SPAR Group Reports Financial Results for 2004 Second Quarter
Company's Operating Loss Reflects Non-Cash Charges
TARRYTOWN, N.Y.--Aug. 20, 2004--SPAR Group, Inc. (Nasdaq:SGRP) today reported financial results for the second quarter and six months ended June 30, 2004.
For the 2004 second quarter, the company sustained a net loss of $12.2 million, equal to $0.65 per share, which includes approximately $9.3 million in non cash expenses ($8.1 million in non-cash impairment charges, and a $1.2 million non-cash charge against net deferred tax assets and tax benefits recorded in the first quarter of 2004). Net revenues for the 2004 second quarter amounted to $11.9 million. The company reported net income of $608,000, or $0.03 per diluted share, on net revenues of $17.4 million for the second quarter of 2003.
For the first six months of 2004, the company posted a net loss of $13.0 million, or $0.69 per share, on revenues of $24.7 million, compared with net income of $1.9 million, equal to $0.10 per fully diluted share, on net revenues of $36.1 million for the corresponding prior year period.
Robert G. Brown, SPAR Group's chairman and chief executive officer, said more than 77% of the loss for the second quarter and 68% of the loss for the six month period was attributable to non-cash, non-recurring items.
"While we have lost some key business, resulting in part from our largest customer completing the sale of its business and a major retailer closing some of its stores and changing some of its merchandising policies to emerge from bankruptcy, we have taken swift and decisive action in a restructuring plan aimed at restoring SPAR's financial health by downsizing our fixed expense structure to reflect our lower revenue base and returning the company to profitability in 2005," Brown said. "We plan to cut fixed costs, but not at the expense of the quality of service we provide to our customers. In addition, we plan to continue investing in technology, local in-store demonstration services and international expansion. We believe these areas though currently contributing to our losses, will improve profits in the future. It is our intent to build a profitable company and add tangible shareholder value. We are taking steps now to help assure that our long-term objectives will be met," Brown said.
SPAR Group, Inc. is a diversified international marketing services company, providing a broad array of productivity enhancing products and services to help Fortune 1000 companies improve their sales, operating efficiency and profits. The company provides in-store merchandising, in-store demonstrations, technology and research to manufacturers and retailers covering all product classifications and all classes of trade, including mass market, drug store, convenience store and grocery chains, throughout the United States and internationally.
Certain statements in this news release are forward-looking, including, but not limited to, the benefits to be derived from the company's restructuring plan and the ability to return to profitability in 2005. The company's actual results, performance and trends could differ materially from those indicated or implied by such statements as a result of various factors, including (without limitation) the continued strengthening of SPAR's selling and marketing functions, continued customer satisfaction and contract renewal, new product development, continued technological superiority over its competitors, continued availability of capable dedicated personnel, continued cost management, the success of its international efforts, success and availability of acquisitions, availability of financing and other factors, as well as by factors applicable to most companies such as general economic, competitive and other business and civil conditions. Information respecting certain of these and other factors that could effect future results, performance or trends are discussed in SPAR Group's annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings made with the Securities and Exchange Commission from time to time.
SPAR Group, Inc.
Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- --------
Net revenues $11,933 $17,351 $24,736 $36,090
Cost of revenues 8,716 11,146 17,411 22,397
Gross profit 3,217 6,205 7,325 13,693
Selling, general and
administrative expenses 5,577 4,768 10,545 9,711
Impairment charges 8,141 - 8,141 -
Depreciation and amortization 369 399 730 777
Operating (loss) income (10,870) 1,038 (12,091) 3,205
Interest expense 64 72 98 140
Other expense (income) 7 (10) 8 28
(Loss) income before provision
for income taxes (10,941) 976 (12,197) 3,037
Provision for income taxes 1,236 368 771 1,151
Net (loss) income $(12,177) $608 $(12,968) $1,886
Basic/diluted net (loss) income
per common share:
Net (loss) income -
basic/diluted $(0.65) $0.03 $(0.69) $0.10
Weighted average common shares -
basic 18,859 18,858 18,859 18,850
Weighted average common shares -
diluted 18,859 19,538 18,859 19,447
SPAR Group, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30, Dec. 31,
2004 2003
---- ----
(Unaudited) (Note)
Assets
Current assets:
Accounts receivable, net $7,743 $13,942
Prepaid expenses and other current assets 310 415
Deferred income taxes - 1,305
Total current assets 8,053 15,662
Property and equipment, net 1,751 2,099
Goodwill 798 8,749
Deferred income taxes - 434
Other assets 448 926
Total assets $11,050 $27,870
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,083 $1,445
Accrued expenses and other current liabilities 1,192 4,350
Accrued expenses, due to affiliates 1,296 996
Restructuring charges, current - 685
Customer deposits 932 17
Line of credit, short-term 1,856 4,084
Total current liabilities 7,359 11,577
Other long-term liabilities 513 270
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 3,000,000
Issued and outstanding shares - none - -
Common stock, $.01 par value:
Authorized shares - 47,000,000
Issued and outstanding shares -
18,858,972 - June 30, 2004 and
December 31, 2003 189 189
Treasury stock (213) (384)
Accumulated other comprehensive loss (3) (7)
Additional paid-in capital 11,197 11,249
Accumulated (deficit) retained earnings (7,992) 4,976
Total stockholders' equity 3,178 16,023
Total liabilities and stockholders' equity $11,050 $27,870
Note: The Balance Sheet at December 31, 2003, has been derived
from the audited financial statements at that date but does not
include any of the information and footnotes required by
accounting principles generally accepted in the United States
for complete financial statements.
Contacts:
SPAR Group, Inc.
Charles Cimitile, 914-332-4100
or
PondelWilkinson Inc.
Roger S. Pondel, 310-279-5980
