Management Network Group Inc. (TMNG, Financial) filed Quarterly Report for the period ended 2009-10-03.
Management Network Group Inc. has a market cap of $18.1 million; its shares were traded at around $0.52 with and P/S ratio of 0.2.
Management has focused on aligning operating costs with operating segment revenues. Selling, general and administrative expenses have been reduced $2.4 million, a decline of 10%, to $21.5 million during the thirty-nine weeks ended October 3, 2009 from $23.9 million for the thirty-nine weeks ended September 27, 2008. This reduction in selling, general and administrative expenses was realized despite the fact that foreign currency losses included in selling, general and administrative expenses were $0.5 million during the thirty-nine weeks ended October 3, 2009 compared to foreign currency gains of $0.3 million during the thirty-nine weeks ended September 27, 2008. With the decline in revenues, our selling, general and administrative expenses have increased as a percentage of revenues to 44.9% in the thirty-nine weeks ended October 3, 2009 from 40.0% in the thirty-nine weeks ended September 27, 2008. During the first thirty-nine weeks of 2009, we continued to reduce selling and administrative costs to better align our cost structure with revenue levels and we will continue to evaluate selling, general and administrative expense reduction opportunities to improve earnings.
We recorded net losses of $0.5 million and $3.1 million for the thirteen and thirty-nine weeks ended October 3, 2009, respectively, compared to net losses of $1.2 million and $9.8 million for the thirteen and thirty-nine weeks ended September 27, 2008. The decline in the loss for the thirty-nine weeks ended October 3, 2009 to the comparable period of 2008 is primarily attributable to a $10.2 million impairment of goodwill related to our strategy business within our Management Consulting Services Segment in the 2008 period, effective cost management initiatives and a decrease in intangible amortization, partially offset by a contraction in revenues and the resulting negative impact on gross margins. We made substantial strides during fiscal year 2008 integrating our 2007 acquisitions and reducing our total operating cost structure with emphasis on selling, general and administrative expenses. However, due to the deterioration in economic conditions, these cost savings were overshadowed by the decrease in revenue levels from the thirty-nine weeks ended September 27, 2008 which impacted our ability to achieve profitability.
Our investments included $14.2 million ($14.8 million par value) in auction rate securities guaranteed through the Federal Family Education Loan Program of the U.S. Department of Education. As discussed in Note 2, Auction Rate Securities, in the notes to condensed consolidated financial statements (unaudited), during 2008, we reached a settlement agreement on $7.55 million of the auction rate securities allowing us to sell these auction rate securities held in accounts with UBS AG (UBS) and UBS affiliates at par value beginning June 30, 2010 and enabling us to borrow up to 75% of the fair value of the securities at zero net interest cost prior to the sales date. As of the end of the third quarter of 2009, we have classified $7.4 million ($7.6 million par value) of our investments in auction rate securities as current assets based on our intent and expected ability to liquidate these investments within the next year. As of October 3, 2009, we had borrowed $4.9 million against the line of credit with UBS. Given our intent to liquidate the collateral
Prior to accepting the UBS settlement offer, we recorded all of our auction rate securities as available-for-sale investments. Upon accepting the UBS settlement, the Company made a one-time election to transfer its UBS auction rate securities holdings from available-for-sale securities to trading securities under FASB ASC 320. For auction rate securities classified as available-for-sale, we recognized unrealized holding gains of $31,000 and $720,000, respectively during the thirteen and thirty-nine weeks ended October 3, 2009 and recognized unrealized holding losses of $384,000 and $846,000 during the thirteen and thirty-nine weeks ended September 27, 2008. For auction rate securities classified as trading securities, we recognized realized holding gains of $208,000 and $606,000, respectively, offset by realized losses on the Companys ARS Rights of $191,000 and $484,000, respectively, during the thirteen and thirty-nine weeks ended October 3, 2009. The ARS Rights will continue to be measured at fair value under FASB ASC 825 until the earlier of our exercise of the ARS Rights or UBSs purchase of the auction rate securities at par value in connection with the ARS Rights Agreement.
Revenue Recognition We recognize revenues from time and materials consulting contracts in the period in which our services are performed. We recognized $6.4 million and $8.3 million in revenues from time and materials contracts during the thirteen weeks ended October 3, 2009 and September 27, 2008, respectively. We recognized $19.4 million and $27.1 million in revenues from time and materials contracts during the thirty-nine weeks ended October 3, 2009 and September 27, 2008, respectively. In addition to time and materials contracts, our other types of contracts include fixed fee contracts, and contingent fee contracts. During the thirteen weeks ended October 3, 2009 and September 27, 2008, we recognized $10.4 million and $9.2 million in revenues on these other types of contracts. We recognized $28.4 million and $32.5 million in revenues from these other types of contracts during the thirty-nine weeks ended October 3, 2009 and September 27, 2008, respectively. We recognize revenues on milestone or deliverables-based fixed fee contracts and time and materials contracts not to exceed contract price using the percentage of completion method prescribed by FASB ASC 605-35, Revenue Recognition Construction-Type and Production-Type Contracts (formerly AICPA Statement of Position (SOP) No. 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts). For fixed fee contracts where services are not based on providing deliverables or achieving milestones, we recognize revenues on a straight-line basis over the period during which such services are expected to be performed. In connection with some fixed fee contracts, we receive payments from customers that exceed recognized revenues. We record the excess of receipts from customers over recognized revenue as deferred revenue. Deferred revenue is classified as a current liability to the extent it is expected to be earned within twelve months from the date of the balance sheet.
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Management Network Group Inc. has a market cap of $18.1 million; its shares were traded at around $0.52 with and P/S ratio of 0.2.
Highlight of Business Operations:
Revenues are driven by the ability of our team to secure new project contracts and deliver those projects in a way that adds value to our client in terms of return on investment or assisting clients address a need or implement change. For the thirty-nine weeks ended October 3, 2009, revenues declined 20% to $47.8 million from $59.6 million for the thirty-nine weeks ended September 27, 2008. Unfavorable foreign currency translation accounted for approximately $3.9 million or 33% of the revenue decline. For the thirteen weeks ended October 3, 2009, revenues declined 4% to $16.8 million from $17.5 million for the thirteen weeks ended September 27, 2008. Removing the impact of unfavorable foreign currency translation, revenues increased $0.2 million, or 1%, in the third quarter of 2009 as compared to the same period of 2008.Management has focused on aligning operating costs with operating segment revenues. Selling, general and administrative expenses have been reduced $2.4 million, a decline of 10%, to $21.5 million during the thirty-nine weeks ended October 3, 2009 from $23.9 million for the thirty-nine weeks ended September 27, 2008. This reduction in selling, general and administrative expenses was realized despite the fact that foreign currency losses included in selling, general and administrative expenses were $0.5 million during the thirty-nine weeks ended October 3, 2009 compared to foreign currency gains of $0.3 million during the thirty-nine weeks ended September 27, 2008. With the decline in revenues, our selling, general and administrative expenses have increased as a percentage of revenues to 44.9% in the thirty-nine weeks ended October 3, 2009 from 40.0% in the thirty-nine weeks ended September 27, 2008. During the first thirty-nine weeks of 2009, we continued to reduce selling and administrative costs to better align our cost structure with revenue levels and we will continue to evaluate selling, general and administrative expense reduction opportunities to improve earnings.
We recorded net losses of $0.5 million and $3.1 million for the thirteen and thirty-nine weeks ended October 3, 2009, respectively, compared to net losses of $1.2 million and $9.8 million for the thirteen and thirty-nine weeks ended September 27, 2008. The decline in the loss for the thirty-nine weeks ended October 3, 2009 to the comparable period of 2008 is primarily attributable to a $10.2 million impairment of goodwill related to our strategy business within our Management Consulting Services Segment in the 2008 period, effective cost management initiatives and a decrease in intangible amortization, partially offset by a contraction in revenues and the resulting negative impact on gross margins. We made substantial strides during fiscal year 2008 integrating our 2007 acquisitions and reducing our total operating cost structure with emphasis on selling, general and administrative expenses. However, due to the deterioration in economic conditions, these cost savings were overshadowed by the decrease in revenue levels from the thirty-nine weeks ended September 27, 2008 which impacted our ability to achieve profitability.
Our investments included $14.2 million ($14.8 million par value) in auction rate securities guaranteed through the Federal Family Education Loan Program of the U.S. Department of Education. As discussed in Note 2, Auction Rate Securities, in the notes to condensed consolidated financial statements (unaudited), during 2008, we reached a settlement agreement on $7.55 million of the auction rate securities allowing us to sell these auction rate securities held in accounts with UBS AG (UBS) and UBS affiliates at par value beginning June 30, 2010 and enabling us to borrow up to 75% of the fair value of the securities at zero net interest cost prior to the sales date. As of the end of the third quarter of 2009, we have classified $7.4 million ($7.6 million par value) of our investments in auction rate securities as current assets based on our intent and expected ability to liquidate these investments within the next year. As of October 3, 2009, we had borrowed $4.9 million against the line of credit with UBS. Given our intent to liquidate the collateral
Prior to accepting the UBS settlement offer, we recorded all of our auction rate securities as available-for-sale investments. Upon accepting the UBS settlement, the Company made a one-time election to transfer its UBS auction rate securities holdings from available-for-sale securities to trading securities under FASB ASC 320. For auction rate securities classified as available-for-sale, we recognized unrealized holding gains of $31,000 and $720,000, respectively during the thirteen and thirty-nine weeks ended October 3, 2009 and recognized unrealized holding losses of $384,000 and $846,000 during the thirteen and thirty-nine weeks ended September 27, 2008. For auction rate securities classified as trading securities, we recognized realized holding gains of $208,000 and $606,000, respectively, offset by realized losses on the Companys ARS Rights of $191,000 and $484,000, respectively, during the thirteen and thirty-nine weeks ended October 3, 2009. The ARS Rights will continue to be measured at fair value under FASB ASC 825 until the earlier of our exercise of the ARS Rights or UBSs purchase of the auction rate securities at par value in connection with the ARS Rights Agreement.
Revenue Recognition We recognize revenues from time and materials consulting contracts in the period in which our services are performed. We recognized $6.4 million and $8.3 million in revenues from time and materials contracts during the thirteen weeks ended October 3, 2009 and September 27, 2008, respectively. We recognized $19.4 million and $27.1 million in revenues from time and materials contracts during the thirty-nine weeks ended October 3, 2009 and September 27, 2008, respectively. In addition to time and materials contracts, our other types of contracts include fixed fee contracts, and contingent fee contracts. During the thirteen weeks ended October 3, 2009 and September 27, 2008, we recognized $10.4 million and $9.2 million in revenues on these other types of contracts. We recognized $28.4 million and $32.5 million in revenues from these other types of contracts during the thirty-nine weeks ended October 3, 2009 and September 27, 2008, respectively. We recognize revenues on milestone or deliverables-based fixed fee contracts and time and materials contracts not to exceed contract price using the percentage of completion method prescribed by FASB ASC 605-35, Revenue Recognition Construction-Type and Production-Type Contracts (formerly AICPA Statement of Position (SOP) No. 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts). For fixed fee contracts where services are not based on providing deliverables or achieving milestones, we recognize revenues on a straight-line basis over the period during which such services are expected to be performed. In connection with some fixed fee contracts, we receive payments from customers that exceed recognized revenues. We record the excess of receipts from customers over recognized revenue as deferred revenue. Deferred revenue is classified as a current liability to the extent it is expected to be earned within twelve months from the date of the balance sheet.
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