Hudson Highland Group Reports 2006 Second Quarter and Six Month Financial Results Company Announces $4 - $7 million 2006 Restructuring Program



    NEW YORK, Aug. 7 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc.
 (Nasdaq:   HHGP), one of the world's leading providers of specialized
 professional staffing, retained executive search and talent management
 solutions, today announced financial results for the second quarter and six
 months ended June 30, 2006.
     2006 Second Quarter Summary
 
     -- Revenue of $365.5 million, essentially flat with $364.8 million for the
        second quarter of 2005
     -- Gross margin of $141.0 million, or 38.6 percent of revenue, down
        slightly from $141.2 million, or 38.7 percent of revenue, for the same
        year-ago period
     -- Adjusted EBITDA of $9.3 million, or 2.6 percent of revenue, down
        slightly from $9.4 million, or 2.6 percent of revenue, for the second
        quarter of 2005
     -- EBITDA of $8.5 million, or 2.3 percent of revenue, down from
        $9.6 million, or 2.6 percent of revenue, for the second quarter of 2005
     -- Net income of $0.6 million, or $0.02 per basic and diluted share,
        compared with a net income of $3.0 million, or $0.15 per basic share
        and $0.14 per diluted share for the same period last year
     "We achieved solid results in Europe, Asia Pacific, and the Highland
 Partners executive search business, and began seeing signs of stabilization
 in our North America staffing operation," said Jon Chait, chairman and
 chief executive officer of Hudson Highland Group.
     2006 Six Month Results
     For the first six months of 2006, Hudson Highland Group reported
 revenue of $708.5 million, down 1.3 percent from $717.7 million for the
 first half of last year. Net loss was $7.5 million, or $0.31 per basic and
 diluted share compared with a net loss of $2.1 million, or $0.10 per basic
 and diluted share, for the same six-month period last year.
     2006 Restructuring Program
     The company also announced today a restructuring program designed to
 reduce costs and increase the sustainable, long-term profitability of the
 company. The company expects to record a charge of between $4 million to $7
 million in 2006, of which $0.7 million was incurred in the second quarter
 of 2006. The actions taken fall into several categories: (1) consolidation
 of support functions, particularly between North America and corporate; (2)
 closing or reducing redundant sales functions and unprofitable offices; and
 (3) moves to more economical properties.
     "We expect our restructuring plan to help allow us to reduce expenses
 and tighten our focus," said Mary Jane Raymond, executive vice president
 and chief financial officer. "As North America recovers, we believe we are
 well positioned for strong operating leverage."
     Restatement of First Quarter 2006 Financial Statements
     As discussed in its first quarter earnings call, the company undertook
 a comprehensive review of the accounting processes supported by the new
 PeopleSoft accounting and management reporting system the company
 implemented last year in its Hudson North America business unit. The
 company believes this review has been comprehensive and that it has
 identified the full extent of the differences existing in the accounts as
 of the end of the second quarter of 2006 that may be material. As a result,
 the company identified accounting errors in Hudson North America and has
 restated results of the first quarter 2006 to reflect net charges of $2.2
 million, and has included net charges of $1.6 million in its results for
 the second quarter of 2006. The second quarter charge includes a $0.7
 million adjustment to revenue attributable to 2005 results, which is
 considered immaterial to that year, and a $0.9 million adjustment to
 receivables, for which the applicable period cannot practicably be
 determined. Earlier today, the company filed an amended Form 10-Q for the
 quarter ended March 31, 2006, reflecting the restatement.
     Guidance
     The company currently expects third quarter revenue of $355 - $370
 million at prevailing exchange rates, and EBITDA of $7.5 - $8.5 million,
 including $2 million of restructuring charges, compared to revenue of $357
 million and EBITDA of $7.5 million in the third quarter of 2005.
     The company has revised its guidance formulation to bring it in line
 with the quarterly industry standard.
     Conference Call / Webcast
     Hudson Highland Group will conduct a conference call Tuesday, August 8,
 2006 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 3401282 at 8:50 AM ET. For those outside the
 United States, please call in on 1-706-634-5594 followed by the participant
 passcode 3401282. 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.
     Additional Information
     Please find additional information about the company's quarterly
 results in our shareholder letter in the investor information section of
 the company's website at http://www.hhgroup.com.
     Hudson Highland Group
     Hudson Highland Group is one of the world's leading professional
 staffing, retained executive search and talent management solution
 providers. We help our clients achieve greater organizational performance
 by attracting, selecting and developing the best and brightest people for
 their businesses. Our approximately 3,800 employees in more than 20
 countries are dedicated to providing unparalleled service and value to our
 clients. 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 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 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; risks and financial
 impact associated with disposition of non-strategic assets; 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; restrictions on the company's
 operating flexibility due to the terms of its credit facility; and the
 company's ability to implement remedial actions with respect to internal
 control weaknesses. 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 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.
                          HUDSON HIGHLAND GROUP, INC.
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)
                                  (unaudited)
 
                                        Three Months Ended   Six Months Ended
                                             June 30,            June 30,
                                          2006    2005 (1)     2006   2005 (1)
 
     Revenue                          $365,478   $364,835  $708,536   $717,704
 
     Direct costs                      224,443    223,668   441,878    448,330
       Gross margin                    141,035    141,167   266,658    269,374
 
     Operating expenses:
       Selling, general
        and administrative             131,696    131,759   259,647    257,672
       Depreciation and amortization     4,341      4,626     8,849      9,483
       Business reorganization expenses
        (recoveries)                       592       (238)      595        291
       Merger and integration expenses
        (recoveries)                       279          8       279        (35)
          Total operating expenses     136,908    136,155   269,370    267,411
       Operating income (loss)           4,127      5,012    (2,712)     1,963
 
 
     Other income (expense):
       Interest, net                      (794)      (495)   (1,208)      (921)
       Other, net                         (240)       271       539         (5)
 
     Income (loss) before provision for
      income taxes                       3,093      4,788    (3,381)     1,037
 
     Provision for income taxes          2,493      1,766     4,099      3,166
 
     Net income (loss)                    $600     $3,022   $(7,480)   $(2,129)
 
     Income (loss) per share:
     Basic                               $0.02      $0.15    $(0.31)    $(0.10)
     Diluted                             $0.02      $0.14    $(0.31)    $(0.10)
 
     Weighted average shares
      outstanding
     Basic                          24,414,000 20,642,000 24,318,000 20,574,000
     Diluted                        25,172,000 21,635,000 24,318,000 20,574,000
 
     (1) Note -- 2005 financial statements have been adjusted for the Company's
         adoption of SFAS 123R using the modified retrospective method.  (The
         comparable expenses for the three months ended June 30, 2006 and 2005
         were $1,434 and $1,343, respectively, and for the six months ended
         June 30, 2006 and 2005 were $2,854 and $2,357, respectively.)
 
 
 
                          HUDSON HIGHLAND GROUP, INC.
                     CONSOLIDATED CONDENSED BALANCE SHEETS
               (in thousands, except share and per share amounts)
 
                                                         June 30,  December 31,
                                                           2006       2005 (1)
                           ASSETS                       (unaudited)
     Current assets:
     Cash and cash equivalents                             $32,310    $34,108
     Accounts receivable, net                              241,125    232,081
     Prepaid and other                                      11,104     14,330
             Total current assets                          284,539    280,519
 
     Intangibles, net                                       37,208     31,100
     Property and equipment, net                            28,541     31,438
     Other assets                                            4,767      5,359
     Total assets                                         $355,055   $348,416
 
 
            LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
     Accounts payable                                      $30,911    $24,718
     Accrued expenses and other current liabilities        136,355    140,036
     Credit facility and current portion of long-term
      debt                                                  36,575     32,544
     Accrued business reorganization expenses                3,844      4,223
     Accrued merger and integration expenses                   930      1,239
         Total current liabilities                         208,615    202,760
 
     Other non-current liabilities                           5,999      5,948
     Accrued business reorganization expenses,
      non-current                                            3,262      4,095
     Accrued merger and integration expenses,
      non-current                                            1,663      2,038
     Long-term debt, less current portion                      351        478
         Total liabilities                                 219,890    215,319
 
     Commitments and contingencies
 
     Stockholders' equity:
     Preferred stock, $0.001 par value, 10,000,000
      shares authorized; none issued or outstanding             --         --
     Common stock, $0.001 par value, 100,000,000 shares
      authorized; issued:
      24,539,889 and 24,340,462 shares, respectively            24         24
     Additional paid-in capital                            423,851    416,448
     Accumulated deficit                                  (325,436)  (317,956)
     Accumulated other comprehensive income -
      translation adjustments                               36,956     34,811
     Treasury stock, 15,798 shares                            (230)      (230)
             Total stockholders' equity                    135,165    133,097
                                                          $355,055   $348,416
 
     (1) Note -- 2005 financial statements have been adjusted for the Company's
         adoption of SFAS 123R using the modified retrospective method.
 
 
 
                          HUDSON HIGHLAND GROUP, INC.
                                SEGMENT ANALYSIS
                                 (in thousands)
                                  (unaudited)
 
     For the Three                         Hudson
     Months Ended      Hudson    Hudson     Asia    Highland
     June 30, 2006    Americas   Europe    Pacific  Partners Corporate  Total
 
     Revenue          $117,580  $122,061  $110,877  $14,960     $ --  $365,478
 
     Gross margin      $27,405   $56,225   $43,430  $13,975     $ --  $141,035
 
     Adjusted
      EBITDA (1)       $(2,982)   $7,972    $9,541   $1,653  $(6,845)   $9,339
 
     Business
      reorganization
      expenses
      (recoveries)         249       (57)      152      (65)     313       592
     Merger and
      integration
      expenses              72        --        --      207       --       279
 
     EBITDA (1)         (3,303)    8,029     9,389    1,511   (7,158)    8,468
 
     Depreciation and
      amortization       1,314     1,776       770      313      168     4,341
 
     Operating income
      (loss)           $(4,617)   $6,253    $8,619   $1,198  $(7,326)   $4,127
 
 
     For the Three                         Hudson
     Months Ended      Hudson    Hudson     Asia    Highland
     June 30, 2005(2) Americas   Europe    Pacific  Partners Corporate  Total
 
     Revenue          $107,813  $124,657  $116,325  $16,040     $ --  $364,835
 
     Gross margin      $27,575   $54,510   $43,848  $15,234     $ --  $141,167
 
     Adjusted
      EBITDA (1)        $2,785    $5,615    $9,871     $494  $(9,357)   $9,408
 
     Business
      reorganization
      (recoveries)         (99)       --        --     (139)      --      (238)
     Merger and
      integration
      expenses               8        --        --       --       --         8
 
     EBITDA (1)          2,876     5,615     9,871      633   (9,357)    9,638
 
     Depreciation and
      amortization       1,072       920     2,156      342      136     4,626
 
     Operating income
      (loss)            $1,804    $4,695    $7,715     $291  $(9,493)   $5,012
 
     (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.
 
     (2) Note -- 2005 financial statements have been adjusted for the Company's
         adoption of SFAS 123R using the modified retrospective method.
 
 
 
                          HUDSON HIGHLAND GROUP, INC.
                                SEGMENT ANALYSIS
                                 (in thousands)
                                  (unaudited)
 
     For the Six                           Hudson
     Months Ended      Hudson    Hudson     Asia    Highland
     June 30, 2006    Americas   Europe    Pacific  Partners Corporate  Total
 
     Revenue          $228,184  $238,203  $211,415  $30,734     $ --  $708,536
 
     Gross margin      $50,302  $107,190   $80,291  $28,875     $ --  $266,658
 
     Adjusted
      EBITDA (1)       $(8,958)  $13,522   $14,273   $2,941 $(14,767)   $7,011
 
     Business
      reorganization
      expenses
      (recoveries)         249       (57)      152      (62)     313       595
     Merger and
      integration
      expenses              72        --        --      207       --       279
 
     EBITDA (1)         (9,279)   13,579    14,121    2,796  (15,080)    6,137
 
     Depreciation and
      amortization       2,819     3,515     1,546      636      333     8,849
 
     Operating income
      (loss)          $(12,098)  $10,064   $12,575   $2,160 $(15,413)  $(2,712)
 
 
     For the Six                           Hudson
     Months Ended      Hudson    Hudson     Asia    Highland
     June 30, 2005(2) Americas   Europe    Pacific  Partners Corporate  Total
 
     Revenue          $219,918  $247,056  $219,826  $30,904     $ --  $717,704
 
     Gross margin      $55,149  $104,961   $79,964  $29,300     $ --  $269,374
 
     Adjusted
      EBITDA (1)        $5,057    $8,716   $16,567     $869 $(19,507)  $11,702
 
     Business
      reorganization
      expenses
      (recoveries)         510       (79)       --     (140)      --       291
     Merger and
      integration
      (recoveries)         (35)       --        --       --       --       (35)
 
     EBITDA (1)          4,582     8,795    16,567    1,009  (19,507)   11,446
 
     Depreciation and
      amortization       2,048     1,898     4,573      696      268     9,483
 
     Operating income
      (loss)            $2,534    $6,897   $11,994     $313 $(19,775)   $1,963
 
     (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.
 
     (2) Note -- 2005 financial statements have been adjusted for the Company's
         adoption of SFAS 123R using the modified retrospective method.
 
 

SOURCE Hudson Highland Group, Inc.

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.