Elkridge, MD. November 5, 2009. GP Strategies Corporation (NYSE: GPX), a global provider of training, e-Learning solutions, management consulting, engineering and technical services through its principal operating subsidiary General Physics Corporation, today reported financial results for the third quarter ended September 30, 2009.

Revenue for the third quarter of 2009 was $54.1 million compared to $66.0 million for the third quarter of 2008 and $53.8 million for the second quarter of 2009. Gross profit was $8.9 million, or 16.4% of revenue, for the third quarter of 2009 compared to $10.1 million, or 15.3% of revenue, for the same period in 2008. Operating income was $3.7 million for the third quarter of 2009 compared to $5.0 million for the third quarter of 2008, and consistent with second quarter 2009 operating income of $3.7 million. EBITDA for the third quarter of 2009 was $4.5 million compared to $6.0 million for the third quarter of 2008. Net income was $2.0 million for the third quarter of 2009, or $0.13 per diluted share, compared to net income of $2.9 million for the third quarter of 2008, or $0.18 per diluted share.

“I am pleased with our strong performance in the third quarter, which allowed us to continue investing in strategic initiatives, open a new office in Bellevue, Washington to support our expanding work in the global software industry and continue our global acquisition program with Milsom Industrial Designs,” commented Scott N. Greenberg, Chief Executive Officer of GP Strategies.  “Our EBITDA and gross profit in the quarter clearly demonstrate that we have substantially mitigated the effects of the economic downturn. We believe that our business model gives us the flexibility to capitalize on opportunities as they arise, as demonstrated by recent wins in the software, technology and pharmaceutical sectors, and to provide award-winning services, which were recognized recently by an award to us from Chief Learning Officer magazine and to our customer from American Society of Training & Development.  GP Strategies is positioned to capture new customers, continue to fund organic growth and execute on strategic acquisitions to enhance shareholder value. We are building a strong platform and are very excited about our future.”

Balance Sheet and Cash Flow Highlights

As of September 30, 2009, the Company had cash and cash equivalents of $4.1 million compared to $4.0 million as of December 31, 2008. The Company had $1.3 million of short-term borrowings outstanding and $21.5 million of available borrowings under its revolving credit facility as of September 30, 2009. Cash provided by operating activities was $10.1 million for the nine months ended September 30, 2009. As of October 30, 2009, the Company had approximately $7.9 million of cash and cash equivalents and no borrowings outstanding under its revolving credit facility. 

Investor Call

The Company has scheduled an investor conference call for 10:00 a.m. ET on November 5, 2009. In addition to prepared remarks from management, there will be a question and answer session on the call. The dial-in numbers for the live conference call are 888-633-3324 or 973-935-8549, using conference ID number 39248256. A telephone replay of the call will also be available beginning at 11:00 a.m. on November 5th and will remain available through midnight on November 19th. To listen to the replay, dial 800-642-1687 or 706-645-9291, using conference ID number 39248256. A replay will also be available on GP Strategies’ website shortly after the conclusion of the call.

Presentation of Non-GAAP Information

This press release contains non-GAAP financial measures, including Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization) and Free Cash Flow. The Company believes these non-GAAP financial measures are useful to investors in evaluating the Company’s results. These measures 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 and Free Cash Flow 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 reconciliations, along with related footnotes, below.

About GP Strategies Corporation

GP Strategies, whose principal operating subsidiary is General Physics Corporation (GP), is a NYSE-listed company (GPX). GP is a global performance improvement solutions provider of sales and technical training, e-Learning solutions, management consulting and engineering services. 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 may be found 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

(In thousands, except per share data)

(Unaudited)

 

 

Quarters ended

Nine months ended

September 30,

September 30,

 


 

2009

2008

2009

2008

 

 

 

 

 

Revenue

$   54,099

$   65,968

$ 161,447

$ 204,913

Cost of revenue (1)

45,211

55,884

136,335

173,730

  Gross profit

8,888

10,084

25,112

31,183

Selling, general and administrative expenses (1)

5,223

5,101

15,266

16,161

Goodwill and intangible asset impairment loss

10,163

Operating income (loss)

Interest expense

3,665

52

4,983

138

(317)

157

15,022

621

Other income

107

207

319

610

   Income (loss) before income tax expense

3,720

5,052

(155)

15,011

Income tax expense

1,737

2,116

3,022

6,243

   Net income (loss)

$    1,983

$    2,936

$    (3,177)

$    8,768

 

 

 

 

 

 

Basic weighted average shares outstanding

 

15,725

 

16,559

 

15,854

 

16,629

Diluted weighted average shares outstanding

15,842

16,662

15,911

16,783

 

Per common share data:

 

 

 

 

  Basic earnings (loss) per share

$      0.13

$     0.18

$     (0.20)

$     0.53

  Diluted earnings (loss) per share

$      0.13

$     0.18

$     (0.20)

$     0.52

 

Other data:

Adjusted EBITDA (2)

 

$   4,547

 

$   6,002

 

$   12,502

 

$ 18,101

 

(1)     Effective January 1, 2009, the Company changed the classification of certain information technology (IT) infrastructure costs on the consolidated statement of operations from cost of revenue to selling, general and administrative expenses.  The statements of operations for the three and nine months ended September 30, 2008 have been reclassified to conform with the presentation for 2009. The reclassification resulted in a decrease of $473,000 and $1,483,000 in cost of revenue and a corresponding increase in selling, general and administrative expenses for the three and nine months ended September 30, 2008, respectively. 

(2)     The term Adjusted 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 – Adjusted EBITDA, along with related footnotes, below.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION

(In thousand)

(Unaudited)

 

 

Quarters ended

Nine months ended

September 30,

September 30,

 


 

2009

2008

2009

2008

Revenue by segment:

 

 

 

 

Manufacturing & BPO

$  24,856

$  29,122

$  68,733

$  90,616

Process & Government

13,315

13,754

41,281

42,335

Energy

5,344

6,066

16,893

16,001

Sandy Training & Marketing

10,584

17,026

34,540

55,961

Total revenue

$  54,099

$  65,968

$ 161,447

$ 204,913

 

 

Gross profit by segment:

 

 

 

 

Manufacturing & BPO

$  3,777

$  4,794

$  9,805

$  13,534

Process & Government

1,833

2,077

5,876

7,218

Energy

1,590

1,853

4,549

4,448

Sandy Training & Marketing

1,688

1,360

4,882

5,983

Total gross profit

$  8,888

$ 10,084

$ 25,112

$ 31,183

 

 

Operating income by segment:

 

 

 

 

Manufacturing & BPO (3)

$  1,621

$  2,644

$  (6,188)

$  7,173

Process & Government

735

1,050

2,448

4,279

Energy

1,151

1,573

3,144

3,545

Sandy Training & Marketing

739

23

1,725

1,763

Corporate and other costs

(581)

(307)

(1,446)

(1,738)

Total operating income

$  3,665

$  4,983

$     (317)

$  15,022

 

 

Supplemental Cash Flow Information:

 

 

 

 

Net cash provided by operating activities

$  5,305

$  9,081

$ 10,146

$  17,313

Capital expenditures

(257)

(110)

(613)

(1,861)

Free cash flow

$  5,048

$  8,971

$   9,533

$  15,452

 

 

(3)   The operating loss for the Manufacturing & BPO segment for the nine months ended September 30, 2009 includes a $10,163,000 goodwill and intangible asset impairment loss recognized during the second quarter of 2009.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 


 

 

 


September 30,

December 31,

 


     2009

     2008

 


(Unaudited)

 

Current assets:

 

 

 

 

   Cash and cash equivalents

 

$     4,143

$    3,961

 

   Accounts and other receivables

 

37,367

42,471

 

   Inventories, net

 

529

537

 

   Costs and estimated earnings in excess of billings on uncompleted contracts


11,067

8,036

 

   Prepaid expenses and other current assets

 

5,901

7,277

 

      Total current assets

 

59,007

62,282

 

Property, plant and equipment, net

 

2,914

2,970

 

Goodwill and other intangibles, net

 

60,616

67,013

 

Other assets

 

4,731

3,575

 

      Total assets


$ 127,268

$  135,840

 

 

 

 

 

 

Current liabilities:

 

 

 

 

   Short-term borrowings

 

$     1,273

$      3,234

 

   Accounts payable and accrued expenses

 

20,668

25,977

 

   Billings in excess of costs and estimated earnings on uncompleted contracts    


10,153

10,222

 

      Total current liabilities


32,094

39,433

 

Other noncurrent liabilities


5,726

3,601

 

      Total liabilities


37,820

43,034

 

Total stockholders’ equity


89,448

92,806

 

      Total liabilities and stockholders’ equity


$ 127,268

$  135,840

 

 


Non-GAAP Reconciliation – Adjusted EBITDA

(In thousands)

(Unaudited)

 

 

 

Quarters ended

 

Nine months ended

September 30,

September 30,

 





 

2009

2008

2009

2008

Net income (loss)

$  1,983

$  2,936

$  (3,177)

$  8,768

Interest expense

52

138

157

621

Income tax expense

1,737

2,116

3,022

6,243

Depreciation and amortization

Goodwill and intangible asset impairment loss

775

812

2,337

10,163

2,469

Adjusted EBITDA (4)

$  4,547

$  6,002

$ 12,502

$ 18,101

 

(4)           Adjusted earnings before interest, income taxes, depreciation and amortization (Adjusted 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. Adjusted EBITDA is calculated by adding back net interest expense, income tax expense, depreciation and amortization, non-cash stock-based compensation expense and goodwill and intangible asset impairment loss to net income. Adjusted EBITDA 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 may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies.

Contacts:

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