HHGP Hudson Highland Grp., Inc. (MM)

NEW YORK, Feb. 17 /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 fourth quarter and full-year ended December 31, 2008. 2008 Fourth Quarter Summary -- Revenue of $207.4 million, a decrease of 28.2 percent from $288.8 million for the fourth quarter of 2007 -- Gross margin of $86.5 million, or 41.7 percent of revenue, down 33.2 percent from $129.4 million, or 44.8 percent of revenue for the same period last year -- Adjusted EBITDA* loss of $3.4 million, or 1.6 percent of revenue, down from adjusted EBITDA of $13.1 million for the fourth quarter of 2007 -- EBITDA* loss of $76.8 million, including a $67.1 million non-cash impairment charge, detailed later, down from EBITDA of $12.5 million for the same period last year -- Net loss from continuing operations of $78.3 million, or $3.12 per basic and diluted share, compared with net income from continuing operations of $4.3 million, or $0.17 per basic and $0.16 per diluted share, for the fourth quarter of 2007 -- Net loss of $80.3 million, or $3.20 per basic and diluted share, compared with net income of $12.0 million, or $0.47 per basic and $0.46 per diluted share, for the fourth quarter of 2007 *Adjusted EBITDA and EBITDA are defined in the segment tables at the end of this release. 2008 Full-Year Summary -- Revenue of $1.08 billion, a decrease of 7.9 percent from $1.17 billion for 2007 -- Gross margin of $464.1 million, or 43.0 percent of revenue, a decrease of 8.3 percent from $505.9 million, or 43.1 percent of revenue for 2007 -- Adjusted EBITDA* of $20.1 million, or 1.9 percent of revenue, a decrease of 49.8 percent from $40.1 million, or 3.4 percent of revenue, for 2007 -- EBITDA* loss of $58.6 million, including a $67.1 million non-cash impairment charge, detailed below, down from EBITDA of $31.3 million, or 2.7 percent of revenue for 2007 -- Net loss from continuing operations of $77.4 million, or $3.07 per basic and diluted share, compared with a net income from continuing operations of $3.9 million, or $0.15 per basic and diluted share, for 2007 -- Net loss of $74.3 million, or $2.95 per basic and diluted share, compared with net income of $15.0 million, or $0.59 per basic and $0.58 diluted share, for 2007 *Adjusted EBITDA and EBITDA are defined in the segment tables at the end of this release. "Uncertainty about the future course of world economies, compounded by unprecedented volatility in the global equity markets, had a significant negative impact during the fourth quarter on both permanent and contract hiring intentions across multiple industries and geographies," said Jon Chait, Hudson Highland Group chairman and chief executive officer. "We expect first quarter demand, historically a seasonal low point, to be soft as well." "We took additional steps during the fourth quarter to reduce our cost base as demand declined, and will continue our expense management diligence as these dynamic market conditions play out," added Mary Jane Raymond, executive vice president and chief financial officer. "We ended the year with $43.9 million in net cash and had positive cash flow from operations for the fourth quarter and full year." Goodwill and Other Impairments On December 18, 2008, the company announced that it was conducting its annual impairment testing of goodwill and other long-term assets during the fourth quarter, and that the company may record a non-cash impairment charge. The process followed the required accounting guidance and the analysis included 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 recorded a $67.1 million non-cash impairment charge for goodwill and other long-term assets in the fourth quarter of 2008. Restructuring Program During the first quarter of 2009, the company expects to continue to streamline its operations in response to shifting market conditions. The company expects to have $3 - $5 million of restructuring charges during the first quarter of 2009. During 2008, the company incurred $11.9 million of restructuring charges in conjunction with its 2008 program, including $6.3 million in the fourth quarter of 2008. Fourth quarter expenses were related to severance and reorganization in all three regional businesses of the company. The restructuring charge and the company's management of costs overall contributed to the $26 million reduction in expenses that offset some of the gross margin decline in the fourth quarter. Liquidity and Capital Resources On December 30, 2008, the company announced it had amended its senior secured credit facility with Wells Fargo Foothill. The revised agreement has no minimum EBITDA covenant, but instead requires Hudson to maintain a minimum borrowing availability of $25 million. Borrowings are based on eligible receivables. The maturity date of the amended credit facility remains July 31, 2012. The company ended the fourth quarter of 2008 with $43.9 million in net cash, an increase from $39 million at the end of 2007, and excess availability under the credit facility of $19.7 million. Share Repurchase Program On February 4, 2008, the company announced that the board of directors authorized the repurchase of up to $15 million of the company's common stock. During the fourth quarter, the company repurchased 493,783 shares at a total cost of approximately $1.7 million. Since the inception of the program, the company has repurchased 1,248,456 shares at a total cost of approximately $7.5 million. The company's amended credit facility prohibits stock repurchases after February 28, 2009. Guidance Due to turbulent economic conditions and low visibility, the company will not provide formal guidance for the first quarter of 2009. The company expects operating conditions to remain weak throughout the first quarter. In a normal year, revenue and adjusted EBITDA in the first quarter would be lower than the fourth quarter of the preceding year. In 2009, we expect that this difference would be larger due to the decline in the general economy. In the first quarter of 2008, the company reported revenue of $295.5 million and adjusted EBITDA of $6.3 million. Last year's first quarter at current forecast exchange rates would have resulted in revenue of $242.3 million and adjusted EBITDA of $3.7 million. Additional Information Additional information about the company's quarterly results can be found in the shareholder letter and the fourth quarter and full-year 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 Tuesday, February 17, 2009 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 83821257 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 83821257. Hudson Highland Group's quarterly conference call can 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 83821257. For those outside the United States, the call will be available on 1-706-645-9291 followed by the participant passcode 83821257. 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 3,100 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 impact of global economic fluctuations including the current economic downturn; the ability of clients to terminate their relationship with the company at any time; risks in collecting our accounts receivable; implementation of the company's cost reduction initiatives effectively; the company's history of negative cash flows and operating losses may continue; the company's limited borrowing availability under our credit facility, which may negatively impact our liquidity; restrictions on the company's operating flexibility due to the terms of its credit facility; fluctuations in the company's operating results from quarter to quarter; risks relating to the company's international operations, including foreign currency fluctuations; risks related to our investment strategy; risks and financial impact associated with dispositions of underperforming or non-core assets; 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; the company's exposure to employment-related claims from both clients and employers and limits on related insurance coverage; the company's dependence on key management personnel; volatility of stock price; the impact of government regulations; restrictions imposed by blocking arrangements. 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 letter. 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. Financial Tables Follow HUDSON HIGHLAND GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Twelve Months Ended December 31, December 31, 2008 2007 2008 2007 Revenue $207,378 $288,842 $1,080,231 $1,173,053 Direct costs 120,921 159,430 616,099 667,180 Gross margin 86,457 129,412 464,132 505,873 Operating expenses: Selling, general and administrative 89,860 116,330 443,985 465,728 Acquisition-related expenses - 837 - 5,299 Depreciation and amortization 3,420 3,525 14,795 14,607 Business reorganization expenses 6,267 (276) 11,588 4,362 Merger and integration (recoveries) expenses - 8 38 (787) Goodwill and other impairment charges 67,087 - 67,087 - Total operating expenses 166,634 120,424 537,493 489,209 Operating (loss) income: (80,177) 8,988 (73,361) 16,664 Other income (expense): Interest, net 195 194 1,061 700 Other, net 1,618 (239) 3,518 3,445 (Loss) income from continuing operations before income taxes (78,364) 8,943 (68,782) 20,809 (Benefit) provision for income taxes (94) 4,672 8,629 16,917 (Loss) income from continuing operations (78,270) 4,271 (77,411) 3,892 (Loss) income from discontinued operations, net of income taxes (2,060) 7,694 3,093 11,089 Net (loss) income $(80,330) $11,965 $(74,318) $14,981 Basic income (loss) per share: (Loss) income from continuing operations $(3.12) $0.17 $(3.07) $0.15 (Loss) income from discontinued operations (0.08) 0.30 0.12 0.44 Net (loss) income $(3.20) $0.47 $(2.95) $0.59 Diluted income (loss) per share: (Loss) income from continuing operations $(3.12) $0.16 $(3.07) $0.15 (Loss) income from discontinued operations (0.08) 0.30 0.12 0.43 Net (loss) income $(3.20) $0.46 $(2.95) $0.58 Weighted average shares outstanding: Basic 25,099 25,443 25,193 25,274 Diluted 25,099 26,058 25,193 25,914 HUDSON HIGHLAND GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except per share amounts) (unaudited) December 31, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $ 49,209 $ 39,245 Accounts receivable, net 128,578 187,981 Prepaid and other 15,683 18,389 Current assets from discontinued operations - 13,460 Total current assets 193,470 259,075 Goodwill - 73,442 Other intangibles, net 2,498 4,793 Property and equipment, net 24,512 29,470 Other assets 10,473 7,214 Non-current assets from discontinued operations - 212 Total assets $230,953 $374,206 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,833 $ 20,988 Accrued expenses and other current liabilities 77,717 120,322 Credit facility and current portion of long-term debt 5,307 243 Accrued business reorganization expenses 5,724 3,490 Current liabilities from discontinued operations - 7,383 Total current liabilities 104,581 152,426 Accrued business reorganization expenses, non-current 1,476 2,689 Other non-current liabilities 16,904 18,976 Total liabilities 122,961 174,091 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: 26,389 and 25,691 shares, respectively 26 26 Additional paid-in capital 450,739 444,075 Accumulated deficit (362,905) (288,587) Accumulated other comprehensive income -- translation adjustments 27,054 44,946 Treasury stock, 1,140 and 25 shares, respectively (6,922) (345) Total stockholders' equity 107,992 200,115 $230,953 $374,206 HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Ended December 31, 2008 Hudson Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $ 52,394 $ 84,232 $ 70,752 $ - $207,378 Gross Margin $ 14,115 $ 42,760 $ 29,582 $ - $ 86,457 Adjusted EBITDA(1) $ (546) $ 4,010 $ 263 $(7,130) $ (3,403) Business reorganization expenses (recoveries) 1,237 1,634 2,399 997 6,267 Merger and integration expenses (recoveries) - - - - - Goodwill and other impairment charges 40,748 19,598 6,741 - 67,087 EBITDA(1) (42,531) (17,222) (8,877) (8,127) (76,757) Depreciation and amortization 1,112 1,325 917 66 3,420 Operating income (loss) $(43,643) $(18,547) $(9,794) $(8,193) $(80,177) For the Three Months Ended December 31, 2007 Hudson Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $ 68,482 $113,561 $106,799 $ - $288,842 Gross Margin $ 21,041 $ 59,815 $ 48,556 $ - $129,412 Adjusted EBITDA(1) $ 1,208 $ 10,120 $ 8,736 $(6,982) $ 13,082 Acquisition-related expenses - 837 - - 837 Business reorganization expenses (recoveries) (118) - (34) (124) (276) Merger and integration expenses (recoveries) 2 - - 6 8 EBITDA(1) 1,324 9,283 8,770 (6,864) 12,513 Depreciation and amortization 1,070 1,373 1,037 45 3,525 Operating income (loss) $ 254 $ 7,910 $ 7,733 $(6,909) $ 8,988 (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 Year Ended December 31, 2008 Hudson Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $273,647 $411,528 $395,056 $ - $1,080,231 Gross Margin $ 75,016 $216,297 $172,819 $ - $ 464,132 Adjusted EBITDA(1) $ 3,999 $ 23,041 $ 21,384 $(28,277) $ 20,147 Business reorganization expenses (recoveries) 3,062 3,028 4,501 997 11,588 Merger and integration expenses (recoveries) - 38 - - 38 Goodwill and other impairment charges 40,748 19,598 6,741 - 67,087 EBITDA(1) (39,811) 377 10,142 (29,274) (58,566) Depreciation and amortization 4,629 5,793 4,148 225 14,795 Operating income (loss) $(44,440) $(5,416) $5,994 $(29,499) $ (73,361) For the Year Ended December 31, 2007 Hudson Hudson Hudson Asia Americas Europe Pacific Corporate Total Revenue $291,526 $466,384 $415,143 $ - $1,173,053 Gross Margin $ 87,495 $237,518 $180,860 $ - $ 505,873 Adjusted EBITDA(1) $ (114) $ 33,359 $ 33,428 $(26,528) $ 40,145 Acquisition-related expenses 3,551 1,748 - - 5,299 Business reorganization expenses (recoveries) 541 2,438 (15) 1,398 4,362 Merger and integration expenses (recoveries) (50) - - (737) (787) EBITDA(1) (4,156) 29,173 33,443 (27,189) 31,271 Depreciation and amortization 4,353 6,043 3,936 275 14,607 Operating income (loss) $ (8,509) $23,130 $ 29,507 $(27,464) $ 16,664 (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. CONTACT: David F. Kirby Hudson Highland Group 212-351-7216 DATASOURCE: Hudson Highland Group, Inc. CONTACT: David F. Kirby, Hudson Highland Group, +1-212-351-7216, Web site: http://www.hudson.com/

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