The one-time pre-tax charges include a $26.7 million write-off of impaired long-lived assets, $4.6 million in restructuring costs, and $6.4 million in write-offs related to uncollectible accounts receivable. Including these charges, in accordance with accounting principles generally accepted in the United States of America, the first quarter net loss was $26.4 million, or a loss of $1.94 per diluted share, versus net income of $2.7 million, or $0.23 per diluted share, for the first quarter of 2000. In addition, the Company may incur additional restructuring costs of up to $0.8 million during the second quarter; these costs are not reflected in the first quarter details as discussed above.
Hall Kinion continues to maintain a healthy balance sheet. At April 1, 2001, the company had total current assets of $76.6 million, working capital of $53.5 million, and cash and cash equivalents of $32.6 million. Long-term debt and other non-current obligations totaled $0.2 million.
The recent slow down in the technology sector has changed our marketplace. The demand for high-tech workers has shifted away from Dot-coms, and web initiatives, and returned to more traditional research and development projects within established technology companies. These projects require very specialized skills that continue to be in high demand and short supply. This bodes well for our demand side, but continues to be a challenge on the supply side, said Brenda Rhodes, CEO of Hall Kinion.
Hall Kinion’s core competency has always been its ability to shift with the high-tech market, and we are pleased with the immediate response of our front-line people to the changes in the marketplace. We have re-organized ourselves in order to put some of our best people in front of our customers and believe that this slow down will ‘sharpen our saw’ and enable us to take advantage of future opportunities, continued Rhodes.
As we pre-announced in mid-March, the recent slow down in the economy has impacted our customers in the technology sector, resulting in our having lowered expectations for the first quarter at that time, stated Rhodes. We also believe given the continued uncertainty in global economic conditions, it is difficult to predict how our customers around the world will be impacted for the immediate future. As a result, we implemented operating and financial actions in Q1 and made accommodations for future actions to enable us to match our operating expenses with our growth rate. This resulted in the restructuring charges described above and a decision to write-off certain receivables, said Rhodes.
Rhodes further commented Hall Kinion’s historical strategy has been to acquire small undervalued companies and grow them into profitability. At this time, given the recent changes in the economy and expected minimal impact on the company’s profitability, management believes these types of acquisitions are not a good use of financial resources or management focus. Accordingly, management decided to write-off its investment in certain subsidiary operations.
Company Announces Stock Repurchase Program
Hall Kinion also announced today that its Board of Directors has authorized the repurchase of up to 2 million shares of Hall Kinion Common Stock. It is anticipated that the shares will be repurchased from time to time in the open market or through privately negotiated purchases, which may include contractual rights to purchase shares in the future, over the next 12 months. The repurchase program is intended to take advantage of what management considers to be an attractive use of the company’s cash in excess of operating requirements. R.W. Baird & Co. will act as agent for Hall Kinion’s stock repurchase program.
