Elkridge, MD, August 8, 2007 – GP Strategies Corporation (NYSE: GPX), a global provider of training and e-Learning solutions, management consulting, and engineering services through its operating subsidiary General Physics Corporation, today reported second quarter 2007 results.
Second Quarter 2007 Highlights:
- Revenue of $63.7 million, up $17.9 million or 39% compared to the second quarter of 2006
- Earnings per share of $0.14 per diluted share compared to $0.11 per diluted share for the second quarter of 2006
- EBITDA of $5.4 million, up $1.5 million or 40% compared to the second quarter of 2006
- Board authorized an additional $5 million for share repurchases under buyback program
“I am proud to report the Company had a 34% increase in net income during the second quarter of 2007 compared to the second quarter of 2006,” said Scott N. Greenberg, CEO of GP Strategies. “The Company is well positioned to become a global leader in the custom training and performance improvement industry.”
Second Quarter 2007 Results
Revenue was $63.7 million for the second quarter of 2007 compared to $45.8 million for the second quarter of 2006. The $17.9 million, or 39%, increase in revenue during the second quarter of 2007 is due to the following drivers by business segment:
- Sandy Sales Training & Marketing – this segment contributed an increase of $18.4 million of revenue during the second quarter of 2007 as a result of the acquisition of Sandy Corporation in January 2007. Sandy provides custom sales training and print-based and electronic publications primarily to the automotive industry.
- Manufacturing & BPO – revenue for this segment increased $2.0 million, or 8%, to $28.6 million during the second quarter of 2007 from $26.5 million for the second quarter of 2006. The net increase in revenue is primarily due to net increases in business process outsourcing and technical training services with new and existing customers and an increase from our international operations in the United Kingdom (UK). On June 1, 2007, we completed the acquisition of Smallpeice Enterprises Ltd. (SEL), a technical and management training company in the UK.
- Process, Energy & Government – revenue for this segment decreased $2.5 million, or 13%, to $16.7 million during the second quarter of 2007 from $19.2 million for the second quarter of 2006. The net decrease in revenue is primarily due to the completion of chemical demilitarization projects in 2006 and the conclusion of hurricane recovery services in 2006. These decreases were offset by increases in revenue primarily from engineering and training services provided to customers in the petroleum and refining industry.
During the second quarter of 2007, operating income increased $1.0 million, or 30%, to $4.3 million, compared to $3.3 million in the second quarter of 2006 and is primarily attributable to the following:
- An increase in gross profit of $2.3 million, or 34%, which consisted of a $1.5 million increase in gross profit contributed by the Sandy Sales Training & Marketing segment, a $0.4 million increase in gross profit contributed by the Manufacturing & BPO segment, and a $0.4 million increase in gross profit contributed by the Process, Energy & Government segment (primarily due to significant increases in profitability on contracts with petroleum and refining customers despite the overall decline in revenue for this segment); offset by
- An increase in selling, general and administrative expenses of $1.4 million, or 37%, primarily due to an increase in amortization expense of $0.5 million related to intangible assets recorded in connection with the acquisition of Sandy and an increase in labor, benefits and facilities expense of $0.4 million primarily due to the acquisition of Sandy.
Income before income tax expense was $4.1 million for the second quarter of 2007 compared to $3.1 million for the second quarter of 2006. Net income was $2.3 million, or $0.14 per diluted share, for the second quarter of 2007 compared to $1.7 million, or $0.11 per diluted share, for the second quarter of 2006. The increases in income before income tax expense, net income and earnings per share during the second quarter of 2007 were primarily due to the increases in operating income discussed above, with the results of Sandy’s operations being the primary driver for the increases along with increases in profitability in our other segments.
Six Months ended June 30, 2007 Results
Revenue was $117.2 million for the six months ended June 30, 2007 compared to $89.3 million for the same period in 2006. The $27.9 million, or 31%, increase in revenue consisted of $30.6 million of revenue contributed by the Sandy Sales Training & Marketing segment and a $2.7 million increase in revenue in the Manufacturing & BPO segment, offset by a $5.4 million decrease in revenue in the Process, Energy & Government segment. The primary drivers of the revenue fluctuations for the six months ended June 30, 2007 compared to the same period in 2006 are largely due to the same factors discussed above in the second quarter 2007 results.
During the six months ended June 30, 2007, operating income increased $2.0 million, or 35%, to $7.7 million, compared to $5.7 million for the same period in 2006, and is primarily attributable to the following:
- An increase in gross profit of $4.6 million, or 36%, which consisted of a $3.3 million increase in gross profit contributed by the Sandy Sales Training & Marketing segment, a $0.5 million increase in gross profit in the Manufacturing & BPO segment, and a $0.8 million increase in gross profit contributed by the Process, Energy & Government segment (primarily due to significant increases in profitability on contracts with petroleum and refining customers despite the overall decline in revenue for this segment); offset by
- An increase in selling, general and administrative expenses of $2.6 million, or 37%, primarily due to an increase in amortization expense of $0.9 million related to intangible assets recorded in connection with the acquisition of Sandy, an increase in labor, benefits and facilities expense of $0.7 million due to the acquisition of Sandy, and the effect of a bad debt recovery of $0.4 million in 2006 which reduced SG&A expenses in 2006 and did not recur in 2007.
Income before income tax expense was $7.6 million for the six months ended June 30, 2007 compared to $5.4 million for the same period in 2006. Net income was $4.4 million, or $0.26 per diluted share, for the six months ended June 30, 2007 compared to $3.1 million, or $0.19 per diluted share, for the same period in 2006. The increases in income before income tax expense, net income and earnings per share during the first half of 2007 were primarily due to the increases in operating income discussed above, with the results of Sandy’s operations being the primary driver for the increases along with increases in profitability in our other segments.
Share Repurchase Program
During the three and six months ended June 30, 2007, we repurchased 37,500 and 145,000 shares, respectively, of our common stock in the open market for approximately $0.4 million and $1.4 million, respectively, in cash. As of June 30, 2007, there was approximately $0.5 million remaining to be used for repurchases under the original $5 million buyback program which was authorized in January 2006. In August 2007, our Board of Directors authorized an additional $5 million of future share repurchases under the buyback program.
Investor Call
The Company has scheduled an investor conference call for 10:00 a.m. ET on August 8, 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 11539386. A telephone replay of the call will also be available beginning at 11:00 a.m. on August 8th, until 11:59 p.m. on August 22nd. To listen to the replay, dial 800-642-1687 or 706-645-9291, using conference ID number 11539386.
Presentation of Non-GAAP Information
This press release contains non-GAAP financial measures, including EBITDA (earnings before interest, income taxes, depreciation and amortization). 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, 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 EBITDA 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 – EBITDA, 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 (GP) 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. These statements reflect our current expectations concerning future events and results. We use words such as “expect,” “intend,” “believe,” “may,” “will,” “should,” “could,” “anticipates,” and similar expressions to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. 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
(In thousands, except per share amounts)
(Unaudited)
|
|
Three months ended |
Six months ended |
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June 30, |
June 30, |
|||
|
|
|
|
|
|
|
|
2007 |
2006 |
2007 |
2006 |
|
|
|
|
|
|
|
Revenue |
$63,658 |
$45,779 |
$117,201 |
$89,307 |
|
Cost of revenue |
54,354 |
38,822 |
99,855 |
76,588 |
|
Gross profit |
9,304 |
6,957 |
17,346 |
12,719 |
|
Selling, general and administrative expenses |
4,989 |
3,632 |
9,608 |
7,004 |
|
Operating income |
4,315 |
3,325 |
7,738 |
5,715 |
|
Interest expense Other income |
387 143 |
443 180 |
659 514 |
857 584 |
|
Income before income tax expense |
4,071 |
3,062 |
7,593 |
5,442 |
|
Income tax expense |
1,724 |
1,317 |
3,192 |
2,328 |
|
Net income |
$2,347 |
$1,745 |
$4,401 |
$3,114 |
|
|
|
|
|
|
|
Other data: EBITDA (1) Basic weighted average shares outstanding |
$ 5,386 16,584 |
$ 3,851 15,550 |
$ 10,052 16,447 |
$ 7,056 15,889 |
|
Diluted weighted average shares outstanding |
17,180 |
16,461 |
17,072 |
16,795 |
|
|
|
|
|
|
|
Per common share data: |
|
|
|
|
|
Basic earnings per share |
$ 0.14 |
$ 0.11 |
$ 0.27 |
$ 0.20 |
|
Diluted earnings per share |
$ 0.14 |
$ 0.11 |
$ 0.26 |
$ 0.19 |
(1)The term EBITDA (earnings before interest, income taxes, depreciation and amortization) 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 –EBITDA, along with related footnotes, below.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
June 30, |
December 31, |
|
|
|
|
2007 (Unaudited) |
2006 |
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ 1,947 |
$ 8,660 |
|
|
Accounts and other receivables |
|
39,476 |
26,628 |
|
|
Inventories, net |
|
814 |
– |
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts |
|
20,287 |
11,257 |
|
|
Prepaid expenses and other current assets |
|
8,606 |
6,411 |
|
|
Total current assets |
|
71,130 |
52,956 |
|
|
Property, plant and equipment, net |
|
2,413 |
1,859 |
|
|
Goodwill and other intangibles, net |
|
66,202 |
57,460 |
|
|
Deferred tax assets |
|
3,611 |
7,420 |
|
|
Other assets |
|
2,686 |
1,705 |
|
|
Total assets |
|
$ 146,042 |
$ 121,400 |
|
|
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
Short-term borrowings Current maturities of long-term debt |
|
$ 9,102 90 |
$ – 30 |
|
|
Accounts payable and accrued expenses |
|
31,456 |
22,903 |
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts |
|
8,190 |
6,881 |
|
|
Total current liabilities |
|
48,838 |
29,814 |
|
|
Long-term debt less current maturities |
|
7,872 |
10,896 |
|
|
Other non-current liabilities |
|
1,055 |
959 |
|
|
Total liabilities |
|
57,765 |
41,669 |
|
|
Total stockholders’ equity |
|
88,277 |
79,731 |
|
|
Total liabilities and stockholders’ equity |
|
$ 146,042 |
$ 121,400 |
|
GP STRATEGIES CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliation – EBITDA
(In thousands)
(Unaudited)
|
|
Three months ended |
Six months ended |
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June 30, |
June 30, |
|
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|
|
|
|
|
|
|
|
|
|
2007 |
2006 |
2007 |
2006 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
$2,347 |
$1,745 |
$4,401 |
$3,114 |
|
|
|
Interest expense |
387 |
443 |
659 |
857 |
|
|
|
Income tax expense |
1,724 |
1,317 |
3,192 |
2,328 |
|
|
|
Depreciation and amortization |
928 |
346 |
1,800 |
757 |
|
|
|
EBITDA (2) |
$5,386 |
$3,851 |
$10,052 |
$7,056 |
|
|
(2)Earnings before interest, income taxes, depreciation and amortization (EBITDA) 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. EBITDA is calculated by adding back interest expense, income tax expense, and depreciation and amortization to net income. EBITDA should not be considered a substitute 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 EBITDA 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