Hudson Highland Group Reports 2003 Third Quarter and Nine Month
Results NEW YORK, Oct. 28 /PRNewswire-FirstCall/ -- Hudson Highland
Group, Inc. , one of the world's leading executive search,
professional staffing and human resource consultancies, today
announced financial results for the third quarter and nine months
ended September 30, 2003. In the third quarter, the company
reported revenue of $272.2 million and a net loss of $226.3
million, or $26.73 per basic and diluted share, which includes a
previously announced goodwill impairment charge of $202.8 million.
2003 Third Quarter Summary -- Revenue of $272.2 million -- Gross
margin of $98.2 million or 36.1% -- Adjusted EBITDA loss of $18.6
million -- including a previously announced incremental $3.4
million bad debt write-off as well as $3.0 million of expenses
related to repositioning the executive search subsidiary --
excluding a charge for impaired goodwill, and business
reorganization, merger and integration effects -- Cash and cash
equivalents of $39.3 million "During the third quarter we continued
to make progress in positioning Hudson Highland Group for the
future while establishing the necessary financial discipline to
manage our current business. Looking forward, we will continue to
focus on both growing our business and improving productivity
across the enterprise by building upon the operating improvements
we realized in the past quarter. We are beginning to realize some
of the benefits of this improved productivity as operating results
for both our Hudson UK and Hudson Asia-Pacific operations increased
over the preceding quarter," said Richard W. Pehlke, executive vice
president and chief financial officer of Hudson Highland Group. "We
have taken appropriate action in writing off impaired goodwill and
uncollectible receivables and, despite the current economic
environment, we are effectively managing our cash position for
financial flexibility. In the near-term, we remain cautious about
the economic environment, however we reaffirm our previous guidance
that we expect to achieve break-even by mid-year 2004," said Jon
Chait, chairman and chief executive officer of Hudson Highland
Group. 2003 Nine Month Results For the first nine months of 2003,
Hudson Highland Group reported revenue of $800.7 million and an
operating loss of $278.2 million, which includes a goodwill
impairment charge of $202.8 million. Hudson Highland Group's net
loss for the first nine months of 2003 was $285.4 million, or
$33.78 per basic and diluted share. Historical Results Historical
results for 2002 relate to the company's businesses as they were
operated as a business unit of Monster Worldwide, Inc. (formerly
TMP Worldwide Inc.). On a historical basis for the third quarter
ended September 30, 2002, Hudson Highland Group reported revenue of
$270.7 million and an operating loss of $5.5 million. The company's
net loss for the third quarter of 2002 was $5.5 million, or $0.65
per basic and diluted share. For the first nine months of 2002,
Hudson Highland Group reported revenue of $812.6 million and an
operating loss of $76.0 million. The company's net loss for the
first nine months of 2002 was $367.4 million, or $43.99 per basic
and diluted share. The nine month net loss included a loss from the
cumulative effect of an accounting change for the write-off of
$293.0 million of impaired goodwill; excluding the accounting
change, the net loss was $74.4 million or $8.91 per basic and
diluted share. Conference Call / Webcast Hudson Highland Group will
conduct a conference call today, Tuesday, October 28, 2003, at
10:30 AM EST to discuss this announcement. Investors wishing to
participate can join the conference call by dialing 1-800-299-9086
followed by the participant passcode 62280319 at 10:20 AM EST. For
those outside the United States, please call in on 1-617-786-2903
followed by the participant passcode 62280319. 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.hhgroup.com/. Hudson Highland Group Hudson Highland
Group offers a full spectrum of retained executive search,
specialty staffing and related human resource consulting solutions
worldwide. As an independent, publicly traded $1 billion company,
Hudson Highland Group employs approximately 4,000 professionals
serving clients in nearly 30 countries through its Highland
Partners search and Hudson Global Resources staffing divisions.
More information about Hudson Highland Group is available at
http://www.hhgroup.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 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 on the Company's temporary
contracting operations, the cyclical nature of the Company's
executive search and mid- market professional staffing businesses,
the Company's ability to manage its growth, risks associated with
expansion, the Company's heavy reliance on information systems and
the impact of potentially losing that technology or failing to
further develop technology, the Company's markets are highly
competitive, the Company's operating results fluctuate from quarter
to quarter, risks relating to the Company's foreign operations,
including foreign currency fluctuations, the Company's dependence
on its highly skilled professionals, the impact of employees
departing with existing executive search clients, risks maintaining
the Company's professional reputation and brand name, restrictions
imposed by blocking arrangements, the Company's exposure to
employment-related claims, legal liability and costs from both
clients and employers and limitations on insurance coverage related
thereto, the Company's dependence on key management personnel, the
impact of government regulations, the Company's ability to
successfully operate as an independent company and the level of
costs associated therewith and restrictions on the Company's
operating flexibility due to the terms of its credit facility.
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 update any forward-looking
statements. HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
(unaudited) Three Months Ended Nine Months Ended September 30,
September 30, 2003 2002 2003 2002 Revenue $272,181 $270,710
$800,653 $812,577 Direct costs 173,959 166,158 501,181 484,752
Gross margin 98,222 104,552 299,472 327,825 Selling, general and
administrative expenses 122,070 110,581 367,408 344,612 Goodwill
impairment charge 202,785 -- 202,785 -- Business reorganization
expenses (recoveries) (906) 407 6,555 53,133 Merger and integration
expenses (recoveries) (102) (902) 876 6,056 Operating loss
(225,625) (5,534) (278,152) (75,976) Other income (expense): Other,
net (749) 415 (930) (8) Interest expense, net (121) (287) (376)
(273) Loss before provision for (benefit of) income taxes and
accounting change (226,495) (5,406) (279,458) (76,257) Provision
for (benefit of) income taxes (221) 66 5,917 (1,827) Loss before
accounting change (226,274) (5,472) (285,375) (74,430) Cumulative
effect of accounting change -- -- -- (293,000) Net loss $(226,274)
$(5,472) $(285,375) $(367,430) Basic and diluted loss per share:
Loss before accounting change $(26.73) $(0.65) $(33.78) $(8.91) Net
loss $(26.73) $(0.65) $(33.78) $(43.99) Weighted average shares
8,466 8,364 8,448 8,353 outstanding HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except per
share amounts) September 30, December 31, 2003 2002 (unaudited)
ASSETS Current assets: Cash and cash equivalents $39,312 $25,908
Accounts receivable, net 140,976 161,831 Due from Monster
Worldwide, Inc. 7,513 -- Other current assets 22,505 28,177 Total
current assets 210,306 215,916 Property and equipment, net 39,643
34,106 Intangibles, net 1,569 201,937 Other assets 17,197 15,145
$268,715 $467,104 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $34,831 $28,305 Accrued expenses and
other current liabilities 105,123 84,669 Accrued merger and
integration expenses 5,244 8,935 Accrued business reorganization
expenses 12,752 25,845 Total current liabilities 157,950 147,754
Other liabilities 3,770 2,776 Total liabilities 161,720 150,530
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 and outstanding: 8,507 and 0 shares,
respectively 9 -- Additional paid-in capital 314,389 -- Retained
deficit (241,364) -- Accumulated other comprehensive income:
Foreign currency translation adjustments 33,961 24,660 Total
divisional equity -- 291,914 Total stockholders' equity 106,995
316,574 $268,715 $467,104 HUDSON HIGHLAND GROUP, INC. SEGMENT
ANALYSIS (in thousands) (unaudited) For the Three Months Ended
September 30, 2003 Americas Europe Asia Pac. Corporate Total
Revenue Hudson $63,488 $90,316 $102,712 $256,516 Highland 10,630
3,719 1,316 15,665 $74,118 $94,035 $104,028 $272,181 Gross Margin
Hudson $14,618 $36,557 $32,410 $83,585 Highland 9,860 3,594 1,183
14,637 $24,478 $40,151 $33,593 $98,222 Adjusted EBITDA (1) Hudson
$(6,584) $(2,164) $2,897 $(5,851) Highland (1,414) (3,806) (230)
(5,450) Corporate -- -- -- $(7,292) (7,292) $(7,998) $(5,970)
$2,667 $(7,292) $(18,593) For the Three Months Ended September 30,
2002 Revenue Hudson $79,906 $81,817 $92,949 $254,672 Highland
11,330 4,337 371 16,038 $91,236 $86,154 $93,320 $270,710 Gross
Margin Hudson $21,214 $35,085 $32,733 $89,032 Highland 11,330 3,819
371 15,520 $32,544 $38,904 $33,104 $104,552 Adjusted EBITDA (1)
Hudson $2,641 $(5,708) $7,085 $4,018 Highland 2,225 159 (226) 2,158
Corporate -- -- -- $(7,524) (7,524) $4,866 $(5,549) $6,859 $(7,524)
$(1,348) (1) Non-GAAP earnings before interest, income taxes,
special charges and depreciation and amortization ("Adjusted
EBITDA") is 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 this measurement to evaluate
capital needs and working capital requirements. Adjusted 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
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 September 30, 2003 Americas Europe Asia Pac. Corporate Total
Revenue Hudson $211,604 $265,675 $275,812 $753,091 Highland 32,278
11,861 3,423 47,562 $243,882 $277,536 $279,235 $800,653 Gross
Margin Hudson $48,548 $114,667 $91,332 $254,547 Highland 30,951
10,912 3,062 44,925 $79,499 $125,579 $94,394 $299,472 Adjusted
EBITDA (1) Hudson $(10,774) $(11,115) $3,680 $(18,209) Highland
(4,571) (8,181) (865) (13,617) Corporate - - - $(20,554) (20,554)
$(15,345) $(19,296) $2,815 $(20,554) $(52,380) For the Nine Months
Ended September 30, 2002 Revenue Hudson $242,795 $253,364 $264,244
$760,403 Highland 35,201 14,880 2,093 52,174 $277,996 $268,244
$266,337 $812,577 Gross Margin Hudson $63,273 $118,618 $95,084
$276,975 Highland 35,201 13,556 2,093 50,850 $98,474 $132,174
$97,177 $327,825 Adjusted EBITDA (1) Hudson $3,643 $(5,800) $15,611
$13,454 Highland 3,241 553 78 3,872 Corporate -- -- -- $(19,375)
(19,375) $6,884 $(5,247) $15,689 $(19,375) $(2,049) (1) Non-GAAP
earnings before interest, income taxes, special charges and
depreciation and amortization ("Adjusted EBITDA") is 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
this measurement to evaluate capital needs and working capital
requirements. Adjusted 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 as presented above may not be comparable with
similarly titled measures reported by other companies. HUDSON
HIGHLAND GROUP, INC. RECONCILIATION OF ADJUSTED EBITDA TO OPERATING
LOSS (in thousands) (unaudited) Three Months Ended Nine Months
Ended September 30, September 30, 2003 2002 2003 2002 Hudson
Adjusted EBITDA (1) $(5,851) $4,018 $(18,209) $13,454 Business
reorganization (expenses) recoveries 335 178 (6,205) (34,544)
Merger and integration (expenses) recoveries 102 11 (876) (7,468)
Depreciation and amortization (3,377) (2,847) (10,324) (8,976)
Goodwill impairment (195,404) -- (195,404) -- Operating loss
$(204,195) $1,360 $(231,018) $(37,534) Highland Adjusted EBITDA (1)
$(5,450) $2,158 $(13,617) $3,872 Business reorganization (expenses)
recoveries 571 13 (213) (13,743) Merger and integration recoveries
-- 891 -- 1,501 Depreciation and amortization (975) (584) (3,280)
(1,956) Goodwill impairment (7,381) -- (7,381) -- Operating loss
$(13,235) $2,478 $(24,491) $(10,326) Corporate Adjusted EBITDA (1)
$(7,292) $(7,524) $(20,554) $(19,375) Business reorganization
expenses -- (598) (137) (4,846) Merger and integration expenses --
-- -- (89) Depreciation and amortization (903) (1,250) (1,952)
(3,806) Corporate expenses $(8,195) $(9,372) $(22,643) $(28,116)
Hudson Highland Group consolidated Adjusted EBITDA (1) $(18,593)
$(1,348) $(52,380) $(2,049) Business reorganization (expenses) 906
(407) (6,555) (53,133) recoveries Merger and integration (expenses)
102 902 (876) (6,056) recoveries Depreciation and amortization
(5,255) (4,681) (15,556) (14,738) Goodwill impairment (202,785) --
(202,785) -- Operating loss $(225,625) $(5,534) $(278,152)
$(75,976) (1) Non-GAAP earnings before interest, income taxes,
special charges and depreciation and amortization ("Adjusted
EBITDA") is 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 this measurement to evaluate
capital needs and working capital requirements. Adjusted 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
as presented above may not be comparable with similarly titled
measures reported by other companies. DATASOURCE: Hudson Highland
Group, Inc. CONTACT: Richard W. Pehlke of Hudson Highland Group,
+1-212-351-7285, or ; or John D. Lovallo of Ogilvy Public Relations
Worldwide, +1-212-880-5216, or Web site: http://www.hhgroup.com/
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