Exhibit 99.1
FOR IMMEDIATE RELEASE
TMNG REPORTS 2003 SECOND QUARTER RESULTS
Overland Park, KS, August 4, 2003 - The Management Network Group, Inc. (Nasdaq:
TMNG), a leading provider of management consulting services to the global
communications industry, today reported financial results for its 2003 second
quarter ended June 28, 2003.
Revenue in the second quarter of 2003 was $5.0 million, compared with $9.9
million in the second quarter of 2002. Net loss on a GAAP-reported basis for the
quarter was $18.7 million, or $0.56 per diluted share, compared with a GAAP net
loss of $1.8 million, or $0.05 per diluted share in last year's second quarter.
Pro forma non-GAAP net loss (defined as GAAP net loss as reported in the
unaudited condensed consolidated statements of operations plus equity-related
charges, intangibles amortization, and intangible asset impairment, all in
accordance with GAAP) for the quarter was $1.7 million, or $0.05 per diluted
share, compared with pro forma non-GAAP net loss of $1.1 million, or $0.03 per
diluted share in the second quarter of 2002.
In the second quarter the company performed an impairment analysis of goodwill
and other intangible assets and estimates it will record an impairment charge of
approximately $18.9 million reflecting the write-down of the assets related to
TMNG Strategy. The charge has no impact on TMNG's cash flow or operating
activities. Also during the second quarter the company reviewed the
recoverability of its tax assets (including amounts arising from the current
goodwill impairment) and has concluded a valuation allowance in the amount of
$5.2 million was necessary to appropriately value the asset.
During the quarter, gross margin was 47.4% compared to 55.3% in the second
quarter of 2002, due primarily to lower consultant utilization. Pricing, as
measured by daily metrics for consulting services, remained relatively flat.
Despite difficult operating conditions, the company further reduced its
receivables collection period in the quarter and continues to maintain a sound
balance sheet, including a cash position of $52.3 million, virtually no
long-term debt, stockholders' equity of $95.5 million, and working capital of
approximately $61.7 million.
Revenue for the first six months of fiscal 2003 totaled $12.4 million, compared
with $17.2 million in the first six months of 2002. Gross margin year-to-date in
2003 was 49.3% compared with 49.9% in the comparable period of 2002. Net loss on
a GAAP-reported basis for the first six months was $20.0 million, or $0.60 per
diluted share, compared with a GAAP net loss of $4.6 million, or $0.14 per
diluted share in the comparable period of 2002. Pro forma non-GAAP net loss was
comparable at $2.4 million, or $0.07 per diluted share, compared to a loss of
$2.2 million, or $0.07 per diluted share a year ago.
"We're obviously disappointed with what was an exceptionally tough second
quarter, though we are currently seeing encouraging signs of improvement in
TMNG's business early in the second half of 2003," said Rich Nespola, Chairman
and CEO. "In what remains a challenging environment overall, we continue to take
prudent steps to run the company while keeping it well positioned. In the second
quarter we took additional expenses out of the business, continued to manage
receivables closely, and, as evidenced by the impairment charge, are maintaining
a conservative approach to the valuation of our assets."
"At the same time, we are beginning to see good traction in several customer
segments, most notably wireless, where the highly competitive carrier
environment as well as the pending implementation of wireless number portability
requirements have resulted in a number of new engagements," continued Mr.
Nespola. "We've also begun recently to re-engage with the major ILEC that
temporarily discontinued our services in the first quarter, and new clients are
signing for longer engagements than we've seen in recent prior periods. These
factors, coupled with positive indicators in our engagement pipeline, contribute
to increased near-term optimism for the business."
CONFERENCE CALL
TMNG will host a conference call at 5:00 p.m. ET today to discuss second quarter
2003 results. Investors can access the conference call via a live webcast on the
Company's Web site, www.tmng.com, or by dialing 877-375-2162. A replay of the
conference call will be archived on the Company's Web site for one week.
Additionally, the archived call can be accessed by dialing 973-341-3080, pin
number 4064176, through August 11, 2003.
NON-GAAP FINANCIAL MEASURES
Management believes the presentation of pro forma non-GAAP net loss and pro
forma non-GAAP net loss per diluted share provides useful information to
investors regarding the Company's financial condition and results of operations
because they illustrate the short-term impact on our cash reserves of the cash
generated or used in our operations. Management uses these non-GAAP financial
measures as an internal analytical tool to evaluate our cash requirements and
cash availability.
ABOUT TMNG
The Management Network Group, Inc. (Nasdaq: TMNG) is a leading provider of
strategy, management, marketing, operational and technology consulting services
to the global communications industry. With more than 500 consultants worldwide,
TMNG serves communications service providers, technology companies, and
financial services firms. Since the company's inception in 1990, TMNG and its
subsidiaries - TMNG Strategy, TMNG Marketing, TMNG Technologies and TMNG Europe
- - have served more than 600 clients worldwide, including all the Fortune 500
telecommunications companies. TMNG is headquartered in Overland Park, Kansas,
with offices in Boston, Chicago, Columbus, Dallas, La Jolla, London, New York,
San Francisco, Toronto, Utrecht and Washington, D.C. TMNG can be reached at
1.888.480.TMNG (8664) or online at http://www.tmng.com.
This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties. In particular, any statements contained herein
regarding expectations with respect to future business, revenues or
profitability are subject to known and unknown risks, uncertainties, and
contingencies, many of which are beyond the Company's control, which may cause
actual results, performance, or achievements to differ materially from those
projected or implied in such forward-looking statements. Factors that might
affect actual results, performance, or achievements include, among other things,
conditions in the telecommunications industry, overall economic and business
conditions, the demand for the Company's goods and services, and technological
advances and competitive factors in the markets in which the Company competes.
These risks and uncertainties are described in detail from time to time in
TMNG's filings with the Securities and Exchange Commission.
(Please see attached financial tables)
CONTACT:
The Management Network Group, Inc. or Brainerd Communicators
Nancy Blanco Brian Schaffer (Investors)
nancy.blanco@tmng.com schaffer@braincomm.com
- --------------------- ----------------------
888.480.TMNG (8664) Ray Yeung (Media)
yeung@braincomm.com
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212.986.6667
THE MANAGEMENT NETWORK GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Quarter Ended Year-to-Date
June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002
Revenues $ 5,020 $ 9,927 $12,426 $17.195
Cost of services:
Direct cost of services 2,724 4,264 6,406 7,938
Equity related charges (benefit) (84) 177 (104) 672
--------- --------- ---------- ---------
Total 2,640 4,441 6,302 8,610
Gross profit 2,380 5,486 6,124 8,585
Operating expenses:
Selling, general and administrative 4,879 5,628 9,753 11,084
Goodwill and intangible asset impairment 18,942 18,942
Depreciation and amortization 869 989 1,814 1,570
Severance costs 194 1,879 200 1,933
Equity related charges (benefit) (8) 117 3 280
--------- --------- ---------- ---------
Total 24,876 8,613 30,712 14,867
Loss from operations (22,496) (3,127) (24,588) (6,282)
Other income, net 146 208 306 507
Income tax benefit, net 3,613 1,097 4,313 2,288
--------- --------- ---------- ---------
Loss before change in accounting principle (18,737) (1,822) (19,969) (3,487)
Change in accounting principle (net of tax) (1,140)
--------- --------- ---------- ---------
Net loss ($18,737) ($1,822) ($19,969) ($4,627)
========= ========= ========== =========
Loss per common share before change
in accounting principle
Basic and diluted ($0.56) ($0.05) ($0.60) ($0.11)
========= ========= ========== =========
Change in accounting principle
per common share
Basic and diluted ($0.03)
========= ========= ========== =========
Net loss per common share
Basic and diluted ($0.56) ($0.05) ($0.60) ($0.14)
========= ========= ========== =========
Shares used in calculation
of net loss per common share
Basic and diluted 33,372 33,259 33,359 32,152
========= ========= ========== =========
THE MANAGEMENT NETWORK GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
Unaudited
(in thousands)
ASSETS
June 28, 2003 December 28, 2002
CURRENT ASSETS:
Cash and cash equivalents $52,312 $53,786
Receivables, net 5,843 9,358
Refundable and deferred income taxes 7,644 4,771
Other assets 1,058 1,723
-------- --------
Total current assets 66,857 69,638
GOODWILL, net 15,528 31,308
INTANGIBLES, net 2,980 7,454
PROPERTY & EQUIPMENT, net 1,897 2,285
DEFERRED TAXES 15,994 14,272
OTHER ASSETS 502 502
-------- --------
TOTAL ASSETS $103,758 $125,459
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 421 $ 1,170
Accrued liabilities and other 4,704 4,990
-------- --------
Total current liabilities 5,125 6,160
NONCURRENT LIABILITIES 3,167 3,573
STOCKHOLDERS' EQUITY 95,466 115,726
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $103,758 $125,459
======== ========
INFORMATION WITH RESPECT TO NON-GAAP FINANCIAL MEASURES
NON-GAAP FINANCIAL MEASURE MOST DIRECTLY COMPARABLE FINANCIAL MEASURE
Pro forma non-GAAP net loss Net loss
Pro forma non-GAAP net loss Net loss per diluted share
per diluted share
The following table contains a reconciliation to the non-GAAP financial measures
described above as compared to financial measures calculated and presented in
accordance with GAAP.
THE MANAGEMENT NETWORK GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Quarter Ended Year-to-Date
June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002
RECONCILLIATION TO PRO FORMA NON-GAAP NET LOSS
GAAP Loss from operations $ (22,496) $ (3,127) $ (24,588) $ (6,282)
Addback
Goodwill and intangible asset impairment 18,942 18,942
Equity related charges (benefit) (92) 294 (101) 952
Tax deductible intangible amortization 562 646 1,196 957
---------- ----------- ----------- -----------
GAAP Loss from operations, excluding above
pro forma items (3,084) (2,187) (4,551) (4,373)
Add: Other income, net 146 208 306 507
---------- ----------- ----------- -----------
Pre-tax pro forma loss (2,938) (1,979) (4,245) (3,886)
After tax rate 60% 60% 60% 60%
---------- ----------- ----------- -----------
Pro forma loss, net of tax benefit (1,763) (1,187) (2,547) (2,320)
Intangible amortization exempt
from tax benefit 82 82 163 163
---------- ----------- ----------- -----------
Pro forma non-GAAP net loss $ (1,681) $ (1,105) $ (2,384) $ (2,157)
========== =========== =========== ===========
Pro forma non-GAAP net loss per common share
Basic and diluted $ (0.05) $ (0.03) $ (0.07) $ (0.07)
========== =========== =========== ===========
RECONCILLIATION TO PRO FORMA NON-GAAP NET LOSS PER DILUTED COMMON SHARE
GAAP Loss from operations $ (0.67) $ (0.09) $ (0.74) $ (0.19)
Addback
Goodwill and intangible asset impairment 0.57 0.57
Equity related charges (benefit) 0.01 0.03
Tax deductible intangible amortization 0.01 0.02 0.04 0.03
---------- ----------- ----------- -----------
GAAP Loss from operations, excluding above
pro forma items (0.09) (0.06) (0.13) (0.13)
Add: Other income, net 0.01 0.01 0.01
---------- ----------- ----------- -----------
Pre-tax pro forma loss (0.09) (0.05) (0.12) (0.12)
After tax rate 60% 60% 60% 60%
---------- ----------- ----------- -----------
Pro forma non-GAAP net loss $ (0.05) $ (0.03) $ (0.07) $ (0.07)
========== =========== =========== ===========
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