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