HAKI Hall, Kinion & Associates (MM)

Hall Kinion Announces Third Quarter Financial Results NOVATO, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Hall, Kinion & Associates, Inc. , The Talent Source(R), announced today financial results for the third quarter ended September 28, 2003. For the third quarter 2003, net revenues were $41.7 million, compared with revenues of $31.9 million in the third quarter 2002. Gross profit for the quarter was $12.1 million, or 29.0 percent of net revenues versus $10.8 million or 33.7 percent of net revenues, for the same period a year ago. The third quarter net income was $228,000, or $0.02 per diluted share, versus net income of $244,000, or $0.02 per diluted share, for the third quarter of 2002. The 2003 third quarter net income includes net restructuring costs of $340,000 related to FAS 146 adjustment for forecasted sublease income, offset by income of $696,000 due to a change in estimate for the executive bonus liability. In addition, the Company did not book any taxes against the operating profits incurred in the third quarter of 2003, since it will report a loss for the full year. The 2003 third quarter's operating results included the financial results of OnStaff(R), which was acquired in August 2002. For the nine-month period ended September 28, 2003, net revenues were $123.3 million versus $81.3 million, for the comparable nine-month period a year ago. Gross profit for the nine-month period ended September 28, 2003 was $36.1 million, compared to $27.7 million, for the comparable nine-month period a year ago. The net loss for the nine-month period ended September 28, 2003, was $3.5 million or a loss of $0.27 per diluted share, compared with a net loss of $3.0 million or a loss of $0.23 per diluted share, in the comparable nine-month period a year ago. "During the third quarter, the Company experienced two distinct trends from its two operating divisions, Technology and OnStaff," stated Brenda Rhodes, Chairman and CEO. "We saw an established trend in the gradual increases in our working contractors during the quarter in our Technology division. In particular, our Healthcare and Government verticals both recorded continual growth during the quarter and are expected to hold solid during the fourth quarter. We are pleased with the results of our sales and recruiting staffs in these areas." "The 3rd quarter also saw the much anticipated bubble bursting of our mortgage refinance boom. We were encouraged by the collapsible model of OnStaff as management adjusted the model to fit the comedown in the refinance business in order to remain profitable. We are further encouraged as we have seen the stabilization of job orders and run rate in the past 4 weeks. We continue to see demand in non-refinance areas utilizing similar processing skills," Ms. Rhodes remarked. Hall, Kinion & Associates will hold a conference call concerning this announcement today, Wednesday, October 29, 2003. The conference call will begin at 8:00 a.m. PST/ 11:00 a.m. EST and will last for approximately one hour. To participate on the call, dial in 703-871-3085 or 888-747-3510 at least five minutes prior to the start time. Investors have the opportunity to listen to the conference call live on the Internet at the Company's Web site at http://www.hallkinion.com/ . Investors should go to the Web site a few minutes early, as it may be necessary to download audio software to hear the conference call. A replay of the conference call will be available for 14 days via phone at 888-266-2081, passcode #288752 through November 12, 2003. About Hall Kinion & Associates Hall, Kinion & Associates, Inc., The Talent Source for specialized professionals, delivers world-class talent on a contract and full-time basis to high-demand sectors. The Company finds, evaluates and places industry-specific Technology and Corporate Professionals. Founded in 1991, Hall Kinion(R) completed its initial public offering in 1997. The Company operates two divisions, both of which provide consultants and direct-hire talent: The Technology Professional Division places highly-skilled experts in positions ranging from software engineering to CTO into technology, financial services, healthcare, government and energy sectors. The Corporate Professional Services Division (OnStaff) places specialists at all levels into real estate, financial services and healthcare sectors. For the most current corporate and financial information, visit the Company's Web site at http://www.hallkinion.com/ . About OnStaff OnStaff is a premier national specialty Staffing firm placing temporary and full-time professionals in the Title, Escrow, Mortgage, Financial Services and Healthcare industries. The Company operates industry-specific recruiting and placement Web sites including: http://www.titleboard.com/, http://www.escrowboard.com/, http://www.bankingboard.com/ and MediCenter.com. OnStaff's Web site address is http://www.onstaff.com/ . OnStaff is a wholly owned subsidiary of Hall Kinion & Associates, Inc. The statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including statements regarding Hall Kinion's expectations, beliefs, hopes, intentions, models or strategies regarding the future. All forward-looking statements included in this release are based upon information available to Hall Kinion as of the date thereof, and Hall Kinion assumes no obligation to update any such forward-looking statement. Actual results could differ materially from Hall Kinion's current expectations. Factors that could cause or contribute to such differences include, but are not limited to the rate of hiring and productivity of sales and sales support personnel; the availability of qualified professionals; changes in the relative mix between contract and permanent placement services; changes in the pricing of Hall Kinion's services; the timing and rate of entrance into or exit from new geographic markets and the addition and closing of offices; the structure and timing of acquisitions, changes in demand for professionals; changes in the economic outlook for the high technology industry and general economic factors. Please refer to the discussion of risk factors and other factors included in Hall Kinion's Report on Form 10-K for the year ended December 29, 2002 and other filings made with the Securities & Exchange Commission ("SEC"). This press release speaks only as of the date it was issued and readers are cautioned that changes in general economic, business or other conditions or in the business condition, financial results or operations of Hall Kinion may have occurred since such date. Hall Kinion undertakes no duty to update the information appearing in the press release. Also, subsequent press releases may have been issued, subsequent public conference calls may have been held or documents containing later or additional information may have been filed with the SEC or NASDAQ or otherwise become available or come into existence. Hall, Kinion & Associates, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) Sept. 28, Dec. 29 2003 2002 Assets Current Assets: Cash and cash equivalents $2,755 $8,571 Accounts receivable, net 20,908 17,804 Prepaid expenses and other current assets 2,240 1,554 Deferred income taxes 3,925 3,925 Total current assets 29,828 31,854 Property and equipment, net 5,710 7,511 Goodwill 11,806 11,849 Intangible assets, net 10,201 10,859 Deferred income taxes and other assets 12,929 12,833 Total assets $70,474 $74,906 Liabilities and Stockholders' Equity Current Liabilities: Line of credit $-- $10,000 Accounts payable and accrued expenses 10,865 11,108 Reserve for restructure costs 2,424 3,014 Income taxes payable 794 816 Total current liabilities 14,083 24,938 Line of credit 10,904 -- Accrued compensation and deferred rent 2,725 3,046 Reserve for non-current restructuring costs 2,466 3,155 Total liabilities 30,178 31,139 Stockholders' equity: Common stock 84,713 85,036 Stockholder notes receivable (500) (800) Accumulated other comprehensive loss (101) (103) Accumulated deficit (43,816) (40,366) Total stockholders' equity 40,296 43,767 Total liabilities and stockholders' equity $70,474 $74,906 Hall, Kinion & Associates, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended Sept. 28, Sept. 29 Sept. 28, Sept. 29 2003 2002 2003 2002 Net revenues: Contract services $40,623 $30,630 $119,875 $77,267 Permanent placement 1,085 1,313 3,423 4,005 Total net revenues 41,708 31,943 123,298 81,272 Cost of contract services 29,606 21,168 87,213 53,554 Gross profit 12,102 10,775 36,085 27,718 29.02% 33.73% 29.27% 34.11% Operating expenses: Selling, general and administrative 11,383 10,819 36,362 33,501 Restructuring costs, net 340 (876) 2,906 (876) Total operating expenses 11,723 9,943 39,268 32,625 Income (loss) from operations 379 832 (3,183) (4,907) Interest expense (163) (67) (404) (76) Interest income 2 58 32 311 Other income/(expense) 10 9 105 43 Net income (loss) before income taxes 228 832 (3,450) (4,629) Income tax provision (benefit) -- (588) -- 1,634 Net income (loss) $228 $244 $(3,450) $(2,995) Net income (loss) per share: Basic $0.02 $0.02 $(0.27) $(0.23) Diluted $0.02 $0.02 $(0.27) $(0.23) Shares used in per share calculations: Shares Outstanding - Basic 12,582 12,556 12,594 13,054 Shares Outstanding - Diluted 12,753 12,627 12,594 13,054 DATASOURCE: Hall, Kinion & Associates, Inc. CONTACT: investors, Martin Kropelnicki, Vice President & CFO of Hall, Kinion & Associates, Inc., +1-415-895-2200 Web site: http://www.hallkinion.com/

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