NEW YORK, Oct. 24 /PRNewswire-FirstCall/ -- Hudson Highland Group,
Inc. (NASDAQ:HHGP), one of the world's leading providers of
permanent recruitment, contract professionals and talent management
solutions, today announced financial results for the third quarter
ended September 30, 2007. 2007 Third Quarter Summary -- Revenue of
$341.3 million, a decrease of 0.1 percent from $341.5 million for
the third quarter of 2006 -- Gross margin of $136.1 million, or
39.9 percent of revenue, up 8.2 percent from $125.9 million, or
36.9 percent of revenue, for the same year-ago period -- Adjusted
EBITDA of $11.8 million, or 3.4 percent of revenue, up 3.5 percent
from $11.4 million for the third quarter of 2006 -- EBITDA of $12.6
million, or 3.7 percent of revenue, up 35.7 percent from $9.3
million for the same period last year -- Net income of $3.9
million, or $0.15 per basic and diluted share, compared with net
income of $4.3 million, or $0.18 per basic and $0.17 per diluted
share, for the third quarter of 2006 "Our strong third quarter
results stemmed from continued execution of our strategic
objectives, including higher temporary contracting margins in every
region and signing a definitive agreement to divest our Australian
Trade and Industrial business," said Jon Chait, Hudson Highland
Group chairman and chief executive officer. "As well, our actions
in Hudson Americas have begun to pay off with improved sequential
performance." "Led by Europe and Asia Pacific, our international
operations continued to demonstrate steady performance
improvement," added Mary Jane Raymond, executive vice president and
chief financial officer. "Given the current global concerns about a
slowing economy, we continue to focus on improving our liquidity."
Unresolved Accounting Issue The company is examining an accounting
issue with its external auditors relating to contingent cash earn
out payments the company made in connection with the JMT
acquisition between 2004 and 2007. The company accounted for the
contingent cash earn out payments as goodwill. The company is
determining whether up to $19 million of those payments must be
reclassified from goodwill to compensation expense. Any such
reclassification could require a restatement of prior period
financial statements, but would not affect the company's cash flows
for such periods. The company intends to resolve this accounting
issue prior to the timely filing of its Form 10-Q for the third
quarter of 2007. Sale of Australian Trade and Industrial Business
On October 2, 2007, the company announced it had signed a
definitive agreement to sell its Australian Trade and Industrial
business to the Skilled Group Limited. This represents the
company's exit from the Australian blue-collar labor market, no
longer core to its long-term business strategy of specialized
professional recruitment, talent management and managed services
solutions. The company will record a gain on sale from this
transaction in the fourth quarter, as this is expected to close at
the end of October, but will treat this business as a discontinued
operation in the third quarter of 2007. Guidance The company
currently expects fourth quarter 2007 revenue of $325 - $340
million at prevailing exchange rates and adjusted EBITDA of $12 -
$14 million, excluding the impact of any future restructuring,
acquisitions or divestures. This compares with revenue of $329.3
million and adjusted EBITDA of $14.8 million in the fourth quarter
of 2006. Additional Information Please find additional information
about the company's quarterly results in the shareholder letter in
the investor information section of the company's website at
http://www.hudson.com/. Conference Call/Webcast Hudson Highland
Group will conduct a conference call Thursday, October 25, 2007 at
9:00 AM ET to discuss this announcement. Investors wishing to
participate can join the conference call by dialing 1-800-374-1532
followed by the participant passcode 20262666 at 8:50 AM ET. For
those outside the United States, please call in on 1-706-634-5594
followed by the participant passcode 20262666. 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.hudson.com/. The archived call will be available for one
week by dialing 1-800-642-1687 followed by the participant passcode
20262666. For those outside the United States, the call will be
available on 1-706-645-9291 followed by the participant passcode
20262666. About Hudson Highland Group Hudson Highland Group, Inc.
is a leading provider of permanent recruitment, contract
professionals and talent management services worldwide. From single
placements to total outsourced solutions, Hudson helps clients
achieve greater organizational performance by assessing,
recruiting, developing and engaging the best and brightest people
for their businesses. The company employs more than 3,600
professionals serving clients and candidates in more than 20
countries. More information is available at http://www.hudson.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 those under the caption "Guidance"
and other 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, any
restatement of the company's prior period financial statements
arising out of the unresolved accounting issue described in this
release; the company's history of negative cash flows and operating
losses may continue; the ability of clients to terminate their
relationship with the company at any time; the impact of global
economic fluctuations on temporary contracting operations; risks
and financial impact associated with acquisitions and dispositions
of non- strategic assets; 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; restrictions imposed by blocking
arrangements; exposure to employment-related claims and limits on
insurance coverage related thereto; government regulations; 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 September 30, 2007 (1) 2006 (1)
Revenue $341,296 $341,523 Direct costs 205,154 215,648 Gross margin
136,142 125,875 Operating expenses: Selling, general and
administrative 124,374 114,501 Depreciation and amortization 3,642
3,864 Business reorganization expenses (recoveries) (56) 2,090
Merger and integration expenses (recoveries) (753) 14 Total
operating expenses 127,207 120,469 Operating income 8,935 5,406
Other income (expense): Interest, net (143) (661) Other, net 1,096
709 Income from continuing operations before income taxes 9,888
5,454 Provision for income taxes 5,721 1,994 Income (loss) from
continuing operations 4,167 3,460 Income (loss) from discontinued
operations, net of income taxes (277) 866 Net income (loss) $3,890
$4,326 Basic income (loss) per share: Income (loss) from continuing
operations $0.16 $0.14 Income (loss) from discontinued operations
(0.01) 0.04 Net income (loss) $0.15 $0.18 Diluted income (loss) per
share: Income (loss) from continuing operations $0.16 $0.14 Income
(loss) from discontinued operations (0.01) 0.03 Net income (loss)
$0.15 $0.17 Weighted average shares outstanding Basic 25,443,000
24,574,000 Diluted 26,058,000 25,023,000 (1) Note - 2007 and 2006
financial statements have been adjusted to the Highland Partners
segment and the Australian Trade and Industrial business as
discontinued operations. The sale of Highland Partners was
completed effective on October 1, 2006 and the sale of the
Australian Trade and Industrial business was announced on October
2, 2007. HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE
SHEETS (in thousands, except share and per share amounts) September
30, December 31, 2007 (1) 2006 (1) (unaudited) ASSETS Current
assets: Cash and cash equivalents $34,874 $44,649 Accounts
receivable, net 233,105 213,559 Prepaid and other 17,163 16,682
Current assets from discontinued operations 4,129 5,217 Total
current assets 289,271 280,107 Intangibles, net 76,521 37,612
Property and equipment, net 29,187 28,100 Other assets 8,147 5,045
Non-current assets of discontinued operations 8 5 Total assets
$403,134 $350,869 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $32,116 $24,042 Accrued expenses and
other current liabilities 131,408 132,942 Short-term borrowings and
current portion of long-term debt 15,494 238 Accrued business
reorganization expenses 3,483 5,077 Accrued merger and integration
expenses 440 837 Current liabilities from discontinued operations
539 1,134 Total current liabilities 183,480 164,270 Other
non-current liabilities 20,205 8,204 Accrued business
reorganization expenses, non-current 3,763 3,409 Accrued merger and
integration expenses, non-current 398 1,721 Long-term debt, less
current portion 27 235 Total liabilities 207,873 177,839
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: 25,594,657 and 24,957,732 shares,
respectively 26 25 Additional paid-in capital 438,746 427,645
Accumulated deficit (294,403) (298,344) Accumulated other
comprehensive income-translation adjustments 51,193 43,934 Treasury
stock, 19,662 shares (301) (230) Total stockholders' equity 195,261
173,030 $403,134 $350,869 (1) Note - 2007 and 2006 financial
statements have been adjusted to reflect the Highland Partners
segment and the Australian Trade and Industrial business as
discontinued operations. The sale of Highland Partners was
completed effective on October 1, 2006 and the sale of the
Australian Trade and Industrial business was announced on October
2, 2007. HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in
thousands) (unaudited) For the Three Months Ended September 30,
2007 (1) Hudson Hudson Hudson Corporate Total Americas Europe Asia
Pacific Revenue $111,405 $120,213 $109,678 $ - $341,296 Gross
margin $27,706 $60,579 $47,857 $ - $136,142 Adjusted EBITDA (2)
$1,972 $6,556 $9,990 $(6,750) $11,768 Business reorganization
expenses (recoveries) (63) (2) (12) 21 (56) Merger and integration
(recoveries) (10) - - (743) (753) EBITDA (2) 2,045 6,558 10,002
(6,028) 12,577 Depreciation and amortization 1,018 1,553 1,023 48
3,642 Operating income (loss) $1,027 $5,005 $8,979 $(6,076) $8,935
For the Three Months Ended September 30, 2006 (1) Hudson Hudson
Hudson Corporate Total Americas Europe Asia Pacific Revenue
$117,071 $119,872 $104,580 $ - $341,523 Gross margin $30,237
$53,523 $42,115 $ - $125,875 Adjusted EBITDA (2) $3,807 $4,982
$9,973 $(7,388) $11,374 Business reorganization expenses 1,221 579
56 234 2,090 Merger and integration expenses 13 1 - - 14 EBITDA (2)
2,573 $4,402 9,917 (7,622) 9,270 Depreciation and amortization
1,130 1,819 756 159 3,864 Operating income (loss) $1,443 $2,583
$9,161 $(7,781) $5,406 (1) Note - 2007 and 2006 financial
statements have been adjusted to reflect the Highland Partners
segment and the Australian Trade and Industrial business as
discontinued operations. The sale of Highland Partners was
completed effective on October 1, 2006 and the sale of the
Australian Trade and Industrial business was announced on October
2, 2007. (2) 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. Amortization for 2006 includes accelerated
amortization expense related to changes in estimates and
valuations. HUDSON HIGHLAND GROUP, INC. RECONCILIATION FOR CONSTANT
CURRENCY (in thousands) (unaudited) The company defines the term
"constant currency" to mean that financial data for a period are
translated into U.S. Dollars using the same foreign currency
exchange rates that were used to translate financial data for the
previously reported period. Changes in revenues, direct costs,
gross margin and selling, general and administrative expenses
include the effect of changes in foreign currency exchange rates.
Variance analysis usually describes period-to-period variances that
are calculated using constant currency as a percentage. The
company's management reviews and analyzes business results in
constant currency and believes these results better represent the
company's underlying business trends. The company believes that
these calculations are a useful measure, indicating the actual
change in operations. Earnings from subsidiaries are rarely
repatriated to the United States, and there are no significant
gains or losses on foreign currency transactions between
subsidiaries. Therefore, changes in foreign currency exchange rates
generally impact only reported earnings and not the company's
economic condition. Quarter Ended September 30, 2007 (1) 2006 (1)
As Reported Currency Constant As Reported Translation Currency
Revenue: Hudson Americas $111,405 $(69) $111,336 $117,071 Hudson
Europe 120,213 (8,744) 111,469 119,872 Hudson Asia Pacific 109,678
(11,525) 98,153 104,580 Total 341,296 (20,338) 320,958 341,523
Direct costs: Hudson Americas 83,699 (11) 83,688 86,834 Hudson
Europe 59,634 (4,341) 55,293 66,349 Hudson Asia Pacific 61,821
(7,105) 54,716 62,465 Total 205,154 (11,457) 193,697 215,648 Gross
margin: Hudson Americas 27,706 (58) 27,648 30,237 Hudson Europe
60,579 (4,403) 56,176 53,523 Hudson Asia Pacific 47,857 (4,420)
43,437 42,115 Total $136,142 $(8,881) $127,261 $125,875 Selling,
general and administrative (2) Hudson Americas $26,752 $(61)
$26,691 $27,560 Hudson Europe 55,576 (4,035) 51,541 50,360 Hudson
Asia Pacific 38,890 (3,619) 35,271 32,898 Corporate 6,798 - 6,798
7,547 Total $128,016 $(7,715) $120,301 $118,365 (1) Note - 2007 and
2006 financial statements have been adjusted to reflect the
Highland Partners segment and the Australian Trade and Industrial
business as discontinued operations. The sale of Highland Partners
was completed effective on October 1, 2006 and the sale of the
Australian Trade and Industrial business was announced on October
2, 2007. (2) Selling, general and administrative expenses include
depreciation and amortization. Amortization for 2006 includes
accelerated amortization expense related to changes in estimates
and valuations. DATASOURCE: Hudson Highland Group, Inc. CONTACT:
David F. Kirby of Hudson Highland Group, +1-212-351-7216, Web site:
http://www.hhgroup.com/
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