2014

MKTG INC Reports $676,000 in Operating Income for Its Second Quarter Ended September 30, 2013

NEW YORK, Nov. 13, 2013 /PRNewswire/ -- MKTG INC (OTC BB: CMKG.OB), a full service marketing agency, today announced its operating results for its second quarter ended September 30, 2013.

Operating Results - Second Quarter, Fiscal 2014

For its second quarter ended September 30, 2013, Operating Revenue decreased $175,000 or 2% to $10.4 million, compared to $10.6 million for the quarter ended September 30, 2012. Compensation and general and administrative expenses were $9.8 million for the quarter, compared to $9.5 million for the quarter ended September 30, 2012. Operating income for the quarter decreased 42% to $676,000, compared to $1,163,000 for the second quarter of the previous year.  Modified EBITDA for the quarter was $935,000, compared to $1,521,000 for the quarter ended September 30, 2012.

Operating Results – Six Months Ended September 30, 2013

For the six months ended September 30, 2013, Operating Revenue decreased $1.3 million or 6% to $20.4 million, compared to $21.7 million for the six months ended September 30, 2012. Compensation and general and administrative expenses were $19.4 million for the six-month period, compared to $19.0 million for the six months ended September 30, 2012.  Operating income for the period decreased 63% to $994,000, compared to $2,677,000 for the six months ended September 30, 2012.  Modified EBITDA for the period was $1.6 million, compared to $3.4 million for the six months ended September 30, 2012.

"As with our prior quarter, we continued to encounter delays in client spending resulting in lower than expected Operating Revenue for both the three and six month periods," said Paul Trager, Chief Financial Officer.  Mr Trager continued, "We are projecting an increase in client activity in the second half of the year, and remain confident that our Operating Revenue for the fiscal year ending March 31, 2014 will exceed prior year results."

"This past quarter we expanded and solidified our presence in London as well as other foreign destinations.  We also continued our investment in digital capabilities that include mobile applications and social media platforms," said Charlie Horsey, President and Chief Executive Officer.  Mr. Horsey concluded, "We continue to execute our strategy of geographic and service offering expansion and diversification and remain unwavering in our pursuit of increasing Operating Revenue.  Despite challenging economic times, we are confident that this strategy, coupled with our disciplined new business approach will drive sustainable, profitable revenue growth."

Fair Value Adjustment to Compound Embedded Derivatives

The Company's income statements for the periods include accounting adjustments shown below the operating income line.  These are non-cash fair value adjustments to compound embedded derivatives generated from the Company's December 2009 financing.  For the three and six months ended September 30, 2013, these adjustments amounted to $739,000 and $1,053,000, respectively.  For the three and six months ended September 30, 2012, these adjustments amounted to ($197,000) and ($809,000), respectively.  The amount of these adjustments is driven by a number of factors, most importantly, by the value of the Company's stock. As its stock price fluctuates, the Company is required to record adjustments, with increases in stock price reducing net income, and declines in stock price increasing net income.  Consequently, the Company believes it is most appropriate to focus on its operating income as the basis for assessing operating performance.

Operating Revenue and Modified EBITDA

The Company believes Operating Revenue and Modified EBITDA are key performance indicators. The Company defines Operating Revenue as sales less reimbursable program costs and expenses and outside production and other program expenses. Operating Revenue is the net amount derived from sales to customers that management believes is available to fund compensation, general and administrative expenses and capital expenditures. The Company defines Modified EBITDA as income before interest, income taxes, depreciation and amortization plus other non-cash expenses. The Company uses Modified EBITDA as a supplemental measure to evaluate operational performance. Operating Revenue and Modified EBITDA are Non-GAAP financial measures disclosed by management to provide additional information to investors in order to provide them with alternative methods for assessing the Company's financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP and may be different from or inconsistent with Non-GAAP financial measures used by other companies. Reconciliations of Operating Revenue to sales and Modified EBITDA to operating income are provided at the end of this press release.

About MKTG INC

MKTG INC is a full service marketing agency headquartered in New York with full service offices in San Francisco, Los Angeles, Chicago, Cincinnati and London, England. The Company currently serves a variety of the world's most recognizable brands. Its services include experiential marketing, digital marketing, retail promotions and strategic research and planning. The firm's programs help its clients profitably connect with consumers and create networks of brand advocates to generate brand awareness and higher sales for its customers. For more information, please visit www.mktg.com.

This press release includes statements which constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release are not promises or guarantees and are subject to risks and uncertainties that could cause our actual results to differ materially from those anticipated. These statements are based on management's current expectations and assumptions and are naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward-looking statements. Actual results may vary materially from those expressed or implied by the statements herein. Factors that could cause actual results to differ materially from the Company's expectations are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2013 under "Risk Factors," and include the risk that projected business opportunities will fail to materialize or will be delayed. The Form 10-K may be obtained by visiting the Company's website or by accessing the database maintained by the Securities and Exchange Commission at http://www.sec.gov.

 

MKTG INC

Consolidated Statements of Operations

For The Three and Six Months Ended September 30, 2013 and 2012 (Unaudited)









Three Months Ended



Six Months Ended



 September 30,



 September 30,



2013



2012



2013



2012

Sales

$

33,391,183


$

32,998,359


$

64,192,333


$

68,434,886

Operating revenue

$

10,437,538


$

10,613,058


$

20,358,492


$

21,653,722

Operating income

$

675,785


$

1,162,804


$

993,913


$

2,676,818

Income before provision for income taxes

$

1,415,424


$

966,255


$

2,047,635


$

1,868,823

Provision for income taxes

$

270,000


$

393,000


$

396,000


$

1,039,000

Net income

$

1,145,424


$

573,255


$

1,651,635


$

829,823













Earnings per share:












Basic

$

0.14


$

0.07


$

0.20


$

0.10

Diluted

$

0.07


$

0.04


$

0.10


$

0.05

 

MKTG INC

Consolidated Balance Sheets

September 30, 2013 and March 31, 2013








September 30, 2013

(Unaudited)


March 31, 2013






Total assets

$

44,260,863

$

40,606,970

Total liabilities

$

29,067,089

$

27,297,244

Preferred stock

$

3,421,156

$

3,132,882

Total stockholders' equity

$

11,772,618

$

10,176,844

 

MKTG INC

Operating Revenue Schedule

For The Three and Six Months Ended September 30, 2013 and 2012

 (Unaudited)









Three Months Ended



Six Months Ended



 September 30,



  September 30,



2013



2012



2013



2012













Sales

$

33,391,183


$

32,998,359


$

64,192,333


$

68,434,886

Reimbursable program costs and expenses


7,163,886



5,748,872



13,489,103



12,025,445

Outside production and other program expenses


15,789,759



16,636,429



30,344,738



34,755,719

Operating Revenue

$

10,437,538


$

10,613,058


$

20,358,492


$

21,653,722

 

MKTG INC

Modified EBITDA Schedule

For The Three and Six Months Ended September 30, 2013 and 2012 (Unaudited)









Three Months Ended



Six Months Ended



 September 30,



 September 30,



2013



2012



2013



2012













Operating income

$

675,785


$

1,162,804


$

993,913


$

2,676,818

Depreciation and amortization


170,005



245,467



426,006



483,906

Share based compensation expense


88,922



113,094



198,002



225,729

Modified EBITDA

$

934,712


$

1,521,365


$

1,617,921


$

3,386,453

 

SOURCE MKTG INC



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