Thomas Group, Inc. (NasdaqGM:TGIS), a leading operations and
process improvement firm, today announced net income of $3.8
million, or $0.34 per diluted share, for the fourth quarter of 2006
on revenues of $14.8 million. Fourth quarter 2006 results included
$1.5 million, or $0.13 per diluted share, in tax benefit related to
reversal of a deferred tax asset valuation allowance. Fourth
quarter 2006 results compare favorably to fourth quarter 2005 net
income of $1.1 million, or $0.10 per diluted share on revenues of
$11.7 million. For the year ended December 31, 2006, net income was
$11.5 million, or $1.04 per diluted share, on revenues of
$59.5�million, compared to net income of $6.7�million, or $0.63 per
diluted share, on revenues of $43.1�million for the year ended
December 31, 2005. Pre-tax income from continuing operations for
the fourth quarter of 2006 was $3.7 million, which compares
favorably to $2.0 million for the same period of 2005. Pre-tax
income from continuing operations for the year ended December 31,
2006 was $15.3 million, which compares favorably to $8.3 million
for the same period of 2005. The Company�s results reflect the
restatement of its historical financial statements as a result of
its previously announced stock option investigation, which was
completed on March 30, 2007. The Company announced the conclusion
and reported the results of the voluntary investigation in a press
release dated April 6, 2007. The results of the investigation and
related restatement of the Company�s historical financial
statements were included in the Company�s Annual Report on Form
10-K for the year ended December 31, 2006 which was filed with the
Securities and Exchange Commission on April 6, 2007 �I am pleased
with our second consecutive year of double-digit revenue growth,�
said Jim Taylor, CEO, �however, I am more pleased we were able to
deliver another year of increased value to our shareholders. This
value came in two primary areas. First, we doubled the rate of our
annual dividend policy during the year, starting the year at a
quarterly dividend of $0.05 per share, increasing it to $0.075 per
quarter per share on June 20, 2006 and then increasing it to $0.10
per quarter per share on December 12, 2006. Additionally, we were
added to the Russell Microcap Index in June and stepped up to the
Nasdaq Global Market in December.� Taylor remarked, �We continue to
generate profits and cash which allow us to remain debt-free while
we pay a dividend to our shareholders. During the year, our market
cap grew and dividends increased. Going forward, we will continue
to follow our business model of profitable revenue growth, high
utilization of our workforce and a diversification of our client
base.� Fourth Quarter and Year 2006 Financial Performance: Revenue:
Revenue for the fourth quarter of 2006 was $14.8 million, which
represents a $3.1 million increase, or 27%, from the comparable
period of 2005. Revenue for the year 2006 was $59.5 million, which
represents a $16.4 million increase, or 38%, over the comparable
period of 2005. This increase for both the quarter and the year is
attributable to new revenue contracts and the expansion of existing
programs in the US, primarily in the governmental sector. Gross
Margins: Gross profit margins for the fourth quarter of 2006 were
54%, compared to 46% for the fourth quarter of 2005. The increase
is primarily attributable to year-end performance compensation paid
to the Company�s Resultants that was accrued ratably throughout
2006, but in 2005 was recorded in the only the fourth quarter. For
the year 2006, gross profit margins were 53%, compared to 52% for
the comparable period of 2005. The increase is primarily
attributable to increased revenue, while maintaining full
utilization of the Company�s direct labor and strict control over
costs. Selling, General & Administrative (S,G&A): S,G&A
costs for the fourth quarter of 2006 were $4.4 million compared to
$3.4 million for the fourth quarter of 2005. This increase is
primarily due to increases in legal and other professional fees.
For the year 2006, S,G&A costs were $16.6 million compared to
$13.5 million for the year 2005. This increase is primarily due to
sales commissions earned on increased revenue, increases in legal
and other professional services, and stock-based compensation
expense attributable to restricted stock awards. Cash Flow: For the
year 2006, net cash provided by operating activities was $7.4
million, compared to $6.3 million for the year 2005. The increase
in net cash provided is primarily due to 2006 profits in excess of
2005 profits. For the year 2006, net cash used in financing
activities was $1.9 million, comprised of $2.7 million used to pay
dividends, offset by $0.8 million in cash and tax benefits related
to the exercise of stock options. For the year 2005, net cash used
in financing activities was $2.8 million, comprised of $1.8 million
used to repay debt, and $1.3 million used to repurchase warrants,
offset by $0.3 million generated from the issuance of common stock
upon the exercise of outstanding options and warrants. Cash used
for investing activities consisted primarily of computer and office
equipment and totaled $467,000 for the year 2006, compared to
$166,000 for the year 2005. For the year 2006, the net change in
cash was a net increase of $5.0 million, compared to a net increase
of $3.3 million for the year 2005. Income Taxes: During the 2006,
we recorded income tax expense of $3.8 million compared to $0.3
million during 2005. Our effective tax rate for 2006 was 25%,
compared to 4% in 2005. The increase in tax expense and resulting
effective rate is primarily due to the utilization of significant
net operating loss (NOL) carryforwards during 2005 not available in
2006, offset by a $1.8 million, or $0.16 per diluted share,
reduction in our deferred tax asset valuation allowance. At
December 31, 2006, after evaluation of operating results of the
most recent three-year period and comparison of all positive and
negative evidence, the Company determined that a valuation
allowance established originally in 2001 was only appropriate on
approximately $117,000 of the NOL carryforward, due to annual
limitations under Section 382. This conclusion was supported by the
Company�s auditors and $1.5 million of the valuation allowance was
removed during the three months ended December 31, 2006. At
December 31, 2006, approximately $2.9 million in remaining NOL
carryforwards are available to be used against future taxable
income, subject to a $0.2 million annual limitation under Section
382 of the Internal Revenue Code, expiring in 2022. Business
Development: During the fourth quarter of 2006, the Company signed
$18.3 million in new and extended business, pushing the total for
2006 to $59.5 million. This is an $18.7 million increase, or 46%,
when compared to 2005 bookings of $40.8 million. Backlog: At
December 31, 2006, the Company had signed backlog of $16.1 million
contracted for 2007. Backlog does not include extensions or option
periods, and therefore does not always represent the full scope of
the clients� commitment to Thomas Group. However, backlog does
accurately represent the portion that has been contracted for in
writing. Thomas Group, Inc. (NasdaqGM:TGIS) is an international,
publicly traded professional services firm specializing in
operational improvements. Thomas Group's unique brand of process
improvement and performance management services enable businesses
to enhance operations, improve productivity and quality, reduce
costs, generate cash and drive higher profitability. Known as The
Results Company(SM), Thomas Group creates and implements customized
improvement strategies for sustained performance improvements in
all facets of the business enterprise. Thomas Group has offices in
Dallas, Detroit, and Hong Kong. For additional information on
Thomas Group, Inc., please go to www.thomasgroup.com. Safe Harbor
Statement under the Private Securities Litigation Reform Act:
Statements in this release that are not strictly historical are
�forward-looking� statements, which should be considered as subject
to the many uncertainties that exist in the Company�s operations
and business environment. These uncertainties, which include
economic and business conditions that may impact clients and the
Company�s performance-oriented fees, timing of contracts and
revenue recognition, competitive and cost factors, and the like,
are set forth in the Company�s filings from time to time with the
Securities and Exchange Commission, including the Company�s Form
10-K for the year ended December 31, 2006. Except as required by
law, the Company expressly disclaims any intent or obligation to
update any forward-looking statements. THOMAS GROUP, INC. Selected
Consolidated Financial Data (Amounts stated in thousands, except
per share amounts) � Three Months Ended December 31, Year Ended
December 31, 2006 (Unaudited) 2005 (Restated) 2006 (Unaudited) 2005
(Restated) Consulting revenue before reimbursements $ 14,541� $
11,633� $ 58,843� $ 42,966� Reimbursements 212� 67� 635� 96� Total
revenue 14,753� 11,700� 59,478� 43,062� Cost of sales before
reimbursable expenses 6,592� 6,256� 27,336� 20,540� Reimbursable
expenses 212� 67� 635� 96� Total cost of sales 6,804� 6,323�
27,971� 20,636� Gross profit 7,949� 5,377� 31,507� 22,426� Selling,
general and administrative 4,403� 3,382� 16,616� 13,547� Sublease
(gain) loss �� �� (16) 610� Operating income 3,546� 1,995� 14,907�
8,269� Other income (expense), net 129� 36� 362� (13) Income from
continuing operations before income taxes 3,675� 2,031� 15,269�
8,256� Income tax (benefit) (135) 137� 3,764� 311� Income from
continuing operations before the cumulative effect of a change in
accounting principle 3,810� 1,894� 11,505� 7,945� Gain (loss) from
discontinued operations, net of related income tax benefit �� (808)
1� (1,212) Income before the cumulative effect of a change in
accounting principle 3,810� 1,086� 11,506� 6,733� Cumulative effect
of a change in accounting principle, net of related income tax
benefit �� (10) �� (10) Net income $ 3,810� $ 1,076� $ 11,506� $
6,723� � Earnings per share: Basic: Income from continuing
operations $ 0.35� $ 0.18� $ 1.06� $ 0.76� Loss on discontinued
operations, net of income tax benefit �� (0.08) �� (0.12)
Cumulative effect of a change in accounting principle, net of
income tax benefit �� �� �� �� Net Income $ 0.35� $ 0.10� $ 1.06� $
0.64� � Diluted: Income from continuing operations $ 0.34� $ 0.18�
$ 1.04� $ 0.75� Loss on discontinued operations, net of income tax
benefit �� (0.08) �� (0.12) Cumulative effect of a change in
accounting principle, net of income tax benefit �� �� �� �� Net
Income $ 0.34� $ 0.10� $ 1.04� $ 0.63� Weighted average shares:
Basic 10,994� 10,655� 10,812� 10,513� Diluted 11,176� 10,810�
11,065� 10,702� THOMAS GROUP, INC. Selected Consolidated Financial
Data (Amounts stated in thousands) � Selected Segment Revenue Data
� Three Months Ended December 31, Year Ended December 31, 2006�
2005� 2006� 2005� � North America $ 14,753� $ 11,700� $ 59,407� $
43,033� Asia/Pacific �� �� 71� 29� Total revenue $ 14,753� $
11,700� $ 59,478� $ 43,062� Selected Balance Sheet Data � December
31, 2006 December 31, 2005 Cash $8,484� $3,481� Trade accounts
receivables 12,318� 8,382� Total current assets 21,487� 12,451�
Total assets 23,466� 13,031� Total current liabilities 4,700�
4,263� Total liabilities 4,803� 4,537� Total stockholders� equity
18,663� 8,494�
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