SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13
or 15(d) of
the Securities Exchange
Act of 1934
| Date of Report (Date of earliest event reported): |
October 28, 2004 |
| Hudson Highland Group, Inc. |
| (Exact name of registrant as specified in its charter) |
| Delaware |
0-50129 |
59-3547281 |
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
| 622 Third Avenue, New York, New York 10017 |
| (Address of principal executive offices, including zip code) |
212-351-7300 |
| (Registrant’s telephone number, including area code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
ITEM 2.02. Results of Operations and Financial Condition.
On October 28, 2004, Hudson Highland Group, Inc. issued a press release announcing its financial results for the quarter and nine months ended September 30, 2004. A copy of such press release is furnished as Exhibit 99.1 to this Current Report.
ITEM 9.01. FINANCIAL STATEMENTS AND
EXHIBITS.
| (a) | Financial
Statements None. |
| (b) | Pro
Forma Financial Information. None. |
| (c) | Exhibits |
| 99.1 | Press Release of Hudson Highland Group, Inc. issued on October 28, 2004. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| HUDSON HIGHLAND GROUP, INC. (Registrant) | ||
|---|---|---|
| Dated: October 28, 2004 | By: | /s/ RICHARD W. PEHLKE |
| RICHARD W. PEHLKE Executive Vice President and Chief Financial Officer | ||
2
Hudson Highland Group,
Inc.
Current Report on Form 8-K
Exhibit Index
| Exhibit Number |
Description |
| 99.1 | Press Release of Hudson Highland Group, Inc. issued on October 28, 2004. |
3
Exhibit 99.1
| For Immediate Release | Contacts: | Richard W. Pehlke Hudson Highland Group 312-795-4228 rich.pehlke@hhgroup.com |
John D. Lovallo Ogilvy Public Relations Worldwide 212-880-5216 john.lovallo@ogilvypr.com |
Hudson Highland Group
Reports
2004 Third Quarter and Nine Month Results
NEW YORK, NY – October 28, 2004 – 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 www.yahoo.com and the investor information section of the company’s website at 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 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 September 30, |
Nine Months Ended 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, 2004 |
December 31, 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 10,238 and 8,573 shares, respectively | 10 | 9 | ||||||
| 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 September 30, 2004
| Americas |
Europe |
Asia Pac |
Corporate 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 September 30, 2003
| Americas |
Europe |
Asia Pac |
Corporate 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 September 30, 2004
| Americas |
Europe |
Asia Pac |
Corporate 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 September 30, 2003
| Americas |
Europe |
Asia Pac |
Corporate 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 September 30, |
Nine Months Ended 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. |