UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2008
or
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission file number: 000-50129
HUDSON HIGHLAND GROUP, INC.
(Exact
name of registrant as specified in its charter)
|
|
|
DELAWARE
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|
59-3547281
|
(State or other jurisdiction of
incorporation or organization)
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|
(IRS Employer
Identification No.)
|
560 Lexington Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 351-7300
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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|
¨
|
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
¨
No
x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
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Class
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Outstanding on July 31, 2008
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Common Stock - $0.001 par value
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25,369,881
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HUDSON HIGHLAND GROUP, INC.
INDEX
2
PART I FINANCIAL INFORMATION
ITEM 1.
|
FINANCIAL STATEMENTS
|
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2008
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2007
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2008
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|
2007
|
|
Revenue
|
|
$
|
305,940
|
|
$
|
297,045
|
|
|
$
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601,428
|
|
$
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583,860
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|
Direct costs (Note 7)
|
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168,723
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|
|
167,325
|
|
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338,603
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336,826
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|
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|
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Gross margin
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137,217
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129,720
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|
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262,825
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247,034
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Selling, general and administrative expenses
|
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125,926
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117,772
|
|
|
|
245,311
|
|
|
230,577
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|
Acquisition-related expenses
|
|
|
|
|
|
3,853
|
|
|
|
|
|
|
4,151
|
|
Depreciation and amortization
|
|
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3,570
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|
|
3,852
|
|
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|
7,429
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|
|
7,542
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Business reorganization expenses
|
|
|
1,071
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|
|
1,578
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|
|
|
2,391
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|
|
4,694
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Operating income
|
|
|
6,650
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|
|
2,665
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7,694
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|
70
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|
Other income (expense):
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|
|
|
|
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|
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Other, net
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899
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(19
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)
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1,325
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2,588
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Interest, net
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|
183
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|
435
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543
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|
647
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|
|
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Income before provision for income taxes
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7,732
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|
|
3,081
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|
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9,562
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3,305
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Provision for income taxes
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6,106
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4,431
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|
|
7,966
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|
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6,636
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|
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|
|
|
|
|
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|
|
|
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|
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Net income (loss) from continuing operations
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|
|
1,626
|
|
|
(1,350
|
)
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|
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1,596
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(3,331
|
)
|
Net income from discontinued operations
|
|
|
3,330
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|
|
732
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|
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4,724
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2,768
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss)
|
|
$
|
4,956
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|
$
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(618
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)
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$
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6,320
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|
$
|
(563
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)
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|
|
|
|
|
|
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|
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Earnings (loss) per share:
|
|
|
|
|
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|
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Basic from continuing operations
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$
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0.07
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$
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(0.05
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)
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$
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0.06
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$
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(0.13
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)
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Basic from discontinued operations
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0.13
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|
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0.03
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|
|
|
0.19
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0.11
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
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|
$
|
0.20
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|
$
|
(0.02
|
)
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|
$
|
0.25
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|
$
|
(0.02
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Diluted from continuing operations
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|
$
|
0.06
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|
$
|
(0.05
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)
|
|
$
|
0.06
|
|
$
|
(0.13
|
)
|
Diluted from discontinued operations
|
|
|
0.13
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|
0.03
|
|
|
|
0.19
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0.11
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|
|
|
|
|
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|
|
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Diluted
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|
$
|
0.19
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|
$
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(0.02
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)
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|
$
|
0.25
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|
$
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(0.02
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)
|
|
|
|
|
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|
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Weighted average shares outstanding:
|
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|
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Basic
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24,984
|
|
|
25,247
|
|
|
|
25,135
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25,084
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Diluted
|
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25,512
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25,247
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25,616
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25,084
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See accompanying notes to condensed consolidated financial statements.
3
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
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|
|
|
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|
|
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June 30,
2008
|
|
|
December 31,
2007
|
|
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|
(unaudited)
|
|
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|
|
ASSETS
|
|
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Current assets:
|
|
|
|
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Cash and cash equivalents
|
|
$
|
51,429
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$
|
39,245
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Cash restricted
|
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|
481
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|
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|
|
Accounts receivable, less allowance for doubtful accounts of $4,531 and $4,838, respectively
|
|
|
196,949
|
|
|
|
187,980
|
|
Prepaid and other
|
|
|
20,143
|
|
|
|
18,389
|
|
Current assets from discontinued operations
|
|
|
|
|
|
|
13,461
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
269,002
|
|
|
|
259,075
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|
Goodwill
|
|
|
67,947
|
|
|
|
73,444
|
|
Other intangibles, net
|
|
|
5,144
|
|
|
|
4,791
|
|
Property and equipment, net
|
|
|
30,025
|
|
|
|
29,470
|
|
Other assets
|
|
|
11,742
|
|
|
|
7,214
|
|
Non-current assets from discontinued operations
|
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
|
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Total assets
|
|
$
|
383,860
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|
|
$
|
374,206
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
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Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
27,679
|
|
|
$
|
20,988
|
|
Accrued expenses and other current liabilities
|
|
|
117,583
|
|
|
|
120,323
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|
Short-term borrowings
|
|
|
1,107
|
|
|
|
243
|
|
Accrued business reorganization expenses
|
|
|
3,356
|
|
|
|
3,490
|
|
Current liabilities from discontinued operations
|
|
|
|
|
|
|
7,382
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|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
149,725
|
|
|
|
152,426
|
|
Other non-current liabilities
|
|
|
19,711
|
|
|
|
18,976
|
|
Accrued business reorganization expenses, non-current
|
|
|
2,305
|
|
|
|
2,689
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
171,741
|
|
|
|
174,091
|
|
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 25,956 and 25,691 shares, respectively
|
|
|
26
|
|
|
|
26
|
|
Additional paid-in capital
|
|
|
448,549
|
|
|
|
444,075
|
|
Accumulated deficit
|
|
|
(282,267
|
)
|
|
|
(288,587
|
)
|
Accumulated other comprehensive income translation adjustments
|
|
|
50,286
|
|
|
|
44,946
|
|
Treasury stock, 589 and 25 shares, respectively, at cost
|
|
|
(4,475
|
)
|
|
|
(345
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
212,119
|
|
|
|
200,115
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
383,860
|
|
|
$
|
374,206
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
4
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,320
|
|
|
$
|
(563
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,547
|
|
|
|
7,761
|
|
Stock-based compensation
|
|
|
2,920
|
|
|
|
2,808
|
|
Gain on sale of assets
|
|
|
(5,996
|
)
|
|
|
(3,241
|
)
|
Other non-cash compensation
|
|
|
|
|
|
|
4,151
|
|
Provision for doubtful accounts
|
|
|
(628
|
)
|
|
|
(292
|
)
|
Deferred income taxes
|
|
|
(293
|
)
|
|
|
(559
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
|
10,642
|
|
|
|
(1,068
|
)
|
(Increase) decrease in other assets
|
|
|
(1,636
|
)
|
|
|
616
|
|
(Decrease) increase in accounts payable, accrued expenses and other liabilities
|
|
|
(13,791
|
)
|
|
|
9,011
|
|
Decrease in accrued business reorganization expenses
|
|
|
(609
|
)
|
|
|
(762
|
)
|
Decrease in accrued merger and integration expenses
|
|
|
(165
|
)
|
|
|
(816
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
4,311
|
|
|
|
17,046
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(6,290
|
)
|
|
|
(6,360
|
)
|
Proceeds from sale of assets
|
|
|
20,615
|
|
|
|
3,393
|
|
Acquisition and investment in businesses, net of cash acquired
|
|
|
(5,473
|
)
|
|
|
(7,569
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
8,852
|
|
|
|
(10,536
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Borrowings under credit facility
|
|
|
204,854
|
|
|
|
233,832
|
|
Repayments under credit facility
|
|
|
(203,920
|
)
|
|
|
(233,832
|
)
|
Purchase of treasury shares
|
|
|
(5,286
|
)
|
|
|
(51
|
)
|
Issuance of common stock Employee Stock Purchase Plan
|
|
|
1,358
|
|
|
|
1,132
|
|
Issuance of common stock Long Term Incentive Plan option exercises
|
|
|
372
|
|
|
|
3,143
|
|
Payments on short and long-term debt
|
|
|
(119
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(2,741
|
)
|
|
|
4,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
1,762
|
|
|
|
1,417
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
12,184
|
|
|
|
12,078
|
|
Cash and cash equivalents, beginning of period
|
|
|
39,245
|
|
|
|
44,649
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
51,429
|
|
|
$
|
56,727
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
749
|
|
|
$
|
669
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
9,471
|
|
|
$
|
4,644
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
Additional
paid-in
capital
|
|
|
Accumulated
deficit
|
|
|
Accumulated
other
comprehensive
income
|
|
Treasury
stock
|
|
|
Total
|
|
Balances at January 1, 2008
|
|
$
|
26
|
|
$
|
444,075
|
|
|
$
|
(288,587
|
)
|
|
$
|
44,946
|
|
$
|
(345
|
)
|
|
$
|
200,115
|
|
Net income
|
|
|
|
|
|
|
|
|
|
6,320
|
|
|
|
|
|
|
|
|
|
|
6,320
|
|
Other comprehensive income, translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,340
|
|
|
|
|
|
|
5,340
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,286
|
)
|
|
|
(5,286
|
)
|
Issuance of shares for 401(k) plan
|
|
|
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
1,156
|
|
|
|
980
|
|
Issuance of shares from exercise of stock options
|
|
|
|
|
|
372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
372
|
|
Issuance of shares for employee stock purchase plans
|
|
|
|
|
|
1,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,358
|
|
Stock-based compensation
|
|
|
|
|
|
2,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2008
|
|
$
|
26
|
|
$
|
448,549
|
|
|
$
|
(282,267
|
)
|
|
$
|
50,286
|
|
$
|
(4,475
|
)
|
|
$
|
212,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
HUDSON HIGHLAND GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 1 BASIS OF PRESENTATION
These interim
unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and should be read in
conjunction with the consolidated financial statements and related notes of Hudson Highland Group, Inc. (Hudson or the Company) filed in its Annual Report on Form 10-K for the year ended December 31, 2007.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of operating revenues and expenses. These estimates are based on managements knowledge and judgments. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The results of
operations for interim periods are not necessarily indicative of the results of operations for the full year. Certain prior year amounts have been reclassified to conform to the current period presentation.
The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. All
significant inter-company accounts and transactions between and among the Company and its subsidiaries have been eliminated in consolidation.
NOTE 2
DESCRIPTION OF BUSINESS
The Company provides professional contract consultants, permanent recruitment services and a range of
talent management services to businesses operating in a wide variety of industries. The Company is organized into three reportable segmentsHudson Americas, Hudson Europe, and Hudson Asia Pacific (collectively, the Hudson regional
businesses), which constituted approximately 16%, 47%, and 37%, respectively, of the Companys gross margin for the six months ended June 30, 2008.
Hudson Americas operates from thirty-five offices in two countries, with 96% of its gross margin generated in the United States (U.S.) during the six months ended June 30, 2008. Hudson Europe operates
from forty-six offices in seventeen countries, with 46% of its gross margin generated in the United Kingdom (U.K.) during the six months ended June 30, 2008. Hudson Asia Pacific operates from twenty-one offices in six countries,
with 64% of its gross margin generated in Australia during the six months ended June 30, 2008.
With respect to contract personnel,
Hudson focuses on providing candidates with specialized functional skills and competencies, such as accounting and finance, legal and information technology. The length of a contract assignment can vary, but engagements at the professional level
tend to be longer than those in the general clerical or industrial sectors. With respect to permanent recruitment, Hudson focuses on mid-level professionals typically earning between $50 and $150 annually and possessing the professional skills
and/or profiles required by clients. Hudson provides permanent recruitment services on both a retained and contingent basis. In larger markets, Hudsons sales strategy focuses on both clients operating in particular industry sectors, such as
financial services or technology, and candidates possessing particular professional skills, such as accounting and finance, information technology, legal and human resources. Hudson uses both traditional and interactive methods to select potential
candidates for its clients, employing a suite of products that assesses talent and helps predict whether a candidate will be successful in a given role.
The Hudson regional businesses also provide organizational effectiveness and development services through their talent management offerings. These services encompass candidate assessment, competency modeling,
leadership development, performance management, and career transition. These services enable Hudson to offer clients a comprehensive set of management services across the entire employment life-cycle from attracting, assessing and selecting best-fit
employees to engaging and developing those individuals to help build a high-performance organization.
7
NOTE 3 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) SFAS
No. 162 The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the sources of accounting principles and the framework, or hierarchy, for selecting the principles used
in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective 60 days following the Securities Exchange and Commissions (SEC) approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not currently expect the adoption of SFAS
No. 162 to have a material impact on its results of operations or financial condition.
In March 2008, FASB issued SFAS
No. 161 Disclosures About Derivative Instruments and Hedging Activities (SFAS No. 161). SFAS No. 161 enhances disclosures for derivative instruments and hedging activities, including: (i) the manner
in which a company uses derivative instruments; (ii) the manner in which derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and
(iii) the effect of derivative instruments and related hedged items on a companys financial position. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 and interim
periods within those fiscal years. The Company does not currently expect the adoption of SFAS No. 161 to have a material impact on its results of operations or financial condition.
In September 2006, FASB issued SFAS No. 157 Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at
fair value. In February 2008, FASB issued Staff Position 157-2 Partial Deferral of the Effective Date of Statement 157 (FSP No. 157-2). FSP No. 157-2 delays the effective date of SFAS No. 157, for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The adoption
of SFAS No. 157 for financial assets and liabilities did not have a material effect on the Companys results of operations or financial position. The Company does not currently expect the adoption of FSP No. 157-2 for nonfinancial
assets and nonfinancial liabilities to have a material impact on its results of operations or financial condition.
In February 2007, FASB
issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (SFAS No. 159). SFAS No. 159 permits entities to choose to
measure many financial instruments and certain other items at fair value, with changes in fair value recognized in earnings each reporting period. The Company adopted SFAS No. 159 on January 1, 2008 and the adoption did not have a material
impact on its results of operations or financial condition as the Company did not elect to apply the option to measure any of its financial assets or liabilities.
NOTE 4 EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are computed by dividing the Companys net
income (loss) from continuing operations by the weighted average number of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Companys net income (loss) from
continuing operations by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options and unvested restricted stock. The dilutive impact of stock options and unvested restricted
stock is determined by applying the treasury stock method. For periods in which losses are presented, dilutive loss per share calculations do not differ from basic loss per share because the effects of any potential common shares were
anti-dilutive and therefore not included in the calculation of dilutive earnings per share. For the three months ended June 30, 2008, 1,688,075 outstanding stock options were excluded from the diluted earnings per share calculation because the
options exercise prices were greater than the average share price for the period. For the six months ended June 30, 2007, the effect of approximately 823,000 outstanding stock options and other common stock equivalents was excluded from
the calculation of diluted loss per share because their effect was anti-dilutive.
8
NOTE 5 STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment (SFAS
No. 123(R)), as interpreted by SEC Staff Accounting Bulletins No. 107 and No. 110. Under SFAS No. 123(R), stock-based compensation is based on the fair value of the award on the date of grant, which is recognized over the
related service period, net of estimated forfeitures. The service period is the period over which the related service is performed, which is generally the same as the vesting period. The Company uses the Black-Scholes option-pricing model to
determine the compensation expense related to stock options.
Long Term Incentive Plan
The Company maintains the Hudson Highland Group, Inc. Long Term Incentive Plan (the LTIP) pursuant to which it can offer equity-based
compensation incentives to eligible recipients. The LTIP permits the granting of stock options and restricted stock as well as other types of equity-based instruments. The Compensation Committee of the Companys Board of Directors will
establish such conditions as it deems appropriate on the granting or vesting of stock options or restricted stock.
Stock Options
Stock options granted under the LTIP generally expire ten years after the date of grant. Stock options granted under the LTIP have an
exercise price of at least 100% of the fair market value of the underlying stock and generally vest ratably over a four-year period.
For
the six months ended June 30, 2008 and 2007, the Company recognized $901 and $2,017, respectively, of stock-based compensation related to stock options. For the three months ended June 30, 2008 and 2007, the Company recognized $503 and
$1,195, respectively, of stock-based compensation related to stock options.
As of June 30, 2008, the Company had $2,012 of total
unrecognized stock-based compensation related to outstanding nonvested stock options. The Company expects to recognize that cost over a weighted-average service period of two years.
The weighted average fair value of stock options granted during the six months ended June 30, 2007 was $9.30. There were no options granted during
the six months ended June 30, 2008.
Restricted Stock
Shares of restricted stock are valued at the closing market value of the Companys common stock on the date of grant. During the six months ended
June 30, 2008, the Company granted 293,180 shares of restricted stock to various employees. Of the 293,180 shares granted, (i) 228,980 vest over a one year period (with 50% vesting on July 1, 2008 and the remaining 50% vesting on
February 13, 2009), (ii) 45,000 shares vest ratably over a four year period, (iii) 15,600 vest over a four year period (with 50% vesting on July 1, 2008 and the remaining 50% vesting ratably over a three year period beginning
May 12, 2009) and (iv) 3,600 shares vested immediately.
For the six months ended June 30, 2008 and 2007, the Company
recognized $1,570 and $479, respectively, of stock-based compensation related to restricted stock. For the three months ended June 30, 2008 and 2007, the Company recognized $1,065 and $341, respectively, of stock-based compensation related to
restricted stock.
As of June 30, 2008, the Company had $1,352 of total unrecognized stock-based compensation related to outstanding
nonvested restricted stock. That cost is expected to be recognized over a weighted-average service period of 1.38 years.
Employee Stock Purchase
Plan
The Company also maintains the Hudson Highland Group, Inc. Employee Stock Purchase Plan (the ESPP), pursuant to which
eligible employees may purchase shares of the Companys common stock at the lesser of 85% of the fair market value at the commencement of each plan purchase period or 85% of the fair market value as of the purchase date. Eligible employee
purchases are limited to $25 in any calendar year.
For the six months ended June 30, 2008 and 2007, the Company recognized $449 and
$312, respectively, of stock-based compensation related to shares purchased under the ESPP. For the three months ended June 30, 2008 and 2007, the Company recognized $266 and $181, respectively, of stock-based compensation related to shares
purchased under the ESPP. As of June 30, 2008, the Company had 223,258 shares reserved for purchase under the ESPP.
9
NOTE 6 DISCONTINUED OPERATIONS
Effective May 1, 2008, the Company completed the sale of substantially all of the assets of Balance Public Management B.V. (BPM), a
division of Balance Ervaring op Projectbasis, B.V. (Balance), a subsidiary of the Company, to KH Health Care B.V. (KHHC). At the closing of the sale, the Company received 4,250, or $6,628, in cash from KHHC. The Company
recorded a gain on the sale of Balance of $2,762, which included $243 of foreign currency translation gains, net of $3,713 of goodwill allocated to the business.
On February 4, 2008, the Company completed the sale of substantially all of the assets of Hudson Americas energy, engineering and technical staffing division (ETS) to System One Holdings LLC
(System One). At the close of the sale, the Company received from System One, pursuant to the agreement (i) $10,988 in cash, subject to a post-closing net working capital adjustment, (ii) a subordinated secured note in the
aggregate principal amount of $5,000 with a five year maturity and (iii) a warrant to purchase 10% of the units of membership interests in System One. The Company has the right to receive an additional $600 that has been deposited by System One
into an escrow account upon the resolution of certain tax withholdings. Of this amount, $119 was released from escrow during the three months ended June 30, 2008. During June 2008, the post-closing net working capital adjustment was finalized
which resulted in a $372 payment to System One. The Company retained approximately $3,600 of receivables of the business, all of which were collected as of April 30, 2008. The Company also retained $1,153 of workers compensation
liabilities. The Company recorded a loss on the sale of ETS of $671, net of approximately $903 of direct costs of the transaction and $6,944 of goodwill allocated to the business.
On December 14, 2007, the Company completed the sale of all of the outstanding shares of its Netherlands reintegration subsidiary, Hudson Human
Capital Solutions B.V. (HHCS) to Workx! Holding B.V (Workx). At the closing of the HHCS sale, the Company received 500 in cash. The share purchase agreement entered into in connection with the HHCS sale provides
for contingent payments to the Company of up to 200 subject to the achievement by HHCS of certain earnings before interest, income taxes, other non-operating expense, and depreciation and amortization (EBITDA) targets in 2008 and
2009. The gain before income taxes on the sale of HHCS was $4,921, which included approximately $7,354 of accumulated foreign currency translation gains previously included in other comprehensive income and now reclassified in accordance with SFAS
No. 52, Foreign Currency Translation as a result of the sale of the entity, offset by severance and professional fees of approximately $2,478.
Effective October 29, 2007, certain of the Companys subsidiaries completed the sale of Hudson Asia Pacifics Australian blue-collar trade and industrial business (T&I) to Skilled Group
Limited. The Company recorded a gain on the sale of T&I of $1,877 from cash proceeds of approximately $3,000 in the fourth quarter of 2007.
Effective October 1, 2006, the Company completed the sale of its Highland Partners executive search business (Highland) to Heidrick & Struggles International, Inc. (Heidrick). The Company recorded an
initial gain of $20,358 on the sale of Highland from cash proceeds of $36,600, less post-closing net working capital adjustments, $9,550 paid to certain partners of Highland in consideration for providing assistance in completing the sale of
Highland, entering into employment agreements with Heidrick and providing the Company with a general release from liability, and other direct costs of the transaction. Heidrick also assumed certain on-going liabilities and obligations of Highland.
In April 2008, as a result of Highland achieving certain revenue metrics in 2007, the Company received an additional earn-out payment of $3,375. The additional gain on sale was recorded in discontinued operations. The Company may receive up to an
additional $11,625 from Heidrick in 2009, subject to the achievement by Highland of certain future revenue metrics in 2008. Under the purchase agreement, Heidrick is required to provide the Company with a notice stating the amount of any such
contingent payment thirty days after Heidricks public release of its consolidated results of operations, or approximately at the end of March 2009. The Company will determine the future amounts to be received under the Heidrick purchase
agreement at that time. During the quarter ended June 30, 2008, the Company recorded a reduction in taxes payable and recognized a deferred tax asset of $926. In March 2008, the Company received notification of an employee-related ruling
requiring the Company to pay approximately $698 to a former Highland employee. The Company accrued the related liability as of March 31, 2008.
ETS was part of the Hudson Americas reportable segment, BPM and HHCS were part of the Hudson Europe reportable segment and T&I was part of the Hudson Asia Pacific reportable segment. The Highland business was a separate reportable
segment of the Company at the time of its sale. The gain or loss on sale and results of operations from all five of these operations were reported in discontinued operations in the relevant periods.
10
NOTE 6 DISCONTINUED OPERATIONS (Continued)
Reported results for the discontinued operations by period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Three Months Ended June 30, 2008
|
|
|
|
Highland
|
|
|
T&I
|
|
|
HHCS
|
|
|
ETS
|
|
|
BPM
|
|
|
Total
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(38
|
)
|
|
$
|
808
|
|
|
$
|
770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(52
|
)
|
|
$
|
199
|
|
|
$
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
34
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(374
|
)
|
|
$
|
48
|
|
|
$
|
(292
|
)
|
Other income
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
(Loss) gain on sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126
|
)
|
|
|
2,762
|
|
|
|
2,636
|
|
Benefit from income taxes (a)
|
|
|
(926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
(949
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
997
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(500
|
)
|
|
$
|
2,833
|
|
|
$
|
3,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months Ended June 30, 2008
|
|
|
|
Highland
|
|
|
T&I
|
|
|
HHCS
|
|
|
ETS
|
|
|
BPM
|
|
|
Total
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,956
|
|
|
$
|
2,827
|
|
|
$
|
15,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
568
|
|
|
$
|
816
|
|
|
$
|
1,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
112
|
|
|
$
|
6
|
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
$
|
(520
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(1,514
|
)
|
|
$
|
240
|
|
|
$
|
(1,794
|
)
|
Other expense
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Gain (loss) on sale
|
|
|
3,375
|
|
|
|
|
|
|
|
|
|
|
|
(671
|
)
|
|
|
2,762
|
|
|
|
5,466
|
|
Benefit from income taxes (a)
|
|
|
(926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(129
|
)
|
|
|
(1,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
3,778
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(2,185
|
)
|
|
$
|
3,131
|
|
|
$
|
4,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Three Months Ended June 30, 2007
|
|
|
|
Highland
|
|
|
T&I
|
|
|
HHCS
|
|
|
ETS
|
|
|
BPM
|
|
|
Total
|
|
Revenue
|
|
$
|
|
|
|
$
|
11,095
|
|
|
$
|
3,453
|
|
|
$
|
35,785
|
|
|
$
|
1,483
|
|
|
$
|
51,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
|
|
|
$
|
1,318
|
|
|
$
|
1,319
|
|
|
$
|
4,762
|
|
|
$
|
484
|
|
|
$
|
7,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
80
|
|
|
$
|
20
|
|
|
$
|
2
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
$
|
(101
|
)
|
|
$
|
487
|
|
|
$
|
(143
|
)
|
|
$
|
536
|
|
|
$
|
198
|
|
|
$
|
977
|
|
Other (expense) income
|
|
|
(146
|
)
|
|
|
|
|
|
|
1
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(148
|
)
|
Provision (benefit) for income taxes (a)
|
|
|
11
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations
|
|
$
|
(258
|
)
|
|
$
|
341
|
|
|
$
|
(142
|
)
|
|
$
|
533
|
|
|
$
|
258
|
|
|
$
|
732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months Ended June 30, 2007
|
|
|
|
Highland
|
|
|
T&I
|
|
|
HHCS
|
|
|
ETS
|
|
|
BPM
|
|
|
Total
|
|
Revenue
|
|
$
|
|
|
|
$
|
20,922
|
|
|
$
|
7,118
|
|
|
$
|
72,042
|
|
|
$
|
2,818
|
|
|
$
|
102,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
|
|
|
$
|
2,494
|
|
|
$
|
3,294
|
|
|
$
|
9,748
|
|
|
$
|
913
|
|
|
$
|
16,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
163
|
|
|
$
|
42
|
|
|
$
|
7
|
|
|
$
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
$
|
(101
|
)
|
|
$
|
856
|
|
|
$
|
194
|
|
|
$
|
1,752
|
|
|
$
|
340
|
|
|
$
|
3,041
|
|
Other (expense) income
|
|
|
(127
|
)
|
|
|
|
|
|
|
5
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(126
|
)
|
Provision (benefit) for income taxes (a)
|
|
|
11
|
|
|
|
257
|
|
|
|
|
|
|
|
|
|
|
|
(121
|
)
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations
|
|
$
|
(239
|
)
|
|
$
|
599
|
|
|
$
|
199
|
|
|
$
|
1,748
|
|
|
$
|
461
|
|
|
$
|
2,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Income tax expense is provided at the effective tax rate by taxing jurisdiction and differs from the U.S. statutory tax rate of 35% for differences in the foreign statutory tax
rates, as well as the ability to offset certain net operating losses (NOLs) against taxable profits.
|
11
NOTE 7 REVENUE, DIRECT COSTS AND GROSS MARGIN
The Companys revenue, direct costs and gross margin were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Three Months Ended June 30, 2008
|
|
For The Three Months Ended June 30, 2007
|
|
|
Contracting
|
|
Other
|
|
Total
|
|
Contracting
|
|
Other
|
|
Total
|
Revenue
|
|
$
|
205,402
|
|
$
|
100,538
|
|
$
|
305,940
|
|
$
|
199,351
|
|
$
|
97,694
|
|
$
|
297,045
|
Direct costs (1)
|
|
|
162,670
|
|
|
6,053
|
|
|
168,723
|
|
|
159,239
|
|
|
8,086
|
|
|
167,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
42,732
|
|
$
|
94,485
|
|
$
|
137,217
|
|
$
|
40,112
|
|
$
|
89,608
|
|
$
|
129,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months Ended June 30, 2008
|
|
For The Six Months Ended June 30, 2007
|
|
|
Contracting
|
|
Other
|
|
Total
|
|
Contracting
|
|
Other
|
|
Total
|
Revenue
|
|
$
|
411,177
|
|
$
|
190,251
|
|
$
|
601,428
|
|
$
|
400,765
|
|
$
|
183,095
|
|
$
|
583,860
|
Direct costs (1)
|
|
|
325,766
|
|
|
12,837
|
|
|
338,603
|
|
|
321,054
|
|
|
15,772
|
|
|
336,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
85,411
|
|
$
|
177,414
|
|
$
|
262,825
|
|
$
|
79,711
|
|
$
|
167,323
|
|
$
|
247,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Direct costs include the direct staffing costs of salaries, payroll taxes, employee benefits, travel expenses and insurance costs for the Companys contractors and reimbursed
out-of-pocket expenses and other direct costs. Other than reimbursed out-of-pocket expenses, there are no other direct costs associated with the Other category, which includes the search, permanent recruitment and other human resource
solutions revenue. Gross margin represents revenue less direct costs. The region where services are provided, the mix of contracting and permanent recruitments, and the functional nature of the staffing services provided can affect gross
margin. The salaries, commissions, payroll taxes and employee benefits related to recruitment professionals are included in selling, general and administrative expenses.
|
NOTE 8 PROPERTY AND EQUIPMENT, NET
As of June 30, 2008 and December 31, 2007,
property and equipment, net consisted of the following:
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
Computer equipment
|
|
$
|
28,367
|
|
$
|
27,367
|
Furniture and fixtures
|
|
|
21,889
|
|
|
20,360
|
Capitalized software costs
|
|
|
30,533
|
|
|
29,208
|
Leasehold and building improvements
|
|
|
28,007
|
|
|
23,754
|
Transportation equipment
|
|
|
214
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
109,010
|
|
|
100,900
|
Less: accumulated depreciation and amortization
|
|
|
78,985
|
|
|
71,430
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
30,025
|
|
$
|
29,470
|
|
|
|
|
|
|
|
NOTE 9 GOODWILL AND OTHER INTANGIBLES
Changes in the carrying amount of goodwill, by reporting segment, for the six months ended June 30, 2008, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2007
|
|
Additions
and
Adjustments
|
|
|
Currency
Translation
|
|
June 30,
2008
|
Hudson Americas
|
|
$
|
43,982
|
|
$
|
(5,847
|
)
|
|
$
|
|
|
$
|
38,135
|
Hudson Europe
|
|
|
24,222
|
|
|
(3,122
|
)
|
|
|
1,982
|
|
|
23,082
|
Hudson Asia Pacific
|
|
|
5,240
|
|
|
1,128
|
|
|
|
362
|
|
|
6,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill
|
|
$
|
73,444
|
|
$
|
(7,841
|
)
|
|
$
|
2,344
|
|
$
|
67,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the carrying amount of goodwill during the six months ended June 30, 2008
primarily related to the sale of ETS ($6,944) and the sale of BPM ($3,713), offset by goodwill from acquisitions and additional purchase price payments related to historical acquisitions as more fully described in footnote 11.
As of June 30, 2008 and December 31, 2007, other intangibles, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
December 31, 2007
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
Client lists
|
|
$
|
10,088
|
|
$
|
(7,518
|
)
|
|
$
|
2,570
|
|
$
|
9,237
|
|
$
|
(6,950
|
)
|
|
$
|
2,287
|
Other amortizable intangibles
|
|
|
5,732
|
|
|
(3,158
|
)
|
|
|
2,574
|
|
|
4,985
|
|
|
(2,481
|
)
|
|
|
2,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangibles, net
|
|
$
|
15,820
|
|
$
|
(10,676
|
)
|
|
$
|
5,144
|
|
$
|
14,222
|
|
$
|
(9,431
|
)
|
|
$
|
4,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the six months ended June 30, 2008 and 2007 was $1,096 and $902,
respectively.
12
NOTE 10 INCOME TAXES
The provision for income taxes for the six months ended June 30, 2008 was $7,966 on pre-tax income of $9,562, compared with a provision of $6,636 on pre-tax income of $3,305 for the same period of 2007. In the
current period, the effective tax rate differs from the U.S. federal statutory rate of 35% due largely to the inability to recognize tax benefits on net U.S. losses. This is offset, in part, by reported income in locations where tax losses are
available to offset the income and variations from the U.S. tax rate in foreign jurisdictions. The Company records a valuation allowance against deferred tax assets to the extent that it is more likely than not that some portion, or all of, the
deferred tax assets will not be realized.
Estimated interest costs and penalties are classified as part of the provision for income taxes
in the Companys condensed consolidated financial statements and totaled $251 and $313, respectively, for the six months ended June 30, 2008 and 2007. Accrued interest and penalties were $2,270 as of June 30, 2008.
As of June 30, 2008 and December 31, 2007, the Company had $7,422 and $6,890, respectively, of unrecognized tax benefits, which if recognized
in the future, would affect the annual effective income tax rate.
In many cases, the Companys uncertain tax positions are related to
tax years that remain subject to examination by the relevant tax authorities. Tax years that had NOLs remain open until the NOLs are utilized in future periods. The open tax years are 2003 through 2007 for the U.S. federal, state and local
jurisdictions, 2000 through 2007 for the U.K., 2000 through 2007 for Australia and 2000 through 2007 for most other jurisdictions. Currently, the Companys income tax filings are not under examination in any federal or state jurisdictions in
the U.S.
13
NOTE 11 BUSINESS COMBINATIONS ACQUISITIONS
In April 2008, the Company and one of its subsidiaries completed the acquisition of certain business assets of Propensity, Ltd., a professional services
firm specializing in accounting and finance services and providing both contract and permanent placement services based in Texas. The purchase agreement provided for a payment at closing of $1,200, plus transactions costs. The purchase agreement
also provides for contingent payouts to the seller of up to a maximum of $3,800 over the next three years, based upon the achievement of future minimum annual and cumulative earnings thresholds. In addition, the Company loaned the seller $600 to be
repaid to the Company in annual installments of principal and interest over a five year period. The loan bears interest at an annual rate of 6% and is secured by any potential contingent payouts due the seller. The Company recorded the preliminary
allocation of the purchase price to the estimated fair value of the net identifiable assets acquired (non-compete agreement valued at $400, which is being amortized over four years, customer relationships valued at $50, which are being amortized
over five years, the Propensity trade name valued at $20, which is being amortized over nine months) with the excess of $1,097 allocated to goodwill, which is non-deductible for tax purposes.
In February 2008, the Company completed the acquisition of a majority of the assets of Executive Coread SARL, a talent management and recruitment company
in France. The purchase agreement provided for a payment at closing of 300, or $454, plus transactions costs and additional contingent payments up to 300, or approximately $475, based on earnings thresholds in 2008 and 2009. Through
June 30, 2008, the Company estimated and accrued a contingent payment of $100.
In February 2007, the Company and one of its
subsidiaries entered into a purchase agreement to acquire the business assets of Tong Zhi (Beijing) Consulting Service Ltd and Guangzhou Dong Li Consulting Service Ltd (collectively, TKA) for an initial investment of $1,000. In
May 2007, the Company completed the acquisition of TKA for additional consideration of $4,000, consisting of $2,800 paid in cash at or shortly after the acquisition, $500 held in escrow to be payable within 90 days of the third anniversary of
the acquisition date and $700 in notes with an interest rate of 6.18% paid in November 2007. The Company recorded the preliminary allocation of the purchase price to the estimated fair value of the net identifiable assets acquired ($45 in assets,
$525 for non-contractual client relationships and other current liabilities of $596) with the excess of $5,026 allocated to goodwill, which is non-deductible for tax purposes. The purchase agreement also provides for contingent payouts to the
sellers of up to a maximum of $8,500 over the next three years, based upon the achievement of future minimum annual and cumulative earnings thresholds. Of this amount, $1,113 was earned during the first year of the contingent payout period and has
been accrued for as of June 30, 2008. This amount, which represents additional purchase price, was paid in July 2008 and recorded as goodwill. TKA is an information technology recruitment business serving multinational clients in China, and its
results have been included in the Hudson Asia Pacific segment since the acquisition.
In April 2008, the Company made the final contingent
payment of 3,500, or $5,008, related to the Hudson Europes segments August 2005 acquisition of Balance, a professional contract staffing firm in the Netherlands. This amount was accrued for as of March 31, 2008.
The primary reasons for the Companys acquisitions and the principal factors that contribute to the recognition of goodwill are the strengthening of
the Companys presence in a particular geographic region and/or the synergies and related cost savings gained from the integration of the acquired operations.
Pro forma information for these acquisitions is not included as it would not have a material impact on the Companys condensed consolidated financial position or results of operations.
14
NOTE 12 BUSINESS REORGANIZATION EXPENSES
On March 5, 2008, the Companys Board of Directors approved a plan to streamline the Companys support operations in each of the Hudson
regional businesses to match its focus on specialization. The Company estimates that the pre-tax cost of the program will be between $5,000 and $7,000 for the year ending December 31, 2008. For the six months ended June 30, 2008, the
Company incurred $2,400 of business reorganization expenses. The Company expects the remaining business reorganization expenses to primarily be incurred by Hudson Europe and Hudson Asia Pacific. The Company expects the program to be completed in
2008. The program includes costs for actions to reduce support functions to match them to the scale of businesses after divestitures, exit underutilized properties and eliminate contracts for certain discontinued services. These costs can be defined
as lease termination payments, employee termination benefits and contract cancellation costs. The Company is taking these actions to help reduce costs and increase the sustainable, long-term profitability of the Company.
In 2006, the Companys Board of Directors approved the 2006 reorganization program with costs for related actions in the following categories:
consolidation of support functions, particularly between the Hudson North America business unit and corporate; closing or reducing redundant sales functions and unprofitable offices, particularly in Hudson North America and Europe; and programs to
reduce management staffing levels in Hudson Asia Pacific.
In 2002, the Company, then part of Monster Worldwide, Inc.
(Monster), announced a plan to separate from Monster. This reorganization program included workforce reductions, consolidation of excess facilities and offices and related write-offs, restructuring of certain business functions and other
special charges, primarily for exiting activities that were no longer part of the Companys strategic plan.
In the following tables,
amounts in the Changes in Estimate and Additional Charges columns represent modifications to amounts charged or recovered for business reorganization expenses in the Companys condensed consolidated statements of
operations. Amounts in the Utilization column are primarily the cash payments associated with the plans. Business reorganization expense activities and liability balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Plan
|
|
December 31,
2007
|
|
Changes in
Estimate
|
|
|
Additional
Charges
|
|
Utilization
|
|
|
June 30,
2008
|
|
Lease termination payments
|
|
$
|
|
|
$
|
|
|
|
$
|
615
|
|
$
|
(75
|
)
|
|
$
|
540
|
|
Employee termination benefits
|
|
|
|
|
|
|
|
|
|
1,767
|
|
|
(1,028
|
)
|
|
|
739
|
|
Contract cancellation costs
|
|
|
|
|
|
|
|
|
|
290
|
|
|
(290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
|
$
|
2,672
|
|
$
|
(1,393
|
)
|
|
$
|
1,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Plan
|
|
December 31,
2007
|
|
Changes in
Estimate
|
|
|
Additional
Charges
|
|
Utilization
|
|
|
June 30,
2008
|
|
Lease termination payments
|
|
$
|
2,118
|
|
$
|
(33
|
)
|
|
$
|
|
|
$
|
(602
|
)
|
|
$
|
1,483
|
|
Employee termination benefits
|
|
|
30
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
Contract cancellation costs
|
|
|
42
|
|
|
|
|
|
|
|
|
|
(40
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,190
|
|
$
|
(33
|
)
|
|
$
|
|
|
$
|
(672
|
)
|
|
$
|
1,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 Plan
|
|
December 31,
2007
|
|
Changes in
Estimate
|
|
|
Additional
Charges
|
|
Utilization
|
|
|
June 30,
2008
|
|
Lease termination payments
|
|
$
|
3,907
|
|
$
|
(207
|
)
|
|
$
|
|
|
$
|
(840
|
)
|
|
$
|
2,860
|
|
Employee termination benefits
|
|
|
40
|
|
|
(41
|
)
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Contract cancellation costs
|
|
|
42
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,989
|
|
$
|
(248
|
)
|
|
$
|
|
|
$
|
(844
|
)
|
|
$
|
2,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total
|
|
$
|
6,179
|
|
$
|
(281
|
)
|
|
$
|
2,672
|
|
$
|
(2,909
|
)
|
|
$
|
5,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
NOTE 13 COMMITMENTS AND CONTINGENCIES
The Company has entered into various consulting, employment and non-compete agreements with certain key management personnel, executive search consultants
and former owners of acquired businesses. Agreements with key members of management are on an at will basis, provide for compensation and severance payments under certain circumstances, and are automatically renewed annually unless either party
gives sufficient notice of termination. Agreements with certain consultants and former owners of acquired businesses are generally two to five years in length.
The Company is subject to various claims from lawsuits, taxing authorities and other complaints arising in the ordinary course of business. The Company records provisions for losses when the claim becomes probable and
the amount due is estimable. Although the outcome of these claims cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Companys financial condition,
results of operations, or liquidity.
The Company has certain asset retirement obligations that are primarily the result of legal
obligations for the removal of leasehold improvements and restoration of premises to their original condition upon termination of leases. At June 30, 2008 and December 31, 2007, $2,712 and $1,520, respectively, of asset retirement
obligations were included in the condensed consolidated balance sheet. As of June 30, 2008, $1,355 of the asset retirement obligations was included in other non-current liabilities with the remainder in accrued expenses and other current
liabilities.
NOTE 14 SUPPLEMENTAL CASH FLOW INFORMATION
During the six months ended June 30, 2008, the Company issued 140,051 shares of its common stock held in treasury to satisfy its 2007 contribution liability to its 401(k) plan, with a value of $980 for these
shares at issuance. Also during the six months ended June 30, 2008, the Company issued 2,535 shares of its common stock for an employee share purchase plan in the U.K. with a value of $1,358.
NOTE 15 FINANCIAL INSTRUMENTS
Credit Facility
The Companys liquidity needs arise primarily from funding working capital requirements and capital investment in information
technology and facilities.
On July 31, 2007, the Company entered into an amended and restated senior secured credit facility with
Wells Fargo Foothill with the ability to borrow up to $75,000 (the Credit Facility). The Company may, subject to certain conditions, increase the maximum Credit Facility limit up to $125,000. The maturity date of the Credit Facility is
July 31, 2012. Borrowings may be made with a base rate loan having an interest rate based on the prime rate and the Leverage Ratio (as defined in the Credit Facility) or a LIBOR rate loan with an interest rate based on the LIBOR rate and the
Leverage Ratio. The Credit Facility is secured by substantially all of the assets of the Company and extensions of credit are based on a percentage of the accounts receivable of the Company. As of June 30, 2008 there were no outstanding
borrowings under the Credit Facility. As of June 30, 2008, there was $8,157 of outstanding letters of credit issued under the Credit Facility. These letters of credit have various maturity dates through 2017 and are primarily used to secure
operating and capital lease financing and support the Companys HSBC Bank (Shanghai) loan. Available credit for use under the Credit Facility was $66,843 as of June 30, 2008.
The Company expects to continue to use the Credit Facility, if and when required, to support its ongoing working capital requirements, capital
expenditures, other corporate purposes and its letters of credit. In July 2007, the Company entered into a collateral trust agreement, which replaced a letter of credit used to support a workers compensation policy. The estimated collateral
under the collateral trust agreement was approximately $2,900, which was provided by the Company as a deposit. On April 1, 2008, the Company received $500 for a reduction in the required collateral under the collateral trust agreement due to a
reduction in workers compensation requirements. Accordingly, as of June 30, 2008, $2,400 was included in other long-term assets.
The Credit Facility contains various restrictions and covenants, including (1) prohibitions on payments of dividends; (2) requirements that the Company maintain its minimum EBITDA (as defined in the Credit Facility) and capital
expenditures within prescribed levels; (3) restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge or otherwise fundamentally change the ownership of the Company; and (4) limitations on
investments, dispositions of assets and guarantees of indebtedness and repurchases of the Companys stock. The Credit Facility allows certain permitted investments in the aggregate amount not to exceed $25,000 per year and certain permitted
dispositions in the aggregate amount not to exceed $15,000 per year.
The financial covenants of the Credit Facility include a minimum
quarterly EBITDA for a twelve-month period and maximum capital expenditures for each fiscal year. The minimum EBITDA covenant provides that the Companys quarterly EBITDA for a trailing twelve-month period may not be less than $25,000. The
maximum capital expenditure covenant provides that the Companys capital expenditures in each fiscal year may not exceed $18,000. The borrowing base is determined under the Credit Facility as an agreed percentage of eligible accounts
receivable, less reserves. These restrictions and covenants could limit the Companys ability to respond to market conditions, to provide for unanticipated capital investments, to raise additional debt or equity capital, or to take advantage of
business opportunities, including future acquisitions. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2008 and December 31, 2007.
In January 2008, the Company entered into a loan agreement with HSBC Bank (Shanghai) in China, and borrowed $964 for working capital purposes and the TKA
acquisition. The loan matures on September 30, 2008, bearing annual interest based upon the Peoples Republic of Chinas six month rate, plus 10% of that rate. This interest rate was 6.47% at June 30, 2008. The loan is secured by
a letter of credit under the Credit Facility. As of June 30, 2008, there was $947 of outstanding borrowings under the HSBC Bank (Shanghai) loan.
16
NOTE 15 FINANCIAL INSTRUMENTS (Continued)
Shelf Registration Statement Filing
The Company has a shelf registration on file with the SEC to
enable it to issue up to 1,350,000 shares of its common stock from time to time in connection with acquisitions of businesses, assets or securities of other companies, whether by purchase, merger or any other form of acquisition or business
combination. If any shares are issued using this shelf registration, the Company will not receive any proceeds from these offerings other than the assets, businesses or securities acquired. As of June 30, 2008, all of the 1,350,000 shares were
still available for issuance.
Forward Contracts
The Company periodically may enter into short-term forward contracts to minimize the exposure to foreign exchange rate risk related to inter-company loan balances denominated in currencies other than the functional
currency. The Company does not apply hedge accounting and, accordingly, any gains or losses resulting from changes in the fair value of the forward contracts are included in other income (expense) in the condensed consolidated statements of
operations. At June 30, 2008, there were no outstanding foreign currency forward contracts.
NOTE 16 COMPREHENSIVE INCOME
An analysis of the Companys comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
2007
|
|
Net income (loss)
|
|
$
|
4,956
|
|
|
$
|
(618
|
)
|
|
$
|
6,320
|
|
$
|
(563
|
)
|
Other comprehensive (loss) incometranslation adjustments
|
|
|
(1,113
|
)
|
|
|
3,661
|
|
|
|
5,340
|
|
|
2,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
3,843
|
|
|
$
|
3,043
|
|
|
$
|
11,660
|
|
$
|
1,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
NOTE 17 SEGMENT AND GEOGRAPHIC DATA
The Company operates in three reportable segments: the Hudson regional businesses of Hudson Americas, Hudson Europe and Hudson Asia Pacific.
Segment information is presented in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. This standard is based on a management approach that requires segmentation based upon the Companys internal organization and disclosure of revenue, certain expenses and operating income based upon internal accounting
methods. Corporate expenses are reported separately from the three reportable segments and consist primarily of expenses for compensation, rent and professional consulting. The Companys financial reporting systems present various data for
management to run the business, including internal profit and loss statements that contain a measure (EBITDA) that is not consistent with GAAP. Accounts receivable, net and long-lived assets, net of accumulated depreciation and amortization are the
only significant assets separated by segment for internal reporting purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
Hudson
Europe
|
|
Hudson
Asia Pacific
|
|
Corporate
|
|
|
Total
|
For The Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
71,507
|
|
$
|
116,838
|
|
$
|
117,595
|
|
$
|
|
|
|
$
|
305,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
20,179
|
|
$
|
64,485
|
|
$
|
52,553
|
|
$
|
|
|
|
$
|
137,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization expenses
|
|
$
|
229
|
|
$
|
842
|
|
$
|
|
|
$
|
|
|
|
$
|
1,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
1,487
|
|
$
|
9,234
|
|
$
|
8,713
|
|
$
|
(9,214
|
)
|
|
$
|
10,220
|
Depreciation and amortization
|
|
|
1,170
|
|
|
1,329
|
|
|
1,018
|
|
|
53
|
|
|
|
3,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
317
|
|
|
7,905
|
|
|
7,695
|
|
|
(9,267
|
)
|
|
|
6,650
|
Interest and other income (expense), net
|
|
|
172
|
|
|
632
|
|
|
439
|
|
|
(161
|
)
|
|
|
1,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes
|
|
$
|
489
|
|
$
|
8,537
|
|
$
|
8,134
|
|
$
|
(9,428
|
)
|
|
$
|
7,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
43,151
|
|
$
|
97,289
|
|
$
|
56,509
|
|
$
|
|
|
|
$
|
196,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (b)
|
|
$
|
46,594
|
|
$
|
36,937
|
|
$
|
16,473
|
|
$
|
3,112
|
|
|
$
|
103,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
|
Hudson
Europe
|
|
|
Hudson
Asia
Pacific
|
|
Corporate
|
|
|
Total
|
For The Three Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
70,830
|
|
|
$
|
120,809
|
|
|
$
|
105,406
|
|
$
|
|
|
|
$
|
297,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
21,200
|
|
|
$
|
62,685
|
|
|
$
|
45,835
|
|
$
|
|
|
|
$
|
129,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization (recoveries) expenses
|
|
$
|
(7
|
)
|
|
$
|
(7
|
)
|
|
$
|
17
|
|
$
|
1,575
|
|
|
$
|
1,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses
|
|
$
|
3,551
|
|
|
$
|
302
|
|
|
$
|
|
|
$
|
|
|
|
$
|
3,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
(4,809
|
)
|
|
$
|
10,334
|
|
|
$
|
9,115
|
|
$
|
(8,123
|
)
|
|
$
|
6,517
|
Depreciation and amortization
|
|
|
1,160
|
|
|
|
1,632
|
|
|
|
994
|
|
|
66
|
|
|
|
3,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(5,969
|
)
|
|
|
8,702
|
|
|
|
8,121
|
|
|
(8,189
|
)
|
|
|
2,665
|
Interest and other (expense) income, net
|
|
|
(46
|
)
|
|
|
589
|
|
|
|
135
|
|
|
(262
|
)
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before provision for income taxes
|
|
$
|
(6,015
|
)
|
|
$
|
9,291
|
|
|
$
|
8,256
|
|
$
|
(8,451
|
)
|
|
$
|
3,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
63,857
|
|
|
$
|
102,401
|
|
|
$
|
51,785
|
|
$
|
|
|
|
$
|
218,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (b)
|
|
$
|
53,532
|
|
|
$
|
32,452
|
|
|
$
|
12,860
|
|
$
|
3,485
|
|
|
$
|
102,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
NOTE 17 SEGMENT AND GEOGRAPHIC DATA (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
|
Hudson
Europe
|
|
Hudson
Asia Pacific
|
|
Corporate
|
|
|
Total
|
For The Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
154,769
|
|
|
$
|
228,171
|
|
$
|
218,488
|
|
$
|
|
|
|
$
|
601,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
42,934
|
|
|
$
|
123,017
|
|
$
|
96,874
|
|
$
|
|
|
|
$
|
262,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization expenses
|
|
$
|
1,691
|
|
|
$
|
605
|
|
$
|
95
|
|
$
|
|
|
|
$
|
2,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
1,254
|
|
|
$
|
15,164
|
|
$
|
13,847
|
|
$
|
(15,142
|
)
|
|
$
|
15,123
|
Depreciation and amortization
|
|
|
2,343
|
|
|
|
2,972
|
|
|
2,008
|
|
|
106
|
|
|
|
7,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(1,089
|
)
|
|
|
12,192
|
|
|
11,839
|
|
|
(15,248
|
)
|
|
|
7,694
|
Interest and other income (expense), net
|
|
|
285
|
|
|
|
953
|
|
|
968
|
|
|
(338
|
)
|
|
|
1,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before provision for income taxes
|
|
$
|
(804
|
)
|
|
$
|
13,145
|
|
$
|
12,807
|
|
$
|
(15,586
|
)
|
|
$
|
9,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
43,151
|
|
|
$
|
97,289
|
|
$
|
56,509
|
|
$
|
|
|
|
$
|
196,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (b)
|
|
$
|
46,594
|
|
|
$
|
36,937
|
|
$
|
16,473
|
|
$
|
3,112
|
|
|
$
|
103,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Americas
|
|
|
Hudson
Europe
|
|
Hudson
Asia Pacific
|
|
Corporate
|
|
|
Total
|
For The Six Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
147,377
|
|
|
$
|
237,817
|
|
$
|
198,666
|
|
$
|
|
|
|
$
|
583,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
43,284
|
|
|
$
|
119,304
|
|
$
|
84,446
|
|
$
|
|
|
|
$
|
247,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business reorganization expenses
|
|
$
|
722
|
|
|
$
|
2,440
|
|
$
|
31
|
|
$
|
1,501
|
|
|
$
|
4,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses
|
|
$
|
3,551
|
|
|
$
|
600
|
|
$
|
|
|
$
|
|
|
|
$
|
4,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (loss) (a)
|
|
$
|
(6,907
|
)
|
|
$
|
14,147
|
|
$
|
14,671
|
|
$
|
(14,299
|
)
|
|
$
|
7,612
|
Depreciation and amortization
|
|
|
2,287
|
|
|
|
3,197
|
|
|
1,877
|
|
|
181
|
|
|
|
7,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(9,194
|
)
|
|
|
10,950
|
|
|
12,794
|
|
|
(14,480
|
)
|
|
|
70
|
Interest and other (expense) income, net
|
|
|
(80
|
)
|
|
|
3,155
|
|
|
242
|
|
|
(82
|
)
|
|
|
3,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before provision for income taxes
|
|
$
|
(9,274
|
)
|
|
$
|
14,105
|
|
$
|
13,036
|
|
$
|
(14,562
|
)
|
|
$
|
3,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
63,857
|
|
|
$
|
102,401
|
|
$
|
51,785
|
|
$
|
|
|
|
$
|
218,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net of accumulated depreciation and amortization (b)
|
|
$
|
53,532
|
|
|
$
|
32,452
|
|
$
|
12,860
|
|
$
|
3,485
|
|
|
$
|
102,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information by geographic region
|
|
United
States
|
|
Australia
|
|
United
Kingdom
|
|
Continental
Europe
|
|
Other
Asia
|
|
Other
Americas
|
|
Total
|
For The Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
70,502
|
|
$
|
86,144
|
|
$
|
70,302
|
|
$
|
46,536
|
|
$
|
31,451
|
|
$
|
1,005
|
|
$
|
305,940
|
Long-lived assets, net of accumulated depreciation and amortization (b)(c)
|
|
$
|
49,651
|
|
$
|
5,408
|
|
$
|
6,012
|
|
$
|
30,925
|
|
$
|
11,065
|
|
$
|
55
|
|
$
|
103,116
|
For The Three Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
69,631
|
|
$
|
76,408
|
|
$
|
82,935
|
|
$
|
37,874
|
|
$
|
28,998
|
|
$
|
1,199
|
|
$
|
297,045
|
Long-lived assets, net of accumulated depreciation and amortization (b)(c)
|
|
$
|
56,984
|
|
$
|
4,827
|
|
$
|
5,301
|
|
$
|
27,154
|
|
$
|
8,033
|
|
$
|
30
|
|
$
|
102,329
|
For The Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
152,727
|
|
$
|
158,014
|
|
$
|
139,956
|
|
$
|
88,215
|
|
$
|
60,474
|
|
$
|
2,042
|
|
$
|
601,428
|
For The Six Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
144,995
|
|
$
|
144,160
|
|
$
|
166,926
|
|
$
|
70,891
|
|
$
|
54,506
|
|
$
|
2,382
|
|
$
|
583,860
|
(a)
|
EBITDA is presented to provide additional information about the Companys 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. 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 GAAP or as a measure of the Companys profitability or liquidity. Furthermore, EBITDA as presented above may not be comparable with similarly titled measures reported by
other companies.
|
(b)
|
Comprised of property and equipment, net, goodwill and other intangibles, net.
|
(c)
|
Corporate assets are held in the United States.
|
19
NOTE 18 STOCKHOLDERS EQUITY
Common Stock Repurchase Program
On February 4, 2008, the Company announced that its Board of
Directors authorized the repurchase of up to $15,000 of the Companys common stock. The Company intends to make purchases from time to time as market conditions warrant. Through June 30, 2008, the Company had repurchased 701,173 shares for
a total cost of approximately $5,257.
20
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto, included in
Item 1 of this Form 10-Q. This Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Please see note regarding Forward-Looking Statements for a discussion of
the uncertainties, risks and assumptions associated with these statements. This Managements Discussion and Analysis of Financial Condition and Results of Operations also uses the non-GAAP measure of earnings before interest, income taxes,
other non-operating expenses, and depreciation and amortization (EBITDA). See Note 17 to the condensed consolidated financial statements for EBITDA segment reconciliation information.
Overview
Hudson Highland Group, Inc.
(Hudson or the Company or we, us and our) is one of the worlds largest specialized professional staffing and talent management solutions providers. The Company provides professional
staffing services on a permanent and contract consulting basis and a range of talent management services to businesses operating in many industries. The Company helps its clients in recruiting and developing employees for professional-level
functional and managerial positions. We are organized into three reportable segments - Hudson Americas, Hudson Europe, and Hudson Asia Pacific (collectively, the Hudson regional businesses), which constituted approximately 16%, 47%, and
37% of the Companys gross margin, respectively, for the six months ended June 30, 2008.
Hudson Americas operates from
thirty-five offices in two countries, with 96% of its gross margin generated in the United States (U.S.) during the six months ended June 30, 2008. Hudson Europe operates from forty-six offices in seventeen countries, with 46% of
its gross margin generated in the United Kingdom (U.K.) during the six months ended June 30, 2008. Hudson Asia Pacific operates from twenty-one offices in six countries, with 64% of its gross margin generated in Australia during the
six months ended June 30, 2008.
The Hudson regional businesses provide professional contract consultants and permanent recruitment
services to a wide range of clients. With respect to temporary and contract personnel, Hudson focuses on providing candidates with specialized functional skills and competencies, such as accounting and finance, legal and information technology. The
length of a contract assignment can vary, but engagements at the professional level tend to be longer than those in the general clerical or industrial sectors. With respect to permanent recruitment, Hudson focuses on mid-level professionals
typically earning between $50,000 and $150,000 annually and possessing the professional skills and/or profile required by clients. Hudson provides permanent recruitment services on both a retained and contingent basis. In larger markets,
Hudsons sales strategy focuses on both clients operating in particular industry sectors, such as financial services or technology, and candidates possessing particular professional skills, such as accounting and finance, information
technology, legal and human resources. Hudson uses both traditional and interactive methods to select potential candidates for its clients, employing a suite of products that assesses talent and helps predict whether a candidate will be successful
in a given role.
The Hudson regional businesses also provide organizational effectiveness and development services through their talent
management offerings. These services encompass candidate assessment, competency modeling, leadership development, performance management, and career transition. These services enable Hudson to offer clients a comprehensive set of management services
across the entire employment life-cycle from attracting, assessing and selecting best-fit employees to engaging and developing those individuals to help build a high-performance organization.
Strategic Actions
Our strategy, since our inception,
has been focused on building our specialized professional recruitment through our staffing, project solutions and talent management businesses. We believe that this core mix has growth potential for the next decade. We have focused our strategy on
higher-margin specialized professional recruitment with a long-term financial goal of 7-10% EBITDA margins. We have executed this strategy through a combination of investments, divestitures and cost restructuring.
In April 2008, we acquired certain business assets of Propensity, Ltd., a professional services firm specializing in accounting and finance services and
providing both contract and permanent placement services based in Texas.
In February 2008, we completed the acquisition of the majority of
the assets of Executive Coread SARL, a talent management and recruitment company in France.
In May 2007, we acquired the business assets
of Tong Zhi (Beijing) Consulting Service Ltd. and Guangzhou Dong Li Consulting Service Ltd. (collectively, TKA), an information technology recruiting business, which has operations located in three major cities in China.
We expect to continue to identify opportunities to acquire businesses to expand our operations in specialized professional recruitment.
21
In the last twenty-four months, we completed the sale of eight non-core businesses to sharpen our
strategic focus:
|
|
|
Hudsons public management division of Balance Ervaring op Projectbasis, B.V. (BPM) in May 2008 (2007 revenue of $6 million).
|
|
|
|
Hudson Americas energy, engineering and technical staffing division (ETS) in February 2008 (2007 revenue of $146 million).
|
|
|
|
The Netherlands reintegration business (HHCS) in December 2007 (2006 revenue of $19 million).
|
|
|
|
Australias trade and industrial business (T&I) in October 2007 (2006 revenue of $44 million).
|
|
|
|
Alder Novo, a company that we acquired in 2006 and subsequently determined was not performing at the level originally expected, in April 2007.
|
|
|
|
U.K. office support business in January 2007 (2006 revenue of $10 million).
|
|
|
|
Highland Partners, our former executive search segment (Highland), in October 2006 (2005 revenue of $63 million).
|
|
|
|
Scottish industrial trade business in September 2006 (2005 revenue of $12 million).
|
We strive to improve profitability at lower margin business primarily in the U.K. and Australia through price negotiations and a more efficient delivery
of services. We periodically elect to exit certain of these business arrangements. We expect to have a continual focus on improving profitability of client contracts.
We have had a continuous program of improving our cost structure. We completed our 2006 reorganization program during the second quarter of 2007. On March 5, 2008, our Board of Directors approved a plan to
streamline our support operations in each of the Hudson regional businesses to match our focus on specialization. We estimate that the pre-tax cost of the program will be between $5 million to $7 million for the year ending December 31, 2008,
including $2.4 million incurred during the six months ended June 30, 2008. We expect the program to be completed in 2008. The program includes costs for actions to reduce support functions to match them to the scale of businesses after
divestitures ($3 million to $4 million), exit underutilized properties ($1 million to $2 million) and eliminate contracts for certain discontinued services ($0.5 million to $1 million). These costs are principally employee termination benefits,
lease termination payments and contract cancellation costs. We are taking these actions to help reduce our costs and increase our sustainable, long-term profitability. The future cash expenditures for the actions described above are anticipated to
be paid out primarily over the following six to twelve months and are approximately equal to the estimated costs.
22
Results of Operations
The following table sets forth the Companys revenue, gross margin, operating income (loss), net income (loss), net income (loss) from continuing operations, contracting revenue, direct costs of contracting
revenue, contracting gross margin and gross margin as a percent of revenue for the three and six months ended June 30, 2008 and 2007 (dollars in thousands). See Note 17 to the condensed consolidated financial statements for EBITDA segment and
reconciliation information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
71,507
|
|
|
$
|
70,830
|
|
|
$
|
154,769
|
|
|
$
|
147,377
|
|
Hudson Europe
|
|
|
116,838
|
|
|
|
120,809
|
|
|
|
228,171
|
|
|
|
237,817
|
|
Hudson Asia Pacific
|
|
|
117,595
|
|
|
|
105,406
|
|
|
|
218,488
|
|
|
|
198,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
305,940
|
|
|
$
|
297,045
|
|
|
$
|
601,428
|
|
|
$
|
583,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
20,179
|
|
|
$
|
21,200
|
|
|
$
|
42,934
|
|
|
$
|
43,284
|
|
Hudson Europe
|
|
|
64,485
|
|
|
|
62,685
|
|
|
|
123,017
|
|
|
|
119,304
|
|
Hudson Asia Pacific
|
|
|
52,553
|
|
|
|
45,835
|
|
|
|
96,874
|
|
|
|
84,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
137,217
|
|
|
$
|
129,720
|
|
|
$
|
262,825
|
|
|
$
|
247,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
317
|
|
|
$
|
(5,969
|
)
|
|
$
|
(1,089
|
)
|
|
$
|
(9,194
|
)
|
Hudson Europe
|
|
|
7,905
|
|
|
|
8,702
|
|
|
|
12,192
|
|
|
|
10,950
|
|
Hudson Asia Pacific
|
|
|
7,695
|
|
|
|
8,121
|
|
|
|
11,839
|
|
|
|
12,794
|
|
Corporate expenses
|
|
|
(9,267
|
)
|
|
|
(8,189
|
)
|
|
|
(15,248
|
)
|
|
|
(14,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,650
|
|
|
$
|
2,665
|
|
|
$
|
7,694
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,956
|
|
|
$
|
(618
|
)
|
|
$
|
6,320
|
|
|
$
|
(563
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
1,626
|
|
|
$
|
(1,350
|
)
|
|
$
|
1,596
|
|
|
$
|
(3,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracting Data (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracting revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
67,799
|
|
|
$
|
63,977
|
|
|
$
|
147,311
|
|
|
$
|
133,354
|
|
Hudson Europe
|
|
|
60,841
|
|
|
|
65,988
|
|
|
|
121,553
|
|
|
|
134,914
|
|
Hudson Asia Pacific
|
|
|
76,762
|
|
|
|
69,386
|
|
|
|
142,313
|
|
|
|
132,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
205,402
|
|
|
$
|
199,351
|
|
|
$
|
411,177
|
|
|
$
|
400,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs of temporary contracting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
51,216
|
|
|
$
|
48,933
|
|
|
$
|
111,650
|
|
|
$
|
102,818
|
|
Hudson Europe
|
|
|
48,640
|
|
|
|
53,300
|
|
|
|
97,182
|
|
|
|
109,081
|
|
Hudson Asia Pacific
|
|
|
62,814
|
|
|
|
57,006
|
|
|
|
116,934
|
|
|
|
109,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
162,670
|
|
|
$
|
159,239
|
|
|
$
|
325,766
|
|
|
$
|
321,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracting gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
16,583
|
|
|
$
|
15,044
|
|
|
$
|
35,661
|
|
|
$
|
30,536
|
|
Hudson Europe
|
|
|
12,201
|
|
|
|
12,688
|
|
|
|
24,371
|
|
|
|
25,833
|
|
Hudson Asia Pacific
|
|
|
13,948
|
|
|
|
12,380
|
|
|
|
25,379
|
|
|
|
23,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
42,732
|
|
|
$
|
40,112
|
|
|
$
|
85,411
|
|
|
$
|
79,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin as a percent of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
|
28.2
|
%
|
|
|
29.9
|
%
|
|
|
27.7
|
%
|
|
|
29.4
|
%
|
Hudson Europe
|
|
|
55.2
|
%
|
|
|
51.9
|
%
|
|
|
53.9
|
%
|
|
|
50.2
|
%
|
Hudson Asia Pacific
|
|
|
44.7
|
%
|
|
|
43.5
|
%
|
|
|
44.3
|
%
|
|
|
42.5
|
%
|
(a)
|
Contracting revenues are a component of our revenue. Contracting gross margin and gross margin as a percent of revenue are shown to provide additional information on the
Companys ability to manage its cost structure and provide further comparability relative to the Companys peers. Contracting gross margin is derived by deducting the direct costs of contracting from contracting revenue. The Companys
calculation of gross margin may differ from those of other companies.
|
23
Constant Currency
The Company defines the term constant currency to mean that financial data for a period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial
data for the previously reported period. Changes in revenues, direct costs, gross margin, selling, general and administrative expenses and operating income (loss) include the effect of changes in foreign currency exchange rates. Variance analysis
usually describes period-to-period variances that are calculated using constant currency as a percentage. The Companys management reviews and analyzes business results in constant currency and believes these results better represent the
Companys underlying business trends.
The Company believes that these calculations are a useful measure, indicating the actual change
in operations. Earnings from subsidiaries are rarely repatriated to the United States, and there are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates
generally impact only reported earnings and not the Companys economic condition (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
As
reported
|
|
|
Currency
translation
|
|
|
Constant
currency
|
|
|
As
reported
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
71,507
|
|
|
$
|
(86
|
)
|
|
$
|
71,421
|
|
|
$
|
70,830
|
|
Hudson Europe
|
|
|
116,838
|
|
|
|
(5,896
|
)
|
|
|
110,942
|
|
|
|
120,809
|
|
Hudson Asia Pacific
|
|
|
117,595
|
|
|
|
(12,288
|
)
|
|
|
105,307
|
|
|
|
105,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
305,940
|
|
|
|
(18,270
|
)
|
|
|
287,670
|
|
|
|
297,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
|
51,328
|
|
|
|
(11
|
)
|
|
|
51,317
|
|
|
|
49,630
|
|
Hudson Europe
|
|
|
52,353
|
|
|
|
(1,307
|
)
|
|
|
51,046
|
|
|
|
58,124
|
|
Hudson Asia Pacific
|
|
|
65,042
|
|
|
|
(6,834
|
)
|
|
|
58,208
|
|
|
|
59,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
168,723
|
|
|
|
(8,152
|
)
|
|
|
160,571
|
|
|
|
167,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
|
20,179
|
|
|
|
(75
|
)
|
|
|
20,104
|
|
|
|
21,200
|
|
Hudson Europe
|
|
|
64,485
|
|
|
|
(4,589
|
)
|
|
|
59,896
|
|
|
|
62,685
|
|
Hudson Asia Pacific
|
|
|
52,553
|
|
|
|
(5,454
|
)
|
|
|
47,099
|
|
|
|
45,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
137,217
|
|
|
$
|
(10,118
|
)
|
|
$
|
127,099
|
|
|
$
|
129,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
19,616
|
|
|
$
|
(74
|
)
|
|
$
|
19,542
|
|
|
$
|
27,218
|
|
Hudson Europe
|
|
|
55,801
|
|
|
|
(3,836
|
)
|
|
|
51,965
|
|
|
|
53,990
|
|
Hudson Asia Pacific
|
|
|
44,858
|
|
|
|
(4,659
|
)
|
|
|
40,199
|
|
|
|
37,697
|
|
Corporate
|
|
|
9,267
|
|
|
|
|
|
|
|
9,267
|
|
|
|
6,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
129,542
|
|
|
$
|
(8,569
|
)
|
|
$
|
120,973
|
|
|
$
|
125,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
317
|
|
|
$
|
(1
|
)
|
|
$
|
316
|
|
|
$
|
(5,969
|
)
|
Hudson Europe
|
|
|
7,905
|
|
|
|
(743
|
)
|
|
|
7,162
|
|
|
|
8,702
|
|
Hudson Asia Pacific
|
|
|
7,695
|
|
|
|
(795
|
)
|
|
|
6,900
|
|
|
|
8,121
|
|
Corporate
|
|
|
(9,267
|
)
|
|
|
|
|
|
|
(9,267
|
)
|
|
|
(8,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,650
|
|
|
$
|
(1,539
|
)
|
|
$
|
5,111
|
|
|
$
|
2,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Selling, general and administrative expenses include acquisition-related expenses and depreciation and amortization and exclude merger and integration expenses (recoveries) of ($46)
and ($42), respectively, for the three months ended June 30, 2008 and 2007.
|
24
Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
Hudson Americas
Hudson Americas revenue
was $71.5 million for the three months ended June 30, 2008, as compared to $70.8 million for the same period of 2007, an increase of 1.0%. Revenues increased in contracting (+6%), partially offset by decreases in permanent recruitment services
(-45%). The decline in permanent recruitment was primarily due to a decrease associated with the decision of a specific client to bring an outsourced recruitment function in-house. Contracting revenue increased in Legal Services (+27%), but was
partially offset by decreases in Information Technology (-23%) and Financial Solutions (-21%). The increase in Legal Services was primarily related to temporary higher client needs as well as the successful acquisition of new clients. The decline in
Information Technology was primarily related to clients delaying various projects as well as slowing down their process of filling open positions due to the current economic climate. The decline in Financial Solutions was primarily related to
clients delaying various projects as well as the Company closing five unprofitable offices during 2007.
Hudson Americas direct costs
were $51.3 million for the three months ended June 30, 2008, as compared to $49.7 million for the same period of 2007, an increase of 3.2%. The increase in direct costs was consistent with the increase in Hudson Americas contracting
revenue for the three months ended June 30, 2008 as compared to the same period of 2007.
Hudson Americas gross margin was $20.2
million for the three months ended June 30, 2008, as compared to $21.2 million for the same period of 2007, a decrease of $1.0 million, or 4.7%. The $20.2 million of gross margin included $16.6 million and $3.6 million, respectively, of
contracting and permanent recruitment gross margin. The $1.0 million decrease in gross margin primarily resulted from a $1.5 million increase in contracting gross margin offset by a $2.4 million decrease in permanent recruitment gross margin. Hudson
Americas contracting gross margin increased to 24.5% for the three months ended June 30, 2008, as compared to 23.5% for the same period of 2007. The increase in contracting gross margin was primarily generated from Legal Services
(+32%) partially offset by Financial Solutions (-24%) and Information Technology (-17%). The decrease in permanent recruitment gross margin primarily resulted from the decrease in permanent recruitment revenue as noted above. Gross margin, as a
percentage of revenue, was 28.3% for the three months ended June 30, 2008, as compared to 29.9% for the same period of 2007, a decrease of 5.7%. The decrease in permanent recruitment gross margin as a percentage of total gross margin (18.3% for
the three months ended June 30, 2008, as compared to 28.5% for the same period of 2007) offset an increase in contracting gross margin (24.5% for the three months ended June 30, 2008, as compared to 23.5% for the same period of 2007), and
resulted in an overall decrease in gross margin as a percentage of revenue as compared to the same period of 2007.
Hudson Americas
selling, general and administrative expenses were $19.6 million for the three months ended June 30, 2008, as compared to $27.2 million for the same period of 2007, a decrease of 27.9%. Selling, general and administrative expenses as a
percentage of revenue decreased from 38.4% for the three months ended June 30, 2007 to 27.4% for the same period of 2008. The decrease in selling, general and administrative expenses was primarily due to decreases in sales salaries ($4.3
million), support staff salaries ($1.9 million) and professional fees ($1.1 million). The decrease in sales salaries primarily resulted from the recognition of $3.6 million of non-cash compensation expense during the three months ended June 30,
2007 related to the June 2004 acquisition of JMT Financial Partners, LLC as well as the cessation of some sales activities in selected offices in the prior year along with a better focus on productivity. The decrease in support staff salaries was
primarily related to our reorganization program that was launched during the three months ended March 31, 2008.
Hudson Americas
incurred $0.2 million of reorganization expenses during the three months ended June 30, 2008, as compared to none for the same period of 2007. Reorganization expenses incurred during the three months ended June 30, 2008 included severance
costs related to the Companys 2008 reorganization program, which included the downsizing of its overhead structure.
Hudson
Americas EBITDA increased $6.3 million to $1.5 million for the three months ended June 30, 2008, as compared to a loss of $4.8 million for the same period of 2007. The EBITDA increase was primarily due to a lower cost base as a result of
the Companys 2008 reorganization program as well as the recognition of $3.6 million in non-cash compensation expense during the three months ended June 30, 2007 related to the acquisition of JMT Financial Partners, LLC.
Hudson Americas operating income increased $6.3 million to $0.3 million for the three months ended June 30, 2008, as compared to an operating
loss of $6.0 million for the same period of 2007. The increase in operating income primarily resulted from the same factors as discussed above with respect to EBITDA.
25
Hudson Europe
Hudson Europes revenue was $116.8 million for the three months ended June 30, 2008, as compared to $120.8 million for the same period of 2007, a decrease of 3.3%. On a constant currency basis, Hudson
Europes revenue decreased 8.2% during the three months ended June 30, 2008, as compared to the same period of 2007. The largest decrease in constant currency revenue was from the U.K., in both lower contracting revenue (-13%) and
permanent recruitment (-16%). This decrease in revenue from the U.K. was primarily driven by a decrease in revenues from the financial services sector and other service sectors in London. The decrease in U.K. revenue was partially offset by
increases in permanent recruitment and talent management consulting services in the Nordic region (+40%), France (+23%) and Central and Eastern Europe (+18%). Increases in the Nordic region and Eastern Europe were the result of our growing
business. The increase in France was the result of our growing business along with the diversification of permanent placements and talent management.
Hudson Europes direct costs were $52.4 million for the three months ended June 30, 2008, as compared to $58.1 million for the same period of 2007, a decrease of 9.8%. On a constant currency basis, direct
costs decreased 12.2% for the three months ended June 30, 2008, as compared to the same period of 2007. The decrease in direct costs was primarily the result of lower contracting costs in the U.K. (-14%).
Hudson Europes gross margin was $64.5 million for the three months ended June 30, 2008, as compared to $62.7 million for the same period of
2007, an increase of $1.8 million, or 2.9%. Gross margin, as a percentage of revenue, was 55.2% for the three months ended June 30, 2008, as compared to 51.9% for the same period of 2007, an increase of 6.4%. On a constant currency basis, gross
margin decreased 4.4% during the three months ended June 30, 2008, as compared to the same period of 2007. The largest decrease in constant currency gross margin was in the U.K. (-15%), partially offset by increases in the Nordic region (+35%),
France (+22%), Central and Eastern Europe (+22%) and Spain (+9%). Hudson Europes contracting gross margin increased to 20.1% for the three months ended June 30, 2008, as compared to 19.2% for the same period of 2007. This increase
was primarily the result of an increase in the U.K.s contracting gross margin from 16.7% for the three months ended June 30, 2007 to 17.1% for the same period of 2008 and a more significant mix impact from Continental Europe where the
gross margin declined from 32.1% for the three months ended June 30, 2007 to 30.9% for the same period of 2008.
Hudson Europes
selling, general and administrative expenses were $55.8 million for the three months ended June 30, 2008, as compared to $54.0 million for the same period of 2007, an increase of 3.3%. Selling, general and administrative expenses as a
percentage of revenue increased from 44.7% for the three months ended June 30, 2007 to 47.8% for the same period of 2008. On a constant currency basis, selling, general and administrative expenses decreased 3.8% during the three months ended
June 30, 2008, as compared to the same period of 2007. The decrease in selling, general and administrative expenses was primarily due to lower sales and delivery costs (-6%), travel and entertainment costs (-21%), equipment rental and
maintenance (-35%) and communications costs (-20%). These decreases were partially offset by increases in support salaries (+13%), support bonuses (+30%) and occupancy costs (+10%). Lower sales and delivery costs were the result of a reduction
in fee earner headcount and lower bonus payments driven by the reduced gross margin. Hudson Europe rolled out new front office software in Balance and has planned a similar implementation in Belgium, which will complete the common software platform
implementation. Support costs have increased due to transitional management arrangements in the Balance contracting business and support salaries have increased due to extra operational management in the U.K. and regional European personnel during
the three months ended June 30, 2008, as compared to the same period of 2007. Our cost control efforts have resulted in reductions in other costs.
Hudson Europe incurred $0.8 million of reorganization expenses during the three months ended June 30, 2008, as compared to none for the same period of 2007. Reorganization expenses incurred during the three
months ended June 30, 2008 included severance costs and the reorganization of certain support functions related to the Companys 2008 reorganization program, which included the downsizing of its overhead structure.
Hudson Europes EBITDA decreased $1.1 million to $9.2 million for the three months ended June 30, 2008, as compared to $10.3 million for the
same period of 2007, a decrease of 10.7%. Hudson Europes EBITDA as a percentage of revenue decreased from 8.5% for the three months ended June 30, 2007 to 7.9% for the same period of 2008. On a constant currency basis, EBITDA decreased
18.8% for the three months ended June 30, 2008, as compared to the same period of 2007. The decrease in EBITDA was the result of EBITDA decreases in the U.K. (-27%), Balance (-40%) and Belgium (-11%). These decreases were partially offset by
EBITDA increases in France (+22%) and other European countries. The EBITDA decrease in the U.K. was primarily due to the decrease in gross margin and the recognition of reorganization expenses as noted above. The EBITDA decrease in Balance was
primarily due to the increase in selling, general and administrative expenses noted above, along with a higher shared cost burden among the remaining three core business units of Information Technology, Legal and Banking/Financial Services following
the disposal of the public management division of Balance in May 2008.
Hudson Europes operating income decreased $0.8 million to
$7.9 million for the three months ended June 30, 2008, as compared to $8.7 million for the same period of 2007. On a constant currency basis, operating income decreased 17.7% for the three months ended June 30, 2008, as compared to the
same period of 2007. The decrease in operating income primarily resulted from the same factors as discussed above with respect to EBITDA.
26
Hudson Asia Pacific
Hudson Asia Pacifics revenue was $117.6 million for the three months ended June 30, 2008, as compared to $105.4 million for the same period of 2007, an increase of 11.6%. On a constant currency basis,
Hudson Asia Pacifics revenue decreased 0.1% during the three months ended June 30, 2008, as compared to the same period of 2007. The largest decrease in constant currency revenue was from Talent Management in Australia (-20%) partially
offset by an increase in permanent recruitment in Asia (+22%), primarily due to the growth in permanent recruitment in China (+131%), and growth in the core Shanghai business. The growth in China was primarily related to continued growth of the
business and the May 2007 TKA acquisition.
Hudson Asia Pacifics direct costs were $65.0 million for the three months ended
June 30, 2008, as compared to $59.6 million for the same period of 2007, an increase of 9.1%. On a constant currency basis, direct costs decreased 2.3% during the three months ended June 30, 2008, as compared to the same period of 2007.
The decrease in direct costs was consistent with the decrease in contracting revenue.
Hudson Asia Pacifics gross margin was $52.6
million for the three months ended June 30, 2008, as compared to $45.8 million for the same period of 2007, an increase $6.8 million, or 14.8%. Gross margin, as a percentage of revenue, was 44.7% for the three months ended June 30, 2008,
as compared to 43.5% for the same period of 2007, an increase of 2.8%. The $6.8 million increase in gross margin primarily resulted from increased permanent recruitment and contracting margins in Australia. On a constant currency basis, gross margin
increased 2.8% for the three months ended June 30, 2008, as compared to the same period of 2007. The gross margin increase was from increases in permanent recruitment in China (+127%) and Hong Kong (+7%), partially offset by decreases in
permanent recruitment Australia (-1%), New Zealand (-6%) and Japan (-18%). Hudson Asia Pacifics contracting gross margin increased to 18.2% for the three months ended June 30, 2008, as compared to 17.8% for the same period of 2007.
Hudson Asia Pacifics selling, general and administrative expenses were $44.9 million for the three months ended June 30, 2008,
as compared to $37.7 million for the same period of 2007, an increase of 19.1%. Selling, general and administrative expenses as a percent of revenue increased from 35.8% for the three months ended June 30, 2007 to 38.2% for the same period of
2008. On a constant currency basis, selling, general and administrative expenses increased 6.6% during the three months ended June 30, 2008, as compared to the same period of 2007. The increase in selling, general and administrative expenses
was primarily due to increases in China (+61%), related to the TKA acquisition and increased occupancy costs resulting from a relocation to larger office space in 2007, and Hong Kong (+15%) related to increased sales and delivery compensation
costs and increased occupancy costs resulting from office expansion.
Hudson Asia Pacific did not have any reorganization expenses for the
three months ended June 30, 2008 and 2007.
Hudson Asia Pacifics EBITDA decreased $0.4 million to $8.7 million for the three
months ended June 30, 2008, as compared to $9.1 million for the same period of 2007, a decrease of 4.4%. Hudson Asia Pacifics EBITDA as a percentage of revenue decreased from 8.6% for the three months ended June 30, 2007 to 7.4% for
the same period of 2008. On a constant currency basis, EBITDA decreased 14.2% for the three months ended June 30, 2008, as compared to the same period of 2007. The decrease in EBITDA was primarily the result of an EBITDA decrease in Australia
(-21%). This decrease was partially offset by EBITDA increases in China and Singapore.
Hudson Asia Pacifics operating income
decreased $0.4 million to $7.7 million for the three months ended June 30, 2008, as compared to $8.1 million for the same period of 2007. On a constant currency basis, operating income decreased 15.0% for the three months ended June 30,
2008, as compared to the same period of 2007. The decrease in operating income primarily resulted from the same factors as discussed above with respect to EBITDA.
27
Corporate and Other
Corporate expenses were $9.3 million for the three months ended June 30, 2008, as compared to $8.2 million for the same period of 2007, an increase of 13.4%. The $1.1 million increase in corporate expenses
primarily resulted from higher professional fees ($2.0 million) and the resolution of outstanding litigation ($0.7 million). This increase was partially offset by the recognition of $1.6 million of lease related restructuring charges during the
three months ended June 30, 2007 from the 2006 reorganization program.
Other non-operating income (expense), was $1.1 million for the
three months ended June 30, 2008, as compared to $0.4 million for the same period of 2007, an increase of 175.0%. The increase during the three months ended June 30, 2008 as compared to the same period of 2007 was primarily related to $1.5
million of foreign exchange translation gains and a $0.3 million subsidy from the Chinese government relating to the establishment of our business presence in a Chinese district. The increase was primarily offset by $0.8 million from other gains on
the dispositions of assets recognized during the three months ended June 30, 2007.
Provision for Income Taxes
The provision for income taxes was $6.1 million on $7.7 million of income from continuing operations for the three months ended June 30, 2008, as
compared to a provision of $4.4 million on $3.1 million of income from continuing operations for the same period of 2007. The decrease in the Companys effective tax rate for the three months ended June 30, 2008 as compared to the same
period of 2007 was primarily related to an increase in income generated in countries in which we are not subject to significant tax liabilities. The effective tax rate differs from the U.S. federal statutory rate of 35% due to the inability to
recognize tax benefits on net U.S. losses, state taxes, non-deductible expenses such as certain acquisition-related payments, variations from the U.S. tax rate in foreign jurisdictions, and taxes on repatriation of foreign profits.
Net Income (Loss) from Continuing Operations
The net income from continuing operations was $1.6 million for the three months ended June 30, 2008, as compared to a net loss of $1.4 million for the same period of 2007. Basic and diluted earnings per share from continuing operations
were $0.07 and $0.06, respectively, for the three months ended June 30, 2008, as compared to a basic and diluted loss per share of $0.05 for the same period of 2007.
Net Income from Discontinued Operations
BPM, ETS, HHCS, T&I and the former Highland
segment comprise the Companys discontinued operations. Income from discontinued operations for the three months ended June 30, 2008 was $3.3 million which included a $2.8 million gain on the sale of BPM business.
Basic and diluted earnings per share from discontinued operations were $0.13 for the three months ended June 30, 2008, as compared to $0.03 for the
same period of 2007.
Net Income (Loss)
Net income was $5.0 million for the three months ended June 30, 2008, as compared to a net loss of $0.6 million for the same period of 2007. Basic and diluted earnings per share were $0.20 and $0.19, respectively, for the three months
ended June 30, 2008, as compared to a basic and diluted loss per share of ($0.02) for the same period of 2007.
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
As
reported
|
|
|
Currency
translation
|
|
|
Constant
currency
|
|
|
As
reported
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
154,769
|
|
|
$
|
(236
|
)
|
|
$
|
154,533
|
|
|
$
|
147,377
|
|
Hudson Europe
|
|
|
228,171
|
|
|
|
(11,825
|
)
|
|
|
216,346
|
|
|
|
237,817
|
|
Hudson Asia Pacific
|
|
|
218,488
|
|
|
|
(24,895
|
)
|
|
|
193,593
|
|
|
|
198,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
601,428
|
|
|
|
(36,956
|
)
|
|
|
564,472
|
|
|
|
583,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
|
111,835
|
|
|
|
(34
|
)
|
|
|
111,801
|
|
|
|
104,093
|
|
Hudson Europe
|
|
|
105,154
|
|
|
|
(3,097
|
)
|
|
|
102,057
|
|
|
|
118,513
|
|
Hudson Asia Pacific
|
|
|
121,614
|
|
|
|
(14,177
|
)
|
|
|
107,437
|
|
|
|
114,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
338,603
|
|
|
|
(17,308
|
)
|
|
|
321,295
|
|
|
|
336,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
|
42,934
|
|
|
|
(202
|
)
|
|
|
42,732
|
|
|
|
43,284
|
|
Hudson Europe
|
|
|
123,017
|
|
|
|
(8,728
|
)
|
|
|
114,289
|
|
|
|
119,304
|
|
Hudson Asia Pacific
|
|
|
96,874
|
|
|
|
(10,718
|
)
|
|
|
86,156
|
|
|
|
84,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
262,825
|
|
|
$
|
(19,648
|
)
|
|
$
|
243,177
|
|
|
$
|
247,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
42,317
|
|
|
$
|
(216
|
)
|
|
$
|
42,101
|
|
|
$
|
51,798
|
|
Hudson Europe
|
|
|
110,206
|
|
|
|
(7,421
|
)
|
|
|
102,785
|
|
|
|
105,914
|
|
Hudson Asia Pacific
|
|
|
84,940
|
|
|
|
(9,241
|
)
|
|
|
75,699
|
|
|
|
71,621
|
|
Corporate
|
|
|
15,248
|
|
|
|
|
|
|
|
15,248
|
|
|
|
12,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
252,711
|
|
|
$
|
(16,878
|
)
|
|
$
|
235,833
|
|
|
$
|
242,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson Americas
|
|
$
|
(1,089
|
)
|
|
$
|
14
|
|
|
$
|
(1,075
|
)
|
|
$
|
(9,194
|
)
|
Hudson Europe
|
|
|
12,192
|
|
|
|
(1,325
|
)
|
|
|
10,867
|
|
|
|
10,950
|
|
Hudson Asia Pacific
|
|
|
11,839
|
|
|
|
(1,463
|
)
|
|
|
10,376
|
|
|
|
12,794
|
|
Corporate
|
|
|
(15,248
|
)
|
|
|
|
|
|
|
(15,248
|
)
|
|
|
(14,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,694
|
|
|
$
|
(2,774
|
)
|
|
$
|
4,920
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Selling, general and administrative expenses include acquisition-related expenses and depreciation and amortization and exclude merger and integration expenses (recoveries) of $29
and ($42), respectively, for the six months ended June 30, 2008 and 2007.
|
29
Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
Hudson Americas
Hudson Americas revenue
was $154.8 million for the six months ended June 30, 2008, as compared to $147.4 million for the same period of 2007, an increase of 5.0%. Revenues increased in contracting (+10%), partially offset by decreases in permanent recruitment
services (-45%). The decline in permanent recruitment was primarily due to a decrease associated with the decision of a specific client to bring an outsourced recruitment function in-house as well as a decrease in financial services. Contracting
revenue increased in Legal Services (+35%), but was partially offset by decreases in Information Technology (-20%) and Financial Solutions (-20%). The increase in Legal Services was primarily related to temporary higher client needs as well as the
successful acquisition of new clients. The decline in Information Technology was primarily related to clients delaying various projects as well as slowing down their process of filling open positions due to the current economic climate. The decline
in Financial Solutions was primarily related to clients delaying various projects as well as the Company closing five unprofitable offices during 2007.
Hudson Americas direct costs were $111.8 million for the six months ended June 30, 2008, as compared to $104.1 million for the same period of 2007, an increase of 7.4%. The increase in direct costs was
consistent with the increase in Hudson Americas contracting revenue for the six months ended June 30, 2008, as compared to the same period of 2007.
Hudson Americas gross margin was $42.9 million for the six months ended June 30, 2008, as compared to $43.3 million for the same period of 2007, a decrease of $0.4 million, or 0.9%. The $42.9 million of
gross margin included $35.6 million and $7.3 million, respectively, of contracting and permanent recruitment gross margin. The $0.4 million decrease in gross margin primarily resulted from a $5.1 million increase in contracting gross margin, offset
by a $5.4 million decrease in permanent recruitment gross margin. Hudson Americas contracting gross margin increased to 24.2% for the six months ended June 30, 2008, as compared to 22.9% for the same period of 2007. The increase in
contracting gross margin was primarily generated from Legal Services (+43%). The decrease in permanent recruitment gross margin primarily resulted from the decrease in permanent recruitment revenue as noted above. Gross margin, as a percentage of
revenue, was 27.7% for the six months ended June 30, 2008, as compared to 29.4% for the same period of 2007. The decrease in permanent recruitment gross margin as a percentage of total gross margin (17.3% for the six months ended June 30,
2008, as compared to 27.7% for the same period of 2007) offset an increase in contracting gross margin (24.2% for the six months ended June 30, 2008, as compared to 22.9% for the same period of 2007), which resulted in an overall decrease in
gross margin as a percentage of revenue as compared to the same period of 2007.
Hudson Americas selling, general and administrative
expenses were $42.3 million for the six months ended June 30, 2008, as compared to $51.8 million for the same period of 2007, a decrease of 18.3%. Selling, general and administrative expenses as a percentage of revenue decreased from 35.1% for
the six months ended June 30, 2007 to 27.3% for the same period of 2008. The decrease in selling, general and administrative expenses was primarily due to decreases in sales and delivery costs ($4.0 million), support staff salaries ($2.5
million) and professional fees ($2.0 million). The decrease in sales salaries primarily resulted from the recognition of $3.6 million of non-cash compensation expense during the six months ended June 30, 2007 related to the acquisition of JMT
Financial Partners, LLC as well as the cessation of some sales activities in selected offices in the prior year along with a better focus on productivity. The decrease in support staff salaries was primarily related to our reorganization program
that was launched during the six months ended June 30, 2008.
Hudson Americas incurred $1.7 million of reorganization expenses during
the six months ended June 30, 2008, as compared to $0.7 million for the same period of 2007. Reorganization expenses incurred during the six months ended June 30, 2008 included severance costs and costs relating to a number of contracts
including, the exiting of three leases in the U.S. Reorganization expenses incurred during the six months ended June 30, 2007 included final adjustments for employee severance costs related to the Companys 2006 reorganization program.
Hudson Americas EBITDA increased $8.2 million to $1.3 million for the six months ended June 30, 2008, as compared to a loss of
$6.9 million for the same period of 2007. The EBITDA increase was primarily due to the reduction in selling, general and administrative expenses noted above.
Hudson Americas operating loss decreased $8.1 million to $1.1 million for the six months ended June 30, 2008, as compared to $9.2 million for the same period of 2007. The decrease in the operating loss
primarily resulted from the same factors as discussed above with respect to EBITDA.
30
Hudson Europe
Hudson Europes revenue was $228.2 million for the six months ended June 30, 2008, as compared to $237.8 million for the same period of 2007, a decrease of 4.0%. On a constant currency basis, Hudson
Europes revenue decreased 9.0% for the six months ended June 30, 2008, as compared to the same period of 2007. The largest decrease in constant currency revenue was from the U.K., in both lower contracting revenue (-16%) and permanent
recruitment (-16%). This decrease in revenue from the U.K. was primarily driven by a decrease in revenues from the financial services sector and other service sectors in London. The decrease was partially offset by increases in permanent recruitment
and talent management consulting services in the Nordic region (+22%), France (+26%), Central and Eastern Europe (+14%), Spain (+11%) as well as increased contracting revenues for Balance (+4%) and increased talent management
consulting revenues in the U.K. (+11%).
Hudson Europes direct costs were $105.2 million for the six months ended June 30, 2008,
as compared to $118.5 million for the same period of 2007, a decrease of 11.2%. On a constant currency basis, direct costs decreased 13.9% for the six months ended June 30, 2008, as compared to the same period of 2007. The decrease was
primarily the result of lower contracting costs in the U.K. (-17%).
Hudson Europes gross margin was $123.0 million for the six
months ended June 30, 2008, as compared to $119.3 million the same period of 2007, an increase of $3.7 million, or 3.1%. Gross margin, as a percentage of revenue, was 53.9% for the six months ended June 30, 2008, as compared to 50.2% for
the same period of 2007, an increase of 7.4%. The increase in gross margin, as a percentage of revenue, was primarily due to a mix shift with less temporary contracting revenue in the U.K. as a percent of total revenue, combined with the growth in
permanent recruitment in continental Europe and talent management consulting services across Europe. On a constant currency basis, gross margin decreased 4.2% during the six months ended June 30, 2008, as compared to the same period of 2007.
The largest decrease in constant currency gross margin was in the U.K. (-16%), partially offset by increases in France (+25%), the Nordic region (+25%), Central and Eastern Europe (+16%), Spain (+11%) and Balance (+5%). Hudson Europes
contracting gross margin increased to 20.0% for the six months ended June 30, 2008, as compared to 19.1% for the same period of 2007.
Hudson Europes selling, general and administrative expenses were $110.2 million for the six months ended June 30, 2008, as compared to $105.9 million for the same period of 2007, an increase of 4.1%. Selling, general and
administrative expenses as a percentage of revenue increased from 44.5% for the six months ended June 30, 2007 to 48.3% for the same period of 2008. On a constant currency basis, selling, general and administrative expenses decreased by 0.3%
during the six months ended June 30, 2008, as compared to the same period of 2007.
Hudson Europe incurred $0.6 million of
reorganization expenses during the six months ended June 30, 2008, as compared to $2.4 million for the same period of 2007. Reorganization expenses incurred during the six months ended June 30, 2008 included severance costs and the
reorganization of certain support functions related to the Companys 2008 reorganization program, which included the downsizing of its overhead structure. Reorganization expenses incurred during the six months ended June 30, 2007 included
final adjustments for employee severance costs related to the Companys 2006 reorganization program.
Hudson Europes EBITDA
increased $1.1 million to $15.2 million for the six months ended June 30, 2008, as compared to $14.1 million for the same period of 2007, an increase of 7.8%. Hudson Europes EBITDA as a percentage of revenue increased from 5.9% for the
six months ended June 30, 2007 to 6.7% for the same period of 2008. On a constant currency basis, EBITDA decreased 3.6% for the six months ended June 30, 2008, as compared to the same period of 2007. The decrease in EBITDA was the result
of EBITDA decreases in the U.K. (-22%), Belgium (-9%) and Balance (-17%). These decreases were partially offset by EBITDA increases in France (+29%) and smaller European countries.
Hudson Europes operating income increased $1.2 million to $12.2 million for the six months ended June 30, 2008, as compared to $11.0 million
for the same period of 2007. On a constant currency basis, operating income decreased 0.8% for the six months ended June 30, 2008, as compared to the same period of 2007. The decrease in operating income primarily resulted from the same factors
as discussed above with respect to EBITDA.
31
Hudson Asia Pacific
Hudson Asia Pacifics revenue was $218.5 million for the six months ended June 30, 2008, as compared to $198.7 million for the same period of 2007, an increase of 10.0%. On a constant currency basis, Hudson
Asia Pacifics revenue decreased 2.6% during the six months ended June 30, 2008, as compared to the same period of 2007. The largest decrease in constant currency revenue was from contracting in Australia (-4%), largely due to the
continued strategic exit from low margin business. The Australian Talent Management practice declined (-22%) as a result of reduced demand for outplacement services. These decreases were partially offset by the growth in permanent recruitment in
China (+129%), which benefited from the TKA acquisition in May 2007 and continued strong market growth, and Hong Kong (+14%).
Hudson Asia
Pacifics direct costs were $121.6 million for the six months ended June 30, 2008, as compared to $114.2 million for the same period of 2007, an increase of 6.5%. On a constant currency basis, direct costs decreased 5.9% for the six months
ended June 30, 2008, as compared to the same period of 2007. The decrease in direct costs was consistent with the reduction in contracting revenue.
Hudson Asia Pacifics gross margin for the six months ended June 30, 2008 was $96.9 million, as compared to $84.4 million for the same period of 2007, an increase of $12.5 million, or 14.8%. Gross margin, as
a percentage of revenue, was 44.3% for the six months ended June 30, 2008, as compared to 42.5% for the same period of 2007, an increase of 4.2%. The increase in gross margin, as a percentage of revenue, was primarily due to an increased
percentage of total gross margin generated from permanent recruitment services, combined with increased contracting margins in Australia. On a constant currency basis, gross margin increased by 2.0% for the six months ended June 30, 2008, as
compared to the same period of 2007. The increase in gross margin was primarily from increases in permanent recruitment in China (+137%) and Hong Kong (+16%). This increase was partially offset by a decrease in Australia (-3%), New Zealand
(-8%) and Japan (-17%). Hudson Asia Pacifics contracting gross margin increased to 17.8% for the six months ended June 30, 2008, as compared to 17.6% for the same period of 2007.
Hudson Asia Pacifics selling, general and administrative expenses were $84.9 million for the six months ended June 30, 2008, as compared to
$71.6 million for the same period of 2007, an increase of 18.6%. Selling, general and administrative expenses as a percentage of revenue increased from 36.0% for the six months ended June 30, 2007 to 38.9% for the same period of 2008. On a
constant currency basis, selling, general and administrative expenses increased 5.7% for the six months ended June 30, 2008, as compared to the same period of 2007. The increase in selling, general and administrative expenses was primarily due
to increases in China (+84%), related to the TKA acquisition and increased occupancy costs resulting from a relocation to larger office space during 2007, and Hong Kong (+20%) related to increased sales and delivery compensation costs and
increased occupancy costs resulting from office expansion.
Hudson Asia Pacific incurred $0.1 million of reorganization expenses during the
six months ended June 30, 2008, as compared to none for the same period of 2007. Reorganization expenses incurred during the six months ended June 30, 2008 included severance costs and the reorganization of certain support functions
related to the Companys 2008 reorganization program, which included the downsizing of its overhead structure.
Hudson Asia
Pacifics EBITDA decreased $0.9 million to $13.8 million for the six months ended June 30, 2008, as compared to $14.7 million for the same period of 2007, a decrease of 6.1%. Hudson Asia Pacifics EBITDA as a percentage of revenue
decreased from 7.4% for the six months ended June 30, 2007 to 6.3% for the same period of 2008. On a constant currency basis, EBITDA decreased 17.0% for the six months ended June 30, 2008, as compared to the same period of 2007. The
decrease in EBITDA was the result of EBITDA decreases in Australia, Hong Kong, New Zealand, Singapore and Japan. These decreases were partially offset by EBITDA increases in China.
Hudson Asia Pacifics operating income decreased $1.0 million to $11.8 million for the six months ended June 30, 2008, as compared to $12.8
million for the same period of 2007. On a constant currency basis, operating income decreased 18.9% for the six months ended June 30, 2008, as compared to the same period of 2007. The decrease in operating income primarily resulted from the
same factors as discussed above with respect to EBITDA.
32
Corporate and Other
Corporate expenses were $15.2 million for the six months ended June 30, 2008, as compared to $14.5 million for the same period of 2007. Corporate expenses for the six months ended June 30, 2008 increased
primarily as a result of higher professional fees ($2.4 million) and the resolution of outstanding litigation ($1.3 million). This increase was partially offset by the recognition of $1.5 million of lease related restructuring charges during the six
months ended June 30, 2007 from the 2006 reorganization program, and decreases in support staff compensation ($0.5 million) and travel and entertainment costs ($0.4 million).
Other non-operating income was $1.9 million for the six months ended June 30, 2008, as compared to $3.2 million for the same period of 2007. The
decrease was primarily related to a $2.5 million gain on the sale of the U.K. office and support services and other gains on dispositions of $0.8 million that were recognized during the six months ended June 30, 2007. The decrease was primarily
offset by $1.7 million of foreign exchange translation gains and a $0.3 million subsidy from the Chinese government relating to the establishment of our business presence in a Chinese district that were recognized during the six months ended June
30, 2008.
Provision for Income Taxes
The provision for income taxes was $8.0 million on $9.6 million of income from continuing operations for the six months ended June 30, 2008, as compared to a provision of $6.6 million on $3.3 million of income from continuing
operations for the same period of 2007. The decrease in the Companys effective tax rate for the six months ended June 30, 2008, as compared to the same period of 2007, was primarily related to an increase in income generated in countries
in which we are not subject to significant tax liabilities. The effective tax rate differs from the U.S. federal statutory rate of 35% due to the inability to recognize tax benefits on net U.S. losses, state taxes, non-deductible expenses such as
certain acquisition-related payments, variations from the U.S. tax rate in foreign jurisdictions, and taxes on repatriation of foreign profits.
Net
Income (Loss) from Continuing Operations
The net income from continuing operations was $1.6 million for the six months ended
June 30, 2008, as compared to a net loss of $3.3 million for the same period of 2007. Basic and diluted earnings per share from continuing operations were $0.06 for the six months ended June 30, 2008, as compared to a basic and diluted
loss per share of $0.13 for the same period of 2007.
Net Income from Discontinued Operations
BPM, ETS, HHCS, T&I and the former Highland segment comprise the Companys discontinued operations. Income from discontinued operations was $4.7
million for the six months ended June 30, 2008 which includes $3.4 million of additional payments due the Company as a result of its former Highland reporting unit achieving certain 2007 revenue metrics as defined in the sale agreement, and a
$2.8 million gain on the sale of BPM. These items were offset by a $0.7 million loss on the sale of ETS and approximately $0.9 million loss on operations of the discontinued businesses.
Basic and diluted earnings per share from discontinued operations were $0.19 for the six months ended June 30, 2008, as compared to $0.11 for the
same period of 2007.
Net Income (Loss)
Net income was $6.3 million for the six months ended June 30, 2008, as compared to a net loss of $0.6 million for the same period of 2007. Basic and diluted earnings per share were $0.25 for the six months ended June 30, 2008, as
compared to a basic and diluted loss per share of ($0.02) for the same period of 2007.
Liquidity and Capital Resources
The Companys liquidity needs arise primarily from funding working capital requirements and capital investment in information technology and
facilities.
On July 31, 2007, the Company entered into an amended and restated senior secured credit facility with Wells Fargo
Foothill with the ability to borrow up to $75.0 million (the Credit Facility). The Company may, subject to certain conditions, increase the maximum Credit Facility limit up to $125.0 million. The maturity date of the Credit Facility is
July 31, 2012. Borrowings may be made with a base rate loan having an interest rate based on the prime rate and the Leverage Ratio (as defined in the Credit Facility) or a LIBOR rate loan with an interest rate based on the LIBOR rate and the
Leverage Ratio. The Credit Facility is secured by substantially all of the assets of the Company and extensions of credit are based on a percentage of the accounts receivable of the Company. As of June 30, 2008 there were no outstanding
borrowings under the Credit Facility. The Company expects to continue to use the Credit Facility, if and when required, to support its ongoing working capital requirements, capital expenditures and other corporate purposes and its letters of credit.
As of June 30, 2008 there was $8.2 million of outstanding letters of credit issued under the Credit Facility. These letters of credit have various maturity dates through 2017 and are primarily used to secure operating and capital lease
financing and support the Companys HSBC Bank (Shanghai) loan. As of June 30, 2008, available credit for use under the Credit Facility was $66.8 million.
The Credit Facility contains various restrictions and covenants, including (1) prohibitions on payments of dividends; (2) requirements that the Company maintain its minimum EBITDA (as defined in the Credit
Facility) and capital expenditures within prescribed levels; (3) restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge or otherwise fundamentally change the ownership of the Company; and
(4) limitations on investments, dispositions of assets and guarantees of indebtedness and repurchases of the Companys stock. The Credit Facility allows certain permitted investments in the aggregate amount not to exceed $25.0 million per
year and certain permitted dispositions in the aggregate amount not to exceed $15.0 million per year.
The financial covenants of the
Credit Facility include a minimum quarterly EBITDA for a twelve-month period and maximum capital expenditures for each fiscal year. The minimum EBITDA covenant provides that the Companys quarterly EBITDA for a trailing twelve-month period may
not be less than $25.0 million. The maximum capital expenditure covenant provides that the Companys capital expenditures in each fiscal year may not exceed $18.0 million. The borrowing base is determined under the Credit Facility as an agreed
percentage of eligible accounts receivable, less reserves. These restrictions and covenants could limit the Companys ability to respond to market conditions, to provide for unanticipated capital investments, to raise additional debt or equity
capital, or to take advantage of business opportunities, including future acquisitions. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2008.
In January 2008, the Company entered into a loan agreement with HSBC Bank (Shanghai) in China, and borrowed $1.0 million for working capital purposes and
the TKA acquisition. The loan matures on September 30, 2008, and bears annual interest based upon the Peoples Republic of Chinas six month rate, plus 10% of that rate. This interest rate was 6.47% at June 30, 2008. The HSBC
Bank (Shanghai) loan is secured by a letter of credit under the Credit Facility. As of June 30, 2008, there was $1.0 million of outstanding borrowings under the HSBC Bank (Shanghai) loan.
33
The Company has a shelf registration on file with the Securities and Exchange Commission to enable it to
issue up to 1,350,000 shares of its common stock from time to time in connection with acquisitions of businesses, assets or securities of other companies, whether by purchase, merger or any other form of acquisition or business combination. If any
shares are issued using this shelf registration, the Company will not receive any proceeds from these offerings other than the assets, businesses or securities acquired.
The Company generated cash from operating activities of $4.3 million and $17.0 million, respectively, for the six months ended June 30, 2008 and 2007. The decrease in cash provided by operating activities during
the six months ended June 30, 2008, as compared to the same period of 2007 was primarily related to a $22.6 million decrease in accounts payable and accrued liabilities, a $2.4 million decrease in other assets and a $6.9 million increase in
non-cash adjustments. This decrease was offset by an $11.7 million decrease in accounts receivable.
The Company generated $8.9 million of
cash from investing activities during the six months ended June 30, 2008, as compared to $10.5 million of cash used by investing activities for the same period of 2007. The increase in cash provided by investing activities during the six months
ended June 30, 2008, as compared to the same period of 2007 was primarily the result of increases in proceeds of $17.2 million from the sale of ETS assets, the sale of BPM and the receipt of an earn-out payment relating to the sale of the
Highland executive search business.
The Company used $2.7 million of cash in financing activities during the six months ended
June 30, 2008, as compared to $4.2 million of cash generated from financing activities during the same period of 2007. The decrease in cash used in financing activities was primarily the result of the $5.3 million purchase of treasury stock and
a $2.8 million decrease in cash from the exercise of stock options. This increase was partially offset by a $0.9 million decrease in borrowings under our Credit Facility.
The Company believes that its cash and cash equivalents on hand at June 30, 2008, supplemented by availability under the Credit Facility, will provide it with sufficient liquidity to satisfy its working capital
needs, capital expenditures, investment requirements and commitments through at least the next twelve months.
The Companys near-term
cash requirements are primarily related to funding operations, a portion of prior year restructuring actions, contingent payments related to prior acquisition earn-out liabilities and capital expenditures. However, the Company cannot provide
assurance that actual cash requirements will not be greater in the future from those currently expected. If sources of liquidity are not available or if the Company cannot generate sufficient cash flow from operations, the Company might be required
to obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third parties, or a combination thereof. The Company cannot provide assurance that these additional sources
of funds will be available or, if available, would have reasonable terms.
34
FORWARD-LOOKING STATEMENTS
This Form 10-Q 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 Form 10-Q, including statements regarding the Companys 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 important factors, risks, uncertainties and assumptions, including industry and economic conditions that could cause actual results to differ materially
from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, (1) the Companys history of negative cash flows and operating losses may continue, (2) the
ability of clients to terminate their relationship with the Company at any time, (3) the impact of global economic fluctuations on the Companys contracting operations, (4) restrictions on the Companys operating flexibility due
to the terms of its credit facility, (5) risks relating to the Companys international operations, including foreign currency fluctuations, (6) risks and financial impact associated with acquisitions and dispositions of non-core
businesses, (7) the Companys heavy reliance on information systems and the impact of potentially losing or failing to develop technology, (8) competition in the Companys markets and the Companys dependence on highly
skilled professionals, (9) fluctuations in the Companys operating results from quarter to quarter, (10) restrictions imposed by blocking arrangements, (11) the Companys exposure to employment-related claims from both
clients and employers and limits on related insurance coverage, (12) the Companys dependence on key management personnel, (13) the impact of government regulations and (14) the Companys ability to maintain effective
internal control over financial reporting. These forward-looking statements speak only as of the date of this Form 10-Q. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as
a result of new information, future events or otherwise.
35
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The majority of the Companys long-term borrowings are in fixed rate capital leases for leasehold improvements. The carrying amounts of long-term debt approximate fair value, generally due to the short-term nature of the underlying
instruments. We do not trade derivative financial instruments for speculative purposes.
The Company conducts operations in various other
countries, including Australia, Belgium, Canada, France, the Netherlands, New Zealand and the U.K. For the six months ended June 30, 2008, the Company earned approximately 84% of its gross margin outside the U.S., and it collected payments in
local currency and related operating expenses were paid in such corresponding local currency. Accordingly, the Company is subject to increased risk for exchange rate fluctuations between such local currencies and the U.S. dollar.
The financial statements of the non-U.S. subsidiaries are translated into U.S. dollars using current rates of exchange, with translation gains or losses
included in the cumulative translation adjustment account, a component of stockholders equity. During the three and six months ended June 30, 2008, the Company had translation gains (losses) of approximately $5.3 million and ($1.1)
million, respectively, primarily attributable to the fluctuations of the U.S. dollar against the British pound, the Euro and the Australian dollar.
The Companys objective is to reduce earnings and cash flow volatility associated with currency exchange rate changes. Accordingly, the Company, from time to time, enters into foreign currency forward contracts where it has determined
that the exposure to currency exchange rate risk related to specific transactions is significant enough to justify the related costs. At June 30, 2008, there were no outstanding foreign currency forward contracts.
ITEM 4.
|
CONTROLS AND PROCEDURES
|
Evaluation of
disclosure controls and procedures
. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), the Companys management, with the participation of the Companys Chairman of the Board and
Chief Executive Officer and Executive Vice President and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
as of the end of the three months ended June 30, 2008. Based upon their evaluation of these disclosure controls and procedures, the Chairman of the Board and Chief Executive Officer and the Executive Vice President and Chief Financial Officer
concluded that the disclosure controls and procedures were effective as of the end of the three months ended June 30, 2008 to ensure that information required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and to ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the Companys management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required
disclosure.
Changes in internal control over financial reporting
. There were no changes in the Companys internal control over
financial reporting that occurred during the three months ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting,
except
that the Company hired additional staff with experience in reporting and technical accounting during the three months ended June 30, 2008.
36
PART II. OTHER INFORMATION
ITEM 1.
|
LEGAL PROCEEDINGS
|
From time to time we become
subject to legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in the significant expenditure of our financial and managerial resources. While the ultimate outcome of those claims and
lawsuits which currently pending cannot be predicted with certainty, we believe, based on our understanding of the facts of these claims and proceedings, that their ultimate resolution will not, in the aggregate, have a material adverse effect on
our financial condition, results of operations or liquidity.
Risk factors relating to the Company
are contained in Item 1A of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007. No material change to such risk factors has occurred during the six months ended June 30, 2008.
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
The following table summarizes purchases of common stock by the Company during the quarter ended June 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
|
Total number of
shares purchased
(a)
|
|
Average
price paid
per share
|
|
Total number of
shares purchased as
part of publicly
announced plans or
programs
|
|
Approximate dollar
value of shares
that
may yet be purchased
under the plans or programs
(b)
|
April 1, through April 30, 2008
|
|
|
|
|
|
|
|
|
$
|
9,743
|
May 1, through May 31, 2008
|
|
2,700
|
|
$
|
9.11
|
|
|
|
$
|
9,743
|
June 1, through June 30, 2008
|
|
379
|
|
$
|
12.38
|
|
|
|
$
|
9,743
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
3,079
|
|
$
|
9.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents shares of restricted stock withheld from employees upon the vesting of such shares to satisfy employees income tax withholding requirements.
|
(b)
|
On February 4, 2008, the Company announced that its Board of Directors authorized the repurchase of up to $15.0 million of the Companys common stock. The authorization
does not have an expiration date. The Company intends to make purchases from time to time as market conditions warrant. The Company did not repurchase any shares under this program during the quarter ended June 30, 2008, but through
June 30, 2008, the Company had repurchased 701,173 shares for a total cost of approximately $5.3 million.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None.
ITEM 4.
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
The Annual Meeting of Stockholders of Hudson Highland Group, Inc. was held on April 24, 2008. At the meeting, the following matters were submitted to a vote of the stockholders of Hudson Highland Group, Inc.:
|
(1)
|
To elect two directors to hold office until the 2011 annual meeting of stockholders and until their successors are duly elected and qualified. The vote with respect to each nominee
was as follows:
|
|
|
|
|
|
Nominee
|
|
For
|
|
Withheld
|
|
|
|
Jennifer Laing
|
|
22,913,569
|
|
1,202,239
|
|
|
|
Robert B. Dubner
|
|
22,917,166
|
|
1,198,642
|
The individuals continuing in the office of director after the annual meeting were John J. Haley, David G.
Offensend, Jon F. Chait and Richard J. Stolz.
|
(2)
|
To ratify the appointment of KPMG LLP as independent registered public accountants:
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker Non Vote
|
24,062,416
|
|
26,216
|
|
27,176
|
|
0
|
ITEM 5.
|
OTHER INFORMATION
|
None.
37
|
|
|
|
|
31.1
|
|
Certification by Chairman and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act, filed herewith.
|
|
|
31.2
|
|
Certification by the Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act, filed herewith.
|
|
|
32.1
|
|
Certification of the Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith.
|
|
|
32.2
|
|
Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed herewith.
|
38
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
HUDSON HIGHLAND GROUP, INC.
(Registrant)
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Jon F. Chait
|
|
|
|
|
|
|
Jon F. Chait
|
|
|
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
|
(Principal Executive Officer)
|
Dated: August 6, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Mary Jane Raymond
|
|
|
|
|
|
|
Mary Jane Raymond
|
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
(Principal Financial Officer)
|
Dated: August 6, 2008
|
|
|
|
|
|
|
39
HUDSON HIGHLAND GROUP, INC.
FORM 10-Q
EXHIBIT INDEX
|
|
|
Exhibit No.
|
|
Description
|
31.1
|
|
Certification by Chairman and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
|
|
31.2
|
|
Certification by the Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
|
|
32.1
|
|
Certification of the Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|
|
|
32.2
|
|
Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
40
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