54,510 $43,848 $99 $125,933 Highland 11,215 3,165 854 - 15,234 $38,691 $57,675 $44,702 $99 $141,167 Adjusted EBITDA (1) Hudson $4,553 $5,796 $10,103 $(1,534) $18,918 Highland 1,291 105 (820) - 576 Corporate - - - (8,743) (8,743) $5,844 $5,901 $9,283 $(10,277) $10,751 EBITDA (1) Hudson $4,644 $5,796 $10,103 $(1,534) $19,009 Highland 1,437 105 (827) - 715 Corporate - - - (8,743) (8,743) $6,081 $5,901 $9,276 $(10,277) $10,981 For the Three Months Ended June 30, 2004 Corporate Americas Europe Asia Pac & Other Total Revenue Hudson $79,996 $109,260 $100,753 $432 $290,441 Highland 12,203 2,098 2,689 - 16,990 $92,199 $111,358 $103,442 $432 $307,431 Gross Margin Hudson $20,489 $45,881 $35,816 $406 $102,592 Highland 11,539 1,959 2,399 - 15,897 $32,028 $47,840 $38,215 $406 $118,489 Adjusted EBITDA (1) Hudson $4,026 $2,525 $6,620 $(1,529) $11,642 Highland 1,212 (157) 337 - 1,392 Corporate - - - (7,363) (7,363) $5,238 $2,368 $6,957 $(8,892) $5,671 EBITDA (1) Hudson $4,026 $2,525 $6,419 $(1,529) $11,441 Highland 1,337 (157) 337 - 1,517 Corporate - - - (7,363) (7,363) $5,363 $2,368 $6,756 $(8,892) $5,595 (1) See the Reconciliation of Adjusted EBITDA to Operating Income (Loss) for a description of note (1). HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Six Months Ended June 30, 2005 Corporate Americas Europe Asia Pac & Other Total Revenue Hudson $218,725 $247,056 $219,826 $1,193 $686,800 Highland 23,687 5,155 2,062 - 30,904 $242,412 $252,211 $221,888 $1,193 $717,704 Gross Margin Hudson $54,276 $104,961 $79,964 $873 $240,074 Highland 22,308 5,027 1,965 - 29,300 $76,584 $109,988 $81,929 $873 $269,374 Adjusted EBITDA (1) Hudson $7,877 $9,030 $16,928 $(2,392) $31,443 Highland 1,945 19 (938) - 1,026 Corporate - - - (18,410) (18,410) $9,822 $9,049 $15,990 $(20,802) $14,059 EBITDA (1) Hudson $7,402 $9,110 $16,928 $(2,392) $31,048 Highland 2,091 19 (945) - 1,165 Corporate - - - (18,410) (18,410) $9,493 $9,129 $15,983 $(20,802) $13,803 For the Six Months Ended June 30, 2004 Corporate Americas Europe Asia Pac & Other Total Total Revenue Hudson $152,230 $212,276 $200,630 $580 $565,716 Highland 21,767 4,145 5,607 - 31,519 $173,997 $216,421 $206,237 $580 $597,235 Gross Margin Hudson $37,241 $89,253 $68,340 $523 $195,357 Highland 20,445 3,924 5,154 - 29,523 $57,686 $93,177 $73,494 $523 $224,880 Adjusted EBITDA (1) Hudson $3,040 $(140) $8,740 $(3,125) $8,515 Highland 808 (225) 865 - 1,448 Corporate - - - (15,497) (15,497) $3,848 $(365) $9,605 $(18,622) $(5,534) EBITDA (1) Hudson $3,110 $(140) $8,522 $(3,125) $8,367 Highland 1,023 (391) 865 - 1,497 Corporate - - - (15,497) (15,497) $4,133 $(531) $9,387 $(18,622) $(5,633) (1) See the Reconciliation of Adjusted EBITDA to Operating Income (Loss) for a description of note (1). HUDSON HIGHLAND GROUP, INC. RECONCILIATION OF ADJUSTED EBITDA TO OPERATING INCOME (LOSS) (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Hudson Adjusted EBITDA (1) $18,918 $11,642 $31,443 $8,515 Business reorganization (expenses) recoveries 99 (201) (430) (185) Merger and integration recoveries (8) - 35 37 EBITDA (1) 19,009 11,441 31,048 8,367 Depreciation and amortization (4,148) (3,599) (8,519) (7,332) Operating income $14,861 $7,842 $22,529 $1,035 Highland Adjusted EBITDA (1) $576 $1,392 $1,026 $1,448 Business reorganization recoveries 139 125 139 49 EBITDA (1) 715 1,517 1,165 1,497 Depreciation and amortization (342) (409) (696) (832) Operating income $373 $1,108 $469 $665 Corporate Adjusted EBITDA and EBITDA (1) $(8,743) $(7,363) $(18,410) $(15,497) Depreciation and amortization (136) (907) (268) (1,830) Corporate expenses $(8,879) $(8,270) $(18,678) $(17,327) Hudson Highland Group consolidated Adjusted EBITDA (1) $10,751 $5,671 $14,059 $(5,534) Business reorganization (expenses) 238 (76) (291) (136) Merger and integration recoveries (8) - 35 37 EBITDA (1) 10,981 5,595 13,803 (5,633) Depreciation and amortization (4,626) (4,915) (9,483) (9,994) Operating income (loss) $6,355 $680 $4,320 $(15,627) (1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization ("Adjusted EBITDA") and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization ("EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. DATASOURCE: Hudson Highland Group, Inc. CONTACT: Richard W. Pehlke of Hudson Highland Group, +1-212-351-7285, ; or Thomas Smith of Ogilvy Public Relations Worldwide +1-212-880-5269, Web site: http://www.hhgroup.com/

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