GP Strategies Reports Fourth Quarter and Fiscal Year 2005 Results.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- GP Strategies Corporation (NYSE NYSE See: New York Stock Exchange : GPX GPX - Early system on UNIVAC II. Listed in CACM 2(5):16 (May 1959). ), a global provider of training, e-Learning solutions, management consulting Noun 1. management consulting - a service industry that provides advice to those in charge of running a business service industry - an industry that provides services rather than tangible objects , and engineering services through its core operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. General Physics Corporation, today reported strong fourth quarter and fiscal year 2005 results. Highlights: Quarter --Gross profit up 20.3% for the fourth quarter of 2005 compared to 2004 --Operating income up $4.3 million for the fourth quarter of 2005 compared to 2004 --Settled litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. claims against EDS (Electronic Data Systems, Plano, TX, www.eds.com) Founded in 1962 by H. Ross Perot (independent candidate for the President of the U.S. in 1992), EDS is the largest outsourcing and data processing services organization in the country. for $9.0 million in cash, resulting in a gain of $5.6 million, net of legal fees and expenses, during the fourth quarter of 2005 Fiscal Year 2005 --Revenue of $175.6 million for fiscal year 2005, up from $164.5 million in 2004 --Operating income improved to $11.0 million, versus $1.8 million in 2004 "GP Strategies successfully met its major objectives for 2005 and I am proud to report the Company had a solid fourth quarter," said Scott N. Greenberg, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of GP Strategies. "We achieved strong operating results, broadened work scopes and added significant new customers during the year, validating val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. our business model and improving our position within the training outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. marketplace." Mr. Greenberg continued, "In September, we completed the spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of our non-core assets, and during the year increased our profitability and cash flow. In January, we simplified our capital structure, through the capital stock restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , eliminating supervoting shares. With these transactions now complete, we can concentrate on our strategic objectives, which leverage our custom content design capabilities, industry knowledge and management team depth. Looking toward fiscal 2006, we are focused on the growth of our core business, General Physics, through international expansion, selective acquisitions, and the development of relationships with new and existing customers." Fourth Quarter Results During the fourth quarter of 2005, revenue decreased $1.4 million, or 3.0%, to $44.3 million from $45.6 million in the fourth quarter of 2004. The net decrease in revenue is primarily due to a change in contract scopes with a business process outsourcing Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in customer during 2005, resulting in a revenue decline of $2.5 million, and a net decrease in revenue from hurricane recovery services of $1.0 million. These decreases in the fourth quarter of 2005 were offset by increases in revenue from new contract awards and increased contract scopes with several of our existing customers to provide various training, business process outsourcing, engineering, and domestic preparedness pre·par·ed·ness n. The state of being prepared, especially military readiness for combat. Noun 1. preparedness - the state of having been made ready or prepared for use or action (especially military action); "putting them services. During the fourth quarter of 2005, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased $4.3 million, to $3.3 million from an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $1.0 million in the fourth quarter of 2004. The increase in operating income is attributable to an increase in gross profit of $1.1 million, a 20.3% increase compared to the fourth quarter of 2004, primarily due to a decrease in lower margin subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. utilization and an increase in higher margin internal labor utilization on several contracts. In addition, corporate overhead expenses decreased $3.2 million, primarily due to a decrease in executive compensation and a decrease in corporate SG&A expenses as a result of the spin-off of National Patent Development Corporation (NPDC NPDC National Plant Data Center (USDA) NPDC Naval Personnel Development Command NPDC New Product Development Center NPDC National Petroleum Development Company NPDC National Parts Distribution Center ) in the fourth quarter of 2004. During the fourth quarter of 2005, income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the before income taxes decreased $3.8 million to $8.6 million, compared to $12.4 million for the fourth quarter of 2004. The decrease is primarily due to a decrease in income relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the EDS litigation in 2005 compared to 2004. In the fourth quarter of 2005, the Company recognized a gain on the litigation settlement of $5.6 million compared to a gain on the arbitration award An arbitration award (or arbitral award) is a determination on the merits by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law. of $13.7 million in the fourth quarter of 2004 relating to the claims against EDS arising out of the Company's 1998 acquisition of Learning Technologies. The net cash proceeds to the Company from the litigation and arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the gains were $4.4 million in 2005 and $8.7 million in 2004, after contributions to NPDC pursuant to a spin-off agreement. Excluding these non-recurring items, income from continuing operations before income taxes increased $4.3 million. Fiscal Year 2005 Results During the year ended December 31, 2005, revenue increased $11.1 million, or 6.7%, to $175.6 million, as compared to revenue of $164.5 million for the year ended December 31, 2004. The increase in revenue is primarily due to new contract awards and net increases in contract scopes with several of our existing customers to provide various training, business process outsourcing, engineering, and domestic preparedness services. The increase was offset by a decrease in revenue from hurricane recovery services of $3.1 million in 2005 compared to 2004 and a change in contract scopes with a business process outsourcing customer during 2005 resulting in a revenue decline of $5.4 million. During the year ended December 31, 2005, operating income increased $9.2 million to $11.0 million from $1.8 million for the year ended December 31, 2004. The improvement is primarily attributable to an increase in gross profit of $5.7 million, primarily due to an increase in revenue and a decrease in overhead expenses as a percentage of revenue, as well as an increase in gross profit due to a shift from subcontractor utilization to internal labor utilization on several contracts which resulted in a higher profit margin. In addition, corporate overhead expenses decreased $3.5 million, primarily due to a decrease in executive compensation and a decrease in corporate SG&A as a result of the spin-off of NPDC in the fourth quarter of 2004. During the year ended December 31, 2005, income from continuing operations before income taxes increased $1.2 million to $15.2 million, compared to $14.0 million for the year ended December 31, 2004. Income from continuing operations before income taxes included a $5.6 million gain on the litigation settlement in 2005 and a $13.7 million gain on the arbitration award in 2004. Excluding these non-recurring items, income from continuing operations before income taxes increased $9.3 million in 2005 compared to 2004. During the course of the Company's evaluation and assessment of its internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act See SOX. of 2002, the Company identified a material weakness in its internal control over financial reporting in the area of accounting for income taxes. The deficiencies in this area were promptly brought to the attention of the Company's Audit Committee and the Company has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a high priority to the improvement of its internal control over financial reporting in this area. The Company has begun implementing a remediation plan to remediate re·me·di·a·tion n. The act or process of correcting a fault or deficiency: remediation of a learning disability. re·me this material weakness. Further information on this material weakness and the Company's remediation plan is set forth in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . The Company has scheduled an investor conference call for 10:00 a.m. ET on March 16, 2006. 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 888-412-9257. A telephone replay of the call will also be available beginning at 1:00 p.m. on March 16th, until 11:59 p.m. on March 31st. To listen to the replay, dial 800-642-1687 or 706-645-9291, using conference ID number 6530810. About GP Strategies Corporation GP Strategies, whose core operating subsidiary is General Physics Corporation, is a NYSE listed company listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → (GPX). General Physics is a global provider of training, e-Learning solutions, management consulting, and engineering services, improving the effectiveness of organizations by customizing solutions to meet the specific needs of 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. This report contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for forward looking statements. Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. We use words such as "expects", "intends", "believes", "may", "will" and "anticipates" to indicate forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including, but not limited to, those factors set forth under Item 1A, Risk Factors, in our Annual Report on Form 10-K and those other risks and uncertainties detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. We caution that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict these new risk factors, nor can we assess the effect, if any, of the new risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ from those expressed or implied by these forward-looking statements. If any one or more of these expectations and assumptions proves incorrect, actual results will likely differ materially from those contemplated by the forward-looking statements. Even if all of the foregoing assumptions and expectations prove correct, actual results may still differ materially from those expressed in the forward-looking statements as a result of factors we may not anticipate or that may be beyond our control. While we cannot assess the future impact that any of these differences could have on our business, financial condition, results of operations and cash flows or the market price of shares of our common stock, the differences could be significant. We do not undertake to update any forward-looking statements made by us, whether as a result of new information, future events or otherwise. You are cautioned. The following table summarizes the consolidated results of operations of GP Strategies Corporation ("the Company" or "GP Strategies") for the quarters and years ended December 31, 2005 and 2004. As previously announced, GP Strategies completed the spin-offs of GSE GSE general somatic efferent system. Systems, Inc. (GSE) on September 30, 2005 and NPDC on November 24, 2004. Subsequent to these spin-offs, the Company's operations consist of General Physics Corporation ("General Physics") and the Company ceased to have any ownership interest in GSE and NPDC. The operations of GSE and NPDC, which included Five Star Products, Inc. and MXL MXL Mexicali, Baja California, Mexico - Rodolfo Sanchez Taboada (Airport Code) MXL Musicmatch Access Layer Industries, Inc., have been reclassified to discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for all periods presented.
(Unaudited - in thousands, Quarters ended Years ended
except per share amounts) December 31, December 31,
------------------------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue $ 44,277 $ 45,644 $175,555 $164,458
Cost of revenue 37,886 40,333 150,564 145,119
------------------------------------
Gross profit 6,391 5,311 24,991 19,339
Selling, general and
administrative expenses 3,043 6,284 14,039 17,545
------------------------------------
Operating income (loss) 3,348 (973) 10,952 1,794
Interest expense 389 467 1,518 1,937
Other income 97 179 238 500
Gain on litigation settlement,
net of legal fees 5,552 - 5,552 -
Gain on arbitration award, net of
legal fees - 13,660 - 13,660
------------------------------------
Income from continuing
operations
before income taxes 8,608 12,399 15,224 14,017
Income tax expense (benefit) 3,893 (9,251) 6,767 (8,249)
------------------------------------
Income from continuing
operations 4,715 21,650 8,457 22,266
Income (loss) from discontinued
operations,
net of income taxes (232) (83) (1,244) 254
------------------------------------
Net income $ 4,483 $ 21,567 $ 7,213 $ 22,520
====================================
Per common share data:
Basic:
Income from continuing
operations $ 0.25 $ 1.21 $ 0.47 $ 1.26
Income (loss) from discontinued
operations (0.01) -- (0.07) 0.01
------------------------------------
Net income $ 0.24 $ 1.21 $ 0.40 $ 1.27
====================================
Diluted:
Income from continuing
operations $ 0.25 $ 1.15 $ 0.45 $ 1.22
Income (loss) from discontinued
operations (0.01) -- (0.07) 0.01
------------------------------------
Net income $ 0.24 $ 1.15 $ 0.38 $ 1.23
====================================
The following table summarizes the condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. data of GP Strategies, as of December 31, 2005 and 2004. On September 30, 2005, the Company distributed net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. of $6.8 million in connection with the spin-off of GSE.
(Unaudited - in thousands)
December 31,
2005 2004
---- ----
Current assets:
Cash and cash equivalents $ 18,118 $ 2,417
Cash held in escrow from arbitration - 13,798
Accounts and other receivables 26,390 31,114
Costs and estimated earnings in excess of
billings on uncompleted contracts 11,487 16,834
Prepaid expenses and other current assets 6,625 5,828
--------------------
Total current assets 62,620 69,991
Property, plant and equipment, net 1,857 2,673
Goodwill and other intangibles, net 58,130 64,891
Deferred tax assets 10,391 15,164
Other assets 1,643 3,316
--------------------
Total assets $134,641 $156,035
====================
Current liabilities:
Current maturities of long-term debt $ 71 $ 100
Short-term borrowings - 6,068
Accounts payable and accrued expenses 20,315 33,219
Billings in excess of costs and estimated
earnings on uncompleted contracts 7,430 10,003
--------------------
Total current liabilities 27,816 49,390
Long-term debt less current maturities 11,309 10,951
Other non-current liabilities 1,174 1,739
--------------------
Total liabilities 40,299 62,080
Minority interest - 2,335
Total stockholders' equity 94,342 91,620
--------------------
Total liabilities and stockholders' equity $134,641 $156,035
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