HHGP Hudson Highland Grp., Inc. (MM)

NEW YORK, Oct. 28 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. (NASDAQ:HHGP), one of the world's leading providers of permanent recruitment, contract professionals and talent management solutions, today announced financial results for the third quarter ended September 30, 2008. 2008 Third Quarter Summary -- Revenue of $271.4 million, a decrease of 9.6 percent from $300.4 million for the third quarter of 2007 -- Gross margin of $114.9 million, or 42.3 percent of revenue, down 11.3 percent from $129.4 million, or 43.1 percent of revenue for the same period last year -- Adjusted EBITDA* of $6.0 million, or 2.2 percent of revenue, down 43.6 percent from $10.6 million for the third quarter of 2007 -- EBITDA* of $3.1 million, or 1.1 percent of revenue, down 72.5 percent from $11.1 million for the same period last year -- Net loss from continuing operations of $0.7 million, or $0.03 per basic and diluted share, compared with net income of $3.0 million, or $0.12 per basic and diluted share for the third quarter of 2007 -- Net loss of $0.3 million, or $0.01 per basic and diluted share, compared with net income of $3.6 million, or $0.14 per basic and diluted share for the third quarter of 2007 * Adjusted EBITDA and EBITDA are defined in the segment tables at the end of this release. "Our third quarter performance was adversely impacted by weakening economic conditions in all of our major markets around the world," said Jon Chait, Hudson Highland Group chairman and chief executive officer. "Despite the macro-economic environment, we continued to see growth in continental Europe, North America's Legal business and Asia. While we are clearly entering a negative economic cycle, I am encouraged by our team's continuing diligence on cost containment and an across-the-board focus on high-demand specializations to cushion the cyclical impact." "In the third quarter, strong expense management helped offset the top-line challenges," added Mary Jane Raymond, executive vice president and chief financial officer. "Our operational teams did a good job reducing expenses by $10 million from the prior year. In addition, our liquidity remains strong with more than $44 million in cash and a $75 million credit facility." Restructuring Program During the remainder of 2008, the company expects to continue to streamline its operations in parallel with shifting market conditions. The company expects to have $8 - $12 million of restructuring charges for the full year, higher than the previous guidance range of $5 - $7 million, and including $2 - $6 million for the fourth quarter. During the first nine months of 2008, the company incurred $5.6 million of restructuring charges in conjunction with its 2008 program. Third quarter expenses were primarily related to severance and reorganization in Hudson Asia Pacific and Europe. 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 third quarter, the company repurchased 53,500 shares at a total cost of approximately $0.5 million. Since the inception of the program, the company has repurchased 754,673 shares at a total cost of approximately $5.8 million. Currency Impact during the Quarter As the company noted previously, exchange rate movement during the third quarter negatively impacted reported results when compared to the prevailing rates at the time third quarter guidance was established. The strengthening U.S. dollar lowered both revenue and expenses in international operations. The impact on the third quarter was a $7.2 million reduction in reported revenue and a $1.1 million reduction in reported adjusted EBITDA. Guidance The company currently expects fourth quarter 2008 revenue of $205 - $220 million at prevailing exchange rates and adjusted EBITDA of $2 - $5 million, excluding the impact of any restructuring, acquisitions or divestitures. This compares with revenue of $288.8 million and adjusted EBITDA of $13.1 million in the fourth quarter of 2007. Last year's fourth quarter at current guidance exchange rates would have resulted in revenue of $236.9 million and adjusted EBITDA of $9.1 million. Additional Information Additional information about the company's quarterly results can be found in the shareholder letter and the third 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 Wednesday, October 29, 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 67938698 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 67938698. 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 67938698. For those outside the United States, the call will be available on 1-706-645-9291 followed by the participant passcode 67938698. 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-core businesses; the company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology; competition in the company's markets and the company's dependence on highly skilled professionals; fluctuations in the company's operating results from quarter to quarter; risks relating to the company's international operations, including foreign currency fluctuations; dependence on key management personnel; restrictions imposed by blocking arrangements; exposure to employment-related claims from both clients and employers and limits on insurance coverage related thereto; government regulations; any impairment to the carrying value of goodwill; 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 Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenue $271,425 $300,351 $872,853 $884,211 Direct costs 156,575 170,924 495,178 507,750 Gross margin 114,850 129,427 377,675 376,461 Operating expenses: Selling, general and administrative expenses 108,852 118,026 354,163 348,603 Acquisition-related expenses - 311 - 4,462 Depreciation and amortization 3,946 3,540 11,375 11,082 Business reorganization expenses 2,931 (56) 5,321 4,638 Total operating expenses 115,729 121,821 370,859 368,785 Operating (loss) income (879) 7,606 6,816 7,676 Other income (expense): Interest, net 323 (141) 866 506 Other, net 575 1,096 1,900 3,684 Income before provision for income taxes 19 8,561 9,582 11,866 Provision for income taxes 757 5,609 8,724 12,245 Net (loss) income from continuing operations (738) 2,952 858 (379) Net income from discontinued operations 429 627 5,153 3,395 Net (loss) income $(309) $3,579 $6,011 $3,016 Basic income (loss) per share: (Loss) income from continuing operations $(0.03) $0.12 $0.03 $(0.02) Income from discontinued operations 0.02 0.02 0.21 0.14 Net (loss) income $(0.01) $0.14 $0.24 $0.12 Diluted income (loss) per share: (Loss) income from continuing operations $(0.03) $0.12 $0.03 $(0.02) Income from discontinued operations 0.02 0.02 0.21 0.14 Net (loss) income $(0.01) $0.14 $0.24 $0.12 Weighted average shares outstanding: Basic 25,245 25,443 25,180 25,205 Diluted 25,245 26,058 25,550 25,205 HUDSON HIGHLAND GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) ASSETS September 30, December 31, 2008 2007 (unaudited) Current assets: Cash and cash equivalents $44,321 $39,245 Cash - restricted - - Accounts receivable, net 177,011 187,980 Prepaid and other 18,263 18,389 Current assets from discontinued operations - 13,461 Total current assets 239,595 259,075 Goodwill 66,275 73,444 Other intangibles, net 3,842 4,791 Property and equipment, net 27,590 29,470 Other assets 13,248 7,214 Non-current assets from discontinued operations - 212 Total assets $350,550 $374,206 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $23,062 $20,988 Accrued expenses and other current liabilities 98,892 120,323 Short-term borrowings 997 243 Accrued business reorganization expenses 3,676 3,490 Current liabilities from discontinued operations - 7,382 Total current liabilities 126,627 152,426 Other non-current liabilities 20,378 18,976 Accrued business reorganization expenses, non-current 2,021 2,689 Total liabilities 149,026 174,091 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: 26,163 and 25,691 shares, respectively 26 26 Additional paid-in capital 449,550 444,075 Accumulated deficit (282,576) (288,587) Accumulated other comprehensive income-translation adjustments 39,713 44,946 Treasury stock, 662 and 25 shares, respectively, at cost (5,189) (345) Total stockholders' equity 201,524 200,115 $350,550 $374,206 HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Hudson Ended Hudson Hudson Asia September 30, 2008 Americas Europe Pacific Corporate Total Revenue $66,485 $99,124 $105,816 $- $271,425 Gross margin $17,967 $50,520 $46,363 $- $114,850 Adjusted EBITDA (1) $1,586 $3,247 $7,179 $(6,004) $6,008 Business reorganization expenses 136 788 2,007 - 2,931 Merger and integration (recoveries) expenses (15) 24 - 1 10 EBITDA (1) 1,465 2,435 5,172 (6,005) 3,067 Depreciation and amortization 1,175 1,495 1,223 53 3,946 Operating income (loss) $290 $940 $3,949 $(6,058) $(879) For the Three Months Hudson Ended Hudson Hudson Asia September 30, 2007 Americas Europe Pacific Corporate Total Revenue $75,667 $115,006 $109,678 $- $300,351 Gross margin $23,178 $58,393 $47,856 $- $129,427 Adjusted EBITDA (1) $1,355 $6,053 $9,990 $(6,749) $10,649 Acquisition-related expenses - 311 - - 311 Business reorganization (recoveries) expenses (63) (2) (12) 21 (56) Merger and integration recoveries (10) - - (742) (752) EBITDA (1) 1,428 5,744 10,002 (6,028) 11,146 Depreciation and amortization 998 1,471 1,023 48 3,540 Operating income (loss) $430 $4,273 $8,979 $(6,076) $7,606 (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. HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Nine Months Ended Hudson September 30, 2008 Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $221,254 $327,295 $324,304 $- $872,853 Gross margin $60,901 $173,537 $143,237 $- $377,675 Adjusted EBITDA (1) $4,544 $19,030 $21,121 $(21,145) $23,550 Business reorganization expenses 1,826 1,393 2,102 - 5,321 Merger and integration expenses - 38 - - 38 EBITDA (1) 2,718 17,599 19,019 (21,145) 18,191 Depreciation and amortization 3,518 4,467 3,231 159 11,375 Operating (loss) income $(800) $13,132 $15,788 $(21,304) $6,816 For the Nine Months Ended Hudson September 30, 2007 Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $223,044 $352,823 $308,344 $- $884,211 Gross margin $66,461 $177,697 $132,303 $- $376,461 Adjusted EBITDA (1) $(1,321) $23,240 $24,692 $(19,547) $27,064 Acquisition-related expenses 3,551 911 - - 4,462 Business reorganization expenses 659 2,438 19 1,522 4,638 Merger and integration recoveries (52) - - (742) (794) EBITDA (1) (5,479) 19,891 24,673 (20,327) 18,758 Depreciation and amortization 3,285 4,668 2,900 229 11,082 Operating (loss) income $(8,764) $15,223 $21,773 $(20,556) $7,676 (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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