Hudson Highland Group Reports 2004 Third Quarter and Nine Month
Results NEW YORK, Oct. 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
third quarter and nine months ended September 30, 2004. For the
third quarter, the company reported revenue of $315.0 million and a
net loss of $6.9 million, or $0.68 per basic and diluted share,
which included restructuring charges of $3.0 million related to
office leases. 2004 Third Quarter Highlights -- Revenue of $315.0
million, an increase of 15.7 percent from $272.2 million for the
third quarter of 2003 -- Gross margin of $116.4 million, or 37.0
percent of revenue, up 18.5 percent from $98.2 million, or 36.1
percent of revenue, for the same year ago period -- Adjusted EBITDA
of $0.6 million, which excludes the restructuring effects noted
above -- Cash and cash equivalents of $26.5 million "Adjusted
EBITDA was positive for the second consecutive quarter and cash
management continues to be strong," said Jon Chait, chairman and
chief executive officer of Hudson Highland Group. "All regional
business units contributed positive adjusted EBITDA results, with
the exception of Europe, where results were affected by seasonal
weakness. North America achieved particularly strong growth in both
revenue and gross margin, up 27.1 percent and 36.1 percent,
respectively, from the third quarter of 2003." "We are encouraged
by steadily improving operating trends and continued strong expense
management during the year," said Richard W. Pehlke, Hudson
Highland Group executive vice president and chief financial
officer. "We expect improved results in the fourth quarter over the
third quarter; however, it is too early to determine if that will
result in positive adjusted EBITDA for the full year." 2004 Third
Quarter Charge For the third quarter of 2004, the company recorded
restructuring charges of $3.0 million related to office leases.
This included a charge of $2.6 million related to the relocation of
its Highland Partners office in Toronto, Canada. The balance of the
charges related to revisions to existing office lease restructuring
plans. "These steps reflect the company's continuing effort to
reduce costs and increase operational efficiencies," Pehlke added.
2004 Nine Month Results For the first nine months of 2004, Hudson
Highland Group reported revenue of $912.3 million and an operating
loss of $22.4 million. Hudson Highland Group's net loss for the
first nine months of 2004 was $25.4 million, or $2.66 per basic and
diluted shares. Historical Results On a historical basis for the
third quarter ended September 30, 2003, Hudson Highland Group
reported revenue of $272.2 million, an operating loss of $225.6
million, which included a goodwill impairment charge of $202.8
million. The company's net loss for the third quarter of 2003 was
$226.3 million, or $26.92 per basic and diluted shares. 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
included 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 $34.05 per basic and diluted shares. Conference
Call / Webcast Hudson Highland Group will conduct a conference call
today, Thursday, October 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 1330308 at 10:20 AM EDT. For those outside the
United States, please call in on 1-706-634-5594 followed by the
participant passcode 1330308. 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 3,700
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 Nine
Months Ended September 30, September 30, 2004 2003 2004 2003
Revenue $315,029 $272,181 $912,264 $800,653 Direct costs 198,615
173,959 570,970 501,181 Gross margin 116,414 98,222 341,294 299,472
Selling, general and administrative expenses 120,165 119,082
360,573 364,420 Goodwill impairment charge -- 202,785 -- 202,785
Business reorganization expenses 3,314 2,082 3,450 9,543 Merger and
integration expenses (recoveries) (317) (102) (354) 876 Operating
loss (6,748) (225,625) (22,375) (278,152) Other income (expense):
Other, net 128 (749) (1,759) (930) Interest income (expense), net
203 (121) (53) (376) Loss before provision for (benefit of) income
taxes (6,417) (226,495) (24,187) (279,458) Provision for (benefit
of) income taxes 530 (221) 1,251 5,917 Net loss $(6,947) $(226,274)
$(25,438) $(285,375) Basic and diluted loss per share: Net loss
$(.68) $(26.92) $(2.66) $(34.05) Weighted average shares
outstanding 10,154 8,405 9,575 8,382 HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except per
share amounts) September 30, December 31, 2004 2003 (unaudited)
ASSETS Current assets: Cash and cash equivalents $26,528 $26,137
Accounts receivable, net 181,852 149,042 Other current assets
11,633 17,719 Due from Monster -- 5,518 Total current assets
220,013 198,416 Property and equipment, net 36,652 38,625 Other
assets 8,801 11,703 Intangibles, net 6,288 2,180 $271,754 $250,924
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $29,407 $26,495 Accrued expenses and other current
liabilities 134,196 118,548 Accrued business reorganization
expenses 10,158 11,543 Accrued merger and integration expenses
2,021 2,960 Total current liabilities 175,782 159,546 Accrued
business reorganization expenses, non-current 7,367 14,840 Accrued
merger and integration expenses, non-current 2,176 3,484 Other
non-current liabilities 5,856 3,693 Total liabilities 191,181
181,563 Commitments and contingencies Stockholders' equity:
Preferred stock, $.001 par value, 10,000 shares authorized; none --
-- issued or outstanding Common stock, $.001 par value, 100,000
shares authorized; issued 10 9 10,238 and 8,573 shares,
respectively Additional paid-in capital 352,465 315,130 Retained
deficit (310,239) (284,801) Accumulated other comprehensive income
- translation adjustments 38,567 39,023 Treasury stock, 8 shares
(230) -- Total stockholders' equity 80,573 69,361 $271,754 $250,924
HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands)
(unaudited) For the Three Months Ended Corporate September 30, 2004
Americas Europe Asia Pac and Other Total Revenue Hudson $83,013
$114,957 $102,175 $683 $300,828 Highland 11,181 1,318 1,702 --
14,201 $94,194 $116,275 $103,877 $683 $315,029 Gross Margin Hudson
$22,658 $43,129 $36,501 $643 $102,931 Highland 10,664 1,253 1,566
-- 13,483 $33,322 $44,382 $38,067 $643 $116,414 Adjusted EBITDA (1)
Hudson $3,014 $(318) $7,227 $(1,328) $8,595 Highland 1,293 (890) 81
-- 484 Corporate -- -- -- (8,462) (8,462) $4,307 $(1,208) $7,308
$(9,790) $617 For the Three Months Ended Corporate September 30,
2003 Americas Europe Asia Pac and Other 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 (573) (1,755) (134) (2,462)
Corporate -- -- -- $(7,292) (7,292) $(7,157) $(3,919) $2,763
$(7,292) $(15,605) (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 Corporate September 30, 2004 Americas Europe Asia Pac and
Other Total Revenue Hudson $235,243 $327,233 $302,805 $1,263
$866,544 Highland 32,948 5,463 7,309 -- 45,720 $268,191 $332,696
$310,114 $1,263 $912,264 Gross Margin Hudson $59,899 $132,382
$104,841 $1,166 $298,288 Highland 31,109 5,177 6,720 -- 43,006
$91,008 $137,559 $111,561 $1,166 $341,294 Adjusted EBITDA (1)
Hudson $6,054 $(458) $15,967 $(4,453) $17,110 Highland 2,101
(1,115) 946 -- 1,932 Corporate -- -- -- (23,959) (23,959) $8,155
$(1,573) $16,913 $(28,412) $(4,917) For the Nine Months Ended
Corporate September 30, 2003 Americas Europe Asia Pac and Other
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 (3,730) (6,130) (769) (10,629) Corporate -- -- --
$(20,554) (20,554) $(14,504) $(17,245) $2,911 $(20,554) $(49,392)
(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, 2004 2003 2004 2003 Hudson Adjusted EBITDA (1) $8,595
$(5,851) $17,110 $(18,209) Business reorganization (expenses)
recoveries (706) 335 (891) (6,205) Merger and integration
(expenses) recoveries 317 102 354 (876) Depreciation and
amortization (3,860) (3,377) (11,192) (10,324) Goodwill impairment
-- (195,404) -- (195,404) Operating loss $4,346 $(204,195) $5,381
$(231,018) Highland Adjusted EBITDA (1) $484 $(2,462) $1,932
$(10,629) Business reorganization (expenses) (2,608) (2,417)
(2,559) (3,201) Depreciation and amortization (473) (975) (1,305)
(3,280) Goodwill impairment -- (7,381) -- (7,381) Operating loss
$(2,597) $(13,235) $(1,932) $(24,491) Corporate Adjusted EBITDA (1)
$(8,462) $(7,292) $(23,959) $(20,554) Business reorganization
expenses -- -- -- (137) Depreciation and amortization (35) (903)
(1,865) (1,952) Corporate expenses $(8,497) $(8,195) $(25,824)
$(22,643) Hudson Highland Group consolidated Adjusted EBITDA (1)
$617 $(15,605) $(4,917) $(49,392) Business reorganization
(expenses) (3,314) (2,082) (3,450) (9,543) Merger and integration
(expenses) recoveries 317 102 354 (876) Depreciation and
amortization (4,368) (5,255) (14,362) (15,556) Goodwill impairment
-- (202,785) -- (202,785) Operating loss $(6,748) $(225,625)
$(22,375) $(278,152) (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, Hudson Highland Group,
+1-312-795-4228, ; or John D. Lovallo of Ogilvy Public Relations
Worldwide, +1-212-880-5216, or Web site: http://www.hhgroup.com/
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