Elkridge, MD. March 12, 2007. GP Strategies Corporation (NYSE: GPX), a global provider of training, e-Learning solutions, management consulting, and engineering services through its principal operating subsidiary General Physics Corporation, today reported strong fourth quarter and fiscal year 2006 results.

Highlights:

Fourth Quarter 2006

  • Revenue of $45.4 million for fourth quarter of 2006, up $1.1 million or 2.6% compared to fourth quarter of 2005, and up $1.4 million or 3.1% from the third quarter of 2006
  • Gross profit of $6.9 million for the fourth quarter of 2006, up $0.5 million or 8.5% compared to fourth quarter of 2005
  • Operating income of  $3.5 million for the fourth quarter of 2006, up $0.2 million or 4.7% compared to the fourth quarter of 2005, and up $0.4 million or 13.7% compared to the third quarter of 2006
  • Adjusted EBITDA excluding non-recurring items of $4.1 million for fourth quarter of 2006, up $0.3 million or 8.2% compared to fourth quarter of 2005

Fiscal Year 2006

  • Revenue of $178.8 million for 2006, up $3.2 million or 1.8% compared to 2005
  • Operating income of  $12.3 million for 2006, up $1.4 million or 12.3% compared to 2005
  • Adjusted EBITDA excluding non-recurring items of $14.8 million for 2006, up $2.1 million or 17.0% compared to 2005

“GP Strategies’ operating income of $3.5 million for the fourth quarter of 2006 was the Company’s strongest operating performance in recent history,” said Scott N. Greenberg, CEO of GP Strategies. “During 2006, we broadened our scope of work with customers. We achieved these improvements despite the downturn of our government business. This performance continues to validate our business model and our improving position within the training outsourcing marketplace.”

Mr. Greenberg continued, “the acquisition of Sandy Corporation which was completed in January 2007 will enhance our existing service offerings by adding custom product sales training to our offering mix. Sandy has an exceptional reputation for providing dealership product sales training solutions to manufacturers in the U.S. automotive industry, a market Sandy has served for over 30 years. We will support the needs of Sandy’s current customers and intend to support the expansion of Sandy’s offerings worldwide and offer Sandy’s unique innovative solutions to our existing clients. This acquisition is consistent with our strategy of being a full-service provider of custom learning solutions to Fortune 500 and other commercial and government customers.”

Fourth Quarter Results

During the fourth quarter of 2006, revenue increased $1.1 million, or 2.6%, to $45.4 million from $44.3 million in the fourth quarter of 2005. The increase in revenue is largely due to a net increase in revenue of $3.1 million in our Manufacturing & BPO segment, primarily due to the expansion of business process outsourcing services with new and existing customers and an increase in revenue from our operations in the United Kingdom, primarily resulting from an acquisition during the first quarter of 2006. The increase in revenue for this business segment was offset by a net decrease in revenue of $2.0 million in our Process, Energy & Government segment, primarily due to a reduction in funding during 2006 for our government contract supporting the Domestic Preparedness Equipment Technical Assistance Program (DPETAP).

During the fourth quarter of 2006, operating income increased $0.2 million, to $3.5 million from $3.3 million in the fourth quarter of 2005. The increase in operating income is attributable to an increase in gross profit of $0.5 million, which consisted of an increase in gross profit of $1.0 million in our Manufacturing & BPO segment, offset by a decrease in gross profit of $0.5 million in our Process, Energy & Government segment primarily due to the revenue fluctuations discussed above. The increase in operating income was offset by an increase in selling, general and administrative expenses of $0.4 million during the fourth quarter of 2006 compared to the fourth quarter of 2005, primarily due to an increase in compensation expense. 

During the fourth quarter of 2006, income from continuing operations before income taxes decreased $5.2 million to $3.4 million, compared to $8.6 million for the fourth quarter of 2005.  The decrease is primarily due to a gain on the EDS litigation settlement of $5.6 million in the fourth quarter of 2005 which did not recur in 2006. Excluding this non-recurring item, income from continuing operations before income taxes increased $0.3 million during the fourth quarter of 2006 compared to the fourth quarter of 2005, primarily due to the increase in operating income discussed above.

Fiscal Year 2006 Results

During the year ended December 31, 2006, revenue increased $3.2 million, or 1.8%, to $178.8 million, as compared to revenue of $175.6 million for the year ended December 31, 2005. The increase in revenue is largely due to a net increase in revenue of $11.7 million in our Manufacturing & BPO segment, primarily due to the expansion of business process outsourcing services with new and existing customers, an increase in revenue from our operations in the United Kingdom as discussed above, and an increase in other technical services including lean manufacturing. The increase in revenue for this business segment was offset by a net decrease in revenue of $8.5 million in our Process, Energy & Government segment primarily due to a reduction in funding during 2006 for the DPETAP government contract discussed above.

During the year ended December 31, 2006, operating income increased $1.4 million to $12.3 million from $11.0 million for the year ended December 31, 2005.  The improvement is primarily attributable to an increase in gross profit of $1.6 million, which consisted of an increase in gross profit of $4.6 million in our Manufacturing & BPO segment, offset by a decrease in gross profit of $3.0 million in our Process, Energy & Government segment primarily due to the revenue fluctuations discussed above. This increase in operating income was offset by an increase in selling, general and administrative expenses of $0.2 million in 2006 compared to 2005 primarily due to an increase in compensation expense. 

During the year ended December 31, 2006, income from continuing operations before income taxes decreased $3.5 million to $11.7 million, compared to $15.2 million for the year ended December 31, 2005.  The decrease is primarily due to a gain on the EDS litigation settlement of $5.6 million in 2005 which did not recur in 2006. Excluding this non-recurring item, income from continuing operations before income taxes increased $2.0 million during 2006 compared to 2005, primarily due to the increase in operating income discussed above, as well as an increase in other income of $0.7 million in 2006 compared to 2005, primarily due to income from a joint venture.

Investor Call

The Company has scheduled an investor conference call for 10:00 a.m. ET on March 12, 2007. In addition to prepared remarks from management, there will be a question and answer session on the call. The dial-in number for the live conference call will be 888-633-3324 using conference ID number 1508897. A telephone replay of the call will also be available beginning at 1:00 p.m. on March 12th, until 11:59 p.m. on March 26th. To listen to the replay, dial 800-642-1687 or 706-645-9291, using conference ID number 1508897.

Presentation of Non-GAAP Information

This press release contains non-GAAP financial measures, including adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization) excluding non-recurring items. The Company believes this non-GAAP financial measure is useful to investors in evaluating the Company’s results. This measure should be considered in addition to, and not as a replacement for, or superior to, either net income, as an indicator of the Company’s operating performance, or cash flow, as a measure of the Company’s liquidity. In addition, because adjusted EBITDA excluding non-recurring items may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. For a reconciliation of these non-GAAP financial measures to the most comparable GAAP equivalent, see the Non-GAAP Reconciliation – Adjusted EBITDA Excluding Non-Recurring Items, along with related footnotes, below.

About GP Strategies Corporation

GP Strategies, whose principal operating subsidiary is General Physics Corporation, is a NYSE listed company (GPX).  General Physics is a global provider of training, e-Learning solutions, management consulting, and engineering services. Through its Sandy Corporation division, GP provides custom sales training solutions. GP’s solutions improve the effectiveness of organizations by delivering innovative and superior training, consulting and business improvement services, customized to meet the specific needs of its clients.  Clients include Fortune 500 companies, manufacturing, process and energy industries, and other commercial and government customers.  Additional information about GP Strategies may be found at www.gpstrategies.com and about General Physics at www.gpworldwide.com.

Forward-Looking Statements

We make statements in this press release that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to be materially different from those we project. For a full discussion of these risks, uncertainties and factors, we encourage you to read our documents on file with the Securities and Exchange Commission, including those set forth in our periodic reports under the forward-looking statements and risk factors sections. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share and share data)

(Unaudited)

 

Quarters ended

Years ended

December 31,

December 31,

 





 

2006

2005

2006

2005

 

 

 

 

 

Revenue

$45,425

$44,277

$178,783

$175,555

Cost of revenue

38,488

37,886

152,217

150,564

  Gross profit

6,937

6,391

26,566

24,991

Selling, general and administrative expenses

3,431

3,043

14,262

14,039

Operating income

Interest expense

3,506

325

3,348

389

12,304

1,558

10,952

1,518

Other income

200

97

964

238

Gain on litigation settlement, net of legal fees

5,552

5,552

   Income from continuing operations

 

 

 

 

      before income taxes

3,381

8,608

11,710

15,224

Income tax expense

1,600

3,893

5,068

6,767

   Income from continuing operations

1,781

4,715

6,642

8,457

Loss from discontinued operations,

 

 

 

 

    net of income taxes

(232)

(1,244)

   Net income

$1,781

$4,483

$6,642

$7,213

 

Other data:

Adjusted EBITDA Excluding

Non-Recurring Items(1)

 

 

 

$4,092

 

 

 

$3,782

 

 

 

$14,792

 

 

 

$12,646

 

 

Basic weighted average shares outstanding

 

 

15,840

 

 

18,362

 

 

15,818

 

 

18,169

Diluted weighted average shares outstanding

16,781

19,036

16,731

18,946

 

Per common share data:

 

Basic:

 

 

 

 

  Income from continuing operations

$     0.11

$     0.25

$     0.42

$     0.47

  Loss from discontinued operations

(0.01)

(0.07)

  Net income

$     0.11

$     0.24

$     0.42

$     0.40

Diluted:

 

 

 

 

  Income from continuing operations

$     0.11

$     0.25

$     0.40

$     0.45

  Loss from discontinued operations

(0.01)

(0.07)

  Net income

$     0.11

$     0.24

$     0.40

$     0.38

(1)The term adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization) excluding non-recurring items is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP financial measure to the most comparable GAAP equivalent, see the Non-GAAP Reconciliation – Adjusted EBITDA Excluding Non-Recurring Items, along with related footnotes, below.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

 


 

 

 


December 31,

 

 


     2006

     2005

Current assets:

 

 

 

 

   Cash and cash equivalents

 

$8,660

$18,118

 

   Accounts and other receivables

 

26,628

27,079

 

   Costs and estimated earnings in excess of billings on uncompleted contracts


11,257

11,487

 

   Prepaid expenses and other current assets

 

6,411

5,936

 

      Total current assets

 

52,956

62,620

 

Property, plant and equipment, net

 

1,859

1,857

 

Goodwill and other intangibles, net

 

57,460

58,130

 

Deferred tax assets

 

7,699

10,391

 

Other assets

 

1,705

1,643

 

      Total assets


$121,679

$134,641

 

 

 

 

 

 

Current liabilities:

 

 

 

 

   Current maturities of long-term debt

 

$30

$71

 

   Accounts payable and accrued expenses

 

22,903

20,315

 

   Billings in excess of costs and estimated earnings on uncompleted contracts    


6,881

7,430

 

      Total current liabilities


29,814

27,816

 

Long-term debt less current maturities


10,896

11,309

 

Other non-current liabilities


959

1,174

 

      Total liabilities


41,669

40,299

 

Total stockholders’ equity


80,010

94,342

 

      Total liabilities and stockholders’ equity


$121,679

$134,641

 

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Non-GAAP Reconciliation – Adjusted EBITDA Excluding Non-Recurring Items

(Dollars in thousands)

(Unaudited)

 

 

 

Quarters ended

 

Years ended

December 31,

December 31,

 





 

2006

2005

2006

2005

 

 

 

 

 

Net income

$1,781

$4,483

$6,642

$7,213

Interest expense

325

389

1,558

1,518

Income tax expense

1,600

3,893

5,068

6,767

Depreciation and amortization

Non-recurring items:

Gain on litigation settlement, net of legal fees

Loss from discontinued operations, net of taxes

386

 

337

 

(5,552)

232

1,524

 

1,456

 

(5,552)

1,244

Adjusted EBITDA excluding

non-recurring items (2)

 

$4,092

 

3,782

 

$14,792

 

$12,646

(2)Adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) excluding non-recurring items is a widely used non-GAAP financial measure of operating performance. It is presented as supplemental information that the Company believes is useful to investors to evaluate its results because it excludes certain items that are not directly related to the Company’s core operating performance. Adjusted EBITDA excluding non-recurring items is calculated by adding back net interest expense, income tax expense, depreciation and amortization, and non-recurring items (including gain on litigation settlement, net of legal fees and loss from discontinued operations, net of tax) to net income. Adjusted EBITDA excluding non-recurring items should not be considered as substitutes either for net income, as an indicator of the Company’s operating performance, or for cash flow, as a measure of the Company’s liquidity. In addition, because adjusted EBITDA excluding non-recurring items may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies.

Contact:

Scott N. Greenberg
Chief Executive Officer
(410) 379-3640

Sharon Esposito-Mayer
Chief Financial Officer
(410) 379-3636

Ann M. Blank
Investor Relations
(410) 379-3725