SPAR Group Reports Financial Results for 2005 Third Quarter
TARRYTOWN, N.Y., Nov 7, 2005 -- SPAR Group, Inc. (SGRP) today reported financial results for the third quarter and nine months ended September 30, 2005.
Net revenues for the 2005 third quarter increased 3.5% to $11.1 million from $10.7 million in the corresponding prior year period. The company sustained a net loss for the 2005 third quarter of $1.1 million, equal to a loss of $0.06 per share, compared with net income of $210,000, or $.01 per share, last year.
The gross margin percentage for the 2005 third quarter amounted to 31.3%, versus 34.8% in the corresponding period last year. Selling, general and administrative expenses for the 2005 period were $4.2 million, the same as that of the preceding second quarter and slightly higher than the $4.0 million of the prior year's third quarter.
For the first nine months of 2005, net revenues rose 8.4% to $38.4 million from $35.4 million for the comparable prior year period. SPAR Group registered net income of $144,000, equal to $0.01 per share, for the year-to-date period of 2005, compared with a net loss of $12.8 million, or $0.68 per share, last year. The loss for 2004 period included impairment and tax charges totaling $9.4 million.
Robert G. Brown, SPAR Group's chairman and chief executive officer, said, "The third quarter loss is attributable principally to our domestic merchandising business, which remains challenging. However, I am pleased to report that our international division continued its strong growth momentum. During the quarter, we announced the launch of joint ventures in China and Lithuania, and we look forward to further growth and expansion of our overseas business in the years to come."
International revenues for the 2005 third quarter increased to $3.6 million from $1.4 million last year, with operating profits of $135,000, compared with an operating loss of $323,000 a year ago. The increase in revenue reflects $1.4 million of revenue resulting from the consolidation of the joint venture in Japan that was not consolidated in the prior year period, as well as continued increases in Canada and India, slightly offset by decreases in South Africa.
Revenue in the U.S. for the 2005 third quarter amounted to $7.5 million, compared with $9.2 million a year ago, with a quarterly operating loss of $1.1 million, versus a loss of $260,000 last year.
"While we are still feeling the impact of the loss of a major customer in 2004, going forward we are optimistic about our domestic business," Brown added. "We expect improvements in the fourth quarter of 2005 and in 2006. In 2006, we hope to increase our merchandising business with new clients obtained in 2005 and late 2004. We are also excited about new products developed for our event staffing business."
With joint venture partners in Japan, Turkey, South Africa, India, Romania, Lithuania and China, as well as operations in Canada and the United States, SPAR Group, Inc. is a diversified international marketing services company, providing a broad array of services to help companies improve their sales, operating efficiency and profits at retail worldwide. The company provides in-store merchandising, in-store event staffing, RFID and other technology, as well as research to manufacturers and retailers covering all product classifications and all classes of trade, including mass market, drug store, electronic store, convenience store and grocery chains, throughout the United States and internationally. For more information, visit the company's Web site, www.sparinc.com.
Certain statements in this news release are forward-looking, including, but not limited to further growth and expansion of the company's international operation and, improvement in its domestic merchandising business. 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 Group's selling and marketing functions, continued customer satisfaction and contract renewal, new product development, 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 regarding certain of these and other factors that could affect 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 Nine Months Ended
------------------- -------------------
September September September September
30, 30, 30, 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Revenues $11,060 $10,683 $38,381 $35,418
Cost of revenues 7,595 6,963 24,414 24,474
--------- --------- --------- ---------
Gross profit 3,465 3,720 13,967 10,944
Selling, general and
administrative expenses 4,214 4,028 12,712 14,471
Impairment Charges - - - 8,141
Depreciation and amortization 261 275 812 1,005
--------- --------- --------- ---------
Operating (loss) income (1,010) (583) 443 (12,673)
Interest expense 29 29 102 127
Other income - 773 14 764
--------- --------- --------- ---------
(Loss) income before provision
for income taxes and minority
interests (1,039) 161 355 (12,036)
Provision for income taxes 15 15 45 783
--------- --------- --------- ---------
(Loss) income before minority
interest (1,054) 146 310 (12,819)
Minority interest 88 (64) 166 (64)
--------- --------- --------- ---------
Net (loss) income $(1,142) $210 $144 $(12,755)
========= ========= ========= =========
Basic/diluted net (loss) income
per common share:
Net (loss) income -
basic/diluted $(0.06) $0.01 $0.01 $(0.68)
========= ========= ========= =========
Weighted average common shares
- basic 18,899 18,859 18,876 18,859
========= ========= ========= =========
Weighted average common shares
- diluted 18,899 19,206 19,388 18,859
========= ========= ========= =========
SPAR Group, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
September December
30, 31,
2005 2004
----------- ----------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $1,813 $887
Accounts receivable, net 8,758 11,307
Prepaid expenses and other current assets 662 657
----------- ----------
Total current assets 11,233 12,851
Property and equipment, net 1,112 1,536
Goodwill 798 798
Other assets 89 636
----------- ----------
Total assets $13,232 $15,821
=========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $1,592 $2,158
Accrued expenses and other current liabilities 2,635 2,391
Accrued expense due to affiliates 770 987
Restructuring charges 99 250
Customer Deposits 1,523 1,147
Lines of credit 2,418 4,956
----------- ----------
Total current liabilities 9,037 11,889
Other long-term liabilities 53 12
Minority Interest 209 206
----------- ----------
Total liabilities 9,299 12,107
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-
18,881,397 - September 30, 2005
18,858,972 - December 31, 2004 189 189
Treasury Stock (1) (108)
Additional paid-in capital 11,077 11,011
Accumulated other comprehensive loss (184) (86)
Accumulated deficit (7,148) (7,292)
----------- ----------
Total stockholders' equity 3,933 3,714
----------- ----------
Total liabilities and stockholders' equity $13,232 $15,821
=========== ==========
Contacts:
SPAR Group, Inc.
Charles Cimitile, 914-332-4100
PondelWilkinson Inc.
Roger S. Pondel, 310-279-5980
