Hudson Highland Group Inc. Annual Report 2010

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FY2010 Annual Report · Hudson Highland Group Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)
(cid:1)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
OR

□

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 000-50129

HUDSON HIGHLAND GROUP, INC.

(Exact Name of Registrant as Speciﬁed in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

59-3547281
(I.R.S. Employer
Identiﬁcation Number)

560 Lexington Avenue, New York, New York 10022
(Address of Principal Executive Offices)

(212) 351-7300
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value
Preferred Share Purchase Rights

The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities

Act. Yes (cid:3) No (cid:1)

Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or 15(d) of the Securities

Act. Yes (cid:3) No (cid:1)

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 (cid:1) No (cid:3)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit to post such ﬂies). Yes (cid:3) No (cid:3)

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K is not contained herein, and will

not be contained, to the best of Registrant’s knowledge, in deﬁnitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. □

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 deﬁnition of ‘‘large accelerated ﬁler’’, ‘‘accelerated ﬁler’’, and ‘‘smaller reporting company’’ in Rule 12b-2 of
the Exchange Act.

Large accelerated ﬁler □

Accelerated ﬁler (cid:1)

Non-accelerated ﬁler □ Smaller reporting company □

Indicate by checkmark whether the Registrant is a shell company (as deﬁned in Exchange Act Rule 12b-2). Yes (cid:3) No (cid:1)
The aggregate market value of the voting common stock held by non-affiliates of the Registrant was approximately $138,860,000

based on the closing price of the Common Stock on the NASDAQ Global Market on June 30, 2010.

The number of shares of Common Stock, $.001 par value, outstanding as of January 31, 2011 was 32,166,474

Portions of the Proxy Statement for the 2011 Annual Meeting of Stockholders are incorporated by reference into Part III.

DOCUMENTS INCORPORATED BY REFERENCE

HUDSON HIGHLAND GROUP, INC.

Table of Contents

PART I

ITEM 1.

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 2.

PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 3.

LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 4.

REMOVED AND RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . .

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 6.

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. .

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . . . . . . .

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . .

ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . .

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . .

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . .

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 1. BUSINESS

PART I

Hudson Highland Group, Inc. (the ‘‘Company’’ or ‘‘Hudson’’, ‘‘we’’, ‘‘us’’ and ‘‘our’’) is one of the
world’s 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.

The Company is organized into four reportable segments: Hudson Europe, Hudson Australia and

New Zealand (‘‘ANZ’’), Hudson Americas and Hudson Asia. These reportable segments constituted
approximately 46%, 30%, 13% and 11% of the Company’s gross margin, respectively, for the year ended
December 31, 2010. The Hudson regional businesses were historically the combination of 67 acquisitions
made between 1999 and 2001, which became the eResourcing division of Monster Worldwide, Inc.
(‘‘Monster’’), formerly TMP Worldwide, Inc. Some of the Company’s constituent businesses have operated for
more than 20 years. On March 31, 2003, Monster distributed all of the outstanding shares of the Company to
its stockholders of record on March 14, 2003 (the ‘‘Distribution’’). Since the Distribution, the Company has
operated as an independent publicly held company.

Hudson’s four 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 varies. 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, Hudson’s 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.

Hudson regional businesses also provide candidate assessment, competency modeling, leadership
development, performance management, and career transition through their talent management units. 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.

Hudson Europe operates from 38 offices in 13 countries, with 48% of its 2010 gross margin generated in

the United Kingdom. Hudson ANZ operates from 12 offices in Australia and New Zealand, with 88% of its
2010 gross margin generated in Australia. Hudson Americas operates from 26 offices in the United States
and Canada, with 97% of its 2010 gross margin generated in the United States. Hudson Asia operates from
5 offices in Mainland China, Hong Kong and Singapore, with 45% of its 2010 gross margin generated in
Mainland China.

Corporate expenses are reported separately from the four reportable segments and pertain to certain
functions, such as executive management, corporate governance, human resources, accounting, administration,
tax and treasury, the majority of which are attributable and have been allocated to the reportable segments.

DISCONTINUED OPERATIONS

In the ﬁrst half of 2009, the Company exited Italy and Japan. The operations in Italy were part of the

Hudson Europe reportable segment and the operations in Japan were part of the Hudson Asia reportable
segment.

In the second quarter of 2008, the Company sold 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, which was part of the Hudson Europe reportable segment. In the ﬁrst quarter of 2008, the
Company sold substantially all of the assets of its Hudson Americas energy, engineering and technical staffing
division (‘‘ETS’’), which was part of the Hudson Americas reportable segment.

In the fourth quarter of 2006, the Company sold its Highland Partners (‘‘Highland’’) executive search

business, which was a separate reportable segment of the Company.

In accordance with the provisions of Financial Accounting Standards Board (‘‘FASB’’) Accounting
Standards Codiﬁcation Topic (‘‘ASC’’) 205-20-45 ‘‘Reporting Discontinued Operations’’, the assets, liabilities,
and results of operations of the Company’s discontinued operations above were reclassiﬁed as discontinued
operations for all the periods presented. The gain or loss on sale and results of operations of the disposed
businesses were reported in discontinued operations in the relevant periods.

SALES AND MARKETING

Each of Hudson’s regional businesses maintains sales personnel aligned along functional practice areas or

industry sector groups as appropriate for the market. From time to time, sales people receive incentives for
cross-selling services with other practices and business units as the client need arises. In addition, each region
has the capability to identify and develop international sales opportunities that arise from clients with global
needs.

The Company’s global marketing and communications function is responsible for brand and marketing

strategy, client and candidate lead generation campaigns, public relations and corporate/employee
communications. This team closely coordinates with the local operations to generate leads, support sales
efforts and build a strong brand reputation — both in the external market and within the organization.

We use three principal channels for marketing our services and promoting our brand: (1) in the
United Kingdom, Australia, New Zealand, and other countries where it is an accepted practice, we use
client-paid and Company-paid advertising for vacant positions; (2) public relations to promote our experts and
offerings, and original research on business management and human capital issues of particular relevance to
senior business managers; and (3) the Internet, both for promoting the Company’s services to clients and
attracting, assisting and managing candidates.

CLIENTS

The Company’s clients include small to large-sized corporations and government agencies. At
December 31, 2010, there were approximately 3,600 Hudson Europe clients, 1,187 Hudson ANZ clients,
316 Hudson Americas clients, and 833 Hudson Asia clients. The business of the Company is not dependent
upon either a single client or a limited number of clients.

COMPETITION

The markets for the Company’s services and products are highly competitive. There are few barriers to

entry, so new entrants occur frequently, resulting in considerable market fragmentation. Companies in this
industry compete on price, service quality, new capabilities and technologies, client attraction methods, and
speed of completing assignments.

EMPLOYEES

The Company employs approximately 2,200 people worldwide. In most jurisdictions, our employees are
not represented by a labor union or a collective bargaining agreement. The Company regards its relationships
with its employees as satisfactory.

SEGMENT AND GEOGRAPHIC DATA

Financial information concerning the Company’s reportable segments and geographic areas of

operation is included in Note 15 in the Notes to Consolidated Financial Statements contained in Item 8 of this
Form 10-K.

AVAILABLE INFORMATION

We maintain a Web site with the address www.hudson.com. We are not including the information
contained on our Web site as part of, or incorporating it by reference into, this report. Through our Web site,
we make available free of charge (other than an investor’s own Internet access charges) our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these
reports in a timely manner after we provide them to the Securities and Exchange Commission.

ITEM 1A. RISK FACTORS

The following risk factors and other information included in this Annual Report on Form 10-K should be

carefully considered. The risks and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our
business operations. If any of the following risks occur, our business, ﬁnancial condition, results of operations,
and cash ﬂows could be materially adversely affected.

Our operations will be affected by global economic ﬂuctuations, including the global economic

conditions prevailing during 2010.

Demand for our services ﬂuctuates with changes in economic conditions in the markets in which we
operate. Those conditions include slower employment growth or reductions in employment. We have limited
ﬂexibility to reduce expenses during economic downturns due to some overhead costs which are ﬁxed in the
short-term. Furthermore, we may face increased pricing pressures during economic downturns. During the
2009 economic downturn, many employers in our operating regions reduced their overall workforce to reﬂect
the reduced demand for their products and services. This contributed to an operating loss for our company in
2009. While conditions improved during 2010, weakness persisted in some economies. As a result, we
reported a net loss for 2010. During 2010, many governments also announced reductions in public sector
spending. This may have an ongoing impact on our businesses in certain markets. Despite indications of
improving economic conditions, the economic recovery has been slower than in previous business cycles and
may result in lower operating results than expected.

Our operating results ﬂuctuate from quarter to quarter and therefore quarterly results cannot be

used to predict future periods’ results.

Our operating results ﬂuctuate quarter to quarter primarily due to the vacation periods during the ﬁrst
quarter in the ANZ region and the third quarter in the Americas and Europe regions. Demand for our services
is typically lower during traditional national vacation periods when clients are on vacation.

Our revenue can vary because our clients can terminate their relationship with us at any time with

limited or no penalty.

We provide professional mid-market staffing services on a temporary assignment-by-assignment basis,
which clients can generally terminate at any time or reduce their level of use when compared to prior periods.
Our professional recruitment business is also signiﬁcantly affected by our clients’ hiring needs and their views
of their future prospects. Clients may, on very short notice, reduce or postpone their recruiting assignments
with us and, therefore, affect demand for our services. This could have a material adverse effect on our
business, ﬁnancial condition and results of operations.

Our markets are highly competitive.

The markets for our services are highly competitive. Our markets are characterized by pressures to
reduce prices, provide high levels of service, incorporate new capabilities and technologies and accelerate job
completion schedules. Furthermore, we face competition from a number of sources. These sources include
other executive search ﬁrms and professional search, staffing and consulting ﬁrms. Several of our competitors
have greater ﬁnancial and marketing resources than we do. Due to competition, we may experience reduced
margins on our services, loss of market share and our customers. If we are not able to compete effectively
with current or future competitors as a result of these and other factors, our business, ﬁnancial condition and
results of operations could be materially adversely affected.

We have no signiﬁcant proprietary technology that would preclude or inhibit competitors from entering

the mid-market professional staffing contract and consulting markets. We cannot provide assurance that
existing or future competitors will not develop or offer services that provide signiﬁcant performance, price,
creative or other advantages over our services. In addition, we believe that, with continuing development and
increased availability of information technology, the industries in which we compete may attract new
competitors. Speciﬁcally, the increased use of the Internet may attract technology-oriented companies to the
professional staffing industry. We cannot provide assurance that we will be able to continue to compete
effectively against existing or future competitors. Any of these events could have a material adverse effect on
our business, ﬁnancial condition and results of operations.

Our investment strategy subjects us to risks.

From time to time, we make investments, including acquisitions, as part of our growth plans. Investments

may not perform as expected because they are dependent on a variety of factors, including our ability to
effectively integrate new personnel and operations, our ability to sell new services, and our ability to retain
existing or gain new clients. Furthermore, we may need to borrow more money from lenders or sell equity or
debt securities to the public to ﬁnance future investments and the terms of these ﬁnancings may be adverse to
us.

We face risks related to our international operations.

We conduct operations in nineteen countries and face both translation and transaction risks related to

foreign currency exchange. For the year ended December 31, 2010, approximately 87% of our gross margin
was earned outside of the United States. Our ﬁnancial results could be materially affected by a number of
factors particular to international operations. These include, but are not limited to, difficulties in staffing and
managing international operations, operational issues such as longer customer payment cycles and greater
difficulties in collecting accounts receivable, changes in tax laws or other regulatory requirements, issues
relating to uncertainties of laws and enforcement relating to the regulation and protection of intellectual
property, and currency ﬂuctuation. If we are forced to discontinue any of our international operations, we
could incur material costs to close down such operations.

Regarding the foreign currency risk inherent in international operations, the results of our local operations

are reported in the applicable foreign currencies and then translated into U.S. dollars at the applicable foreign
currency exchange rates for inclusion in our ﬁnancial statements. In addition, we generally pay operating
expenses in the corresponding local currency. Because of devaluations and ﬂuctuations in currency exchange
rates or the imposition of limitations on conversion of foreign currencies into U.S. dollars, we are subject to
currency translation exposure on the revenue and income of our operations in addition to economic exposure.
Our consolidated U.S. dollar cash balance could be lower because a signiﬁcant amount of cash is generated
outside of the United States. This risk could have a material adverse effect on our business, ﬁnancial condition
and results of operations.

We depend on our key management personnel.

Our continued success will depend to a signiﬁcant extent on our senior management team. The loss of
the services of one or more key senior management team member could have a material adverse effect on our
business. On February 22, 2011, our Board of Directors removed Jon F. Chait as chairman and chief executive
officer (‘‘CEO’’) of the company and appointed Mary Jane Raymond, the company’s executive vice president
and chief ﬁnancial officer, to serve as interim CEO until the search process of the successor is completed. Our
inability to attract a suitable successor to replace Mr. Chait could have a material adverse effect on our
business, ﬁnancial condition and results of operations. In addition, if one or more key employees join a
competitor or form a competing company, the resulting loss of existing or potential clients could have a
material adverse effect on our business, ﬁnancial condition and results of operations.

If we fail to attract and retain qualiﬁed personnel, it may negatively impact our business, ﬁnancial

condition and results of operations.

Our success also depends upon our ability to attract and retain highly-skilled professionals who possess

the skills and experience necessary to meet the staffing requirements of our clients. We must continually
evaluate and upgrade our base of available qualiﬁed personnel to keep pace with changing client needs and
emerging technologies. Furthermore, a substantial number of our contractors during any given year may
terminate their employment with us and accept regular staff employment with our clients. Competition for
qualiﬁed professionals with proven skills is intense, and demand for these individuals is expected to remain
strong for the foreseeable future. There can be no assurance that qualiﬁed personnel will continue to be
available to us in sufficient numbers. If we are unable to attract the necessary qualiﬁed personnel for our
clients, it may have a negative impact on our business, ﬁnancial condition and results of operations.

We face risks in collecting our accounts receivable.

In virtually all of our businesses, we invoice customers after providing services, which creates accounts

receivable. Delays or defaults in payments owed to us could have a signiﬁcant adverse impact on our
business, ﬁnancial condition and results of operations. Factors that could cause a delay or default include, but
are not limited to, business failures, turmoil in the ﬁnancial and credit markets, and global economic
conditions.

We have had periods of negative cash ﬂows and operating losses that may reoccur in the future.

We have experienced negative cash ﬂows and reported operating and net losses in the past. For example,
our cash ﬂows from operations were negative during 2010 and 2009 and we had operating and net losses for
the years ended December 31, 2010, 2009 and 2008, which included impairment charges related to goodwill
of $64.5 million in 2008. We cannot provide any assurance that we will have positive cash ﬂows or operating
proﬁtability in the future, particularly to the extent the global economy continues to recover slowly from the
global economic downturn. If our revenue declines or if operating expenses exceed our expectations, we may
not be proﬁtable and may not generate positive operating cash ﬂows.

Our credit facilities restrict our operating ﬂexibility.

Our credit facilities contain various restrictions and covenants that restrict our operating ﬂexibility

including:

•

borrowings limited to eligible receivables;

lenders’ ability to impose restrictions, such as payroll or other reserves;

limitations on payments of dividends;

restrictions on our ability to make additional borrowings, or to consolidate, merge or otherwise
fundamentally change our ownership;

limitations on capital expenditures, investments, dispositions of assets, guarantees of indebtedness,
permitted acquisitions and repurchases of stock; and

limitations on certain intercompany payments of expenses, interest and dividends.

These restrictions and covenants could have adverse consequences for investors, including the need to

use a portion of our cash ﬂow from operations for debt service rather than for our operations, restrictions on
our ability to incur additional debt ﬁnancing for future working capital or capital expenditures, a lesser ability
to take advantage of signiﬁcant business opportunities, such as acquisition opportunities, the potential need to
undertake equity transactions which may dilute the ownership of existing investors, and inability to react to
market conditions by selling lesser-performing assets.

In addition, a default, amendment or waiver to our credit facilities to avoid a default may result in higher
rates of interest and could impact our ability to obtain additional borrowings. Finally, debt incurred under our
credit facilities bear interest at variable rates. Any increase in interest expense could reduce the funds
available for operations.

If we are unable to achieve anticipated cost savings through our cost reduction initiatives, including

outsourcing, our ability to compete could be adversely impacted and our regional operations could be
disrupted.

We have undertaken a series of cost reduction initiatives. In 2009, we initiated a number of structural

cost reduction and productivity improvement initiatives in our operations to reduce costs and improve
proﬁtability. The impact of these cost reduction actions may be inﬂuenced by several factors’ including our
ability to maintain the level of cost savings currently being realized as a result of these initiatives.

In the ﬁrst quarter of 2009, we outsourced certain back-office processes performed in our Hudson ANZ
regional business to a company located in India. The processes that were outsourced are invoicing, accounts
payable, accounts receivable and transactional accounting. The efficient operation of that regional business is
dependent on, among other things, the stability of the Indian political environment. Substantially all of the

specially-trained employees at the Indian company are Indian nationals. Because substantially all of the named
operations have been transferred, it may not be possible to replace the Indian-based employees in another
location, should operations at this Indian company be disrupted. This could impact adversely the operational
efficiency of that regional business.

We rely on our information systems, and if we lose that technology or fail to further develop our

technology, our business could be harmed.

Our success depends in large part upon our ability to store, retrieve, process, and manage substantial
amounts of information, including our client and candidate databases. To achieve our strategic objectives and
to remain competitive, we must continue to develop and enhance our information systems. This may require
the acquisition of equipment and software and the development, either internally or through independent
consultants, of new proprietary software. Our inability to design, develop, implement and utilize, in a
cost-effective manner, information systems that provide the capabilities necessary for us to compete
effectively, or any interruption or loss of our information processing capabilities, for any reason, could harm
our business, ﬁnancial condition and results of operations.

Our business depends on uninterrupted service to clients.

Our operations depend on our ability to protect our facilities, computer and telecommunication equipment

and software systems against damage or interruption from ﬁre, power loss, cyber attacks, sabotage,
telecommunications interruption, weather conditions, natural disasters and other similar events. Additionally,
severe weather can cause our employees or contractors to miss work and interrupt delivery of our service,
resulting in a loss of revenue. While interruptions of these types that have occurred in the past have not
caused material disruption, it is not possible to predict the type, severity or frequency of interruptions in the
future or their impact on our business.

We may be exposed to employment-related claims, legal liability and costs from clients, employers

and regulatory authorities that could adversely affect our business, ﬁnancial condition or results of
operations, and our insurance coverage may not cover all of our potential liability.

We are in the business of employing people and placing them in the workplaces of other businesses.

Risks relating to these activities include:

•

claims of misconduct or negligence on the part of our employees;

claims by our employees of discrimination or harassment directed at them, including claims relating
to actions of our clients;

claims related to the employment of illegal aliens or unlicensed personnel;

claims for payment of workers’ compensation and other similar claims;

claims for violations of wage and hour requirements;

claims for retroactive entitlement to employee beneﬁts;

claims of errors and omissions of our temporary employees;

claims by taxing authorities related to our independent contractors and the risk that such contractors
could be considered employees for tax purposes;

claims related to our non-compliance with data protection laws, which require the consent of a
candidate to transfer resumes and other data; and

claims by our clients relating to our employees’ misuse of client proprietary information,
misappropriation of funds, other misconduct, criminal activity or similar claims.

We are exposed to potential claims with respect to the recruitment process. A client could assert a claim
for matters such as breach of a blocking arrangement or recommending a candidate who subsequently proves
to be unsuitable for the position ﬁlled. Similarly, a client could assert a claim for deceptive trade practices on
the grounds that we failed to disclose certain referral information about the candidate or misrepresented

material information about the candidate. Further, the current employer of a candidate whom we place could
ﬁle a claim against us alleging interference with an employment contract. In addition, a candidate could assert
an action against us for failure to maintain the conﬁdentiality of the candidate’s employment search or for
alleged discrimination or other violations of employment law by one of our clients.

We may incur ﬁnes and other losses or negative publicity with respect to these problems. In addition,
some or all of these claims may give rise to litigation, which could be time-consuming to our management
team, costly and could have a negative effect on our business. In some cases, we have agreed to indemnify
our clients against some or all of these types of liabilities. We cannot assure that we will not experience these
problems in the future, that our insurance will cover all claims, or that our insurance coverage will continue to
be available at economically-feasible rates.

From time to time, we may continue to incur liabilities associated with certain pre-spin off activities with
Monster. Under the terms of our Distribution Agreement with Monster, these liabilities generally will continue
to be retained by us. If these liabilities are signiﬁcant, the retained liabilities could have a material adverse
effect on our business, ﬁnancial condition and results of operations. However, in some circumstance, we may
have claims against Monster, and we will make a determination on a case by case basis

Our ability to utilize net operating loss carry-forwards may be limited.

The Company has U.S. net operating loss carry-forwards that expire through 2030. Section 382 of the

Internal Revenue Code imposes an annual limitation on a corporation’s ability to utilize NOLs if it
experiences an ‘‘ownership change.’’ In general terms, an ownership change may result from transactions
increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-
year period. Future changes in our stock ownership, some of which are outside of our control, could result in
an ownership change. The imposition of a limitation on our ability to use our NOLs to offset future taxable
income could cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such
limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the beneﬁt
of such NOLs.

There may be volatility in our stock price.

The market price for our common stock has ﬂuctuated in the past and could ﬂuctuate substantially in the

future. For example, during 2010, the market price of our common stock reported on the NASDAQ Global
Market ranged from a high of $6.02 to a low of $2.93. Factors such as general macroeconomic conditions
adverse to workforce expansion, the announcement of variations in our quarterly ﬁnancial results or changes
in our expected ﬁnancial results could cause the market price of our common stock to ﬂuctuate signiﬁcantly.
Further, due to the volatility of the stock market generally, the price of our common stock could ﬂuctuate for
reasons unrelated to our operating performance.

Government regulations may result in the prohibition, regulation or restriction of certain types of

employment services we offer, the imposition of additional licensing or tax requirements, or increases in
compliance audits may reduce our future earnings.

In many jurisdictions in which we operate, the contract staffing industry is heavily regulated. For

example, governmental regulations can restrict the length of contracts of contract employees and the industries
in which they may be used. In some countries, special taxes, fees or costs are imposed in connection with the
use of contract workers.

The countries in which we operate may:

•

create additional regulations that prohibit or restrict the types of employment services that we
currently provide;

impose new or additional beneﬁt requirements;

require us to obtain additional licensing to provide staffing services;

impose new or additional visa restrictions on movements between countries;

increase taxes, such as sales or value-added taxes, payable by the providers of staffing services; or

•

increase the number of various tax and compliance audits relating to a variety of regulations,
including wage and hour laws, unemployment taxes, workers’ compensation, immigration, and
income, value-added and sales taxes.

Any future regulations that make it more difficult or expensive for us to continue to provide our staffing

services may have a material adverse effect on our business, ﬁnancial condition and results of operations.

Provisions in our organizational documents and Delaware law will make it more difficult for

someone to acquire control of us.

Our certiﬁcate of incorporation and by-laws and the Delaware General Corporation Law contain several
provisions that make more difficult an acquisition of control of us in a transaction not approved by our Board
of Directors, including transactions in which stockholders might otherwise receive a premium for their shares
over then current prices, and that may limit the ability of stockholders to approve transactions that they may
deem to be in their best interests. Our certiﬁcate of incorporation and by-laws include provisions:

•

dividing our Board of Directors into three classes to be elected on a staggered basis, one class each
year;

authorizing our Board of Directors to issue shares of our preferred stock in one or more series
without further authorization of our stockholders;

requiring that stockholders provide advance notice of any stockholder nomination of directors or any
proposal of new business to be considered at any meeting of stockholders;

permitting removal of directors only for cause by a super-majority vote;

providing that vacancies on our Board of Directors will be ﬁlled by the remaining directors then in
office;

requiring that a super-majority vote be obtained to amend or repeal speciﬁed provisions of our
certiﬁcate of incorporation or by-laws; and

eliminating the right of stockholders to call a special meeting of stockholders or take action by
written consent without a meeting of stockholders.

In addition, Section 203 of the Delaware General Corporation Law generally provides that a corporation

may not engage in any business combination with any interested stockholder during the three-year period
following the time that the stockholder becomes an interested stockholder, unless a majority of the directors
then in office approve either the business combination or the transaction that results in the stockholder
becoming an interested stockholder or speciﬁed stockholder approval requirements are met.

In February 2005, our Board of Directors declared a dividend of one preferred share purchase right (a
‘‘Right’’) for each outstanding share of our common stock payable upon the close of business on February 28,
2005 to the stockholders of record on that date. Each Right entitles the registered holder to purchase from us
one one-hundredth (1/100th) of a share of our Series A Junior Participating Preferred Stock (‘‘Preferred
Shares’’) at a price of $60 per one one-hundredth of a Preferred Share, subject to adjustment. These Rights
may make the cost of acquiring us more expensive and, therefore, make an acquisition more difficult.

ITEM 1B. UNRESOLVED STAFF COMMENTS

The Company has not received a closing letter related to an SEC Division of Corporation Finance
comment letter received by the Company in July 2009. The letter provided comments about (1) whether the
factors driving the Company’s 2008 goodwill impairment were reﬂected in the relevant trend commentary,
and (2) how the Company accounted for the sales tax matters disclosed in the Company’s May 13, 2009
Form 8-K. The Company responded in August 2009.

ITEM 2. PROPERTIES

All of the Company’s operating offices are located in leased premises. Our principal executive office is

currently located at 560 Lexington Avenue, New York, New York, where we occupy space under a lease
expiring in March 2017.

Hudson Europe operates from 38 leased locations with approximately 298,000 aggregate square feet.

Hudson ANZ operates from 12 leased locations with approximately 148,000 aggregate square feet. Hudson
Americas operates from 31 leased locations with approximately 170,000 aggregate square feet, which includes
2 leased locations with space of approximately 60,000 aggregate square feet, which are shared between the
Hudson Americas and corporate functions. Hudson Asia operates from 6 leased locations with approximately
51,000 aggregate square feet. All leased space is considered to be adequate for the operation of its business,
and no difficulties are foreseen in meeting any future space requirements.

ITEM 3. LEGAL PROCEEDINGS

In January 2011, the Company reached a settlement with the SEC regarding a previously disclosed
investigation of sales tax issues in its North American subsidiary. The Company neither admitted nor denied
the ﬁndings of the SEC order, but agreed to pay a $200,000 penalty in conjunction with the settlement. The
SEC order found that the Company failed to maintain adequate books and records and internal accounting
controls to accurately track, calculate and remit amounts due for U.S. state sales tax obligations for a number
of years up to 2007. These issues date back prior to the Company’s 2003 spin off from Monster. The
Company settled all sales tax claims, and by the beginning of 2009, paid all related state sales tax due. The
staff of the SEC previously advised in August 2010 that it did not intend to recommend that the Commission
take action in this matter against the Company’s chief ﬁnancial officer.

The Company is involved in various legal proceedings that are incidental to the conduct of its business.

The Company is not involved in any pending or threatened legal proceedings that it believes could reasonably
be expected to have a material adverse effect on its ﬁnancial condition or results of operations.

ITEM 4. REMOVED AND RESERVED

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information, as of February 23, 2011, regarding the executive

officers of Hudson Highland Group, Inc.:

Name

Mary Jane Raymond

Margaretta R. Noonan
Richard S. Gray
Latham Williams

Frank P. Lanuto
Neil J. Funk

Age

53
54
58

48
59

Title

Interim Chief Executive Officer and Executive Vice
President and Chief Financial Officer
Senior Human Resources Officer
Senior Vice President, Marketing and Communications
Senior Vice President, Legal Affairs and Administration,
Corporate Secretary
Senior Vice President and Corporate Controller
Vice President, Internal Audit

The following biographies describe the business experience of our executive officers:

Mary Jane Raymond was appointed to serve as Interim Chief Executive Officer on February 23, 2011.
She continues to also serve as the Executive Vice President and Chief Financial Officer, which position she
has held since joining the Company in December 2005. Prior to that, Ms. Raymond was the Chief Risk
Officer of The Dun & Bradstreet Corporation during 2005. From 2002 to 2005, Ms. Raymond served as the
Vice President and Corporate Controller of the Dun & Bradstreet Corporation. Ms. Raymond served as the
Merger Integration Vice President of Lucent Technologies, Inc. from 1998 to 2002 and as Financial Vice
President in International from 1997 to 1998. From 1988 to 1997, Ms. Raymond served in various positions
with Cummins, Inc.

Margaretta R. Noonan has served as Senior Human Resources Officer since March 3, 2009. Prior to that,

Ms. Noonan served as Executive Vice President and Chief Administrative Officer since February 2005. Prior
to that Ms. Noonan served as Executive Vice President, Human Resources since she joined the Company in
April 2003. Prior to joining the Company, Ms. Noonan served as Senior Vice President, Global Human
Resources and corporate officer of Monster Worldwide, Inc. Prior to joining Monster in 1998, Ms. Noonan
was Vice President, Human Resources — Stores, for the Lord & Taylor division of May Department Stores
Company, a large retail department store, from February 1997 to May 1998 and was Vice President, Human
Resources, of Kohl’s Corporation, a large retail department store, from November 1992 to February 1997.

Richard S. Gray has served as Senior Vice President, Marketing and Communications since

February 2005. Prior to that, Mr. Gray served as Vice President, Marketing and Communications since joining
the Company in May 2003. Prior to joining the Company, Mr. Gray was Senior Vice President for Ogilvy
Public Relations Worldwide, a large public relations ﬁrm, in Chicago, Illinois from September 2002 until
May 2003. Before joining Ogilvy Public Relations Worldwide, Mr. Gray was Vice President, Marketing and
Communications for Lante Corporation, an internet consulting boutique, in Chicago, Illinois from
November 1998 until November 2001.

Latham Williams has served as Senior Vice President, Legal Affairs and Administration, Corporate

Secretary since February 2007. Prior to that, Mr. Williams served as Vice President, Legal Affairs and
Administration, Corporate Secretary since joining the Company in April 2003. Prior to joining the Company,
Mr. Williams was a Partner, Leader Diversity Practice Group and Co-Leader Global Legal Practice in
Monster’s executive search division. Prior to joining Monster in 2001, Mr. Williams was an equity partner
with the international law ﬁrm of Sidley Austin LLP from 1993 to 2000, specializing in health care joint
ventures, mergers and acquisitions. Before joining Sidley Austin, Mr. Williams was an equity partner in the
Chicago-based law ﬁrm of Gardner, Carton & Douglas (now, Drinker Biddle) and was with the ﬁrm from
1981 to 1993.

Frank P. Lanuto has served as Senior Vice President and Corporate Controller since November 9, 2009.
Prior to that, Mr. Lanuto served as Vice President and Corporate Controller since he joined the Company in
June 2008. Prior to joining the Company, Mr. Lanuto served as Executive Vice President and Chief Financial
Officer of Initiative Media Worldwide, a subsidiary of The Interpublic Group of Companies. Inc., from
September 2005 to March 2008. Prior to that, Mr. Lanuto served as Chief Financial Officer of Publicis
Healthcare Communications, from April 2003 to August 2005. Prior to that, he served as Executive Vice
President, Corporate Finance of Bcom3 Group, Inc. from December 2001 to March 2003 and Senior Vice
President and Director, Group Financial Reporting of Bcom3 Group from May 2000 to November 2001.
Mr. Lanuto served in various positions for Omnicom Group Inc. from 1993 to 2000, including Chief
Operating Officer and Chief Financial Officer of its Rapp Collins Worldwide (New York office) business.

Neil J. Funk has served as Vice President, Internal Audit since joining the Company in August 2003.
Prior to joining the Company, Mr. Funk was a Senior Manager at Deloitte & Touche LLP, a multi-national
auditing and consulting ﬁrm, from September 2000 until July 2003. Before joining Deloitte & Touche,
Mr. Funk was with Prudential Financial, Inc., a large insurance company, specializing in personal ﬁnancial
planning from March 2000 until August 2000. Before joining Prudential Financial, Inc., Mr. Funk was District
Audit Manager for PRG-Schultz, Inc., a recovery audit company, based in Atlanta, Georgia from
September 1997 until February 2000.

Executive officers are elected by, and serve at the discretion of, the Board of Directors. There are no

family relationships between any of our directors or executive officers.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR COMMON STOCK

The Company’s common stock was listed for trading on the NASDAQ Global Market under the symbol

‘‘HHGP’’ in 2010. Effective January 3, 2011, the Company’s common stock is listed for trading on the
NASDAQ Global Select Market under the symbol ‘‘HHGP’’ because NASDAQ determined that the Company
meets the initial listing requirement of the NASDAQ Global Select Market. On December 31, 2010, there
were approximately 969 holders of record of the Company’s common stock.

The following is a list by ﬁscal quarter of the market prices of the Company’s common stock.

Market Price

High

Low

2010
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6.01
$4.81
$6.02
$5.56

$5.19
$4.04
$2.63
$3.67

$3.30
$2.93
$4.30
$4.00

$2.99
$1.70
$1.09
$0.68

We have never declared or paid cash dividends on our common stock, and we currently do not intend to

declare or pay cash dividends on our common stock. Any payment of cash dividends will depend upon our
ﬁnancial condition, capital requirements, earnings and other factors deemed relevant by our Board of
Directors. In addition, the terms of our credit agreement prohibit us from paying dividends and making other
distributions.

ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s purchases of its common stock during the fourth quarter of ﬁscal 2010 were as follows:

Period
October 1, 2010 − October 31, 2010 . . . . . . .
November 1, 2010 − November 30, 2010(b) . .
December 1, 2010 − December 31, 2010 . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Number of
Shares
Purchased
—
368
—
368

Average Price
Paid per Share
$ —
$3.65
$ —
$3.65

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(a)
$6,792,000
$6,792,000
$6,792,000
$6,792,000

(a) On February 4, 2008, the Company announced that its Board of Directors authorized the repurchase of a
maximum of $15 million of the Company’s common stock. The Company has repurchased 1,491,772
shares for a total cost of approximately $8.2 million under this authorization. Repurchases of common
stock are restricted under the Company’s revolver agreement entered into on August 5, 2010.
(b) Consisted of shares of restricted stock withheld from employees upon the vesting of such shares to

satisfy employees’ income tax withholding requirements.

The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be
‘‘soliciting material’’ or to be ‘‘ﬁled’’ with the SEC or subject to Regulation 14A or 14C under the Securities
Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not

be deemed to be incorporated by reference into any ﬁling under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent we speciﬁcally incorporate it by reference into such a ﬁling.

PERFORMANCE INFORMATION

The following graph compares on a cumulative basis changes since December 31, 2005 in (a) the total
stockholder return on the Company’s common stock with (b) the total return on the Russell 2000 Index and
(c) the total return on the companies in a peer group selected in good faith by the Company, in each case
assuming reinvestment of dividends. Such changes have been measured by dividing (a) the difference between
the price per share at the end of and the beginning of the measurement period by (b) the price per share at the
beginning of the measurement period. The graph assumes $100 was invested on December 31, 2005 in the
Company’s common stock, the Russell 2000 Index and the peer group consisting of Kforce Inc., Manpower,
Inc., Spherion Corporation, CDI Corp. and Robert Half International Inc. The returns of each component
company in the peer group have been weighted based on each company’s relative market capitalization on
December 31, 2010.

$150

$100

$50

12/31/05

06/30/06

12/31/06

6/30/07

12/31/07

6/30/08

12/31/08

6/30/09

12/31/09

6/30/10

12/31/10

HHGP

Russell 2000

Peer Group

December 31,

HHGP. . . . . . . . . . . . . . . . . . . . . . .
PEER GROUP . . . . . . . . . . . . . . . . .
RUSSELL 2000 INDEX . . . . . . . . . .

2010
$ 33.58
$109.75
$116.40

2009
$27.36
$93.06
$92.90

2008
$19.30
$62.32
$74.19

2007
$ 48.44
$ 96.35
$113.79

2006
$ 96.08
$126.33
$117.00

2005
$100.00
$100.00
$100.00

ITEM 6. SELECTED FINANCIAL DATA

The following table shows selected ﬁnancial data of the Company that has been adjusted to reﬂect the

classiﬁcation of certain businesses as discontinued operations. The data has been derived from, and should be
read together with, the Consolidated Financial Statements and corresponding notes and ‘‘Management’s
Discussion and Analysis of Financial Condition and Results of Operations’’ included in Items 7 and 8 of this
Form 10-K.

2010

Year ended December 31,
2008
(dollars in thousands, except per share data)

2009

2007

2006

SUMMARY OF OPERATIONS:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . .

$794,542

$691,149

$1,079,085 $1,170,061

$1,146,794

Gross margin. . . . . . . . . . . . . . . . . . . . . .

$298,573

$260,453

$ 454,986 $ 496,440

$ 444,213

Business reorganization and integration

expense. . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other impairment charges(a) . .
Depreciation and amortization . . . . . . . . . .

$
$

1,694

$ 18,180
1,549

— $

11,217 $
67,087 $

3,575

$
— $

8,184

$ 12,543

14,662 $

14,377

$
$

Operating (loss) income . . . . . . . . . . . . . .
(Loss) income from continuing operations . .
(Loss) income from discontinued operations,
net of income taxes. . . . . . . . . . . . . . . .
Net (loss) income. . . . . . . . . . . . . . . . . . .
Basic (loss) income per share from

continuing operations . . . . . . . . . . . . . .
Basic net (loss) income per share . . . . . . . .
Diluted (loss) income per share from

continuing operations . . . . . . . . . . . . . .
Diluted net (loss) income per share. . . . . . .

OTHER FINANCIAL DATA:
Net cash (used in) provided by operating

$ (5,618)
$ (4,441)

$ (49,453) $ (70,783) $
$ (42,953) $ (73,096) $

18,995
5,528

(244)
$
$ (4,685)

2,344

(1,222) $
$
$
$ (40,609) $ (74,318) $

9,453
14,981

$
$

(0.15)
(0.16)

$
$

(1.65) $
(1.56) $

(2.90) $
(2.95) $

(1.65) $
(1.56) $

(2.90) $
(2.95) $

0.22
0.59

0.21
0.58

activities . . . . . . . . . . . . . . . . . . . . . . .

$ (14,461)

$ (26,988) $

11,860 $

37,741

35,867

Net cash (used in) provided by investing

activities . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) ﬁnancing

activities . . . . . . . . . . . . . . . . . . . . . . .

BALANCE SHEET DATA:
Current assets . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion . . . . . .
Total stockholders’ equity . . . . . . . . . . . . .

OTHER DATA:
EBITDA (loss)(b) . . . . . . . . . . . . . . . . . . .

(57)

7,578

6,804

4,371

4,196 $ (50,837) $

1,881

(646) $

4,864

$ (28,803)

$172,087
$205,834
$ 93,760
$
$ 93,278

$148,366
$181,944
$ 86,154

$ 76,260

$ 194,149 $ 259,075
$ 230,953 $ 374,206
$ 104,581 $ 152,426
— $
$ 107,992 $ 200,115

$ 280,107
$ 352,182
$ 167,289
235
$ 171,324

— $

6,503

$ (35,466) $ (52,852) $

36,795

13,959

(a) The results for the year ended December 31, 2009 included an impairment charge of $1,669 related to
goodwill associated with the Tong Zhi (Beijing) Consulting Service Ltd. and Guangzhou Dong Li
Consulting Service Ltd. (collectively, ‘‘TKA’’) acquisition. The results for the year ended December 31,
2008 included impairment charges related to goodwill of $64,495, a write down of long-term assets of

6,046
1,300

18,196

(5,826)
(8,855)

29,283
20,428

(0.36)
0.83

$
$

$2,224 and impairment charges related to intangible assets of $368. The results for the year ended
December 31, 2006 included an impairment charge of $1,300 related to goodwill associated with the
Alder Novo acquisition.

(b) SEC Regulation S-K 229.10(e)1(ii)(A) deﬁnes EBITDA as earnings before interest, taxes, depreciation
and amortization. EBITDA is presented to provide additional information to investors about the
Company’s operations on a basis consistent with the measures that the Company uses to manage its
operations and evaluate its performance. Management also uses this measurement to evaluate working
capital requirements. EBITDA should not be considered in isolation or as a substitute for operating
income and net income prepared in accordance with generally accepted accounting principles or as a
measure of the Company’s proﬁtability. See Note 15 to the Consolidated Financial Statements for further
EBITDA segment and reconciliation information.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations

(‘‘MD&A’’) should be read in conjunction with the Consolidated Financial Statements and the notes thereto,
included in Item 8 of this Form 10-K. This MD&A 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 MD&A also uses the non-GAAP measure of earnings before interest,
taxes, depreciation and amortization (‘‘EBITDA’’). See Note 15 to the Consolidated Financial Statements for
EBITDA segment reconciliation information.

Executive Overview

Hudson Highland Group, Inc. (the ‘‘Company’’ or ‘‘Hudson,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’) has operated as an

independent publicly traded company since April 1, 2003, when we were spun-off from Monster Worldwide,
Inc. Our businesses are specialized professional staffing services for permanent and contract and talent
management services to businesses operating in many industries and in 19 countries around the world. Our
largest operations are in the United Kingdom (‘‘U.K.’’), Australia, and the U.S. We are organized into four
reportable segments: Hudson Europe, Hudson Australia and New Zealand (‘‘ANZ’’), Hudson Americas and
Hudson Asia. These segments contributed approximately 46%, 30%, 13% and 11% of the Company’s gross
margin, respectively, for the year ended December 31, 2010. Our management’s primary focus since the
spin-off has been to move the Company to proﬁtability, particularly at the level most in the control of the
country level operating leaders. We have focused on specialized professional recruitment through our staffing,
project solutions and talent management businesses. In doing so, we have sold or discontinued non-core
businesses, taken actions to streamline support operations to match the business focus and reduced costs to
increase our long-term proﬁtability. We have measured our improvements at the level of gross margin, less
selling, general and administrative expenses, and depreciation and amortization.

Prevailing Economic Conditions

During 2010, the Company continued to experience improving economic conditions ﬁrst seen in the
fourth quarter of 2009. Conditions generally improved throughout the year, though rates of improvement
varied from market to market in both overall magnitude and momentum. The improvement was led by
increases in permanent placement activities, followed by increases in temporary contracting, which were more
evident in the second half of the year.

As the year progressed, growth in the recovery leading markets of the U.K. and Asia began to level off,

while markets in North America, Continental Europe and ANZ began to pick up. Unemployment rates,
traditionally a lagging economic indicator, remained generally elevated in North America and the Europe, at
high single digit levels. Unemployment rates in Asia and ANZ, which were less affected by the global
economic downturn in 2009, continued to improve.

We believe the economic growth outlook for 2011 is positive. Growth rates for developing markets,
particularly those in Asia, are generally expected to continue to outpace developed economies. However, the
strength of the global economic recovery and related job creation could be moderated by several factors,
including expansion of the sovereign debt crisis in Europe, mounting governmental budget deﬁcits, and a
continued weak housing market in the U.S. While we are unable to accurately predict changes in general
economic conditions and their effect on the levels of new hiring, we do not expect a return to signiﬁcantly
negative conditions in any market, even though companies are likely to remain cautious on hiring.

Financial Performance

As discussed in more detail in this MD&A, the following ﬁnancial data present an overview of our

ﬁnancial performance for 2010, 2009 and 2008:

$ in thousands
Revenue . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . .
Selling, general and administrative

expenses(a). . . . . . . . . . . . . . . . .

Business reorganization and

Year Ended December 31,
2009
$691,149
260,453

2008
$1,079,085
454,986

2010
$794,542
298,573

Changes
2010 vs. 2009
Amount
$103,393
38,120

Changes
2009 vs. 2008
Amount
$(387,936)
(194,533)

302,497

290,177

447,465

12,320

(157,288)

integration expenses . . . . . . . . . .

1,694

18,180

11,217

(16,486)

6,963

Goodwill and other impairment

charges . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . .
Loss from continuing operations . . .
Net loss . . . . . . . . . . . . . . . . . . . .

—
(5,618)
(4,441)
$ (4,685)

1,549
(49,453)
(42,953)
$ (40,609)

67,087
(70,783)
(73,096)
$ (74,318)

(1,549)
43,835
38,512
$ 35,924

(65,538)
21,330
30,143
$ 33,709

(a) Selling, general and administrative expenses include depreciation and amortization expense of $8.2 million,
$12.5 million and $14.7 million, respectively, for the years ended December 31, 2010, 2009 and 2008.
•

Revenue was $794.5 million for the year ended December 31, 2010, compared to $691.1 million for
2009, an increase of $103.4 million, or 15.0%. Of this increase, $63.5 million, or a 12.2% increase
compared to 2009, was in contracting and $42.5 million, or a 37% increase compared to 2009, was
in permanent recruitment revenue. The increase was partially offset by a $2.8 million, or 5.8%,
decline in talent management revenue compared to 2009 primarily from counter-cyclical
outplacement services.

•

Revenue was $691.1 million for the year ended December 31, 2009, compared to $1,079.1 million
for 2008, a decrease of $388 million, or 36%. Of this decrease, $244 million, or a 32% decrease
compared to 2008, was in contracting and $122 million, or a 51% decrease compared to 2008, was
in permanent recruitment revenue.

Gross margin was $298.6 million for the year ended December 31, 2010, compared to
$260.5 million for 2009, an increase of $38.1 million, or 14.6%. Of this increase, $41.3 million, or a
36.4% increase compared to 2009, was in permanent recruitment gross margin and $0.4 million, or a
0.3% increase compared to 2009, was in contracting gross margin. The increase was partially offset
by a $3 million, or 7.3%, decline in talent management gross margin compared to 2009.

Gross margin was $260.5 million for the year ended December 31, 2009, compared to $455 million
for 2008, a decrease of $194.5 million, or 42.8%. Of this decrease, $120.8 million, or a 51.4%
decrease compared to 2008, was in permanent recruitment gross margin and $60.2 million, or a
36.9% decrease compared to 2008, was in contracting gross margin.

Selling, general and administrative expenses were $302.5 million for the year ended December 31,
2010, as compared to $290.2 million for 2009, an increase of $12.3 million, or 4.2%. The increase
was primarily due to increased staff compensation as a result of the increase in gross margin,
partially offset by reductions in costs resulting from the restructuring program completed in 2009.

Selling, general and administrative expenses were $290.2 million for the year ended December 31,
2009, as compared to $447.5 million for 2008, a decrease of $157.3 million, or 35.2%. The decrease
was primarily due to decreased staff compensation as a result of the decline in gross margin, and
reductions in costs resulting from the restructuring programs completed in 2009 and 2008.

There were no goodwill and other impairment charges in 2010. Goodwill and other impairment
charges of $1.7 million were included in the results for the year ended December 31, 2009, as
compared to $67.1 million for 2008.

Goodwill and Other Impairment Charges

Under the Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codiﬁcation Topic

(‘‘ASC’’) 350-20-35 ‘‘Intangibles — Goodwill and Other, Goodwill Subsequent Measurement’’, the Company
is required to test goodwill and indeﬁnite-lived intangible assets for impairment on an annual basis as of
October 1, or more frequently if circumstances indicate that its carrying value might exceed its current fair
value.

By the fourth quarter of 2008, virtually all of our markets were affected by weakening economic

conditions. These conditions negatively impacted both the Company’s stock price and its outlook for operating
results. The Company’s stock price declined approximately ﬁfty percent as of December 31, 2008 compared to
the stock price as of October 1, 2008. As a result, the Company’s market capitalization declined below its
book value, an indication that the aggregate fair value of its reporting units could potentially be less than their
carrying value. Accordingly, management updated its impairment testing from October 1 (annual assessment
date), through December 31, 2008 with the assistance of a third-party valuation ﬁrm utilizing both an income
and market based approach.

At the conclusion of the impairment testing, the Company determined that goodwill was impaired at all

of its reporting units and recorded an impairment charge of $64.5 million in 2008. It also recorded an
additional impairment charge on intangible assets of $2.6 million. The total charges of $67.1 million for 2008
were recorded under the caption of ‘‘Goodwill and other impairment charges’’ in the Company’s Consolidated
Statements of Operations included in the Company’s 2008 Annual Report on Form 10-K. The primary drivers
that resulted in the goodwill impairment charge were the anticipated signiﬁcant reduction in 2009 revenue,
earnings and cash ﬂows with modest expected recovery in 2010 and a reduction in the market price of the
Company’s stock.

During the ﬁrst half of 2009, the Company experienced a continued deterioration in market conditions.

Over the course of the ﬁrst six months of the 2009, the Company’s stock price declined approximately
thirty-ﬁve percent as of June 30, 2009 as compared to December 31, 2008. As a result, management
performed an interim test for impairment of the $1.7 million additional purchase price payment for its
Tong Zhi (Beijing) Consulting Service Ltd and Guangzhou Dong Li Consulting Service Ltd (collectively,
‘‘TKA’’) acquisition, which was recorded as goodwill at June 30, 2009. The Company concluded that the
entire amount of recorded goodwill was impaired and recorded an impairment charge of $1.7 million at the
same reporting unit.

In 2010, the Company’s ﬁnancial results continued the improvement which began in the latter half of

2009, particularly in Asia. However, business and economic conditions remained mixed. As a result, the
Company performed an interim test for impairment of the $1.9 million ﬁnal purchase price payment for its
TKA acquisition, which was recorded as goodwill at June 30, 2010. At the conclusion of its testing, the
Company determined that no impairment of goodwill existed at June 30, 2010. Management updated its
testing for impairment as of October 1 (annual impairment date) and conﬁrmed its earlier determination that
no impairment of goodwill existed as of October 1, 2010.

Strategic Actions

Our management’s primary focus has been on specialized professional recruitment through our

recruitment, staffing, project solutions and talent management businesses. Our long-term ﬁnancial goal is to
reach 7 − 10% EBITDA margins, with EBITDA being the measure most within the control of our operating
leaders. We continue to execute this strategy through a combination of delivery of higher margin services,
efficient delivery of services, investments, cost management, acquisitions and divestitures. In doing so, we
continue to focus on retaining and maintaining key clients, retaining high performing revenue earning
employees, integrating businesses to achieve synergies, discontinuing non-core businesses, streamlining
support operations and reducing costs to achieve the Company’s long-term proﬁtability goals. We expect to
continue our review of opportunities to expand our operations in specialized professional recruitment.

Discontinued Operations

In the ﬁrst half of 2009, the Company exited Italy and Japan. The operations in Italy were part of the

Hudson Europe reportable segment and the operations of Japan were part of the Hudson Asia reportable
segment.

In the fourth quarter of 2006, the Company sold its Highland Partners (‘‘Highland’’) executive search

business, which was a separate reportable segment of the Company.

In accordance with the provisions of ASC 205-20-45 ‘‘Reporting Discontinued Operations’’, the assets,

liabilities, and results of operations of the Company’s discontinued operations above were reclassiﬁed as
discontinued operations for all the periods presented. The gain or loss on sale and results of operations of the
disposed businesses were reported in discontinued operations in the relevant periods

Use of EBITDA

Management believes EBITDA is a meaningful indicator of the Company’s performance that provides

useful information to investors regarding the Company’s ﬁnancial condition and results of operations.
EBITDA is also considered by management as the best indicator of operating performance and most
comparable measure across our regions. 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, or net income prepared in accordance with generally accepted accounting principles in the United
States of America (‘‘US GAAP’’) or as a measure of the Company’s proﬁtability. EBITDA is derived from net
income (loss) adjusted for (beneﬁt from) provision for income taxes, interest expense (income), and
depreciation and amortization. The reconciliation of EBITDA to the most directly comparable US GAAP
ﬁnancial measure is provided in the table below:

$ in thousands
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted for (loss) income from discontinued

operations, net of income taxes . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . .

Adjustments to loss from continuing operations

Provision for (beneﬁt from) income taxes . . . . . . . .
Interest expense (income), net . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . .
Total adjustments from loss from continuing operations
to EBITDA (loss). . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2009
$(40,609)

2008
$(74,318)

2010
$ (4,685)

(244)
(4,441)

2,344
(42,953)

(1,222)
(73,096)

1,482
1,278
8,184

(5,750)
694
12,543

6,681
(1,099)
14,662

10,944
$ 6,503

7,487
$(35,466)

20,244
$(52,852)

Critical Accounting Policies

Our discussion and analysis of our ﬁnancial condition and results of operations are based upon our
Consolidated Financial Statements, which have been prepared in accordance with US GAAP. The preparation
of ﬁnancial statements in accordance with US GAAP requires our management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities. US GAAP provides the framework from which to make these estimates,
assumptions and disclosures. We choose accounting policies within US GAAP that our management believes
are appropriate to accurately and fairly report our operating results and ﬁnancial position in a consistent
manner. Our management regularly assesses these policies in light of current and forecasted economic

conditions. Our accounting policies are stated in Note 2 to our Consolidated Financial Statements included in
Item 8. We believe the following accounting policies are critical to understanding our results of operations and
affect the more signiﬁcant judgments and estimates used in the preparation of our Consolidated Financial
Statements that are inherently uncertain:

Revenue Recognition

The Company recognizes revenue for temporary services at the time services are provided and revenue is

recorded on a time and materials basis. Temporary contracting revenue is reported on a gross basis when the
Company acts as the principal in the transaction and is at risk for collection in accordance with ASC 605-45,
‘‘Overall Considerations of Reporting Revenue Gross as a Principal versus Net as an Agent’’. The Company’s
revenues are derived from its gross billings, which are based on (i) the payroll cost of its worksite employees;
and (ii) a markup computed as a percentage of the payroll cost.

The Company recognizes revenue for permanent placements based on the nature of the fee arrangement.
Revenue generated when the Company permanently places an individual with a client on a contingent basis is
recorded at the time of acceptance of employment, net of an allowance for estimated fee reversals. Revenue
generated when the Company permanently places an individual with a client on a retained basis is recorded
ratably over the period services are rendered, net of an allowance for estimated fee reversals.

ASC 605-45-50-3 and ASC 605-45-50-4, ‘‘Taxes Collected from Customers and Remitted to
Governmental Authorities’’ provide that the presentation of taxes on either a gross or net basis is an
accounting policy decision. The Company collects various taxes assessed by governmental authorities and
records these amounts on a net basis.

Accounts Receivable

The Company’s accounts receivable balances are composed of trade and unbilled receivables. The
Company maintains an allowance for doubtful accounts and makes ongoing estimates as to the collectability
of the various receivables. If the Company determines that the allowance for doubtful accounts is not adequate
to cover estimated losses, an expense to provide for doubtful accounts is recorded in selling, general and
administrative expenses. If an account is determined to be uncollectible, it is written off against the allowance
for doubtful accounts. Management’s assessment and judgment are vital requirements in assessing the ultimate
realization of these receivables, including the current credit-worthiness, ﬁnancial stability and effect of market
conditions on each customer.

Income Taxes

We account for income taxes using the asset and liability method in accordance with ASC 740, ‘‘Income
Taxes’’. This standard establishes ﬁnancial accounting and reporting standards for the effects of income taxes
that result from an enterprise’s activities during the current and preceding years. It requires an asset and
liability approach for ﬁnancial accounting and reporting of income taxes.

The calculation of net deferred tax assets assumes sufficient future earnings for the realization of such
assets as well as the continued application of currently anticipated tax rates. Included in net deferred tax assets
is a valuation allowance for deferred tax assets where management believes it is more likely than not that the
deferred tax assets will not be realized in the relevant jurisdiction. If we determine that a deferred tax asset
will not be realizable, an adjustment to the deferred tax asset will result in a reduction of earnings at that
time. See Note 10 to the Consolidated Financial Statements for further information regarding deferred tax
assets and valuation allowance.

ASC 740-10-55-3 ‘‘Recognition and Measurement of Tax Positions — a Two Step Process’’ provides

implementation guidance related to the accounting for uncertainty in income taxes recognized in an
enterprise’s ﬁnancial statements and prescribes a two-step evaluation process for a tax position taken or
expected to be taken in a tax return. The ﬁrst step is recognition and the second is measurement. ASC 740
also provides guidance on derecognition, measurement, classiﬁcation, disclosures, transition and accounting for
interim periods. In addition, ASC 740-10-25-9 provides guidance on how to determine whether a tax position
is effectively settled for the purpose of recognizing previously unrecognized tax beneﬁts.

The Company’s unrecognized tax beneﬁts, if recognized in the future, would affect the annual effective

income tax rate. See Note 10 to the Consolidated Financial Statements for further information regarding
unrecognized tax beneﬁts. We elected to continue our historical practice of classifying applicable interest and
penalties as a component of the provision for income taxes.

We provide tax reserves for federal, state, local and international exposures relating to periods subject to

audit. The development of reserves for these exposures requires judgments about tax issues, potential
outcomes and timing, and is a subjective critical estimate. We assess our tax positions and record tax beneﬁts
for all years subject to examination based upon management’s evaluation of the facts, circumstances and
information available at the reporting dates. For those tax positions where it is more likely than not that a tax
beneﬁt will be sustained, we have recorded the largest amount of tax beneﬁt with greater than 50% likelihood
of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For
those tax positions where it is not more likely than not that a tax beneﬁt will be sustained, no tax beneﬁt has
been recognized in the Consolidated Financial Statements. Where applicable, associated interest and penalties
have also been recognized. Although the outcome relating to these exposures are uncertain, we believe that
our reserves reﬂect the probable outcome of known tax contingencies. In certain circumstances, the ultimate
outcome of exposures and risks involves signiﬁcant uncertainties which render them inestimable. If actual
outcomes differ materially from these estimates, including those that cannot be quantiﬁed, they could have a
material impact on our results of operations.

Contingencies

From time to time in the ordinary course of business, the Company is subject to compliance audits by

federal, state, local and foreign government regulatory, tax, and other authorities relating to a variety of
regulations, including wage and hour laws, unemployment taxes, workers’ compensation, immigration, and
income, value-added and sales taxes. The Company is also subject to, from time to time in the ordinary
course of business, various claims, lawsuits, and other complaints from, for example, clients, candidates,
suppliers, and landlords for both leased and subleased properties. Periodic events can change the number and
type of audits, claims, lawsuits or complaints asserted against the Company. Events can also change the
likelihood of assertion and the behavior of third parties to reach resolution regarding such matters.

The present economic circumstances have given rise to many news reports and bulletins from clients, tax
authorities and other parties about changes in their procedures for audits, payment, plans to challenge existing
contracts and other such matters aimed at being more aggressive in the resolution of such matters in their own
favor. The Company has appropriate procedures in place for identifying and communicating any matters of
this type, whether asserted or likely to be asserted, and it evaluates its liabilities in light of the prevailing
circumstances. Changes in the behavior of third parties could cause the Company to change its view of the
likelihood of a claim and what might constitute a trend. In the last twelve months, the Company has not seen
a marked difference in employee disputes or client disputes, though pressure on fees continues.

For matters that have reached the threshold of probable and estimable, the Company has established
reserves for legal, regulatory and other contingent liabilities. Although the outcome of these matters cannot be
determined, the Company believes that none of the currently pending matters, individually or in the aggregate,
will have a material adverse effect on the Company’s ﬁnancial condition, results of operations or liquidity.

The Company is currently appealing a decision by the Pennsylvania Department of Revenue related to its
2004 and 2005 state income tax returns. Under the appeals process, the state has ﬁled a tax lien in the amount
of $3.5 million on the U.S. operating company. The Company has posted a security bond amounting to
120 percent of the lien. The Company does not expect this bond to be drawn.

Goodwill

Under ASC 350-20-35 ‘‘Intangibles — Goodwill and Other, Goodwill Subsequent Measurement’’, the
Company is required to test goodwill and indeﬁnite-lived intangible assets for impairment on an annual basis
as of October 1, or more frequently if circumstances indicate that its carrying value might exceed its current
fair value.

ASC 350-20-35 requires a two-step process to identify potential goodwill impairment and to measure the
amount of the impairment loss to be recognized, if applicable. The ﬁrst step of the goodwill impairment test,

used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount,
including goodwill. If the fair value of a reporting unit exceeds its carrying amount, then goodwill of the
reporting unit is not considered impaired and the second step of the impairment test is unnecessary. In
contrast, if the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill
impairment test shall be performed to measure the amount of impairment loss, if any.

Step two of the impairment test, if necessary, consists of determining the implied fair value of each

reporting unit’s goodwill. In calculating the implied fair value of goodwill, the fair values of the reporting
units are allocated to all of the other assets and liabilities of the reporting units based on their fair values. The
excess of the fair value of each reporting unit over the amounts assigned to its other assets and liabilities is
equal to the implied fair value of its goodwill. The goodwill impairment is measured as the excess of the
carrying amount of goodwill over its implied fair value.

A reporting unit is an operating segment or one level below an operating segment (referred to as a
component). A component of an operating segment is a reporting unit if the component constitutes a business
for which discrete ﬁnancial information is available and segment management regularly reviews the operating
results of that component.

To estimate the fair value of a reporting unit, the Company utilizes the income approach, a valuation

technique which indicates the fair value of the invested capital of a reporting unit based on the value of the
cash ﬂows that it is expected to generate in the future. The discounted cash ﬂow method, an application of the
income approach, estimates the future cash ﬂows of the reporting unit and discounts these cash ﬂows to their
present value equivalents at a rate of return that considers the relative risk of achieving the cash ﬂows and the
time value of money. These cash ﬂows indicate the fair value of the invested capital of the reporting unit on a
marketable, controlling basis.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of signiﬁcant
estimates and assumptions. These estimates and assumptions include revenue growth rates, operating margins,
corporate overhead allocations, cash ﬂow adjustments related to capital expenditures, and working capital
investments and risk-adjusted discount rates used to calculate the present value of the projected future cash
ﬂows. We base our fair value estimates on assumptions we believe to be reasonable.

The Company also considers the market approach, which indicates the fair value of the invested capital

of the Company based on the Company’s market capitalization. We use the quoted market price method to
estimate the fair value of the Company based on the quoted market price in the active markets (NASDAQ).
We estimate the Company’s market capitalization by multiplying the quoted per share market price by the
number of shares outstanding. As an additional measure, the Company reconciles the aggregate fair value of
all of its reporting units, as determined by the discounted cash ﬂow method, with its total market
capitalization to determine the reasonableness of the fair value calculations.

Intangibles and Long-lived Assets

The Company evaluates the recoverability of the carrying value of its long-lived assets, excluding

goodwill, whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. Under such circumstances, the Company assesses whether the projected undiscounted cash ﬂows
of its businesses are sufficient to recover the existing unamortized cost of its long-lived assets. If the
undiscounted projected cash ﬂows are not sufficient, the Company calculates the impairment amount by
discounting the cash ﬂows using its weighted average cost of capital. The amount of the impairment is
written-off against earnings in the period in which the impairment has been determined in accordance with
ASC 360-10-35, ‘‘Impairment or Disposal of Long-Lived Assets.’’

Business Reorganization and Merger and Integration Plans

The Company records signiﬁcant charges and accruals in connection with its business reorganization,

merger and integration plans. These reserves include estimates pertaining to lease termination payments,
employee termination beneﬁts and contract cancellation costs resulting from its actions. Although the
Company does not anticipate signiﬁcant changes, the actual costs may differ from these estimates.

Foreign Currency Translation

The ﬁnancial position and results of operations of the Company’s international subsidiaries are
determined using local currency as the functional currency. Assets and liabilities of these subsidiaries are
translated at the exchange rate in effect at each year-end. Statements of Operations accounts are translated at
the average rate of exchange prevailing during each period. Translation adjustments arising from the use of
differing exchange rates from period to period are included in the other comprehensive income (loss) account
in stockholders’ equity, other than translation adjustments on short-term inter-company balances, which are
included in other income (expense). Gains and losses resulting from other foreign currency transactions are
included in other income (expense). Inter-company receivable balances of a long-term investment nature are
considered part of the Company’s permanent investment in a foreign jurisdiction and the gains or losses on
these balances are reported in other comprehensive income.

Self-Insurance Liabilities

The Company utilizes a combination of insurance and self-insurance for employee related health care
beneﬁts (a portion of which is paid by its employees). Self-insurance claims ﬁled and claims incurred but not
reported are accrued based upon our estimates of ultimate cost for self-insured claims incurred using actuarial
assumptions followed in the insurance industry and historical experience. Liabilities associated with the risks
that the Company retains are estimated by considering historical claims experience, demographic factors,
severity factors and other actuarial assumptions. Although the Company’s claims experience has not displayed
substantial volatility in the past, actual experience could materially vary from its historical experience in the
future. Factors that affect these estimates include, but are not limited to, inﬂation, the number and severity of
claims and regulatory changes. In the future, if the Company concludes an adjustment to self insurance
accruals is required, the liability will be adjusted accordingly.

Stock-Based Compensation

Under ASC 718 ‘‘Compensation — Stock Compensation’’, the Company uses the Black-Scholes option

pricing model to determine the fair value of its stock options. The Black-Scholes model includes various
assumptions, including the expected life of stock options, the expected risk free interest rate and the historic
volatility of the Company’s stock price. These assumptions reﬂect the Company’s best estimates, but they
involve inherent uncertainties based on market conditions generally outside the control of the Company. As a
result, if other assumptions had been used, total stock-based compensation cost, as determined in accordance
with ASC 718 could have been materially impacted. Furthermore, if the Company uses different assumptions
for future grants, stock-based compensation cost could be materially impacted in future periods.

The Company determines its assumptions for the Black-Scholes option pricing model in accordance with

ASC 718 and Staff Accounting Bulletin (‘‘SAB’’) No. 107, ‘‘Interaction between Statement of Financial
Accounting Standards Statement No. 123 (revised 2004), Share-Based Payment and certain Securities and
Exchange Commission rules and regulations and provides the staffs views regarding the valuation of share-
based payment arrangements for public companies’’.

•

The expected term of stock options is estimated using the simpliﬁed method since the Company
currently does not have sufficient stock option exercise history.

The expected risk free interest rate is based on the U.S. Treasury constant maturity interest rate
which term is consistent with the expected term of the stock options.

The expected volatility is based on the historic volatility.

In December 2007, the Securities and Exchange Commission (‘‘SEC’’) staff issued SAB No. 110,
‘‘Certain Assumptions Used in Valuation Methods — Expected Term’’. SAB No. 110 allows companies to
continue to use the simpliﬁed method, as deﬁned in SAB No. 107, to estimate the expected term of stock
options under certain circumstances. The simpliﬁed method for estimating expected term uses the mid-point
between the vesting term and the contractual term of the stock option. We have analyzed the circumstances in
which the use of the simpliﬁed method is allowed. We have opted to use the simpliﬁed method for stock
options we granted in 2008 because management believes that the Company does not have sufficient historical
exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period
of time the Company’s shares of common stock have been publicly traded.

For awards with graded vesting conditions, the values of the awards are determined by valuing each
tranche separately and expensing each tranche over the required service period. The Company is required to
record stock-based compensation expense net of estimated forfeitures. The Company estimated its forfeiture
rate based on historical data. The future forfeiture rate could differ from these estimates.

Recent Accounting Pronouncements

In December 2010, the FASB issued Accounting Standards Update (‘‘ASU’’). 2010-28, Intangibles —
Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting
Units with Zero or Negative Carrying Amounts. ASU 2010-28 modiﬁes Step 1 of the goodwill impairment
test such that for reporting units with zero or negative carrying amounts, an entity is required to perform Step
2 of the goodwill impairment test if it is more likely than not based on an assessment of qualitative indicators
that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment
exists, an entity should consider whether there are any adverse qualitative factors indicating that an
impairment may exist. ASU 2010-28 is effective for ﬁscal years, and interim periods within those years,
beginning after December 15, 2010. Early adoption is not permitted. The Company does not expect adoption
of this standard to have a material impact on its consolidated results of operations or ﬁnancial position.

In January 2010, the FASB issued ASU 2010-06, ‘‘Improving Disclosures about Fair Value

Measurements.’’ ASU 2010-06 provides amendments to ASC 820 that require separate disclosure of signiﬁcant
transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of separate
information regarding purchases, sales, issuances and settlements for Level 3 fair value measurements.
Additionally, ASU 2010-06 provides amendments to ASC 820 that clarify existing disclosures about the level
of disaggregation, inputs and valuation techniques. The new disclosures and clariﬁcation of existing
disclosures of ASU 2010-06 are effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosure about purchases, sales, issuance, and settlements in the
rollforward of activity in Level 3 fair value measurements. Those disclosures are effective for ﬁscal years
beginning after December 15, 2010 and for interim periods within those ﬁscal years. The Company adopted
ASU 2010-06 effective January 1, 2010. The adoption had no material impact on the Company’s results of
operations or ﬁnancial position.

Results of Operations

The following table sets forth the Company’s revenue, gross margin, operating (loss) income, loss from
continuing operations, net loss, temporary contracting revenue, direct costs of temporary contracting revenue,
temporary contracting gross margin, and gross margin as a percentage of revenue for the years ended
December 31, 2010, 2009 and 2008 (dollars in thousands). See Note 15 to the Consolidated Financial
Statements for EBITDA segment and reconciliation information.

$ in thousands
Revenue:
Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin:
Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating (loss) income:
Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TEMPORARY CONTRACTING DATA(a):
Temporary contracting revenue:
Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct costs of temporary contracting:
Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Temporary contracting gross margin:
Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Temporary contracting gross margin as a percent of temporary

contracting revenue:

For The Year Ended December 31,
2009

2008

2010

$328,491
269,383
162,432
34,236
$794,542

$137,191
88,989
39,417
32,976
$298,573

$ 5,050
5,756
(2,491)
5,066
(18,999)
$ (5,618)
$ (4,441)
$ (4,685)

$220,093
207,150
156,961
1,117
$585,321

$183,094
175,365
122,982
734
$482,175

$ 36,999
31,785
33,979
383
$103,146

$276,975
227,169
161,872
25,133
$691,149

$124,162
71,689
40,959
23,643
$260,453

$ (12,813)
(2,747)
(14,999)
(1,547)
(17,347)
$ (49,453)
$ (42,953)
$ (40,609)

$182,713
181,592
156,435
1,040
$521,780

$145,112
152,275
120,880
722
$418,989

$ 37,601
29,317
35,555
318
$102,791

$ 415,871
351,148
273,648
38,418
$1,079,085

$ 212,603
130,750
75,016
36,617
$ 454,986

(5,285)
13,154
(44,442)
(4,712)
(29,498)
$ (70,783)
$ (73,096)
$ (74,318)

$ 244,232
259,961
260,657
870
$ 765,720

$ 189,603
214,034
198,434
682
$ 602,753

54,629
45,927
62,223
188
$ 162,967

Hudson Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.8%
15.3%
21.6%
34.3%

20.6%
16.1%
22.7%
30.6%

22.4%
17.7%
23.9%
21.6%

(a) Temporary contracting gross margin and gross margin as a percent of revenue are shown to provide
additional information on the Company’s ability to manage its cost structure and provide further
comparability relative to the Company’s peers. Temporary contracting gross margin is derived by
deducting the direct costs of temporary contracting from temporary contracting revenue. The Company’s
calculation of gross margin may differ from those of other companies.

Constant Currency

The Company operates on a global basis, with the majority of our gross margin generated outside of the
United States. Accordingly, ﬂuctuations in foreign currency exchange rates can affect our results of operations.
Constant currency information compares ﬁnancial results between periods as if exchange rates had remained
constant period-over-period. The Company currently deﬁnes the term ‘‘constant currency’’ to mean that
ﬁnancial data for a previously reported period are translated into U.S. dollars using the same foreign currency
exchange rates that were used to translate ﬁnancial data for the current period.

In prior periods the Company reported constant currency by translating ﬁnancial data for the current

reported period into U.S. dollars using the same foreign currency exchange rates that were used to translate
ﬁnancial data for the previously reported period. The Company’s current deﬁnition of constant currency
produces similar results to the previous method with inconsequential differences and was implemented to
improve operating efficiencies. The impact to the variance analysis of presenting constant currency results
under the current deﬁnition was a change of less than 2% for any single reportable segment’s revenues, gross
margin and SG&A.

Changes in revenue, direct costs, gross margin, selling, general and administrative expenses and operating

(loss) income 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
Company’s management reviews and analyzes business results in constant currency and believes these results
better represent the Company’s underlying business trends.

Earnings from subsidiaries are, at times, repatriated to the U.S., 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 Company’s economic condition. The tables on
page 32 and below summarize the impact of foreign currency exchange adjustments on the Company’s
operating results for the years ended December 31, 2010, 2009 and 2008 (dollars in thousands).

For The Year Ended December 31,

$ in thousands
Revenue:

2010

As reported

Hudson Europe. . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Direct costs:

Gross margin:

Selling, general and administrative(a):

Hudson Europe. . . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$328,491
269,383
162,432
34,236
794,542

191,300
180,394
123,015
1,260
495,969

137,191
88,989
39,417
32,976
$298,573

$130,855
83,197
41,485
27,961
18,999
$302,497

$276,975
227,169
161,872
25,133
691,149

152,813
155,480
120,913
1,490
430,696

124,162
71,689
40,959
23,643
$260,453

$127,296
71,291
50,960
23,420
17,210
$290,177

2009
Currency
translation

$ (6,704)
37,122
190
844
31,452

(3,250)
25,262
15
56
22,083

(3,454)
11,860
175
788
$ 9,369

$ (2,884)
12,039
203
706
—
$10,064

Constant
currency

$270,271
264,291
162,062
25,977
722,601

149,563
180,742
120,928
1,546
452,779

120,708
83,549
41,134
24,431
$269,822

$124,412
83,330
51,163
24,126
17,210
$300,241

(a) Selling, general and administrative expenses include the following captions on the Consolidated

Statements of Operations: salaries and related, office and general, acquisition-related expenses, marketing
and promotion, and depreciation and amortization.

The Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

Hudson Europe

Hudson Europe’s revenue was $328.5 million for the year ended December 31, 2010, as compared to

$277.0 million for 2009, an increase of $51.5 million or 18.6%. On a constant currency basis, Hudson
Europe’s revenue increased $58.2 million or 21.5%. The revenue increase was primarily due to an increase of
$41.5 million or 23.2% in contracting revenue and $17 million or 30.1% in permanent recruitment revenue.
Talent management revenue was ﬂat as compared to 2009.

The entire revenue increase in constant currency was in the U.K., where contracting and permanent
recruitment revenue increased $46.8 million and $12 million, or 35.2% and 46.8%, respectively, as compared
to 2009. These increases were primarily due to increased projects and hiring activity in the ﬁnance and
banking and IT sectors, partially offset by a reduction in public sector revenue, which decreased 28% as
compared to 2009. The public sector constituted approximately 13% of U.K. revenue in 2010. We expect that
public sector revenue in the U.K. will continue to decline through 2011 due to the U.K. government’s
reduction in public spending, although the impact on revenue is difficult to predict.

In Continental Europe, revenue was largely ﬂat as compared to 2009. The increase in permanent
recruitment revenue was $5 million or 16.4%, primarily in France and Belgium. The increases in permanent
recruitment revenue were primarily due to increases in the real estate, healthcare, industrial and tourism
sectors. Contracting revenue declined $5.2 million, or 11.4%, primarily in The Netherlands. The decreases in
The Netherlands was primarily due to reductions in spending levels at all levels of the public sector as well as
increased competition in the public sector niche where we operate because of even greater declines in private
sector demand. Towards the end of 2010, we saw initial signs of recovery in The Netherlands market.
Revenues rose by approximately 16% sequentially in the fourth quarter of 2010 compared to the third quarter
of 2010 reﬂecting new contract wins.

Hudson Europe’s direct costs were $191.3 million for the year ended December 31, 2010, as compared to

$152.8 million for 2009, an increase of $38.5 million or 25.2%. On a constant currency basis, Hudson
Europe’s direct costs increased $41.7 million or 27.9%. The increase in direct costs was due primarily to the
greater number of contractors on billing in the U.K. and was a direct result of the factors affecting revenue as
noted above.

Hudson Europe’s gross margin was $137.2 million for the year ended December 31, 2010, as compared

to $124.2 million for 2009, an increase of $13.0 million or 10.5%. On a constant currency basis, gross margin
increased $16.5 million or 13.7%.

The majority of the increase in gross margin in constant currency was in the U.K., where permanent
recruitment and contracting gross margins increased $11.6 million and $3.9 million, or 47.4% and 16.6%,
respectively. These increases were primarily due to increased demand for permanent staff and increased
contractors on billing, even though the mix of clients shifted towards higher volume clients with lower rates,
which is also reﬂected in the contracting gross margin percentage as noted below. Contracting gross margin as
a percentage of revenue declined to 15.2% in 2010 from 17.7% in 2009 reﬂecting in part the shift in client
mix.

In Continental Europe, the gross margin increase in constant currency was $1.0 million or 1.5% as
compared to 2009. Permanent recruitment gross margin increased $5.0 million or 16.4%, partially offset by
decreases of $3.5 million or 26.6% in contracting gross margin. The increase in permanent recruitment gross
margin was primarily in Belgium and France and directly linked to the increase in revenue, while the
contracting gross margin decrease was due to lower revenue, lower average bill rates resulting from increased
competition for public sector work, and adjustments for payroll taxes in The Netherlands.

Hudson Europe’s contracting gross margin as a percentage of revenue was 16.9% as compared to 20.6%

for 2009. The decline was partially driven by a shift in client mix towards clients with higher volume and
lower margins, increased competition in the Netherlands and a shift in country mix. The shift in country mix
was due to a revenue increase in the U.K., a country with historically lower gross margin percentages,
combined with a decline of revenue in The Netherlands, a country with historically higher gross margin
percentages. Total gross margin, as a percentage of total revenue, was 41.8% as compared to 44.7% for 2009
and was primarily due to the decline in the contracting gross margin percentage.

Hudson Europe’s selling, general and administrative expenses were $130.9 million for the year ended

December 31, 2010, as compared to $127.3 million for 2009, an increase of $3.6 million or 2.8%. On a
constant currency basis, selling, general and administrative expenses increased $6.4 million or 5.2%. The
increase was primarily due to increased staff compensation as a result of the higher gross margin, partially
offset by savings resulting largely from the restructuring program completed in 2009, and lower depreciation
expense. Selling, general and administrative expenses, as a percentage of revenue, were 39.8% compared to
46.0% for 2009. The decrease was primarily due to the proportionally greater increase in revenue in 2010.

Hudson Europe incurred $1.4 million in reorganization expenses for the year ended December 31, 2010,

as compared to $9.7 million for 2009, a decrease of $8.3 million. On a constant currency basis, reorganization
expenses decreased $8.0 million. Reorganization expenses for the year ended December 31, 2010 included
expenses primarily related to revisions in estimates of prior year reorganization costs. Reorganization expenses
incurred during the year ended December 31, 2009 included amounts provided for employee termination
beneﬁts primarily in the U.K., France and Belgium, which related to restructuring of regional corporate
management, contract cancellation costs and lease termination payments related to the Company’s 2009
restructuring plan.

Hudson Europe’s net other non-operating expense was $6.8 million for the year ended December 31,
2010, as compared to $1.5 million for 2009, an increase of $5.2 million. On a constant currency basis, net
other non-operating expense increased $5.4 million. The increase was primarily due to increased corporate
management service allocations, partially offset by lower foreign currency translation losses.

Hudson Europe’s EBITDA was $1.1 million for the year ended December 31, 2010, as compared to an

EBITDA loss of $9.8 million for 2009, an increase in EBITDA of $10.9 million. On a constant currency
basis, EBITDA increased $11.0 million. Hudson Europe’s EBITDA, as a percentage of revenue, was 0.3%
compared to an EBITDA loss of 3.7% for 2009. The increase in EBITDA was primarily due to the factors
discussed above.

Hudson Europe’s operating income was $5.1 million for the year ended December 31, 2010, as compared

to an operating loss of $12.8 million for 2009, an increase in operating income of $17.9 million. On a
constant currency basis, operating income increased $18.2 million. Operating income, as a percentage of
revenue, was 1.5% compared to an operating loss of 4.9% for 2009.

Hudson ANZ

Hudson ANZ’s revenue was $269.4 million for the year ended December 31, 2010, as compared to
$227.2 million for 2009, an increase of $42.2 million, or 18.6%. On a constant currency basis, Hudson ANZ’s
revenue increased $5.1 million or 1.9%. The revenue increase was primarily due to an increase of
$13.4 million or 38.1% in permanent recruitment revenue, partially offset by decreases in talent management
and contracting revenues of $4.5 million and $4 million, or 28.2% and 1.9%, respectively. The increase in
permanent recruitment revenue was primarily due to continued greater demand and higher average placement
fees. The increased demand was in the mining and resources sector, with increases as well in the industrial,
ﬁnance, and IT sectors. Talent management revenue decreased primarily due to a decrease in demand for
counter-cyclical outplacement services as the economy continued to improve. Demand for contracting services
has lagged the overall recovery in recruitment services in ANZ.

Hudson ANZ’s direct costs were $180.4 million for the year ended December 31, 2010, as compared to
$155.5 million for 2009, an increase of $24.9 million or 16%. On a constant currency basis, Hudson ANZ’s
direct costs remained ﬂat compared to 2009.

Permanent recruitment gross margin increased $12.7 million or 36% primarily due to higher average

placement fees and increased volume of placements. Talent management and contracting gross margins
decreased $4.5 million or 33.8% and $2.4 million or 7%, respectively. The decline in talent management gross
margin was driven by lower demand for outplacement services. The decline in contracting gross margin was
primarily driven by fewer contractors on billing and a shift in mix between office support and professional
contract projects.

Contracting gross margin, as a percentage of revenue, was 15.3% compared to 16.2% for 2009 and was

due principally to the shift in mix to lower margin and pricing pressure. Total gross margin, as a percentage of
total revenue, was 33.0% compared to 31.6% for 2009, and the increase was primarily attributable to a
proportionately greater increase in permanent recruitment revenue in 2010.

Hudson ANZ’s selling, general and administrative expenses were $83.2 million for the year ended

December 31, 2010, as compared to $71.3 million for 2009, an increase of $11.9 million or 16.7%. On a
constant currency basis, selling, general and administrative expenses were ﬂat as compared to 2009. These
expenses, as a percentage of revenue, were 30.9% compared to 31.5% for 2009. The decrease was primarily
due to the proportionally greater increase in revenue in 2010.

Hudson ANZ did not incur reorganization expenses for the year ended December 31, 2010, as compared

to $3.1 million for 2009, a decrease of $3.1 million. On a constant currency basis, reorganization expenses
decreased $3.9 million. The reorganization expenses for the year ended December 31, 2009 were related
primarily to the amounts provided for employee termination beneﬁts and costs to terminate a number of
contracts, including exiting several leases related to the Company’s 2008 and 2009 restructuring programs.

Hudson ANZ’s net other non-operating expense was $3.9 million for the year ended December 31, 2010,

as compared to $0.1 million for 2009, an increase of $3.8 million. On a constant currency basis, net other
non-operating expense increased $3.8 million. The increase was primarily due to increased corporate
management service allocations and lower foreign currency translation gains.

Hudson ANZ’s EBITDA was $4.2 million for the year ended December 31, 2010, as compared to an
EBITDA loss of $0.3 million for 2009, an increase in EBITDA of $4.5 million. On a constant currency basis,
EBITDA increased $5.0 million. Hudson ANZ’s EBITDA, as a percentage of revenue, was 1.6% compared to
an EBITDA loss of 0.3% for 2009. The increase in EBITDA was primarily due to the factors discussed above.

Hudson ANZ’s operating income was $5.8 million for the year ended December 31, 2010, as compared
to an operating loss of $2.7 million for 2009, an increase in operating income of $8.5 million. On a constant
currency basis, operating income increased $9.5 million. Operating income, as a percentage of revenue, was
2.1% compared to an operating loss of 1.4% for 2009.

Hudson Americas

Hudson Americas’ revenue was $162.4 million for the year ended December 31, 2010, as compared to
$161.9 million for 2009, an increase of $0.6 million or 0.3%. Of this increase, $0.5 million or 0.3% was in
contracting revenue. Permanent recruitment revenue remained ﬂat as compared to 2009.

Contracting revenue represents substantially all of Hudson Americas’ revenues. Revenues in the Legal
Services practice, the segment’s largest practice, increased $12.4 million or 12.8%. The increase was due to a
higher volume of projects and contractors on billing, particularly litigation, and antitrust projects, partially
offset by lower average bill rates. The increase was partially offset by the other contracting areas of which
declined $11.9 million or 19.8%. The declines in other contracting was largely driven by Financial Solutions
due to a lack of a meaningful recovery in this practice and lower bill rates. IT contracting revenue declined
slightly compared to 2009 but showed growth in the latter part of 2010 as demand for IT services improved.

Hudson Americas’ direct costs were $123.0 million for the year ended December 31, 2010, as compared

to $120.9 million for 2009, an increase of $2.1 million or 1.7%. The increase was due to growth in
contractors on billing and was a direct result of the factors affecting the contracting revenue as noted above.

Hudson Americas’ gross margin was $39.4 million for the year ended December 31, 2010, as compared
to $41.0 million for 2009, a decrease of $1.5 million or 3.8%. Gross margin from permanent recruitment was
ﬂat as compared to 2009 with the entire gross margin decline in contracting gross margin. The decline in

contracting gross margin resulted from a change in mix, with Legal Services representing a greater proportion
of the Americas’ revenues. Legal services contracting gross margin increased $2.7 million, or 14.2% primarily
due to increased contractor in billing and billable hours. Other contracting area gross margin declined
$3.7 million, or 23%, primarily due to a decrease in Financial Solutions gross margin and slower overall
recovery in demand for these services.

Contracting gross margin as a percentage of total revenue was 20.9% as compared to 22.0% for 2009.
The decrease was due to a mix shift toward Legal Services, which has lower average gross margins compared
to Financial Solutions and IT contracting. Total gross margin, as a percentage of total revenue, was 24.3%
compared to 25.3% for 2009, and the decrease was primarily due to the lower contracting gross margin
percentage.

Hudson Americas’ selling, general and administrative expenses were $41.5 million for the year ended

December 31, 2010, as compared to $51.0 million for 2009, a decrease of $9.5 million or 18.6%. The
decrease was primarily due to savings from the restructuring program completed in 2009 and lower supporting
costs and depreciation expense. Selling, general and administrative expenses as a percentage of revenue were
25.5% compared to 31.5% for 2009.

Hudson Americas incurred $0.3 million of reorganization expenses for the year ended December 31,
2010, as compared to $5.1 million for 2009, a decrease of $4.8 million. The reorganization expenses incurred
during the year ended December 31, 2009 were related primarily to the amounts provided for employee
termination beneﬁts and lease termination payments related to the 2009 restructuring plan.

Hudson Americas’ net other non-operating income was $1.8 million for the year ended December 31,
2010, as compared to net other non-operating expense of $0.8 million for 2009, an increase in net other non-
operating income of $2.6 million. The increase was primarily related to a $3.9 million gains from recovery of
a loan receivable, unclaimed property and sale of warrants, partially offset by an increase in corporate
allocation of $0.5 million and lower foreign transaction gains of $0.3 million.

Hudson Americas’ EBITDA was $1.7 million for the year ended December 31, 2010, compared to
EBITDA loss of $11.3 million 2009, an increase in EBITDA of $13.0 million. Hudson Americas’ EBITDA, as
a percentage of revenue, was 1.0% for the year ended December 31, 2010, compared to EBITDA loss of 7.0%
for 2009. The increase in EBITDA was primarily due to the factors discussed above.

Hudson Americas’ operating loss was $2.5 million for the year ended December 31, 2010, compared to

$15.0 million for 2009, a decrease in operating loss of $12.5 million. Operating loss, as a percentage of
revenue, was 1.5% for the year ended December 31, 2010, compared to 9.3% for 2009.

Hudson Asia

Hudson Asia’s revenue was $34.2 million for the year ended December 31, 2010, as compared to
$25.1 million for 2009, an increase of $9.1 million or 36.2%. On a constant currency basis, Hudson Asia’s
revenue increased $8.3 million or 31.8%. The revenue increase in Hudson Asia was entirely in permanent
recruitment, which represents substantially all of the business in this segment.

The increase in permanent recruitment revenue was led by China, which increased $4.6 million or 49.6%

on a constant currency basis. In Singapore and Hong Kong, permanent recruitment revenue increased
$2.0 million and $1.3 million, or 20.2% and 38.9%, respectively. In the segment, the majority of our business
is with subsidiaries of multi-national ﬁrms and their business conﬁdence and hiring activity has improved
signiﬁcantly compared to 2009. The increase in revenue was primarily due to increased hiring activity in the
IT, industrial, and banking and ﬁnance sectors.

Hudson Asia’s direct costs were $1.3 million for the year ended December 31, 2010, as compared to
$1.5 million for 2009, a decrease of $0.2 million or 15.4%. On a constant currency basis, Hudson Asia’s
direct costs decreased $0.3 million or 18.5%.

Hudson Asia’s gross margin was $33.0 million for the year ended December 31, 2010, as compared to

$23.6 million for 2009, an increase of $9.3 million or 39.5%. On a constant currency basis, gross margin
increased $8.5 million or 35%. The majority of the gross margin increase was in China, which increased
$4.9 million or 48.6%. Gross margin increased in Singapore and Hong Kong by $2.4 million and $1.3 million

or 21.8% and $38.8%, respectively, compared to 2009. Hudson Asia’s gross margin increased primarily for the
same reasons as discussed above with respect to revenue. Total gross margin, as a percentage of total revenue,
was 96.3% compared to 94.0% for 2009.

Hudson Asia’s selling, general and administrative expenses were $28.0 million for the year ended

December 31, 2010, as compared to $23.4 million for 2009, an increase of $4.5 million or 19.4%. On a
constant currency basis, selling, general and administrative expenses increased $3.8 million or 15.9%. The
increase was primarily due to increased staff compensation due to the higher gross margin. These expenses, as
a percentage of revenue, were 81.7% compared to 92.9% for 2009 and were attributable primarily to an
increase in sales productivity. The decrease in selling, general and administrative expenses as a percentage of
revenue was primarily due to the higher revenue in 2010 and savings from the restructuring program
completed in 2009.

The 2009 results included a non-cash charge of $1.7 million related to the impairment of goodwill at the

China reporting unit. There were no goodwill impairment charges for the year ended December 31, 2010.

Hudson Asia’s net other non-operating expense was $0.9 million for the year ended December 31, 2010,

as compared to net other non-operating income of $0.2 million for 2009, an increase in net other
non-operating expense of $1.1 million. On a constant currency basis, net other non-operating expense
increased $1.1 million. The entire increase was due to increased corporate management service allocations.

Hudson Asia’s EBITDA was $4.6 million for the year ended December 31, 2010, as compared to an
EBITDA loss of $0.6 million for 2009, an increase in EBITDA of $5.2 million. On a constant currency basis,
EBITDA increased $5.1 million. Hudson Asia’s EBITDA, as a percentage of revenue, was 13.4% compared to
an EBITDA loss of 1.8% for 2009. The increase in EBITDA was primarily due to the factors discussed above.

Hudson Asia’s operating income was $5.1 million for the year ended December 31, 2010, as compared to

an operating loss of $1.5 million for 2009, an increase in operating income of $6.6 million. On a constant
currency basis, operating income increased $6.5 million. Operating income, as a percentage of revenue, was
14.8% compared to an operating loss of 5.7% for 2009.

Corporate and Other

Corporate expenses were $19.0 million for the year ended December 31, 2010, as compared to
$17.2 million for 2009, an increase of $1.8 million or 10.4%. The increase was primarily due to higher
performance based compensation of $2.0 million as a result of the improvement in gross margin of
$38.1 million and improvement in EBITDA of $42.0 million as compared to 2009.

Corporate net other non-operating income was $13.7 million for the year ended December 31, 2010, as

compared to $3.7 million for 2009, an increase of $10.1 million. The increase was primarily due to increased
corporate management service allocations to the reportable segments to reﬂect their greater use of corporate
resources.

Corporate EBITDA loss was $5.1 million for the year ended December 31, 2010, as compared to

$13.5 million for 2009, an increase in EBITDA of $8.4 million and was primarily due to the factors discussed
above.

Interest

Interest expense, net of interest income was $1.3 million for the year ended December 31, 2010, as
compared to $0.7 million for 2009, an increase of $0.6 million. Interest for the year ended December 31, 2010
included a $0.3 million write-off of unamortized deferred ﬁnancing costs related to the early termination of
the Company’s credit agreement with Wells Fargo Capital Finance, Inc.

Provision for (beneﬁt from) Income Taxes

The provision for income taxes for the year ended December 31, 2010 was $1.5 million on a

$3.0 million loss from continuing operations, as compared to a beneﬁt from income taxes of $5.8 million on a
$48.7 million loss from continuing operations for 2009. The effective tax rate for the year ended
December 31, 2010 was negative 50.1%, as compared to 11.8% for 2009.

The changes in the Company’s effective tax rate compared to 2009 resulted primarily from a reduction in
the Company’s pre-tax losses in jurisdictions where we obtain tax beneﬁts and the inability to obtain beneﬁts
from losses incurred in other jurisdictions. The effective tax rate differs from the U.S. federal statutory rate of
35% due to the inability to recognize tax beneﬁts on net losses in the U.S. and certain other foreign
jurisdictions, state taxes, certain non-deductible expenses, such as certain acquisition-related payments, and
variations from the U.S. tax rate in foreign jurisdictions.

Net Loss from Continuing Operations

Net loss from continuing operations was $4.4 million for the year ended December 31, 2010, as

compared to $43.0 million for 2009, a decrease in net loss of $38.5 million. Basic and diluted loss per share
from continuing operations were $0.15 for the year ended December 31, 2010, as compared to a loss of
$1.65 for 2009.

Net (Loss) Income from Discontinued Operations

Net loss from discontinued operations was $0.2 million for the year ended December 31, 2010, as

compared to net income from discontinued operations of $2.3 million for 2009, a decrease in net income from
discontinued operations of $2.6 million. Net income from discontinued operations for the year ended
December 31, 2009 included the receipt of the ﬁnal earn-out payment of $11.6 million as a result of the
Company’s former Highland reporting unit achieving certain 2008 revenue metrics as deﬁned in the sales
agreement, partially offset by operating losses from discontinued operations for Japan and Italy of $2.7 million
and $2.2 million, respectively. Basic and diluted loss per share from discontinued operations was $0.01 for the
year ended December 31, 2010, as compared to basic and diluted earnings per share of $0.09 for 2009.

Net Loss

Net loss was $4.7 million for the year ended December 31, 2010, as compared to $40.6 million for 2009,

a decrease in net loss of $35.9 million. Basic and diluted loss per share were $0.16 for the year ended
December 31, 2010, as compared to $1.56 for 2009.

The Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008

For The Year Ended December 31,

$ in thousands
Revenue:

2009

As reported

Direct costs:

Gross margin:

Hudson Europe. . . . . . . . . . . . . . . . . . . . . . .
Hudson Americas . . . . . . . . . . . . . . . . . . . . .
Hudson ANZ . . . . . . . . . . . . . . . . . . . . . . . .
Hudson Asia . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selling, general and administrative(a):

$276,975
227,169
161,872
25,133
691,149

152,813
155,480
120,913
1,490
430,696

124,162
40,959
71,689
23,643
$260,453

$127,296
71,291
50,960
23,420
17,210
$290,177

$ 415,871
351,148
273,648
38,418
1,079,085

203,268
220,398
198,632
1,801
624,099

212,603
75,016
130,750
36,617
$ 454,986

$ 195,428
113,614
75,647
34,277
28,499
$ 447,465

2008
Currency
translation

$(50,855)
(31,290)
(288)
(88)
(82,521)

(27,634)
(19,256)
(105)
(10)
(47,005)

(23,221)
(183)
(12,034)
(78)
$(35,516)

$(21,002)
(10,412)
(277)
(53)
—
$(31,744)

Constant
currency

$365,016
319,858
273,360
38,330
996,564

175,634
201,142
198,527
1,791
577,094

189,382
74,833
118,716
36,539
$419,470

$174,426
103,202
75,370
34,224
28,499
$415,721

(a) Selling, general and administrative expenses include the following captions on the Consolidated

Statements of Operations: salaries and related, office and general, acquisition-related expenses, marketing
and promotion, and depreciation and amortization.

Hudson Europe

Hudson Europe’s revenue was $277.0 million for the year ended December 31, 2009, compared to
$415.9 million for 2008, a decrease of $138.9 million or 33.4%. On a constant currency basis, Hudson
Europe’s revenue decreased $86.1 million or 23.7%. The revenue decrease was primarily due to decreases of
$43.4 million or 42.9% in permanent recruitment, $28.3 million or 13.4% in contracting and $9.7 million or
23% in talent management revenues.

The majority of the decline in constant currency was in the U.K., where contracting and permanent
recruitment revenues declined $27.3 million and $18.6 million or 16.8% and 41.7%, respectively. The revenue
declined as a result of general economic weakness, particularly in the ﬁnancial services sector, and the
continued weakness in other professional sectors, which experienced the majority of the job losses in the U.K.
In the second half of 2009, however, the U.K. experienced sequential improvement in both contracting and
permanent recruitment revenue over the ﬁrst half of 2009, as clients, particularly in the banking and ﬁnancial
services sectors, eased hiring and budget restrictions implemented in the beginning of the year.

In Continental Europe, permanent recruitment and talent management revenues declined $24.9 million
and $6.9 million, respectively, for the year ended December 31, 2009, compared to 2008. Contracting revenue
declined less than 3% for the year ended December 31, 2009, compared to 2008 and returned to sequential
growth by the end of 2009. In France and Belgium, permanent recruitment revenue declined $10.2 million or
42.4%, and $7 million or 42%, respectively, for the year ended December 31, 2009, compared to 2008. These
markets experienced declines in their major sectors, including real estate and ﬁnancial services. Permanent
recruitment revenue in France did, however, begin to show signs of sequential growth in the later part of
2009. Talent management revenue in Belgium declined $5.6 million or 21.2% for the year ended
December 31, 2009, compared to 2008. The majority of the decline was driven by reductions in demand for
assessment work in the public and ﬁnancial services sectors. The decrease was partially offset by an increase
in revenue for career guidance services. The economic weakness did not have a major impact on the
Netherlands’ contracting revenue as public sector spending remained stable.

Hudson Europe’s direct costs were $152.8 million for the year ended December 31, 2009, as compared to

$203.3 million for 2008, a decrease of $50.5 million or 24.8%. On a constant currency basis, Hudson
Europe’s direct costs decreased $22.6 million or 12.9%. The decrease in direct costs was primarily due to
fewer contractors on billing and was a direct result of the factors affecting revenue as discussed above.

Hudson Europe’s gross margin was $124.2 million for the year ended December 31, 2009, compared to

$212.6 million for 2008, a decrease of $88.4 million or 41.6%. On a constant currency basis, gross margin
decreased $63.6 million or 33.9%. Permanent recruitment gross margin declined $43.1 million or 43.4% for
the year ended December 31, 2009, of which slightly less than half of the decline, or $18.5 million, was in
the U.K. Declines in permanent recruitment gross margin in France and Belgium were $10.3 million and
$7 million, respectively. The declines in the U.K., France and Belgium approximated 42.6%, 43.1% and
42.0%, respectively. These declines were generally due to decreased demand for hiring permanent staff and
lower average fees. The declines in contracting and talent management gross margin were $10.1 million and
$8.5 million, or 21.2% and 23%, respectively. The majority of the decline in contracting was in the U.K. and
it was primarily driven by a reduction in billable hours and fewer contractors on billing. The majority of the
talent management gross margin decline was in Belgium and it was driven by the same factors affecting
revenue as described above.

Contracting gross margin as a percentage of revenue was 20.6% for the year ended December 31, 2009,

compared to 22.6% for 2008. The decline was partially driven by a change in client mix towards high volume
and IT clients with lower margins in the U.K. Total gross margin as a percentage of revenue was 44.8% for
the year ended December 31, 2009, compared to 51.7% for 2008. The steeper decline in total gross margin as
a percentage of revenue was primarily due to the decline in permanent recruitment revenue, which has a
proportionately greater effect on gross margin.

Hudson Europe’s selling, general and administrative expenses were $127.3 million for the year ended

December 31, 2009, compared to $195.4 million for 2008, a decrease of $68.1 million or 34.9%. On a
constant currency basis, selling, general and administrative expenses decreased $47.7 million or 26%. The
decrease in selling, general and administrative expenses was partially due to reductions resulting from

performance management of the consultant staff, lower travel and marketing expenses and lower commissions
associated with lower gross margin. The decrease in selling, general and administrative expenses also resulted
from restructuring actions, including the reduction of management and support staff, the consolidation of
functions and the successful negotiations of existing and new leases at lower rates in the fourth quarter of
2008 and in 2009. Selling, general and administrative expenses, as a percentage of revenue, were 46% for the
year ended December 31, 2009, compared to 47.4% for 2008.

Hudson Europe incurred $9.7 million of reorganization expenses for the year ended December 31, 2009,
compared to $2.9 million for 2008, an increase of $6.8 million. On a constant currency basis, reorganization
expenses increased $6.8 million. Reorganization expenses incurred in 2009 were related to the Company’s
2009 restructuring plan and included amounts provided for employee termination beneﬁts primarily in the
U.K., France, Belgium, Spain and Sweden. The expenses also related to the restructuring of the management
structure in regional head-office and in local markets, as well as contract cancellation costs and lease
termination payments.

Hudson Europe’s 2008 results included a non-cash charge of $19.6 million for the impairment of
goodwill related to Hudson Europe. There were no impairment charges for the year ended December 31,
2009.

Hudson Europe’s other non-operating expense was $1.5 million for the year ended December 31, 2009,

as compared to non-operating income of $1.5 million for 2008, a decrease in non-operating income of
$3 million. On a constant currency basis, net non-operating income decreased $3 million. The decrease was
primarily due to lower foreign currency translation gains and increased corporate management services
allocations.

Hudson Europe’s EBITDA loss was $9.8 million for the year ended December 31, 2009, as compared to

positive EBITDA of $2.2 million for 2008, a decrease in EBITDA of $12 million. On a constant currency
basis, EBITDA decreased $8.1 million. Hudson Europe’s EBITDA loss, as a percentage of revenue, was 3.5%
for the year ended December 31, 2009, compared to positive EBITDA of 0.5% for 2008. The decrease in
EBITDA was primarily due to the factors discussed above.

Hudson Europe’s operating loss was $12.8 million for the year ended December 31, 2009, as compared
to $5.3 million for 2008, an increase of $7.5 million. On a constant currency basis, operating loss increased
$4.5 million. Operating loss, as a percentage of revenue, was 4.6% for the year ended December 31, 2009,
compared to 2.3% for 2008.

Hudson ANZ

Hudson ANZ’s revenue was $227.2 million for the year ended December 31, 2009, as compared to
$351.1 million for 2008, a decrease of $124.0 million, or 35.3%. On a constant currency basis, Hudson ANZ’s
revenue decreased $92.7 million or 29.0%. The revenue decline was primarily driven by contracting and
permanent recruitment revenue decreases of $55.9 million and $34.5 million, or 23.5% and 55.4%,
respectively. The decrease in revenue was slightly offset by an increase in talent management revenue of
$1.5 million or 12.3%.

The decrease in contracting revenue was primarily due to the continued recessionary economic conditions

in the markets in which we operate. We experienced declines in major sectors of these markets including
ﬁnancial services, public works, industrial, technology, and mining and resources. Permanent recruitment
revenue declined partially due to reduced demand for permanent recruitment services in a weaker economic
environment and partially to a decrease in fees on permanent placements. However, the rate of decline in
revenue was less in the second half of 2009, as compared to the ﬁrst half of 2009. Talent management
revenue increased primarily due to the increase in demand for outplacement services as companies reduced the
size of their work forces earlier in the year.

Hudson ANZ’s direct costs were $155.5 million for the year ended December 31, 2009, as compared to
$220.4 million for 2008, a decrease of $64.9 million or 29.5%. On a constant currency basis, Hudson ANZ’s
direct costs decreased by $45.7 million or 22.7%. The decrease in direct costs was primarily due to fewer
contractors on billing, a direct result of the factors affecting revenue as noted above.

Hudson ANZ’s gross margin was $71.7 million for the year ended December 31, 2009, as compared to

$130.7 million for 2008, a decrease of $59 million or 45.2%. On a constant currency basis, gross margin
decreased $47.0 million or 39.6%. Permanent recruitment and contracting gross margins decreased
$34.3 million or 53.2% and $12.5 million or 29.9%, respectively. Talent management gross margins increased
$0.9 million or 9.1%.

Permanent recruitment gross margin declined primarily for the same reasons as the decline in permanent

recruitment revenue. The decline in contracting gross margin was driven by a reduction in billable hours,
average fees and fewer contractors on billing. The increase in talent management gross margin was driven by
the same factors affecting revenue as described above.

Contracting gross margin, as a percentage of revenue, was 16.1% compared to 17.6% for 2008. The
decline was partially driven by increased pricing pressure discussed above. Total gross margin, as a percentage
of total revenue, was 31.6% compared to 37.1% for 2008. The steeper decline in total gross margin as a
percentage of revenue was primarily due to the decline in permanent recruitment revenue, which has a
proportionately greater effect on gross margin.

Hudson ANZ’s selling, general and administrative expenses were $71.3 million for the year ended
December 31, 2009, as compared to $113.8 million for 2008, a decrease of $42.5 million or 37.4%. On a
constant currency basis, selling, general and administrative expenses decreased $32.1 million or 31.1%. The
decrease in selling, general and administrative expenses was primarily attributable to lower commissions and
bonuses associated with lower gross margin and lower travel and marketing expenses. The decrease also
resulted from restructuring actions, including reduction of consultant headcount and management support, and
consolidation of functions and facilities. These expenses, as a percentage of revenue, were 31.4% compared to
32.3% for the same period in 2008.

Hudson ANZ’s reorganization expenses were $3.1 million for the year ended December 31, 2009, as

compared to $3.7 million for 2008, a decrease of $0.6 million. On a constant currency basis, reorganization
expenses decreased $1.2 million. Reorganization expenses incurred for the year ended December 31, 2009
included amounts provided for employee termination beneﬁts primarily in Australia and New Zealand and
costs to exit several leases in Australia and New Zealand.

Hudson ANZ’s net other non-operating expense was $0.1 million for the year ended December 31, 2009,

as compared to $3.4 million for 2008, a decrease of $3.3 million. On a constant currency basis, net other
non-operating expense decreased $2.9 million. The decrease was primarily due to lower corporate
management service allocations.

Hudson ANZ’s EBITDA loss was $0.3 million for the year ended December 31, 2009, as compared to

EBITDA of $12.7 million for 2008, a decrease in EBITDA of $13 million. On a constant currency basis,
EBITDA declined $10.9 million. Hudson ANZ’s EBITDA loss, as a percentage of revenue, was 0.1%
compared to EBITDA of 3.3% for 2008. The decline in EBITDA was primarily due to the factors discussed
above.

Hudson ANZ’s operating loss was $2.7 million for the year ended December 31, 2009, as compared to an

operating income of $13.2 million for 2008, a decrease in operating income of $15.9 million. On a constant
currency basis, operating income decreased $13.6 million. Operating loss, as a percentage of revenue, was
1.2% compared to operating income of 3.4% for 2008.

Hudson Americas

Hudson Americas’ revenue was $161.9 million for the year ended December 31, 2009, as compared to

$273.7 million for 2008, a decrease of $111.8 million or 40.9%. Of this decline, $104.3 million was in
contracting and $7.8 million was in permanent recruitment revenue. These declines were 40.0% and 58.8%,
respectively, compared to 2008.

Revenue in Legal Services contracting, the largest Hudson Americas practice, declined $75.0 million or
44.1%, and the other contracting areas of IT and Financial Solutions declined $29.2 million or 32.3%. With
respect to Legal Services contracting revenue, the 2008 results included revenue attributed to two large
projects of approximately $49.9 million that were completed by the end of 2008, about the time large-project

initiation was declining. The remainder of the decline in Legal Services contracting revenue, $25.1 million,
was primarily due to the initiation of fewer, large scale, new client projects and a lower level of litigation and
merger and acquisition activities by clients in the period. The rate of decline in Legal Services contracting
revenue was less in the second half of 2009 as compared to the ﬁrst half of 2009 and Legal Services reported
sequential growth in the latter part of the year. Contracting revenue in IT and Financial Solutions declined
primarily due to weaker economic conditions. Clients who tend to use these services generally delayed new
projects and restricted outside hiring as a cost reduction and cash preservation measure.

Hudson Americas’ direct costs were $120.9 million for the year ended December 31, 2009, as compared

to $198.6 million for 2008, a decrease of $77.7 million or 39.1%. The decrease was primarily due to fewer
contractors on billing, which was a direct result of the factors affecting the contracting revenue as noted
above.

Hudson Americas’ gross margin was $41.0 million for the year ended December 31, 2009, as compared

to $75.0 million for 2008, a decrease of $34.0 million or 45.4%. The majority of Hudson Americas’ gross
margin decline was from contracting, which declined $26.7 million or 42.9% compared to 2008. The largest
portion of the contracting decline was in Legal Services which declined by $16.4 million or 46.8%. The
decline in Legal Services gross margin was primarily due to the lower level of demand for these services,
underutilization of legal project facilities and approximately a 6% reduction in average bill rates as a result of
increased competition. The decline in contracting revenue in IT and Financial Solutions was partially due to a
reduction in billable hours, fewer contractors on billing and approximately a 2% reduction in average bill rates
as a result of increased pricing pressure from clients.

Contracting gross margin as a percentage of revenue was 22.7% for the year ended December 31, 2009,

as compared to 23.9% for 2008. The decline was primarily driven by lower average bill rates, which were
down approximately 3%, and underutilization of legal project facilities.

Total gross margin, as a percentage of revenue, was 25.3% for the year ended December 31, 2009, as

compared to 27.4% for 2008. The steeper decline in total gross margin as a percentage of revenue was
primarily due to the decline in contracting gross margin as noted above and in permanent recruitment revenue,
which has a proportionately greater effect on gross margin.

Hudson Americas’ selling, general and administrative expenses were $51.0 million for the year ended

December 31, 2009, as compared to $75.6 million for 2008, a decrease of $24.6 million or 32.6%. The
decrease in selling, general and administrative expenses was partially due to head count reductions resulting
from performance management of the consultant staff, lower commissions associated with lower gross margin
and lower travel and marketing expenses. The decrease in selling, general and administrative expenses also
resulted from restructuring actions, including the reduction of management and support staff and the
consolidation of functions and facilities. Hudson Americas’ selling, general and administrative expenses, as a
percentage of revenue, were 31.5% for the year ended December 31, 2009, compared to 27.6% for 2008.

Hudson Americas incurred $5.1 million of reorganization expenses during the year ended December 31,

2009, as compared to $3.1 million for 2008, an increase of $2 million. Reorganization expenses incurred
during the year ended December 31, 2009 consisted primarily of amounts provided for employee termination
beneﬁts and lease termination payments related to the 2009 restructuring plan.

Hudson Americas’ 2008 results included non-cash charges of $38.2 million, $2.2 million and $0.4 million

for the impairment of goodwill, other long-term assets and intangibles, respectively, related to Hudson
Americas. There were no impairment charges for the year ended December 31, 2009.

Hudson Americas’ other non-operating expense was $0.8 million for the year ended December 31, 2009,
as compared to $2.8 million for 2008, a decrease of $2 million. The decrease was primarily due to a decrease
in corporate management service allocations of $1.1 million, an unrealized gain on derivative of $0.5 million
in 2009 and an increase of $0.3 million in foreign exchange gains.

Hudson Americas’ EBITDA loss was $11.3 million for the year ended December 31, 2009, compared to

$42.6 million for 2008, a decrease in EBITDA loss of $31.2 million. Hudson Americas’ EBITDA loss, as a
percentage of revenue, was 7% for the year ended December 31, 2009, compared to 15.6% for 2008. The
decrease in EBITDA loss was primarily due to the goodwill, intangible assets and other long-term asset
impairment charges of $40.8 million in 2008 and reductions in selling, general and administrative expenses of
$24.5 million in 2009, partially offset by the reduced gross margin of $34 million in 2009.

Hudson Americas’ operating loss was $15.0 million for the year ended December 31, 2009, compared to
an operating loss of $44.4 million for 2008, a decrease in operating loss of $29.4 million. Operating loss, as a
percentage of revenue, was 9.3% for the year ended December 31, 2009, compared to 16.2% for 2008. The
decrease in operating loss resulted primarily from the same factors as discussed above with respect to
EBITDA.

Hudson Asia

Hudson Asia’s revenue was $25.1 million for the year ended December 31, 2009, as compared to
$38.4 million for 2008, a decrease of $13.3 million or 34.6%. On a constant currency basis, Hudson Asia’s
revenue decreased $13.2 million or 34.4%. The revenue decrease in Hudson Asia was entirely in permanent
recruitment, which represents substantially all of its business.

The decrease in permanent recruitment revenue was led by China, which decreased $6.7 million or
42.6% on a constant currency basis. In Singapore and Hong Kong, permanent recruitment revenue decreased
$2.8 million and $4.3 million, or 23.3% and 56.1%, respectively. As with other markets, general economic
conditions caused a reduction in demand for permanent recruitment services, including widespread hiring
freezes early in 2009. The majority of revenue in Asia is derived from multinational clients, and during the
second half of 2009, we experienced sequential improvement in revenue in China and Singapore over the ﬁrst
half of 2009 as these clients eased hiring restrictions implemented in the beginning of the year. Although the
majority of recruitment needs in the region continue to be met using in-house resources, demand is increasing
for recruitment agency services.

Hudson Asia’s direct costs were $1.5 million for the year ended December 31, 2009, as compared to
$1.8 million for 2008, a decrease of $0.3 million or 17.3%. On a constant currency basis, Hudson Asia’s
direct costs decreased $0.3 million or 16.8%. The decrease was a direct result of the factors affecting revenue
as noted above.

Hudson Asia’s gross margin was $23.6 million for the year ended December 31, 2009, as compared to

$36.6 million for 2008, a decrease of $13 million or 35.4%. On a constant currency basis, gross margin
decreased $12.9 million or 35.3%. The majority of the gross margin decrease was in China, which decreased
$6.4 million or 39.2%. Gross margin decreased in Hong Kong and Singapore by $4.4 million and $2.4 million
or 56.2% and 18.6%, respectively, compared to 2008. Hudson Asia’s gross margin declined primarily for the
same reasons as the decline in permanent recruitment revenue. Total gross margin, as a percentage of total
revenue, was 94.1% compared to 95.3% for the same period in 2008.

Hudson Asia’s selling, general and administrative expenses were $23.4 million for the year ended

December 31, 2009, as compared to $34.3 million for 2008, a decrease of $10.9 million or 31.7%. On a
constant currency basis, selling, general and administrative expenses decreased $10.8 million or 31.6%. The
decrease in selling, general and administrative expenses was primarily attributable to lower commissions and
bonuses associated with lower gross margin. The decrease also resulted from restructuring actions, including a
reduction of headcount and management support, and consolidation of functions and facilities. These
expenses, as a percentage of revenue, were 93.2% compared to 89.3% for 2008 and is attributable primarily to
a decrease in sales productivity. The increase in selling, general and administrative expenses as a percentage
of revenue was also due to the lower revenue in 2009 as compared to 2008.

In 2009, the Company recorded a non-cash charge of $1.7 million for the impairment of goodwill related
to its China reporting unit. This amount was for an earn-out payment linked to the 2008 ﬁnancial results for a
business within the China reporting unit that achieved its required ﬁnancial targets. However, the ﬁnancial
results and projected cash ﬂows for the total China reporting unit were insufficient to support the additional

goodwill. The 2008 results included a non-cash charge of $6.7 million also related to the impairment of
goodwill at the Company’s China reporting unit.

Hudson Asia’s net other non-operating income was $0.2 million for the year ended December 31, 2009,

as compared to $0.2 million for 2008. On a constant currency basis, net other non-operating income remained
ﬂat.

Hudson Asia’s EBITDA loss was $0.6 million for the year ended December 31, 2009, as compared to
$3.4 million for 2008, a decrease in EBITDA loss of $2.9 million. On a constant currency basis, EBITDA loss
decreased $2.9 million. Hudson Asia’s EBITDA loss, as a percentage of revenue, was 2.2% compared to 9.0%
for 2008. The decrease in EBITDA loss was primarily due to the factors discussed above.

Hudson Asia’s operating loss was $1.5 million for the year ended December 31, 2009, as compared to

$4.7 million for 2008, a decrease of $3.3 million. On a constant currency basis, operating loss decreased
$3.2 million. Operating loss, as a percentage of revenue, was 6.2% compared to 12.4% for 2008.

Corporate and Other

Corporate expenses were $17.2 million for the year ended December 31, 2009, as compared to
$28.5 million for 2008, a decrease of $11.3 million or 39.6%. This decrease was primarily due to lower
professional fees of $4.3 million, decreases in support staff compensation of $2.8 million, other office and
administrative costs of $2.7 million and travel related expenses of $0.7 million.

Corporate net other non-operating income was $3.7 million for the year ended December 31, 2009, as
compared to $7.7 million for 2008, a decrease of $4 million. The decrease was primarily due to decreased
corporate management service allocations to the reportable segments as a result of lower corporate expenses
incurred in 2009.

Interest

Interest expense, net of interest income was $0.7 million for the year ended December 31, 2009, as
compared to net interest income of $1.1 million for 2008, a decrease in interest income of $1.8 million. The
decrease in interest income was primarily due to lower interest income received on cash balances at lower
interest rates and higher interest expense as a result of increased borrowings under our credit agreement in
2009.

(Beneﬁt from) Provision for Income Taxes

The beneﬁt from income taxes for the year ended December 31, 2009 was $5.8 million on a

$48.7 million loss from continuing operations, as compared to a provision for income taxes of $6.7 million on
a $66.4 million loss from continuing operations for 2008. The effective tax rate for the year ended
December 31, 2009 was 11.8%, as compared to negative 10.1% for 2008.

The changes in the Company’s effective tax rate resulted primarily from the Company’s ability to
recognize income tax beneﬁts from losses incurred in certain foreign jurisdictions that have historically been
proﬁtable. The effective tax rate differs from the U.S. federal statutory rate of 35% due to the inability to
recognize tax beneﬁts on U.S. and foreign losses of $8.1 million, state and local taxes of $0.1 million,
non-deductible goodwill impairment charges of $0.6 million, other non-deductible expenses of $1.5 million
and variations from the U.S. tax rate in foreign jurisdictions of $1 million. The Company’s effective tax rate
will change from year to year based on non-recurring and recurring factors including, but not limited to, the
geographical mix of earnings, enacted tax legislation, state and local taxes, and tax audit settlements.

Net Loss from Continuing Operations

Net loss from continuing operations was $43 million for the year ended December 31, 2009, as compared

to $73.1 million for 2008, a decrease in net loss of $26.1 million. Basic and diluted loss per share from
continuing operations was $1.65 for the year ended December 31, 2008, as compared to $2.9 for 2008.

Net Income (Loss) from Discontinued Operations

Net income from discontinued operations was $2.3 million for year ended December 31, 2009, as

compared to a net loss from discontinued operations of $1.2 million for 2008, an increase of $3.5 million. The
increase was primarily due to the receipt of the ﬁnal earn-out payment of $11.6 million due the Company as a
result of its former Highland Partners executive search business (‘‘Highland’’) reporting unit achieving certain
2008 revenue metrics as deﬁned in the sale agreement, partially offset by the provision for income taxes from
the gain of the ﬁnal earn out payment above of $4 million, and the losses from discontinued operations in
Japan of $2.9 million and Italy of $1.6 million.

Basic and diluted earnings per share from discontinued operations were $0.09 for the year ended

December 31, 2009, as compared to basic and diluted loss per share from discontinued operations of $0.05 for
2008.

Net (Loss) Income

Net loss was $40.6 million for the year ended December 31, 2009, as compared to $74.3 million for

2008, a decrease of $33.7 million. Basic and diluted loss per share were $1.56 for the year ended
December 31, 2009, as compared to $2.95 for 2008.

Liquidity and Capital Resources

The Company’s liquidity needs arise primarily from funding working capital requirements and capital

investments in information technology and facilities.

Cash ﬂows

(In millions)
Net cash (used in) provided by operating activities . . . . . . . . . .
Net cash (used in) provided by investing activities. . . . . . . . . . .
Net cash provided by (used in) ﬁnancing activities. . . . . . . . . . .
Effect of exchange rates on cash and cash equivalents . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . .

For The Year Ended December 31,
2009
$(27.0)
6.8
4.4
2.7
$(13.1)

2010
$(14.5)
(0.1)
7.6
0.5
$ (6.5)

2008
$11.9
4.2
(0.7)
(5.4)
$10.0

The Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

Cash Flows Used in Operating Activities

For the year ended December 31, 2010, net cash used in operating activities was $14.5 million, compared
to $27 million for 2009, a decrease in net cash used in operating activities of $12.5 million. The decrease was
primarily due to lower net operating losses from continuing operations and lower payments related to the 2009
restructuring program in 2010 offset principally by an increase in working capital as a result of the growth in
contracting revenue in 2010.

Cash Flows (Used in) Provided by Investing Activities

For the year ended December 31, 2010, net cash used in investing activities was $0.1 million compared

to net cash provided by investing activities of $6.8 million for 2009, a decrease in net cash provided by
investing activities of $6.9 million. The primary source of net cash from investing activities in 2010 was the
collection of $6.2 million total from instruments related to the sale of Hudson Americas’ ETS division, namely
a note receivable of $4.5 million and the sale of warrants for $1.7 million. This was offset by an increase in
restricted cash of $1.7 million. In 2009, the primary source of net cash from investing activities was the
receipt of the ﬁnal earn out payment of $11.6 million from the sale of Highland Partners.

Cash Flows Provided by Financing Activities

For the year ended December 31, 2010, net cash provided by ﬁnancing activities was $7.6 million

compared to $4.4 million for 2009, an increase of $3.2 million. The increase was primarily due to
$19.2 million of proceeds from the issuance of common stock and a reduction in purchase of treasury stock,
partially offset by an increase in net repayments under the Company’s credit facilities of $14.5 million and
payment of deferred ﬁnancing costs of $1.5 million.

The Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008

Cash Flows (Used in) Provided by Operating Activities

For the year ended December 31, 2009, net cash used in operating activities was $27 million, compared

to net cash provided by operating activities of $11.9 million for 2008, a decrease in net cash provided by
operating activities of $38.8 million. The decrease was primarily due to lower net earnings from operations
and $18.7 million in restructuring payments associated with the Company’s business reorganization plans to
reduce expenses, partially offset by lower expenses and greater collections as revenue declined.

Cash Flows Provided by Investing Activities

For the year ended December 31, 2009, net cash provided by investing activities was $6.8 million,
compared to $4.2 million for 2008, an increase of $2.6 million. The primary source of net cash from investing
activities was the receipt of the ﬁnal earn out payment of $11.6 million in 2009 from the sale of Highland,
offset by an earn out payment to TKA of $1.7 million and capital expenditures of $3.7 million. In 2008, the
sources of cash from investing activities were the proceeds of $20.9 million related to the sales of BPM and
ETS and the ﬁrst earn out payment from Highland, offset by $6.6 million of aggregate earn out payments to
TKA and Balance and the acquisitions of Propensity and Coread, and $10.6 million in capital expenditures.

Cash Flows Provided by (Used in) Financing Activities

For the year ended December 31, 2009, net cash provided by ﬁnancing activities was $4.4 million,
compared to net cash used in ﬁnancing activities of $0.7 million for 2008, an increase in net cash provided by
ﬁnancing activities of $5 million. The increase was primarily due to a $6.8 million reduction on repurchases
of shares of our common stock, partially offset by $1.7 million less of cash proceeds from the exercise of
stock options.

Credit Agreements

On August 5, 2010, the Company and certain of its North American and U.K. subsidiaries entered into a
senior secured revolving credit facility (the ‘‘Revolver Agreement’’) with RBS Business Capital, a division of
RBS Asset Finance, Inc. (‘‘RBS’’), that provides the Company with the ability to borrow up to $40 million,
including the issuance of letters of credit. The Company may increase the maximum borrowing amount to
$50 million, subject to certain conditions including lender acceptance. Extensions of credit are based on a
percentage of the eligible accounts receivable less required reserves principally related to the U.K. and
North America operations. In connection with the Revolver Agreement, the Company incurred and capitalized
approximately $1.5 million of deferred ﬁnancing costs, which are being amortized over the term of the
agreement. As of December 31, 2010, the Company’s borrowing base was $34.6 million and the Company
was required to maintain a minimum availability of $10 million. As of December 31, 2010, the Company had
no outstanding borrowings, and $2.7 million of outstanding letters of credit issued, under the Revolver
Agreement, resulting in the Company being able to borrow up to an additional $21.9 million after deducting
the minimum availability, outstanding borrowings and outstanding letters of credit issued.

The maturity date of the Revolver Agreement is August 5, 2014. Borrowings may initially be made with

an interest rate based on a base rate plus 2.25% or on the LIBOR rate for the applicable period plus 3.25%.
The applicable margin for each rate is based on the Company’s Fixed Charge Coverage Ratio (as deﬁned in
the Revolver Agreement). The interest rate on outstanding borrowings was 5.5% as of December 31, 2010.
Borrowings under the Revolver Agreement are secured by substantially all of the assets of the Company and
certain of its North American and U.K. subsidiaries.

of at least $0.5 million during the ﬁscal years 2010 and 2011 and $1 million thereafter; (2) a limit on the
payment of dividends of not more than $5 million per year and subject to certain conditions; (3) restrictions
on the ability of the Company to make additional borrowings, acquire, merge or otherwise fundamentally
change the ownership of the Company or repurchase the Company’s stock; (4) a limit on investments, and a
limit on acquisitions of not more than $25 million in cash and $25 million in non-cash consideration per year,
subject to certain conditions set forth in the Revolver Agreement; and (5) a limit on dispositions of assets of
not more than $4 million per year. The Company was in compliance with all covenants under the Revolver
Agreement as of December 31, 2010.

Prior to entering into the Revolver Agreement with RBS, the Company had a primary credit facility (the
‘‘Credit Agreement’’) with Wells Fargo Capital Finance, Inc. (‘‘WFCF’’) and another lender that provided the
Company with the ability to borrow up to $75 million, including the issuance of letters of credit. In
connection with entering into the Revolver Agreement described above, the Company terminated the Credit
Agreement effective August 12, 2010. The Company repaid the outstanding balance of $10.5 million under the
Credit Agreement and paid an early termination fee of $0.6 million on the effective date of termination. The
early termination fee is included in the caption ‘‘Fee for early extinguishment of credit facility’’ in the
accompanying Consolidated Statements of Operations. In addition, the Company recorded a non-cash write-off
of $0.3 million of unamortized deferred ﬁnancing costs in connection with the termination of the Credit
Agreement.

On August 3, 2010, an Australian subsidiary of the Company entered into a Receivables Finance
Agreement and related agreements (the ‘‘Finance Agreement’’) with Commonwealth Bank of Australia
(‘‘CBA’’) that provides the Australian subsidiary with the ability to borrow up to approximately $15.3 million
(AUD 15 million). Under the terms of the Finance Agreement, the Australian subsidiary may make offers to
CBA to assign its accounts receivable with recourse, which accounts receivable CBA may in its good faith
discretion elect to purchase. As of December 31, 2010, the Company had $0.5 million (AUD 0.5 million) of
outstanding borrowings under the Finance Agreement. Available credit for use under the Finance Agreement
as of December 31, 2010 was $14.8 million (AUD 14.5 million).

The Finance Agreement does not have a stated maturity date and can be terminated by either party upon
90 days written notice. Borrowings may be made with an interest rate based on the average bid rate for bills
of exchange (‘‘BBSY’’) with the closest term to 30 days plus a margin of 1.6%. The interest rate was 6.28%
as of December 31, 2010. Borrowings are secured by substantially all of the assets of the Australian
subsidiary and are based on an agreed percentage of eligible accounts receivable.

The Finance Agreement contains various restrictions and covenants for the Australian subsidiary,

including (1) a requirement to maintain a minimum Tangible Net Worth (as deﬁned in the Finance Agreement)
ratio of 70%; (2) a minimum Fixed Charge Coverage Ratio (as deﬁned in the Finance Agreement) of 1.4x for
a trailing twelve month period; and (3) a limitation on certain intercompany payments of expenses, interest
and dividends not to exceed Net Proﬁt After Tax (as deﬁned in the Finance Agreement). The Australian
subsidiary was in compliance with all covenants under the Finance Agreement as of December 31, 2010.

As of December 31, 2010, the Company had a total of $1.8 million of bank guarantees issued by CBA

under the Finance Agreement that were collateralized by a restricted term deposit of an equal amount.

The Company also has lending arrangements with local banks through its subsidiaries in Belgium, the
Netherlands, New Zealand, Singapore and China. The aggregate outstanding borrowings under the lending
arrangements in Belgium, the Netherlands and New Zealand were $0.8 million and $0 as of December 31,
2010 and 2009, respectively. As of December 31, 2010, the Belgium and the Netherlands subsidiaries could
borrow up to $5 million based on an agreed percentage of accounts receivable related to their operations.
Borrowings under the Belgium and the Netherlands lending arrangements may be made with an interest rate
based on the one month EURIBOR plus 2.5%, or about 3.31% at December 31, 2010. The lending
arrangements of Belgium and the Netherlands will expire on May 2, 2011 and May 15, 2011, respectively. In
New Zealand, the Company’s subsidiary can borrow up to $1.9 million (NZD 2.5 million) as of December 31,
2010 for working capital purposes. This lending arrangement expires on March 31, 2012. Interest on
borrowings under the New Zealand lending arrangement is based on a three month cost of funds rate as
determined by the bank, plus a 1.6% margin, and was 6.76% on December 31, 2010. In China, the

Company’s subsidiary can borrow up to $1 million for working capital purposes. Interest on borrowings under
this overdraft facility is based on the People’s Republic of China’s six month rate, plus 200 basis points, and
was 7.6% on December 31, 2010. There were no outstanding borrowings under this overdraft facility as of
December 31, 2010 and 2009. This overdraft facility expires annually each September, but can be renewed for
one year periods at that time.

The Company continues to use the aforementioned credit to support its ongoing global working capital

requirements, capital expenditures and other corporate purposes and to support letters of credit. Letters of
credit and bank guarantees are used primarily to support office leases.

Shelf Registration and Common Stock Offering

In December 2009, the Company ﬁled a shelf registration statement (the ‘‘2009 Shelf Registration’’) with

the Securities and Exchange Commission (‘‘SEC’’) to enable it to issue up to $30.0 million equivalent of
securities or combinations of securities. The types of securities permitted for issuance under the 2009 Shelf
Registration are debt securities, common stock, preferred stock, warrants, stock purchase contracts and stock
purchase units.

On April 6, 2010, the Company issued, in a registered public offering under the 2009 Shelf Registration,

4,830,000 shares (which share number includes the exercise of the underwriter’s overallotment option of
630,000 shares) of common stock at $4.35 per share. Net proceeds to the Company after underwriting
discounts and expenses of the public offering were approximately $19.2 million.

After this offering, the Company may issue up to $9 million equivalent of securities or combinations of

securities under the 2009 Shelf Registration.

Liquidity Outlook

The Company has a total liquidity of $73.4 million as of December 31, 2010, which included
$29.5 million of cash and cash equivalents on hand and $43.9 million of availability under the Revolver
Agreement, the Finance Agreement with CBA and other lending arrangements in Belgium, the Netherlands,
New Zealand and China. The Company believes that it has sufficient liquidity to satisfy its needs through at
least the next 12 months, based on the Company’s total liquidity as of December 31, 2010. The Company’s
near-term cash requirements during 2011 are primarily related to funding operations and capital expenditures.
The Company expects to maintain a reduced level of capital expenditures in 2011 as it did in 2010 and 2009.
In 2011, the Company expects to make capital expenditures of approximately $5 million to $7 million. The
Company is closely managing its capital spending and will perform capital additions where economically
prudent, while continuing to invest strategically for future growth.

Although 2010 showed some encouraging signs of economic recovery in the key markets in which the

Company operates, there remains concern about the strength and sustainability of the economic recovery. The
Company believes that future external market conditions remain uncertain particularly the access to credit,
rates of near-term projected economic growth and levels of unemployment in the markets in which it operates.
Due to these uncertain external market conditions, the Company cannot provide assurance that actual cash
requirements will not be greater in the future than those currently expected, especially if market conditions
deteriorate substantially. 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 of those sources. The Company cannot provide assurance that these additional sources of funds
will be available or, if available, would have reasonable terms.

Off-Balance Sheet Arrangements.

As of December 31, 2010, the Company had no off-balance sheet arrangements.

Contractual Obligations.

The Company has entered into various commitments that will affect its cash generation capabilities going

forward. Particularly, it has entered into several non-cancelable operating leases for facilities and equipment
worldwide. Future contractual obligations as of December 31, 2010 are as follows (dollars in thousands)
(commitments based in currencies other than U.S. dollars were translated using exchange rates as of
December 31, 2010):

Contractual Obligation(a)
Operating lease obligations. . . . . . .
. . . . . .
Other long term liabilities:
Reorganization expenses . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .

Less than
1 year
$27,256

2,619
$29,875

1 to 3 years
$40,578

3 to 5 years
$27,940

More than
5 years
$39,996

510
$41,088

—
$27,940

—
$39,996

Total
$135,770

3,129
$138,899

(a) The Company’s other non-current liabilities and non-current income tax payable of $18.3 million in the

Consolidated Balance Sheet as of December 31, 2010 are primarily comprised of income taxes,
unrecognized tax beneﬁts, deferred rent, and other various accruals. As the timing and/or amounts of any
cash payment is uncertain, the related amounts have not been reﬂected in the table above.

REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K 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-K, including statements regarding the Company’s future
ﬁnancial condition, results of operations, business operations and business prospects, are forward-looking
statements. Words such as ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘predict,’’
‘‘believe’’ and similar words, expressions and variations of these words and expressions are intended to
identify forward-looking statements. All forward-looking statements are subject to 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) global economic ﬂuctuations, (2) risks related to ﬂuctuations in
the Company’s operating results from quarter to quarter, (3) the ability of clients to terminate their relationship
with the Company at any time, (4) competition in the Company’s markets, (5) risks associated with the
Company’s investment strategy, (6) risks related to international operations, including foreign currency
ﬂuctuations, (7) the Company’s dependence on key management personnel, (8) the Company’s ability to
attract and retain highly skilled professionals, (9) the Company’s ability to collect its accounts receivable,
(10) the Company’s history of negative cash ﬂows and operating losses may continue, (11) the Company’s
ability to utilize net operating loss carry-forwards, (12) restrictions on the Company’s operating ﬂexibility due
to the terms of its credit facilities, (13) the Company’s ability to achieve anticipated cost savings through the
Company’s cost reduction initiatives, (14) the Company’s heavy reliance on information systems and the
impact of potentially losing or failing to develop technology, (15) risks related to providing uninterrupted
service to clients, (16) the Company’s exposure to employment-related claims from clients, employers and
regulatory authorities and limits on related insurance coverage, (17) volatility of the Company’s stock price,
(18) the impact of government regulations, and (19) restrictions imposed by blocking arrangements. These
forward-looking statements speak only as of the date of this Form 10-K. 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company conducts operations in various countries and faces both translation and transaction risks

related to foreign currency exchange. For the year ended December 31, 2010, the Company earned
approximately 87% of its gross margin outside of the United States, and it collected payments in local
currency and related operating expenses were paid in such corresponding local currency. Revenues and
expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. dollars as the U.S.
dollar weakens or strengthens against other currencies. Therefore, changes in exchange rates may affect our
consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations.

Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect

at the balance sheet date. The resulting translation adjustments are recorded as a component of accumulated
other comprehensive income (loss) in the stockholders’ equity section of the Consolidated Balance Sheets. The
translation of foreign currency into the U.S. dollar is reﬂected as a component of stockholders’ equity and it
does not impact our operating results.

As more fully described in Item 7 — Management’s Discussion and Analysis of Financial Condition and

Results of Operations, the Company has credit agreements with RBS Business Capital and Commonwealth
Bank of Australia. The Company also has other credit agreements with lenders in Belgium, the Netherlands,
New Zealand, Singapore and China. The Company does not hedge the interest risk on borrowings under any
such credit agreements, and accordingly, it is exposed to interest rate risk on the borrowings under such credit
agreements. Based on our annual average borrowings, a 1% increase or decrease in interest rates on our
borrowings would not have a material impact on our earnings.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Annual Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal
control over ﬁnancial reporting, as such term is deﬁned in Rules 13a-15(f) and 15(d)-15(f) of the Securities
Exchange Act of 1934. The Company’s internal control over ﬁnancial reporting is designed to provide
reasonable assurance regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements
for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over ﬁnancial

reporting as of December 31, 2010 using the criteria set forth in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, the Company’s management believes that, as of December 31, 2010, the Company’s internal
control over ﬁnancial reporting was effective based on those criteria.

The Company’s independent registered public accounting ﬁrm, KPMG LLP, has issued an attestation
report on the effectiveness of the Company’s internal control over ﬁnancial reporting. That attestation report is
set forth immediately following the report of KPMG LLP on the ﬁnancial statements included herein.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Hudson Highland Group, Inc.:

We have audited the accompanying consolidated balance sheets of Hudson Highland Group, Inc.

and subsidiaries (Hudson Highland Group, Inc.) as of December 31, 2010 and 2009, and the related
consolidated statements of operations, changes in stockholders’ equity, and cash ﬂows for each of the years in
the three-year period ended December 31, 2010. In connection with our audit of the consolidated ﬁnancial
statements, we also have audited the ﬁnancial statement schedules included in Item 15 of Form 10-K. These
consolidated ﬁnancial statements and the ﬁnancial statement schedules are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated ﬁnancial statements and the
ﬁnancial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the ﬁnancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An
audit also includes assessing the accounting principles used and signiﬁcant estimates made by management, as
well as evaluating the overall ﬁnancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material
respects, the ﬁnancial position of Hudson Highland Group, Inc. as of December 31, 2010 and 2009, and the
results of its operations and its cash ﬂows for each of the years in the three-year period ended December 31,
2010, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related
ﬁnancial statement schedules, when considered in relation to the basic consolidated ﬁnancial statements taken
as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States), the effectiveness of Hudson Highland Group, Inc.’s internal control over ﬁnancial
reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated February 23, 2011 expressed an unqualiﬁed opinion on the effective operation of internal control over
ﬁnancial reporting.

/s/ KPMG LLP

New York, New York
February 23, 2011

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Hudson Highland Group, Inc.:

We have audited Hudson Highland Group Inc.’s and subsidiaries (Hudson Highland Group, Inc.) internal

control over ﬁnancial reporting as of December 31, 2010, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Hudson Highland Group, Inc.’s management is responsible for maintaining effective
internal control over ﬁnancial reporting and for its assessment of the effectiveness of internal control over
ﬁnancial reporting, included in the accompanying ‘‘Management’s Annual Report on Internal Control Over
Financial Reporting’’. Our responsibility is to express an opinion on the Company’s internal control over
ﬁnancial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over ﬁnancial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable

assurance regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
ﬁnancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Hudson Highland Group, Inc. maintained, in all material respects, effective internal

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Hudson Highland Group, Inc. as of December 31,
2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity and
cash ﬂows for each of the years in the three-year period ended December 31, 2010, and our report dated
February 23, 2011 expressed an unqualiﬁed opinion on those consolidated ﬁnancial statements.

/s/ KPMG LLP

New York, New York
February 23, 2011

HUDSON HIGHLAND GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses:

Salaries and related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office and general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and promotion . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Business reorganization and integration expenses . . . . . . . . . .
Goodwill and other impairment charges . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other (expense) income:

Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee for early extinguishment of credit facility . . . . . . . . . . . .

Loss from continuing operations before provision for income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (beneﬁt from) income taxes . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income from discontinued operations, net of income taxes.
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) earnings per share:
Basic and diluted

Loss from continuing operations . . . . . . . . . . . . . . . . . . . . .
(Loss) income from discontinued operations . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic and diluted weighted average shares outstanding: . . . . . . .

2010
$794,542
495,969
298,573

Year Ended December 31,
2009
$691,149
430,696
260,453

2008
$1,079,085
624,099
454,986

222,185
65,185
6,943
8,184
1,694
—
304,191
(5,618)

(1,278)
4,500
(563)

204,097
66,713
6,824
12,543
18,180
1,549
309,906
(49,453)

(694)
1,444
—

325,774
90,110
16,919
14,662
11,217
67,087
525,769
(70,783)

1,099
3,269
—

(2,959)
1,482
(4,441)
(244)
$ (4,685)

(48,703)
(5,750)
(42,953)
2,344
$ (40,609)

(66,415)
6,681
(73,096)
(1,222)
$ (74,318)

(0.15)
(0.01)
(0.16)
29,931

(1.65)
0.09
(1.56)
26,036

(2.90)
(0.05)
(2.95)
25,193

See accompanying notes to consolidated ﬁnancial statements.

December 31,

2010

2009

$ 29,523

$ 36,064

128,576
13,988
172,087
16,593
17,154
$ 205,834

98,994
13,308
148,366
19,433
14,145
$ 181,944

$ 12,811
54,103
10,456
8,784
86,154
11,115
8,415
105,684

HUDSON HIGHLAND GROUP, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of $2,145 and

$2,423, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued business reorganization expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax payable, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,812
74,990
1,339
2,619
93,760
10,493
8,303
112,556

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 32,181

and 26,836 shares, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deﬁcit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income − translation adjustments . . . . . . .
Treasury stock, 9 and 114 shares, respectively, at cost . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

32
466,582
(408,199)
34,902
(39)
93,278
$ 205,834

27
445,541
(403,514)
34,509
(303)
76,260
$ 181,944

See accompanying notes to consolidated ﬁnancial statements.

HUDSON HIGHLAND GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Cash ﬂows from operating activities:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,685)

$(40,609)

$ (74,318)

Year Ended December 31,
2009

2008

2010

Adjustments to reconcile net loss to net cash used in operating

activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other impairment charges . . . . . . . . . . . . . . . . . . . .
Provision (recovery) of doubtful accounts. . . . . . . . . . . . . . . . . . .
(Beneﬁt from) provision for deferred income taxes . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee for early extinguishment of credit facility . . . . . . . . . . . . . . . .
Gains on note and warrant from asset sale . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities, net of effects of business

acquisitions:
(Increase) decrease in accounts receivable . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accounts payable, accrued expenses and other
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in accrued business reorganization expenses . . .
Net cash (used in) provided by operating activities . . . . . . . . . . . .

Cash ﬂows from investing activities:

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from notes and sales of warrants . . . . . . . . . . . . . . . . . .
Change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . . . . .

Cash ﬂows from ﬁnancing activities:

Borrowings under credit facility and other short term ﬁnancing . . . .
Repayments under credit facility and other short term ﬁnancing. . . .
Payment for early extinguishment of credit facility . . . . . . . . . . . .
Payment of deferred ﬁnancing costs . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net
. . . . . . . . . . . . . . .
Net payment on current and long-term debt . . . . . . . . . . . . . . . . .
Issuance of common stock − Employee Stock Purchase Plans and

8,184
—
392
(223)
1,724
—
563
(3,369)
462

12,630
1,549
(290)
(3,542)
973
(11,625)
—
—
(625)

(27,252)
(1,592)

39,147
5,635

17,366
(6,031)
(14,461)

(31,523)
1,292
(26,988)

(3,264)
81
6,179
(1,197)
(1,856)
(57)

99,914
(109,304)
(563)
(1,565)
19,167
—

(3,666)
11,625
—
514
(1,669)
6,804

51,985
(46,836)
—
—
—
—

—
(703)
(75)
4,371
2,668
(13,145)
49,209
$ 36,064

14,913
67,087
(213)
935
4,701
(4,838)
—
—
—

50,393
(3,663)

(44,909)
1,772
11,860

(10,558)
20,861
—
500
(6,607)
4,196

104,104
(98,797)
—
—
—
(262)

2,042
(7,491)
(242)
(646)
(5,446)
9,964
39,245
$ 49,209

—
Long Term Incentive Plan option exercises . . . . . . . . . . . . . . . .
—
Purchase of treasury stock, including fees . . . . . . . . . . . . . . . . . .
(71)
Purchase of restricted stock from employees. . . . . . . . . . . . . . . . .
7,578
Net cash provided by (used in) ﬁnancing activities . . . . . . . . . . . .
399
Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . .
(6,541)
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . .
36,064
Cash and cash equivalents, beginning of the period. . . . . . . . . . . . . .
Cash and cash equivalents, end of the period . . . . . . . . . . . . . . . . . . $ 29,523
Supplemental disclosures of cash ﬂow information:

Cash paid during the period for interest . . . . . . . . . . . . . . . . . . . . $
Cash payment (refund), net during the period for income taxes . . . . $

1,098
1,905

$
999
$ (1,215)

$
936
$ 12,183

See accompanying notes to consolidated ﬁnancial statements.

HUDSON HIGHLAND GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)

Common stock

Shares
25,666
—

Value
$ 26
—

Additional
paid-in
capital
$444,075
—

Accumulated
deﬁcit
$(288,587)
(74,318)

Accumulated
other
comprehensive
income (loss)
$ 44,946
—

Treasury
stock

Total

$ (345) $200,115
— (74,318)

Total
Comprehensive
Income (loss)

$(74,318)

Balance at January 1, 2008 . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss,

translation adjustments . . . . . . . .
Purchase of treasury stock. . . . . . . .
Purchase of restricted stock from

—
(1,248)

employees . . . . . . . . . . . . . . . . .

(27)

Issuance of shares for 401(k) plan

contribution . . . . . . . . . . . . . . . .

140

Issuance of shares from exercise of

stock options . . . . . . . . . . . . . . .

Issuance of shares from employee

stock purchase plan . . . . . . . . . .
Stock-based compensation. . . . . . . .
Balance at December 31, 2008. . . . .
Net loss . . . . . . . . . . . . . . . . . . . .
Other comprehensive income,

translation adjustments . . . . . . . .
Purchase of treasury stock. . . . . . . .
Purchase of restricted stock from

—
(243)

employees . . . . . . . . . . . . . . . . .

(29)

Issuance of shares for 401(k) plan

contribution . . . . . . . . . . . . . . . .
Stock-based compensation. . . . . . . .
Balance at December 31, 2009. . . . .
Net loss . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss,

translation adjustments . . . . . . . .
Issuance of shares . . . . . . . . . . . . .
Purchase of restricted stock from

1,318
322
26,722
—

—
4,830

employees . . . . . . . . . . . . . . . . .

(16)

Issuance of shares for 401(k) plan

—
—

—

—
—

—

(176)

372

—
—

—

(17,892)
—

— (17,892)
(7,491)

(7,491)

(17,892)
—

—

(242)

1,156

—

980

372

—

296
473
25,354
—

—
—
$ 26
—

1,670
4,798
$450,739
—

—
—
$(362,905)
(40,609)

—
—
$ 27,054
—

—
—

1,670
4,798
$(6,922) $107,992
— (40,609)

—
—
$(92,210)
(40,609)

—
—

—

—
—

—

—
—

—

7,455
—

—
(703)

7,455
(703)

7,455
—

—

(75)

—

1
—
$ 27
—

(6,171)
973
$445,541
—

—
—
$(403,514)
(4,685)

—
—
$ 34,509
—

7,397
—

1,227
973
$ (303) $ 76,260
(4,685)

—

—
—
$(33,154)
(4,685)

—
5

—

—
19,111

—

—
—

—

393
—

—

—
—

393
19,116

(71)

393
—

—

contribution . . . . . . . . . . . . . . . .
Stock-based compensation. . . . . . . .
Balance at December 31, 2010. . . . .

121
514
32,171

—
—
$ 32

206
1,724
$466,582

—
—
$(408,199)

—
—
$ 34,902

541
335
—
1,724
(39) $ 93,278

—
—
$ (4,292)

See accompanying notes to consolidated ﬁnancial statements.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

Hudson Highland Group, Inc. and its subsidiaries (the ‘‘Company’’) are comprised of the operations,

assets and liabilities of the four Hudson regional businesses of Hudson Europe, Hudson Australia and
New Zealand (‘‘ANZ’’), Hudson Americas and Hudson Asia (‘‘Hudson regional businesses’’ or ‘‘Hudson’’).
The Company has operated as an independent publicly held company since its spin-off (the ‘‘Distribution’’)
from Monster Worldwide, Inc. (‘‘Monster’’), formerly TMP Worldwide, Inc., on March 31, 2003 (the
‘‘Distribution Date’’).

Certain prior year amounts have been reclassiﬁed to conform to the current period presentation.

Reporting Segments

The Company provides professional staffing services on a permanent and contract basis and a range of
human capital services to businesses operating in a wide variety of industries. The Company is organized into
four reportable segments: Hudson Europe, Hudson ANZ, Hudson Americas, and Hudson Asia, which
constituted approximately 46%, 30% 13%, and 11% of the Company’s gross margin, respectively, for the year
ended December 31, 2010.

Hudson Europe operates from 38 offices in 13 countries, with 48% of its 2010 gross margin generated in

Hudson’s regional businesses provide contract personnel and permanent recruitment services to a wide

range of clients. 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. Hudson
provides permanent recruitment services on both a retained and contingent basis and focuses on mid-level
professionals. Hudson regional businesses also provide organizational effectiveness and development services
through their talent management solutions units.

Discontinued Operations

The Company has designated certain of its operations as discontinued operations in the accompanying

Consolidated Financial Statements, as further discussed in Note 3.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The 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. Transactions and balances between
the Company and Monster are included in the accompanying Consolidated Financial Statements.

Nature of Business and Credit Risk

The Company’s revenue is earned from professional placement services, mid-level employee professional
staffing and temporary contracting services and human capital services. These services are provided to a large
number of customers in many different industries. The Company operates throughout North America, the
United Kingdom, Continental Europe, Australia, New Zealand and Asia.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

Financial instruments, which potentially subject the Company to concentrations of credit risk, are

primarily cash and accounts receivable. The Company performs continuing credit evaluations of its customers
and does not require collateral. The Company has not experienced signiﬁcant losses related to receivables
from individual customers or groups of customers in any particular industry or geographic area.

Fair Value of Financial Instruments

The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents,
accounts receivable, accounts payable and short-term borrowings approximate fair value because of the
immediate or short-term maturity of these ﬁnancial instruments. See Note 6 ‘‘Fair Value Measurement’’ for
further information on the Company’s fair value measurements.

Use of Estimates

The preparation of ﬁnancial statements in conformity with accounting principles generally accepted in the

United States requires management to make estimates and assumptions about future events. These estimates
and the underlying assumptions affect the reported amounts of assets and liabilities, the disclosures about
contingent assets and liabilities, and the reported amounts of revenue and expenses. Such estimates include the
value of purchase consideration, allowances for doubtful accounts, goodwill, intangible assets, and other long-
lived assets, legal reserve and provision, estimated self-insured liabilities, assumptions used in the fair value of
stock-based compensation and the valuation of deferred tax assets. These estimates and assumptions are based
on management’s best estimates and judgment. Management evaluates the estimates and assumptions on an
ongoing basis using historical experience and other factors, including the current economic environment,
which management believes to be reasonable under the circumstances. The Company adjusts such estimates
and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined
with precision, actual results could differ signiﬁcantly from those estimates.

The recent global economic downturn has adversely impacted companies worldwide, including many of

the Company’s clients. This impact may in turn impact the aforementioned estimates and assumptions,
including speciﬁcally the Company’s allowance for doubtful accounts and liquidity. Refer to Note 13 for
further discussion of the provisions of the Company’s credit agreements.

Revenue Recognition

The Company recognizes revenue for temporary services at the time services are provided and revenue is

recorded on a time and materials basis. Temporary contracting revenue is reported on a gross basis when the
Company acts as the principal in the transaction and is at risk for collection in accordance with Financial
Accounting Standards Board (‘‘FASB’’) Accounting Standards Codiﬁcation Topic (‘‘ASC’’) 605-45, ‘‘Overall
Considerations of Reporting Revenue Gross as a Principal versus Net as an Agent’’. The Company’s revenues
are derived from its gross billings, which are based on (i) the payroll cost of its worksite employees; and (ii) a
markup computed as a percentage of the payroll cost.

The ASC 605-45-50-3 and ASC 605-45-50-4, ‘‘Taxes Collected from Customers and Remitted to

Governmental Authorities’’ provide that the presentation of taxes on either a gross or net basis is an
accounting policy decision. The Company collects various taxes assessed by governmental authorities and
records these amounts on a net basis.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

Revenue, direct costs and gross margin of the Company were as follows:

Revenue . . . . . . . . . .
Direct costs . . . . . . . .
Gross margin . . . . . . .

For The Year Ended
December 31, 2010
Other
$209,221
13,794
$195,427

Temporary
$585,321
482,175
$103,146

Total
$794,542
495,969
$298,573

For The Year Ended
December 31, 2009(1)(2)
Other
$169,369
11,707
$157,662

Temporary
$521,780
418,989
$102,791

Total
$691,149
430,696
$260,453

For The Year Ended
December 31, 2008(2)(3)
Other
$313,365
21,347
$292,018

Total
$1,079,085
624,099
$ 454,986

Temporary
$765,720
602,752
$162,968

(1)

Included in the 2009 results were $3,962 of revenue and $827 of gross margin for three additional days
of billings, principally related to the Company’s temporary contracting business. The additional days
resulted from certain subsidiaries conforming their reporting period from a weekly basis to a calendar
month-end basis. The impact of this change was not deemed material to the current and prior periods.
(2) For the year ended December 31, 2008, the Company reclassiﬁed $8,043 of temporary revenue, $7,311 of
temporary direct costs, and $732 of temporary gross margin from other revenue, other direct costs and
other gross margin, respectively.

(3) The Company reclassiﬁed $6,901 from other revenue (principally permanent recruitment business) to
temporary revenue (principally contracting business) for the years ended December 31, 2008 to be
consistent with the underlying nature of services being performed. The reclassiﬁed amounts relate to
revenue earned on services performed by contractors on temporary, short-term assignments for an up-
front fee, which is recognized as revenue at the time the client and contractor have accepted all
employment terms.

Direct Costs and Gross Margin

Direct costs include the direct staffing costs of salaries, payroll taxes, employee beneﬁts, travel expenses

and insurance costs for the Company’s temporary contractors as well as reimbursed out-of-pocket expenses
and other direct costs. Other direct costs include out-of-pocket expenses associated with search, permanent
placement and other talent management services. Gross margin represents revenue less direct costs. The region
where services are provided, the mix of temporary and permanent placements, and the functional nature of the
staffing services provided can affect gross margin.

Operating Expenses

Salaries and related expenses include the salaries, commissions, payroll taxes and employee beneﬁts
related to recruitment professionals, executive level employees, administrative staff and other employees of the
Company who are not temporary contractors. Office and general expenses include occupancy, equipment
leasing and maintenance, utilities, travel expenses, professional fees and provision for doubtful accounts. The
Company expenses the costs of advertising as incurred.

Accounts Receivable

The Company’s accounts receivable balances are composed of trade and unbilled receivables. The

Company maintains an allowance for doubtful accounts and makes ongoing estimates as to the ability to
collect on the various receivables. If the Company determines that the allowance for doubtful accounts is not
adequate to cover estimated losses, an expense to provide for doubtful accounts is recorded in office and
general expenses. If an account is determined to be uncollectible, it is written off against the allowance for
doubtful accounts. Management’s assessment and judgment are vital requirements in assessing the ultimate
realization of these receivables, including the current credit-worthiness, ﬁnancial stability and effect of market
conditions on each customer.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

Cash and Cash Equivalents

Cash and cash equivalents, which consist primarily of money market funds, are stated at cost, which
approximates fair value. For ﬁnancial statement presentation purposes, the Company considers all highly
liquid investments having an original maturity of three months or less as cash equivalents. Outstanding checks
in excess of cash account balances that are included in accounts payable on the accompanying Consolidated
Balance Sheets were insigniﬁcant as of December 31, 2010 and 2009.

Restricted Cash

The Company had approximately $3,934 and $3,665 of restricted cash included in the accompanying
Consolidated Balance Sheets as of December 31, 2010 and 2009, respectively. Included in these balances was
$1,294 and $1,894 as of December 31, 2010 and 2009, respectively, held as collateral under a collateral trust
agreement, which supports the Company’s workers’ compensation policy. As of December 31, 2010 and 2009,
the Company had $1,811and $0 of restricted term deposits, respectively, with Commonwealth Bank of
Australia (‘‘CBA’’) held as collateral. These restricted term deposits support the issuances of bank guarantees
for certain leases in the Company’s Australia operation and effectively replace the letters of credit covered
under the Company’s previous credit agreement with Wells Fargo Capital Finance, Inc. (‘‘WFCF’’). As of
December 31, 2010 and 2009, the Company had $143 and $0, respectively, in deposits with banks as
guarantees for the rent on the Company’s offices in the Netherlands. These balances, totaled to $3,248 and
$1,894 as of December 31, 2010 and 2009, respectively, were included in the caption ‘‘Other assets’’ in the
accompanying Consolidated Balance Sheets.

The Company had $193 and $159 of deposits with a bank for customer guarantees in Belgium as of
December 31, 2010 and 2009, respectively. The Company also had $345 and $293 in deposits with banks in
the Netherlands as guarantees for the rent on the Company’s offices and a reserve for employee social tax
payments required by law as of December 31, 2010 and 2009, respectively. These deposits totaled
approximately $538 and $452 as of December 31, 2010 and 2009, respectively, and were included in the
caption ‘‘Prepaid and other’’ in the accompanying Consolidated Balance Sheets.

The Company maintained $133 and $179 of deposits with banks in Spain as guarantees for the rent on

the Company’s offices, and insigniﬁcant business license deposits with a bank in Singapore as of
December 31, 2010 and 2009, respectively. The Company also maintained $1,127 of deposits with banks in
the Netherlands as required by law as a reserve for employee social tax payments as of December 31, 2009.
These deposits totaled approximately $149 and $1,319 as of December 31, 2010 and 2009, respectively, and
were included in the caption ‘‘Cash and cash equivalents’’ in the accompanying Consolidated Balance Sheets.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed primarily using the straight line

method over the following estimated useful lives:

Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years
3 − 8
3 − 5
2 − 5

Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease term.
The amortization periods of material leasehold improvements are estimated at the inception of the lease term.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

Capitalized Software Costs

Capitalized software costs consist of costs to purchase and develop software for internal use. The
Company capitalizes certain incurred software development costs in accordance with the ASC 350-40,
‘‘Intangibles Goodwill and Other: Internal-Use Software.’’ Costs incurred during the application-development
stage for software bought and further customized by outside vendors for the Company’s use and software
developed by a vendor for the Company’s proprietary use have been capitalized. Costs incurred for the
Company’s own personnel who are directly associated with software development are capitalized as
appropriate. Capitalized software costs are included in property and equipment.

Long-Lived Assets and Amortizable Intangibles

Intangible assets are amortized on straight line basis over the estimate useful life. The Company

evaluates the recoverability of the carrying value of its long-lived assets, excluding goodwill, whenever events
or changes in circumstances indicate that the carrying value may not be recoverable. Under such
circumstances, the Company assesses whether the projected undiscounted cash ﬂows of its businesses are
sufficient to recover the existing unamortized cost of its long-lived assets. If the undiscounted projected cash
ﬂows are not sufficient, the Company calculates the impairment amount by discounting the cash ﬂows using
its weighted average cost of capital. The amount of the impairment is written-off against earnings in the
period in which the impairment has been determined in accordance with ASC 360-10-35, ‘‘Impairment or
Disposal of Long-Lived Assets.’’

Goodwill

ASC 350-20-35 ‘‘Intangibles-Goodwill and Other, Goodwill Subsequent Measurement’’ requires that

goodwill not be amortized but be tested for impairment on an annual basis, or more frequently if
circumstances warrant. The Company tests goodwill for impairment annually as of October 1, or more
frequently if circumstances indicate that its carrying value might exceed its current fair value. Per the
provisions of ASC 350, goodwill impairment testing is a two-step process. The ﬁrst step of the goodwill
impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. The Company’s reporting units are the components within the reportable
segments identiﬁed in Note 15. If the fair value of a reporting unit exceeds its carrying amount, goodwill of
the reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary. If the
carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is
performed to measure the amount of impairment loss, if any. Step two compares the implied fair value of the
reporting unit’s goodwill with the current carrying amount of that goodwill. If the carrying value of a
reporting unit’s goodwill exceeds its implied fair value, an impairment amount equal to the difference is
recorded.

Foreign Currency Translation

The ﬁnancial position and results of operations of the Company’s international subsidiaries are
determined using local currency as the functional currency. Assets and liabilities of these subsidiaries are
translated at the exchange rate in effect at each year-end. Statements of Operations accounts are translated at
the average rate of exchange prevailing during each period. Translation adjustments arising from the use of
differing exchange rates from period to period are included in the other comprehensive income (loss) account
in stockholders’ equity, other than translation adjustments on short-term intercompany balances, which are
included in other income (expense). Gains and losses resulting from other foreign currency transactions are
included in other income (expense). Intercompany receivable balances of a long-term investment nature are
considered part of the Company’s permanent investment in a foreign jurisdiction and the gains or losses on
these balances are reported in other comprehensive income.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, ‘‘Income Taxes’’. This standard

establishes ﬁnancial accounting and reporting standards for the effects of income taxes that result from an
enterprise’s activities during the current and preceding years. It requires an asset and liability approach for
ﬁnancial accounting and reporting of income taxes.

ASC 740-10-55-3 ‘‘Recognition and Measurement of Tax Positions — a Two Step Process’’ provides

Earnings (Loss) Per Share

Basic earnings (loss) per share are computed by dividing the Company’s income (loss) 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 Company’s income (loss) 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 stock were
anti-dilutive and therefore not included in the calculation of dilutive earnings per share. For the years ended
December 31, 2010, 2009 and 2008, the effect of approximately 2,583,000, 2,350,000, and 2,286,000,
respectively, of outstanding stock options and other common stock equivalents was excluded from the
calculation of diluted loss per share because the effect was anti-dilutive.

Income (loss) per share calculations for each quarter include the weighted average effect for the quarter;
therefore, the sum of quarterly income (loss) per share amounts may not equal year-to-date income (loss) per
share amounts, which reﬂect the weighted average effect on a year-to-date basis.

Comprehensive Income (Loss)

Comprehensive income (loss) is deﬁned to include all changes in equity except those resulting from
investments by owners and distributions to owners. The Company’s other comprehensive income (loss) is
solely comprised of foreign currency translation adjustments, which relate to investments that are permanent
in nature. To the extent that such amounts relate to investments that are permanent in nature, no adjustments
for income taxes are made.

Stock-Based Compensation

The Company applies the fair value recognition provisions of ASC 718 ‘‘Compensation — Stock

Compensation’’. ASC 718 requires companies to estimate the fair value of share-based payment awards on the
date of grant using an option-pricing model. The Company determines the fair value as of the grant date. For
awards with graded vesting conditions, the values of the awards are determined by valuing each tranche
separately and expensing each tranche over the required service period. For stock options, the Black-Scholes
option pricing model considers, among other factors, the expected life of the award and the expected volatility
of the Company’s stock price.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

The Company determines its assumptions for the Black-Scholes option-pricing model in accordance with

•

The expected term of stock options is estimated using the simpliﬁed method since the Company
currently does not have sufficient stock option exercise history.

The expected risk free interest rate is based on the U.S. Treasury constant maturity interest rate
which term is consistent with the expected term of the stock options.

The expected volatility is based on the historic volatility.

In December 2007, the Securities and Exchange Commission (‘‘SEC’’) staff issued SAB No. 110,
‘‘Certain Assumptions Used In Valuation Methods — Expected Term’’. SAB No. 110 allows companies to
continue to use the simpliﬁed method, as deﬁned in SAB No. 107, to estimate the expected term of stock
options under certain circumstances. The simpliﬁed method for estimating expected term uses the mid-point
between the vesting term and the contractual term of the stock option. The Company has analyzed the
circumstances in which the use of the simpliﬁed method is allowed. The Company has opted to use the
simpliﬁed method for stock options the Company granted in 2008 because management believes that the
Company does not have sufficient historical exercise data to provide a reasonable basis upon which to
estimate the expected term due to the limited period of time the Company shares of common stock have been
publicly traded. There were no stock options granted in 2010 and 2009.

Effect of Recently Issued Accounting Standards

In December 2010, the FASB issued Accounting Standards Update (‘‘ASU’’). 2010-28,

Intangibles — Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts. ASU 2010-28 modiﬁes Step 1 of the goodwill
impairment test such that for reporting units with zero or negative carrying amounts, an entity is required to
perform Step 2 of the goodwill impairment test if it is more likely than not based on an assessment of
qualitative indicators that a goodwill impairment exists. In determining whether it is more likely than not that
goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors
indicating that an impairment may exist. ASU 2010-28 is effective for ﬁscal years, and interim periods within
those years, beginning after December 15, 2010. Early adoption is not permitted. The Company does not
expect adoption of this standard to have a material impact on its consolidated results of operations or ﬁnancial
position.

In January 2010, the FASB issued ASU 2010-06, ‘‘Improving Disclosures about Fair Value

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (continued)

beginning after December 15, 2010 and for interim periods within those ﬁscal years. The Company adopted
ASU 2010-06 effective January 1, 2010. The adoption had no material impact on the Company’s results of
operations or ﬁnancial position.

3. DISCONTINUED OPERATIONS

In the ﬁrst half of 2009, the Company exited Italy and Japan. In accordance with the provision of
ASC 205-20-45 ‘‘Reporting Discontinued Operations’’ the assets, liabilities, and results of operations of the
Italy and Japan operations were reclassiﬁed as discontinued operations.

In the second quarter of 2008, the Company sold substantially all of the assets of Balance Public

Management B.V. (‘‘BPM’’), a division of Balance Ervaring op Projectbasis, B.V. (‘‘Balance’’), to KH Health
Care B.V. (‘‘KHHC’’). In the ﬁrst quarter of 2008, the Company sold substantially all of the assets of Hudson
Americas’ energy, engineering and technical staffing division (‘‘ETS’’) to System One Holdings LLC
(‘‘System One’’).

In the fourth quarter of 2006, the Company sold its Highland Partners executive search business
(‘‘Highland’’) to Heidrick & Struggles International, Inc. As a result of Highland achieving certain revenue
metrics in 2008, the Company received an additional and ﬁnal earn-out payment of $11,625 on April 9, 2009,
which was reﬂected within discontinued operations as a gain from sale of discontinued operations for the year
ended December 31, 2009.

Italy and BPM were part of the Hudson Europe reportable segment, Japan was part of the Hudson Asia

reportable segment, ETS was part of the Hudson Americas reportable segment, and T&I was part of the
Hudson ANZ reportable segment. Highland was a separate reportable segment of the Company at the time of
its sale. The gain or loss on sale and results of operations of the disposed businesses were reported in
discontinued operations in the relevant periods.

Reported results for the discontinued operations were insigniﬁcant for the year ended December 31, 2010.
The reported results for the discontinued operations for the years ended December 31, 2009 and 2008 were as
follows:

Revenue . . . . . . . . . . . . . .
Gross margin . . . . . . . . . .

Operating (loss) income . . .
Other (expense) income . . .
Gain from sale of

discontinued operations . .

Provision for income

taxes(a) . . . . . . . . . . . . .

(Loss) income from

Italy

$
$

432
338

$(2,179)
699

Japan
$ 1,022
986
$

$(2,624)
(247)

—

126

—

For The Year Ended December 31, 2009
ETS
$ —
$383

T&I
$ —
$ —

BPM
$—
$—

Total

Highland
$ — $ 1,454
$ — $ 1,707

$—
—

—

$237
—

$ —
201

$ (104)
(1,111)

$ (4,670)
(458)

—

11,625

3,967

4,153

discontinued operations . .

$(1,606)

$(2,871)

$—

$237

$141

$ 6,443

$ 2,344

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

3. DISCONTINUED OPERATIONS − (continued)

Revenue . . . . . . . . . . . . . .

Italy
$3,862

Gross margin . . . . . . . . . .

$3,694

Operating (loss) income . . .
Other income (expense) . . .
Gain (loss) from sale of

discontinued operations . .
Provision for (beneﬁt from)
income taxes(a). . . . . . . .

(Loss) income from

$ (131)
(247)

—

Japan
$ 5,490

$ 5,452

$(2,448)
458

For The Year Ended December 31, 2008
ETS
$12,956

BPM
$2,827

T&I
$ —

$ 816

$ 469
—

568

$ (3,419)
—

$ —

$ —
(136)

Highland
$ — $25,135

Total

$ — $10,530

$(2,606)
—

$ (8,135)
75

—

2,686

(651)

—

3,410

5,445

1,887

101

—

(202)

(3,239)

(1,393)

discontinued operations . .

$ (438)

$(3,877)

$3,054

$ (4,070)

$ 66

$ 4,043

$ (1,222)

(a)

Income tax expense (beneﬁt) 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 net operating loss carry forwards (‘‘NOLs’’) against taxable proﬁts.

Amounts related to assets and liabilities of discontinued operations were insigniﬁcant as of December 31,

2010 and 2009.

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold and building improvements . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated depreciation and amortization . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2010
$17,510
13,762
31,563
23,502
—
86,337
69,744
$16,593

2009
$19,095
14,635
32,074
24,194
22
90,020
70,587
$19,433

Leasehold improvements included assets classiﬁed under capital leases at December 31, 2010 and 2009
with a cost of $1,022 and $898, respectively, and accumulated amortization of $1,018 and $766, respectively.
The Company had approximately $343 and $2,474 of property and equipment costs incurred, mainly for
computer software development, which had not been placed in service as of December 31, 2010 and 2009,
respectively. Depreciation expense is not recorded for such costs until the properties and equipment are placed
in service.

5. GOODWILL

The Company tests goodwill for impairment at the reporting unit level. A reporting unit is an operating
segment or one level below an operating segment (referred to as a component). A component of an operating
segment is a reporting unit if the component constitutes a business for which discrete ﬁnancial information is
available and segment management regularly reviews the operating results of that component.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

5. GOODWILL − (continued)

To estimate the fair value of a reporting unit, the Company utilized the income approach, a valuation

The Company also considers the market approach, which indicates the fair value of the invested capital

of the Company based on the Company’s market capitalization. We use the quoted market price method to
estimate the fair value of the Company based on the quoted market price in the active markets (NASDAQ).
We estimate the Company’s market capitalization by multiplying the quoted per share market price multiplied
by the number of shares outstanding. As an additional measure, the Company reconciles the aggregate fair
value of all of its reporting units, as determined by the discounted cash ﬂow method, with its total market
capitalization to determine the reasonableness of the fair value calculations.

In 2010, the Company’s ﬁnancial results continued the improvement which began in the latter half of

2009. However, business and economic conditions remained mixed. As a result, the Company performed an
interim test for impairment of the $1,856 ﬁnal purchase price payment for its Tong Zhi (Beijing) Consulting
Service Ltd. and Guangzhou Dong Li Consulting Ltd. (collectively, ‘‘TKA’’) acquisition, which was recorded
as goodwill at June 30, 2010. At the conclusion of its testing, the Company determined that no impairment of
goodwill existed at June 30, 2010. Management updated its testing for impairment as of October 1 (annual
impairment date) and conﬁrmed its earlier determination that no impairment of goodwill existed as of
October 1, 2010.

In July 2009, the Company paid a $1,669 earn-out payment related to the TKA acquisition, which

represented additional purchase price and was recorded as goodwill at June 30, 2009. The prevailing economic
conditions at year end 2008 had not sufficiently improved during the ﬁrst-half of 2009 so the Company
updated its step one and step two procedures for the China reporting unit as of June 30, 2009. The Company
concluded that the entire amount of recorded goodwill was impaired and consequently recorded an impairment
charge of $1,669, which is included in the results for the year ended December 31, 2009 in the accompanying
Consolidated Statements of Operations.

In the fourth quarter of 2008, the Company determined that goodwill was impaired at all of its reporting

units and recorded an impairment charge of $64,495. In connection with its testing, management also
determined that certain intangible assets were impaired and recorded an additional impairment charge of $368.
The total charges of $64,863 have been recorded under the caption of ‘‘Goodwill and other impairment
charges’’ in the accompanying Consolidated Statements of Operations.

The foregoing impairment tests in the determination of the fair value of a reporting unit is judgmental in

nature and involves the use of signiﬁcant estimates and assumptions that the Company believes to be
reasonable based on current circumstances. Therefore, any value ultimately derived may differ from the
Company’s estimate of fair value.

Additionally in 2008, the Company evaluated the recoverability of other long-term assets and recorded an

impairment charge of $2,224, which was also recorded under the caption of ‘‘Goodwill and other impairment
charges’’ in the accompanying Consolidated Statements of Operations.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

5. GOODWILL − (continued)

A summary of changes in the Company’s goodwill by reportable segment follows. Additions in 2010,

2009 and 2008 reﬂect acquisitions and purchase price adjustments made during that year.

Hudson Asia . . . . . . . . . . . . . .

December 31,
2009
$—
$—

Additions and
adjustments
$1,856
$1,856

December 31,
2008
$—
$—

Additions and
adjustments
$1,669
$1,669

Impairments
$—
$—

Impairments
$(1,669)
$(1,669)

Currency
translation
$53
$53

Currency
translation
$—
$—

December 31,
2010
$1,909
$1,909

December 31,
2009
$—
$—

6. FAIR VALUE MEASUREMENTS

In connection with the sale of the assets of Hudson Americas’ ETS business in 2008, the Company

received warrants, which under certain circumstances, can be converted into cash. These warrants are
considered derivative instruments which require fair value measurement. As per ASC 815 ‘‘Derivatives and
Hedging,’’ these derivative instruments are considered undesignated derivative instruments. The Company
determined the fair value of these instruments using signiﬁcant unobservable inputs (level 3) as deﬁned in
ASC 820 ‘‘Fair value Measurements and Disclosures.’’

The Company did not have derivative instruments as of December 31, 2010. As of December 31, 2009,

the carrying and fair value of warrant of $488 was included under the caption ‘‘Prepaid and other’’ in the
Consolidated Balance Sheets. The changes in the fair value of the warrants of $1,165, $488 and $0 for the
years ended December 31, 2010, 2009 and 2008, respectively, were included in the Consolidated Statement of
Operations under the caption ‘‘Other income (expense)’’. For the year ended December 31, 2010, the
Company received $1,650 of cash from the sale of the warrants, which were reported under the caption
‘‘Proceeds from notes and sales of warrants’’ in the Consolidated Statements of Cash Flows.

7. BUSINESS REORGANIZATION EXPENSES

The Company’s Board of Directors (the ‘‘Board’’) approved reorganization plans in 2009 (‘‘2009 Plan’’),

2008 (‘‘2008 Plan’’), and 2006 (‘‘2006 Plan’’) to streamline the Company’s support operations and included
actions to reduce support functions to match them to the scale of the business, to exit underutilized properties
and to eliminate contracts for certain discontinued services. These actions resulted in costs for lease
termination payments, employee termination beneﬁts and contract cancellations. The 2009 Plan provided for
up to $19,000 for restructuring actions. For the year ended December 31, 2010, the Company incurred
$1,701 of business reorganization expenses of which $227, $73 and $1,401 were related to changes in
estimate for previously accrued liabilities of the 2009 Plan, 2008 Plan and 2006 Plan, respectively.

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
Company’s Consolidated Statements of Operations. Amounts in the ‘‘Payments’’ column represent the cash
payments associated with the reorganization programs. Changes in the accrued business reorganization
expenses for the year ended December 31, 2010 were as follows:

Year Ended December 31, 2010
Lease termination payments . . . . . .
Employee termination beneﬁts . . . .
Contract cancellation costs . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .

December 31,
2009
$4,897
4,100
134
$9,131

Changes in
Estimate
$1,472
222
7
$1,701

Additional
Charges
$—
—
—
$—

Payments
$(3,993)
(3,672)
(38)
$(7,703)

December 31,
2010
$2,376
650
103
$3,129

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

7. BUSINESS REORGANIZATION EXPENSES − (continued)

Lease Termination Payments

During the year ended December 31, 2010, the Company recorded expenses for the 2009 Plan, the 2008
Plan and the 2006 Plan of $1,472 primarily for leases in Hudson Europe of approximately $1,347. During the
year ended December 31, 2009, the Company recorded expenses for the 2009 Plan of $4,193 primarily for
leases in Hudson Europe of $2,685 and Hudson Americas of $1,048, and for the 2008 Plan of $991 for leases
in Hudson ANZ. During the year ended December 31, 2008, the Company recorded expenses for the 2008
Plan of $1,489 for leases in Hudson ANZ, Hudson Americas, and Hudson Asia.

As of December 31, 2010, the remaining accrual related to approximately 20 locations and will be paid
over the remaining lease terms, which have various expiration dates up until 2012. The estimated payments
for 2011 are $1,868.

Employee Termination Beneﬁts

During the year ended December 31, 2010, the Company recorded expenses for the 2009 Plan and the
2008 Plan of $222 primarily for workforce reductions in Hudson Europe, Hudson ANZ and Hudson Americas.
During the year ended December 31, 2009, the Company recorded expenses for the 2009 Plan of $12,437 for
workforce reductions in Hudson Europe ($6,888), Hudson ANZ ($1,516) and Hudson Americas ($3,910), and
the 2008 Plan of $288 for workforce reductions in Hudson Europe, Hudson ANZ, and Hudson America.
During the year ended December 31, 2008, the Company recorded expenses for the 2008 Plan of $9,594 for
workforce reductions in Hudson Europe ($3,257), Hudson ANZ ($2,737), Hudson America ($2,072), Hudson
Asia ($478) and Corporate ($1,050). As of December 31, 2010, the workforce reduction accrual related to
settlements and termination payments for 22 former employees, which are all payable in 2011.

Contract Cancellation Costs

During the year ended December 31, 2010, the Company’s contract cancellation costs incurred in
connection with the 2009 Plans and 2008 Plan were insigniﬁcant. During the year ended December 31, 2009,
the Company recorded charges of $343 for professional fees under the 2009 Plan in association with contract
cancellations and $84 for professional fees under the 2008 Plan in association with contract cancellations.
During the year ended December 31, 2008, the Company recorded additional charges of $626 for the 2008
Plan. The accrual at December 31, 2010 was included in current liabilities.

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

Salaries, commissions and beneﬁts . . . . . . . . . . . . . . . . . . . . . . . . .
Sales, use and income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees for professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accruals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2010
$42,008
13,244
2,149
1,897
15,692
$74,990

2009
$29,211
9,928
2,646
1,961
10,357
$54,103

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

9. STOCK-BASED COMPENSATION AND STOCK COMPENSATION PLANS

Incentive Compensation Plan

The Company maintains the Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan (the

‘‘ISAP’’) to award equity-based compensation incentives to eligible participants. The ISAP permits the
granting of stock options and restricted stock as well as other types of equity-based awards. The
Compensation Committee of the Board will establish such conditions as it deems appropriate on the granting
or vesting of stock options or restricted stock. While the Company historically granted both stock options and
restricted stock to its employees, since 2008 the Company has granted primarily restricted stock to its
employees. In rare cases, the Company grants stock options to certain of its executive employees at the time
of hire.

The ISAP provides an aggregate of 1,600,000 shares of the Company’s common stock for issuance to

participants. The Compensation Committee of the Board administers the ISAP and may designate as a
participant under the ISAP any employee or director of the Company and independent contractor who
provides services to the Company. As of December 31, 2010, there were approximately 887,000 shares
available for future issuance. All options granted have a contractual term of ten years. Unvested options
outstanding have vesting periods of four years that vest 25% on each of the four annual anniversary dates.
Unvested restricted stock awards outstanding have vesting periods of four years that vest 25% on each of the
four annual anniversary dates, three years that vest 33% on each of the three annual anniversary dates,
two years that vest 50% on each of the annual anniversary dates, vest based on the stock price of the
Company up to the ﬁfth anniversary date from issuance, or vest based on the performance of the Company up
to the ﬁfth anniversary date from issuance (see section ‘‘Restricted Stock’’ below for detail).

Stock-based Compensation

The Company recognized expenses of $1,724, $999 and $4,701 in the years ended December 31, 2010,
2009, and 2008 respectively, for stock options, restricted stock and stock under the employee stock purchase
plan. These expenses are included in selling, general and administrative expenses. In accordance with
ASC 718, the Company reﬂects the tax savings resulting from tax deductions in excess of income tax beneﬁts
as a ﬁnancing cash ﬂow in its Consolidated Statement of Cash Flows rather than as an operating cash ﬂow as
in prior periods. The Company recognized a current tax beneﬁt for the years ended December 31, 2010, 2009,
and 2008, of $132, $100 and $434, respectively, in certain foreign jurisdictions where the Company has
taxable income. As of December 31, 2010, unrecognized compensation expense related to the unvested portion
of the Company’s stock options and restricted stock awards, based on the Company’s historical valuation
treatment, was $36 and $1,702, respectively, and was expected to be recognized over a weighted average
period of 1.2 years and 1.7 years, respectively. All share issuances related to stock compensation plans are
issued from unissued shares of stockholder approved compensation plans.

Stock Options

The fair value of stock options granted is estimated on the date of grant using a Black-Scholes option
pricing model. Expected volatilities are calculated based on the historical volatility of the Company’s stock.
Management monitors stock option exercise and employee termination patterns to estimate forfeiture rates.
The Company analyzed its historical forfeiture rate, the remaining lives of unvested options and the amount of
vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is
materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-
based compensation expense could be signiﬁcantly different from what was recorded in the current periods.
The risk-free interest rate is based on the U.S. Treasury, the term of which is consistent with the expected
term of the option. Volatility is determined using historical prices to estimate the expected future ﬂuctuations
in the Company’s share price. The dividend rate is assumed to be zero as the Company has never paid
dividends on its common stock and does not anticipate paying dividends in the foreseeable future. For awards

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

9. STOCK-BASED COMPENSATION AND STOCK COMPENSATION PLANS − (continued)

with graded vesting conditions, the values of the awards are determined by valuing each tranche separately
and expensing each tranche over the required service period.

In December 2007, the SEC staff issued SAB 110, which allows companies to continue to use the
simpliﬁed method, as deﬁned in SAB 107, to estimate the expected term of stock options under certain
circumstances. The simpliﬁed method for estimating expected term uses the mid-point between the vesting
term and the contractual term of the stock option. The Company has analyzed the circumstances in which the
use of the simpliﬁed method is allowed. The Company has opted to use the simpliﬁed method for stock
options the Company granted in 2008 because management believes that the Company does not have
sufficient historical exercise data to provide a reasonable basis for a better estimate of the expected term of
stock options. There were no stock options granted in 2010 and 2009.

The following were the weighted average assumptions used to determine the fair value of stock options

granted by the Company and the details of option activity as of and for the respective periods:

For the years ended December 31,
2009

2008

2010

Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . .
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average fair value of options granted during

the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)

2.9%
58.0%
6.3
0.0%

$ (a)

$2.99

(a) Stock option assumptions were not provided above because there were no option granting activities for

the years ended December 31, 2010 and 2009.

Changes in the Company’s stock options for the ﬁscal year ended December 31, 2010 were as follows:

Options outstanding, beginning of year . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . .

Number of
Options
Outstanding
1,763,250
(17,625)
(197,325)
1,548,300

Weighted
Average
Exercise Price
per Share
$12.79
15.96
13.67
12.64

Options exercisable at December 31, 2010 . . . . . . . . . . . . . . . . . . .

1,508,000

$12.71

The weighted average remaining contractual term and the aggregated intrinsic value for stock options
outstanding as of December 31, 2010 was approximately 4.1 years and $0, respectively. The weighted average
remaining contractual term and the aggregated intrinsic value for options exercisable as of December 31, 2010
was 3.9 years and $0, respectively. The total intrinsic value for stock options exercised, based on the closing
price of the Company’s common stock during the years ended December 31, 2010, 2009, and 2008 was $0,
$0, and $120, respectively.

There were no cash proceeds from the exercise of stock options for the year ended December 31, 2010,

and there were no associated income tax beneﬁts. The total fair value of stock options vested during the years
ended December 31, 2010, 2009, and 2008, was $862, $3,793, and $5,155, respectively.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

9. STOCK-BASED COMPENSATION AND STOCK COMPENSATION PLANS − (continued)

Restricted Stock

During the year ended December 31, 2010, the Company granted 597,732 shares of restricted stock to

various employees. Shares of restricted stock with only service-based vesting conditions and shares of
restricted stock with performance vesting conditions are valued at the closing market value of the Company’s
common stock on the date of grant. The Company recognizes compensation cost for the awards with
performance conditions if and when the Company concludes that it is probable that the performance condition
will be achieved. Of the 597,732 shares granted, (i) 17,567 shares vested immediately, (ii) 229,832 shares vest
ratably over a three year period from the date of grant with only service-based conditions, (iii) 65,000 shares
vest ratably over a four year period from the date of grant with only service-based conditions, (iv) 240,333
shares vest ratably over a three year period from the date of grant based on performance of the Company’s
Gross Margin and Earnings Before Interest, Income Taxes, Depreciation and Amortization (‘‘EBITDA’’), and
(v) 45,000 shares vest in full on April 1, 2013.

The Company treated its restricted stock awards to employees as having been issued and measured at the
fair market value on the date of grant. The Company may grant restricted stock to employees under the ISAP.
These shares are provided at no cost to the employee.

Changes in the Company’s restricted stock for the year ended December 31, 2010 were as follows:

Nonvested restricted stock, beginning of year . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested restricted stock at December 31, 2010 . . . . . . . . . . . . . . .

Number of
Shares of
Restricted
Stock
531,083
597,732
(111,112)
(64,666)
953,037

Weighted
Average
Grant-Date
Fair Value
$2.70
4.56
4.33
3.19
$3.64

The total fair value of restricted shares vested during the years ended December 31, 2010, 2009, and

2008, was $481, $1,496 and $1,746, respectively.

Employee Stock Purchase Plan

The Company suspended the Hudson Highland Group, Inc. Employee Stock Purchase Plan (the ‘‘ESPP’’)

effective January 1, 2009. Prior to the suspension of the ESPP, eligible employees could purchase shares of
the Company’s 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
were limited to $25 in any calendar year. ESPP purchase dates were generally every six months ended
June 30 and December 31. The Company values its ESPP using the Black-Scholes option pricing model. The
risk-free interest rate is based on the U.S. Treasury six-month or one-year rate in effect at the time of the
grant. Volatility is determined using historical prices of six-months or one-year prior to the date of grant to
estimate the expected future ﬂuctuations in the Company’s share price. The dividend rate is assumed to be
zero as the Company has never paid dividends on its common stock and does not anticipate paying dividends
in the foreseeable future.

Because the Company suspended the ESPP, there was no expense for the years ended December 31,
2010 and 2009. The Company recognized $858 of stock-based compensation related to shares purchased
under the ESPP for the year ended December 31, 2008, as salaries and related expense. The Company issued
292,475 shares of common stock pursuant to the ESPP at an average price of $5.60 per share in 2008.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

9. STOCK-BASED COMPENSATION AND STOCK COMPENSATION PLANS − (continued)

The Company also suspended the Hudson Global Resources Share Incentive Plan (the ‘‘SIP’’) for the
United Kingdom subsidiary effective December 11, 2008. Under the SIP, a stock purchase plan for its U.K.
employees, eligible employees could purchase shares on the open market at the end of each month. The
Company matched the employee purchases with a contribution of shares equal to 50% of the number of
employee shares purchased. The Company did not issue any shares in connection with the SIP in 2010 and
2009. The Company issued 4,080 shares of common stock pursuant to the SIP in 2008. Shares were issued
under the SIP from the ESPP share reserve.

As of December 31, 2010 and 2009, the Company had 116,000 shares reserved for future share issuances

under the ESPP and SIP.

For all share plans described above, the Company has issued new shares of the Company’s common

stock only from stockholder approved stock compensation plans.

Deﬁned Contribution Plans

The Company maintains the Hudson Highland Group, Inc. 401(k) Savings Plan (the ‘‘401(k) plan’’). The
401(k) plan allows eligible employees to contribute up to 15% of their earnings to the 401(k) plan subject to
the limitations of the Employee Retirement Income Security Act of 1974. The Company matches employees’
contributions up to 3% through a contribution of the Company’s common stock. Vesting of the Company’s
contribution occurs over a ﬁve-year period. Expense for this plan for the years ended December 31, 2010,
2009 and 2008 was $610, $622, and $1,053, respectively. This expense is included in ‘‘income from
continuing operation’s’’ in the Consolidated Statement of Operations. In March 2010, the Company issued
121,016 shares of its common stock with a value of $541 plus cash of $111 to satisfy the 2009 contribution
liability to the 401(k) plan. In March 2009, the Company issued 1,318,161 shares of its common stock with a
value of $1,226 to satisfy the 2008 contribution liability to the 401(k) plan. In March 2008, the Company
issued 140,051 shares of its common stock with a value of $1,156 to satisfy the 2007 contribution liability to
the 401(k) plan.

10. PROVISION FOR INCOME TAXES

The domestic and foreign components of (loss) income before income taxes from continuing operations:

Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before provision for income

Year ended December 31,
2009
$(25,080)
(23,623)

2008
$(64,887)
(1,528)

2010
$(2,363)
(596)

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(2,959)

$(48,703)

$(66,415)

The (beneﬁt from) provision for income taxes from continuing operations was as follows:

Current tax provision (beneﬁt):

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax (beneﬁt) provision

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,
2009

2008

2010

$ —
(819)
2,524
1,705

—
—
(223)
(223)
$1,482

$(3,700)
115
1,376
(2,209)

—
—
(3,541)
(3,541)
$(5,750)

254
(1,180)
8,518
7,592

—
—
(911)
(911)
$ 6,681

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

10. PROVISION FOR INCOME TAXES − (continued)

Deferred income taxes are provided for the tax effect of temporary differences between the ﬁnancial

reporting basis and the tax basis of assets and liabilities. Signiﬁcant temporary differences at December 31,
2010 and 2009 were:

Current deferred tax assets:

Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current deferred tax assets (liabilities):

Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities and other liabilities . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current deferred tax asset (liability) . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2010

2009

572
(428)
2,162
3,597
152
6,055
(739)
5,316

721
(220)
2,912
2,348
144
5,905
(1,022)
4,883

2,540
22,584
1,342
4,238
1,786
130,155
162,645
(154,329)
8,316
$ 13,632

1,155
26,864
2,018
4,136
2,586
121,346
158,105
(151,077)
7,028
$ 11,911

Net deferred tax assets were included in other current assets and other assets in the accompanying

Consolidated Balance Sheets.

At December 31, 2010, the Company had net operating losses (‘‘NOLs’’) for U.S. Federal tax purposes
of approximately $277,749. This amount includes a deduction in the amount of $4,521 attributable to stock
options and restricted stock that is not being reﬂected in the NOL carry-forward for deferred tax assets until
such time as the deduction reduces U.S. income tax payable and approximately $16,584 of tax losses that
were not absorbed by Monster on its consolidated U.S. Federal tax returns through the Distribution Date,
which expire through 2030. These losses included pre-acquisition losses of certain acquired companies and are
subject to an annual limitation on the amount that can be utilized. As of December 31, 2010, certain
international subsidiaries had NOLs for local tax purposes of $84,958. With the exception of $69,053 of
NOLs with an indeﬁnite carry forward period as of December 31, 2010, these losses will expire at various
dates through 2030, with $2,442 scheduled to expire during 2011.

Tax years with NOLs remain open until the losses expire or the statutes of limitations for those years
expire. The open tax years are 2007 through 2010 for the U.S. Federal and 2005 through 2010 for most state
and local jurisdictions, 2009 through 2010 for the U.K., 2000 through 2003 and 2006 through 2010 for
Australia and 2003 through 2010 for most other jurisdictions. The Company is currently under income tax
examination in Belgium (2009), France (2006 − 2008) and the State of Pennsylvania (2004 − 2005). The
Company is also subject to income tax examinations in numerous other states, local and foreign jurisdictions.
The Company believes that its tax reserves are adequate for all years subject to examination.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

10. PROVISION FOR INCOME TAXES − (continued)

ASC 740-10-30-5 requires that a valuation allowance be established when it is more likely than not that
all or a portion of a deferred tax asset will not be realized. In making this assessment, management considers
the level of historical taxable income, scheduled reversal of deferred tax liabilities, tax planning strategies, and
projected future taxable income. The valuation allowance of $124,552 relates to the deferred tax asset for
NOLs, $105,544 of which is U.S. Federal and state, and $19,008 of which is foreign, that management has
determined will more likely than not expire prior to realization, and $30,516 which relates to deferred tax
assets on U.S. and foreign temporary differences that management estimates will not be realized due to the
Company’s U.S. and foreign tax losses.

The following table shows a reconciliation of the beginning and ending amounts of unrecognized tax

beneﬁts, exclusive of interest and penalties (in thousands):

Balance at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency Translation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,514
437
391
(246)
(180)
(624)
116
$6,408

The Company had $8,303 and $8,528 of unrecognized tax beneﬁts, including interest and penalties, at

December 31, 2010 and 2009, respectively, which if recognized, would affect its effective tax rate. These
unrecognized tax beneﬁts are related to tax positions in jurisdictions in which the Company does not have tax
losses to offset the tax liability with respect to the uncertain tax positions. During 2010, the income tax audits
and examinations noted above remained pending. On the basis of the information available in this regard as of
December 31, 2010, it is reasonably possible that a reduction in the range of $1,400 to $4,700 of
unrecognized tax beneﬁts may occur in 2011 as a result of projected resolutions of global tax examinations
and controversies or by lapsing statutes of limitations.

Earnings from the Company’s global operations are subject to tax in various jurisdictions both within and

outside the United States. The Company provides tax reserves for U.S. Federal, state, local and international
unrecognized tax beneﬁts for all periods subject to audit. The development of reserves for these exposures
requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate. The
Company assesses its tax positions and records tax beneﬁts for all years subject to examination based upon
management’s evaluation of the facts, circumstances, and information available at the reporting dates. For
those tax positions where it is more-likely-than-not that a tax beneﬁt will be sustained, the Company has
recorded the largest amount of tax beneﬁt with a greater than 50% likelihood of being realized upon
settlement with a tax authority that has full knowledge of all relevant information. For those tax positions
where it is not more-likely-than-not that a tax beneﬁt will be sustained, no tax beneﬁt has been recognized in
the ﬁnancial statements. Where applicable, associated interest and penalties have also been recognized.
Although the outcome related to these exposures is uncertain, in management’s opinion, adequate provisions
for income taxes have been made for estimable potential liabilities emanating from these exposures. In certain
circumstances, the ultimate outcome for exposures and risks involve signiﬁcant uncertainties which render
them inestimable. If actual outcomes differ materially from these estimates, including those that cannot be
quantiﬁed, they could have material impact on the Company’s results of operations.

The Company recognizes interest accrued and penalties related to unrecognized tax beneﬁts in tax
expense. The Company recognized net beneﬁts of approximately $93, an expense of $320 and net beneﬁts of
$201 in interest and penalties for 2010, 2009 and 2008, respectively. At December 31, 2010 and 2009, the

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

10. PROVISION FOR INCOME TAXES − (continued)

Company had accrued approximately $1,895 and $2,014 for the payment of interest and penalties, respectively
which if recognized in the future, would affect the annual effective income tax rate as of December 31, 2010
and 2009.

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 repatriations of foreign
proﬁts. The following is a reconciliation of the effective tax rate from continuing operations for the years
ended December 31, 2010, 2009 and 2008 to the U.S. Federal statutory rate of 35%:

(Beneﬁt from) provision for continuing operations at Federal

statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of Federal income tax effect . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . .
Non-deductible goodwill impairment charges . . . . . . . . . . . .
Taxes related to foreign income . . . . . . . . . . . . . . . . . . . . .
Nondeductible expenses and others . . . . . . . . . . . . . . . . . . .
(Beneﬁt from) provision for income tax . . . . . . . . . . . . . . . .

Year ended December 31,
2009

2008

2010

$(1,036)
(532)
2,970
—
(467)
547
$ 1,482

$(17,046)
75
8,060
600
1,004
1,557
$ (5,750)

$(23,244)
(767)
16,990
9,338
(40)
4,404
$ 6,681

Federal income and foreign withholding taxes have not been provided on the undistributed earnings of

foreign subsidiaries at December 31, 2010. The Company intends to reinvest these earnings in its foreign
operations indeﬁnitely, except where it is able to repatriate these earnings to the United States without a
material incremental tax provision. The determination and estimation of the future income tax consequences in
all relevant taxing jurisdictions involves the application of highly complex tax laws in the countries involved,
particularly in the United States, and is based on the tax proﬁle of the Company in the year of earnings
repatriation. Accordingly, it is not practicable to determine the amount of tax associated with such
undistributed earnings.

The Company had a net current income tax payable of $698 and a net current income tax payable of

$241 at December 31, 2010 and 2009, respectively.

11. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases facilities and equipment under operating leases that expire at various dates through
2027. Some of the operating leases provide for increasing rents over the term of the lease. Total rent expense
under these leases is recognized ratably over the lease terms. As of December 31, 2010, future minimum lease
commitments under non-cancelable operating leases, which will be expensed as direct costs (for contractor
project space) and office and general expenses, were as follows:

2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 27,256
22,614
17,964
15,171
12,769
39,996
$135,770

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

11. COMMITMENTS AND CONTINGENCIES − (continued)

Rent and related expenses for operating leases of facilities and equipment recorded under the caption
‘‘Office and general’’ in the accompanying Consolidated Statements of Operations were $19,285, $21,397, and
$26,024 for the years ended December 31, 2010, 2009, and 2008, respectively. Commitments based in
currencies other than U.S. dollars were translated using exchange rates as of December 31, 2010. The
Company is the guarantor of one assigned lease for a former Hudson office in the U.K. The guarantee for the
U.K. location is for an assigned lease with approximately $1,076 of annual rent. The Company’s commitment
of guarantee for the U.K. location ends on April 29, 2023.

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. As of December 31, 2010 and 2009, $2,825 and $2,935, respectively, of asset retirement
obligations were included in the Consolidated Balance Sheets, of which $2,627 and $2,935, respectively, were
included under the caption other non-current liabilities.

Consulting, Employment and Non-compete Agreements

The Company has entered into various consulting, employment and non-compete agreements with certain

key management personnel and former owners of acquired businesses. Agreements with key members of
management are generally one year in length, 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.

Litigation and Complaints

The Company is subject, from time to time, to various claims, lawsuits, and other complaints from, for

example, clients, candidates, suppliers, landlords, regulators or tax authorities arising in the ordinary course of
business. The Company routinely monitors claims such as these, and records provisions for losses when the
claim becomes probable and the amount due is estimable. Although the outcome of these claims cannot be
determined, the Company believes that the ﬁnal resolution of these matters will not have a material adverse
effect on the Company’s ﬁnancial condition, results of operations or liquidity.

For matters that have reached the threshold of probable and estimable, the Company has established
reserves for legal, regulatory and other contingent liabilities. The Company’s reserves were not signiﬁcant as
of December 31, 2010 and 2009.

Matters Under Appeal

The Company has an appeal underway with the Commonwealth of Pennsylvania regarding income tax.

All appeals in Pennsylvania carry statutory automatic liens in the amount of the matter. The lien is $3,508 on
the U.S. operating company for which the Company has posted a security bond amounting to 120 percent of
the lien. The Company does not expect this bond to be drawn.

12. RELATED PARTY TRANSACTIONS

After the Distribution Date, the Company was no longer included in Monster’s consolidated group for

United States Federal income tax purposes. The Company and Monster entered into a tax separation
agreement to reﬂect the Company’s separation from Monster with respect to tax matters. The primary purpose
of the tax separation agreement is to reﬂect each party’s rights and obligations relating to payments and
refunds of taxes that are attributable to periods before and including the Distribution date and any taxes
resulting from transactions in connection with the Distribution. The Company has agreed to indemnify
Monster for any tax liability attributable to the Distribution resulting from any action taken by the Company.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

13. FINANCIAL INSTRUMENTS

Credit Agreements

On August 5, 2010, the Company and certain of its North American and U.K. subsidiaries entered into a
senior secured revolving credit facility (the ‘‘Revolver Agreement’’) with RBS Business Capital, a division of
RBS Asset Finance, Inc. (‘‘RBS’’), that provides the Company with the ability to borrow up to $40,000,
including the issuance of letters of credit. The Company may increase the maximum borrowing amount to
$50,000, subject to certain conditions including lender acceptance. Extensions of credit are based on a
percentage of the eligible accounts receivable less required reserves principally related to the U.K. and
North America operations. In connection with the Revolver Agreement, the Company incurred and capitalized
approximately $1,457 of deferred ﬁnancing costs, which are being amortized over the term of the agreement.
As of December 31, 2010, the Company’s borrowing base was $34,569 and the Company was required to
maintain a minimum availability of $10,000. As of December 31, 2010, the Company had no outstanding
borrowings, and $2,679 of outstanding letters of credit issued, under the Revolver Agreement, resulting in the
Company being able to borrow up to an additional $21,890 after deducting the minimum availability,
outstanding borrowings and outstanding letters of credit issued.

The maturity date of the Revolver Agreement is August 5, 2014. Borrowings may initially be made with

The Revolver Agreement contains various restrictions and covenants including (1) a requirement to
maintain a minimum excess availability of $10,000 until such time as for two consecutive ﬁscal quarters
(i) the Company’s Fixed Charge Coverage Ratio is at least 1.2x and (ii) the Company’s North American and
U.K. operations, for the four ﬁscal quarters then ending, have an EBITDA (as deﬁned in the Revolver
Agreement) for such twelve month period of not less than $500 as of the end of each ﬁscal quarter during the
ﬁscal years 2010 and 2011 and $1,000 at the end of each ﬁscal quarter thereafter; thereafter a requirement to
maintain a minimum availability of $5,000, a Fixed Charge Coverage Ratio of at least 1.1x and EBITDA (as
deﬁned in the Revolver Agreement) for the Company’s North American and U.K. operations of at least $500
during the ﬁscal years 2010 and 2011 and $1,000 thereafter; (2) a limit on the payment of dividends of not
more than $5,000 per year and subject to certain conditions; (3) restrictions on the ability of the Company to
make additional borrowings, acquire, merge or otherwise fundamentally change the ownership of the
Company or repurchase the Company’s stock; (4) a limit on investments, and a limit on acquisitions of not
more than $25,000 in cash and $25,000 in non-cash consideration per year, subject to certain conditions set
forth in the Revolver Agreement; and (5) a limit on dispositions of assets of not more than $4,000 per year.
The Company was in compliance with all ﬁnancial covenants under the Revolver Agreement as of
December 31, 2010.

Prior to entering into the Revolver Agreement with RBS, the Company had a primary credit facility (the

‘‘Credit Agreement’’) with WFCF and another lender that provided the Company with the ability to borrow up
to $75,000, including the issuance of letters of credit. In connection with entering into the Revolver
Agreement described above, the Company terminated the Credit Agreement effective August 12, 2010. The
Company repaid the outstanding balance of $10,456 under the Credit Agreement and paid an early termination
fee of $563 on the effective date of termination. The early termination fee is included in the caption ‘‘Fee for
early extinguishment of credit facility’’ in the accompanying Consolidated Statements of Operations. In
addition, the Company recorded a non-cash write-off of $290 of unamortized deferred ﬁnancing costs in
connection with the termination of the Credit Agreement. This charge is included in the caption ‘‘Interest,
net’’ in the accompanying Consolidated Statements of Operations.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

13. FINANCIAL INSTRUMENTS − (continued)

On August 3, 2010, an Australian subsidiary of the Company entered into a Receivables Finance
Agreement and related agreements (the ‘‘Finance Agreement’’) with CBA that provides the Australian
subsidiary with the ability to borrow up to approximately $15,329 (AUD 15,000). Under the terms of the
Finance Agreement, the Australian subsidiary may make offers to CBA to assign its accounts receivable with
recourse, which accounts receivable CBA may in its good faith discretion elect to purchase. As of
December 31, 2010, the Company had $498 (AUD 487) of outstanding borrowings under the Finance
Agreement. Available credit for use under the Finance Agreement as of December 31, 2010 was $14,831
(AUD 14,513).

The Finance Agreement contains various restrictions and covenants for the Australian subsidiary,

including (1) a requirement to maintain a minimum Tangible Net Worth (as deﬁned in the Finance Agreement)
ratio of 70%; (2) a minimum Fixed Charge Coverage Ratio (as deﬁned in the Finance Agreement) of 1.4x for
a trailing twelve month period; and (3) a limitation on certain intercompany payments of expenses, interest
and dividends not to exceed Net Proﬁt After Tax (as deﬁned in the Finance Agreement). The Australian
subsidiary was in compliance with all ﬁnancial covenants under the Finance Agreement as of December 31,
2010.

As of December 31, 2010, the Company had a total of $1,811 of bank guarantees issued by CBA under
the Finance Agreement that were collateralized by a restricted term deposit of an equal amount. See section
‘‘Restricted Cash’’ at Note 2 for details.

The Company also has lending arrangements with local banks through its subsidiaries in Belgium, the
Netherlands, New Zealand, Singapore and China. The aggregate outstanding borrowings under the lending
arrangements in Belgium, the Netherlands and New Zealand were $841 and $0 as of December 31, 2010 and
2009, respectively. As of December 31, 2010, the Belgium and the Netherlands subsidiaries could borrow up
to $5,029 based on an agreed percentage of accounts receivable related to their operations. Borrowings under
the Belgium and the Netherlands lending arrangements may be made with an interest rate based on the
one month EURIBOR plus 2.5%, or about 3.31% at December 31, 2010. The lending arrangements of
Belgium and the Netherlands will expire on May 2, 2011 and May 15, 2011, respectively. In New Zealand,
the Company’s subsidiary can borrow up to $1,947 (NZD2,500) as of December 31, 2010 for working capital
purposes. This lending arrangement expires on March 31, 2012. Interest on borrowings under the
New Zealand lending arrangement is based on a three month cost of funds rate as determined by the bank,
plus a 1.6% margin, and was 6.76% on December 31, 2010. In China, the Company’s subsidiary can borrow
up to $1,000 for working capital purposes. Interest on borrowings under this overdraft facility is based on the
People’s Republic of China’s six month rate, plus 200 basis points, and was 7.6% on December 31, 2010.
There were no outstanding borrowings under this overdraft facility as of December 31, 2010 and 2009. This
overdraft facility expires annually each September, but can be renewed for one year periods at that time.

The Company continues to use the aforementioned credit to support its ongoing global working capital

requirements, capital expenditures and other corporate purposes and to support letters of credit. Letters of
credit and bank guarantees are used primarily to support office leases.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

13. FINANCIAL INSTRUMENTS − (continued)

Acquisition Shelf Registration Statement

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 December 31, 2010, all of the 1,350,000 shares
were available for issuance.

Shelf Registration and Common Stock Offering

In December 2009, the Company ﬁled a shelf registration statement (the ‘‘2009 Shelf Registration’’) with
the SEC to enable it to issue up to $30,000 equivalent of securities or combinations of securities. The types of
securities permitted for issuance under the 2009 Shelf Registration are debt securities, common stock,
preferred stock, warrants, stock purchase contracts and stock purchase units.

On April 6, 2010, the Company issued in a registered public offering under the 2009 Shelf Registration

4,830,000 shares (which includes the exercise of the underwriter’s overallotment option of 630,000 shares) of
common stock at $4.35 per share. Net proceeds to the Company after underwriting discounts and expenses of
the public offering were approximately $19,167.

After this offering, the Company may issue up to $8,990 equivalent of securities or combinations of

securities under the 2009 Shelf Registration.

14. STOCKHOLDER RIGHTS PLAN

On February 2, 2005, the Board declared a dividend of one preferred share purchase right (a ‘‘Right’’)

for each outstanding share of common stock of the Company. The dividend was paid upon the close of
business on February 28, 2005 to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred
Stock, par value $.001 (‘‘Preferred Shares’’), of the Company, at a price of $60 per one one-hundredth of a
Preferred Share, subject to adjustment. If any person becomes a 15% or more stockholder of the Company,
then each Right (subject to certain limitations) will entitle its holder to purchase, at the Right’s then current
exercise price, a number of shares of common stock of the Company or of the acquirer having a market value
at the time of twice the Right’s per share exercise price. The Company’s Board of Directors may redeem the
Rights for $.001 per Right at any time prior to the time when the Rights become exercisable. Unless the
Rights are redeemed, exchanged or terminated earlier, they will expire on February 28, 2015.

15. SEGMENT AND GEOGRAPHIC DATA

The Company operates in four reportable segments: the Hudson regional businesses of Hudson Europe,

Hudson ANZ, Hudson Americas, and Hudson Asia. Corporate expenses are reported separately from the
four reportable segments and pertain to certain functions, such as executive management, corporate
governance, human resources, accounting, administration, tax and treasury, the majority of which are
attributable to and have been allocated to the reportable segments.

Segment information is presented in accordance with ASC 280, ‘‘Segments Reporting.’’ This standard is
based on a management approach that requires segmentation based upon the Company’s internal organization
and disclosure of revenue, certain expenses and operating income based upon internal accounting methods.
The Company’s ﬁnancial reporting systems present various data for management to run the business, including
internal proﬁt and loss statements prepared on a basis not consistent with generally accepted accounting
principles. Accounts receivable, net and long-lived assets are the only signiﬁcant assets separated by segment
for internal reporting purposes.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

15. SEGMENT AND GEOGRAPHIC DATA − (continued)

In the ﬁrst quarter of 2010, the Company revised its reportable segments by segregating the segments of

Hudson ANZ and Hudson Asia (previously included in the results for Hudson Asia Paciﬁc). The Company has
reclassiﬁed prior period information to reﬂect this change to the segment reporting in accordance with the
requirement of ASC 280-10-50-12 to 19, ‘‘Quantitative thresholds.’’

Hudson
Europe

Hudson
ANZ

Hudson
Americas

Hudson
Asia

Corporate

Inter-
segment
elimination

Total

For The Year Ended
December 31, 2010
Revenue, from external

customers . . . . . . . . . $328,491
Inter-segment revenue . .
195
Total revenue . . . . . . . . $328,686

$269,383
—
$269,383

$162,432
(3)
$162,429

$34,236
70
$34,306

$ —
—
$ —

$ —
(262)
$(262)

$794,542
—
$794,542

Gross margin, from

external customers . . . $137,191

$ 88,989

$ 39,417

$32,976

$ —

$298,573

Inter-segment gross

margin . . . . . . . . . . .

125
Total gross margin. . . . . $137,316
Business reorganization

(52)
$ 88,937

(124)
$ 39,293

51
$33,027

—
$ —

—
$298,573

and integration
expenses (recovery) . . $
EBITDA (loss)(a) . . . . . . $
Depreciation and

1,402
1,086

$
$ 4,248

(15) $
$

307
1,687

$ — $ —
$ (5,117)
$ 4,599

$ —
$ —

$
$

1,694
6,503

amortization . . . . . . .

2,789

2,407

2,356

480

152

Interest (expense)

income, net . . . . . . . .

(16)

(39)

(7)

(1,219)

—

8,184

(1,278)

(Loss) income from

continuing operations
before income taxes . . $ (1,719) $ 1,802

Provision for (beneﬁt

(676)

$ 4,122

$ (6,488)

$ —

$ (2,959)

from) income taxes . . $

1,266

$ (1,025) $

(504)

905

840

1,482

As of December 31,

2010

Accounts receivable,

net. . . . . . . . . . . . . . $ 56,275

$ 37,826

$ 26,388

$ 8,087

$ —

$128,576

Long-lived assets, net of

accumulated
depreciation and
amortization . . . . . . . $

4,819

$ 8,152

1,487

$ 2,119

Total assets . . . . . . . . . $ 86,133

$ 58,036

$ 30,130

$19,168

$ 2,248

$12,367

$ —

$ 18,825

$205,834

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

15. SEGMENT AND GEOGRAPHIC DATA − (continued)

Hudson
Europe

Hudson
ANZ

Hudson
Americas

Hudson
Asia

Corporate

Inter-
segment
elimination

Total

For The Year Ended
December 31, 2009
Revenue, from external

customers . . . . . . . . . $276,975
Inter-segment revenue . .
21
Total revenue . . . . . . . . $276,996

$227,169
3
$227,172

$161,872
3
$161,875

$25,133
41
$25,174

Gross margin, from

external customers . . . $124,162

$ 71,689

$ 40,959

$23,643

Inter-segment gross

margin . . . . . . . . . . .

2
Total gross margin. . . . . $124,164
Business reorganization

(15)
$ 71,674

15
$ 40,974

(2)
$23,641

—
—
—

—

—
—

$ —
(68)
$(68)

$691,149
—
$691,149

$ —

$260,453

—
$ —

—
$260,453

and integration
expenses (recovery) . . $

$
EBITDA (loss)(a) . . . . . . $ (9,787) $
Depreciation and

9,682

5,133
$
3,130
(274) $ (11,349)

98
$
$ (551)

137
$
$(13,505)

$ —
$ —

$ 18,180
$ (35,466)

amortization . . . . . . .

4,553

2,568

4,418

Interest income

(expense), net . . . . . .

222

Loss from continuing
operations before
income taxes . . . . . . . $ (14,291) $ (2,620) $ (15,754)

Provision for (beneﬁt

823

181

(992)

—

12,543

(694)

$ (1,360)

$(14,678)

$ —

$ (48,703)

from) income taxes . . $ (2,690) $ (1,037) $

415

908

$ (3,346)

$ (5,750)

As of December 31,

2009

Accounts receivable,

net. . . . . . . . . . . . . . $ 46,834

$ 26,160

$ 20,433

$ 5,566

—

$ —

$ 98,993

Long-lived assets, net of

accumulated
depreciation and
amortization . . . . . . . $

7,345

6,912

2,957

584

$ 2,138

Total assets . . . . . . . . . $ 79,222

$ 45,202

$ 28,509

$12,235

$ 16,776

$ —

$ 19,936

$181,944

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

15. SEGMENT AND GEOGRAPHIC DATA − (continued)

Hudson
Europe

Hudson
ANZ

Hudson
Americas

Hudson
Asia

Corporate

Inter-
segment
elimination

Total

For The Year Ended
December 31, 2008
Revenue, from external

customers . . . . . . . . . $415,871
Inter-segment revenue . .
98
Total revenue . . . . . . . . $415,969

$351,148
5
$351,153

$273,648
266
$273,914

$38,418
264
$38,682

Gross margin, from

external customers . . . $212,603

$130,750

$ 75,016

$36,617

Inter-segment gross

margin . . . . . . . . . . .

(270)
Total gross margin. . . . . $212,333
Business reorganization

(29)
$130,721

268
$ 75,284

250
$36,867

—
—
—

—

—
—

$ — $1,079,085
—
$1,079,085

(633)
$(633)

$ — $ 454,986

(219)
$(219)

—
$ 454,986

and integration
expenses (recovery) . . $
EBITDA (loss)(a) . . . . . . $
Depreciation and

2,863
2,181

3,733
$
$ 12,660

3,062
$
$ (42,604)

562
$
$ (3,440)

997
$
$(21,649)

11,217
$ — $
$ — $ (52,852)

amortization . . . . . . .

5,781

2,945

4,630

1,082

224

Interest income

(expense), net . . . . . .

333

899

458

(32)

(559)

—

14,662

1,099

(Loss) income from

continuing operations
before income taxes . . $ (3,267) $ 10,614

Provision for (beneﬁt

$ (46,776)

$ (4,554)

$(22,432)

$ — $ (66,415)

from) income taxes . . $ 4,401

$ 1,340

$ (1,157)

$ 1,272

$ 25,956

$ 30,947

$ 6,311

825

$ — $

6,681

—

$ — $ 127,169

As of December 31,

2008

Accounts receivable, net. $ 63,955
Long-lived assets, net of

accumulated
depreciation and
amortization . . . . . . . $ 10,323

$ 5,459

6,912

$ 1,121

$ 3,063

$ — $

26,878

Total assets . . . . . . . . . $ 99,673

$ 42,571

$ 42,176

$17,476

$ 29,057

$ — $ 230,953

(a) SEC Regulation S-K 229.10(e)1(ii)(A) deﬁnes EBITDA as earnings before interest, taxes, depreciation
and amortization. EBITDA is presented to provide additional information to investors about the
Company’s operations on a basis consistent with the measures that the Company uses to manage its
operations and evaluate its performance. Management also uses this measurement to evaluate working
capital requirements EBITDA should not be considered in isolation or as a substitute for operating
income and net income prepared in accordance with generally accepted accounting principles or as a
measure of the Company’s proﬁtability.

A summary of revenues for the years ended December 31, 2010, 2009 and 2008 and long-lived assets

and net assets by geographic area as of December 31, 2010, 2009 and 2008 is as follows:

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

15. SEGMENT AND GEOGRAPHIC DATA − (continued)

United
Kingdom

Australia

United
States

Continental
Europe

Other
Asia

Other
Americas

Total

Information by geographic
region
For The Year Ended
December 31, 2010

Revenue(b) . . . . . . . . . $221,538
For The Year Ended
December 31, 2009

Revenue(b) . . . . . . . . . $164,947
For The Year Ended
December 31, 2008

Revenue(b) . . . . . . . . . $255,902
As of December 31,

$232,936

$161,241

$106,954

$ 70,682

$1,191

$ 794,542

$194,976

$160,281

$112,028

$ 57,326

$1,591

$ 691,149

$287,059

$270,139

$159,969

$102,507

$3,509

$1,079,085

2010

Long-lived assets, net
of accumulated
depreciation and
amortization(c) . . . . . $

3,086
Net assets . . . . . . . . . $ 27,636
As of December 31,

2009

Long-lived assets, net
of accumulated
depreciation and
amortization(c) . . . . . $

4,219
Net assets . . . . . . . . . $ 24,458
As of December 31,

2008

Long-lived assets, net
of accumulated
depreciation and
amortization(c) . . . . . $

4,869
Net assets . . . . . . . . . $ 30,552

$ 6,841
$ 23,348

$
3,743
$ 16,947

$
1,725
$ 13,876

$
3,430
$ 10,997

$ — $
$
$ 474

18,825
93,278

$ 5,398
$ 17,184

$
$

5,094
9,456

$
3,127
$ 17,604

$
$

2,098
7,461

$ — $
$
97
$

19,936
76,260

$ 3,680
$ 13,736

9,940
$
$ 30,435

5,454
$
$ 19,112

2,899
$
$ 13,149

35
$
$1,008

26,877
$
$ 107,992

(b) Revenue is generally recorded on a geographic basis according to the location of the operating subsidiary.
(c) Comprised of property and equipment and intangibles. Corporate assets are included in the United States.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

16. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

Year Ended December 31, 2010
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income from continuing operations(e) . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic (loss) earnings per share from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic loss per share from discontinued operations . . . . .
Basic (loss) earnings per share . . . . . . . . . . . . . . . . . .
Diluted (loss) earnings per share from continuing

operations(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted loss per share from discontinued operations(a)
. .
Diluted (loss) earnings per share . . . . . . . . . . . . . . . . .
Basic weighted average shares outstanding . . . . . . . . . .
Diluted weighted average shares outstanding. . . . . . . . .

Year Ended December 31, 2009(b)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations(d). . . . . . . . . . . . . . . .
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic loss per share from continuing operations. . . . . . .
Basic earnings (loss) per share from discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic loss per share . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted loss per share from continuing operations(a) . . . .
Diluted earnings (loss) per share from discontinued

operations(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted loss per share . . . . . . . . . . . . . . . . . . . . . . . .
Basic weighted average shares outstanding . . . . . . . . . .
Diluted weighted average shares outstanding. . . . . . . . .

First
quarter

Second
quarter

Third
quarter

Fourth
quarter(e)

$180,118
$ 66,421
$ (4,312)
$ (4,138)
$ (4,207)

$
$
$

(0.16)
(0.00)
(0.16)

(0.16)
0.00
(0.16)
26,257
26,257

$194,969
$ 74,237
89
$
177
$
229
$

$
$
$

0.01
0.00
0.01

0.01
0.00
0.01
30,947
31,311

$200,394
$ 74,991
$ (1,409)
$ (1,884)
$ (1,898)

$
$
$

(0.06)
(0.00)
(0.06)

(0.06)
0.00
(0.06)
31,225
31,225

$219,061
$ 82,924
14
$
1,404
$
1,191
$

$
$
$

0.04
(0.00)
0.04

0.04
(0.00)
0.04
31,234
31,754

First
quarter

Second
quarter(c)

Third
quarter

Fourth
quarter(d)

$165,150
$ 62,004
$ (19,325)
$ (14,834)
$ (5,559)
(0.59)
$

$
$
$

$
$

0.37
(0.22)
(0.59)

0.37
(0.22)
25,171
25,171

$173,848
$ 64,884
$ (12,396)
$ (15,499)
$ (17,771)
(0.59)
$

$
$
$

$
$

(0.09)
(0.68)
(0.59)

(0.09)
(0.68)
26,311
26,311

$169,647
$ 64,190
$ (8,841)
$ (7,623)
$ (6,853)
(0.29)
$

$
$
$

$
$

0.03
(0.26)
(0.29)

0.03
(0.26)
26,320
26,320

$182,504
$ 69,375
$ (8,891)
$ (4,997)
$ (10,426)
(0.19)
$

$
$
$

$
$

(0.21)
(0.40)
(0.19)

(0.21)
(0.40)
26,329
26,329

(a) Diluted earnings (loss) per share reﬂect the potential dilution from the assumed exercise of all dilutive
potential common shares, primarily stock options. For the ﬁrst and third quarters of 2010, and the ﬁrst,
second, third and fourth quarters of 2009, the effect of approximately 2,771,000, 2,646,000, 2,492,000,
2,277,000, 2,333,000 and 2,350,000, respectively, of outstanding stock options and other common stock
equivalents was excluded from the calculation of diluted earnings (loss) per share because the effect was
anti-dilutive. For the second and fourth quarters of 2010, the effect of approximately 1,588,000 and
1,548,000, respectively, of outstanding stock options with exercise prices greater than the average market
prices for the Company’s common stock was excluded from the calculation of diluted earnings and loss
per share because the effect was anti-dilutive.

HUDSON HIGHLAND GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

16. SELECTED QUARTERLY FINANCIAL DATA (unaudited) − (continued)

(b) The reported quarterly numbers for the quarter ended March 31, 2009 have been restated to reﬂect the
effect of the discontinued operations of Italy operations in 2009 as described in Note 3 ‘‘Discontinued
Operations’’.

(c) The second quarter of 2009 results included impairment charges related to goodwill of $1,669.
(d) The loss from continuing operations for the quarter ended December 31, 2009 includes an income tax

beneﬁt of $4,000 with an offsetting provision for income taxes in income from discontinued operations.
The income tax beneﬁt was related to the $11,625 ﬁnal earn-out payment received in April 2009 in
connection with the sale of Highland Partners in 2006. The earn-out payment was recorded as a gain
from sale of discontinued operations in the quarter ended March 31, 2009. The incremental tax beneﬁt/
provision should have been recorded in that quarter but at that time it was recorded at nil for both the
loss from continuing operations and discontinued operations as a result of the Company’s NOL. The
amounts recorded in the fourth quarter adjusted the tax allocation used in the ﬁrst quarter with no
resulting impact to net loss in either period. The Company does not believe the adjustment is material to
either period.
Income from continuing operations for the quarter ended December 31, 2010 includes a pretax
adjustment of $1,172 and associated tax beneﬁt of $299 for previously unrecorded employer payroll taxes
in the Netherlands. The adjustment relates to 2009 and the ﬁrst three quarters of 2010. The pretax impact
arising in 2009 and the ﬁrst three quarters of 2010 was $667 and $505, respectively, with associated tax
beneﬁt of $170 and $129, respectively. The Company does not believe these adjustments are material to
either period.

(e)

Earnings (loss) per share calculations for each quarter include the weighted average effect for the quarter;

therefore, the sum of quarterly loss per share amounts may not equal year-to-date earnings (loss) per share
amounts, which reﬂect the weighted average effect on a year-to-date basis.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chairman and Chief Executive

Officer and its Executive Vice President and Chief Financial Officer, has conducted an evaluation of the
design and operation of the Company’s disclosure controls and procedures, as such term is deﬁned under
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the
Company’s Chairman and Chief Executive Officer and its Executive Vice President and Chief Financial
Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31,
2010.

Management’s Annual Report on Internal Control Over Financial Reporting

The report of management required under this Item 9A is contained in Item 8 of this Annual Report on
Form 10-K under the caption ‘‘Management’s Annual Report on Internal Control Over Financial Reporting’’
on page 45.

Report of Independent Registered Public Accounting Firm

The attestation report required under this Item 9A is contained in Item 8 of this Annual Report on
Form 10-K under the caption ‘‘Report of Independent Registered Public Accounting Firm’’ on page 46.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over ﬁnancial reporting that occurred during

the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over ﬁnancial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information included under the captions ‘‘Election of Directors,’’ ‘‘Board of Directors and Corporate

Governance’’ and ‘‘Section 16(a) Beneﬁcial Ownership Reporting Compliance’’ in the Company’s deﬁnitive
proxy statement, which is expected to be ﬁled pursuant to Regulation 14A within 120 days following the end
of the ﬁscal year covered by this report (the ‘‘Proxy Statement’’), is hereby incorporated by reference. The
information required by Item 10 with respect to our Executive Officers is included in Part I of this Annual
Report on Form 10-K.

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees and a Code
of Ethics for the Chief Executive Officer and the Senior Financial and Accounting Officers. We have posted a
copy of the Code of Business Conduct and Ethics and the Code of Ethics on our Web site at
www.hudson.com. The Code of Business Conduct and Ethics and the Code of Ethics are also available in print
to any stockholder who requests them in writing from the Corporate Secretary at 560 Lexington Avenue,
5th Floor, New York, New York 10022. We intend to satisfy the disclosure requirements under Item 5.05 of
Form 8-K regarding amendments to, or waivers from, our Code of Ethics by posting such information on our
Web site at www.hudson.com. We are not including the information contained on our Web site as part of, or
incorporating it by reference into, this report.

ITEM 11. EXECUTIVE COMPENSATION

The information required in Item 11 is incorporated by reference to the information in the Proxy

Statement under the captions ‘‘Director Compensation’’, ‘‘Compensation Discussion and Analysis’’,
‘‘Compensation Committee Report’’ and ‘‘Executive Compensation.’’

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required in Item 12 is incorporated by reference to the information in the Proxy

Statement under the caption ‘‘Principal Stockholders.’’

Equity Compensation Plan Information

The following table presents information on the Company’s equity compensation plans as of

December 31, 2010.

Number of shares to
be issued upon
exercise of
outstanding options
A

Weighted average
exercise price of
outstanding options
B

Number of shares
remaining available for
future issuance under
equity compensation
plans (excluding shares
reﬂected in Column A)
C

Equity Compensation Plans approved by

stockholders:
Long Term Incentive Plan. . . . . . . . . . .
2009 Incentive Stock and Awards Plan . .
Employee Stock Purchase Plan . . . . . . .

Equity Compensation Plans not approved

by stockholders: . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,548,300
—
—

—
1,548,300

$12.64
—
—

—
$12.64

—(1)
886,910(1)
116,329(2)

—
1,003,239

(1) Excludes 1,034,602,shares of restricted common stock previously issued under the Hudson Highland

Group, Inc. Long Term Incentive Plan and 2009 Incentive Stock and Awards Plan.

(2) The Company suspended the Hudson Highland Group, Inc. Employee Stock Purchase Plan (the ‘‘ESPP’’)

effective January 1, 2009.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required in Item 13 is incorporated by reference to the information in the Proxy
Statement under the captions ‘‘Board of Directors and Corporate Governance — Independent Directors’’ and
‘‘Board of Directors and Corporate Governance — Policies and Procedures Regarding Related Person
Transactions.’’

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required in Item 14 is incorporated by reference to the information in the Proxy
Statement under the caption ‘‘Ratiﬁcation of the Appointment of KPMG LLP as Independent Registered
Public Accounting Firm.’’

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

(a) 1. Financial statements — The following ﬁnancial statements and the reports of independent registered

public accounting ﬁrms are contained in Item 8.

Reports of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008 .

Consolidated Balance Sheets as of December 31, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008 .

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31,

2010, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

2. Financial statement schedules

Schedule I — Condensed Financial Information of Registrant

Schedule II — Valuation and qualifying accounts and reserves.

All other schedules are omitted since the required information is not present, or is not present in amounts

sufficient to require submission of the schedule, or because the information required is included in the
consolidated ﬁnancial statements and the notes thereto.

3. Exhibits — The exhibits listed in the accompanying index to exhibits are ﬁled as part of this Annual

Report on Form 10-K.

HUDSON HIGHLAND GROUP, INC.

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS (PARENT COMPANY ONLY)
(in thousands)

Year Ended December 31,
2009

2008

2010

Operating expenses:

Selling, general and administrative expenses . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Business reorganization and integration expenses . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 18,848
152
—
(19,000)

Other (expense) income:

Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate costs allocation and other, net . . . . . . . . . . . . . . . .
Equity in earnings (losses) of subsidiaries, net of income taxes.
Fee for early extinguishment of credit facility . . . . . . . . . . . .

Loss from continuing operations before provision for income

7,268
14,293
(5,599)
(563)

(3,601)
840
(4,441)
(244)
$ (4,685)

$ 17,028
181
137
(17,346)

6,372
3,661
(38,960)
—

(46,273)
(3,321)
(42,952)
2,343
$(40,609)

$ 28,276
224
997
(29,497)

5,913
7,675
(56,361)
—

(72,270)
825
(73,095)
(1,223)
$(74,318)

See notes to condensed ﬁnancial statements

HUDSON HIGHLAND GROUP, INC.

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED BALANCE SHEETS (PARENT COMPANY ONLY)
(in thousands, except per share amounts)

December 31,

2010

2009

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in and advances to/from subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable, accrued expenses and other current liabilities . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent and other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,424
961
7,385
2,248
90,190
2,179
$102,002

6,457
—
6,457
2,267
8,724
93,278
$102,002

$11,142
1,596
12,738
2,682
75,714
1,892
$93,026

$ 3,168
10,666
13,834
2,932
16,766
76,260
$93,026

See notes to condensed ﬁnancial statements

HUDSON HIGHLAND GROUP, INC.

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)
(in thousands)

For the Years Ended December 31,
2009

2008

2010

Cash ﬂows from operating activities:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (4,685)

(40,609)

(74,318)

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:
Dividend received from subsidiaries . . . . . . . . . . . . . . . . . . .
Non-cash losses from subsidiaries, net of taxes . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on disposal of assets . . . . . . . . . . . . . . . . . . . . . . .
Fee for early extinguishment of credit facility . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities, net of effects of business

acquisitions:
Decrease in prepaid and other assets. . . . . . . . . . . . . . . . . . .
(Increase) decrease in due from subsidiaries . . . . . . . . . . . . .
Increase (decrease) in accounts payable, accrued expenses and
other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Decrease) increase in accrued business reorganization

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . .

Cash ﬂows from investing activities:

Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . .
Change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to and investments in subsidiaries . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . .

Cash ﬂows from ﬁnancing activities:

Borrowings under credit facility . . . . . . . . . . . . . . . . . . . . .
Repayments under credit facility . . . . . . . . . . . . . . . . . . . . .
Payment for early extinguishment of credit facility . . . . . . . . .
Payment of deferred ﬁnancing costs . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net . . . . . . . . . . . .
Issuance of common stock − Long Term Incentive Plan option
exercises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock − Employee Stock Purchase Plans. .
Purchase of treasury stock, including fees . . . . . . . . . . . . . . .
Purchase of restricted stock from employees . . . . . . . . . . . . .
Net cash provided by (used in) ﬁnancing activities . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . .
Cash and cash equivalents, beginning of the period . . . . . . . . . .
Cash and cash equivalents, end of the period . . . . . . . . . . . . . .

3,123
5,599
152
693
—
563
460

—
38,960
181
638
(11,628)
—
—

15,100
56,361
224
1,668
(4,838)
—
—

1,120
(13,200)

437
(4,624)

16
11,587

2,696

(3,071)

(5,872)

(210)
(3,689)

16
—
599
(2,438)
(5,667)
(7,490)

10,869
(21,325)
(563)
(1,565)
19,116

—
—
—
(71)
6,461
(4,718)
11,142
$ 6,424

(790)
(20,506)

73
11,628
515
(1,669)
(3,356)
7,191

51,985
(46,836)
—
—
—

—
—
(703)
(75)
4,371
(8,944)
20,086
$ 11,142

929
857

182
20,861
523
(6,607)
(3,128)
11,831

104,104
(98,797)
—
—
—

372
1,670
(7,491)
(242)
(384)
12,304
7,782
$ 20,086

See notes to condensed ﬁnancial statements

HUDSON HIGHLAND GROUP, INC.

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands)

NOTE 1 — BASIS OF PRESENTATION

Hudson Highland Group, Inc. (the ‘‘Parent Company’’) is a holding company that conducts substantially

all of its business through its subsidiaries. As speciﬁed in certain of its subsidiaries’ credit agreements in
Australia, Belgium and The Netherlands, there are restrictions on the Parent Company’s ability to obtain funds
from certain of its subsidiaries through dividends, intercompany expenses or interest (refer to Note 13,
‘‘Financial Instruments’’, to the Company’s Consolidated Financial Statements). As of December 31, 2010, the
Company was in a stockholders’ equity position of $93,278, and approximately $30,550 constituted restricted
net assets as deﬁned in Rule 4-08(e)(3) of Regulation S-X. The restricted net assets of the Company’s
subsidiaries exceeded 25% of the consolidated net assets of the Company and its subsidiaries, thus requiring
this Schedule I, ‘‘Condensed Financial Information of the Registrant.’’ Accordingly, the results of operations
and cash ﬂows for the years ended December 31, 2010, 2009 and 2008, and the balance sheets as of
December 31, 2010 and 2009 have been presented on a ‘‘Parent-only’’ basis. In these statements, the
Company’s investments in its consolidated subsidiaries are presented under the equity method of accounting.
The Parent-only ﬁnancial statements should be read in conjunction with the Company’s audited Consolidated
Financial Statements included elsewhere herein.

NOTE 2 — DIVIDENDS RECEIVED

The Company received dividends of $3,123, $0 and $15,100 in 2010, 2009 and 2008, respectively, from

its consolidated subsidiaries.

NOTE 3 — CREDIT AGREEMENT

Several of the Company’s subsidiaries have credit agreements with lenders. Borrowings under the

certain agreements are based on agreed percentage of eligible account receivable. The borrowings of the
holding company are secured by the accounts receivable of the Company’s U.S. and U.K. subsidiaries. Refer
to Note 13, ‘‘Financial Instruments’’ to the Company’s Consolidated Financial Statements for further details.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

Column A

Descriptions
Allowance for Doubtful Accounts(a)

Column B
Balance at
Beginning
of Period

Column C Additions

Column D

Charged to
Costs/Expenses
(Recoveries)

Charged to
Other
Accounts

Deductions

Year Ended December 31, 2008. . . . .
Year Ended December 31, 2009. . . . .
Year Ended December 31, 2010. . . . .

$4,897
$3,521
$2,422

(213)
(255)
392

115
(38)
—

1,278
806
669

Column E
Balance at
End of
Period

$3,521
$2,422
$2,145

(a)

Included in the balances presented here are the allowances for doubtful accounts for the Company’s
discontinued operations. The sale and subsequent reduction to the account balance is in column C
charged to other accounts as a deletion.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
on this twenty-third day of February 2011.

SIGNATURES

HUDSON HIGHLAND GROUP, INC.

By /s/ MARY JANE RAYMOND

MARY JANE RAYMOND
Interim Chief Executive Officer and Executive
Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ MARY JANE RAYMOND
Mary Jane Raymond

/s/ FRANK P. LANUTO
Frank P. Lanuto

/s/ JON F. CHAIT
Jon F. Chait

/s/ ROBERT B. DUBNER
Robert B. Dubner

/s/ JOHN J. HALEY
John J. Haley

/s/ JENNIFER LAING
Jennifer Laing

/s/ DAVID G. OFFENSEND
David G. Offensend

/s/ RICHARD J. STOLZ
Richard J. Stolz

February 23, 2011

Interim Chief Executive Officer and Executive
Vice President and Chief Financial Officer
(Principal Executive Officer and Principal
Financial Officer)

Senior Vice President, Corporate Controller
(Principal Accounting Officer)

Director

Exhibit
Number

(3.1)

(3.2)

(3.3)

(4.1)

(4.2)

(4.3)

(4.4)

(4.5)

(10.1)*

(10.2)*

(10.3)*

(10.4)*

(10.5)*

EXHIBIT INDEX

Exhibit Description

Amended and Restated Certiﬁcate of Incorporation of Hudson Highland Group, Inc.
(incorporated by reference to Exhibit 3.1 to Hudson Highland Group, Inc.’s Registration
Statement on Form 10 ﬁled March 14, 2003 (ﬁle No. 0-50129)).

Certiﬁcate of Designations of the Board of Directors Establishing the Series and Fixing the
Relative Rights and Preferences of Series A Junior Participating Preferred Stock (incorporated by
reference to Exhibit 3.1 to Hudson Highland Group, Inc.’s Current Report on Form 8-K dated
February 2, 2005 (ﬁle No. 0-50129)).

Amended and Restated By-laws of Hudson Highland Group, Inc. (incorporated by reference to
Exhibit 3.1 to Hudson Highland Group, Inc.’s Current Report on Form 8-K dated February 22,
2011 (ﬁle No. 0-50129)).

Rights Agreement, dated as of February 2, 2005, between Hudson Highland Group, Inc. and The
Bank of New York (incorporated by reference to Exhibit 4.1 to the Registration Statement on
Form 8-A of Hudson Highland Group, Inc. dated February 3, 2005 (ﬁle No. 0-50129)).

Loan and Security Agreement, dated as of August 5, 2010, by and among Hudson Highland
Group, Inc. and each of its subsidiaries that are signatories thereto, as Borrowers, the lenders that
are signatories thereto, as Lenders, and RBS Business Capital, a division of RBS Asset Finance,
Inc., as Agent (incorporated by reference to Exhibit 4.1 to Hudson Highland Group, Inc.’s
Current Report on Form 8-K dated August 3, 2010 (File No. 0-50129)).
Receivables Finance Agreement, dated as of August 3, 2010, by and between Hudson Global
Resources (Aust) Pty Limited and Commonwealth Bank of Australia (incorporated by reference
to Exhibit 4.2 to Hudson Highland Group, Inc.’s Current Report on Form 8-K dated August 3,
2010 (File No. 0-50129)).
Receivables Finance Facility Offer Letter, accepted as of August 3, 2010, from Commonwealth
Bank of Australia to Hudson Global Resources (Aust) Pty Limited (incorporated by reference to
Exhibit 4.3 to Hudson Highland Group, Inc.’s Current Report on Form 8-K dated August 3, 2010
(File No. 0-50129)).
Letter of Approval, accepted as of August 3, 2010, from Commonwealth Bank of Australia to
Hudson Global Resources (Aust) Pty Limited (incorporated by reference to Exhibit 4.4 to
Hudson Highland Group, Inc.’s Current Report on Form 8-K dated August 3, 2010
(File No. 0-50129)).
Hudson Highland Group, Inc. Long Term Incentive Plan, as amended through October 29, 2007
(incorporated by reference to Exhibit 10.1 to Hudson Highland Group, Inc.’s Annual Report on
Form 10-K for the year ended December 31, 2007 (ﬁle No. 0-50129)).
Form of Hudson Highland Group, Inc. Long Term Incentive Plan Restricted Stock Award
Agreement (incorporated by reference to Exhibit 10.1 to Hudson Highland Group, Inc.’s Current
Report on Form 8-K dated May 1, 2007 (ﬁle No. 0-50129)).

Form of Hudson Highland Group, Inc. Long Term Incentive Plan Restricted Stock Award
Agreement for share price vesting awards (incorporated by reference to Exhibit 10.2 to Hudson
Highland Group, Inc.’s Current Report on Form 8-K dated February 9, 2009 (ﬁle No. 0-50129)).

Form of Hudson Highland Group, Inc. Long Term Incentive Plan Stock Option Agreement
(Employees) (incorporated by reference to Exhibit 10.4 to Hudson Highland Group, Inc.’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (ﬁle No. 0-50129)).

Form of Hudson Highland Group, Inc. Long Term Incentive Plan Stock Option Agreement
(Directors) (incorporated by reference to Exhibit 10.1 to Hudson Highland Group, Inc. Current
Report on Form 8-K dated May 11, 2006 (File No. 0-50129)).

Exhibit
Number

(10.6)*

(10.7)*

(10.8)*

(10.9)*

(10.10)*

(10.11)*

(10.12)*

(10.13)*

(10.14)*

(10.15)*

(10.16)*

(10.17)*

(10.18)*

Exhibit Description

Form of Hudson Highland Group, Inc. Long Term Incentive Plan Stock Option Agreement
applicable to Jon F. Chait (incorporated by reference to Exhibit 10.1 to Hudson Highland Group,
Inc.’s Current Report on Form 8-K dated July 13, 2007 (ﬁle No. 0-50129)).

Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan (incorporated by reference
to Exhibit A to the Company’s deﬁnitive proxy statement ﬁled with the Securities Exchange
Commission on Schedule 14A on April 1, 2009 (ﬁle No. 0-50129)).

Form of Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan Stock Option
Agreement (Employees) (incorporated by reference to Exhibit 4.2 to Hudson Highland Group,
Inc.’s Registration Statement on Form S-8 dated August 7, 2009 (ﬁle No. 333-161171)).

Form of Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan Stock Option
Agreement (Directors) (incorporated by reference to Exhibit 4.3 to Hudson Highland Group,
Inc.’s Registration Statement on Form S-8 dated August 7, 2009 (ﬁle No. 333-161171)).

Form of Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan Stock Option
Agreement applicable to Jon F. Chait (incorporated by reference to Exhibit 4.4 to Hudson
Highland Group, Inc.’s Registration Statement on Form S-8 dated August 7, 2009
(ﬁle No. 333-161171)).
Form of Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock
Award Agreement (incorporated by reference to Exhibit 4.6 to Hudson Highland Group, Inc.’s
Registration Statement on Form S-8 dated August 7, 2009 (ﬁle No. 333-161171)).
Form of Hudson Highland Group, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock
Award Agreement for EBITDA and gross margin growth performance vesting awards
(incorporated by reference to Exhibit 10.1 to Hudson Highland Group, Inc.’s Current Report on
Form 8-K dated February 11, 2010 (ﬁle No. 0-50129)).
Executive Employment Agreement, amended and restated effective as of March 1, 2009, between
Hudson Highland Group, Inc. and Margaretta R. Noonan (incorporated by reference to
Exhibit 10.8 to Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2008 (ﬁle No. 0-50129)).
Executive Employment Agreement, amended and restated effective as of March 3, 2009, between
Hudson Highland Group, Inc. and Richard S. Gray (incorporated by reference to Exhibit 10.9 to
Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended December 31,
2008 (ﬁle No. 0-50129)).
Executive Employment Agreement, amended and restated effective as of March 3, 2009, between
Hudson Highland Group, Inc. and Latham Williams (incorporated by reference to Exhibit 10.10
to Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2008 (ﬁle No. 0-50129)).
Executive Employment Agreement, amended and restated effective as of March 3, 2009, between
Hudson Highland Group, Inc. and Neil J. Funk (incorporated by reference to Exhibit 10.11 to
Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended December 31,
2008 (ﬁle No. 0-50129)).

Executive Employment Agreement, amended and restated effective as of March 3, 2009, between
Hudson Highland Group, Inc. and Frank P. Lanuto (incorporated by reference to Exhibit 10.12 to
Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended December 31,
2008 (ﬁle No. 0-50129)).

Executive Employment Agreement, amended and restated effective as of March 3, 2009, between
Hudson Highland Group, Inc. and Mary Jane Raymond (incorporated by reference to
Exhibit 10.13 to Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2008 (ﬁle No. 0-50129)).

Exhibit
Number

(10.19)*

(10.20)*

(10.21)*

(10.22)*

(21)

(23)

(31)

(32)

(99.1)

Exhibit Description

Hudson Highland Group, Inc. Nonqualiﬁed Deferred Compensation Plan (Effective May 1, 2004,
as Amended and Restated Effective January 1, 2008) (incorporated by reference to Exhibit 10.8
to Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2007 (ﬁle No. 0-50129)).

Summary of Hudson Highland Group, Inc. Compensation for Non-employee Members of the
Board of Directors (incorporated by reference to Exhibit 10.9 to Hudson Highland Group, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2007 (ﬁle No. 0-50129)).

Summary of Hudson Highland Group, Inc. 2009 Incentive Compensation Program (incorporated
by reference to Exhibit 10.1 to Hudson Highland Group, Inc.’s Current Report on Form 8-K
dated February 9, 2009 (ﬁle No. 0-50129)).

Hudson Highland Group, Inc. Director Deferred Share Plan (incorporated by reference to
Exhibit 10.15 to Hudson Highland Group, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2007 (ﬁle No. 0-50129)).

Subsidiaries of Hudson Highland Group, Inc.

Consent of KPMG LLP.

Certiﬁcation by the Interim Chief Executive Officer and Executive Vice President and Chief
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
Certiﬁcation of the Interim Chief Executive Officer and Executive Vice President and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350.
Proxy Statement for the 2010 Annual Meeting of Stockholders [To be ﬁled with the Securities
and Exchange Commission under Regulation 14A within 120 days after December 31, 2010;
except to the extent speciﬁcally incorporated by reference, the Proxy Statement for the 2011
Annual Meeting of Stockholders shall not be deemed to be ﬁled with the Securities and
Exchange Commission as part of this Annual Report on Form 10-K.]

A management contract or compensatory plan or arrangement.

Exhibit 31

I, Mary Jane Raymond, certify that:

CERTIFICATIONS

I have reviewed this annual report on Form 10-K of Hudson Highland Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the ﬁnancial statements, and other ﬁnancial information included in this report,

fairly present in all material respects the ﬁnancial condition, results of operations and cash ﬂows of the
registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as deﬁned in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over ﬁnancial reporting (as deﬁned in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) Designed such internal control over ﬁnancial reporting, or caused such internal control over ﬁnancial

reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes in
accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over ﬁnancial reporting that

occurred during the registrant’s most recent ﬁscal quarter (the registrant’s fourth ﬁscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over ﬁnancial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over ﬁnancial reporting, to the registrant’s auditors and the audit committee of registrant’s
board of directors (or persons performing the equivalent function):

a) All signiﬁcant deﬁciencies and material weaknesses in the design or operation of internal control

over ﬁnancial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report ﬁnancial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a

signiﬁcant role in the registrant’s internal control over ﬁnancial reporting.

Dated: February 23, 2011

/s/ MARY JANE RAYMOND
Mary Jane Raymond
Interim Chief Executive Officer and Executive Vice President
and Chief Financial Officer

Exhibit 32

Written Statement of the Interim Chief Executive Officer and
Executive Vice President and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Interim Chief
Executive Officer and Executive Vice President and Chief Financial Officer of Hudson Highland Group, Inc.
(the ‘‘Company’’), hereby certify, based on my knowledge, that the Annual Report on Form 10-K of the
Company for the year ended December 31, 2010 (the ‘‘Report’’) fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly
presents, in all material respects, the ﬁnancial condition and results of operations of the Company.

/s/ MARY JANE RAYMOND
Mary Jane Raymond

February 23, 2011