EX-99 3 form8k_8403-ex991.txt EXH. 99.1 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 ------------------- 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) ========== =========== =========== ===========
# # #