Thomas Group, Inc. (NasdaqCM: TGIS), a global change
management and operations improvement consulting firm, today
announced a net loss of $1.4 million, or negative $0.14 per diluted
share, for the second quarter of 2010 on revenues of $1.0 million,
compared to a net loss of $1.4 million, or negative $0.13 per
diluted share, on revenues of $2.6 million for the second quarter
of 2009. Loss from operations before income taxes decreased to $1.4
million on $1.0 million in total revenue for the second quarter of
2010 compared to a loss from operations before income taxes of $2.2
for the second quarter of 2009 on $2.6 million in total
revenue.
Second Quarter 2010 Financial Performance
Revenue
Revenue for the second quarter of 2010 was $1.0 million,
compared to $2.6 million in the second quarter of 2009. Consulting
revenue from US government clients, represented by our Government
practice, was $0.6 million, or 61% of revenue, in the second
quarter of 2010, compared to $0.5 million, or 21% of revenue, in
the second quarter of 2009. Consulting revenue from commercial
clients, represented by our Commercial and European practices, was
$0.3 million, or 27% of revenue, in the second quarter of 2010,
compared to $1.7 million, or 64% of revenue, in the second quarter
of 2009. Reimbursement of expenses was $0.1 million, or 12% of
revenue in the second quarter of 2010, compared to $0.4 million, or
15% of revenue in the second quarter of 2009.
Revenue for the first half of 2010 was $2.6 million, compared to
$5.9 million in the first half of 2009. Consulting revenue from US
government clients was $0.9 million, or 33% of revenue, in the
first half of 2010, compared to $1.4 million, or 24% of revenue, in
the first half of 2009. Consulting revenue from commercial clients
was $1.5 million, or 58% of revenue, in the first half of 2010,
compared to $3.8 million, or 64% of revenue, in the first half of
2009. Reimbursement of expenses was $0.3 million, or 10% of revenue
in the first half of 2010, compared to $0.8 million, or 13% of
revenue, in the first half of 2009.
Gross Margins
Gross profit margins for the second quarter of 2010 were 17%,
compared to 34% for the second quarter of 2009. Gross profit
margins for the first half of 2010 were 25%, compared to 39% for
the first half of 2009. The drop in the quarterly and year-to-date
gross margins is related to the significant slowdown of our
government and commercial programs during the first half of 2010,
to lower utilization rates of our consultants in the first half of
2010, and to lower pricing on some engagements in this period.
Selling, General & Administrative (SG&A)
SG&A costs for the second quarter of 2010 were $1.6 million,
compared to $3.1 million in the second quarter of 2009. The
$1.5 million decrease is related primarily to a
$0.8 million decrease in payroll costs due to the decline in
the number of consultants employed, a $0.2 million decrease in
sales commissions and executive bonus, a $0.2 million decrease in
travel related expenses, a $0.2 million decrease in legal expenses,
a $0.1 million decrease in our use of outside consultants, and a
$0.1 million decrease in other costs due to a decline in activity
as compared to the same period in 2009, offset by a $0.1 million
increase in stock-based compensation during the second quarter of
2010.
SG&A costs for the first half of 2010 were $3.6 million
compared to $6.5 million in the first half of 2009. The
$2.9 million decrease is primarily related to a
$1.5 million decrease in payroll costs due to the decline in
the number of consultants employed, a $0.5 million decrease in
sales commissions and executive bonus, a $0.4 million decrease in
travel related expenses, a $0.3 million decrease in legal expenses,
a $0.2 million decrease in outside consultants used related to the
decrease in activity, and a $0.2 million decline in other
costs due to a decrease in activity and the number of consultants
employed as compared to prior year, offset by a $0.2 million
increase in stock-based compensation during the first half of
2010.
Other Income
Other income for the first half of 2010 included the collection
of $0.2 million from the final liquidation of a former subsidiary
in Europe.
Income Tax (Expense) Benefit
For the first half of 2010 we incurred income tax expense of
$1.6 million compared to an income tax benefit of $1.6 million in
the first half of last year. In the first quarter of 2010, our
cumulative losses began to exceed our cumulative earnings.
Additionally, we are not currently profitable, and we determined
that as of the end of March 2010 it was no longer probable that we
will recover our deferred tax asset. The combined tax effect was to
cause an income tax expense of $1.6 million for the first half of
2010. The effect is to increase the net loss as well as the loss
per share compared to prior quarters.
Working Capital and Cash Flow
Working capital decreased from $8.1 million at December 31,
2009, to $5.6 million at June 30, 2010, due primarily to our
operating loss for the first half of 2010.
Our 2009 tax losses were available for carry back for Federal
tax purposes, and we received refunds of taxes paid in prior years
of approximately $2.5 million in the second quarter of 2010. After
the end of the second quarter 2010 we received an additional
Federal income tax refund of $0.2 million.
For the first half of 2010, net cash increased $0.1 million,
compared to a net decrease of $0.5 million for the first half of
2009. For the first half of 2010, net cash provided by operating
activities was $0.2 million, compared to net cash used of $0.3
million for the first half of 2009. This increase is due primarily
to the income tax refund received in the first half of 2010 of $2.5
million offset by a non-cash decrease in deferred tax assets of
$1.6 million, a decrease in our accrued liabilities, and increased
collection of our accounts receivable offset by the net loss for
the first half of 2010. There were no investing activities in the
first half of 2010 or 2009. Cash used for financing activities for
the first half of 2010 was $0.02 million related to the purchase of
stock under our stock repurchase plan, compared to $0.1 million in
the first half of 2009, related to the $0.1 million purchase of
stock under our stock repurchase plan and the net tax effect of
stock issuances.
During the first quarter of 2008, we established a written plan
pursuant to Rule 10b5-1 under the Securities Exchange Act of
1934, which provides for the purchase of our common stock in
support of our announced share repurchase program. After a waiting
period, repurchases commenced on April 7, 2008. During the
first quarter of 2010, we repurchased 26,744 shares for a total of
$17,737, or an average of $0.66 per share including commissions and
fees.
As of January 31, 2010, we completed the authorized repurchase
of 805,450 shares under the plan at a total cost of $1,259,640 or
$1.56 per share. At this time we have no plans for additional stock
repurchases.
Operations and Business Development
In addition to previously announced efforts, we continue to seek
additional ways to reduce costs. As of June 30, 2010, we had six
consultants on furlough. These furloughed consultants will be
offered the opportunity to return to the payroll if and when we
develop client engagements that require their individual skill
sets. We now employ a “variable cost model” for staffing consulting
projects which enables us to minimize our “bench costs.” In
addition to these reductions in payroll costs, we have aggressively
worked to reduce other costs wherever possible.
Despite our continuing efforts to reduce costs and control
expenses, we expect to continue to operate at a loss until we are
able to develop client engagements sufficient to generate revenue
to allow us to break even.
NASDAQ Listing Status Update
As previously disclosed, on December 11, 2009, we transferred
our stock listing to the Nasdaq Capital Market from the Nasdaq
Global Market. We made this transfer because we no longer satisfied
the requirement of the Nasdaq Global Market to maintain a market
value of publicly held shares of at least $5 million. At that time
and continuing until the present, we meet the requirements for
listing on the Nasdaq Capital Market with the exception of
maintaining a minimum closing bid price of $1 per share. Nasdaq
granted a grace period until March 15, 2010, to regain compliance
with this requirement. On March 16, 2010, we were notified by
Nasdaq that we had not regained compliance with this requirement
and that our stock would be delisted from Nasdaq.
We filed a request for an appeal hearing which we were granted,
and the hearing was held on April 29, 2010. On May 10, 2010, we
received notification that a Nasdaq Listing Qualifications Panel
(the “Panel”) had granted our request for an extension of time, as
permitted under Nasdaq’s Listing Rules, to comply with the $1.00
per share minimum bid price requirement for continued listing. In
accordance with the Panel’s decision, on or before September 13,
2010, we must evidence a closing bid price of $1.00 or more for a
minimum of ten prior consecutive trading days. Under Nasdaq’s
rules, this date represented the maximum length of time that the
Panel could have granted us to regain compliance.
In order to provide an additional opportunity to regain
compliance, at our 2010 annual meeting of stockholders we received
stockholder approval for a potential reverse stock split that would
reduce the number of shares of our common stock outstanding in an
attempt to increase the price of our common stock. Our Board of
Directors has approved a reverse stock split effective as of the
close of business on August 13, 2010, with an exchange ratio of
five existing shares to one new share of our common stock. More
information related to the reverse stock split is contained in our
Form 8-K filed on August 2, 2010, and in the definitive proxy
statement that we filed on April 30, 2010, with the Securities and
Exchange Commission.
If we are unable to satisfy the minimum closing bid price
requirement through a reverse stock split or otherwise, trading in
our common stock may be transferred to the over-the-counter market
on the OTC Bulletin Board or in the “pink sheets.” This could
adversely impact both the liquidity and price of our common
stock.
About Thomas Group
Thomas Group, Inc. (NasdaqCM: TGIS) is an international,
publicly-traded professional services firm specializing in
organization change management and operations improvement. 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 for Breakthrough Process
Performance, 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 and Washington, D.C. For more information, please visit
www.thomasgroup.com.
Important Notices:
Safe Harbor Statement under the Private Securities Litigation
Reform Act:
Any statements in this release that are not strictly historical
statements, including statements about our beliefs and
expectations, are “forward-looking statements” within the meaning
of the United States Private Securities Litigation Reform Act of
1995. These forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by these statements, including
general economic and business conditions that may impact clients
and our revenues, timing and awarding of customer contracts,
revenue recognition, competition and cost factors, lack of
profitability and potential delisting as well as other factors
detailed from time to time in our filings with the Securities and
Exchange Commission, including our Form 10-K for the year ended
December 31, 2009. These forward-looking statements may be
identified by words such as “anticipate,” “expect,” “suggests,”
“plan,” “believe,” “intend,” “estimates,” “targets,” “projects,”
“could,” “should,” “may,” “would,” “continue,” “forecast,” and
other similar expressions. These forward-looking statements speak
only as of the date of this release. Except as required by law, we
expressly disclaim any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained
herein to reflect any change in our expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based.
THOMAS GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2010
2009 2010 2009 Consulting revenue before
reimbursements $ 873 $ 2,236 $ 2,393 $ 5,157 Reimbursements
121 383 252 751
Total revenue 994 2,619 2,645
5,908 Cost of sales before reimbursable
expenses 704 1,350 1,719 2,829 Reimbursable expenses 121
383 252 751 Total
cost of sales 825 1,733 1,971
3,580 Gross profit 169 886 674 2,328 Selling,
general and administrative expenses 1,615
3,150 3,592 6,511 Operating loss
(1,446 ) (2,264 ) (2,918 ) (4,183 ) Interest income, net of expense
(1 ) 2 (2 ) 6 Other income 18 21
180 27 Loss from operations before income
taxes (1,429 ) (2,241 ) (2,740 ) (4,150 ) Income taxes (expense)
benefit (17 ) 887 (1,612
) 1,571 Net loss ($1,446 )
($1,354 ) ($4,352 ) ($2,579 )
Loss per share: Basic: ($0.14 ) ($0.13 ) ($0.41 ) ($0.24 )
Diluted: ($0.14 ) ($0.13 ) ($0.41 ) ($0.24 ) Weighted
average shares: Basic 10,608 10,667 10,535 10,672 Diluted 10,608
10,667 10,535 10,672
THOMAS GROUP, INC.
Selected Consolidated Financial
Data
(Amounts stated in thousands)
Selected Geographical Revenue
Data
(Unaudited)
Three Months Ended
Six Months Ended June 30, June 30, 2010
2009 2010 2009 Revenue: North America $
994 $ 1,851 $ 2,313 $ 3,771 South America - - - 17 Europe -
768 332 2,120 Total revenue $ 994 $ 2,619 $
2,645 $ 5,908
Selected Balance Sheet
Data
(Unaudited)
June 30,2010
December 31,2009
Cash and cash equivalents $ 5,120 $ 5,004 Trade accounts
receivables 615 849 Income tax receivable 358 2,835 Deferred tax
asset (current), net - 111 Total current assets 6,381 9,458
Deferred tax asset (non-current), net - 1,471 Total assets 6,898
11,578 Total current liabilities 807 1,366 Total liabilities 883
1,492 Total stockholders’ equity $ 6,015 $ 10,086
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