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, 2003
Hudson Highland Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-50129 59-3547281
(Commission File Number) (IRS Employer Identification No.)
622 Third Avenue
New York, NY 10017
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212) 351-7300
ITEM 7. 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. (the "Company")
issued on October 28, 2003 relating to its earnings for the
three and nine month periods ended September 30, 2003.
ITEM 12. DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 28, 2003, the Company issued a press release announcing its earnings
for the three and nine month periods ended September 30, 2003. A copy of such
press release is filed as Exhibit 99.1 and is incorporated by reference herein.
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)
By: /s/ RICHARD W. PEHLKE
-------------------------------------
Richard W. Pehlke
Executive Vice President and Chief Financial
Officer
Dated: October 28, 2003
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, 2003
relating to its third quarter earnings.
3
Exhibit 99.1
For Immediate Release
- ---------------------
Contacts:
Richard W. Pehlke
Hudson Highland Group
212-351-7285
rich.pehlke@hhgroup.com
John D. Lovallo
Ogilvy Public Relations Worldwide
212-880-5216
john.lovallo@ogilvypr.com
Hudson Highland Group Reports
2003 Third Quarter and Nine Month Results
NEW YORK, NY - October 28, 2003 - Hudson Highland Group, Inc. (NASDAQ: HHGP),
one of the world's leading executive search, professional staffing and human
resource consultancies, today announced financial results for the third quarter
and nine months ended September 30, 2003. In the third quarter, the Company
reported revenues of $272.2 million and a net loss of $226.3 million, or $26.73
per basic and diluted share, which includes a previously announced goodwill
impairment charge of $202.8 million.
2003 Third Quarter Summary
o Revenue of $272.2 million
o Gross margin of $98.2 million or 36.1%
o Adjusted EBITDA loss of $18.6 million
o including a previously announced incremental $3.4 million bad debt
write-off as well as $3.0 million of expenses related to repositioning the
executive search subsidiary
o excluding a charge for impaired goodwill, and business reorganization,
merger and integration effects
o Cash and cash equivalents of $39.3 million
"During the third quarter we continued to make progress in positioning Hudson
Highland Group for the future while establishing the necessary financial
discipline to manage our current business. Looking forward, we will continue to
focus on both growing our business and improving productivity across the
enterprise by building upon the operating improvements we realized in the past
quarter. We are beginning to realize some of the benefits of this improved
productivity as operating results for both our Hudson UK and Hudson Asia-Pacific
operations increased over the preceding quarter," said Richard W. Pehlke,
executive vice president and chief financial officer of Hudson Highland Group.
"We have taken appropriate action in writing off impaired goodwill and
uncollectible receivables and, despite the current economic environment, we are
effectively managing our cash position for financial flexibility. In the
near-term, we remain cautious about the economic environment, however we
reaffirm our previous guidance that we expect to achieve break-even by mid-year
2004," said Jon Chait, chairman and chief executive officer of Hudson Highland
Group.
2003 Nine Month Results
For the first nine months of 2003, Hudson Highland Group reported revenues of
$800.7 million and an operating loss of $278.2 million, which includes 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 $33.78 per basic and
diluted share.
Historical Results
Historical results for 2002 relate to the Company's businesses as they were
operated as a business unit of Monster Worldwide, Inc. (formerly TMP Worldwide
Inc.). On a historical basis for the third quarter ended September 30, 2002,
Hudson Highland Group reported revenues of $270.7 million and an operating loss
of $5.5 million. The Company's net loss for the third quarter of 2002 was $5.5
million, or $0.65 per basic and diluted share.
For the first nine months of 2002, Hudson Highland Group reported revenues of
$812.6 million and an operating loss of $76.0 million. The Company's net loss
for the first nine months of 2002 was $367.4 million, or $43.99 per basic and
diluted share. The nine month net loss included a loss from the cumulative
effect of an accounting change for the write-off of $293.0 million of impaired
goodwill; excluding the accounting change, the net loss was $74.4 million or
$8.91 per basic and diluted share.
Conference Call / Webcast
Hudson Highland Group will conduct a conference call today, Tuesday, October 28,
2003, at 10:30 AM EST to discuss this announcement. Investors wishing to
participate can join the conference call by dialing 1-800-299-9086 followed by
the participant passcode 62280319 at 10:20 AM EST. For those outside the United
States, please call in on 1-617-786-2903 followed by the participant passcode
62280319. 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 spectrum of retained executive search,
specialty staffing and related human resource consulting solutions worldwide. As
an independent, publicly traded $1 billion company, Hudson Highland Group
employs approximately 4,000 professionals serving clients in nearly 30 countries
through its Highland Partners search and Hudson Global Resources staffing
divisions. 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 the Company's 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 heavy reliance on information
systems and the impact of potentially losing that technology or failing to
further develop technology, the Company's markets are highly competitive, the
Company's operating results fluctuate from quarter to quarter, risks relating to
the Company's foreign operations, including foreign currency fluctuations, the
Company's dependence on its highly skilled professionals, the impact of
employees departing with existing executive search clients, risks maintaining
the Company's professional reputation and brand name, restrictions imposed by
blocking arrangements, the Company's exposure to employment-related claims,
legal liability and costs from both clients and employers and limitations on
insurance coverage related thereto, the Company's dependence on key management
personnel, the impact of 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,
2003 2002 2003 2002
---- ---- ---- ----
Revenue $ 272,181 $270,710 $ 800,653 $ 812,577
Direct costs 173,959 166,158 501,181 484,752
--------- -------- --------- ---------
Gross margin 98,222 104,552 299,472 327,825
Selling, general and administrative expenses 122,070 110,581 367,408 344,612
Goodwill impairment charge 202,785 - 202,785 -
Business reorganization expenses (recoveries) (906) 407 6,555 53,133
Merger and integration expenses (recoveries) (102) (902) 876 6,056
--------- -------- --------- ---------
Operating loss (225,625) (5,534) (278,152) (75,976)
Other income (expense):
Other, net (749) 415 (930) (8)
Interest expense, net (121) (287) (376) (273)
--------- -------- --------- ---------
Loss before provision for (benefit of) income taxes and
accounting change (226,495) (5,406) (279,458) (76,257)
Provision for (benefit of) income taxes (221) 66 5,917 (1,827)
--------- -------- --------- ---------
Loss before accounting change (226,274) (5,472) (285,375) (74,430)
Cumulative effect of accounting change - - - (293,000)
--------- -------- --------- ---------
Net loss $(226,274) $ (5,472) $(285,375) $(367,430)
========= ======== ========= =========
Basic and diluted loss per share:
Loss before accounting change $ (26.73) $ (0.65) $ (33.78) $ (8.91)
Net loss $ (26.73) $ (0.65) $ (33.78) $ (43.99)
Weighted average shares outstanding 8,466 8,364 8,448 8,353
HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share amounts)
September 30, December 31,
2003 2002
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 39,312 $ 25,908
Accounts receivable, net 140,976 161,831
Due from Monster Worldwide, Inc. 7,513 -
Other current assets 22,505 28,177
-------- --------
Total current assets 210,306 215,916
Property and equipment, net 39,643 34,106
Intangibles, net 1,569 201,937
Other assets 17,197 15,145
-------- --------
$268,715 $467,104
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,831 $ 28,305
Accrued expenses and other current liabilities 105,123 84,669
Accrued merger and integration expenses 5,244 8,935
Accrued business reorganization expenses 12,752 25,845
-------- --------
Total current liabilities 157,950 147,754
Other liabilities 3,770 2,776
-------- --------
Total liabilities 161,720 150,530
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 and
outstanding: 8,507 and 0 shares, respectively 9 -
Additional paid-in capital 314,389 -
Retained deficit (241,364) -
Accumulated other comprehensive income:
Foreign currency translation adjustments 33,961 24,660
Total divisional equity - 291,914
-------- --------
Total stockholders' equity 106,995 316,574
-------- --------
$268,715 $467,104
======== ========
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS
(in thousands)
(unaudited)
For the Three Months
Ended September 30, 2003 Americas Europe Asia Pac. Corporate 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 (1,414) (3,806) (230) (5,450)
Corporate - - - $ (7,292) (7,292)
------- ------- -------- -------- --------
$(7,998) $(5,970) $ 2,667 $ (7,292) $(18,593)
======= ======= ======== ======== ========
For the Three Months Ended September
30, 2002
Revenue
Hudson $79,906 $81,817 $ 92,949 $254,672
Highland 11,330 4,337 371 16,038
------- ------- -------- --------
$91,236 $86,154 $ 93,320 $270,710
======= ======= ======== ========
Gross Margin
Hudson $21,214 $35,085 $ 32,733 $ 89,032
Highland 11,330 3,819 371 15,520
------- ------- -------- --------
$32,544 $38,904 $ 33,104 $104,552
======= ======= ======== ========
Adjusted EBITDA (1)
Hudson $ 2,641 $(5,708) $ 7,085 $ 4,018
Highland 2,225 159 (226) 2,158
Corporate - - - $ (7,524) (7,524)
------- ------- -------- -------- --------
$ 4,866 $(5,549) $ 6,859 $ (7,524) $ (1,348)
======= ======= ======== ======== ========
(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, 2003 Americas Europe Asia Pac. Corporate 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 (4,571) (8,181) (865) (13,617)
Corporate - - - $(20,554) (20,554)
-------- -------- -------- -------- --------
$(15,345) $(19,296) $ 2,815 $(20,554) $(52,380)
======== ======== ======== ======== ========
For the Nine Months
Ended September 30, 2002
Revenue
Hudson $242,795 $253,364 $264,244 $760,403
Highland 35,201 14,880 2,093 52,174
-------- -------- -------- --------
$277,996 $268,244 $266,337 $812,577
======== ======== ======== ========
Gross Margin
Hudson $ 63,273 $118,618 $ 95,084 $276,975
Highland 35,201 13,556 2,093 50,850
-------- -------- -------- --------
$ 98,474 $132,174 $ 97,177 $327,825
======== ======== ======== ========
Adjusted EBITDA (1)
Hudson $ 3,643 $ (5,800) $ 15,611 $ 13,454
Highland 3,241 553 78 3,872
Corporate - - - $(19,375) (19,375)
-------- -------- -------- -------- --------
$ 6,884 $ (5,247) $ 15,689 $(19,375) $ (2,049)
======== ======== ======== ======== ========
(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,
2003 2002 2003 2002
---- ---- ---- ----
Hudson
Adjusted EBITDA (1) $ (5,851) $ 4,018 $ (18,209) $ 13,454
Business reorganization (expenses)
recoveries 335 178 (6,205) (34,544)
Merger and integration (expenses)
recoveries 102 11 (876) (7,468)
Depreciation and amortization (3,377) (2,847) (10,324) (8,976)
Goodwill impairment (195,404) - (195,404) -
--------- ------- --------- --------
Operating loss $(204,195) $ 1,360 $(231,018) $(37,534)
========= ======= ========= ========
Highland
Adjusted EBITDA (1) $ (5,450) $ 2,158 $ (13,617) $ 3,872
Business reorganization (expenses)
recoveries 571 13 (213) (13,743)
Merger and integration recoveries - 891 - 1,501
Depreciation and amortization (975) (584) (3,280) (1,956)
Goodwill impairment (7,381) - (7,381) -
--------- ------- --------- --------
Operating loss $ (13,235) $ 2,478 $ (24,491) $(10,326)
========= ======= ========= ========
Corporate
Adjusted EBITDA (1) $ (7,292) $(7,524) $ (20,554) $(19,375)
Business reorganization expenses - (598) (137) (4,846)
Merger and integration expenses - - - (89)
Depreciation and amortization (903) (1,250) (1,952) (3,806)
--------- ------- --------- --------
Corporate expenses $ (8,195) $(9,372) $ (22,643) $(28,116)
========= ======= ========= ========
Hudson Highland Group consolidated
Adjusted EBITDA (1) $ (18,593) $(1,348) $ (52,380) $ (2,049)
Business reorganization (expenses)
recoveries 906 (407) (6,555) (53,133)
Merger and integration (expenses)
recoveries 102 902 (876) (6,056)
Depreciation and amortization (5,255) (4,681) (15,556) (14,738)
Goodwill impairment (202,785) - (202,785) -
--------- ------- --------- --------
Operating loss $(225,625) $(5,534) $(278,152) $(75,976)
========= ======= ========= ========
(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.