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

Thank you and good morning. I'd like to thank everyone for joining us today for the SPAR Group Year-End 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 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 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'd now like to congratulate management on the terrific performance and strong annual results and introduce Mr. Gary Raymond, CEO of SPAR Group. Gary, please go ahead.

Thank you, Alan, and thank you, everyone, for joining us today for our year-end 2012 shareholder update conference call. Management is extremely pleased to have exceeded our previously announced guidance by reporting $102.8 million in revenues for 2012 while also increasing our earnings per share to $0.14 compared to $0.10 for 2011. During 2012, we further improved our balance sheet as of December 31, 2012, by paying down over $1.3 million in debt while increasing our cash position to $1.8 million. SPAR has been able to secure this impressive growth due to significant operational achievements in both our domestic and international businesses. Management believes that we have reached the ideal balance in our business that is necessary for the continued success as a market leader. Achieving over $100 million in revenue has opened new doors and relationships with additional Fortune 500 customers. Based on the size of our organization, combined with our strong balance sheet, we believe that we can serve the largest companies in the world with our superior marketing and merchandising products and services. Our ability to simultaneously and significantly expand operations in both our international and domestic businesses has always been paramount to the company's success, and fiscal year 2012 was no exception. 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 domestic earnings via large-scale contracts. We also finalized multiple acquisitions in the U.S. within the past 12 months. This was the first time in several years that we completed domestic acquisitions to add new product offerings and services to our clients. The first domestic business was acquired with a U.S.-based company that provides merchandising services. The company is currently generating approximately $3 million in annual revenue, specializing primarily…

Thank you, Gary. As Gary mentioned, we are very excited with the strong financial gains achieved during both the fourth quarter and year ended December 31, 2012. We are especially encouraged with the strong growth in our net income. The fourth quarter is traditionally our strongest performing quarter. While our revenue and gross profit were very wrong in the fourth quarter of 2011, we are pleased to report that the fourth quarter of 2012, we improved revenue by 31% and gross profit by 14%, exceeding our expectations. Financial highlights for the year ended December 31, 2012. Now, as revenue has increased 40%, our gross profit increased 21%. However, gross profit margin declined by 4 percentage points. Our net income increased 32% and earnings per share increased to $0.14 per diluted share compared to $0.10 per share in 2011. Performance by division for the year ended 2012. International revenue totaled $60 million, an increase of 67%. As Gary had mentioned, 13% of that increase was directly attributable to organic growth. International gross profit for 2012 increased to $13 million, a 34% increase compared to the same period in 2011. The increases in international revenue and gross profit were directly attributable to the first full-year impact from acquisitions in Mexico and Turkey, the 2012 acquisitions in Romania and South Africa, and improvements in South Africa and Japan as well. International gross profit margin for 2012 declined by 5.4 percentage points, to 22.3% compared to 27.7% in 2011. The decline was directly attributable to the low margin dedicated business model utilized in Mexico and the Canadian markets, continued economic pressure and a mix of business negatively impacting our gross profit margins in Australia, Japan and China. Domestic revenues for the year ended 2012 totaled $43 million, a 14% increase over the same period…

Thank you, Jim. SPAR's strong financial results and our market expansion during 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 companies. We have provided revenue guidance of $115 million for 2013. This guidance is attainable based on the relationships that we have formed with clients as well as augmenting our core business with new services that we have acquired via market force. Our current project pipeline remains strong and we are currently in the midst of targeting and hopefully securing new profitable acquisition candidates. Management is truly excited about the direction of the company and look forward to executing on the numerous opportunities that lay ahead of us. In closing, we are pleased to have achieved over $100 million in annual revenue while generating $0.14 per share. It is our belief that these results prove that our stock is currently undervalued. Therefore, we look forward to continuing to deliver strong financial results in order to increase our overall valuation for shareholders. On behalf of the entire team at SPAR Group, I would like to thank you all for joining us on today's call, and we are now available to answer any questions from participants.

[Operator Instructions] Your first question comes from Damien Marks [ph] from Sinclair Capital.

I have a quick 2-part question. One, what area should the investors expect to be more successful in 2013, the international division or the domestic side? And then also, as specific as you can be, what other geographic locations are you targeting for potential acquisitions?

Okay, thanks. We're actually looking for improvements in both sides of our business for 2013. Probably we're looking for a bigger increase from our international side of things, partially because of our organic growth that we're currently getting that we think is going to be expanded based on the contracts that we mentioned. The other part of it is the acquisition that we made late in 2012 in South Africa, we're now going to have a full year -- or, excuse me, another 3 quarters of 1 year incremental addition for that. So we think we're going to get organic growth rate of just about double digits for the international side of the business for 2013. On the domestic side, we're looking at improvements simply from the Market Force acquisition. We're -- it's only been now about -- I think it's about 2 weeks old, I think officially. So we're trying to get everything absorbed and everything started, switched over to all of our systems and so forth. And our hope is as we go through the calendar year that that's going to improve more and more as we go. The second part of your question, as far as new markets go, we're kind of still looking at 2 different things. One is we're looking at our existing markets to see if there are other potential opportunities within those. You see us do that twice now in the last -- I guess, it's 5, 6 months between South Africa as well as India. So we're looking to see if we can kind of bolster some of those markets to get them even better. There are incremental ones in our -- of our existing 10 that we're looking at. We're also looking to -- down into the South America region. We've been looking at that, I think I mentioned that on last quarter's call. We are in dialogue to close in one market down there, but we haven't finalized the total deal. We're still going through diligence, but that is probably the next region that we're looking to primarily because that's where our current stable of clients has kind of directed us to go to. So, I hope that answers your question. But we continue to look at acquisition opportunities both internationally as well as domestically.

[Operator Instructions] Your next question comes from Thomas Raymond [ph] from Lauren Capital Group [ph].

My question is, I guess, a 2-part question. What is going to be done on the margin side to increase them? And is it specific clients or overall margins that are being impacted?

I'll do the second part first. It's really -- right now, the mix -- and I'm going to take them separately, domestically and internationally. Domestically, it's the mix between our current business. If you looked at '11 versus '12, our project business, in particular -- and our project business breaks into 2 pieces. There are more traditional products with our merchandising group as well as we do a lot of new-store openings and reset type of projects. And that one has a little bit of a thinner margin than our traditional business. And throughout 2012, we just happened to acquire a bigger chunk of our revenue with that side of the business that was a little bit less of a margin. So we are, as we go forward in 2013, trying to grow both sides of the business, frankly. So it's not that we mind the other side that's got a little bit of thinner margin, we're just trying to expand our traditional merchandising continuity work and project work that we get a little bit of a better margin to it. Internationally, it's really just the mix of countries. So what you see on the gross margin side on the percentage is you're getting a mix of all these different roll-ups of all these different countries. And 2012, in particular, has -- particularly, I'll use Mexico as an example, you had 12 months of Mexico versus 4 months, I believe, in 2011. And you've got -- that is one, as a margin percentage, has been a little bit of a drag on our overall international margins because it is a dedicated model and we don't get the same type of margins that we enjoy in some of these other places. So that's part of the reason that it's driving the international margins down. Now that you're going to have more of a year-on-year perspective in '13 versus '12, we're hoping you're going to see a lot of that stuff come closer to leveling out. The answer to the other question, it's not a particular client that's driving the thing, it's more of the mix of business and also the mix of country.

And there are no further questions at this time. Please continue. [Operator Instructions] Your next question comes from John Curti from Singular Research.

With respect to gross margin expectations in 2013, given your mix of business and the acquisitions that you've completed and their subsequent growth in this upcoming year, anything that's going to either drive the margins up or down significantly from the levels of 2012? You mentioned Mexico being a year-on-year now kind of an equal comps, so that kind of flattens out. But anything that was -- that might drive them up or down in '13 from an acquisition perspective that's going to be included in '13 for a larger part of the year than in '12?

I think a couple of things. Like I said, internationally, you're going to see some -- a little bit of flattening out as it relates to Mexico. In South Africa, you're going to have the same thing where you had a business that we -- like I said, it's going to be not the same thing. You're going to be looking at a 3-month versus a 12-month year-on-year with our new business that we acquired. I don't think we're going to have a major change in that, but you might have a slight tick-down a little bit on the margin side for that particular market. But we're looking at -- in 2013 that we could take our international markets combined. There were still a couple of markets that were lagging behind a little bit from a profitability perspective in 2012, and our belief is that they are going all, hopefully, be profitable in 2013. So we're hopeful that some of the markets that have been dragging us a little bit are going to hopefully improve in that vein as well. And domestically, we're hopeful, again, that our margins will get a little bit helped by the acquisition, but part of that remains to be seen. As you're going through some of the costs that are associated with putting the entire enterprise together. You've got some start-up costs and things that you have to deal with. It doesn't necessarily translate to the gross margin side but as to the total cost side, but our hope is that you're going to start to see a flattening out of the particular gross margin that we got in 2012.

And then a question back on the guidance for the revenues of $115 million. That's based on contracts in hand and what -- and the differential in terms of the acquisitions that were completed last year being in the full -- for a full 12 months this year and doesn't include anything that you're negotiating at the present time?

It does not include anything that we're negotiating at the present time.

And there are no further questions at this time. Please continue.

Okay, thank you. I would -- just want to, once again, thank all of our clients, and particularly our employees, for an extraordinarily successful year. And we look forward to 2013, be it as successful as it was in 2012 with all the efforts and diligence that all of our folks put into it. So again, I'd like to thank everybody today for listening in. And if you have any questions, you're welcome to contact either Alliance Advisors or myself if you did not have the chance to ask on the call. And again, thank you very much, and look forward to talking with you again next quarter.

Ladies and gentlemen, this concludes the conference call for today. Thanks for participating. You may now disconnect your lines.