HAKI Hall, Kinion & Associates (MM)

Hall Kinion Announces 2004 First Quarter Financial Results NOVATO, Calif., May 12 /PRNewswire-FirstCall/ -- Hall, Kinion & Associates, Inc. , The Talent Source(R), announced today financial results for the first quarter ended March 28, 2004. For the first quarter 2004, net revenues were $31.3 million, compared with revenues of $39.0 million in the first quarter 2003. Gross profit for the quarter was $8.2 million, or 26.1 percent versus $11.4 million or 29.2 percent for the same period a year ago. The first quarter net loss was $2.2 million, or a loss of $0.18 per diluted share, versus a net loss of $4.1 million, or $0.32 per diluted share, for the first quarter of 2003. The first quarter 2004 net loss includes merger-related costs of $0.5 million related to the previously announced proposed merger with Kforce. In addition, the Company did not book any tax benefit against the operating losses incurred in the first quarter of 2004. "During the latter part of the quarter and in recent weeks, we noted several positive trends. The most significant one was the improvement in our revenue run rates during the quarter. For our OnStaff(R) Division, the upward trend started near the end of the first quarter. Its revenue bottomed-out and started to recover and this trend has continued over the first half of the second quarter," stated Brenda Rhodes, Chairman and CEO. "We saw a slight drop in our Technology Division's revenue the first month of the quarter but that has also started to recover. For both divisions, we saw an increase in the average weekly run rate, since the lows of this past holiday season. We believe this recent momentum bodes well for our pending merger with Kforce," added Ms. Rhodes. 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. Hall Kinion finds, evaluates and places industry-specific Technology and Corporate Professionals. Founded in 1991, Hall Kinion completed its initial public offering in 1997. Hall Kinion 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; and the Corporate Professional Services Division (OnStaff(R)) places specialists at all levels into real estate, financial services and healthcare sectors. For the most current corporate and financial information, visit Hall Kinion's Web site at http://www.hallkinion.com/. 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/A for the year ended December 28, 2003 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 Statements of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended March 28, March 30, 2004 2003 Net revenues: Contract services $30,367 $37,858 Permanent placement 952 1,122 Total net revenues 31,319 38,980 Cost of contract services 23,150 27,604 Gross profit 8,169 11,376 Operating expenses: Operating expenses 10,214 13,055 Restructuring costs 2,261 Total operating expenses 10,214 15,316 Loss from operations (2,045) (3,940) Other expense, net (134) (118) Loss before income taxes (2,179) (4,058) Income taxes provision 37 -- Net loss $(2,216) $(4,058) Net loss per share: Basic $(0.18) $(0.32) Diluted $(0.18) $(0.32) Shares used in per share calculations: Shares Outstanding -- Basic 12,589 12,583 Shares Outstanding -- Diluted 12,589 12,583 Hall, Kinion & Associates, Inc. Condensed Consolidated Balance Sheets (in thousands) (unaudited) March 28, Dec. 28, 2004 2003 Current Assets: Cash and cash equivalents $1,554 $4,517 Accounts receivable, net 17,667 15,787 Prepaid expenses and other current assets 930 2,653 Property held for sale -- 1,593 Total current assets 20,151 24,550 Property and equipment, net 3,128 3,501 Goodwill 15,390 15,390 Intangible assets, net 9,763 9,982 Deferred income taxes and other assets 1,586 1,620 Total assets $50,018 $55,043 Liabilities and stockholders' equity Current Liabilities: Line of credit $6,566 $8,528 Accounts payable and accrued expenses 17,421 16,844 Income taxes payable 117 150 Total current liabilities 24,104 25,522 Long-term debt and other non-current obligations 2,728 4,228 Total liabilities 26,832 29,750 Commitments and contingencies Stockholders' Equity: Common stock 84,725 84,716 Stockholder notes receivable (300) (400) Accumulated other comprehensive loss (85) (85) Accumulated deficit (61,154) (58,938) Total stockholders' equity 23,186 25,293 Total liabilities and stockholders' equity $50,018 $55,043 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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