Spar Group Reports Second Quarter Results

Spar Group Reports Second Quarter Results

Net Income Up 280 Percent for Quarter

TARRYTOWN, N.Y., July 26, 2001 -- SPAR Group, Inc. (Nasdaq:SGRP) today announced results for its second quarter ended June 30, 2001, with net income up 280 percent and operating income climbing 21 percent.

For the second quarter of 2001, SPAR reported net income of $319,000, or $0.02 per diluted share, compared with net income of $113,000, or $0.01 per diluted share, a year ago. Revenues for the second quarter of 2001 were $23.5 million compared with $28.3 million in the second quarter a year ago. Revenues for the 2001 second quarter reflect discontinued in-store merchandising programs previously contracted with PIA Merchandising Co. Inc., a subsidiary of PIA Merchandising Services, Inc., which SPAR Group acquired in July 1999 and completed integrating in the third quarter of 2000.

For the six months ended June 30, 2001, SPAR reported net income of $996,000, or $0.05 per diluted share, compared with net income of $529,000, or $0.03 per diluted share. Revenues for the first half of 2001 were $51.2 million compared with $60.7 million in the comparable 2000 period.

"Results for the second quarter continue to reflect the success of applying SPAR's technology for our day-to-day management of accounts, while offering clients efficient and cost-effective marketing services," said Bob Brown, SPAR Group's chairman and chief executive officer. "We have conducted numerous customer surveys designed to monitor our performance and the results are very positive. Based upon current business prospects, we remain optimistic regarding our targets of $0.14 per share earnings for the year 2001 and $0.28 per share in 2002."

Brown noted that SPAR's International Division, which is initially focused on expanding its merchandising services to the Pacific Rim region, is proceeding according to plan in Japan. The Japanese reporting and other technical support systems now operate from the company's Detroit facility and are running 24 hours a day, seven days a week. He added that SPAR's Incentive division is expected to benefit from several new product introductions, supported by the company's systems and technology that have successfully improved performance within the merchandising services division.

"We are clearly on the right track and look forward to other opportunities to further enhance shareholder value," said Brown.

SPAR Group, Inc., a diversified marketing services company, provides a broad array of productivity enhancing products and services to help Fortune 1000 companies improve their sales, operating efficiency and profits. SPAR is organized into four operating divisions. SPAR's Merchandising Division provides in-store merchandising, database and research services to general retail, mass market, drug, and grocery chains. SPAR's Incentive Division provides a wide variety of consulting, creative program administration, travel and merchandising fulfillment services to companies seeking to retain, train, and motivate employees to higher levels of productivity. SPAR's Internet Division offers a series of Internet-based productivity improvement applications designed to help clients increase operating efficiencies and train employees in remote locations. SPAR's International Division, through a joint venture with a large Japanese wholesaler, is poised to provide in-store merchandising, database and research services in general retail, mass market, drug, and grocery chains in the Far East.

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 from those indicated by such statements as a result of various factors, including the continued building of sales momentum, the success of marketing its Internet application software products and other factors discussed in SPAR Group's Form 10-K, Form 10-Q, and other filings made with the Securities and Exchange Commission from time to time.

                           SPAR Group, Inc. 
           Condensed, 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, 
                           2001       2000         2001       2000 
 
Net revenues             $23,509    $28,290      $51,187    $60,737 
Cost of revenues          15,990     19,177       34,816     42,142 
Gross profit               7,519      9,113       16,371     18,595 
 Selling, general, 
  and administrative 
  expenses                 5,690      7,567       12,065     15,843 
 Depreciation and 
  amortization               969        838        1,889      1,638 
Operating income             860        708        2,417      1,114 
Interest expense             332        494          719        951 
Other (income) 
 expense                      --          5           --      (785) 
Income before 
 provision for 
 income taxes                528        209        1,698        948 
Provision for income 
 taxes                       209         96          702        419 
Net income                  $319       $113         $996       $529 
 
Basic earnings per 
 share                     $0.02      $0.01        $0.05      $0.03 
Basic weighted 
 average common 
 shares                   18,272     18,176       18,272     18,165 
Diluted earnings per 
 share                     $0.02      $0.01        $0.05      $0.03 
Diluted weighted 
 average common 
 shares                   18,336     18,299       18,329     18,289 
 
 
 
                           SPAR Group, Inc. 
                Condensed, Consolidated Balance Sheets 
                 (in thousands, except per share data) 
 
                                        June 30,       December 31, 
                                          2001              2000 
                                     (unaudited)         (audited) 
 
ASSETS 
Cash and cash equivalents              $    --           $    -- 
 Accounts receivable, net               19,239            23,207 
 Prepaid expenses and other 
  current assets                         1,306               880 
 Prepaid program costs                   2,196             3,542 
 Deferred income taxes                   1,718             1,718 
Total current assets                    24,459            29,347 
 
Property and equipment, net              3,588             3,561 
Goodwill and other 
 intangibles, net                       20,370            21,485 
Deferred income taxes                    1,082             1,082 
Other assets                               223               143 
Total assets                           $49,722           $55,618 
 
LIABILITIES & STOCKHOLDERS' EQUITY 
Current liabilities: 
 Accounts payable                       $3,972            $5,849 
 Accrued expenses and other 
  current liabilities                   10,044            10,178 
 Deferred revenue                        4,839             8,581 
 Restructuring and other 
  charges, current                       1,655             2,205 
 Due to certain 
  stockholders, current                  3,133             3,505 
 Current portion of 
  long-term debt                           928             1,211 
Total current liabilities               24,571            31,529 
 
Line of credit and 
 long-term liabilities, net 
 of current portion                      8,549             8,093 
Long-term debt due to 
 certain stockholders                    2,230             2,160 
Restructuring and other 
 charges, long-term                      1,136             1,596 
 
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 -- 18,272,330 
     as of June 30, 2001 
     and December 31, 2000                 182               182 
 Additional paid-in capital             10,127            10,127 
 Retained earnings                       2,927             1,931 
Total stockholders' equity              13,236            12,240 
Total liabilities and 
 stockholders' equity                  $49,722           $55,618 

Contacts:

SPAR Group, Inc.
Charles Cimitile
914/332-4100

PondelWilkinson MS&L
Gary S. Maier
310/207-9300