Thomas Group, Inc. (NasdaqCM: TGIS), an operations and
process improvement firm, today announced a net loss of $0.7
million, or negative $0.06 per diluted share, for the fourth
quarter of 2009 on revenues of $1.5 million, compared to net loss
of $2.0 million, or negative $0.19 per diluted share, on revenues
of $3.5 million for the fourth quarter of 2008.
For the year ended December 31, 2009, net loss was $4.3 million,
or negative $0.40 per diluted share, on revenues of $9.6 million,
compared to a net loss of $5.9 million, or $0.53 per diluted share,
on revenues of $25.1 million for the year ended December 31,
2008.
Michael McGrath, Executive Chairman, President and CEO, stated,
“2009 was a very disappointing year for Thomas Group. At the end of
the year, the board of directors initiated corrective actions.
Effective December 22, 2009, I assumed the roles of President and
CEO in addition to my role as Executive Chairman. Our strategy is
now to be much more efficient, reduce costs to even lower levels
than we achieved in 2009, operate more like a traditional
consulting firm, and target mid-size contracts with clients more
suitable to our present size, while continuing to pursue 'game
changing' opportunities on a more limited basis.
“We have further reduced our unassigned consulting staff,
redeployed our business development staff to engagements,
eliminated several positions, realigned salaries, eliminated
unnecessary general and administrative costs, and reduced
professional fees. We remain a public company so there are certain
related costs that are unavoidable. However, we have sought to
reduce them to a minimum. As part of our review of these costs, we
have elected to discontinue quarterly earnings calls for the time
being, so we can focus entirely on turning the company around. Of
course, we will continue to issue quarterly press releases of
earnings results such as this when available and file the required
reports with the SEC.”
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 minimum market value of publicly
held shares of at least $5 million. We did meet the other
requirements for listing on the NASDAQ Capital Markets with the
exception of maintaining an average minimum closing bid price of $1
per share. Under NASDAQ’s rules, we have until March 15, 2010 to
meet this requirement. Based on recent closing bid prices of our
stock, it currently appears unlikely that we will be able to
satisfy this requirement to maintain a $1 per share minimum closing
bid by that date. While there are alternatives available to us if
we are unable to do so, they each involve additional costs. We may
determine that we will forgo incurring such costs. Also, we may not
be successful in any alternative we might select to increase the
minimum closing bid price above this required threshold. In either
of these cases, our securities may be transferred to the National
Quotation Service Bureau, or “Pink Sheets.” This could adversely
impact both the liquidity and price of our stock.
Subsequent to year end, on January 26, 2010 we completed the
repurchase of the 805,450 shares authorized by our Board of
Directors to be repurchased under the Rule 10b5-1 Plan begun in
April 2008 at a total cost of $1,259,640, or $1.56 per share. At
this time we have no plans for additional stock repurchases.
McGrath added, “Despite the somewhat pessimistic news that I
have discussed above, we remain committed to making Thomas Group
successful once again. However, it is clearly more challenging,
time consuming and costly than we had anticipated. In the meantime,
we must work to conserve cash, minimize costs, increase revenue,
and seek to return to breakeven as soon as possible.”
Fourth Quarter and Year 2009 Financial Performance
Revenue
Revenue for the fourth quarter of 2009 was $1.5 million,
compared to $3.5 million in the fourth quarter of 2008. Consulting
revenue from US government clients, represented by our Government
practice, was $0.3 million, or 22% of revenue, in the fourth
quarter of 2009, compared to $0.9 million, or 25% of revenue, in
the fourth quarter of 2008. Consulting revenue from commercial
clients, represented by our Aerospace and Defense, Healthcare,
Transportation and Logistics, and European practices, was $1.0
million, or 66% of revenue, in the fourth quarter of 2009, compared
to $2.2 million, or 62% of revenue, in the fourth quarter of 2008.
Reimbursement of expenses was $0.2 million, or 12% of revenue in
the fourth quarter of 2009, compared to $0.4 million, or 13% of
revenue in the fourth quarter of 2008.
Revenue for the year ended December 31, 2009 was $9.6 million,
compared to $25.1 million for the year ended December 31, 2008.
Consulting revenue from US government clients was $2.2 million, or
23% of revenue, for the year ended December 31, 2009, compared to
$13.0 million, or 52% of revenue, for the year ended December 31,
2008. Consulting revenue from commercial clients was $6.1 million,
or 64% of revenue, for the year ended December 31, 2009, compared
to $10.3 million, or 41% of revenue, for the year ended December
31, 2008. Reimbursement of expenses was $1.3 million, or 13% of
revenue for the year ended December 31, 2009, compared to $1.8
million, or 7% of revenue, for the year ended December 31,
2008.
Gross Margins
Gross profit margins for the fourth quarter of 2009 were 23%,
compared to 29% for the fourth quarter of 2008. Gross profit
margins for the year ended December 31, 2009 were 36%, compared to
40% for the year ended December 31, 2008. The drop in quarterly and
year-to-date gross margins is related to the slowdown of our
government and commercial programs during 2009 and to lower
utilization rates of our consultants in 2009.
Selling, General & Administrative (SG&A)
SG&A costs for the fourth quarter of 2009 were $1.6 million,
compared to $3.7 million in the fourth quarter of 2008. The
$2.1 million decrease is related primarily to a $0.9 million
decrease in stock-based compensation during the fourth quarter of
2009, a $0.7 million decrease in payroll and related expenses due
to decrease in the number of consultants, a $0.2 million decrease
in bad debt expenses, a $0.1 million decrease in travel expenses,
and a $0.4 million decrease in other costs due to a decline in
activity and the number of consultants we employed as compared to
the same period in 2008, offset by an increase of $0.2 million in
severance costs.
SG&A costs for the year ended December 31, 2009 were $10.7
million compared to $18.6 million for the year ended December 31,
2008. The $7.9 million decrease is related primarily a $1.7
million decrease in stock-based compensation, a $2.5 million
decrease in payroll costs related to reduction in the support
staff, $0.5 million decrease in severance and recruiting costs
related to the reduction in our labor force during the second
quarter of 2008, a $1.3 million decrease in sales commission and
executive bonus, a $0.3 million decrease in bad debt
allowance, a $0.3 million decrease in travel expenses, a $0.2
million decrease in outside consultants, a $0.2 million decrease in
equipment rent, a $0.2 million decrease in depreciation expense, a
$0.2 million decrease in legal expenses and insurance costs, and a
$0.5 million decrease in other costs due to a decline in
activity.
Other Income
Other income for the fourth quarter of 2009 included the
collection of $0.06 million from the liquidation of a former
subsidiary in Europe. We also received credits for audit
adjustments on insurance premiums of $0.03 million.
Other income for the year ended December 31, 2009 included the
collection of a bad debt written off in 2008 of $0.2 million. We
also received credits for audit adjustments on insurance premiums
of $0.1 million. We also received payment of $0.06 million from the
liquidation of a former subsidiary in Europe.
Working Capital and Cash Flow
Working capital decreased from $13.2 million at December 31,
2008 to $8.1 million at December 31, 2009, due primarily to our
operating loss for the year ended December 31, 2009.
For the year ended December 31, 2009, net change in cash was a
net decrease of $3.3 million, compared to a net decrease of $3.6
million for the year ended December 31, 2008. For the year 2009,
net cash used by operating activities was $3.0 million, compared to
$1.1 million used for the year 2008. This decrease is due primarily
to our operating loss for the year 2009, decrease in our accrued
liabilities, and the reversal of stock based compensation expense,
offset by collection of our accounts receivable and receipt of
income tax refund during the year. For the year 2009 and 2008, net
cash used for investing activities was $0.1 million, consisting of
computer and software purchases. Cash used for financing activities
for the year 2009 was $0.3 consisting primarily of stock
repurchases under our stock repurchase program compared to $2.5
million used in the year 2008, related to the $1.2 million payment
of dividends for the fourth quarter of 2007 which were paid in
2008, the $1.0 million purchase of stock under our stock repurchase
plan, and the $0.2 million net tax effect of stock issuances.
We received $2.7 million in Federal income tax refunds during
the second quarter of 2009. We anticipate that we will receive a
refund of approximately $2.7 million in Federal income taxes in
mid-2010 as well. We have developed an updated business plan for
2010 which includes an internal forecast of cash needs. We believe
that our existing working capital resources, our anticipated tax
refund and cash generated from current operations will be
sufficient to satisfy our operating working capital needs at least
through March 31, 2011. We continue to assess this situation on an
on-going basis.
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
fourth quarter of 2009, we repurchased 101,806 shares for a total
cost of $114,287, or an average of $1.12 per share including
commissions and fees.
As of December 31, 2009, 778,706 shares had been repurchased
under the Rule 10b5-1 Plan for a total cost of $1,241,903 at
an average price of $1.59 per share including commissions and fees.
As of January 26, 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.
Operations and Business Development
As we previously announced, during March and April of 2008, two
of our multi-year contracts with the U.S. Navy expired. These
contracts accounted for approximately 85% of our revenue in
2007. Our revenue for 2009 decreased significantly as compared
to 2008, due in large part to these contract expirations.
In response to the loss of these contracts, in early 2008 we put
in place a plan to return to profitability and growth. This
included an immediate reduction of staff as well as on-going
efforts to significantly reduce expenses in order to minimize
losses and to make it easier to return to profitability. However,
in reducing expenses, we attempted to balance the need for reduced
costs with the need to be able to develop new product offerings, as
well as to maintain the ability to add new clients as the result of
our continuing business development efforts.
In addition to previously announced efforts and as discussed at
the beginning of this press release, we continue to seek additional
ways to reduce costs. As of December 31, 2009, we had 15
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 best 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.
About Thomas Group
Thomas Group, Inc. (NasdaqCM: 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 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 Detroit. For more
information, please visit www.thomasgroup.com.
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 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, 2008 and our Form 10-Q for the quarter
ended September 30, 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 Twelve Months Ended December 31,
December 31, 2009 2008
2009 2008 Consulting revenue before reimbursements $
1,354 $ 3,026 $ 8,293 $ 23,339 Reimbursements 193
448 1,260 1,782 Total
revenue 1,547 3,474 9,553
25,121 Cost of sales before reimbursable expenses 999
2,031 4,897 13,277 Reimbursable expenses 193
448 1,260 1,782 Total cost of
sales 1,192 2,479 6,157
15,059 Gross profit 355 995 3,396 10,062 Selling,
general and administrative 1,609 3,731
10,716 18,623 Operating income (1,254 )
(2,736 ) (7,320 ) (8,561 ) Other income 91 - 420 - Interest income,
net - 37 5 295
Income (loss) from operations before income taxes (1,163 )
(2,699 ) (6,895 ) (8,265 ) Income taxes (490 ) (696 )
(2,619 ) (2,450 ) Net income (loss) ($673 )
($2,003 ) ($4,276 ) ($5,815 ) Earnings
per share: Basic: ($0.06 ) ($0.19 ) ($0.40 ) ($0.53 ) Diluted:
($0.06 ) ($0.19 ) ($0.40 ) ($0.53 ) Weighted average shares:
Basic 10,511 10,787 10,618 10,977 Diluted 10,511 10,787 10,618
10,977
THOMAS GROUP, INC. Selected Consolidated
Financial Data
(Amounts stated in thousands)
Selected Geographical Revenue Data
(Unaudited)
Three Months Ended Twelve
Months Ended December 31, December 31,
2009 2008 2009
2008 Revenue: North America $ 1,269 $ 2,297 $ 6,578 $
21,433 Europe 278 1,177 2,958 3,688 Asia/Pacific - -
17 - Total revenue $ 1,547 $ 3,474 $ 9,553 $ 25,121
Selected Balance Sheet Data
(Unaudited)
December 31,2009
December 31,2008
Cash $ 5,004 $ 8,349 Trade accounts receivables 849 1,432
Income tax receivable, net 2,835 3,650 Total current assets 9,457
14,912 Total assets 11,578 17,154 Total current liabilities 1,366
1,701 Total liabilities 1,492 1,903 Total stockholders’ equity
10,086 15,251
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