HHGP Hudson Highland Grp., Inc. (MM)

NEW YORK, July 30 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. (NASDAQ:HHGP), one of the world's leading providers of permanent recruitment, contract professionals and talent management solutions, today announced financial results for the second quarter ended June 30, 2008. 2008 Second Quarter Summary -- Revenue of $305.9 million, an increase of 3.0 percent from $297.0 million for the second quarter of 2007 -- Gross margin of $137.2 million, or 44.9 percent of revenue, up 5.8 percent from $129.7 million, or 43.7 percent of revenue for the same period last year -- Adjusted EBITDA* of $11.2 million, or 3.7 percent of revenue, down 5.6 percent from $11.9 million for the second quarter of 2007 -- EBITDA of $10.2 million, or 3.3 percent of revenue, up 56.8 percent from $6.5 million for the same period last year -- Net income from continuing operations of $1.6 million, or $0.07 per basic and $0.06 per diluted share, compared with net loss of ($1.4) million, or ($0.05) per basic and diluted share, for the second quarter of 2007 -- Net income of $5.0 million, or $0.20 per basic and $0.19 per diluted share, compared with net loss of ($0.6) million, or ($0.02) per basic and diluted share, for the second quarter of 2007 * Adjusted EBITDA is defined in the segment tables at the end of this release. "Second quarter operating results were led by our international operations and continuing improvement in North America," said Jon Chait, Hudson Highland Group chairman and chief executive officer. "Our management team did a commendable job in navigating turbulent economies in many markets." "Our cash position more than doubled from last quarter to over $50 million, driven by better working capital management, particularly in North America," added Mary Jane Raymond, executive vice president and chief financial officer. "Our restructuring program is providing the desired financial flexibility for future investments." Restructuring Program During the remainder of 2008, the company will continue to streamline its support operations to match its focus on specialization. The company expects to have $5 - $7 million of restructuring actions throughout this year, including $1 - $3 million in the third quarter. During the first half of 2008, the company incurred $2.7 million of restructuring expenses in conjunction with its 2008 program. Second quarter expenses were predominantly related to severance and reorganization of certain support functions in Hudson Europe. Sale of Balance Public Management Division Effective May 1, 2008, the company completed the sale of the assets of the public management division of Balance, which supplies contractors with medical expertise. Revenue for this division in 2007 was $6.0 million. The company has treated the business as a discontinued operation effective June 30, 2008. As a result of the sale, the company allocated $3.7 million of goodwill and recorded a gain on sale of $2.8 million. Share Repurchase Program On February 4, 2008, the company announced that its board of directors authorized the repurchase of up to $15 million of the company's common stock. The company intends to make purchases from time to time as market conditions warrant. During the first quarter of 2008, the company repurchased 701,173 shares at a total cost of approximately $5.3 million. During the second quarter, the company did not make any repurchases. Guidance The company currently expects third quarter 2008 revenue of $290 - $305 million at prevailing exchange rates and adjusted EBITDA of $8 - $11 million, excluding the impact of any restructuring, acquisitions or divestitures. This compares with revenue of $300.4 million and adjusted EBITDA of $10.6 million in the third quarter of 2007. Additional Information Additional information about the company's quarterly results can be found in the shareholder letter and the second quarter earnings slides in the investor information section of the company's website at http://www.hudson.com/. Conference Call/Webcast Hudson Highland Group will conduct a conference call Thursday, July 31, 2008 at 9:00 AM ET to discuss this announcement. Investors wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 53821851 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 53821851. Hudson Highland Group's quarterly conference call can also be accessed online through Yahoo! Finance at http://www.yahoo.com/ and the investor information section of the company's website at http://www.hudson.com/. The archived call will be available for one week by dialing 1-800-642-1687 followed by the participant passcode 53821851. For those outside the United States, the call will be available on 1-706-645-9291 followed by the participant passcode 53821851. About Hudson Highland Group Hudson Highland Group, Inc. is a leading provider of permanent recruitment, contract professionals and talent management services worldwide. From single placements to total outsourced solutions, Hudson helps clients achieve greater organizational performance by assessing, recruiting, developing and engaging the best and brightest people for their businesses. The company employs more than 3,600 professionals serving clients and candidates in more than 20 countries. More information is available at http://www.hudson.com/. Safe Harbor Statement This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including those under the caption "Guidance" and other statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors include, but are not limited to, the company's history of negative cash flows and operating losses may continue; the ability of clients to terminate their relationship with the company at any time; the impact of global economic fluctuations on temporary contracting operations; risks and financial impact associated with acquisitions and dispositions of non-strategic assets; the company's reliance on information systems and technology; competition; fluctuations in operating results; risks relating to foreign operations, including foreign currency fluctuations; dependence on highly skilled professionals and key management personnel; restrictions imposed by blocking arrangements; exposure to employment-related claims and limits on insurance coverage related thereto; government regulations; restrictions on the company's operating flexibility due to the terms of its credit facility; and the company's ability to maintain effective internal control over financial reporting. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this press release. The company assumes no obligation, and expressly disclaims any obligation, to review or confirm analysts' expectations or estimates or to update any forward-looking statements, whether as a result of new information, future events or otherwise. Contact: David F. Kirby Hudson Highland Group 212-351-7216 Financial Tables Follow HUDSON HIGHLAND GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Revenue $305,940 $297,045 $601,428 $583,860 Direct costs 168,723 167,325 338,603 336,826 Gross margin 137,217 129,720 262,825 247,034 Operating expenses: Selling, general and administrative 125,973 117,814 245,283 230,619 Acquisition-related expenses - 3,853 - 4,151 Depreciation and amortization 3,570 3,852 7,429 7,542 Business reorganization expenses 1,071 1,578 2,391 4,694 Merger and integration (recoveries) expenses (47) (42) 28 (42) Total operating expenses 130,567 127,055 255,131 246,964 Operating income 6,650 2,665 7,694 70 Other income (expense): Interest, net 183 435 543 647 Other, net 899 (19) 1,325 2,588 Income from continuing operations before income taxes 7,732 3,081 9,562 3,305 Provision for income taxes 6,106 4,431 7,966 6,636 Income (loss) from continuing operations 1,626 (1,350) 1,596 (3,331) Income from discontinued operations, net of income taxes 3,330 732 4,724 2,768 Net income (loss) $4,956 $(618) $6,320 $(563) Basic income (loss) per share: Income (loss) from continuing operations $0.07 $(0.05) $0.06 $(0.13) Income from discontinued operations 0.13 0.03 0.19 0.11 Net income (loss) $0.20 $(0.02) $0.25 $(0.02) Diluted income (loss) per share: Income (loss) from continuing operations $0.06 $(0.05) $0.06 $(0.13) Income from discontinued operations 0.13 0.03 0.19 0.11 Net income (loss) $0.19 $(0.02) $0.25 $(0.02) Weighted average shares outstanding: Basic 24,984 25,247 25,135 25,084 Diluted 25,512 25,247 25,615 25,084 HUDSON HIGHLAND GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except per share amounts) (unaudited) ASSETS June 30, December 31, 2008 2007 Current assets: Cash and cash equivalents $51,429 $39,245 Restricted cash, short term 481 - Accounts receivable, net 196,949 187,980 Prepaid and other 20,143 18,389 Current assets from discontinued operations - 13,461 Total current assets 269,002 259,075 Goodwill 67,947 73,444 Other intangibles, net 5,144 4,791 Property and equipment, net 30,025 29,470 Other assets 11,742 7,214 Non-current assets from discontinued operations - 212 Total assets $383,860 $374,206 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $27,679 $20,988 Accrued expenses and other current liabilities 117,353 120,009 Credit facility and current portion of long-term debt 1,107 243 Accrued business reorganization expenses 3,356 3,490 Accrued merger and integration expenses 230 314 Current liabilities from discontinued operations - 7,382 Total current liabilities 149,725 152,426 Accrued business reorganization expenses, non-current 2,305 2,689 Accrued merger and integration expenses, non-current 244 327 Other non-current liabilities 19,467 18,649 Total liabilities 171,741 174,091 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding - - Common stock, $0.001 par value, 100,000 shares authorized; issued: 25,956 and 25,691 shares, respectively 26 26 Additional paid-in capital 448,549 444,075 Accumulated deficit (282,267) (288,587) Accumulated other comprehensive income-translation adjustments 50,286 44,946 Treasury stock, 589 and 25 shares, respectively (4,475) (345) Total stockholders' equity 212,119 200,115 $383,860 $374,206 HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Ended Hudson June 30, 2008 Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $71,507 $116,838 $117,595 $- $305,940 Gross margin $20,179 $64,485 $52,553 $- $137,217 Adjusted EBITDA (1) $1,733 $10,013 $8,713 $(9,215) $11,244 Business reorganization expenses (recoveries) 229 842 - - 1,071 Merger and integration expenses (recoveries) 17 (63) - (1) (47) EBITDA (1) 1,487 9,234 8,713 (9,214) 10,220 Depreciation and amortization 1,170 1,329 1,018 53 3,570 Operating income (loss) $317 $7,905 $7,695 $(9,267) $6,650 For the Three Months Ended Hudson June 30, 2007 Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $70,830 $120,809 $105,406 $- $297,045 Gross margin $21,200 $62,685 $45,835 $- $129,720 Adjusted EBITDA (1) $(1,307) $10,629 $9,132 $(6,548) $11,906 Acquisition-related expenses 3,551 302 - - 3,853 Business reorganization expenses (recoveries) (7) (7) 17 1,575 1,578 Merger and integration expenses (recoveries) (42) - - - (42) EBITDA (1) (4,809) 10,334 9,115 (8,123) 6,517 Depreciation and amortization 1,160 1,632 994 66 3,852 Operating income (loss) $(5,969) $8,702 $8,121 $(8,189) $2,665 (1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization ("Adjusted EBITDA") and non-GAAP earnings before interest, income taxes, other non-opera ting expense, and depreciation and amortization ("EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Six Months Ended Hudson June 30, 2008 Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $154,769 $228,171 $218,488 $- $601,428 Gross margin $42,934 $123,017 $96,874 $- $262,825 Adjusted EBITDA (1) $2,960 $15,783 $13,942 $(15,143) $17,542 Business reorganization expenses (recoveries) 1,691 605 95 - 2,391 Merger and integration expenses (recoveries) 15 14 - (1) 28 EBITDA (1) 1,254 15,164 13,847 (15,142) 15,123 Depreciation and amortization 2,343 2,972 2,008 106 7,429 Operating income (loss) $(1,089) $12,192 $11,839 $(15,248) $7,694 For the Six Months Ended Hudson June 30, 2007 Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $147,377 $237,817 $198,666 $- $583,860 Gross margin $43,284 $119,304 $84,446 $- $247,034 Adjusted EBITDA (1) $(2,676) $17,187 $14,702 $(12,798) $16,415 Acquisition-related expenses 3,551 600 - - 4,151 Business reorganization expenses (recoveries) 722 2,440 31 1,501 4,694 Merger and integration expenses (recoveries) (42) - - - (42) EBITDA (1) (6,907) 14,147 14,671 (14,299) 7,612 Depreciation and amortization 2,287 3,197 1,877 181 7,542 Operating income (loss) $(9,194) $10,950 $12,794 $(14,480) $70 (1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization ("Adjusted EBITDA") and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization ("EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. DATASOURCE: Hudson Highland Group, Inc. CONTACT: David F. Kirby of Hudson Highland Group, +1-212-351-7216, Web site: http://www.hudson.com/

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