HUDSON HIGHLAND GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
1.
|
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
|
Basis of
Presentation
Hudson Highland Group, Inc. and its subsidiaries (the Company) are comprised of the operations, assets and
liabilities of the three Hudson regional businesses of Hudson Americas, Hudson Europe and Hudson Asia Pacific (Hudson regional businesses or Hudson). The Company has operated as an independent publicly held company since its
spin-off (the Distribution) from Monster Worldwide, Inc. (Monster), formerly TMP Worldwide, Inc., on March 31, 2003 (the Distribution Date).
Reporting Segments
The Company provides professional staffing services on a permanent and contract
basis and a range of human capital services to businesses operating in a wide variety of industries. The Company is organized into three reportable segments: Hudson Americas, Hudson Europe, and Hudson Asia Pacific, which constituted approximately
17%, 47% and 36% of the Companys gross margin, respectively, for the year ended December 31, 2007.
Corporate expenses are
reported separately from the three reportable segments and consist primarily of expenses for compensation, marketing programs, rent and professional consulting.
Hudson Americas operates from 35 offices in two countries, with 95% of its 2007 gross margin generated in the United States. Hudson Europe operates from 46 offices in 17 countries, with 54% of its 2007 gross margin
coming from the United Kingdom operations. Hudson Asia Pacific operates from 21 offices in 6 countries, with 65% of its 2007 gross margin stemming from Australia.
Hudsons three regional businesses provide contract personnel and permanent recruitment services to a wide range of clients. With respect to contract personnel, Hudson focuses on providing candidates with
specialized functional skills and competencies, such as accounting and finance, legal and information technology. The Company is one of the worlds largest specialized professional staffing and talent management solutions firms. The assignment
can vary, but engagements at the professional level tend to be longer than those in the general clerical or industrial sectors. With respect to permanent recruitment, Hudson focuses on mid-level professionals typically earning between $50,000 and
$150,000 annually and possessing the professional skills and/or profile required by clients. Hudson provides permanent recruitment services on both a retained and contingent basis. In larger markets, Hudsons sales strategy focuses on both
clients operating in particular industry sectors, such as financial services, or technology, and candidates possessing particular professional skills, such as accounting and finance, information technology, legal and human resources. Hudson uses
both traditional and interactive methods to select potential candidates for its clients, employing a suite of products that assesses talent and helps predict whether a candidate will be successful in a given role.
All of the Hudson regional businesses also provide organizational effectiveness and development services through their Talent Management Solutions units.
These services encompass candidate assessment, competency modeling, leadership development, performance management, and career transition. These services enable Hudson to offer clients a comprehensive set of management services, across the entire
employment life cycle, from attracting, assessing and selecting best-fit employees to engaging and developing those individuals to help build a high-performance organization.
Discontinued Operations
The Company has designated certain of its operations as discontinued
operations in the accompanying financial statements, as further discussed in Note 4.
43
2.
|
RESTATEMENT OF RESULTS AND ADOPTION OF SAB 108
|
Restatement for
BalanceConsideration Paid to Shareholders of Balance Ervaring Op Projectbasis B.V.
The Company has restated its Consolidated
Financial Statements as of and for the year ended December 31, 2006 and its quarterly results of operations for the three months ended September 30, 2006 and December 31, 2006. In addition, the Company has restated its quarterly
results of operations for the three months ended March 31, 2007, June 30, 2007 and September 30, 2007. The restatement involved the timing of recording contingent payments related to the acquisition of Balance Ervaring Op
Projectbasis B.V. (Balance) and to expense a portion of the contingent payments, including $1,687 (1,300) that was previously recorded as goodwill when the amount was paid in the second quarter of 2007.
The following is a description of the accounting adjustments included in the restatement of the Companys Consolidated Financial Statements and the
effect of such adjustments at December 31, 2006 on the Consolidated Balance Sheet and on the Consolidated Statement of Operations and Change in Stockholders Equity for the year then ended and on the unaudited selected quarterly financial
data for the three months ended September 30, 2006, December 31, 2006, March 31, 2007, June 30, 2007 and September 30, 2007. All amounts included in this report as of and for the years ended December 31,
2005 and for the three months ended March 31, 2006 and June 30, 2006 were not affected by the restatement.
This restatement
resulted in an increase in the Companys and the Hudson Europe segments reported operating expenses and related impact on EBITDA (see Note 19), operating income (loss), income (loss) from continuing operations and net income (loss) for
each of the periods as follows:
|
|
|
Three months ended September 30, 2006
|
|
$829 ($0.03 per basic and diluted share)
|
Three months ended December 31, 2006
|
|
$858 ($0.03 per basic and diluted share)
|
Year ended December 31, 2006
|
|
$1,687 ($0.07 per basic and diluted share)
|
Three months ended March 31, 2007
|
|
$298 ($0.01 per basic and diluted share)
|
Three months ended June 30, 2007
|
|
$302 ($0.01 per basic and diluted share)
|
Three months ended September 30, 2007
|
|
$311 ($0.01 per basic and diluted share)
|
The restatement also resulted in an increase in goodwill and accrued expenses as of
December 31, 2006 of $1,313 and $3,019, respectively.
The restatement did not affect the Companys cash flows for any of the
periods.
The Company entered into a share purchase agreement dated July 19, 2005 for the acquisition of Balance. The purchase
price for Balance was 20,750 plus a series of contingent payments to be made annually based upon future minimum annual earnings thresholds during the first three years subsequent to the purchase. On July 12, 2006, the Company entered into
an amendment to the share purchase agreement, which changed the earn-out formula to increase the potential future maximum contingent payments related to calendar 2006 from 1,000 to 2,300 and in calendar 2007 from 2,250 to
3,500. The Company recorded the contingent payment for calendar 2006, including the increased maximum earn-out, when paid in April 2007 as an adjustment of the purchase price and added the amount to the recorded value of goodwill. The
Company has evaluated the amendment and has determined that this amendment would be considered a new agreement, separate from the original share purchase agreement, outside of the guidance of Statement of Financial Accounting Standards
(SFAS) 141, Business Combinations. Accordingly, the amount paid in excess of the original maximum contingent payment would not be considered additional purchase price under the contingent consideration provisions of SFAS 141.
Instead it should be recorded as expense in the period in which the amount is estimable and becomes probable of being paid under the guidance of SFAS 5, Accounting for Contingencies, also considering the interim accounting guidance
provided under Accounting Principles Board Opinion No. 28, Interim Financial Reporting. Accordingly, the Company accrued $1,687 (1,300) that it previously recorded as goodwill when paid in April 2007 as an expense in the
third and fourth quarters of 2006 and accrued the
44
remaining contingent payment related to calendar 2006 of approximately $1,313 (1,000) as goodwill as of December 31, 2006. In addition, the
Company recorded a total of approximately $911 as a period expense over the first, second and third quarters of 2007 related to the increased maximum contingent payment amount for calendar 2007 to be paid in April 2008.
The following table presents the effect of the restatement on the previously reported Consolidated Condensed Statement of Operations for the three months
ended September 30, 2006 (dollars in thousands)(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2006
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
Revenue
|
|
$
|
299,517
|
|
|
$
|
|
|
|
$
|
299,517
|
|
Direct costs
|
|
|
181,190
|
|
|
|
|
|
|
|
181,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
118,327
|
|
|
|
|
|
|
|
118,327
|
|
Selling, general and administrative expenses
|
|
|
109,364
|
|
|
|
|
|
|
|
109,364
|
|
Acquisition-related expenses
|
|
|
|
|
|
|
829
|
|
|
|
829
|
|
Depreciation and amortization
|
|
|
3,732
|
|
|
|
|
|
|
|
3,732
|
|
Business reorganization expenses
|
|
|
2,062
|
|
|
|
|
|
|
|
2,062
|
|
Merger and integration expenses
|
|
|
14
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3,155
|
|
|
|
(829
|
)
|
|
|
2,326
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
727
|
|
|
|
|
|
|
|
727
|
|
Interest, net
|
|
|
(662
|
)
|
|
|
|
|
|
|
(662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
3,220
|
|
|
|
(829
|
)
|
|
|
2,391
|
|
Income taxes
|
|
|
1,994
|
|
|
|
|
|
|
|
1,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
1,226
|
|
|
|
(829
|
)
|
|
|
397
|
|
Income from discontinued operations
|
|
|
3,100
|
|
|
|
|
|
|
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,326
|
|
|
$
|
(829
|
)
|
|
$
|
3,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.05
|
|
|
|
|
|
|
$
|
0.02
|
|
Income from discontinued operations
|
|
|
0.13
|
|
|
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.18
|
|
|
|
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.05
|
|
|
|
|
|
|
$
|
0.02
|
|
Income from discontinued operations
|
|
|
0.12
|
|
|
|
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.17
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
45
The following table presents the effect of the restatement on the previously reported Consolidated
Condensed Statement of Operations for the three months ended December 31, 2006 (dollars in thousands)(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2006
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
Revenue
|
|
$
|
286,421
|
|
|
$
|
|
|
|
$
|
286,421
|
|
Direct costs
|
|
|
168,355
|
|
|
|
|
|
|
|
168,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
118,066
|
|
|
|
|
|
|
|
118,066
|
|
Selling, general and administrative expenses
|
|
|
106,289
|
|
|
|
|
|
|
|
106,289
|
|
Acquisition-related expenses
|
|
|
|
|
|
|
858
|
|
|
|
858
|
|
Depreciation and amortization
|
|
|
8,117
|
|
|
|
|
|
|
|
8,117
|
|
Business reorganization expenses
|
|
|
3,297
|
|
|
|
|
|
|
|
3,297
|
|
Merger and integration expenses
|
|
|
287
|
|
|
|
|
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
76
|
|
|
|
(858
|
)
|
|
|
(782
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
173
|
|
|
|
|
|
|
|
173
|
|
Other, net
|
|
|
(223
|
)
|
|
|
|
|
|
|
(223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
26
|
|
|
|
(858
|
)
|
|
|
(832
|
)
|
Income taxes (benefit)
|
|
|
(2,011
|
)
|
|
|
|
|
|
|
(2,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
2,037
|
|
|
|
(858
|
)
|
|
|
1,179
|
|
Income from discontinued operations
|
|
|
21,666
|
|
|
|
|
|
|
|
21,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
23,703
|
|
|
$
|
(858
|
)
|
|
$
|
22,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.08
|
|
|
|
|
|
|
$
|
0.05
|
|
Income from discontinued operations
|
|
|
0.88
|
|
|
|
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.96
|
|
|
|
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.08
|
|
|
|
|
|
|
$
|
0.05
|
|
Income from discontinued operations
|
|
|
0.86
|
|
|
|
|
|
|
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.94
|
|
|
|
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
46
The following table presents the effect of the restatement on the previously reported Consolidated
Statement of Operations for the year ended December 31, 2006 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
Revenue
|
|
$
|
1,157,874
|
|
|
$
|
|
|
|
$
|
1,157,874
|
|
Direct costs
|
|
|
698,619
|
|
|
|
|
|
|
|
698,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
459,255
|
|
|
|
|
|
|
|
459,255
|
|
Selling, general and administrative expenses
|
|
|
435,754
|
|
|
|
|
|
|
|
435,754
|
|
Acquisition-related expenses
|
|
|
|
|
|
|
1,687
|
|
|
|
1,687
|
|
Depreciation and amortization
|
|
|
19,803
|
|
|
|
|
|
|
|
19,803
|
|
Business reorganization expenses
|
|
|
6,015
|
|
|
|
|
|
|
|
6,015
|
|
Merger and integration expenses
|
|
|
362
|
|
|
|
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,679
|
)
|
|
|
(1,687
|
)
|
|
|
(4,366
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
(1,634
|
)
|
|
|
|
|
|
|
(1,634
|
)
|
Other, net
|
|
|
1,584
|
|
|
|
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(2,729
|
)
|
|
|
(1,687
|
)
|
|
|
(4,416
|
)
|
Income taxes
|
|
|
3,771
|
|
|
|
|
|
|
|
3,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(6,500
|
)
|
|
|
(1,687
|
)
|
|
|
(8,187
|
)
|
Income from discontinued operations
|
|
|
28,615
|
|
|
|
|
|
|
|
28,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22,115
|
|
|
$
|
(1,687
|
)
|
|
$
|
20,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
$
|
(0.34
|
)
|
Income from discontinued operations
|
|
|
1.17
|
|
|
|
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.90
|
|
|
|
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
$
|
(0.34
|
)
|
Income from discontinued operations
|
|
|
1.17
|
|
|
|
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.90
|
|
|
|
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
47
The following table presents the effect of the restatement on the previously reported Consolidated
Condensed Statement of Operations for the three months ended March 31, 2007 (dollars in thousands)(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
Revenue
|
|
$
|
288,150
|
|
|
$
|
|
|
|
$
|
288,150
|
|
Direct costs
|
|
|
170,407
|
|
|
|
|
|
|
|
170,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
117,743
|
|
|
|
|
|
|
|
117,743
|
|
Selling, general and administrative expenses
|
|
|
112,965
|
|
|
|
|
|
|
|
112,965
|
|
Acquisition-related expenses
|
|
|
|
|
|
|
298
|
|
|
|
298
|
|
Depreciation and amortization
|
|
|
3,695
|
|
|
|
|
|
|
|
3,695
|
|
Business reorganization expenses
|
|
|
3,116
|
|
|
|
|
|
|
|
3,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,033
|
)
|
|
|
(298
|
)
|
|
|
(2,331
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
212
|
|
|
|
|
|
|
|
212
|
|
Other, net
|
|
|
2,607
|
|
|
|
|
|
|
|
2,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
786
|
|
|
|
(298
|
)
|
|
|
488
|
|
Income taxes
|
|
|
2,266
|
|
|
|
|
|
|
|
2,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(1,480
|
)
|
|
|
(298
|
)
|
|
|
(1,778
|
)
|
Income from discontinued operations
|
|
|
1,833
|
|
|
|
|
|
|
|
1,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
353
|
|
|
$
|
(298
|
)
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
$
|
(0.07
|
)
|
Income from discontinued operations
|
|
|
0.07
|
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
$
|
(0.07
|
)
|
Income from discontinued operations
|
|
|
0.07
|
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
48
The following table presents the effect of the restatement on the previously reported Consolidated
Condensed Statement of Operations for the three months ended June 30, 2007 (dollars in thousands)(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2007
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
Revenue
|
|
$
|
298,528
|
|
|
$
|
|
|
|
$
|
298,528
|
|
Direct costs
|
|
|
168,324
|
|
|
|
|
|
|
|
168,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
130,204
|
|
|
|
|
|
|
|
130,204
|
|
Selling, general and administrative expenses
|
|
|
117,978
|
|
|
|
|
|
|
|
117,978
|
|
Acquisition-related expenses
|
|
|
3,551
|
|
|
|
302
|
|
|
|
3,853
|
|
Depreciation and amortization
|
|
|
3,854
|
|
|
|
|
|
|
|
3,854
|
|
Business reorganization expenses
|
|
|
1,578
|
|
|
|
|
|
|
|
1,578
|
|
Merger and integration recoveries
|
|
|
(42
|
)
|
|
|
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3,285
|
|
|
|
(302
|
)
|
|
|
2,983
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
435
|
|
|
|
|
|
|
|
435
|
|
Other, net
|
|
|
(19
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
3,701
|
|
|
|
(302
|
)
|
|
|
3,399
|
|
Income taxes
|
|
|
4,491
|
|
|
|
|
|
|
|
4,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(790
|
)
|
|
|
(302
|
)
|
|
|
(1,092
|
)
|
Income from discontinued operations
|
|
|
474
|
|
|
|
|
|
|
|
474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(316
|
)
|
|
$
|
(302
|
)
|
|
$
|
(618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
$
|
(0.04
|
)
|
Income from discontinued operations
|
|
|
0.02
|
|
|
|
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
$
|
(0.04
|
)
|
Income from discontinued operations
|
|
|
0.02
|
|
|
|
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
49
The following table presents the effect of the restatement on the previously reported Consolidated
Condensed Statement of Operations for the three months ended September 30, 2007 (dollars in thousands)(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2007
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
Revenue
|
|
$
|
301,913
|
|
|
$
|
|
|
|
$
|
301,913
|
|
Direct costs
|
|
|
171,931
|
|
|
|
|
|
|
|
171,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
129,982
|
|
|
|
|
|
|
|
129,982
|
|
Selling, general and administrative expenses
|
|
|
118,959
|
|
|
|
|
|
|
|
118,959
|
|
Acquisition-related expenses
|
|
|
|
|
|
|
311
|
|
|
|
311
|
|
Depreciation and amortization
|
|
|
3,543
|
|
|
|
|
|
|
|
3,543
|
|
Business reorganization recoveries
|
|
|
(56
|
)
|
|
|
|
|
|
|
(56
|
)
|
Merger and integration recoveries
|
|
|
(753
|
)
|
|
|
|
|
|
|
(753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8,289
|
|
|
|
(311
|
)
|
|
|
7,978
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
(142
|
)
|
|
|
|
|
|
|
(142
|
)
|
Other, net
|
|
|
1,099
|
|
|
|
|
|
|
|
1,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
9,246
|
|
|
|
(311
|
)
|
|
|
8,935
|
|
Income taxes
|
|
|
5,721
|
|
|
|
|
|
|
|
5,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,525
|
|
|
|
(311
|
)
|
|
|
3,214
|
|
Income from discontinued operations
|
|
|
365
|
|
|
|
|
|
|
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,890
|
|
|
$
|
(311
|
)
|
|
$
|
3,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.14
|
|
|
|
|
|
|
$
|
0.13
|
|
Income from discontinued operations
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.15
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.14
|
|
|
|
|
|
|
$
|
0.13
|
|
Income from discontinued operations
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.15
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
50
The following table presents the effect of the restatement on the previously reported Consolidated
Balance Sheet as of December 31, 2006 (dollars in thousands)(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
|
As reported (a)
|
|
|
Adjustment
|
|
|
Restated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
44,649
|
|
|
$
|
|
|
|
$
|
44,649
|
|
Accounts receivable, net
|
|
|
204,746
|
|
|
|
|
|
|
|
204,746
|
|
Prepaid and other
|
|
|
16,609
|
|
|
|
|
|
|
|
16,609
|
|
Current assets of discontinued operations
|
|
|
14,103
|
|
|
|
|
|
|
|
14,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
280,107
|
|
|
|
|
|
|
|
280,107
|
|
Intangibles, net
|
|
|
37,603
|
|
|
|
1,313
|
|
|
|
38,916
|
|
Property and equipment, net
|
|
|
27,276
|
|
|
|
|
|
|
|
27,276
|
|
Other assets
|
|
|
4,560
|
|
|
|
|
|
|
|
4,560
|
|
Non-current assets of discontinued operations
|
|
|
1,323
|
|
|
|
|
|
|
|
1,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
350,869
|
|
|
$
|
1,313
|
|
|
$
|
352,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
21,274
|
|
|
|
|
|
|
$
|
21,274
|
|
Accrued expenses and other current liabilities
|
|
|
122,542
|
|
|
|
3,019
|
|
|
|
125,561
|
|
Short-term borrowings and current portion of long-term debt
|
|
|
238
|
|
|
|
|
|
|
|
238
|
|
Accrued business reorganization expenses
|
|
|
5,077
|
|
|
|
|
|
|
|
5,077
|
|
Accrued merger and integration expenses
|
|
|
837
|
|
|
|
|
|
|
|
837
|
|
Liabilities from discontinued operations
|
|
|
14,302
|
|
|
|
|
|
|
|
14,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
164,270
|
|
|
|
3,019
|
|
|
|
167,289
|
|
Other non-current liabilities
|
|
|
8,204
|
|
|
|
|
|
|
|
8,204
|
|
Accrued business reorganization expenses, non-current
|
|
|
3,409
|
|
|
|
|
|
|
|
3,409
|
|
Accrued merger and integration expenses, non-current
|
|
|
1,721
|
|
|
|
|
|
|
|
1,721
|
|
Long-term debt, less current portion
|
|
|
235
|
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
177,839
|
|
|
|
3,019
|
|
|
|
180,858
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
25
|
|
|
|
|
|
|
|
25
|
|
Additional paid-in capital
|
|
|
427,645
|
|
|
|
|
|
|
|
427,645
|
|
Accumulated deficit
|
|
|
(298,344
|
)
|
|
|
(1,687
|
)
|
|
|
(300,031
|
)
|
Accumulated other comprehensive income-translation adjustments
|
|
|
43,934
|
|
|
|
(19
|
)
|
|
|
43,915
|
|
Treasury stock
|
|
|
(230
|
)
|
|
|
|
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
173,030
|
|
|
|
(1,706
|
)
|
|
|
171,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
350,869
|
|
|
$
|
1,313
|
|
|
$
|
352,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The As Reported column reflects amounts previously reported adjusted for discontinued operations (see Note 4).
|
51
Adoption of SAB 108
In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 108, which became effective for years ending on or after November 15, 2006. SAB 108
provides guidance on the consideration of the effects of prior period misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 permitted companies to initially apply its provisions by either
restating prior financial statements or recording a cumulative effect adjustment to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings for errors that were previously deemed
immaterial but are material under the guidance in SAB 108.
The Company adopted SAB 108, effective January 1, 2006, with an adjustment
to record credits of $923 to unbilled accounts receivable, $140 to accrued expenses and other current liabilities and $1,704 to other long-term liabilities with the offsetting debits of $1,860 to retained deficit and $907 to additional paid-in
capital.
This adjustment represents two items: an un-reconciled difference in unbilled accounts receivable, for which the applicable prior
period could not practicably be determined, and a correction of an error in the amortization of a free rent amount related to a lease of office space in the United Kingdom. The un-reconciled difference in unbilled accounts receivable was discovered
in the second quarter of 2006 during a comprehensive review of the accounting processes supported by the new PeopleSoft accounting and management reporting system implemented in 2005 in the Hudson Americas business units. An adjustment of unbilled
accounts receivable totaling $923 could not be reconciled to the reported balances. After an extensive financial and accounting review by the Company and its experts, the period in which the error occurred could not be determined with certainty, but
management concluded that the error most likely occurred prior to January 1, 2005, as the periods after that date were covered by the comprehensive review. The possible overstatement of revenue during the years prior to December 31, 2004
was not considered material, separately or in addition to the lease item noted below, to the reported losses in those years and those results therefore were not restated.
The second item was a lease entered into in 2001. The lease has a term of twenty years; however the initial amortization of the free rent period was incorrectly taken over a four and a half year period, until the
first rent review date, rather than the lease term. The error was discovered during the year ended December 31, 2005 and that years statement of operations was properly stated. The understatement of expense for the years ended
December 31, 2004, 2003, 2002 and 2001 totaled $1,844 and was not considered material to the reported losses in those years and those results therefore were not restated. The $907 debit to additional paid-in capital represents the portion of
the adjustment for the lease that relates to the period prior to the Distribution.
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles of
Consolidation
The consolidated financial statements include the accounts of the Company and all of its wholly-owned and majority-owned
subsidiaries. All significant inter-company accounts and transactions between and among the Company and its subsidiaries have been eliminated in consolidation. Transactions and balances between the Company and Monster are included in the
accompanying consolidated financial statements.
Nature of Business and Credit Risk
The Companys revenue is earned from professional placement services, mid-level employee professional staffing and temporary contracting services.
These services are provided to a large number of customers in many different industries. The Company operates throughout North America, the United Kingdom, Continental Europe and the Asia Pacific region (primarily Australia).
Financial instruments, which potentially subject the Company to concentrations of credit risk, are primarily cash and accounts receivable. The Company
performs continuing credit evaluations of its customers and does not require collateral. The Company has not experienced significant losses related to receivables from individual customers or groups of customers in any particular industry or
geographic area.
52
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported for long-term debt approximates fair value generally due to the short-term nature of the underlying instruments.
Foreign Currency Risk Management
The Company periodically enters into forward contracts to reduce
exposure to currency exchange rate risk related to short-term inter-company loans denominated in currencies other than the functional currency. The Company does not apply hedge accounting, and all gains and losses are included in other expense. The
Company does not trade derivative financial instruments for speculative purposes.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period. These estimates include, among others, allowances for doubtful accounts, net realizable values for long-lived assets, and the recoverability of deferred tax assets. Actual results could differ from these estimates.
Revenue Recognition
Although the Companys
revenue recognition policy involves a relatively low level of uncertainty, it does require judgment on complex matters that is subject to multiple sources of authoritative guidance.
The Company recognizes revenue for temporary services at the time services are provided and revenue is recorded on a time and materials basis. Temporary
contracting revenue is reported gross when the Company acts as the principal in the transaction and is at risk for collection. Revenues that do not meet the criteria for gross revenue reporting are reported on a net basis. Revenue generated when the
Company permanently places an individual with a client on a contingent basis is recorded at the time of acceptance of employment, net of an allowance for estimated fee reversals. Revenue generated when the Company permanently places an individual
with a client on a retained basis is recorded ratably over the period services are rendered, net of an allowance for estimated fee reversals.
Revenue, direct costs and gross margin of the Company were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
Year ended December 31, 2006
|
|
Year ended December 31, 2005
|
|
|
Temporary
|
|
Other
|
|
Total
|
|
Temporary
|
|
Other
|
|
Total
|
|
Temporary
|
|
Other
|
|
Total
|
Revenue
|
|
$
|
808,085
|
|
$
|
370,990
|
|
$
|
1,179,075
|
|
$
|
838,192
|
|
$
|
319,682
|
|
$
|
1,157,874
|
|
$
|
831,353
|
|
$
|
297,101
|
|
$
|
1,128,454
|
Direct costs
|
|
|
640,534
|
|
|
30,628
|
|
|
671,162
|
|
|
673,854
|
|
|
24,765
|
|
|
698,619
|
|
|
670,237
|
|
|
25,774
|
|
|
696,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
167,551
|
|
$
|
340,362
|
|
$
|
507,913
|
|
$
|
164,338
|
|
$
|
294,917
|
|
$
|
459,255
|
|
$
|
161,116
|
|
$
|
271,327
|
|
$
|
432,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Costs and Gross Margin
Direct costs include the direct staffing costs of salaries, payroll taxes, employee benefits, travel expenses and insurance costs for the Companys temporary contractors and reimbursed out-of-pocket expense and
other direct costs. Other than reimbursed out-of-pocket expenses, there are no other direct costs associated with the Other category, which includes search, permanent placement and other talent management revenue. Gross margin represents revenue
less direct costs. The region where services are provided, the mix of temporary and permanent placements, and the functional nature of the staffing services provided can affect gross margin.
53
Operating Expenses
Salaries and related expenses include the salaries, commissions, payroll taxes and employee benefits related to recruitment professionals, executive level employees, administrative staff and other employees of the
Company who are not temporary contractors. Office and general expenses include occupancy, equipment leasing and maintenance, utilities, travel expenses, professional fees and provision for doubtful accounts. The Company expenses the costs of
advertising as incurred.
Accounts Receivable
The Companys accounts receivable balances are composed of trade and unbilled receivables. The Company maintains an allowance for doubtful accounts and makes ongoing estimates as to the ability to collect on the various receivables. If
the Company determines that the allowance for doubtful accounts is not adequate to cover estimated losses, an expense to provide for doubtful accounts is recorded in office and general expenses. If an account is determined to be uncollectible, it is
written off against the allowance for doubtful accounts. Managements assessment and judgment are vital requirements in assessing the ultimate realization of these receivables, including the current credit-worthiness, financial stability and
effect of market conditions on each customer.
Cash and Cash Equivalents
Cash and cash equivalents, which consist primarily of money market funds, are stated at cost, which approximates fair value. For financial statement
presentation purposes, the Company considers all highly liquid investments having an original maturity of three months or less as cash equivalents. At December 31, 2007 and 2006, outstanding checks in excess of cash account balances were $7,025
and $7,798, respectively, and are included in accounts payable on the accompanying balance sheet.
Restricted Cash
During 2007, the Company deposited $2,900 with an independent financial institution in a restricted account for the purpose of securing its Hudson U.S.
workers compensation obligations. These deposits are restricted cash and represent deposits that have been provided or pledged to an insurance company to cover the cost of claims in the event the Company is unable to make payment on such
claims. The restrictions on these deposits may be released as workers compensation claims are paid or when letters of credit are issued to cover the estimated obligation. This replaces a letter of credit of $2,900 that the Company had for this
purpose. This restricted cash is held in interest bearing accounts and the interest is accrued for the benefit of the Company. Restricted cash is included in other long term assets.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated useful lives:
|
|
|
|
|
Years
|
Furniture and equipment
|
|
3 7
|
Capitalized software costs
|
|
2 5
|
Computer equipment
|
|
3 4
|
Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease
term. The amortization periods of material leasehold improvements are estimated at the inception of the lease term.
54
Capitalized Software Costs
Capitalized software costs consist of costs to purchase and develop software for internal use. The Company capitalizes certain incurred software development costs in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement of Position No. 98-1,
Accounting for the Cost of Computer Software Developed or Obtained for Internal Use
(SOP 98-1). Costs incurred during the
application-development stage for software bought and further customized by outside vendors for the Companys use and software developed by a vendor for the Companys proprietary use have been capitalized. Costs incurred for the
Companys own personnel who are directly associated with software development are capitalized as appropriate. Capitalized software costs are included in property and equipment.
Intangibles
Intangibles represent acquisition costs
in excess of the fair value of net tangible assets of businesses purchased and consist primarily of client lists, trademarks and goodwill. With the exception of goodwill, these costs are being amortized over periods ranging from three to five years
on a straight-line basis or on an accelerated basis where appropriate. The Company evaluates its goodwill annually for impairment for each of its reporting units, or earlier if indicators of potential impairment exist. The impairment review process
compares the fair value of the reporting unit in which goodwill resides to its carrying value.
Long-Lived Assets
Long-lived assets, such as intangibles (except for goodwill), and property and equipment, are evaluated for impairment when events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of these assets and its eventual
disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows.
Foreign Currency Translation
The financial position and results of operations of the Companys international subsidiaries are determined using local currency
as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year-end. Statements of Operations accounts are translated at the average rate of exchange prevailing during each period.
Translation adjustments arising from the use of differing exchange rates from period to period are included in the other comprehensive income (loss) account in stockholders equity, other than translation adjustments on short-term intercompany
balances, which are included in other income (expense). Gains and losses resulting from other foreign currency transactions are included in other income (expense). Intercompany receivable balances of a long-term investment nature are considered part
of the Companys permanent investment in a foreign jurisdiction and the gains or losses on these balances are reported in other comprehensive income.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income
Taxes
(SFAS 109). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their
respective tax bases, net operating loss and tax credit carry-forwards, and tax contingencies. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company records a valuation allowance against deferred tax assets to the extent that it is more likely than not that some portion, or all of, the deferred tax assets will not be realized.
On July 13, 2006, the Financial Accounting Standards Board (the FASB) issued SFAS Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48)an interpretation of SFAS No. 109,
55
Accounting for Income Taxes
(SFAS 109). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Companys adoption of FIN 48 as of January 1, 2007 resulted in a cumulative
adjustment of $3,537, which was accounted for as an increase in non-current liabilities for unrecognized tax benefits and an increase to beginning retained deficit. The cumulative effect adjustment consisted of $1,969 for income taxes related to
both foreign and U.S. state and local jurisdictions, $671 of interest and $897 of penalties related to uncertain tax benefits. Accrued interest and penalties were $1,568 as of January 1, 2007. As of December 31, 2007, the Company had
approximately $6,390 of unrecognized tax benefits, excluding interest and penalties of $2,019 which if recognized in the future, would affect the annual effective income tax rate. See Note 14Income Taxes for further information regarding
FIN 48.
Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing the Companys income (loss) by the weighted average number of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings per share is computed
by dividing the Companys income (loss) by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options and unvested restricted stock. The dilutive impact of stock options and
unvested restricted stock is determined by applying the treasury stock method. For periods in which losses are presented, dilutive loss per share calculations do not differ from basic loss per share because the effects of any potential
common stock were anti-dilutive and therefore not included in the calculation of dilutive earnings per share. For the years ended December 31, 2006 and 2005, the effect of approximately 768,000 and 1,379,000, respectively, of outstanding stock
options and other common stock equivalents was excluded from the calculation of diluted loss per share because the effect was anti-dilutive.
Income (loss) per share calculations for each quarter include the weighted average effect for the quarter; therefore, the sum of quarterly income (loss) per share amounts may not equal year-to-date income (loss) per share amounts, which
reflect the weighted average effect on a year-to-date basis.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The
Companys other comprehensive income (loss) is solely comprised of foreign currency translation adjustments, which relate to investments that are permanent in nature. To the extent that such amounts relate to investments that are permanent in
nature, no adjustments for income taxes are made.
Stock-Based Compensation
In the first quarter of 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based
Payment (SFAS 123R), which revises SFAS 123 Accounting for Stock-Based Compensation (SFAS 123) and supersedes Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees. In adopting SFAS 123R,
the Company chose to apply the modified retrospective method, requiring the Company to recognize stock compensation expense for stock options granted prior to its adoption of SFAS 123R under the fair value method and expense these
amounts over the remaining vesting period of the stock options. Prior period results have been adjusted for the application of the modified retrospective method. For additional discussion of stock-based compensation, see Note 5.
56
Effect of Recently Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. In February
2008, the FASB issued FSP 157-2 Partial Deferral of the Effective Date of Statement 157 (FSP 157-2). FSP 157-2 delays the effective date of SFAS No. 157, for all nonfinancial assets and nonfinancial liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The Company believes that the adoption of SFAS 157 will not have a material effect
on its results of operations or financial position.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for
Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
(SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with
changes in fair value recognized in earnings each reporting period. The election, called the fair value option, will enable entities to achieve an offset accounting effect for changes in fair value of certain related assets and liabilities without
having to apply complex hedge accounting provisions. The statement is effective in the fiscal first quarter of 2008 and the Company expects to adopt the statement at that time. The Company believes that the adoption of SFAS 159 will not have a
material effect on its results of operations or financial position.
On December 4, 2007, the FASB issued SFAS 141(R),
Business
Combinations
(SFAS 141R). SFAS 141R replaces SFAS 141,
Business Combinations
and applies to all transactions or other events in which an entity obtains control of one or more businesses. SFAS 141R requires the
acquiring entity in a business combination to recognize the acquisition-date fair value of all assets acquired and liabilities assumed including contingent consideration and those relating to minority interests. SFAS 141R also requires
acquisition-related transaction expenses and restructuring costs to be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008 and may
not be applied before that date. The provisions of SFAS 141R will impact the Company if it is party to a business combination after the pronouncement has been adopted.
On December 4, 2007, the FASB also issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements
(SFAS
160). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (previously referred to as minority interests) in a subsidiary and for the deconsolidation of a subsidiary by requiring all
noncontrolling interests in subsidiaries be reported in the same way, as equity in the consolidated financial statements and eliminates the diversity in accounting for transactions between an entity and noncontrolling interests by requiring they be
treated as equity transactions. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and may not be applied before that date. The Company does not currently expect the adoption of SFAS 160 to have a material effect
on its consolidated results of operations and financial condition.
4.
|
DISCONTINUED OPERATIONS
|
In December 2007,
the Company committed to a plan to sell the assets of its Hudson Americas energy, engineering and technical staffing division (ETS), to make such assets available immediately for sale and actively seek a buyer for such assets. The
Company determined that the sale of the assets was probable within one year. In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets,
the assets of ETS were classified on the
balance sheet as discontinued operations and the results of operations of ETS have been included in the results from discontinued operations. See Note 21, Subsequent Events, for details regarding the subsequent sale of ETS.
On December 14, 2007, the Company completed the sale (the HHCS Sale) of all of the outstanding shares of its Netherlands reintegration
subsidiary, Hudson Human Capital Solutions B.V. (HHCS) to Workx! Holding
57
B.V (Workx). Workx is controlled by certain officers and key employees of HHCS. At the closing of the HHCS Sale, the Company received
500 in cash. The Share Purchase Agreement entered into in connection with the HHCS Sale provides for contingent payments to the Company of up to 200 subject to the achievement by HHCS of certain earnings before interest, tax,
depreciation and amortization (EBITDA) targets in 2008 and 2009. The gain before income taxes on the HHCS Sale was $4,921, which includes approximately $7,354 of accumulated foreign currency translation gains previously included in other
comprehensive income and now reclassified in accordance with SFAS No. 52,
Foreign Currency Translation
as a result of the sale of the entity, offset by severance and professional fees of approximately $2,478. The gain on sale
and results from HHCS operations have been included in discontinued operations.
Effective October 29, 2007, certain of the
Companys subsidiaries completed the sale (the T&I Sale) of Hudson Asia Pacifics Australian blue-collar trade and industrial business (T&I) to Skilled Group Limited. The Company recorded a gain on the
T&I Sale of $1,877 from cash proceeds of approximately $3,000. The gain was net of approximately $1,000 of estimated expenses for lease abandonment, professional service fees and severance costs. The Company retained approximately $3,600 in net
assets, primarily accounts receivable, of T&I that the Company subsequently collected. The gain on sale and results from T&Is operations have been included in discontinued operations.
Effective October 1, 2006, the Company completed the sale of Highland to Heidrick (the Heidrick Sale). Heidrick also assumed certain
on-going liabilities and obligations of Highland. The Company recorded a gain of $20,358 from the Heidrick Sale, from cash proceeds of $36,600, less post-closing net working capital adjustments, $9,550 paid to certain partners of Highland in
consideration for providing assistance in completing the Heidrick Sale, entering into employment agreements with Heidrick and providing the Company with a general release from liability, and other direct costs of the transaction. The Company may
receive up to an additional $15,000 from Heidrick at future dates, subject to the achievement by Highland of certain future revenue metrics in 2007 and 2008. Under the purchase agreement, Heidrick has to provide the Company with a Revenue Notice (as
defined in the purchase agreement) thirty days after Heidricks public release of its consolidated results of operations, or approximately later March 2008 and 2009. The Company will determine the future amounts to be received under the
Heidrick purchase agreement at that time.
The Highland business was a separate reportable segment of the Company. The gain on sale and
results from Highland operations have been included in discontinued operations.
ETS was part of the Hudson Americas reportable
segment, HHCS was part of the Hudson Europe reportable segment, T&I was part of the Hudson Asia Pacific reportable segment and Highland was a separate reportable segment of the Company.
Reported results for the discontinued operations by period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007
|
|
|
|
Highland
|
|
|
T&I
|
|
HHCS
|
|
ETS
|
|
|
Total
|
|
Revenue
|
|
$
|
|
|
|
$
|
36,611
|
|
$
|
13,293
|
|
$
|
146,237
|
|
|
$
|
196,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
|
|
|
|
4,208
|
|
|
6,010
|
|
|
18,700
|
|
|
|
28,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
|
(907
|
)
|
|
|
1,232
|
|
|
364
|
|
|
3,393
|
|
|
|
4,082
|
|
Depreciation and amortization
|
|
|
|
|
|
|
3
|
|
|
280
|
|
|
82
|
|
|
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(907
|
)
|
|
|
1,229
|
|
|
84
|
|
|
3,311
|
|
|
|
3,717
|
|
Other income (expense)
|
|
|
(64
|
)
|
|
|
|
|
|
6
|
|
|
(8
|
)
|
|
|
(66
|
)
|
Gain from sale of discontinued operations
|
|
|
|
|
|
|
1,877
|
|
|
4,921
|
|
|
|
|
|
|
6,798
|
|
Provision for income taxes (b)
|
|
|
3
|
|
|
|
372
|
|
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
(974
|
)
|
|
$
|
2,734
|
|
$
|
5,011
|
|
$
|
3,303
|
|
|
$
|
10,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006
|
|
|
|
Highland
|
|
|
T&I
|
|
HHCS
|
|
|
ETS
|
|
|
Total
|
|
Revenue
|
|
$
|
44,419
|
|
|
$
|
44,437
|
|
$
|
18,674
|
|
|
$
|
152,488
|
|
|
$
|
260,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
41,762
|
|
|
$
|
6,363
|
|
$
|
8,921
|
|
|
$
|
20,060
|
|
|
$
|
77,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (a)
|
|
$
|
2,861
|
|
|
$
|
2,277
|
|
$
|
1,566
|
|
|
$
|
5,931
|
|
|
$
|
12,635
|
|
Depreciation and amortization
|
|
|
920
|
|
|
|
21
|
|
|
438
|
|
|
|
110
|
|
|
|
1,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,941
|
|
|
|
2,256
|
|
|
1,128
|
|
|
|
5,821
|
|
|
|
11,146
|
|
Other income (expense)
|
|
|
(983
|
)
|
|
|
|
|
|
(406
|
)
|
|
|
(14
|
)
|
|
|
(1,403
|
)
|
Gain from sale of discontinued operations
|
|
|
20,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,358
|
|
Provision for income taxes (b)
|
|
|
713
|
|
|
|
678
|
|
|
95
|
|
|
|
|
|
|
|
1,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
20,603
|
|
|
$
|
1,578
|
|
$
|
627
|
|
|
$
|
5,807
|
|
|
$
|
28,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005
|
|
|
|
Highland
|
|
|
T&I
|
|
HHCS
|
|
|
ETS
|
|
|
Total
|
|
Revenue
|
|
$
|
62,827
|
|
|
$
|
50,359
|
|
$
|
30,896
|
|
|
$
|
155,097
|
|
|
$
|
299,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
59,733
|
|
|
$
|
6,832
|
|
$
|
14,996
|
|
|
$
|
22,284
|
|
|
$
|
103,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (a)
|
|
$
|
4,166
|
|
|
$
|
2,476
|
|
$
|
2,774
|
|
|
$
|
7,933
|
|
|
$
|
17,349
|
|
Depreciation and amortization
|
|
|
1,354
|
|
|
|
16
|
|
|
420
|
|
|
|
119
|
|
|
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
2,812
|
|
|
|
2,460
|
|
|
2,354
|
|
|
|
7,814
|
|
|
|
15,440
|
|
Other income (expense)
|
|
|
1,840
|
|
|
|
|
|
|
(335
|
)
|
|
|
(14
|
)
|
|
|
1,491
|
|
Gain/ (loss) from sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes (b)
|
|
|
(79
|
)
|
|
|
738
|
|
|
(155
|
)
|
|
|
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
4,731
|
|
|
$
|
1,722
|
|
$
|
2,174
|
|
|
$
|
7,800
|
|
|
$
|
16,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization (EBITDA) are presented to provide additional information
about the Companys 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. 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 Companys profitability or liquidity. Furthermore, EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
|
(b)
|
Income tax expense (benefit) is provided at the effective tax rate by taxing jurisdiction and differs from the U.S. statutory tax rate of 35% for differences in the foreign
statutory tax rates, as well as the ability to offset certain NOLs against taxable profits.
|
59
Reported assets and liabilities for discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
As of
December 31,
2007
|
|
|
T & I
|
|
HHCS
|
|
ETS
|
|
TOTAL
|
|
ETS
|
Assetsdiscontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
|
|
$
|
2,595
|
|
$
|
11,381
|
|
$
|
13,976
|
|
$
|
12,210
|
Other current assets
|
|
|
54
|
|
|
13
|
|
|
60
|
|
|
127
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets of discontinued operations
|
|
|
54
|
|
|
2,608
|
|
|
11,441
|
|
|
14,103
|
|
|
12,265
|
Property and equipment
|
|
|
5
|
|
|
524
|
|
|
300
|
|
|
829
|
|
|
205
|
Intangibles
|
|
|
|
|
|
|
|
|
9
|
|
|
9
|
|
|
|
Other assets
|
|
|
|
|
|
475
|
|
|
10
|
|
|
485
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets of discontinued operations
|
|
|
5
|
|
|
999
|
|
|
319
|
|
|
1,323
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of discontinued operations
|
|
$
|
59
|
|
$
|
3,607
|
|
$
|
11,760
|
|
$
|
15,426
|
|
$
|
12,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilitiesdiscontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
33
|
|
$
|
1,090
|
|
$
|
1,678
|
|
$
|
2,801
|
|
$
|
2,509
|
Accrued and other liabilities
|
|
|
1,101
|
|
|
5,569
|
|
|
4,831
|
|
|
11,501
|
|
|
3,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities of discontinued operations
|
|
$
|
1,134
|
|
$
|
6,659
|
|
$
|
6,509
|
|
$
|
14,302
|
|
$
|
6,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
STOCK BASED COMPENSATION
|
In the first quarter of
2006, the Company adopted SFAS 123R, which revised SFAS 123 and supersedes Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees. The Company had adopted the disclosure only provisions of SFAS 123 and SFAS
148
Accounting for Stock-Based CompensationTransition and Disclosure
, which required certain financial statement disclosures, including pro forma operating results, as if the Company had prepared its consolidated financial
statements in accordance with the fair value based method of accounting for stock-based compensation. In adopting SFAS 123R, the Company chose to apply the modified retrospective method, requiring the Company to recognize stock
compensation expense for stock options granted prior to its adoption of SFAS 123R under the fair value method and expense these amounts over the remaining vesting period of the stock options. Prior period results have been adjusted for the
application of the modified retrospective method. All employee stock option grants made since the beginning of 2003 have been reflected as an expense in prior years or will be expensed over the related remaining stock option vesting period based on
the estimated fair value at the date the options are granted. As a result of the adoption of SFAS 123R using the modified retrospective method, the Company recognized expenses from continuing operations of $4,041, $4,545 and $4,183 in the years
ended December 31, 2007, 2006 and 2005, respectively, for the stock option and employee stock purchase plans. These expenses are included in selling, general and administrative expenses. The Company also recognized expenses in discontinued
operations of $0, $263 and $286 in the years ended December 31, 2007, 2006 and 2005, respectively, for the stock option and employee stock purchase plans related to the discontinued operations of the Highland segment. In addition, SFAS 123R
requires the Company to reflect the tax savings resulting from tax deductions in excess of expense as a financing cash flow in its statement of cash flows rather than as an operating cash flow as in prior periods. The Company recognized a current
tax benefit for the year ended December 31, 2007 and 2006, of $347 and $541, respectively, in certain foreign jurisdictions where the Company has taxable income. As of December 31, 2007, there was approximately $3,787 of compensation
expense that has yet to be recognized related to non-vested stock option awards. This expense is expected to be recognized over a weighted-average period of 2.3 years. All share issuances related to stock compensation plans are issued from unissued
shares of stockholder approved compensation plans.
60
The following were the weighted average assumptions used to determine the fair value of options granted
and the details of option activity as of and for the respective periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Risk free interest rate
|
|
|
4.7
|
%
|
|
|
4.4
|
%
|
|
|
4.0
|
%
|
Volatility
|
|
|
60.0
|
%
|
|
|
55.0
|
%
|
|
|
55.0
|
%
|
Expected life (years)
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
Dividends
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Weighted average fair value of options granted during the period
|
|
$
|
9.29
|
|
|
$
|
7.69
|
|
|
$
|
7.52
|
|
Under SFAS 123R, the Company is required to select a valuation technique or option-pricing model
that meets the criteria as stated in the standard. Two models that meet the criteria required under SFAS 123R are a lattice model (for example, a binomial model) and a closed-form model (for example, the Black-Scholes-Merton option-pricing model).
The Company is continuing to use the Black-Scholes-Merton option-pricing model. SFAS 123R also requires the Company to estimate forfeitures in calculating the expense relating to stock-based compensation, as opposed to only recognizing forfeitures
and the corresponding reduction in expense as they occur. Volatility is determined using historical prices to estimate the expected future fluctuations in the Companys share price. There was no material impact on basic or diluted earnings per
share due to the adoption of SFAS No. 123R. See Note 13 for additional information about the Companys stock-based compensation plans.
6.
|
PROPERTY AND EQUIPMENT
|
Property and equipment
consisted of the following:
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
Computer equipment
|
|
$
|
27,367
|
|
$
|
30,655
|
Furniture and equipment
|
|
|
20,360
|
|
|
22,047
|
Capitalized software costs
|
|
|
29,208
|
|
|
30,996
|
Leasehold and building improvements
|
|
|
23,754
|
|
|
24,635
|
Transportation equipment
|
|
|
211
|
|
|
371
|
|
|
|
|
|
|
|
|
|
|
101,900
|
|
|
108,704
|
Less: accumulated depreciation and amortization
|
|
|
71,430
|
|
|
81,428
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
29,470
|
|
$
|
27,276
|
|
|
|
|
|
|
|
Leasehold improvements included assets classified under capital leases at December 31, 2007
and 2006 with a cost of $873 and $785, respectively, and accumulated amortization of $312 and $168, respectively. Capitalized software costs included software under capital leases at December 31, 2007 and 2006 with a cost of $4,861 and $4,716,
respectively and accumulated amortization of $2,501 and $1,408, respectively. Computer equipment with a cost of $153 included equipment classified under capital leases at December 31, 2006 and accumulated amortization of $127. In 2006, the
Company included $2,774 of accelerated amortization expense, as a result of a change in estimated useful life, related to leasehold improvements of its former corporate offices vacated in early 2007.
61
7.
|
GOODWILL AND INTANGIBLES
|
A summary of changes in
the Companys goodwill by reporting unit follows. Additions in 2007, 2006 and 2005 reflect acquisitions and purchase price adjustments made during that year, as described in Note 8.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2006
|
|
Additions and
adjustments
|
|
|
Impairments (a)
|
|
|
Currency
translation
|
|
|
December 31,
2007
|
Hudson Americas
|
|
$
|
13,351
|
|
$
|
30,631
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
43,982
|
Hudson Europe
|
|
|
19,807
|
|
|
2,482
|
|
|
|
|
|
|
|
1,933
|
|
|
|
24,222
|
Hudson Asia Pacific
|
|
|
|
|
|
5,238
|
|
|
|
|
|
|
|
|
|
|
|
5,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,158
|
|
$
|
38,351
|
|
|
$
|
|
|
|
$
|
1,933
|
|
|
$
|
73,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2005
|
|
Additions and
adjustments
|
|
|
Impairments
|
|
|
Currency
translation
|
|
|
December 31,
2006
|
Hudson Americas
|
|
$
|
6,022
|
|
$
|
8,629
|
|
|
$
|
(1,300
|
)
|
|
$
|
|
|
|
$
|
13,351
|
Hudson Europe
|
|
|
15,310
|
|
|
2,587
|
(b)
|
|
|
|
|
|
|
1,910
|
|
|
|
19,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,332
|
|
$
|
11,216
|
|
|
$
|
(1,300
|
)
|
|
$
|
1,910
|
|
|
$
|
33,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2004
|
|
Additions and
adjustments
|
|
|
Impairments
|
|
|
Currency
translation
|
|
|
December 31,
2005
|
Hudson Americas
|
|
$
|
4,567
|
|
$
|
1,455
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,022
|
Hudson Europe
|
|
|
|
|
|
15,400
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
15,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,567
|
|
$
|
16,855
|
|
|
$
|
|
|
|
$
|
(90
|
)
|
|
$
|
21,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Impairments were reported in depreciation and amortization expense.
|
As of December 31, 2007
and 2006, intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
December 31, 2006
(Restated)
|
|
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
|
Gross
Carrying
amount
|
|
Accumulated
amortization
|
|
Goodwill
|
|
$
|
73,442
|
|
$
|
|
|
|
$
|
33,158
|
|
$
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client lists and other amortizable intangibles
|
|
|
15,523
|
|
|
(10,730
|
)
|
|
|
13,652
|
|
|
(7,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
88,965
|
|
$
|
(10,730
|
)
|
|
$
|
46,810
|
|
$
|
(7,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets, including 2006 impairments, were $3,240, $6,045 and $1,980, for
the years ended December 31, 2007, 2006 and 2005, respectively. Estimated intangible asset amortization expense is expected to be $2,351 and $2,442 for the years ended December 31, 2008 and 2009, respectively.
SFAS 142
Goodwill and Other Intangible Assets
requires that goodwill and indefinite-lived intangible assets not be amortized but be tested for
impairment on an annual basis, or more frequently if circumstances warrant. As a result of this test and the related fair value examination, the Company recorded a non-cash goodwill impairment charge for the Alder Novo acquisition, a unit within the
Talent Management Solutions reporting unit, of $1,300, in the fourth quarter of 2006. The impairment valuation was based upon a discounted cash flow approach that used estimated future revenue and costs for the Hudson Americas Talent
Management Solutions reporting unit as well as appropriate discount rates. The estimates that were used are consistent with the plans and estimates the Company was using to manage the underlying business. The 2006 goodwill impairment charge
wrote-off all goodwill related to Alder Novo and was recorded in depreciation and amortization expense.
62
8.
|
BUSINESS REORGANIZATION EXPENSES
|
In the third
quarter of 2006, the Companys Board of Directors approved the 2006 reorganization program with costs for related actions in the following categories: consolidation of support functions, particularly between the Hudson Americas and corporate;
closing or reducing redundant sales functions and unprofitable offices, particularly in Hudson Americas, corporate and Hudson Europe; and programs to reduce management staffing levels in Hudson Asia Pacific. During 2007, the Company recorded
reorganization expenses of $4,663, and a change in estimate resulting in recoveries of $317, associated with the 2006 program, primarily for the abandonment of a lease in London, and the cancellation of a lease in New York City and other property
leases in the U.K. and the Netherlands. During 2006, the Company recorded reorganization expenses of $4,971 associated with the 2006 program.
In addition, the Company recorded changes in estimates to prior period programs, other than the 2006 program, resulting in additional costs of $16 during 2007. The Company recorded changes in estimates to prior period program costs of
$1,044 and business reorganization expense of $511 for the years ended December 31, 2006 and 2005, respectively, primarily for lease on facilities included in prior programs where the leases related to these facilities have garnered lower
sublease income than estimated or have remained vacant longer than expected because of deteriorating market conditions. Such amounts have been classified as a component of operating expenses.
The reorganization accruals for discontinued operations are classified as liabilities from continuing operations for all periods presented. In 2007, the
Company recorded a change in estimate to business reorganization expense (recoveries) of $(301) within continuing operations. In 2006 and 2005, the Company recorded $58 and $(278), respectively, as a component of income from discontinued operations.
The Company does not expect there to be any material changes to these discontinued operations accruals in the future, but cannot assure that additional expenses will not be required.
Consolidation of Excess Facilities
During the year
ended December 31, 2007, the Company recorded expenses for the 2006 reorganization program of $4,535 for leases in Hudson Europe and Hudson Americas and expense recovery of $11 for changes in estimates to prior programs expenses. During
the year ended December 31, 2006, the Company recorded expenses for the 2006 program of $581 for leases in Hudson Europe and Hudson Americas and expense of $1,303 for changes in estimates to prior programs expenses, primarily in Hudson
Europe for leases on facilities included in prior programs where the leases related to these facilities have garnered lower sublease income than estimated or have remained vacant longer that expected, and in Hudson Americas on a number of leases in
their final year. As of December 31, 2007, the remaining accrual related to approximately eight locations and will be paid over the remaining lease terms, which have various expiration dates up until 2011, except one with a 2021 expiration
date. The estimated payments for 2008 are $3,335.
During the years ended December 31, 2007, 2006 and 2005, the Company recorded, as a
component of income from discontinued operations, recoveries of prior period expenses related to leases and facilities of $0, $90 and $312, respectively.
Workforce Reduction
During the year ended 2007, the Company recorded additional charges for workforce reductions of $87 and
recoveries for changes in estimates to prior programs of $134 for costs associated with workforce reductions. During the year ended 2006, the Company recorded additional charges for workforce reductions of $4,277 and recoveries for changes in
estimates to prior programs of $309 for costs associated with workforce reductions. The 2006 expenses were primarily comprised of $1,520 in Hudson Americas, primarily related to the closing of the Center for High Performance and closing or reducing
redundant sales functions and unprofitable offices, $1,168 in
63
Hudson Europe to reduce redundant sales functions and unprofitable offices and close the Norway office, $596 in Hudson Asia Pacific for management changes in
Japan and Australian reductions in redundant sales functions and $690 related to corporate expense. As of December 31, 2007, the workforce reduction accrual related to settlements and termination payments for one former employee, which are all
payable in 2008.
During the years ended December 31, 2007, 2006 and 2005, the Company recorded, as a component of income from
discontinued operations, a recovery of $0, an expense of $27 and a recovery of $91, respectively, for prior period reorganization programs workforce reduction expenses.
Professional Fees and Other Charges
During the year ended 2007, the Company recorded additional
charges of $41 and recoveries for changes in estimates to prior programs of $156 for professional fees and other charges. Professional fees and other charges were $113 and $0 in the years ended December 31, 2006 and 2005, respectively. This
accrual at December 31, 2007 was included in current liabilities.
During the years ended December 31, 2007, 2006 and 2005, the
Company recorded, as a component of income from discontinued operations, expenses of $0, $121 and $125, respectively, for prior period reorganization programs professional fees and other charges.
Amounts under the Utilization caption of the following tables are primarily the cash payments associated with the plans. Business
reorganization expense activities and liability balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
December 31,
2006
|
|
Changes in
estimate
|
|
|
Additional
charges
|
|
Utilization
|
|
|
December 31,
2007
|
Consolidation of excess facilities
|
|
$
|
6,489
|
|
$
|
(11
|
)
|
|
$
|
4,535
|
|
$
|
(4,989
|
)
|
|
$
|
6,024
|
Workforce reduction
|
|
|
1,877
|
|
|
(134
|
)
|
|
|
87
|
|
|
(1,759
|
)
|
|
|
71
|
Professional fees and other
|
|
|
120
|
|
|
(156
|
)
|
|
|
41
|
|
|
79
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,486
|
|
$
|
(301
|
)
|
|
$
|
4,663
|
|
$
|
(6,669
|
)
|
|
$
|
6,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006
|
|
December 31,
2005
|
|
Changes in
estimate
|
|
|
Additional
charges
|
|
Utilization
|
|
|
December 31,
2006
|
Consolidation of excess facilities
|
|
$
|
7,288
|
|
$
|
1,303
|
|
|
$
|
581
|
|
$
|
(2,683
|
)
|
|
$
|
6,489
|
Workforce reduction
|
|
|
361
|
|
|
(309
|
)
|
|
|
4,277
|
|
|
(2,452
|
)
|
|
|
1,877
|
Professional fees and other
|
|
|
669
|
|
|
108
|
|
|
|
113
|
|
|
(770
|
)
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,318
|
|
$
|
1,102
|
|
|
$
|
4,971
|
|
$
|
(5,905
|
)
|
|
$
|
8,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005
|
|
December 31,
2004
|
|
Changes in
estimate
|
|
|
Additional
charges
|
|
Utilization
|
|
|
December 31,
2005
|
Consolidation of excess facilities
|
|
$
|
12,894
|
|
$
|
309
|
|
|
$
|
|
|
$
|
(5,915
|
)
|
|
$
|
7,288
|
Workforce reduction
|
|
|
663
|
|
|
(124
|
)
|
|
|
|
|
|
(178
|
)
|
|
|
361
|
Professional fees and other
|
|
|
2,205
|
|
|
48
|
|
|
|
|
|
|
(1,584
|
)
|
|
|
669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,762
|
|
$
|
233
|
|
|
$
|
|
|
$
|
(7,677
|
)
|
|
$
|
8,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
The following table presents a summary of plan activity related to business reorganization costs by plan
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
December 31,
2006
|
|
Changes in
estimate
|
|
|
Additional
charges
|
|
Utilization
|
|
|
December 31,
2007
|
Second Quarter 2002 Plan
|
|
$
|
444
|
|
$
|
85
|
|
|
$
|
|
|
$
|
(529
|
)
|
|
$
|
|
Fourth Quarter 2002 Plan
|
|
|
4,631
|
|
|
24
|
|
|
|
|
|
|
(666
|
)
|
|
|
3,989
|
Fourth Quarter 2003 Plan
|
|
|
1,069
|
|
|
(93
|
)
|
|
|
|
|
|
(976
|
)
|
|
|
|
2006 Plan
|
|
|
2,342
|
|
|
(317
|
)
|
|
|
4,663
|
|
|
(4,498
|
)
|
|
|
2,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,486
|
|
$
|
(301
|
)
|
|
$
|
4,663
|
|
$
|
(6,669
|
)
|
|
$
|
6,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006
|
|
December 31,
2005
|
|
Changes in
estimate
|
|
|
Additional
charges
|
|
Utilization
|
|
|
December 31,
2006
|
Second Quarter 2002 Plan
|
|
$
|
1,409
|
|
$
|
(301
|
)
|
|
$
|
|
|
$
|
(664
|
)
|
|
$
|
444
|
Fourth Quarter 2002 Plan
|
|
|
4,996
|
|
|
1,124
|
|
|
|
|
|
|
(1,489
|
)
|
|
|
4,631
|
Fourth Quarter 2003 Plan
|
|
|
1,913
|
|
|
246
|
|
|
|
|
|
|
(1,090
|
)
|
|
|
1,069
|
2006 Plan
|
|
|
|
|
|
33
|
|
|
|
4,971
|
|
|
(2,662
|
)
|
|
|
2,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,318
|
|
$
|
1,102
|
|
|
$
|
4,971
|
|
$
|
(5,905
|
)
|
|
$
|
8,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005
|
|
December 31,
2004
|
|
Changes in
estimate
|
|
|
Additional
charges
|
|
Utilization
|
|
|
December 31,
2005
|
Second Quarter 2002 Plan
|
|
$
|
3,062
|
|
$
|
320
|
|
|
$
|
|
|
$
|
(1,973
|
)
|
|
$
|
1,409
|
Fourth Quarter 2002 Plan
|
|
|
7,921
|
|
|
5
|
|
|
|
|
|
|
(2,930
|
)
|
|
|
4,996
|
Fourth Quarter 2003 Plan
|
|
|
4,779
|
|
|
(92
|
)
|
|
|
|
|
|
(2,774
|
)
|
|
|
1,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,762
|
|
$
|
233
|
|
|
$
|
|
|
$
|
(7,677
|
)
|
|
$
|
8,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
BUSINESS COMBINATIONSMERGER AND INTEGRATION EXPENSES
|
Acquisitions Accounted for Using the Purchase Method
In February 2007, the Company and one of its subsidiaries entered into
a purchase agreement to acquire the business assets of Tong Zhi (Beijing) Consulting Service Ltd and Guangzhou Dong Li Consulting Service Ltd (collectively, TKA) for an initial investment of $1,000. On May 2, 2007, the Company
completed the acquisition of TKA (the Completion) for consideration of $4,000, consisting of $2,500 paid in cash at or shortly after the Completion, $500 held in escrow to be payable within 90 days of the third anniversary of the
Completion and $700 in notes with an interest rate of 6.18% paid in November 2007. The Company recorded the preliminary allocation of the purchase price to the estimated fair value of the net identifiable assets acquired ($45 in assets, $525 for
non-contractual client relationships and other current liabilities of $596), with the excess of $5,026 allocated to goodwill, which is non-deductible for tax purposes. The purchase agreement also provides for contingent payouts to the sellers over
the next three years, based upon future minimum annual and cumulative earnings thresholds, of up to a maximum of $8,500. If and when such payments become determinable beyond a reasonable doubt, the amounts paid will be added to the recorded value of
goodwill. TKA is an information technology recruitment business serving multinational clients in China, and its results have been included in the Hudson Asia Pacific segment since the Completion. Pro forma information for this acquisition is not
included as it would not have a material impact on the Companys consolidated financial position or results of operations.
In April
2006, Hudson Americas purchased Professional Solutions LLC, a Cleveland, Ohio-based professional services firm, for a total cash consideration of $4,666. The Company recorded the preliminary allocation of the purchase price to the estimated fair
value of the net assets acquired ($604 in assets, $205 in liabilities), with the excess of $4,267 allocated to goodwill, which is deductible for tax purposes. The purchase
65
agreement provides for contingent payouts to the sellers over the next three years, based upon future minimum annual and cumulative earnings thresholds of up
to a maximum of $13,500. If and when such payments become determinable beyond a reasonable doubt, the amounts paid will be added to the recorded value of goodwill. The results of the acquired business have been included in the Hudson Americas
segment of the consolidated financial statements since the acquisition date. In 2007, the Company made an earn-out of $133 related to this acquisition and added this amount to the recorded value of goodwill.
In January 2006, Hudson Americas, through its Talent Management Solutions business, purchased Alder Novo for a total cash consideration of $1,315. The
Company recorded the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired ($25 in tangible assets, $75 in intangible assets, $85 in liabilities) with the excess of $1,300 allocated to goodwill, which is
deductible for tax purposes. The purchase agreement provides for contingent payouts to the sellers over the next three years, based upon future minimum annual and cumulative earnings thresholds of up to a maximum of $16,550. The results of the
acquired business have been included in the Hudson Americas segment since the acquisition date. In the fourth quarter of 2006, the Company determined that the Alder Novo goodwill was impaired and expensed the entire balance of $1,300 in depreciation
and amortization. In 2007, the Company determined that Alder Novo was not performing at the level originally expected and, based on this determination, sold Alder Novo to the original selling shareholders in the second quarter of 2007 for nominal
consideration and recognized a nominal loss on the sale.
Pro forma information related to the two acquisitions completed in 2006 are not
included because the impact of these acquisitions, both individually and in the aggregate, on the Companys consolidated financial position or results of operations is not considered material.
In August 2005, the Company and its subsidiary Hudson Group Holdings B.V. completed the acquisition of all of the shares of Balance Ervaring op
Projectbasis B.V. (Balance), a leading professional temporary and contract-staffing firm in the Netherlands, pursuant to a Share Purchase Agreement (the Purchase Agreement). The Purchase Agreement provided for a payment at
closing of 17,750, up to 3,000 paid into escrow to be paid to the sellers in 2006 based upon 2005 earnings thresholds for Balance, and additional earn-out payments of up to 4,250 based on higher earnings thresholds for Balance from
2005 through 2007 (the original earn-out). Converted to U.S. dollars, the payment in Euros at closing including escrow and all costs totaled $24,210 (net of cash acquired of $1,900). The Company recorded the allocation of the purchase
price to the estimated fair value of the net assets acquired of approximately $9,410 in current assets, $8,650 in current liabilities, $500 in non-current assets and $10,800 for amortizable intangible assets (primarily customer base ($7,100) and
trade name ($3,400), to be amortized on an accelerated basis that matches the estimated discounted cash flows related to the assets over their estimated useful lives of 3 to 5 years), $3,250 for deferred tax liabilities and the balance of $15,400
allocated to non-amortizable goodwill, which is not deductible for tax purposes. The following unaudited pro forma results are not necessarily indicative of the results that would have been achieved if the Company had acquired Balance at the
beginning of the periods presented: net income for the twelve month period ended December 31, 2005 would have been approximately $2,650 ($0.12 per basic and diluted share). The effect on annual revenue in 2005 would not have been material. In
April 2006, the Company made a payment relating to the original earn-out for 2005 of 1,000, or $1,274, which was recorded as additional goodwill. The payment relating to the original earn-out for 2006 of 1,000, or $1,313, was accrued as
of December 31, 2006, as the amount due was determinable beyond a reasonable doubt, with a corresponding amount recorded to goodwill (See Note 2) and was paid in April 2007. The payment relating to the original earn-out for 2007 of 2,250,
or $3,260, was accrued for as of December 31, 2007 as the amount due was determinable beyond a reasonable doubt, with a corresponding amount recorded to goodwill. The payment relating to the original earn-out for 2007 will be paid in April
2008.
As discussed in Note 2, the Company amended the Balance Purchase Agreement in July 2006 to increase the potential maximum contingent
payments for 2006 and 2007 (the incremental earn-out). The incremental earn-out for 2006 of 1,300, or $1,687, was accrued for as of December 31, 2006 with the expense recorded in the third and fourth quarters of 2006. The
incremental earn-out for 2007 of 1,250, or $1,748, was accrued and
66
expensed over the four quarters of the year ending December 31, 2007 as the amount was estimated to have been earned. The 2006 incremental earn-out was
paid in April 2007. The 2007 incremental earn-out will be paid in April 2008.
The incremental earn-out accrued for Balance as a result of
the amendment was recorded as acquisition-related expenses in the statements of operations in 2007 and 2006.
The Company also purchased a
Ukrainian business in August 2005 for $117. The results of Balance and other 2005 acquired businesses have been included in the Hudson Europe segment of the consolidated financial statements since the respective dates of acquisition.
The Company purchased JMT Financial Partners, LLC (JMT) on June 2, 2004 with an effective date of May 31, 2004. The purchase price
for JMT was $5,300 plus a series of contingent payments (Earn-Out Payment or Payments), with interim Earn-Out Payments to be made annually based upon future minimum annual and cumulative earnings thresholds during the first three years
subsequent to the purchase (the Earn-Out Period). In connection with the Companys purchase of JMT, the Company considered the accounting guidance in EITF 95-8,
Accounting for Contingent Consideration Paid to Shareholders of an
Acquired Enterprise in a Purchase Business Combination
and concluded that any future Earn-Out Payments should be recorded as an adjustment of the purchase price.
The owners of JMT (collectively the Sellers) entered into an agreement with each other dated concurrent with the Companys purchase of JMT (the Members Letter) intended to address
matters solely related to the partnership. The Company was not a party to the Members Letter and did not become aware of it until October 16, 2007. The Members Letter contained (a) a provision for an increasing percentage of
each Earn-Out Payment to one of the Sellers through the Earn-Out Period; and (b) a provision that if any of the Sellers did not remain in employment with the Company, they would relinquish their right to 50%, 40% and 30% of the remaining
Earn-Out Payments to the remaining Sellers, not the Company, if the Seller left JMT in the first, second and third years, respectively, after the closing of the acquisition.
The Company determined that, as a result of the Members Letter, the portion of the Earn-Out Payments for the acquisition of JMT that three of the
Sellers reallocated to the fourth Seller was required to be accounted for as compensation expense by the Company. Accordingly, the Company recorded approximately $3,551 as non-cash compensation expense with a corresponding credit to additional paid
in capital in the second quarter of 2007. The non-cash compensation expense for JMT and the incremental payments accrued for Balance as a result of the amendment was recorded as acquisition-related expenses in the statements of operations in 2007
and 2006. In April 2007, the Company made a final Earn-Out Payment of $30,499 relating to JMT, and added this payment to the recorded value of goodwill, which is deductible for tax purposes.
The primary reasons for the Companys acquisitions and the principal factors that contribute to the recognition of goodwill are the strengthening of
the Companys presence in a particular geographic region and/or the synergies and related cost savings gained from the integration of the acquired operations.
Merger and Integration Expenses Incurred with Pooling of Interests Transactions
In connection with pooling of interests
transactions completed prior to June 30, 2001, the Company formulated plans to integrate the operations of such companies. Such plans involved the closure of certain offices of the acquired and merged companies and the termination of certain
management and employees. The objectives of the plans were to eliminate redundant facilities and personnel, and to create a single brand in the related markets in which the Company operates. As of December 31, 2004, all remaining integration
balances are for assumed lease obligations on closed facilities. The merger and integration accruals for the Highland segment are classified as liabilities from continuing operations for all periods presented. These liabilities were not transferred
to Heidrick upon the sale.
67
The Company adjusted its estimates of these merger and integration costs by recognizing a recovery of
$787 and $70 for the years ended December 31, 2007 and 2005, respectively and an expense of $362 for the year ended December 31, 2006, which consisted of additional changes in the estimated costs associated with assumed lease obligations
on closed facilities related to leased office locations of acquired companies that were either under-utilized prior to the acquisition date or closed by the Company in connection with acquisition-related restructuring plans. The amount is based on
the present value of minimum future lease obligations, net of estimated sublease income. The Company also recorded merger and integration expenses of $218, classified as a component of income from discontinued operations, for the year ended
December 31, 2006.
Amounts reflected in the Expense column in the following tables represent changes in estimates to
established plans subsequent to finalization. Amounts under the Utilization column of the following tables are primarily the cash payments associated with the plans.
The following tables present a summary of activity relating to the Companys integration plans for acquisitions made in prior years by the year of
acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
December 31,
2006
|
|
Expenses
|
|
|
Utilization
|
|
|
December 31,
2007
|
2000 Plans
|
|
$
|
1,083
|
|
$
|
(737
|
)
|
|
$
|
(346
|
)
|
|
$
|
|
2002 Plans
|
|
|
1,475
|
|
|
(50
|
)
|
|
|
(784
|
)
|
|
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,558
|
|
$
|
(787
|
)
|
|
$
|
(1,130
|
)
|
|
$
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006
|
|
December 31,
2005
|
|
Expenses
|
|
Utilization
|
|
|
December 31,
2006
|
2000 Plans
|
|
$
|
1,671
|
|
$
|
170
|
|
$
|
(758
|
)
|
|
$
|
1,083
|
2001 Plans
|
|
|
456
|
|
|
|
|
|
(456
|
)
|
|
|
|
2002 Plans
|
|
|
1,150
|
|
|
410
|
|
|
(85
|
)
|
|
|
1,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,277
|
|
$
|
580
|
|
$
|
(1,299
|
)
|
|
$
|
2,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005
|
|
December 31,
2004
|
|
Expenses
|
|
|
Utilization
|
|
|
December 31,
2005
|
2000 Plans
|
|
$
|
2,407
|
|
$
|
(35
|
)
|
|
$
|
(701
|
)
|
|
$
|
1,671
|
2001 Plans
|
|
|
800
|
|
|
(35
|
)
|
|
|
(309
|
)
|
|
|
456
|
2002 Plans
|
|
|
1,994
|
|
|
|
|
|
|
(844
|
)
|
|
|
1,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,201
|
|
$
|
(70
|
)
|
|
$
|
(1,854
|
)
|
|
$
|
3,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated payments for 2008 are $314 with the remaining balance paid over the terms of the
five leases that end in various years through 2010.
10.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
Accrued expenses and other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
(Restated)
|
Salaries, commissions and benefits
|
|
$
|
53,018
|
|
$
|
53,705
|
Sales, use and income taxes
|
|
|
28,973
|
|
|
28,057
|
Fees for professional services
|
|
|
3,851
|
|
|
6,707
|
Rent
|
|
|
3,998
|
|
|
6,842
|
Other accruals
|
|
|
31,002
|
|
|
30,250
|
|
|
|
|
|
|
|
|
|
$
|
120,842
|
|
$
|
125,561
|
|
|
|
|
|
|
|
68
Long-term debt obligations
consisted of the following:
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
Capitalized lease, payable with interest of 7.2%, in installments through 2009
|
|
$
|
243
|
|
$
|
473
|
Less: Current portion
|
|
|
243
|
|
|
238
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
235
|
|
|
|
|
|
|
|
As of December 31, 2007, long-term debt matures as follows: $243 in 2008. Certain of the
leases can be paid prior to the scheduled maturity. Capital lease obligations presented here exclude the interest portion of the obligation, which is considered immaterial.
12.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
Interest paid
|
|
$
|
1,557
|
|
$
|
3,331
|
|
$
|
2,741
|
Income taxes paid
|
|
$
|
11,835
|
|
$
|
6,920
|
|
$
|
3,313
|
Value of common stock issued to satisfy 401(k) contribution (a)
|
|
$
|
2,108
|
|
$
|
2,073
|
|
$
|
1,563
|
Capital lease obligations incurred
|
|
|
|
|
|
|
|
$
|
2,079
|
(a)
|
The Company issued 133,952,126,950 and 94,960 shares of its common stock in 2007, 2006 and 2005, respectively.
|
13.
|
STOCK COMPENSATION PLANS
|
The Company maintains the
Hudson Highland Group, Inc. Long Term Incentive Plan (the LTIP) pursuant to which it granted 374,000, 340,500 and 1,389,000 stock options to purchase shares of the Companys common stock to certain key employees during the years
ended December 31, 2007, 2006 and 2005, respectively. All options granted have a contractual term of ten years. Unvested options outstanding have vesting periods of four years, which vest 25% on each of the four anniversary dates or 50% on the
third and fourth anniversary dates. Options exercisable within one year from December 31, 2007 totaled 1,279,375. No options related to the common stock of Monster were converted at the Distribution into options to purchase the Companys
stock.
The Company granted 100,000 options to purchase shares of the Companys common stock under the LTIP to two non-employee
members of the Board of Directors in 2006 and 250,000 options in periods prior to January 1, 2004. These options had an immediate vesting of 40% of the options granted with the remaining options vesting evenly over the next three years. All
options granted have a contractual term of ten years. Of these options 60,000 have been exercised and the remaining 290,000 were outstanding as of December 31, 2007. Options exercisable within one year from December 31, 2007 totaled
250,000, which includes 50,000 options of one former member of the Board of Directors, which expire in May 2008.
69
Stock option activity for the three years ended December 31, 2007 follows:
|
|
|
|
|
|
|
|
|
|
|
|
LTIP
shares
available
for
grant
|
|
|
Number of
options
outstanding
|
|
|
Weighted
average
exercise price
per share
|
As of January 1, 2005
|
|
872,210
|
|
|
1,641,866
|
|
|
$
|
8.37
|
|
|
|
|
|
|
|
|
|
|
Additional shares reserved
|
|
1,200,000
|
|
|
|
|
|
|
|
Options granted
|
|
(1,389,000
|
)
|
|
1,389,000
|
|
|
|
14.82
|
Restricted shares granted
|
|
(57,000
|
)
|
|
|
|
|
|
|
Options exercised
|
|
|
|
|
(187,038
|
)
|
|
|
7.91
|
Options forfeited/canceled
|
|
48,413
|
|
|
(48,413
|
)
|
|
|
9.95
|
Options expired
|
|
|
|
|
(1,250
|
)
|
|
|
7.93
|
Restricted shares forfeited/canceled
|
|
2,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005
|
|
676,686
|
|
|
2,794,165
|
|
|
|
11.57
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
(440,500
|
)
|
|
440,500
|
|
|
|
14.78
|
Restricted shares granted
|
|
(31,400
|
)
|
|
|
|
|
|
|
Options exercised
|
|
|
|
|
(243,104
|
)
|
|
|
8.04
|
Options forfeited/canceled
|
|
339,475
|
|
|
(339,475
|
)
|
|
|
12.78
|
Options expired
|
|
|
|
|
(11,675
|
)
|
|
|
12.69
|
Restricted shares forfeited/canceled
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
555,261
|
|
|
2,640,410
|
|
|
|
12.27
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
(374,000
|
)
|
|
374,000
|
|
|
|
16.69
|
Restricted shares granted
|
|
(57,500
|
)
|
|
|
|
|
|
|
Options exercised
|
|
|
|
|
(397,960
|
)
|
|
|
9.06
|
Options forfeited/canceled
|
|
203,800
|
|
|
(203,800
|
)
|
|
|
14.70
|
Options expired
|
|
|
|
|
(26,125
|
)
|
|
|
9.02
|
Restricted shares forfeited/canceled
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
335,561
|
|
|
2,386,525
|
|
|
$
|
13.33
|
|
|
|
|
|
|
|
|
|
|
70
The Company may grant restricted stock to employees under the LTIP. These shares are provided at no cost
to the employee. As of December 31, 2007, there was unrecognized compensation expense related to the unvested restricted stock granted under the LTIP of $882 to be recognized over a weighted-average period of 2.2 years. During the first quarter
of 2008, the Company also granted 3,700 shares of restricted stock, which vested immediately, to 37 employees as performance awards. Restricted stock activity and fair value information for the three years ended December 31, 2007 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Opening balance unvested restricted stock
|
|
|
96,500
|
|
|
|
138,250
|
|
|
|
138,625
|
|
Grants issued with two year vesting (e)
|
|
|
34,000
|
|
|
|
|
|
|
|
|
|
Grants issued with four year vesting (a)
|
|
|
19,100
|
|
|
|
27,500
|
|
|
|
53,000
|
|
Grants issued with immediate vesting (b)
|
|
|
4,400
|
|
|
|
3,900
|
|
|
|
4,000
|
|
Grants canceled
|
|
|
(8,000
|
)
|
|
|
(11,000
|
)
|
|
|
(2,063
|
)
|
Grants vested with three year vesting (c)
|
|
|
|
|
|
|
(25,750
|
)
|
|
|
(27,812
|
)
|
Grants vested with four year vesting (a)
|
|
|
(33,875
|
)
|
|
|
(32,500
|
)
|
|
|
(23,500
|
)
|
Grants vested with immediate vesting (b)
|
|
|
(4,400
|
)
|
|
|
(3,900
|
)
|
|
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance unvested restricted stock
|
|
|
107,725
|
|
|
|
96,500
|
|
|
|
138,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening unvested balance
|
|
$
|
16.46
|
|
|
$
|
17.98
|
|
|
$
|
11.23
|
|
Grants issued
|
|
$
|
14.80
|
|
|
$
|
13.63
|
|
|
$
|
24.28
|
|
Grants canceled
|
|
$
|
12.85
|
|
|
$
|
11.37
|
|
|
$
|
6.83
|
|
Grants vested
|
|
$
|
17.48
|
|
|
$
|
12.44
|
|
|
$
|
10.03
|
|
Ending unvested balance
|
|
$
|
11.86
|
|
|
$
|
16.46
|
|
|
$
|
17.98
|
|
Restricted stock expense (d)
|
|
$
|
908
|
|
|
$
|
1,148
|
|
|
$
|
795
|
|
(a)
|
Restricted stock with a four-year vesting period vests 25% on each of the four anniversary dates.
|
(b)
|
Restricted shares that vested immediately were granted to a total of 160 employees as performance awards.
|
(c)
|
Restricted stock with a three-year vesting period vests 50% on the first anniversary of the date of grant and 25% on each of the two succeeding anniversaries of the date of grant.
|
(d)
|
Expense consists of the value of the restricted stock and share incentive plan at the date of grant is amortized over the related vesting period as a charge to compensation expense
and an increase in additional paid-in capital.
|
(e)
|
Restricted stock with a two-year vesting period vests 50% on each of the two anniversary dates.
|
The following table summarizes stock options information at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding
|
|
Options exercisable
|
Range of exercise prices
|
|
Number
outstanding
|
|
Weighted-
average
remaining
contractual life
|
|
Weighted-
average
exercise price
|
|
Aggregate
intrinsic
value
|
|
Number
exercisable
|
|
Weighted-
average
exercise price
|
|
Aggregate
intrinsic value
|
$6.83
|
|
507,250
|
|
5.3 years
|
|
$
|
6.83
|
|
$
|
801
|
|
507,250
|
|
$
|
6.83
|
|
$
|
801
|
$ 8.61 to $10.77
|
|
113,500
|
|
7.5 years
|
|
$
|
9.20
|
|
|
|
|
77,375
|
|
$
|
9.19
|
|
|
|
$11.07 to $12.85
|
|
76,850
|
|
5.9 years
|
|
$
|
11.83
|
|
|
|
|
69,600
|
|
$
|
11.78
|
|
|
|
$13.25 to $13.91
|
|
759,500
|
|
7.1 years
|
|
$
|
13.25
|
|
|
|
|
43,500
|
|
$
|
13.30
|
|
|
|
$14.06 to $16.33
|
|
731,925
|
|
8.4 years
|
|
$
|
15.91
|
|
|
|
|
156,125
|
|
$
|
14.95
|
|
|
|
$17.92 to $25.94
|
|
197,500
|
|
8.1 years
|
|
$
|
23.74
|
|
|
|
|
30,000
|
|
$
|
17.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,386,525
|
|
7.2 years
|
|
$
|
13.33
|
|
$
|
801
|
|
883,850
|
|
$
|
9.56
|
|
$
|
801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value
based on the Companys closing stock price of $8.41 as of December 31, 2007 that would have been received by the option
71
holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the years ended
December 31, 2007, 2006 and 2005 was $3,457, $1,926 and $2,138, respectively.
The Company maintains the Hudson Highland Group, Inc.
Employee Stock Purchase Plan (the ESPP), pursuant to which eligible employees may purchase shares of the Companys common stock at the lesser of 85% of the fair market value at the commencement of each plan purchase period or 85% of
the fair market value as of the purchase date. ESPP purchase dates are generally every six months ended June 30 and December 31. The Company recorded expense for the ESPP in salaries and related of $565, $648 and $586 for 2007, 2006 and
2005, respectively. The Company also recorded expense for the ESPP in income from discontinued operations of $0, $61 and $67 for 2007, 2006 and 2005, respectively. The Company issued 147,183, 225,865 and 164,930 shares of common stock pursuant to
the ESPP at an average price of $10.90, $9.17 and $12.71 per share in 2007, 2006 and 2005, respectively. As of December 31, 2007, the Company has 412,885 shares reserved for future share issuances under the ESPP and SIP (as defined below).
The Companys United Kingdom subsidiary maintains the Hudson Global Resources Share Incentive Plan (the SIP), a stock
purchase plan for its employees, whereby eligible employees may purchase shares on the open market at the end of each month, and the Company matches the employee purchases with a contribution of shares equal to 50% of the number of employee shares
purchased. The Company issued 4,156, 3,515, and 2,653 shares of common stock pursuant to the SIP in 2007, 2006 and 2005, respectively. Shares are issued under the SIP from the ESPP share reserve.
The Company maintains the Hudson Highland Group, Inc. 401(k) Savings Plan (the 401(k) plan). The 401(k) plan allows eligible employees to
contribute up to 15% of their earnings to the 401(k) plan. The Company matches contributions up to 3% for contributions through a contribution of the Companys common stock. Vesting of the Companys contribution occurs over a five-year
period. Expense, included in continuing operations, for the years ended December 31, 2007, 2006 and 2005 for the 401(k) plan was $1,608, $1,932 and $1,733, respectively. Expense, included in income from discontinued operations, for the years
ended December 31, 2007, 2006 and 2005 for the 401(k) plan was $500, $278 and $338, respectively. In March 2007, the Company issued 134,331 shares of its common stock with a value of $2,108 to satisfy the 2006 contribution liability to the
401(k) plan. In March 2006, the Company issued 126,950 shares of its common stock with a value of $2,073 to satisfy the 2005 contribution liability to the 401(k) plan. The 2007 401(k) plan matching shares will be issued in the first quarter of 2008.
For all share plans described above, the Company has issued new shares of the Companys common stock from stockholder approved stock
compensation plans.
14.
|
PROVISION FOR INCOME TAXES
|
The domestic and
foreign components of income (loss) before income taxes from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Domestic
|
|
$
|
(24,772
|
)
|
|
$
|
(52,540
|
)
|
|
$
|
(37,351
|
)
|
Foreign
|
|
|
46,919
|
|
|
|
48,124
|
|
|
|
25,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision for income taxes
|
|
$
|
22,147
|
|
|
$
|
(4,416
|
)
|
|
$
|
(11,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
The provision (benefit) for income taxes from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
Current tax provision (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
State and local
|
|
|
2,093
|
|
|
|
2,135
|
|
|
|
106
|
Foreign
|
|
|
15,719
|
|
|
|
8,874
|
|
|
|
3,789
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
17,812
|
|
|
|
11,009
|
|
|
|
3,895
|
Deferred tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
|
|
|
|
|
|
|
|
|
State and local
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
(572
|
)
|
|
|
(7,238
|
)
|
|
|
637
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(572
|
)
|
|
|
(7,238
|
)
|
|
|
637
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
17,240
|
|
|
$
|
3,771
|
|
|
$
|
4,532
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes are provided for the tax effects of temporary differences between the
financial reporting basis and the tax basis of assets and liabilities. Significant temporary differences at December 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
1,255
|
|
|
$
|
1,104
|
|
Capital allowances
|
|
|
2,163
|
|
|
|
3,444
|
|
Accrued and other current liabilities
|
|
|
2,652
|
|
|
|
1,911
|
|
Accrued compensation liabilities
|
|
|
3,642
|
|
|
|
3,396
|
|
Valuation allowance
|
|
|
(1,917
|
)
|
|
|
(1,757
|
)
|
|
|
|
|
|
|
|
|
|
Total current deferred tax asset
|
|
|
7,795
|
|
|
|
8,098
|
|
Non-current deferred tax assets (liabilities):
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(1,347
|
)
|
|
|
(1,608
|
)
|
Intangibles
|
|
|
6,469
|
|
|
|
8,615
|
|
Accrued and other current liabilities and other liabilities
|
|
|
331
|
|
|
|
406
|
|
Deferred compensation
|
|
|
524
|
|
|
|
724
|
|
Tax loss carry-forwards
|
|
|
105,300
|
|
|
|
100,300
|
|
Valuation allowance
|
|
|
(110,168
|
)
|
|
|
(108,612
|
)
|
|
|
|
|
|
|
|
|
|
Total non-current deferred tax asset (liability)
|
|
|
1,109
|
|
|
|
(175
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
8,904
|
|
|
$
|
7,923
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets were included in other current assets and other assets.
At December 31, 2007, the Company had net operating loss carry-forwards (NOLs) for U.S. Federal tax purposes of approximately $249,600
including approximately $13,900 of tax losses that were not absorbed by Monster on its consolidated U.S. Federal tax returns through the Distribution Date, which expire through 2024. These losses included pre-acquisition losses of certain acquired
companies and are subject to an annual limitation on the amount that can be utilized. A recalculation of the Monster stock options deductions for periods prior to the Distribution reduced the unabsorbed U.S. NOL position related to this deduction
from $27,400 to $13,900 in 2006. In addition, the Company had NOLs from all other countries outside of the United States of approximately $46,100 as of December 31, 2007, of which approximately $42,500 have no expiration.
73
Tax years that had net operating losses that carry forward remain open until the losses are utilized in
future periods. The open tax years are 2004-2006 for the U.S. Federal, state and local jurisdictions, 2000 through 2006 for the U.K., Australia and most other jurisdictions. The Company is not currently under examination in any jurisdiction.
SFAS 109 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset
will not be realized. In making this assessment, management considers the level of historical taxable income, scheduled reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income. The valuation allowance of
$112,085 relates to the deferred tax asset for NOLs, $89,000 of which is U.S. Federal and state, and $15,530 of which is foreign, that management has determined will more likely than not expire prior to realization, and $7,555 which relates to
deferred tax assets on U.S. temporary differences that management estimates will not be realized due to the Companys U.S. tax losses.
The Company adopted the provisions of FASB Interpretation No 48,
Accounting for Uncertainty in Income Taxes
on January 1, 2007. As a result of the implementation, the Company recognized $3,537 increase in the
liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. A reconciliation of the beginning and ending amounts of unrecognized tax benefits (in thousands):
|
|
|
|
|
Balance at January 1, 2007
|
|
$
|
6,276
|
|
Additions based on tax positions related to the current year
|
|
|
593
|
|
Additions for tax positions of prior years
|
|
|
187
|
|
Reductions for tax positions of prior years
|
|
|
(326
|
)
|
Settlements
|
|
|
|
|
Lapse of statute of limitations
|
|
|
(340
|
)
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
6,390
|
|
|
|
|
|
|
At December 31, 2007, the Company had $8,409, including interest and penalties, of
unrecognized tax benefits that, if recognized, would affect its effective tax rate. These unrecognized tax benefits are related to tax positions in jurisdictions in which the Company does not have tax losses to offset the tax liability with respect
to the uncertain tax positions. The amount of unrecognized tax benefits pertaining to uncertain tax positions for U.S. state and local income taxes may be reduced by approximately $500 over the next twelve months for the lapse of the statue of
limitations with respect to the 2003 tax year.
In evaluating its provision for uncertain tax positions related to a 2007 filing position
in a foreign jurisdiction, the Company determined that it was necessary to record an additional provision with respect to the 2005 and 2006 tax years. The liability for uncertain tax positions of prior years was reduced in one foreign jurisdiction
by recognizing the liability on the related income tax filings.
The Company recognizes interest accrued and penalties related to
unrecognized tax benefits in tax expense. During the year ended December 31, 2007, the Company recognized approximately $895 in interest and penalties. No amount of interest and penalties was recognized in 2006 and 2005. At December 31,
2007 and 2006 the Company had accrued approximately $2,019 and $0 for the payment of interest and penalties, respectively.
74
The effective tax rate differs from the U.S. Federal statutory rate of 35% due to the inability to
recognize tax benefits on net U.S. losses, State taxes, non-deductible expenses such as certain acquisition related payments, variations from the U.S. tax rate in foreign jurisdictions and taxes on repatriations of foreign profits. The following is
a reconciliation of the effective tax rate from continuing operations for the years ended December 31, 2007, 2006 and 2005 to the U.S. Federal statutory rate of 35%:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2007
|
|
2006
|
|
|
2005
|
|
Provision (benefit) from continuing operations at Federal statutory rate
|
|
$
|
7,751
|
|
$
|
(1,545
|
)
|
|
$
|
(4,093
|
)
|
State income taxes, net of Federal income tax effect
|
|
|
2,093
|
|
|
2,135
|
|
|
|
161
|
|
Change in valuation allowance
|
|
|
1,716
|
|
|
(2,492
|
)
|
|
|
3,625
|
|
Taxes related to foreign income
|
|
|
4,316
|
|
|
4,956
|
|
|
|
4,205
|
|
Nondeductible expenses
|
|
|
1,364
|
|
|
717
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
17,240
|
|
$
|
3,771
|
|
|
$
|
4,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No provision was made for U.S. or foreign taxes on undistributed earnings of foreign subsidiaries
as such earnings are considered to be permanently reinvested. Such earnings have been and will continue to be reinvested but could become subject to additional tax if they were remitted as dividends, or were loaned to the Company or a U.S.
affiliate, or if the Company should sell its stock in the foreign subsidiaries. It is not practicable to determine the amount of additional tax, if any, that might be payable on the undistributed foreign earnings.
15.
|
COMMITMENTS AND CONTINGENCIES
|
Leases
The Company leases facilities and equipment under operating leases that expire at various dates through 2027. Some of the operating leases provide for
increasing rents over the terms of the leases; and total rent expense under these leases is recognized ratably over the lease terms. Future minimum lease commitments under non-cancelable operating leases at December 31, 2007, were as follows:
|
|
|
|
2008
|
|
$
|
40,340
|
2009
|
|
|
32,400
|
2010
|
|
|
24,589
|
2011
|
|
|
16,263
|
2012
|
|
|
13,142
|
Thereafter
|
|
|
49,969
|
|
|
|
|
|
|
$
|
176,703
|
|
|
|
|
Rent and related expenses under operating leases for facilities and equipment were $27,839,
$27,721 and $25,780 for the years ended December 31, 2007, 2006 and 2005, respectively. Operating lease obligations after 2010 relate to building leases. Commitments based in currencies other than U.S. dollars were translated using exchanges
rates as of December 31, 2007.
Consulting, Employment and Non-compete Agreements
The Company has entered into various consulting, employment and non-compete agreements with certain key management personnel and former owners of acquired
businesses. Agreements with key members of management are generally one year in length, on an at will basis, and provide for compensation and severance payments under certain circumstances and are automatically renewed annually unless either party
gives sufficient notice of termination. Agreements with certain consultants and former owners of acquired businesses are generally two to five years in length.
75
Litigation
The Company is subject to various claims from lawsuits, taxing authorities and other complaints arising in the ordinary course of business. The Company records provisions for losses when the claim becomes probable and the amount due is
estimable. Although the outcome of these claims cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Companys financial condition, results of
operations, or liquidity.
16.
|
RELATED PARTY TRANSACTIONS
|
After the Distribution
Date, the Company was no longer included in Monsters consolidated group for United States federal income tax purposes. The Company and Monster entered into a tax separation agreement to reflect the Companys separation from Monster with
respect to tax matters. The primary purpose of the tax separation agreement is to reflect each partys rights and obligations relating to payments and refunds of taxes that are attributable to periods beginning before and including the date of
the distribution and any taxes resulting from transactions effected in connection with the distribution. The Company has agreed to indemnify Monster for any tax liability attributable to the distribution resulting from any action taken by the
Company.
17.
|
FINANCIAL INSTRUMENTS
|
Credit Facility
The Companys liquidity needs arise primarily from funding working capital requirements and capital investment in information technology and
facilities.
On July 31, 2007, the Company entered into an amended and restated senior secured credit facility with Wells Fargo
Foothill with the ability to borrow up to $75,000 (the Credit Facility). The Company may, subject to certain conditions, increase the maximum Credit Facility limit up to $125,000. The maturity date of the Credit Facility is July 31,
2012. Borrowings may be made with a base rate loan having an interest rate based on the prime rate and the Leverage Ratio (as defined in the Credit Facility) or a LIBOR rate loan with an interest rate based on the LIBOR rate and the Leverage Ratio.
The Credit Facility is secured by substantially all of the assets of the Company and extensions of credit are based on a percentage of the accounts receivable of the Company.
As of December 31, 2007 there were no outstanding borrowings under the Credit Facility and there were a total of $7,858 of outstanding letters of
credit issued under the Credit Facility. Available credit for use under the Credit Facility as of December 31, 2007 was $67,142.
The
Company expects to continue to use such credit, if and when required, to support its ongoing working capital requirements, capital expenditures and other corporate purposes and to support letters of credit. Letters of credit are used to support
certain of the Companys office leases and its finance leases. In July 2007, the Company entered into a collateral trust agreement, which replaced a letter of credit used to support the workers compensation policy. The estimated
collateral under the collateral trust agreement is approximately $2,900, which was provided by the Company as a deposit and is included in other long term assets at December 31, 2007.
The Credit Facility contains various restrictions and covenants, including (1) prohibitions on payments of dividends; (2) requirements that the
Company maintain its minimum EBITDA (as defined in the Credit Facility) and capital expenditures within prescribed levels; (3) restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge or otherwise
fundamentally change the ownership of the Company; and (4) limitations on investments, dispositions of assets and guarantees of indebtedness and repurchases of the Companys stock. The Credit Facility allows certain permitted investments
in the aggregate amount not to exceed $25,000 per year and certain permitted dispositions in the aggregate amount not to exceed $15,000 per year.
The financial covenants of the Credit Facility include a minimum quarterly EBITDA for a twelve-month period and maximum capital expenditures for each fiscal year. The minimum EBITDA covenant provides that the Companys quarterly EBITDA
for a trailing twelve-month period may not be less than $25,000. The
76
maximum capital expenditure covenant provides that the Companys capital expenditures in each fiscal year may not exceed $18,000. The borrowing base is
determined under the Credit Facility as an agreed percentage of eligible accounts receivable, less reserves. These restrictions and covenants could limit the Companys ability to respond to market conditions, to provide for unanticipated
capital investments, to raise additional debt or equity capital, to pay dividends or to take advantage of business opportunities, including future acquisitions.
Outstanding Letters of Credit
The Company had letters of credit outstanding at December 31, 2007 of $7,858, leaving
$67,142 of the Credit Facility available for use on the terms set forth in the Credit Facility. These letters of credit have various maturity dates through 2017 and are primarily used to secure operating and capital lease financing.
Shelf Registration Statement Filing
The Company has
on file with the SEC a shelf registration to enable it to issue up to 1,350,000 shares of its common stock from time to time in connection with acquisitions of businesses, assets or securities of other companies, whether by purchase, merger or any
other form of acquisition or business combination. If any shares are issued using this shelf registration, the Company will not receive any proceeds from these offerings other than the assets, businesses or securities acquired. As of
December 31, 2007, all of the 1,350,000 shares were still available.
Forward Contracts
The Company periodically may enter into forward contracts to minimize the exposure to foreign exchange rate risk related to inter-company loan balances
denominated in currencies other than the functional currency. The Company does not apply hedge accounting and accordingly, any gains or losses resulting from changes in the fair value of the forward contracts are included in other income (expense)
in the consolidated statements of income. The earnings impact of gains and losses on foreign currency forward contracts was immaterial for 2007, 2006 and 2005. At December 31, 2007, there was one outstanding foreign currency forward contract,
which matured in early January 2008.
18.
|
STOCKHOLDER RIGHTS PLAN
|
On February 2, 2005,
the Board of Directors of the Company declared a dividend of one preferred share purchase right (a Right) for each outstanding share of common stock of the Company. The dividend was payable upon the close of business on February 28,
2005 to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $.001 par value (Preferred
Shares), of the Company, at a price of $60 per one one-hundredth of a Preferred Share, subject to adjustment. If any person becomes a 15% or more stockholder of the Company, then each Right (subject to certain limitations) will entitle its
holder to purchase, at the Rights then current exercise price, a number of shares of common stock of the Company or of the acquirer having a market value at the time of twice the Rights per share exercise price. The Companys Board
of Directors may redeem the Rights for $.001 per Right at any time prior to the time when the Rights become exercisable. Unless the Rights are redeemed, exchanged or terminated earlier, they will expire on February 28, 2015.
19.
|
SEGMENT AND GEOGRAPHIC DATA
|
The Company operates
in three reportable segments: the Hudson regional businesses of Hudson Americas, Hudson Europe and Hudson Asia Pacific.
Segment
information is presented in accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
. This standard is based on a management approach that requires
77
segmentation based upon the Companys internal organization and disclosure of revenue, certain expenses and operating income based upon internal
accounting methods. The Companys financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with generally accepted accounting
principles. Accounts receivable, net and long-lived assets are the only significant assets separated by segment for internal reporting purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
|
Hudson
Europe
|
|
Hudson
Asia Pacific
|
|
|
Corporate
|
|
|
Total
|
|
For the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
291,525
|
|
|
$
|
472,407
|
|
$
|
415,143
|
|
|
$
|
|
|
|
$
|
1,179,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
87,494
|
|
|
$
|
239,559
|
|
$
|
180,860
|
|
|
$
|
|
|
|
$
|
507,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization expenses
|
|
$
|
541
|
|
|
$
|
2,438
|
|
$
|
(15
|
)
|
|
$
|
1,398
|
|
|
$
|
4,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses
|
|
$
|
3,551
|
|
|
$
|
1,748
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
(4,156
|
)
|
|
$
|
30,530
|
|
$
|
33,443
|
|
|
$
|
(27,191
|
)
|
|
$
|
32,626
|
|
Depreciation and amortization
|
|
|
4,354
|
|
|
|
6,059
|
|
|
3,937
|
|
|
|
274
|
|
|
|
14,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(8,510
|
)
|
|
|
24,471
|
|
|
29,506
|
|
|
|
(27,465
|
)
|
|
|
18,002
|
|
Interest and other income (expense), net
|
|
|
(87
|
)
|
|
|
3,728
|
|
|
(1,475
|
)
|
|
|
1,979
|
|
|
|
4,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(8,597
|
)
|
|
$
|
28,199
|
|
$
|
28,031
|
|
|
$
|
(25,486
|
)
|
|
$
|
22,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
45,454
|
|
|
$
|
90,081
|
|
$
|
53,537
|
|
|
$
|
|
|
|
$
|
189,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization
|
|
$
|
53,461
|
|
|
$
|
37,179
|
|
$
|
13,746
|
|
|
$
|
3,319
|
|
|
$
|
107,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
|
Hudson
Europe
(Restated)
|
|
Hudson
Asia Pacific
|
|
|
Corporate
|
|
|
Total
|
|
For the Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
306,732
|
|
|
$
|
458,815
|
|
$
|
392,327
|
|
|
$
|
|
|
|
$
|
1,157,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
91,461
|
|
|
$
|
208,966
|
|
$
|
158,828
|
|
|
$
|
|
|
|
$
|
459,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization expenses (recoveries)
|
|
$
|
1,764
|
|
|
$
|
2,684
|
|
$
|
874
|
|
|
$
|
693
|
|
|
$
|
6,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses
|
|
$
|
|
|
|
$
|
1,687
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
(7,559
|
)
|
|
$
|
21,425
|
|
$
|
29,965
|
|
|
$
|
(28,394
|
)
|
|
$
|
15,437
|
|
Depreciation and amortization
|
|
|
6,343
|
|
|
|
6,871
|
|
|
3,171
|
|
|
|
3,418
|
|
|
|
19,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(13,902
|
)
|
|
|
14,554
|
|
|
26,794
|
|
|
|
(31,812
|
)
|
|
|
(4,366
|
)
|
Interest and other income (expense), net
|
|
|
(178
|
)
|
|
|
1,226
|
|
|
827
|
|
|
|
(1,925
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(14,080
|
)
|
|
$
|
15,780
|
|
$
|
27,621
|
|
|
$
|
(33,737
|
)
|
|
$
|
(4,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
55,613
|
|
|
$
|
97,322
|
|
$
|
51,811
|
|
|
$
|
|
|
|
$
|
204,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization
|
|
$
|
20,801
|
|
|
$
|
33,270
|
|
$
|
6,997
|
|
|
$
|
5,124
|
|
|
$
|
66,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
|
Hudson
Europe
|
|
|
Hudson
Asia Pacific
|
|
|
Corporate
|
|
|
Total
|
|
For the Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
291,209
|
|
|
$
|
450,727
|
|
|
$
|
386,518
|
|
|
$
|
|
|
|
$
|
1,128,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
91,487
|
|
|
$
|
189,443
|
|
|
$
|
151,513
|
|
|
$
|
|
|
|
$
|
432,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization expenses (recoveries)
|
|
$
|
510
|
|
|
$
|
(42
|
)
|
|
$
|
43
|
|
|
$
|
|
|
|
$
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
4,545
|
|
|
$
|
12,789
|
|
|
$
|
27,210
|
|
|
$
|
(37,420
|
)
|
|
$
|
7,124
|
|
Depreciation and amortization
|
|
|
5,098
|
|
|
|
4,351
|
|
|
|
6,485
|
|
|
|
569
|
|
|
|
16,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(553
|
)
|
|
|
8,438
|
|
|
|
20,725
|
|
|
|
(37,989
|
)
|
|
|
(9,379
|
)
|
Interest and other income (expense), net
|
|
|
(198
|
)
|
|
|
(47
|
)
|
|
|
(250
|
)
|
|
|
(1,820
|
)
|
|
|
(2,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(751
|
)
|
|
$
|
8,391
|
|
|
$
|
20,475
|
|
|
$
|
(39,809
|
)
|
|
$
|
(11,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
59,687
|
|
|
$
|
86,714
|
|
|
$
|
45,430
|
|
|
$
|
|
|
|
$
|
191,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization
|
|
$
|
16,512
|
|
|
$
|
31,418
|
|
|
$
|
6,668
|
|
|
$
|
5,885
|
|
|
$
|
60,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization (EBITDA) are presented to provide additional information
to investors about the Companys operations on a basis consistent with the measures which the Company uses to manage its operations and evaluate its performance. Management also uses this measurement to evaluate capital needs and working
capital requirements. 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 Companys profitability or liquidity. Furthermore, EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information by geographic region
|
|
United
States
|
|
Australia
|
|
United
Kingdom
|
|
Continental
Europe
|
|
Other
Asia
|
|
Other
Americas
|
|
Total
|
Year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (b)
|
|
$
|
286,926
|
|
$
|
297,659
|
|
$
|
322,879
|
|
$
|
149,528
|
|
$
|
117,484
|
|
$
|
4,599
|
|
$
|
1,179,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (c)
|
|
$
|
56,757
|
|
$
|
5,210
|
|
$
|
5,412
|
|
$
|
31,767
|
|
$
|
8,536
|
|
$
|
23
|
|
$
|
107,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (b)
|
|
$
|
302,580
|
|
$
|
289,674
|
|
$
|
335,704
|
|
$
|
123,111
|
|
$
|
102,653
|
|
$
|
4,152
|
|
$
|
1,157,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (c, d)
|
|
$
|
25,892
|
|
$
|
5,238
|
|
$
|
4,912
|
|
$
|
28,358
|
|
$
|
1,759
|
|
$
|
33
|
|
$
|
66,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (b)
|
|
$
|
288,508
|
|
$
|
282,444
|
|
$
|
362,603
|
|
$
|
88,124
|
|
$
|
104,074
|
|
$
|
2,701
|
|
$
|
1,128,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (c)
|
|
$
|
22,353
|
|
$
|
5,955
|
|
$
|
3,938
|
|
$
|
27,480
|
|
$
|
713
|
|
$
|
44
|
|
$
|
60,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Revenue is generally recorded on a geographic basis according to the location of the operating subsidiary.
|
(c)
|
Comprised of property and equipment and intangibles. Corporate assets are included in the United States.
|
(d)
|
The long-lived assets for the year ended December 31, 2006 have been restated for Continental Europe (see Note 2).
|
79
20.
|
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
|
Second quarter
|
|
|
Third quarter
|
|
Fourth quarter (a)
|
|
|
|
(Restated- See Note 2)
|
|
|
(Restated- See Note 2)
|
|
|
(Restated- See Note 2)
|
|
|
|
Year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
288,150
|
|
|
$
|
298,528
|
|
|
$
|
301,913
|
|
$
|
290,484
|
|
Gross margin
|
|
$
|
117,743
|
|
|
$
|
130,204
|
|
|
$
|
129,982
|
|
$
|
129,984
|
|
Operating income (loss)
|
|
$
|
(2,331
|
)
|
|
$
|
2,983
|
|
|
$
|
7,978
|
|
$
|
9,372
|
|
Income (loss) from continuing operations
|
|
$
|
(1,778
|
)
|
|
$
|
(1,092
|
)
|
|
$
|
3,214
|
|
$
|
4,563
|
|
Net income (loss)
|
|
$
|
55
|
|
|
$
|
(618
|
)
|
|
$
|
3,579
|
|
$
|
11,965
|
|
Basic earnings (loss) per share from continuing operations
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.13
|
|
$
|
0.18
|
|
Basic earnings per share from discontinued operations
|
|
|
0.07
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
0.29
|
|
Basic earnings (loss) per share
|
|
$
|
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.14
|
|
$
|
0.47
|
|
Diluted earnings (loss) per share from continuing operations (b)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.13
|
|
$
|
0.18
|
|
Diluted earnings per share from discontinued operations (b)
|
|
|
0.07
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
0.28
|
|
Diluted earnings (loss) per share
|
|
$
|
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.14
|
|
$
|
0.46
|
|
Basic weighted average shares outstanding
|
|
|
24,919,000
|
|
|
|
25,247,000
|
|
|
|
25,443,000
|
|
|
25,479,000
|
|
Diluted weighted average shares outstanding
|
|
|
24,919,000
|
|
|
|
25,247,000
|
|
|
|
26,058,000
|
|
|
25,781,000
|
|
|
|
|
|
|
|
|
First quarter
|
|
|
Second quarter
|
|
|
Third quarter
|
|
Fourth quarter (a)
|
|
|
|
|
|
|
|
|
|
(Restated- See Note 2)
|
|
(Restated- See Note 2)
|
|
Year ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
274,534
|
|
|
$
|
297,402
|
|
|
$
|
299,517
|
|
$
|
286,421
|
|
Gross margin
|
|
$
|
102,985
|
|
|
$
|
119,877
|
|
|
$
|
118,327
|
|
$
|
118,066
|
|
Operating income (loss)
|
|
$
|
(8,558
|
)
|
|
$
|
2,648
|
|
|
$
|
2,326
|
|
$
|
(782
|
)
|
Income (loss) from continuing operations
|
|
$
|
(9,388
|
)
|
|
$
|
(375
|
)
|
|
$
|
397
|
|
$
|
1,179
|
|
Net income (loss)
|
|
$
|
(8,080
|
)
|
|
$
|
2,166
|
|
|
$
|
3,497
|
|
$
|
22,845
|
|
Basic earnings (loss) per share from continuing operations
|
|
$
|
(0.39
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.02
|
|
$
|
0.05
|
|
Basic earnings (loss) per share from discontinued operations
|
|
$
|
0.06
|
|
|
$
|
0.11
|
|
|
$
|
0.13
|
|
$
|
0.88
|
|
Basic earnings (loss) per share
|
|
$
|
(0.33
|
)
|
|
$
|
0.09
|
|
|
$
|
0.15
|
|
$
|
0.93
|
|
Diluted earnings (loss) per share from continuing operations (b)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.02
|
|
$
|
0.05
|
|
Diluted earnings (loss) per share from discontinued operations (b)
|
|
$
|
0.06
|
|
|
$
|
0.11
|
|
|
$
|
0.12
|
|
$
|
0.86
|
|
Diluted earnings (loss) per share
|
|
$
|
(0.33
|
)
|
|
$
|
0.09
|
|
|
$
|
0.14
|
|
$
|
0.91
|
|
Basic weighted average shares outstanding
|
|
|
24,224,000
|
|
|
|
24,414,000
|
|
|
|
24,574,000
|
|
|
24,668,000
|
|
Diluted weighted average shares outstanding
|
|
|
24,224,000
|
|
|
|
24,414,000
|
|
|
|
25,023,000
|
|
|
25,346,000
|
|
(a)
|
The fourth quarter of 2007 results include gains on the T&I Sale and the HHCS Sale of $1,877 and $4,921, respectively, included in discontinued operations. The
fourth quarter 2006 results include a $20,358 gain on the Heidrick Sale included in discontinued operations and a benefit from deferred income taxes of $5,503, primarily from the release of valuation allowances on tax loss carry-forwards in foreign
jurisdictions. The
|
80
|
increase was partially offset by $3,804 of an increase in current foreign and state and local income tax provisions, $2,771 of accelerated amortization
related to the leasehold improvements at the former corporate offices, and a non-cash impairment charge for intangibles of the Alder Novo acquisition of $1,300.
|
(b)
|
Diluted earnings (loss) per share reflect the potential dilution from the assumed exercise of all dilutive potential common shares, primarily stock options. For the first and second
quarters of 2007 and the first and second quarters of 2006, the effect of approximately 742,000, 916,000, 1,186,000 and 758,000, respectively, of outstanding stock options and other common stock equivalents was excluded from the calculation of
diluted loss per share because the effect was anti-dilutive.
|
Earnings (loss) per share calculations for each quarter include
the weighted average effect for the quarter; therefore, the sum of quarterly loss per share amounts may not equal year-to-date earnings (loss) per share amounts, which reflect the weighted average effect on a year-to-date basis. See Note 2 for the
reconciliation between the restated amounts above and the amounts previously reported in the respective Form 10-Q or Form 10-K filings.
Sale of Engineering and Technical Staffing
Division
On February 4, 2008, the Company completed the sale of substantially all of the assets of Hudson Americas energy,
engineering and technical staffing division to System One Holdings, LLC (the Buyer) for (i) $10,988 in cash, subject to a post-closing net working capital adjustment, (ii) a subordinated note in the aggregate principal amount
of $5,000 with a five year maturity and (iii) a warrant to purchase 10% of the units of membership interests in Buyer. The Company has the right to receive an additional $600 that has been deposited into an escrow account upon resolution of
certain liabilities. Buyer is controlled by the former Chairman of the Companys Legal practice group. The former Executive Vice President of the Companys Energy, Scientific and Managed Staffing practice group, is an investor in the
Buyer. The Company also retained $3,600 of receivables of the Business. The gain before income taxes on the sale is estimated to be approximately $5,000.
Share Repurchase Program
On February 4, 2008, the Company announced that its Board of Directors authorized the
repurchase of up to $15,000 of the Companys common stock. The Company intends to make purchases from time to time as market conditions warrant. Through February 28, 2008, the Company had repurchased 701,173 shares for a total cost of
approximately $5,257.
Purchase of Assets of Executive Coread SARL in France
In February 2008, the Company completed the acquisition of a majority of the assets of Executive Coread SARL, a talent management and recruitment company
in France. The Purchase Agreement provides for a payment at closing of 300 and additional earn-out payments up to 300 based on earnings thresholds in 2008 and 2009.
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