UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the second quarterly period ended June 30, 2003
Commission file number: 0-27824
SPAR Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0684451
State of Incorporation IRS Employer Identification No.
580 White Plains Road, Tarrytown, New York 10591
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (914) 332-4100
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: [ X ] Yes [ ] No
Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act): [ ] Yes [ X ] No
On June 30, 2003, there were 18,858,972 shares of Common Stock outstanding.
SPAR Group, Inc.
Index
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
as of June 30, 2003 and December 31, 2002........................................3
Consolidated Statements of Income for the six
months ended June 30, 2003 and June 30, 2002.....................................4
Consolidated Statements of Cash Flows
for the six months ended June 30, 2003 and
June 30, 2002....................................................................5
Notes to Consolidated Financial Statements.......................................6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................12
Item 3: Quantitative and Qualitative Disclosures About Market Risk......................23
Item 4: Controls and Procedures.........................................................23
PART II: OTHER INFORMATION
Item 1: Legal Proceedings...............................................................24
Item 2: Changes in Securities and Use of Proceeds.......................................24
Item 3: Defaults upon Senior Securities.................................................24
Item 4: Submission of Matters to a Vote of Security Holders.............................24
Item 5: Other Information...............................................................24
Item 6: Exhibits and Reports on Form 8-K................................................24
SIGNATURES............................................................................................25
Certifications........................................................................................26
2
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SPAR Group, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
JUNE 30, DECEMBER 31,
2003 2002
---------------------- --------------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, net 19,504 17,415
Prepaid expenses and other current assets 1,208 783
Deferred income taxes 707 903
---------------------- --------------------
Total current assets 21,419 19,101
Property and equipment, net 2,267 1,972
Goodwill 8,100 7,858
Deferred income taxes 648 705
Other assets 667 121
---------------------- --------------------
Total assets $ 33,101 $ 29,757
====================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 958 $ 422
Accrued expenses and other current liabilities 5,229 6,097
Accrued expenses, due to affiliates 1,535 958
Restructuring charges, current 772 1,354
Due to certain stockholders - 3,951
---------------------- --------------------
Total current liabilities 8,494 12,782
Line of credit 6,648 148
Restructuring charges, long-term - 235
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, 2003 189 188
18,824,527 - December 31, 2002
Treasury Stock (582) (30)
Additional paid-in capital 10,951 10,919
Retained earnings 7,401 5,515
---------------------- --------------------
Total stockholders' equity 17,959 16,592
---------------------- --------------------
Total liabilities and stockholders' equity $ 33,101 $ 29,757
====================== ====================
Note: The Balance Sheet at December 31, 2002, 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.
See accompanying notes.
3
SPAR Group, Inc.
Consolidated Statements of Income
(unaudited)
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
--------------------- ----------------------------------------------------------
Net revenues $ 17,351 $ 17,542 $ 36,090 $ 33,588
Cost of revenues 11,146 10,591 22,397 20,342
--------------------- ----------------------------------------------------------
Gross profit 6,205 6,951 13,693 13,246
Selling, general and administrative expenses 4,768 4,675 9,711 9,642
Depreciation and amortization 399 460 777 877
--------------------- ----------------------------------------------------------
Operating income 1,038 1,816 3,205 2,727
Interest expense 72 38 140 86
Other (income)/expense (10) 52 28 134
--------------------- ----------------------------------------------------------
Income before provision for income taxes 976 1,726 3,037 2,507
Provision for income taxes 368 657 1,151 956
--------------------- ----------------------------------------------------------
Net income $ 608 $ 1,069 $ 1,886 $ 1,551
===================== ==========================================================
Net income per common share:
- Basic $ 0.03 $ 0.06 $ 0.10 $ 0.08
- Diluted $ 0.03 $ 0.06 $ 0.10 $ 0.08
--------------------- -----------------------------------------------------------
Weighted average common shares - basic 18,858 18,593 18,850 18,592
===================== ===========================================================
Weighted average common shares - diluted 19,538 19,021 19,447 19,021
===================== ===========================================================
See accompanying notes.
4
SPAR Group, Inc.
Consolidated Statements of Cash Flows
(unaudited) (In thousands)
SIX MONTHS ENDED
--------------------
JUNE 30, JUNE 30,
2003 2002
------- -------
OPERATING ACTIVITIES
Net income $ 1,886 $ 1,551
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Depreciation 777 877
Changes in operating assets and liabilities:
Accounts receivable (2,089) 60
Prepaid expenses, other current assets and other assets (971) (270)
Accounts payable, accrued expenses and other current
liabilities (332) 1,453
Accrued expenses due to affiliates 577 -
Deferred taxes 341 -
Discontinued operations, net - (902)
Restructuring charges (817) (178)
------- -------
Net cash (used in) provided by operating activities (628) 2,591
INVESTING ACTIVITIES
Purchases of property and equipment (966) (160)
Acquisition of businesses (436) -
------- -------
Net cash used in investing activities (1,402) (160)
FINANCING ACTIVITIES
Net borrowings on (payments to) line of credit 6,500 (2,187)
Proceeds from exercise of options 32 -
Proceeds from issuance of common stock - 13
Payments of other long-term debt - (57)
Payments to certain stockholders (3,951) (200)
Purchase of treasury stock (551) -
------- -------
Net cash provided by (used in) financing activities 2,030 (2,431)
Net change in cash - -
Cash at beginning of period - -
======= =======
Cash at end of period $ - $ -
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 111 $ 319
See accompanying notes.
5
SPAR Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements of SPAR
Group, Inc., and its subsidiaries (collectively, the "Company" or the "SPAR
Group") have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the financial statements. However, these interim financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the Company as contained in Company's Annual
Report on Form 10-K for the year ended December 31, 2002, as filed with the
Securities Exchange Commission on March 31, 2003 (the "Company's Annual Report
on Form 10-K"). The results of operations for the interim periods are not
necessarily indicative of the operating results for the entire year.
2. RESTRUCTURING CHARGES
In 1999, the Company's Board of Directors approved a plan to
restructure the operations of the PIA Companies. Restructuring costs were
composed of committed costs required to integrate the SPAR Companies and the PIA
Companies' field organizations and the consolidation of administrative functions
to achieve beneficial synergies and costs savings.
The following table displays a roll forward of the liabilities for
restructuring charges from December 31, 2002 to June 30, 2003 (in thousands):
SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 2003 JUNE 30,
2002 DEDUCTIONS 2003
-------------------------------------------------------------------------------
Restructuring charges:
Equipment and office lease
settlements $ 1,589 $ 817 $ 772
Management believes that the remaining reserves for restructuring are
adequate to complete its plan.
6
SPAR Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
3. EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted
earnings per share (in thousands, except per share data):
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- -----------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
----------------------------------- -----------------------------------
Numerator:
Net income $ 608 $ 1,069 $ 1,886 $ 1,551
Denominator:
Shares used in basic
earnings per share
calculation 18,858 18,593 18,850 18,592
Effect of diluted
securities:
Employee stock options 680 428 597 429
----------------------------------- -----------------------------------
Shares used in diluted
earnings per share
calculation 19,538 19,021 19,447 19,021
=================================== ===================================
Basic and diluted earnings
per common share:
Net Income - basic $ 0.03 $ 0.06 $ 0.10 $ 0.08
=================================== ===================================
- diluted $ 0.03 $ 0.06 $ 0.10 $ 0.08
=================================== ===================================
4. LINE OF CREDIT
In January 2003, the Company and Whitehall Business Credit Corporation
("Whitehall"), as successor to the business of IBJ Whitehall Business Credit
Corporation, entered into the Third Amended and Restated Revolving Credit and
Security Agreement and related documents (the "New Credit Facility"). The New
Credit Facility provides the Company with a $15.0 million revolving credit
facility (the "New Revolving Facility") that matures on January 23, 2006. The
New Revolving Facility allows the Company to borrow up to $15.0 million based
upon a borrowing base formula as defined in the agreement (principally 85% of
"eligible" accounts receivable). The New Revolving Facility bears interest at
7
SPAR Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
Whitehall's "Alternate Base Rate" or LIBOR plus two and one-half percent and is
secured by all the assets of the Company and its subsidiaries. The New Revolving
Facility interest rate was Whitehall's "Alternate Base Rate" of 4.75% per annum
at June 30, 2003.
The New Credit Facility replaces a previous 1999 agreement, as amended,
between the Company and Whitehall (the "Old Credit Facility") that was scheduled
to mature on February 28, 2003. The Old Credit Facility provided for a $15.0
million revolving credit facility (the "Old Revolving Facility"), as well as a
$2.5 million term loan. The Old Revolving Facility allowed the Company to borrow
up to $15.0 million based upon a borrowing base formula as defined in the old
agreement (principally 85% of "eligible" accounts receivable). The term loan
under the Old Credit Facility amortized in equal monthly installments of $83,334
and was repaid in full as of December 31, 2001.
The New Credit Facility contains certain financial covenants (amending,
restating and replacing those contained in the Old Credit Facility) that must be
met on a consolidated basis, among which are a minimum "Net Worth", a "Fixed
Charge Coverage Ratio", a capital expenditure limitation and a minimum EBITDA,
as such terms are defined in the respective agreement. The Company was in
compliance with such financial covenants at June 30, 2003.
The balances outstanding on the revolving lines of credit were $6.6
million under the New Revolving Facility at June 30, 2003, and $0.1 million
under the Old Revolving Facility at December 31, 2002. As of June 30, 2003,
based upon the borrowing base formula, the SPAR Group had availability of $2.4
million of the $8.4 million unused revolving line of credit under the New
Revolving Facility.
5. RELATED-PARTY TRANSACTIONS
As of April 2003, all outstanding funds due certain stockholders under
certain notes were paid in full.
The SPAR Group, Inc. is affiliated through common ownership with SPAR
Marketing Services, Inc. ("SMS"), SPAR Management Services, Inc. ("SMSI") and
SPAR Infotech, Inc. ("SIT"). SMS and SMSI (through SMS) provided approximately
92% of the Company's field representatives (through its independent contractor
field force) and substantially all of the Company's field management services.
Under the terms of the Field Service Agreement, SMS provides the services of
approximately 5,700 field representatives and SMSI provides approximately 90
full-time national, regional and district managers to the Company as they may
request from time to time, for which the Company has agreed to pay SMS for all
of its costs of providing those services plus 4%.
SIT provided Internet and other computer programming services to the
Company. Under the terms of the programming agreement between SPAR Marketing
Force, Inc. ("SMF") and SIT effective as of October 1, 1998, SIT continues to
provide programming services to SMF as SMF may request from time to time, for
which SMF has agreed to pay SIT competitive hourly wage rates and to reimburse
SIT's out-of-pocket expenses.
8
SPAR Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
The following transactions occurred between the Company and the above
affiliates (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
----------------------------------------------------------------
Services provided by affiliates:
SMS: Independent contractor
field services $ 7,257 $ 6,505 $ 14,954 $ 11,090
================================================================
SMSI: Field management services $ 1,859 $ 1,879 $ 3,775 $ 3,598
================================================================
SIT: Internet and computer
programming services $ 476 $ 415 $ 882 $ 870
================================================================
Services provided to affiliates:
Management services $ 52 $ 132 $ 108 $ 211
================================================================
Balance of accrued expense due to affiliates:
JUNE 30,
2003 2002
-------------------------------
SMS (SPAR Marketing Services, Inc.) $ 1,535 $ 1,814
===============================
6. STOCK OPTIONS
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation as amended by SFAS 148. No compensation
cost has been recognized for the stock option plans. Had compensation cost for
the Company's option plans been determined based on the fair value at the grant
date consistent with the provisions of SFAS No. 123, the Company's net income
and pro forma net income per share from continuing operations would have been
reduced to the adjusted amounts indicated below (in thousands, except per share
data):
9
SPAR Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
SIX MONTHS ENDED JUNE 30,
2003 2002
---------------------------------------
Net income, as reported $ 1,886 $ 1,551
Stock based employee compensation expense
under the fair market value method $ 907 $ 971
---------------------------------------
Pro forma net income $ 979 $ 580
Basic and diluted net income per share, as reported $ 0.10 $ 0.08
Basic and diluted net income per share, pro forma
after adjustment for stock based employee compensation
expense under the fair market value method $ 0.05 $ 0.03
7. SHARE REPURCHASE
The Company initiated a share repurchase program in 2002, which allowed
for the repurchase of up to 100,000 shares. On May 9, 2003 the Board of
Directors approved the repurchase of an additional 100,000 shares increasing the
total approval to 200,000 shares. The Company repurchased 110,149 shares in the
quarter ended June 30, 2003, for $474,035. Since the repurchase program went
into effect, a total of 142,831 shares have been repurchased for a total of
$582,439.
8. COMMITMENT AND DEPOSITS DUE TO SPAR PERFORMANCE GROUP, INC. ("SPGI")
In connection with the sale of SPGI on June 30, 2002, the Company
agreed to provide a discretionary revolving line of credit to SPGI not to exceed
$2.0 million (the "SPGI Revolver") through September 30, 2005. The SPGI Revolver
is secured by a pledge of all the assets of SPGI and is guaranteed by its
parent, Performance Holdings, Inc. The SPGI Revolver provides for advances in
excess of the borrowing base through September 30, 2003. As of October 1, 2003,
the SPGI Revolver will include a borrowing base calculation (principally 85% of
"eligible" accounts receivable). Prior to September 1, 2003, SPGI may request
that the Company provide advances of up to $1,000,000 in excess of the borrowing
base. If advances are limited to the borrowing base on and after October 1,
2003, the interest rate will be reduced to the higher of the Term Loans interest
rate less 4.0% per annum or the prime
10
SPAR Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
commercial lending rate as announced in the Wall Street Journal plus 4.0% per
annum. If SPGI requests that advances be allowed in excess of the borrowing
base, the interest rate will remain unchanged.
Under the SPGI Revolver terms, SPGI is required to deposit all of its
cash to the Company's lockbox. At June 30, 2003, there was no borrowing under
the SPGI Revolver and the Company had cash deposits due SPGI totaling $0.3
million.
Due to the speculative nature of the SPGI Revolver, the Company has a
reserve of approximately $0.8 million against the $2.0 million SPGI Revolver
commitment. This reserve and the cash deposits due to SPGI are included in other
current liabilities.
9. CONTINGENT LIABILITIES
In May 2001 SPAR Group International, Inc. and Paltac, Inc. ("Paltac"),
a large Japanese distributor, entered into a joint venture to create a Japanese
company, SPAR FM. SPAR FM entered into a 300 million yen Revolving Credit
Agreement with a Japanese bank. The bank required Paltac to guarantee the
outstanding balance on the revolving credit facility. As part of the joint
venture agreement, should Paltac be required to make a payment on its guarantee
to the bank, then SPAR Group, Inc. has agreed to remit to Paltac 50% of any such
payment up to a maximum of 150 million yen or approximately $1.2 million. As of
June 30, 2003, SPAR FM has borrowed 90 million yen under its Revolving Credit
Agreement. Therefore, the Company's maximum potential exposure to Paltac under
the commitment would be 45 million yen or approximately $0.4 million.
10. ACQUISITIONS
In February 2003, the Company purchased the business and certain assets
of All Store Marketing Services, Inc. ("ASMS"), a Texas corporation specializing
in in-store product demonstrations. In connection with the acquisition of ASMS,
the Company entered into an employment agreement with the President of ASMS for
a period of two years. In June 2003, the Company purchased the business and
certain assets of Impulse Marketing Solutions ("IMS"), a division of KaBOOM
Entertainment, Inc., a Canadian company specializing in providing merchandising
services in Canada. In connection with the purchase of IMS, the Company entered
into a consulting agreement with the President and a second senior officer of
IMS that expires on December 31, 2006. The effect of these acquisitions are not
considered material to the Company's financial statements.
11
SPAR Group, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
- --------------------------
Statements contained in this Quarterly Report on Form 10-Q of SPAR
Group, Inc. (the "Company"), include "forward-looking statements" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"),
including (without limitation) Section 27A thereof, and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including (without limitation)
Section 21E thereof. These forward-looking statements include, in particular
and without limitation, the statements contained in the discussions under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations". Forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the Company's actual results,
performance and achievements, whether expressed or implied by such
forward-looking statements, to not occur or be realized or to be less than
expected. Such forward-looking statements generally are based upon the Company's
best estimates of future results, performance or achievement, based upon current
conditions and the most recent results of operations. Forward-looking statements
may be identified by the use of forward-looking terminology such as "may",
"will", "expect", "intend", "believe", "estimate", "anticipate", "continue" or
similar terms, variations of those terms or the negative of those terms. You
should carefully consider such risks, uncertainties and other information,
disclosures and discussions which contain cautionary statements identifying
important factors that could cause actual results to differ materially from
those provided in the forward-looking statements.
Although the Company believes that its plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, it cannot assure that such plans, intentions or expectations will be
achieved in whole or in part. You should carefully review the risk factors
described and any other cautionary statements contained in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with
the Securities and Exchange Commission on March 31, 2003 (the "Company's Annual
Report on Form 10-K"). All forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified by the risk
factors (see Item 1 - Certain Risk Factors) and other cautionary statements in
the Company's Annual Report on Form 10-K and in this Quarterly Report. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
OVERVIEW
- --------
The Company is a supplier of in-store merchandising and marketing
services both throughout the United States and internationally. The Company's
operations are divided into two divisions: the Merchandising Services Division
and the International Division. The Merchandising Services Division provides
merchandising services, database marketing, teleservices and marketing research
to manufacturers and retailers with product distribution primarily in mass
merchandisers, drug chains and grocery stores in the United States. The
International Division established in July 2000, currently provides
merchandising services in Japan and Canada and continues to focus on expanding
the Company's merchandising services business throughout the world.
12
SPAR Group, Inc.
MERCHANDISING SERVICES DIVISION
The Company provides nationwide retail merchandising and marketing
services to home entertainment, PC software, general merchandise, health and
beauty care, consumer goods and food products companies in mass merchandisers,
drug chains and retail grocery stores throughout the United States.
Merchandising services primarily consist of regularly scheduled dedicated routed
services and special projects provided at the store level for a specific
retailer or multiple manufacturers primarily under single or multi-year
contracts and arrangements. Services also include stand-alone large-scale
implementations such as new store openings, new product launches, special
seasonal or promotional merchandising, focused product support and product
recalls. These services may include sales enhancing activities, such as,
ensuring client products authorized for distribution are in stock and on the
shelf, adding new products that are approved for distribution but not presently
on the shelf, setting category shelves in accordance with approved store
schematics, ensuring shelf tags are in place, checking for the overall
salability of client products and setting new and promotional items, placing
and/or removing point of purchase and other related media advertising. Specific
in-store services can be initiated by retailers or manufacturers, and include
new store openings, new product launches, special seasonal or promotional
merchandising, focused product support and product recalls.
The Company's Merchandising Services Division consists of: (1) SPAR
Marketing, Inc. ("SMI") (an intermediate holding company), SPAR Marketing Force,
Inc. ("SMF"), SPAR Marketing, Inc., ("SMNEV"), SPAR/Burgoyne Retail Services,
Inc. ("SBRS"), and SPAR, Inc. ("SINC") (collectively, the "SPAR Marketing
Companies"); and (2) PIA Merchandising, Co., Inc., Pacific Indoor Display d/b/a
Retail Resources, Pivotal Sales Company and PIA Merchandising Ltd.
(collectively, "PIA" or the "PIA Companies"). The SPAR Marketing Companies are
the original predecessor of the current Company and were founded in 1967. The
PIA Companies, first organized in 1943, are also a predecessor of the Company
and a supplier of in-store merchandising services throughout the United States,
and were deemed "acquired" by the SPAR Marketing Companies for accounting
purposes pursuant to the Merger on July 8, 1999 (see Merger and Restructuring in
the Company's Annual Report on Form 10-K).
INTERNATIONAL DIVISION
In July 2000, the Company established its International Division, SPAR
Group International, Inc. ("SGI"), to focus on expanding its merchandising
services business worldwide. In May 2001, the Company entered into a joint
venture with a large Japanese distributor and together established SPAR FM to
provide merchandising services in Japan. In June 2003, the Company expanded its
merchandising services into Canada through the creation of its indirect
subsidiary, SPAR Canada Company ("SCC") and SCC's purchase of the business and
certain assets of Impulse Marketing Services Inc., a subsidiary of KaBOOM
Entertainment, Inc.
13
SPAR Group, Inc.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The Company's critical accounting policies, including the assumptions
and judgments underlying them, are disclosed in the Company's Annual Report on
Form 10-K in Note 2 to the Financial Statements. These policies have been
consistently applied in all material respects and address such matters as
revenue recognition, depreciation methods, asset impairment recognition,
business combination accounting, and discontinued business accounting. While the
estimates and judgments associated with the application of these policies may be
affected by different assumptions or conditions, the Company believes the
estimates and judgments associated with the reported amounts are appropriate in
the circumstances. Two critical accounting policies are revenue recognition and
allowance for doubtful accounts:
REVENUE RECOGNITION
The Company's services are provided under contracts or arrangements,
and consist primarily of service fees and per unit fee arrangements.
Revenues under service fee arrangements are recognized when the service
is performed. The Company's per unit contracts or arrangements provide
for fees to be earned based on the retail sales of client's products to
consumers. The Company recognizes per unit fees in the period such
amounts become determinable.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company continually monitors the collectability of its accounts
receivable based upon current customer credit information available.
Utilizing this information, the Company has established an allowance
for doubtful accounts of approximately $401,000 and $301,000 at June
30, 2003 and December 31, 2002, respectively. Historically, the
Company's estimates have not differed materially from the actual
results.
14
SPAR Group, Inc.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002
- -----------------------------------------------------------------------------
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
---------------------------------------------------------------------------------
June 30, 2003 June 30, 2002
% Incr.
Amount % Amount % (Decr.)
------ - ------ - -------
Net Revenues $ 17,351 100.0% $ 17,542 100.0% (1.1)%
Cost of revenues 11,146 64.2 10,591 60.4 5.2
Selling, general, and administrative expense 4,768 27.5 4,675 26.6 2.0
Depreciation and amortization 399 2.3 460 2.6 (13.2)
Interest expense 72 0.4 38 0.2 89.6
Other (income)/expense (10) (0.1) 52 0.3 (118.9)
---------------- --------------- ----------------- -----------------
Income before provision for income taxes 976 5.7 1,726 9.9 (43.5)
Income tax provision 368 2.1 657 3.7 (44.0)
---------------- --------------- ----------------- -----------------
Net income $ 608 3.6% $ 1,069 6.2% (43.2)%
================ =============== ================= =================
Net revenues from operations for the three months ended June 30,
2003, were $17.4 million, compared to $17.5 million for the three
months ended June 30, 2002, a decrease of 1.1%. The decrease in net
revenues of 1.1% resulted primarily from decreased per unit revenue
resulting from lower retail sales of customer products offset by
increases in service fee revenue.
One customer accounted for 37% and 29% of the Company's net
revenues for the three months ended June 30, 2003 and 2002,
respectively. This customer also accounted for approximately 43% and
47% of accounts receivable at June 30, 2003, and 2002, respectively.
A second customer accounted for 8% and 10% of the Company's net
revenues for the three months ended June 30, 2003 and 2002,
respectively. This customer also accounted for approximately 1.0% and
3.0% of accounts receivable at June 30, 2003 and 2002, respectively.
15
SPAR Group, Inc.
Approximately 15% and 20% of the Company's net revenues for the three
months ended June 30, 2003, and 2002, respectively, resulted from merchandising
services performed at Kmart for various customers. Kmart filed for protection
under the U.S. Bankruptcy Code in January of 2002 and emerged from bankruptcy in
May of 2003. During its time in bankruptcy, Kmart closed a number of stores in
the United States. While the Company's customers and the resultant contractual
relationships are with various manufacturers and not this retailer, a
significant reduction of this retailer's stores or cessation of this retailer's
business would negatively impact the Company. As of August 31, 2003, one
customer will discontinue its merchandising programs with the Company. Some but
not all of these programs were performed at Kmart. This customer accounted for
11% of the Kmart business for both the three month periods ending June 30, 2003
and 2002.
Cost of revenues consists of field in-store labor and field management
wages, related benefits, travel and other direct labor-related expenses. Cost of
revenues as a percentage of net revenues increased 3.8% to 64.2% for the three
months ended June 30, 2003, compared to 60.4% for the three months ended June
30, 2002. The increase is primarily a result of a decrease in per unit revenues
that do not have a proportionate decrease in cost. As discussed above under
Critical Accounting Policies/Revenue Recognition, the Company's revenue consists
of: (1) service fee revenue, which is earned when the merchandising services are
performed and therefore, has proportionate costs in the period the services are
performed and; (2) per unit revenue, which is earned when the client's product
is sold to the consumer at retail, not when the services are performed and
therefore, does not have proportionate costs in the period the revenue is
earned. Since the merchandising service and the related costs associated with
per unit revenue are normally performed prior to the retail sale and the retail
sales of client products are influenced by numerous factors, including consumer
tastes and preferences, and not solely by the merchandising service performed,
in any given period, the cost of per unit revenues may not be directly
proportionate to the per unit revenue. Approximately 81.8% and 79.2% of the
Company's costs of revenue in the three months ended June 30, 2003, and 2002,
respectively, resulted from field in-store independent contractor and field
management services purchased from the Company's affiliates, SPAR Marketing
Services, Inc., and SPAR Management Services, Inc., respectively.
Operating expenses include selling, general and administrative expenses
as well as depreciation and amortization. Selling, general and administrative
expenses include corporate overhead, project management, information technology,
executive compensation, human resources expenses, legal and accounting expenses.
The following table sets forth the operating expenses as a percentage of net
revenues for the time periods indicated (in millions, except percent data):
Three Months Ended
------------------------------------------------------------------------
Incr.
June 30, 2003 June 30, 2002 (Decr.)
--------------------------- -------------------------- -----------
Amount % Amount % %
------ - ------ - -
Selling, general and administrative $ 4.8 27.5% $ 4.7 26.6% 2.0%
Depreciation and amortization 0.4 2.3 0.5 2.6 (13.2)
Selling, general and administrative expenses were $4.8 million for the
three months ended June 30, 2003 compared to $4.7 million for the three months
ended June 30, 2002, an increase of $0.1 million or 2.0%. The increase is due
primarily to an increase in legal and bad debt expense, partially offset by less
software maintenance expense in 2003. The Company purchased $0.5 million and
$0.4 million of information technology from its affiliate SPAR Infotech, Inc.
for both the three months ended June 30, 2003 and 2002, respectively.
OTHER EXPENSE
Other expense represents the Company's share in the Japanese joint
venture loss totaling $52,032 for the three months ended June 30, 2002.
16
SPAR Group, Inc.
INCOME TAXES
The income tax provision represents a combined federal and state income
tax rate of approximately 38% for the three months ended June 30, 2003, and June
30, 2002, respectively.
NET INCOME
The Company had net income of $0.6 million for the three months ended
June 30, 2003, or $0.03 per diluted share compared to net income of $1.1 million
or $0.06 per diluted share for the corresponding period last year.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
- -------------------------------------------------------------------------
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):
Six Months Ended
---------------------------------------------------------------------------------
June 30, 2003 June 30, 2002
------------- -------------
% Incr.
Amount % Amount % (Decr.)
------ - ------ - -------
Net Revenues $ 36,090 100.0% $ 33,588 100.0% 7.4%
Cost of revenues 22,397 62.1 20,342 60.6 10.1
Selling, general, and administrative expense 9,711 26.9 9,642 28.7 0.7
Depreciation and amortization 777 2.2 877 2.6 (11.4)
Interest expense 140 0.4 86 0.3 62.6
Other expense 28 0.1 134 0.4 (79.1)
---------------- --------------- ----------------- -----------------
Income before provision for income taxes 3,037 8.3 2,507 7.4 21.1
Income tax provision 1,151 3.2 956 2.8 20.4
---------------- --------------- ----------------- -----------------
Net income $ 1,886 5.1% $ 1,551 4.6% 21.5%
================ =============== ================= =================
Net revenues from operations for the six months ended June 30, 2003,
were $36.1 million, compared to $33.6 million for the six months ended June 30,
2002, an increase of 7.4%. The increase in
17
SPAR Group, Inc.
net revenues of 7.4% resulted primarily from increased service fee revenue from
a new client and offset by decreases in per unit revenues.
One customer accounted for 33% and 29% of the Company's net revenues
for the six months ended June 30, 2003 and 2002, respectively. This customer
also accounted for approximately 43% and 47% of accounts receivable at June 30,
2003, and 2002, respectively.
A second customer accounted for 10% and 12% of the Company's net
revenues for the six months ended June 30, 2003 and 2002, respectively. This
customer also accounted for approximately 1% and 3% of accounts receivable at
June 30, 2003, and 2002, respectively.
Approximately 16% and 20% of the Company's net revenues for the six
months ended June 30, 2003, and 2002, respectively, resulted from merchandising
services performed at Kmart for various customers. Kmart filed for protection
under the U.S. Bankruptcy Code in January of 2002 and emerged from bankruptcy in
May of 2003. During its time in bankruptcy, Kmart closed a number of stores in
the United States. While the Company's customers and the resultant contractual
relationships are with various manufacturers and not this retailer, a
significant reduction of this retailer's stores or cessation of this retailer's
business would negatively impact the Company. As of August 31, 2003, one
customer will discontinue its merchandising programs with the Company. Some but
not all of these programs were performed at Kmart. This customer accounted for
18% and 13% of the Kmart business for six months ending June 30, 2003 and 2002
respectively.
Cost of revenues consists of field in-store labor and field management
wages, related benefits, travel and other direct labor-related expenses. Cost of
revenues as a percentage of net revenues increased 1.5% to 62.1% for the six
months ended June 30, 2003, compared to 60.6% for the six months ended June 30,
2002. The increase is primarily a result of a decrease in per unit revenues that
do not have a proportionate decrease in cost. As discussed above under Critical
Accounting Policies/Revenue Recognition, the Company's revenue consists of: (1)
service fee revenue, which is earned when the merchandising services are
performed and therefore, has proportionate costs in the period the services are
performed and; (2) per unit revenue, which is earned when the client's product
is sold to the consumer at retail, not when the services are performed and
therefore, does not have proportionate costs in the period the revenue is
earned. Since the merchandising service and the related costs associated with
per unit revenue are normally performed prior to the retail sale and the retail
sales of client products are influenced by numerous factors, including consumer
tastes and preferences, and not solely by the merchandising service performed,
in any given period, the cost of per unit revenues may not be directly
proportionate to the per unit revenue. Approximately 83.6% and 72.2% of the
Company's costs of revenue in the six months ended June 30, 2003, and 2002,
respectively, resulted from field in-store independent contractor and field
management services purchased from the Company's affiliates, SPAR Marketing
Services, Inc. ("SMS"), and SPAR Management Services, Inc. ("SMSI"),
respectively. SMS's and SMSI's increased shares of field services resulted from
their more favorable cost structure.
Operating expenses include selling, general and administrative expenses
as well as depreciation and amortization. Selling, general and administrative
expenses include corporate overhead, project management, information technology,
executive compensation, human resources expenses, legal and accounting expenses.
The following table sets forth the operating expenses as a percentage of net
revenues for the time periods indicated (in millions, except percent data):
Six Months Ended
--------------------------- -- -------------------------- -- -----------
Incr.
June 30, 2003 June 30, 2002 (Decr.)
--------------------------- -------------------------- -----------
Amount % Amount % %
------ - ------ - -
Selling, general and administrative $ 9.7 26.9% $ 9.6 28.7% 0.7%
Depreciation and amortization 0.8 2.2 0.9 2.6 (11.4)
18
SPAR Group, Inc.
Selling, general and administrative expenses were $9.7 million for the
six months ended June 30, 2003 compared to $9.6 million for the six months ended
June 30, 2002, an increase of $0.1 million or 0.7%. The increase is due
primarily to an increase in legal and bad debt expense, partially offset by less
software maintenance expense in 2003. The Company purchased $0.9 million and
$0.8 million of information technology from its affiliate SPAR Infotech, Inc.
for the six months ended June 30, 2003 and 2002, respectively.
OTHER EXPENSE
Other expense represents the Company's share in the Japanese joint
venture loss totaling $37,806 and $134,032 for the six months ended June 30,
2003, and June 30, 2002, respectively.
INCOME TAXES
The income tax provision represents a combined federal and state income
tax rate of approximately 38% for the six months ended June 30, 2003, and June
30, 2002, respectively.
NET INCOME
The Company had net income of $1.9 million for the six months ended
June 30, 2003, or $0.10 per diluted share compared to net income of $1.6 million
or $0.08 per diluted share for the corresponding period last year.
LIQUIDITY AND CAPITAL RESOURCES
In the six months ended June 30, 2003, the Company had net income of
$1.9 million. Net cash used in operating activities for the six months ended
June 30, 2003, was $0.6 million compared with net cash provided by operations of
$2.6 million for the six months ended June 30, 2002. The decrease in cash
provided by operating activities in 2003 was a result of increased accounts
receivable, prepaid expenses and other current assets, decreases in accrued
expenses and other liabilities and restructuring payments, offset by increases
in accounts payable and accrued expenses due to affiliates.
Net cash used in investing activities for the six months ended June 30,
2003, was $1.4 million, compared with net cash used in investing activities of
$0.2 million for the six months ended June 30, 2002. The net cash used in
investing activities in 2003 resulted from the acquisition of businesses,
purchases of property and equipment and the capitalization of software
development costs.
Net cash provided by financing activities for the six months ended June
30, 2003, was $2.0 million, compared with net cash used in financing activities
of $2.4 million for the six months ended June 30, 2002. The increase of net cash
provided by financing activities was primarily a result of borrowings on the
line of credit, offset by repayments of stockholder loans and the purchase of
treasury stock.
The above activity resulted in no change in cash and cash equivalents
for the six months ended June 30, 2003, as the Company utilizes excess cash to
pay down its line of credit.
19
SPAR Group, Inc.
At June 30, 2003, the Company had positive working capital of $12.9
million as compared to positive working capital of $6.3 million at December 31,
2002. The increase in working capital is due primarily to increases in accounts
receivable and prepaid expenses and decreases in accrued expenses and other
current liabilities, restructuring charges and stockholder loans partially
offset by increases in accounts payable and accrued expenses due to affiliates.
The Company's current ratio was 2.52 at June 30, 2003, and 1.49 at December 31,
2002.
In January 2003, the Company and Whitehall Business Credit Corporation
("Whitehall"), as successor to the business of IBJ Whitehall Business Credit
Corporation, entered into the Third Amended and Restated Revolving Credit and
Security Agreement and related documents (the "New Credit Facility"). The New
Credit Facility provides the Company with a $15.0 million revolving credit
facility (the "New Revolving Facility") that matures on January 23, 2006. The
New Revolving Facility allows the Company to borrow up to $15.0 million based
upon a borrowing base formula as defined in the agreement (principally 85% of
"eligible" accounts receivable). The New Revolving Facility bears interest at
Whitehall's "Alternate Base Rate" or LIBOR plus two and one-half percent and is
secured by all the assets of the Company and its subsidiaries. The New Revolving
Facility interest rate was Whitehall's "Alternate Base Rate" of 4.75% per annum
at June 30, 2003.
The New Credit Facility replaces a previous 1999 agreement, as amended,
between the Company and Whitehall (the "Old Credit Facility") that was scheduled
to mature on February 28, 2003. The Old Credit Facility provided for a $15.0
million revolving credit facility (the "Old Revolving Facility"), as well as, a
$2.5 million term loan. The Old Revolving Facility allowed the Company to borrow
up to $15.0 million based upon a borrowing base formula as defined in the old
agreement (principally 85% of "eligible" accounts receivable). The term loan
under the Old Credit Facility amortized in equal monthly installments of $83,334
and was repaid in full as of December 31, 2001.
The New Credit Facility contains certain financial covenants (amending,
restating and replacing those contained in the Old Credit Facility) that must be
met on a consolidated basis, among which are a minimum "Net Worth", a "Fixed
Charge Coverage Ratio", a capital expenditure limitation and a minimum EBITDA,
as such terms are defined in the respective agreement. The Company was in
compliance with such financial covenants June 30, 2003.
The balances outstanding on the revolving lines of credit were $6.6
million under the New Revolving Facility at June 30, 2003, and $0.1 million
under the Old Revolving Facility at December 31, 2002. As of June 30, 2003,
based upon the borrowing base formula, the SPAR Group had availability of $2.4
million of the $8.4 million unused revolving line of credit under the New
Revolving Facility.
As of April 2003, all outstanding funds due certain stockholders under
certain notes were paid in full.
Management believes that based upon the Company's current working
capital position and the existing credit facilities, funding will be sufficient
to support ongoing operations over the next twelve months. However, delays in
collection of receivables due from any of the Company's major clients, or a
significant reduction in business from such clients, or the inability to acquire
new clients, would have a material adverse effect on the Company's cash
resources.
20
SPAR Group, Inc.
In connection with the sale of SPAR Peformance Group, Inc. ("SPGI") on
June 30, 2002, as disclosed in the Company's Annual Report on Form 10-K in Note
1 to the Financial Statements, the Company sold all of the stock of its
subsidiary, SPGI. In connection with the sale, SPGI issued two Term Loans
totaling $6.0 million, which due to their speculative nature have been fully
reserved. The Company also agreed to provide a discretionary revolving line of
credit to SPGI not to exceed $2.0 million (the "SPGI Revolver") through
September 30, 2005. The SPGI Revolver is secured by a pledge of all the assets
of SPGI and is guaranteed by its parent, Performance Holdings, Inc. The SPGI
Revolver provides for advances in excess of the borrowing base through September
30, 2003. As of October 1, 2003, the SPGI Revolver will include a borrowing base
calculation (principally 85% of "eligible" accounts receivable). Prior to
September 1, 2003, SPGI may request that the Company provide advances of up to
$1,000,000 in excess of the borrowing base. If advances are limited to the
borrowing base on and after October 1, 2003, the interest rate will be reduced
to the higher of the Term Loans interest rate less 4.0% per annum or the prime
commercial lending rate as announced in the Wall Street Journal plus 4.0% per
annum. If SPGI requests that advances be allowed in excess of the borrowing
base, the interest rate will remain unchanged.
In addition, due to the speculative nature of the SPGI Revolver, the
Company has established a reserve for collection of approximately $0.8 million
against the $2.0 million SPGI Revolver commitment. This reserve is included in
other current liabilities.
Under the SPGI Revolver terms, SPGI is required to deposit all of its
cash to the Company's lockbox. At June 30, 2003, there was no borrowing under
the SPGI Revolver and the Company owed SPGI approximately $0.3 million for
excess cash deposited into the Company's lockbox, which obligation is recorded
in other current liabilities.
CERTAIN CONTRACTUAL OBLIGATIONS
The following table contains a summary of certain of the Company's
contractual obligations by category as of June 30, 2003 (in thousands):
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD ($)
- --------------------------------------------------------------------------------------------------------------------
Total Less than 1 1-3 years 3-5 years More than 5
year years
- --------------------------------------------------------------------------------------------------------------------
Long-Term Debt Obligations $ 6,648 $ - $ 6,648 $ - $ -
- --------------------------------------------------------------------------------------------------------------------
Operating Lease Obligations 2,505 943 1,318 244 -
- --------------------------------------------------------------------------------------------------------------------
Total $ 9,153 $ 943 $ 7,966 $ 244 $ -
- --------------------------------------------------------------------------------------------------------------------
In addition to the above table, the Company had agreed to provide a
discretionary line of credit to SPGI not to exceed $2.0 million and currently
holds excess cash deposits of approximately $0.3 million, as discussed in
Liquidity and Capital Resources (above).
In May 2001 SPAR Group International, Inc. and Paltac, Inc. ("Paltac"),
a large Japanese distributor, entered into a joint venture to create a Japanese
company, SPAR FM. SPAR FM entered into a 300 million yen Revolving Credit
Agreement with a Japanese bank. The bank required Paltac to guarantee the
outstanding balance on the revolving credit facility. As part of the joint
venture agreement, should Paltac be required to make a payment on its guarantee
to the bank, then SPAR Group, Inc. has agreed to remit to Paltac 50% of any such
payment up to a maximum of 150 million yen or approximately $1.2 million. As of
21
June 30, 2003, SPAR FM has borrowed 90 million yen under its Revolving Credit
Agreement. Therefore, the Company's maximum potential exposure to Paltac under
the commitment would be 45 million yen or approximately $0.4 million.
22
SPAR Group, Inc.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to the variable interest
rate on the line of credit. The Company's accounting policies for financial
instruments and disclosures relating to financial instruments require that the
Company's consolidated balance sheets include the following financial
instruments: cash and cash equivalents, accounts receivable, accounts payable
and long-term debt. The Company considers carrying amounts of current assets and
liabilities in the consolidated financial statements to approximate the fair
value for these financial instruments because of the relatively short period of
time between origination of the instruments and their expected realization. The
carrying amount of the line of credit approximates fair value because the
obligation bears interest at a floating rate. The Company monitors the risks
associated with interest rates and financial instrument positions. The Company's
investment policy objectives require the preservation and safety of the
principal, and the maximization of the return on investment based upon the
safety and liquidity objectives.
Currently, the Company's revenue derived from international operations
is not material and, therefore, the risk related to foreign currency exchange
rates is not material.
The Company has no derivative financial instruments or derivative
commodity instruments in its cash and cash equivalents and investments. Excess
cash is normally used to pay down the revolving line of credit.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of June 30, 2003, the Company's Chief Executive Officer, Robert
Brown, and Chief Financial Officer, Charles Cimitile, have carried out an
evaluation of the effectiveness of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon this evaluation,
these officers believe that the Company's disclosure controls and procedures are
effective to provide reasonable assurance of the timely disclosure to them of
material information related to the Company that is required to be included in
its publicly filed reports or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. For a more complete
description of their evaluation and conclusions, see Exhibits 31.1 and 31.2
hereto.
CHANGES IN INTERNAL CONTROLS
There was no change during the fiscal quarter ended June 30, 2003, in
the Company's internal controls over financial reporting that has materially
affected, or would be reasonably likely to materially affect, the Company's
internal controls over financial reporting.
23
SPAR Group, Inc.
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
No change.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
Item 2(a): Not applicable
-------------------------
Item 2(b): Not applicable
-------------------------
Item 2(c): Not Applicable
-------------------------
Item 2(d): Not Applicable
-------------------------
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Item 3(a) Defaults under Indebtedness: None.
Item 3(b) Defaults under Preferred Stock: Not Applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5: OTHER INFORMATION
Not applicable.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS.
31.1 Certification of the CEO pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, and filed herewith.
31.2 Certification of the CFO pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, and filed herewith.
32.1 Certification of the CEO pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, and filed herewith.
32.2 Certification of the CFO pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, and filed herewith.
24
SPAR Group, Inc.
REPORTS ON FORM 8-K.
On April 30, 2003, the Company filed a Current Report on Form 8-K
relating to Item 9, Regulation FD Disclosure, reporting the issuance of a press
release relating to the Company's financial results for the first quarter ended
March 31, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 2003 SPAR Group, Inc., Registrant
By: /s/ Charles Cimitile
---------------------------------
Charles Cimitile
Chief Financial Officer and duly
authorized signatory
25