Good day, ladies and gentlemen, thank you for standing by. Welcome to the SPAR Group Inc. Third Quarter 2012 Update Conference Call. [Operator Instructions] I would now like to turn the conference over to Alan Sheinwald of Alliance Advisors. Please go ahead.

Thank you and good morning. I'd like to thank everyone for joining us today for the SPAR Group third quarter 2012 shareholder update conference call. Mr. Gary Raymond, Chief Executive Officer; and Mr. Jim Segreto, Chief Financial Officer of SPAR Group, will be your presenters on the call. Before we begin, I'm going to review the company's Safe Harbor statement. Statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events, and as such, all forward-looking statements are made pursuant to the Securities and Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. When used in this call the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to SPAR Group are such a forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties which may cause actual results to differ from those anticipated by SPAR Group at this time. In addition, other risks are more fully described in SPAR Group's public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov. With that, I would now like to congratulate management on yet another strong quarter and introduce Mr. Gary Raymond, CEO of SPAR Group. Gary, the floor is yours.

Okay. Thank you, Alan, and thank you, everyone, for joining us today for our third quarter 2012 shareholder update conference call. Management is extremely pleased with the strong financial results achieved during the third quarter and the first 9 months of 2012. The company has increased its quarterly revenue by 50%, gross profit by 29% and net income by 134%. SPAR achieved this significant growth due to achievements in both our domestic and international businesses. We believe this type of balanced growth is vital to our continued success, and will be the key to continually increasing our true earnings power. Our ability to simultaneously and significantly experience growth throughout both business lines was of the utmost importance during the current fiscal year. We have accomplished this goal by maintaining strict adherence to our previously implemented business model of acquiring and efficiently integrating profitable international subsidiaries, while organically growing both our domestic and international earnings via large scale contracts with Fortune 500 companies including Staples, Wal-Mart, Family Dollar, Procter & Gamble and many others. During the quarter, we also made a key acquisition in the U.S. marketplace, that I will discuss in further detail later in my remarks. Internationally, we recorded strong organic growth due to the signing of multiple contracts that will provide strong revenue growth over the next 12 months. Management remains confident that the increased number of contracts, coupled with the increased size and scale of the projects, will continue to propel growth throughout our operation. Recently, our subsidiary in South Africa entered into a new strategic alliance that will enhance our operations throughout the inland territory of South Africa. This new joint venture expands our capabilities throughout South Africa and makes this market a key growth area for our future. The new JV with CMR Meridian will…

Thank you, Gary. As Gary mentioned, we are very excited with the strong financial gains achieved during the 3 and 9-month period ending September 30, 2012. We are especially encouraged with the strong growth in our revenue and operating income. Consolidated net income for the 3-month and 9-month periods ended September 30, 2012, increased 50% and 44% respectively, when compared to the same periods in 2011. The increases in net revenue were primarily driven due to our new subsidiaries in Mexico, Romania and Turkey, and strong performances in South Africa, China and Japan. Combined with continued growth in our domestic operations, driven primarily by new client work in addition to continued growth in the company's syndicated services, assembly businesses and increased project work in the third quarter 2012 when compared to a year ago. Consolidated gross profit for the 3 and 9-month periods ended September 30, 2012, increased 29% and 25% respectively, when compared to the prior year, primarily due to our expansion in the international community. Net income attributable to the SPAR Group increased 134% and 59% for the 3 and 9-month periods ended September 30 respectively, when compared to the same period a year ago. The increase in net income for the 3-month period ended September 30, 2012, was driven by 119% increase in domestic operation. The improvement in net income for the 9-month period ended September 30, 2012, was attributable to the improved performance in both domestic and the international division. As of September 30, 2012, our working capital improved to $8.2 million and our current ratio was 1.7:1. Total current assets and total assets were $20.5 million and $25.7 million respectively, and our cash and cash equivalents totaled $1.9 million at September 30, 2012. Total current liabilities and total liabilities were $12.3 million and $12.7 million respectively, and total equity was $11.6 million at September 30, 2012. It is important to point out that while we increased our cash position, we also lowered our debt and borrowings by approximately $3 million for the period. We expect this trend to continue in 2013 as we continue our efforts to improve our profitability. I would now like to turn the call back to Gary for closing remarks.

Okay. Thank you, Jim. SPAR's strong financial results and market expansion during the first 9 months of 2012 have positioned us as a viable market leader within the retail merchandising industry. We have continued to expand our market footprint, while constantly bolstering relationships with some of the world's largest retailers and manufacturers. We expect to continue to record financial gains throughout the fourth quarter, which is historically our strongest quarter. Our current project pipeline, coupled with the difficult seasonality of the retail and merchandising business, is expected to propel our impressive growth trajectory, and we are very confident in our ability to beat our previously stated revenue guidance of $90 million for 2012. During the fourth quarter, the company will focus its domestic business on servicing large scale retail outlets, in time for the pending holiday season. Our international business will remain focused on the task of identifying and acquiring profitable acquisition in underserved markets. We currently have targeted several potential locales in South and Latin America, which would significantly bolster our revenue and profit production. SPAR's suite of service offering, combined with a strong local knowledge of the area, have provided strong name recognition and provided a competitive advantage when seeking new subsidiaries. Management is extremely pleased with the wide array of opportunities that lay ahead during the fourth quarter and beyond. So on behalf of the entire team at SPAR Group, I'd like to thank everyone for joining us on today's call. We're now available to answer any questions from any of the participants on the line.

[Operator Instructions] Our first question is from the line of Antonio Nunez [ph] with Nunez [ph] Capital.

Can you please elaborate on your plans for Latin and South America based on the success of Mexico?

Yes. We've been looking at numerous markets, not just in South America, frankly, but around different markets around the world. And we've been investigating this one now for probably going on about 8 months. And we have -- and the primary target market that we've looked at first is Brazil. We actually talked to, probably, somewhere between 10 and 12 companies originally. We narrowed the focus to 1 -- to 4 and now we're in the process of trying to negotiate with the one that we think is the best fit for us and trying to get that done and set up hopefully some time during 2013.

Okay, also are there any other geographic regions that you're looking to augment your international division aside from South America and Brazil?

Yes. Probably the biggest one that we're looking at is over in Asia. We currently have a footprint there between Japan and China and India, and we're trying to look and see what are the other best potential markets to go pursue. Based on the client information, the clients that we work with and their recommendations on where they think will be the next best market to go to, they've given us a few recommendations and probably at the top of the list would be South Korea over in Asia. We are also looking at other Eastern European markets to see if we want to expand there as well. And those are just what would be our new markets. We are also looking quite extensively at markets that we're already in, and acquisitions in those markets are similar to what we did in South America -- excuse me, in South Africa, where we just started on October 1. We are looking to see if there are other companies that fit into our model and that we could bolt onto our current businesses. The primary markets that we're looking out for those are Canada, South Africa and Australia.

Okay. And also you said you guys acquired a small company in the U.S. during the quarter. Are there any plans to further acquire companies in the U.S. on the larger side?

Yes, there is. We don't -- we do not have anything today that's, what I would call, imminent. But we just came out of a board meeting yesterday, and I was going through with them, kind of what my next initiatives and plans are, to try to find out what I would describe as -- I'd like to find a sizable acquisition in the U.S. for us to be able to go after. We have, prior to this small one that we just did, the last one in the U.S. goes back to, I think it's almost like the last month of '09 or beginning of 2010. So the organization is clearly ready to take on another acquisition, and we'd like to find something that is relatively sizable.

[Operator Instructions] The next question is from the line of John Curti with Singular Research.

I am new to the story, got a couple of questions here, maybe help me understand just, kind of, the business model. Looks as though there's a fairly sizable difference in the gross margin capability -- gross margins being reported between domestic and international. My first question is, is there anything structural that would keep that differential where it is, or can it narrow in the sense that international's gross margins come up?

The primary thing -- I mean, the international ones are obviously a collection of all the different markets. So there's a pretty wide range of margin percentages that are in there. There's one market that's probably close to the U.S. There's other that are kind of in the middle and then there's -- we've had a couple, frankly, that have been about breakeven or even losing a little bit. So what we're trying to do market-by-market is we've given them, as we move into the new year, we've assigned them EBITDA targets to go hit and gross margin profits to go hit so that they can keep moving the needle up as it relates to that. Part of the other issue we've had, over the past year in particular, is as we took on Mexico, Mexico is a market that we make a thinner margin than we did in some of the other international markets. And because of the weight of what Mexico brings as a percentage of the international business, it was really driving the international margins down. So I think there are things that we're going to do to improve the international margins or at least attempt to. I would probably doubt that we're going to get to the point that we're going to be at what the U.S. profit margin is. But we're certainly going to try to close the gap.

And with respect to profitability, beyond the differential in gross margins, do you have a fairly sizable difference in the SG&A side? In other words, you've built up an -- you've got an infrastructure for international and you just need to add more revenue on top of that to improve profitability, or again are the expenses on the international side, relative to domestic, at a level such that they will always be at a higher percentage than domestic? Because you've got a pretty good -- you've got pretty good revenues there versus the...

Yes. Yes. Part of it is growing the, like I said, market-by-market growing the bandwidth in all these markets. So as an example, we're trying to use right now South Africa as our kind of model, because if you went back a couple of years ago, it was a relatively small revenue joint venture. It was doing between a couple million, few million dollars in revenue, and they were able to obtain some rather large multinational contracts with both Nestle and Procter & Gamble. And with that, was able -- were able to build on the business under -- along with those contracts. And then subsequently as I just mentioned, we had the -- another acquisition that we did in the inland region of South Africa that actually built in onto that. So these guys are going to be up now, going into 2013, you're talking about them being at probably a $16 million, $17 million $18 million range, where they were at 2 [ph]. And when we start getting to the heart of your question, which is around the expenses in the SG&A and all that, well, all of a sudden, if you can start building some big businesses and big contracts that make a lot of those things with the SG&A look relatively minor. But when you're in some of the other markets where you have not built up that base to the point that we all hope, then all that stuff kind of fits through a little bit. So I think, again, we're probably going to get to the point where we're going to get better as we keep building up our bandwidth in those markets. I don't know if you're really though ever going to see it as good as the U.S.

And the investments that you're making within these joint venture companies, or agreements, how are they handled on the balance sheet? Where do they show up?

As in -- either in other asset as the investment component or as an intangible asset based on the purchase price accounting.

You're just backing out the noncontrolling amount on the income statement?

Correct.

The next question is from the line of Damien White [ph] with [indiscernible] Rich [ph] Capital.

My question relates to international, the international division. You guys have undergone some impressive growth there, and I'm just curious as to when we can expect the net income there to follow suit?

Well I haven't -- probably it's that [ph], I think last quarter and the quarter before, I was hoping it would be this year. I'd tell you right now based on where we are and where we'll probably finish, we'll probably be close. But certainly in 2013 as we move into full year cycles on the new business in South Africa, full year with Mexico with some of their new contracts, some of the market that dragged us, frankly, a little bit in 2012 has turned the corner a little bit this quarter. So I'm hoping that their performance this quarter is going to carry into fourth quarter and in 2013. So if we can get all those up, I'm pretty confident it should happen by next year.

There are no further questions. I will turn it back over to management for any further comments.

Okay. Just, again, in summary, I just wanted to thank everybody. From our perspective, we're really pleased with, obviously, where we finished the quarter, the 9-months and probably more importantly, we feel that we're on a very good track to carry us into 2013 and beyond. So on behalf of SPAR, we just wanted to thank all of our management in our company and all the people that we've got that have just done a tremendous job for us, and look forward to talking with everybody again next quarter. If anybody has any other questions, you're welcome to contact Alliance Advisors and set up a call with me if you like, if you have individual questions you'd like to ask. Thank you very much.

Ladies and gentlemen, this does conclude this conference call. You may now disconnect and [indiscernible].