HHGP Hudson Highland Grp., Inc. (MM)

Hudson Highland Group Reports 2004 First Quarter Financial Results NEW YORK, April 29 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. , one of the world's leading providers of specialized professional staffing, retained executive search and human capital solutions, today announced financial results for the first quarter ended March 31, 2004. In the first quarter, the company reported revenue of $289.8 million and a net loss of $18.7 million, or $2.17 per basic and diluted share. 2004 First Quarter Highlights -- Revenue of $289.8 million -- Gross margin of $106.4 million or 36.7% -- Adjusted EBITDA loss of $11.2 million -- Cash and cash equivalents of $38.2 million -- Completed a $28 million equity offering "We are pleased with our first quarter 2004 operating results having met or exceeded our expectations firmwide," said Jon Chait, chairman and chief executive officer of Hudson Highland Group. "This performance was driven by a combination of organic growth, increased productivity and improved expense control. "We also ended the quarter on a strong note, recording in March our first profitable month, at the EBITDA level, since becoming an independent company one year ago," Chait added. "We continue to expect adjusted EBITDA to be positive for the second quarter and remain fully committed to achieving sustainable profitability for Hudson Highland Group." "Our first quarter was an encouraging start to the year," said Richard W. Pehlke, executive vice president and chief financial officer of Hudson Highland Group. "On a constant currency basis, operating results approximated those of the previous quarter, generally a seasonally stronger period. "We are seeing the benefits of our cost reduction initiatives taken throughout 2003 and continue to see good expense control throughout the business," Pehlke added. "We experienced higher operating margins on sequentially even revenue in our operating segments." The first quarter operating results included approximately $2 million of expenses that are non-recurring. The company also recorded a loss of $0.9 million of expense resulting from the decision to withdraw its investment in Hudson's German operations. During the first quarter, the company realized net cash proceeds from the sale of 1,273,885 shares of common stock. The transaction closed on March 28, 2004. The company also has filed an S-4 with the Securities and Exchange Commission for the issuance of up to 350,000 shares of common stock to be used for future acquisitions should the opportunity arise. Historical Results Historical results for the first quarter 2003 reflect the company's operations as a business unit of Monster Worldwide, Inc (formerly TMP Worldwide Inc.). Hudson Highland Group's results for that quarter included revenue of $259.2 million, an operating loss of $35.8 million and a net loss of $44.0 million or $5.27 per basic and diluted share. Conference Call / Webcast Hudson Highland Group will conduct a conference call today Thursday, April 29, 2004 at 10:30 AM EDT to discuss this announcement. Investors wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 6656357 at 10:20 AM EDT. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 6656357. Hudson Highland Group's quarterly conference call can also be accessed online through Yahoo! Finance at http://www.yahoo.comand/ the investor information section of the company's website at http://www.hhgroup.com/. Hudson Highland Group Hudson Highland Group offers a full suite of specialized professional staffing, retained executive search and human capital solutions worldwide. Hudson Highland Group employs more than 3,600 professionals serving clients in more than 20 countries through its Highland Partners executive search and Hudson staffing and solutions businesses. 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 company's ability to manage its growth; risks associated with expansion; the company's reliance on information systems and technology; competition; fluctuations in operating results; the impact of global economic fluctuations on temporary contracting operations; the cyclical nature of the company's executive search and mid-market professional staffing businesses; risks relating to foreign operations, including foreign currency fluctuations; dependence on highly skilled professionals; the impact of employees departing with existing executive search clients; risks maintaining professional reputation and brand name; restrictions imposed by blocking arrangements; exposure to employment-related claims, legal liability and costs and limitations on insurance coverage related thereto; dependence on key management personnel; government regulations; the company's ability to successfully operate as an independent company and the level of costs associated therewith; and the company's ability to obtain financing on a stand-alone basis 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 March 31, 2004 2003 Revenue $289,804 $259,189 Direct costs 183,413 161,657 Gross margin 106,391 97,532 Selling, general and administrative expenses 122,675 124,418 Business reorganization expenses 60 7,961 Merger and integration (recoveries) expenses (37) 975 Operating loss (16,307) (35,822) Other expenses: Other 1,597 1,747 Interest, net 401 293 Loss before provision for income taxes (18,305) (37,862) Provision for income taxes 403 6,149 Net loss $(18,708) $(44,011) Basic and diluted loss per share: Net loss $(2.17) $(5.27) Weighted average shares outstanding 8,615 8,359 HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except per share amounts) March 31, December 31, 2004 2003 (unaudited) ASSETS Current assets: Cash and cash equivalents $38,152 $26,137 Accounts receivable, net 160,843 149,042 Prepaid and other 12,211 17,719 Due from Monster Worldwide, Inc. 3,018 5,518 Total current assets 214,224 198,416 Property and equipment, net 36,032 38,625 Other assets 9,305 11,703 Intangibles, net 2,041 2,180 $261,602 $250,924 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $28,175 $26,495 Accrued expenses and other current liabilities 124,780 118,548 Accrued business reorganization expenses 11,721 11,543 Accrued merger and integration expenses 2,537 2,960 Total current liabilities 167,213 159,546 Accrued business reorganization expenses, non-current 7,869 14,840 Accrued merger and integration expenses, non-current 2,935 3,484 Other long-term liabilities 2,764 3,693 Total liabilities 180,781 181,563 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 10 9 and outstanding: 9,894 and 8,573 shares, respectively Additional paid-in capital 344,389 315,130 Retained deficit (303,509) (284,801) Accumulated other comprehensive income - translation adjustments 39,931 39,023 Total stockholders' equity 80,821 69,361 $261,602 $250,924 HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Ended March 31, 2004 Americas Europe Asia Pac Corp/Other Total Revenue Hudson $72,234 $103,016 $99,877 $148 $275,275 Highland 9,564 2,047 2,918 - 14,529 $81,798 $105,063 $102,79 $148 $289,804 Gross Margin Hudson $16,752 $43,372 $32,524 $117 $92,765 Highland 8,906 1,965 2,755 - 13,626 $25,658 $45,337 $35,279 $117 $106,391 Adjusted EBITDA (1) Hudson $(986) $(2,665) $2,120 $(1,596) $(3,127) Highland (404) (68) 528 - 56 Corporate - - - (8,134) (8,134) $(1,390) $(2,733) $2,648 $(9,730) $(11,205) For the Three Months Ended March 31, 2003 Revenue Hudson $77,208 $84,932 $81,825 $- $243,965 Highland 10,432 3,999 793 - 15,224 $87,640 $88,931 $82,618 $- $259,189 Gross Margin Hudson $17,557 $37,637 $27,456 $- $82,650 Highland 10,432 3,699 751 - 14,882 $27,989 $41,336 $28,207 $- $97,532 Adjusted EBITDA (1) Hudson $(2,190) $(8,079) $(1,067) - $(11,336) Highland (2,354) (2,402) (345) - (5,101) Corporate - - - (4,964) (4,964) $(4,544) $(10,481) $(1,412) $(4,964) $(21,401) (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 March 31, 2004 2003 Hudson Adjusted EBITDA (1) $(3,127) $(11,336) Business reorganization recoveries (expenses) 16 (6,839) Merger and integration recoveries (expenses) 37 (975) Depreciation and amortization (3,733) (3,849) Operating loss $(6,807) $(22,999) Highland Adjusted EBITDA (1) $56 $(5,101) Business reorganization expenses (76) (985) Depreciation and amortization (423) (1,477) Operating loss $(443) $(7,563) Corporate Adjusted EBITDA (1) $(8,134) $(4,964) Business reorganization expenses - (137) Depreciation and amortization (923) (159) Corporate expenses $(9,057) $(5,260) Hudson Highland Group consolidated Adjusted EBITDA (1) $(11,205) $(21,401) Business reorganization expenses (60) (7,961) Merger & integration recoveries (expenses) 37 (975) Depreciation and amortization (5,079) (5,485) Operating loss $(16,307) $(35,822) (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 John D. Lovallo of Ogilvy Public Relations Worldwide, +1-212-880-5216, Web site: http://www.hhgroup.com/

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