Hudson Highland Group Updates Q4 2008 Guidance and Status of Impairment Testing
December 18 2008 - 7:00AM
PR Newswire (US)
NEW YORK, Dec. 18 /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 revised guidance for the fourth quarter
and an update on its annual impairment testing, both of which
reflect the impact of the global economic slowdown. Hudson's
markets worldwide declined significantly during November. Results
for the month were below prior year in all regions: Asia Pacific,
Europe, and North America. The company experienced reduced demand
in both contract and permanent recruitment from October levels,
with the largest percentage drop coming from the permanent
recruitment business. Given these trends, the company now expects
its fourth quarter 2008 revenue to be between $200-$210 million at
prevailing exchange rates, compared with previous guidance of
$205-$220 million. The company also believes adjusted EBITDA could
be as low as a loss of $6 million, compared with previous adjusted
EBITDA guidance of $2-$5 million. Adjusted EBITDA excludes the
impact of any restructuring, acquisitions, divestitures and
impairments. Economic conditions in North America began to
deteriorate in late 2007. Hudson took a number of actions at the
end of 2007 and through 2008 in all of its markets that reduced its
pre-tax expense base by $40 million on an annualized basis, about
half of which was realized during 2008 to offset gross margin
declines, and continues to assess options to align its operations
with the market while serving client and candidate needs. A number
of additional actions to reduce expenses are already underway, but
the rapid drop in permanent recruitment during November limited the
company's ability to mitigate the adjusted EBITDA decline in a few
weeks. Hudson currently expects that the benefit of these
additional actions will begin to be realized in the early part of
2009, in addition to the full annualized impact of the 2008
actions. More detailed information regarding cost reduction actions
and the timing of benefits will be provided when the company
announces fourth quarter and full-year earnings results. These cost
reduction actions are also important to the company's liquidity
position. As of yesterday, the company had net cash of
approximately $42 million. Every region is focused on cash
management as part of its response to the economic conditions.
Hudson expected slowing economic conditions when it announced its
third quarter 2008 results and set guidance for the fourth quarter.
However, economic conditions during the quarter have been worse
than anticipated with greater contraction in North America and the
European Union, and slower growth rates in the emerging markets.
The company expects weak global conditions to persist throughout
2009, resulting in a reduction in demand for its services. In
addition, revenue has been affected by the strengthening U.S.
dollar against most currencies in 2008, and this condition may
continue in 2009. The company is also in the process of conducting
its annual impairment testing of goodwill, as well as other
long-term assets. The process follows the required accounting
guidance and the analysis includes consideration of factors such as
deterioration in macro-economic conditions, their impact on the
company's markets and business performance and the decline in the
market price of the company's common stock. Based on this analysis,
the company may record in the fourth quarter of 2008 a non-cash
impairment charge of between $30-$75 million for goodwill and
intangibles from its various acquisitions since 2004, and possibly
other long-term assets. 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 3,300
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 DATASOURCE: Hudson Highland Group, Inc. CONTACT:
CONTACT: David F. Kirby of the Hudson Highland Group,
+1-212-351-7216, Web Site: http://www.hudson.com/
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