SPAR Group Reports 2006 Financial Results

Mar 14, 2007
SPAR Group Reports 2006 Financial Results

SPAR Group Reports 2006 Financial Results

TARRYTOWN, N.Y., March 14, 2007 -- SPAR Group, Inc. (Nasdaq:SGRP) today reported financial results for the fourth quarter and year ended December 31, 2006.

For the 2006 fourth quarter, net revenues rose 20% to $15.8 million from $13.2 million for the fourth quarter of 2005. The company recorded a net loss of $105,000, equal to $0.01 per share, for the 2006 fourth quarter, compared with net income of $733,000, or $0.04 per share, a year ago. Operating income for the 2006 fourth quarter was $11,000, compared with $1.1 million for the corresponding period last year. Selling, general and administrative expenses for the 2006 fourth quarter amounted to $6.0 million, compared with $4.4 million a year ago.

For the full 2006 year, revenues advanced 11% to $57.3 million from $51.6 million for the prior year. SPAR Group recorded a net loss of $621,000, equal to $0.03 per share, for 2006, compared with net income of $878,000, or $0.05 per share, for 2005. The operating loss for all of 2006 was $724,000, versus operating income of $1.9 million last year. Selling, general and administrative expenses for 2006 amounted to $19.8 million, compared with $16.7 million a year ago.

Robert G. Brown, SPAR Group's chairman and chief executive officer said the revenue increases for the 2006 fourth quarter and full year reflected contributions from the company's international operations. He said SPAR Group's performance was impacted primarily by higher selling, general and administrative expenses, including costs associated with launching the new joint venture operations, along with initial operating losses associated with the international division, and investments in future marketing and technology programs.

For the fourth quarter of 2006, international revenues advanced to $7.1 million from $3.9 million a year earlier. The international division had a net loss of $264,000 for the 2006 fourth quarter versus a loss of $322,000 for the 2005 fourth quarter. International revenues for the full 2006 year rose to $23.2 million from $14.9 million last year. Included in the 2006 revenue was an additional quarter of revenue, totaling approximately $1.3 million, associated with the change to the reporting year of the company's joint venture in Japan, as well as revenue from the company's new joint venture operations in Australia and Lithuania. The international division sustained a net loss of $630,000 for 2006, compared with net income of $162,000 for 2005.

For the fourth quarter of 2006, U.S. revenues amounted to $8.7 million, compared with $9.3 million a year earlier. The domestic operations registered net income of $159,000 for the 2006 fourth quarter versus $1.1 million for the 2005 fourth quarter. Revenues in the U.S. for the full 2006 year totaled $34.1 million, including $770,000 from the termination of a customer service agreement during the first quarter, versus $36.7 million for 2005. The company's domestic business posted net income of $9,000 for 2006, compared with $716,000 the prior year. Included in U.S. net income for 2006 was approximately $100,000 resulting from a favorable $1.3 million judgment awarded in a lawsuit offset by the 2006 related legal expenses of approximately $1.2 million.

"We continued to expand our international division in 2006, establishing a joint venture operation in Australia that today is beginning to provide tangible contributions to the company," Brown said. "While the U.S. markets continued to be challenging throughout most of 2006, we successfully launched a significant new customer relationship during the year that we anticipate will provide solid returns in 2007."

"We strengthened our management team as well and launched important technology-based programs utilizing RFID that we believe will provide tangible benefits to the company in the years ahead. We also were pleased to have augmented our board of directors during the year with the addition of C. Manly Molpus, formerly president and chief executive officer of the Grocery Manufacturers Association and one of our industry's leading executives," Brown added.

About SPAR Group

SPAR Group, Inc., a diversified international marketing services company, provides a broad array of services to help manufacturers and retailers improve their sales, operating efficiency and profits at retail worldwide. Services include in-store merchandising and event staffing, RFID and other technology and research, covering all product classifications and all classes of trade, including mass market, drug store, electronic store, convenience store and grocery chains. The company operates throughout the United States and internationally in Japan, Canada, Turkey, South Africa, India, Romania, China, Lithuania, Australia, Latvia and New Zealand. For more information, visit SPAR Group's Web site, www.sparinc.com.

Certain statements in this news release are forward-looking, including, but not limited to, currently anticipated tangible contributions from the company's Australian joint venture operation and benefits from a new U.S. customer relationship. 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 Inc.'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        Twelve Months Ended
                       ---------------------     ---------------------
                            December 31,              December 31,
                         2006         2005*        2006         2005*
                       --------      -------     --------      -------

 Net Revenues          $ 15,839      $13,205     $ 57,316      $51,586
 Cost of revenues         9,610        7,525       37,463       31,939
                       --------      -------     --------      -------
 Gross profit             6,229        5,680       19,853       19,647
                                                             
 Selling, general                                            
  and administrative                                         
  expenses                6,037        4,401       19,831       16,691
 Depreciation and                                            
  amortization              181          219          746        1,031
                       --------      -------     --------      -------
 Operating income                                            
  (loss)                     11        1,060         (724)       1,925
                                                             
 Interest expense            75           89          237          191
 Other expense                                               
  (income)                  204           38         (338)         446
                       --------      -------     --------      -------
 (Loss) income before                                        
  provision for income
  taxes and minority 
  interests                (268)         933         (623)       1,288
 Provision for                                               
  income taxes              (73)         198           99          242
                       --------      -------     --------      -------
 (Loss) income before                                        
  minority interest        (195)         735         (722)       1,046
                                                             
 Minority interest          (90)           2         (101)         168
                       --------      -------     --------      -------
 Net (loss) income     $   (105)     $   733     $   (621)     $   878
                       ========      =======     ========      =======
                                                           
 Basic/diluted net
  (loss) income per
  common share:

 Net (loss) income -
  basic/diluted        $  (0.01)     $  0.04     $  (0.03)     $  0.05
                       ========      =======     ========      =======
  
 Weighted average 
  common shares - 
  basic                  18,934       18,917       18,934       18,904
                       ========      =======     ========      =======
  
 Weighted average 
  common shares - 
  diluted                18,934       19,147       18,934       19,360
                       ========      =======     ========      =======

  * Certain reclassifications have been made to the 2005 
    financial statements to conform to the 2006 presentation.





                        SPAR Group, Inc.
                 Consolidated Balance Sheets
                          (unaudited)
          (in thousands, except share and per share data) 

                                                 December 31,   
                                            2006               2005*
                                         ---------          --------
 Assets
 Current Assets:
   Cash and cash equivalents              $  1,148          $  1,914
   Accounts receivable, net                 12,982            10,656
   Prepaid expenses and other                            
    current assets                             553               702
                                          --------          --------
 Total current assets                       14,683            13,272
                                                         
 Property and equipment, net                   901             1,131
 Goodwill                                      798               798
 Other assets                                1,695               216
                                          --------          --------
 Total assets                             $ 18,077          $ 15,417
                                          ========          ========
                                                         
 Liabilities and stockholders'                           
  equity 
 Current liabilities:                            
   Accounts payable                       $  2,551          $  1,597
   Accrued expenses and other                            
    current liabilities                      2,864             2,639
   Accrued expense due to                                
    affiliates                               1,752             1,190
   Restructuring charges                        --                99
   Customer Deposits                           560             1,658
   Lines of credit                           5,318             2,969
                                          --------          --------
 Total current liabilities                  13,045            10,152
                                                         
                                                         
 Minority Interest and other                             
  long-term liabilities                        504               415
                                          --------          --------
 Total liabilities                          13,549            10,567
                                                         
 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-                        
    18,934,182 - December 31, 2006                        
    18,916,847 - December 31, 2005             189               189
   Treasury Stock                               (1)               (1)
   Additional paid-in capital               11,484            11,059
   Accumulated other                                      
    comprehensive (loss) gain                 (109)               17
   Accumulated deficit                      (7,035)           (6,414)
                                          --------          --------
 Total stockholders' equity                  4,528             4,850
                                          --------          --------
 Total liabilities and                                   
  stockholders' equity                    $ 18,077          $ 15,417
                                          ========          ========
           
  * Certain reclassifications have been made to the 2005 
    financial statements to conform to the 2006 presentation.
CONTACT:  SPAR Group, Inc.
          Charles Cimitile, Chief Financial Officer
          (914) 332-4100
 
          PondelWilkinson Inc.
          Roger S. Pondel
          (310) 279-5980