MKTG, INC. 
By NEW YORK, Nov. 4, 2010 /PRNewswire-FirstCall/ -- MKTG INC (OTC Bulletin Board: CMKG), a full service marketing agency, today announced its operating results for its second quarter ended September 30, 2010.
Operating Results - Second Quarter, Fiscal 2011
For its second quarter ended September 30, 2010, Operating Revenue increased $1.7 million or 23% to $9.2 million, compared to $7.5 million for the quarter ended September 30, 2009. Compensation and general and administrative expenses, amounting to $8.0 million for the quarter, including an accrual for potential bonuses, decreased by $606,000 from the same period of the previous year. Operating income for the quarter increased $2.3 million to $1.2 million, compared to an operating loss of $1.1 million for the second quarter of the previous year. Modified EBITDA for the quarter was $1.7 million, compared to a negative $688,000 for the quarter ended September 30, 2009.
Operating Results - For The Six Months Ended September 30, 2010
For the six months ended September 30, 2010, Operating Revenue increased $1.6 million or 10% to $17.3 million, compared to $15.7 million for the six months ended September 30, 2009. Compensation and general and administrative expenses were $15.4 million for the period, a decrease of $1.2 million from the same period of the previous year. Operating income for the period increased $2.9 million to $1.9 million, compared to an operating loss of $1.0 million for the six months ended September 30, 2009. Modified EBITDA for the period was $2.8 million, compared to a negative $179,000 for the six months ended September 30, 2009.
"This marks our second consecutive quarter of positive operating income, with operating income up 76% from the previous quarter," said Jim Haughton, Senior Vice President - Controller. Mr. Haughton continued, "Our improved performance is a result of increasing Operating Revenues while holding the line on our base costs, which consist of general and administrative expenses, and compensation before bonuses. We plan on increasing our team to support fully funded additional work from our largest clients, and are currently targeting these base costs at between $7.3 and $7.5 million per quarter, before giving effect to the significant costs associated with the derivative litigation."
"We believe that our business, client relationships and both our short and long term growth opportunities are strong," said Charlie Horsey, President and Chief Executive Officer. Mr. Horsey continued, "We expect our profitable performance and momentum established during the first half of the year to continue throughout the remainder of this fiscal year."
Mr. Haughton added: "Our income statement for the current quarter includes an accounting adjustment of $1,652,000, shown below the operating income line, which causes our reported net income to be negative. This is a non-cash fair value adjustment to the derivative financial instruments generated from our December 2009 financing. The amount of this adjustment is driven by a number of factors, most importantly, by the value of our stock. As our stock price fluctuates, we will be required to book adjustments with increases in stock price reducing net income, and declines in stock price increasing net income. Consequently we think it most appropriate to focus on operating income as the basis for assessing operating performance."
Operating Revenue & 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. A reconciliation of Operating Revenues 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 and Cincinnati. 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, 2010 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
Condensed Consolidated Statements of Operations
For The Three and Six Months Ended September 30, 2010 and 2009
(Unaudited)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Sales $28,556,087 $17,867,383
----------- -----------
Operating revenue $9,166,842 $7,481,413
---------- ----------
Operating income (loss) $1,214,996 $(1,076,608)
---------- -----------
Income (loss) before
provision for income
taxes $(613,931) $(1,082,167)
--------- -----------
Provision for income taxes $ - $ -
Net income (loss) $(613,931) $(1,082,167)
========= ===========
Earnings (loss) per share:
Basic $(0.07) $(0.14)
====== ======
Diluted $(0.07) $(0.14)
====== ======
Six Months Ended
September 30,
-------------
2010 2009
---- ----
Sales $57,692,875 $37,686,487
----------- -----------
Operating revenue $17,323,523 $15,660,190
----------- -----------
Operating income (loss) $1,904,527 $(1,007,044)
---------- -----------
Income (loss) before
provision for income
taxes $99,462 $(1,029,880)
------- -----------
Provision for income taxes $ - $ -
Net income (loss) $99,462 $(1,029,880)
======= ===========
Earnings (loss) per share:
Basic $0.01 $(0.15)
===== ======
Diluted $0.01 $(0.15)
===== ======
MKTG INC
Condensed Consolidated Balance Sheets
September 30, 2010 and March 31, 2010
September 30, March 31,
------------- ---------
2010 2010
--- ----
(Unaudited)
-----------
Total assets $35,263,695 $26,194,031
=========== ===========
Total liabilities $28,939,056 $20,246,361
=========== ===========
Preferred stock $1,751,924 $1,503,589
========== ==========
Total stockholders' equity $4,572,715 $4,444,081
========== ==========
MKTG INC
Operating Revenue Schedule
For The Three and Six Months Ended September 30, 2010 and 2009
(Unaudited)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Sales $28,556,087 $17,867,383
Reimbursable program
costs and expenses (6,099,942) (3,666,976)
Outside production and
other program expenses (13,289,303) (6,718,994)
----------- ----------
Operating Revenue $9,166,842 $7,481,413
========== ==========
Six Months Ended
September 30,
-------------
2010 2009
---- ----
Sales $57,692,875 $37,686,487
Reimbursable program
costs and expenses (11,580,696) (7,761,900)
Outside production and
other program expenses (28,788,656) (14,264,397)
----------- -----------
Operating Revenue $17,323,523 $15,660,190
=========== ===========
MKTG INC
Modified EBITDA Schedule
For The Three and Six Months Ended September 30, 2010 and 2009
(Unaudited)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Operating income (loss) $1,214,996 $(1,076,608)
Depreciation and
amortization 279,438 301,734
Income tax expense 15,000 -
Share based compensation
expense 197,134 86,851
------- ------
Modified EBITDA $1,706,568 $(688,023)
========== =========
Six Months Ended
September 30,
-------------
2010 2009
---- ----
Operating income (loss) $1,904,527 $(1,007,044)
Depreciation and
amortization 558,852 607,143
Income tax expense 30,000 -
Share based compensation
expense 283,985 220,451
------- -------
Modified EBITDA $2,777,364 $(179,450)
========== =========
SOURCE MKTG INC
