SPAR Group Reports Third Quarter/Nine-Month Results
Company on Track Following Merger
TARRYTOWN, N.Y., Nov. 8, 1999 -- SPAR Group, Inc. (Nasdaq:SGRP) today reported results for its third quarter ended September 30,1999, representing the first consolidated report since the merger of the prior SPAR Group companies and PIA Merchandising Services, Inc. in July 1999.
Robert G. Brown, chairman, chief executive officer and president of SPAR Group, Inc. said, ``We are extremely encouraged and pleased with the progress of theintegration, the cost-savings and other operating efficiencies we were able to realize since the completion of the merger.''
For the third quarter, SPAR recorded pro forma net income of $98,000, or $0.01 per pro forma diluted share, compared with pro forma net income of $1.3 million, or$0.10 per pro forma diluted share, in the 1998 third quarter. These results are based upon a 45 percent increase in the pro forma diluted weighted shares outstanding inthe 1999 quarter. Revenues for the same period increased more than three fold to $36.4 million from $11.1 million a year ago.
For the nine months, pro forma net income was $1.1 million, or $0.08 per pro forma diluted share, compared with pro forma net income of $3.0 million, or $0.24 per proforma diluted share, for the same prior-year period. These results are based upon a 14 percent increase in the pro forma diluted weighted shares outstanding for the ninemonths. Revenues for the nine months climbed more than two and a half times to $77.9 million from $30.1 million in the same period a year ago.
Consolidated figures for the third quarter include a non-cash, non-recurring provision for income tax for conversion of the prior SPAR Group companies from asubchapter S status to a C corporation.
Brown noted that since the merger of the prior SPAR Group companies and PIA, fixed overhead costs have already been reduced by approximately $6 million on anannualized basis and PIA's gross margin has improved 4 percentage points from 26% in the third quarter of 1998 to over 31% in this quarter. Brown stated, ``Some ofthe savings we have achieved have already been redirected to improve client services and in-store activities. The progress we have made so quickly at PIAdemonstrates SPAR's ability to quickly integrate acquisitions, while continuing to be a low cost producer of services. We expect to realize additional cost savings as wefurther integrate SPAR's business plan and aggressively pursue synergistic savings.''
``Our goal is to create one of the nation's largest providers of retail merchandising and other marketing services utilizing SPAR's advanced Internet reporting and controlservices. This innovative technology allows clients real-time access to their accounts and on-demand marketing services, providing enhanced quality, a range of tailoredprograms and improved profitability and growth for SPAR. We are well-positioned to capitalize on the opportunities in a growing and dynamic industry which sourcesestimate to be approximately $85 billion annually worldwide,'' said Brown.
Separately, the company announced that Terry Peets, vice chairman and former chief executive of PIA Merchandising Services, Inc., has resigned his position. ``Withthe successful integration of SPAR and PIA, Terry has decided that the time was right for him to leave and spend more time with his family. We appreciate his manycontributions and his desire to make the merger and transition period as smooth as possible,'' stated Brown.
SPAR Group, Inc. is focused on providing clients a wide array of marketing and sales solutions through a single point of contact. The company serves more than 18,000grocery stores, 6,200 drug stores and 8,800 mass merchandiser stores with retail merchandising. The company also offers incentive marketing, teleservices, databasemarketing and marketing research services.
Certain statements in this news release are forward-looking and involve a number of risks and uncertainties. The company's actual results could differ materially fromthose indicated by such statements as a result of various factors, including the continued building of sales momentum, the ability to achieve expected synergies as a resultof the merger and other factors discussed in PIA's Definitive Proxy Statement, Form 10-K and Form 10-Q on file with the SEC and other filings made with the SECfrom time to time.
SPAR GROUP INC.(Unaudited)(in thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended Nine Months Ended
Sept. 30 Sept. 30 Sept. 30 Sept. 30
1999 1998 1999 1998
Net Revenues $ 36,390 $ 11,095 $ 77,949 $ 30,076
Cost of Revenues 24,466 5,415 52,921 15,133
Gross Profit 11,924 5,680 25,028 14,943
Operating Expenses:
Selling, general and
administrative
expenses 10,688 3,521 20,427 9,841
Depreciation and
amortization 704 34 1,218 104
Total operating
expenses 11,392 3,555 21,645 9,945
Operating Income 532 2,125 3,383 4,998
Other Expenses 250 120 1,059 264
Income Before Provision
for Income Taxes 282 2,005 2,324 4,734
Provision for income taxes:
Nonrecurring charge for
termination of Subchapter
S election 3,100 -- 3,100 --
C Corporation taxes 23 -- 23 --
Net Income (Loss) $ (2,841) $ 2,005 $ (799) $ 4,734
Unaudited pro forma information:
Historical Income (Loss)
Before Provision for
Income Taxes $ 282 $ 2,005 $ 2,324 $ 4,734
Pro forma provision
(benefit) for
income taxes 184 740 1,216 1,747
Pro Forma Net Income $ 98 $ 1,265 $ 1,108 $ 2,987
Pro Forma Basic
Earnings Per Share $ 0.01 $ 0.10 $ 0.08 $ 0.24
Pro Forma Diluted
Earnings Per Share $ 0.01 $ 0.10 $ 0.08 $ 0.24
Pro Forma Basic
Weighted Average
Common Shares 18,153 12,659 14,350 12,659
Pro Forma Diluted
Weighted Average
Common Shares 18,295 12,659 14,491 12,659
CONDENSED BALANCE SHEET
September 30 December 31
1999 1998
ASSETS
Cash and cash equivalents $ 2,429 $ 910
Accounts receivable, net 26,587 10,628
Goodwill, net 22,873 0
Other assets 11,607 3,326
Total assets $ 63,496 $ 14,864
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities $ 51,080 $ 15,958
Non-current liabilities 1,839 311
Shareholders' equity 10,577 (1,405)
Total liabilities and
shareholders' equity $ 63,496 $ 14,864
CONTACT: SPAR Group, Inc., Irvine
Cathy L. Wood, 949/476-2200
or
Pondel/Wilkinson Group
Gary S. Maier/Kristin Bruno, 310/207-9300
