HHGP Hudson Highland Grp., Inc. (MM)

Hudson Highland Group Reports 2004 Second Quarter and Six Month Results; Achieves Second Quarter Net Income NEW YORK, July 28 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. (NASDAQ:HHGP), one of the world's leading providers of specialized professional staffing, retained executive search and human capital solutions, today announced financial results for the second quarter and six months ended June 30, 2004. In the second quarter, the company reported revenue of $307.4 million and net income of $0.2 million, or $0.02 per basic and diluted share. 2004 Second Quarter Highlights * Revenue of $307.4 million, an increase of 14.2 percent from $269.3 million for the second quarter of 2003 * Gross margin of $118.5 million, or 38.5 percent, up 14.2 percent from $103.7 million for the same year ago period * Adjusted EBITDA of $5.7 million * Net income of $0.2 million or $0.02 per basic and diluted share Cash and cash equivalents of $28.0 million * Acquired JMT Financial Partners to enhance specialized solutions offering "The second quarter performance exceeded our goal of positive adjusted EBITDA for the period," said Jon Chait, chairman and chief executive officer of Hudson Highland Group. "The excellent work of our operating management team, continued strong expense control, increased productivity and an improving global economy all contributed to our results. "There was across-the-board improvement from the previous quarter and prior year by all of our major operations," Chait added. "Though it is premature to change our guidance, we are cautiously optimistic for the second half of the year based on our second quarter performance. We expect the second half of the year to be profitable on an adjusted EBITDA basis, notwithstanding the seasonally tougher third quarter. However, we are unable to determine if it will be possible to offset our first half 2004 operating loss." "Our second quarter performance underscores an ongoing diligence to reduce our expenses, find further efficiencies, effectively manage our working capital and maintain a strong balance sheet," said Richard W. Pehlke, executive vice president and chief financial officer. "Additionally, stringent controls over our receivables in Hudson North America implemented over the past year contributed $1.7 million to the quarter in recoveries and reduced reserve needs. We will continue to look for opportunities to further streamline our operation to enable greater flexibility for future growth." 2004 Third Quarter Charge The company will record a restructuring charge of $2.8 million for the third quarter of 2004 related to the relocation of its Highland Partners office in Toronto, Canada. "This move is another step in our continuing effort to reduce our operating costs," added Pehlke. 2004 Six Month Results For the first six months of 2004, Hudson Highland Group reported revenue of $597.2 million and an operating loss of $15.6 million. Hudson Highland Group's net loss for the first six months of 2004 was $18.5 million, or $1.99 per basic and diluted shares. Historical Results On a historical basis for the second quarter ended June 30, 2003, Hudson Highland Group reported revenue of $269.3 million, an operating loss of $16.7 million and a net loss of $15.1 million, or $1.80 per basic and diluted shares. For the first six months of 2003, Hudson Highland Group reported revenue of $528.5 million and an operating loss of $52.5 million. Hudson Highland Group's net loss for the first six months of 2003 was $59.1 million, or $7.06 per basic and diluted shares. Conference Call / Webcast Hudson Highland Group will conduct a conference call today Wednesday, July 28, 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 8648410 at 10:20 AM EDT. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 8648410. 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 suite of specialized professional staffing, retained executive search and human capital solutions worldwide. The company employs more than 3,600 professionals serving clients and candidates in more than 20 countries through its Hudson and Highland Partners 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 impact of global economic fluctuations on 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 reliance on information systems and technology; competition; fluctuations in operating results; risks relating to foreign operations, including foreign currency fluctuations; dependence on highly skilled professionals and key management personnel; 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, and limits on insurance coverage related thereto; 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 Six Months Ended June 30, June 30, 2004 2003 2004 2003 Revenue $307,431 $269,283 $597,235 $528,472 Direct costs 188,942 165,565 372,355 327,222 Gross margin 118,489 103,718 224,880 201,250 Selling, general and administrative expenses 117,733 120,920 240,408 245,338 Business reorganization expenses (recoveries) 76 (500) 136 7,461 Merger and integration expenses (recoveries) -- 3 (37) 978 Operating income (loss) 680 (16,705) (15,627) (52,527) Other income (expense): Other income (expense), net (290) 1,566 (1,887) (181) Interest income (expense), net 145 38 (256) (255) Income (loss) before provision for (benefit of) income taxes 535 (15,101) (17,770) (52,963) Provision for (benefit of) income taxes 318 (11) 721 6,138 Net income (loss) $217 $(15,090) $(18,491) $(59,101) Income (loss) per share: Basic earnings (loss) $.02 $(1.80) $(1.99) $(7.06) Diluted earnings (loss) $.02 $(1.80) $(1.99) $(7.06) Weighted average shares outstanding: Basic 9,951 8,382 9,283 8,371 Diluted 10,436 8,382 9,283 8,371 HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except per share amounts) June 30, December 31, 2004 2003 (unaudited) ASSETS Current assets: Cash and cash equivalents $27,952 $26,137 Accounts receivable, net 175,591 149,042 Other current assets 12,969 17,719 Due from Monster Worldwide, Inc. -- 5,518 Total current assets 216,512 198,416 Property and equipment, net 36,758 38,625 Other assets 8,561 11,703 Intangibles, net 6,428 2,180 $268,259 $250,924 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $29,461 $26,495 Accrued expenses and other current liabilities 124,909 118,548 Accrued business reorganization expenses 10,552 11,543 Accrued merger and integration expenses 2,246 2,960 Total current liabilities 167,168 159,546 Accrued business reorganization expenses, non-current 6,339 14,840 Accrued merger and integration expenses, non-current 2,683 3,484 Other non-current liabilities 5,352 3,693 Total liabilities 181,542 181,563 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: 10,216 and 8,573 shares, respectively 10 9 Additional paid-in capital 351,628 315,130 Retained deficit (303,292) (284,801) Accumulated other comprehensive income - translation adjustments 38,589 39,023 Treasury stock, 7 shares (218) -- Total stockholders' equity 86,717 69,361 $268,259 $250,924 HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Ended June 30, 2004 Americas Europe Asia Pac Corp/Other Total Revenue Hudson $79,996 $109,260 $100,753 $432 $290,441 Highland 12,203 2,098 2,689 -- 16,990 $92,199 $111,358 $103,442 $432 $307,431 Gross Margin Hudson $20,489 $45,881 $35,816 $406 $102,592 Highland 11,539 1,959 2,399 -- 15,897 $32,028 $47,840 $38,215 $406 $118,489 Adjusted EBITDA (1) Hudson $4,026 $2,525 $6,620 $(1,529) $11,642 Highland 1,212 (157) 337 -- 1,392 Corporate -- -- -- (7,363) (7,363) $5,238 $2,368 $6,957 $(8,892) $5,671 For the Three Months Ended June 30, 2003 Revenue Hudson $70,908 $90,427 $91,275 $ -- $252,610 Highland 11,216 4,143 1,314 -- 16,673 $82,124 $94,570 $92,589 $ -- $269,283 Gross Margin Hudson $16,373 $40,473 $31,466 $ -- $88,312 Highland 10,659 3,619 1,128 -- 15,406 $27,032 $44,092 $32,594 $ -- $103,718 Adjusted EBITDA (1) Hudson $(2,000) $(872) $1,850 $ -- $(1,022) Highland (803) (1,973) (290) -- (3,066) Corporate -- -- -- (8,298) (8,298) $(2,803) $(2,845) $1,560 $(8,298) $(12,386) (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 Six Months Ended June 30, 2004 Americas Europe Asia Pac Corp/Other Total Revenue Hudson $152,230 $212,276 $200,630 $580 $565,716 Highland 21,767 4,145 5,607 -- 31,519 $173,997 $216,421 $206,237 $580 $597,235 Gross Margin Hudson $37,241 $89,253 $68,340 $523 $195,357 Highland 20,445 3,924 5,154 -- 29,523 $57,686 $93,177 $73,494 $523 $224,880 Adjusted EBITDA (1) Hudson $3,040 $(140) $8,740 $(3,125) $8,515 Highland 808 (225) 865 -- 1,448 Corporate -- -- -- (15,497) (15,497) $3,848 $(365) $9,605 $(18,622) $(5,534) For the Six Months Ended June 30, 2003 Revenue Hudson $148,116 $175,359 $173,100 $ -- $496,575 Highland 21,648 8,142 2,107 -- 31,897 $169,764 $183,501 $175,207 $ -- $528,472 Gross Margin Hudson $33,930 $78,110 $58,922 $ -- $170,962 Highland 21,091 7,318 1,879 -- 30,288 $55,021 $85,428 $60,801 $ -- $201,250 Adjusted EBITDA (1) Hudson $(4,190) $(8,951) $783 $ -- $(12,358) Highland (3,157) (4,375) (635) -- (8,167) Corporate -- -- -- (13,262) (13,262) $(7,347) $(13,326) $148 $(13,262) $(33,787) (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 INCOME (LOSS) (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Hudson Adjusted EBITDA (1) $11,642 $(1,022) $8,515 $(12,358) Business reorganization (expenses) recoveries (201) 299 (185) (6,540) Merger and integration (expenses) recoveries -- (3) 37 (978) Depreciation and amortization (3,599) (3,098) (7,332) (6,947) Operating income (loss) $7,842 $(3,824) $1,035 $(26,823) Highland Adjusted EBITDA (1) $1,392 $(3,066) $1,448 $(8,167) Business reorganization (expenses) recoveries 125 202 49 (784) Depreciation and amortization (409) (829) (832) (2,305) Operating income (loss) $1,108 $(3,693) $665 $(11,256) Corporate Adjusted EBITDA (1) $(7,363) $(8,298) $(15,497) $(13,262) Business reorganization (expenses) -- (1) -- (137) Depreciation and amortization (907) (889) (1,830) (1,049) Corporate expenses $(8,270) $(9,188) $(17,327) $(14,448) Hudson Highland Group consolidated Adjusted EBITDA (1) $5,671 $(12,386) $(5,534) $(33,787) Business reorganization (expenses) recoveries (76) 500 (136) (7,461) Merger and integration (expenses) recoveries -- (3) 37 (978) Depreciation and amortization (4,915) (4,816) (9,994) (10,301) Operating income (loss) $680 $(16,705) $(15,627) $(52,527) (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, , for Hudson Highland Group, Inc. Web site: http://www.hhgroup.com/

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