SPAR GROUP, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains
"forward-looking statements" within the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, made by, or respecting,
All statements (other than those that are purely historical) are forward-looking statements. Words such as "may," "will," "expect," "intend", "believe", "estimate", "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also identify forward-looking statements. Forward-looking statements made by the Company in this Quarterly Report or the Annual Report may include (without limitation) statements regarding: risks, uncertainties, cautions, circumstances and other factors ("Risks"); and plans, intentions, expectations, guidance or other information respecting the potential negative effects of the Coronavirus and COVID-19 pandemic on Company's business, cash flow or financial condition, the Company's cash flow later this year, or the pursuit or achievement of the Company's five corporate objectives (growth, customer value, employee development, greater productivity & efficiency, and increased earnings per share), building upon the Company's strong foundation, leveraging compatible global opportunities, growing the Company's client base and contracts, continuing to strengthen its balance sheet, growing revenues and improving profitability through organic growth, new business development and strategic acquisitions, and continuing to control costs. The Company's forward-looking statements also include (without limitation) those made in the Annual Report in "Business", "Risk Factors", "Legal Proceedings", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Directors, Executive Officers and Corporate Governance", "Executive Compensation", "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters", and "Certain Relationships and Related Transactions, and Director Independence".
You should carefully review and consider the Company's forward-looking statements (including all risk factors and other cautions and uncertainties) and other information made, contained or noted in or incorporated by reference into this Quarterly Report, the Annual Report, the Proxy Statement, the First Special Meeting Proxy/Information Statement and the First Special Meeting Report and the other applicable SEC Reports, but you should not place undue reliance on any of them. The results, actions, levels of activity, performance, achievements or condition of the Company (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition) and other events and circumstances planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, "Expectations"), and our forward-looking statements (including all Risks) and other information reflect the Company's current views about future events and circumstances. Although the Company believes those Expectations and views are reasonable, the results, actions, levels of activity, performance, achievements or condition of the Company or other events and circumstances may differ materially from our Expectations and views, and they cannot be assured or guaranteed by the Company, since they are subject to Risks and other assumptions, changes in circumstances and unpredictable events (many of which are beyond the Company's control). In addition, new Risks arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company. Accordingly, the Company cannot assure you that its Expectations will be achieved in whole or in part, that it has identified all potential Risks, or that it can successfully avoid or mitigate such Risks in whole or in part, any of which could be significant and materially adverse to the Company and the value of your investment in the Company's Common Stock.
These forward-looking statements reflect the Company's Expectations, views, Risks and assumptions only as of the date of this Quarterly Report, and the Company does not intend, assume any obligation, or promise to publicly update or revise any forward-looking statements (including any Risks or Expectations) or other information (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changed circumstances, future events, recognition, or otherwise.
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SPAR Group, Inc. and Subsidiaries
GENERAL
The SPAR Group ("SGRP", "SPAR" or the "Company") and its subsidiaries (together with SGRP, "SPAR", the SPAR Group" or the "Company") are a leading global merchandising and marketing services company, providing a broad range of services to retailers, manufacturers and distributors around the world. With more than 40 years of experience, 25,000+ merchandising specialists around the world, 200,000+ average store visits a week and long-term relationships with some of the world's leading manufacturers and retail businesses, SPAR provides specialized capabilities across 9 countries and 4 continents.
The Company's focus is merchandising and marketing. Its specialists are in stores restocking shelves, auditing inventory, performing competitive price shopping, setting up exciting promotions, assembling fixtures and furniture, preparing new locations for grand openings, assisting with sales and more. SPAR provides the "last mile" of retailing and manufacturer product merchandising and marketing.
The Company's services apply to a wide range of segments and categories. SPAR serves retailers in the grocery, drug, dollar, discount, convenience, cash and carry, home improvement, consumer electronics, automotive, pharmacy, office supply and mass merchandise segments. SPAR serves manufacturers and distributors in the personal technology, electronics, beverage, household product, consumables, automotive aftermarket and consumer product segments. The Company's ability to recognize trends and opportunities across segments and geographies distinguishes the business from local or regional competition.
The Company operates in markets that represent more than 50% of the world's
population. SPAR has expanded internationally to serve clients but also to
capitalize on growing global demand. As of
The Company operates under two divisions: Domestic and International. The
Domestic division is comprised of all operations within
The Domestic business is led and operated from its global headquarters in
The Company's approach to the international marketplace has historically been to establish joint ventures. SPAR believes this approach enables the Company to bring the breadth of its global capabilities and tools while capitalizing on the strength and importance of local executive leadership and resources.
Summaries of the Company's business and domestic and international business are set forth below. Please see Item 1 of the Annual Report for a more detailed description of the Company's Business, and the following parts of the Proxy Statement (which were incorporated by reference into the Annual Report): (i) Security Ownership of Certain Beneficial Owners and Management, (ii) Corporate Governance, (iii) Executive Compensation, Directors and Other Information and (iv) Executive Compensation, Equity Awards and Options.
Please also see, review and give particular attention to (1) the Risk Factors in Item 1A of the Annual Report (including, without limitation, Dependence Upon and Cost of Services Provided by Affiliates and Use of Independent Contractors, Potential Conflicts in Services Provided by Affiliates, Risks Related to the Company's Significant Stockholders: Potential Voting Control and Conflicts, and Risks of a Nasdaq Delisting and Penny Stock Trading), (2) Note 9 to the Company's Condensed Consolidated Financial Statements - Commitments and Contingencies - Legal Matters, above, (3) Note 6 to the Company's Condensed Consolidated Financial Statements - Related Party Transactions, above, and (4) Item 4 - Management's Report on Internal Control Over Financial Reporting, below.
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SPAR Group, Inc. and Subsidiaries
Results of Operations
Three months ended
The following table sets forth selected financial data and data as a percentage of net revenues for the periods indicated (in thousands, except percent data).
Three Months Ended September 30,
2021 2020
$ % $ %
Net revenues $ 67,423 100.0 % $ 58,865 100.0 %
Cost of revenues 54,813 81.3 46,849 79.6
Gross profit 12,610 18.7 12,016 20.4
Selling, general & administrative
expense 9,426 14.0 8,145 13.8
Depreciation & amortization 509 0.8 530 0.9
Operating income 2,675 3.9 3,341 5.7
Interest expense, net 124 0.2 169 0.3
Other (income), net (137 ) (0.2 ) (143 ) (0.2 )
Income before income taxes 2,688 3.9 3,315 5.6
Income tax expense 549 0.8 870 1.5
Net income 2,139 3.1 2,445 4.1
Net income attributable to
non-controlling interest (959 ) (1.4 ) (1,301 ) (2.2 )
Net income attributable to SPAR
Group, Inc. $ 1,180 1.7 % $ 1,144 1.9 %
Net Revenues
Net revenues for the three months ended
Domestic net revenues totaled
International net revenues totaled
Cost of Revenues
The Company's cost of revenues consists of its on-site labor and field
administration fees, travel and other direct labor related expenses and was
81.3% of its net revenues for the three months ended
Domestic cost of revenues was 80.8% of net domestic revenues for the three
months ended
Internationally, the cost of revenues as a percentage of net international
revenues was 81.6% and 81.4% for the three months ended
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SPAR Group, Inc. and Subsidiaries
Selling, General and Administrative Expenses
Selling, general and administrative expenses of the Company include its
corporate overhead, project management, information technology, executive
compensation, human resources, legal and accounting expenses. Selling, general
and administrative expenses were approximately
Domestic selling, general and administrative expenses totaled
International selling, general and administrative expenses totaled
Depreciation and Amortization
Depreciation and amortization charges totaled
Interest Expense
The Company's net interest expense was
Other (Income)
Other income was
Income Taxes
Income tax expense was
Non-controlling Interest
Net operating profits from the non-controlling interest, from the Company's 51%
owned subsidiaries, resulted in a reduction of net income attributable to SGRP
of
Net Income
The Company reported net income of
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SPAR Group, Inc. and Subsidiaries
Nine months ended
The following table sets forth selected financial data and data as a percentage of net revenues for the periods indicated (in thousands, except percent data).
Nine Months Ended September 30,
2021 2020
$ % $ %
Net revenues $ 195,696 100.0 % $ 171,157 100.0 %
Cost of revenues 158,821 81.2 137,478 80.3
Gross profit 36,875 18.8 33,679 19.7
Selling, general & administrative
expense 28,020 14.3 25,287 14.8
Depreciation & amortization 1,573 0.8 1,609 0.9
Operating income 7,282 3.7 6,783 4.0
Interest expense, net 402 0.2 482 0.3
Other (income), net (208 ) (0.1 ) (201 ) (0.1 )
Income before income taxes 7,088 3.6 6,502 3.8
Income tax expense 2,036 1.0 1,830 1.1
Net income 5,052 2.6 4,672 2.7
Net income attributable to
non-controlling interest (2,441 ) (1.2 ) (3,335 ) (1.9 )
Net income attributable to SPAR
Group, Inc. $ 2,611 1.4 % $ 1,337 0.8 %
Net Revenues
Net revenues for the nine months ended
Domestic net revenues totaled
International net revenues totaled
Cost of Revenues
The Company's cost of revenues consists of its on-site labor and field
administration fees, travel and other direct labor related expenses and
was 81.2% of its net revenues for the nine months ended
Domestic cost of revenues was 80.0% of net domestic revenues for the nine months
ended
Internationally, the cost of revenues as a percentage of net international
revenues was 82.0% and 82.4% for the nine months ended
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SPAR Group, Inc. and Subsidiaries
Selling, General and Administrative Expenses
Selling, general and administrative expenses of the Company include its
corporate overhead, project management, information technology, executive
compensation, human resources, legal and accounting expenses. Selling, general
and administrative expenses were approximately
Domestic selling, general and administrative expenses totaled
International selling, general and administrative expenses totaled
Depreciation and Amortization
Depreciation and amortization charges totaled
Interest Expense
The Company's net interest expense was
Other (Income)
Other income was
Income Taxes
Income tax expense was
Non-controlling Interest
Net operating profits from the non-controlling interest, from the Company's 51%
owned subsidiaries, resulted in a reduction of net income attributable to
SGRP of
Net Income
The Company reported net income of
Liquidity and Capital Resources
In the nine months ended
Net cash provided by operating activities was
Net cash used in investing activities was
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SPAR Group, Inc. and Subsidiaries
Net cash provided by financing activities for the nine months ended
The above activity and the impact of foreign exchange rate changes resulted in a
decrease in cash and cash equivalents for the nine months ended
The Company had net working capital of
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