GP Strategies Reports Results for the Quarter Ended September 30, 2002 and Announces Significant Cost Reductions
NEW YORK--Nov. 14, 2002--Cost Reductions Will Exceed $7.0 Million On an Annualized Basis Filed
IRS Ruling Application for Tax Free Spin-off of Non-core Assets
GP Strategies Corporation , a leader in workforce development, technical training and engineering services, today announced results for the quarter ended September 30, 2002.
Although net sales for the third quarter of 2002 decreased, as discussed below, the Company has taken proactive steps to position itself for the future, including significant cost reductions and continued debt reduction. Most importantly, the Company has recently received contracts from new clients in the pharmaceutical and technology field, who the Company believes have the potential to become significant customers.
Net sales were $36.6 million for the third quarter ended September 30, 2002 compared to net sales of $39.2 million for the quarter ended June 30, 2002 and $44.7 million for the quarter ended September 30, 2001. The decrease in net sales from the second quarter of 2002 was primarily attributable to a reduction in net sales from the advanced manufacturing and automotive customers of the manufacturing and process group and a decrease in net sales from the Company's optical plastics business. The remaining net sales were only marginally less than net sales in the second quarter of 2002. The Company believes that the decline in net sales in the third quarter of 2002 from the third quarter of 2001 was primarily attributable to the continued downturn in the economy, compounded by the impact of continued cutbacks from the Company's automotive customers.
For the quarter ended September 30, 2002, the pretax loss was $3.7 million, as compared to pretax income of $1.6 million for the quarter ended September 30, 2001.
Results for the quarter ended September 30, 2002 includes severance charges of approximately $2.0 million, a loss on an investment and losses relating to the Company's e-Learning business. The quarter also included legal expenses for an arbitration and other matters, which were largely offset by gains from sales of marketable securities.
Results for the quarter ended September 30, 2001 reflected a gain on sales of marketable securities of $1.0 million and a non-cash credit on a deferred compensation plan of $2.8 million, offset by a loss from Hydro Med Sciences of approximately $0.9 million.
The Company has reduced its future operating costs by over $7.0 million on an annualized basis, primarily as a result of personnel reductions, which were substantially completed in the third quarter of 2002. In addition, the Company is currently modifying its employee benefits program and considering other measures to reduce expenses. It is anticipated that the full impact of the $7.0 million of cost reductions will be initially reflected in the first quarter of 2003. Furthermore, GP Strategies has continued to reduce its debt outstanding under its revolving credit and term loan agreement from $49.5 million at December 31, 2000 to $23.6 million at September 30, 2002 (a $25.9 million reduction).
The Company is filing an application today for a Section 355 ruling request with the IRS, which, if approved, will enable the Company to do a tax-free spin-off of certain non-core assets into a separate corporation to be named National Patent Development Corporation. The spin-off is subject to certain conditions, including the consent of the Company's lenders. The Company believes that the potential benefits of the spin-off would, among other things, include improved access to the capital markets, enhanced focus on the core training business of General Physics and strengthened employee relations.
In January 2002, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires that goodwill and other intangible assets with indefinite useful lives no longer be amortized. The net (loss) income for the quarters ended September 30, 2002, June 30, 2002 and September 30, 2001, as adjusted for amortization expense that is no longer recorded, in accordance with SFAS No. 142, was $(3.9) million, $0.1 million and $1.2 million, respectively.
About GP Strategies Corporation
GP Strategies, whose principal operating subsidiary is General Physics Corporation, is a NYSE listed company (GPX). General Physics is a workforce development company that improves the effectiveness of organizations by providing training, management systems and engineering services to meet the specific needs of clients. Programs have been developed for service managers and executives, engineers, sales associates, plant operators, the maintenance and purchasing workforces and information technology professionals in the public and private sectors in North and South America, Europe and Asia. Clients include Fortune 1000 companies, manufacturing, process and energy industries, and other commercial and government customers. Additional information about General Physics may be found at www.gpworldwide.com.
The Company has scheduled an investor conference call for 10:00 a.m. EST today. The dial-in number for the live conference call will be 800-288-8976 (612-332-0226 outside the United States). A telephone replay of the call will also be available beginning at 1:30 p.m. EST on November 14. To listen to the replay, dial 800-475-6701 (320-365-3844 outside the United States) and enter access code number 661028.
The forward-looking statements contained herein reflect GP Strategies' management's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, all of which are difficult to predict and many of which are beyond the control of GP Strategies, including, but not limited to those risks and uncertainties detailed in GP Strategies' periodic reports and registration statements filed with the Securities and Exchange Commission.
An unaudited comparative summary of GP Strategies' consolidated
net sales and net (loss) income for the quarters ended September 30,
2002, June 30, 2002 and September 30, 2001 is as follows (in
thousands):
Quarter Ended
---------------------------------
September 30, June 30, September 30,
2002 2002 2001
------- ------- -------
General Physics $34,395 $36,528 $41,953
Other 2,221 2,714 2,760
------- ------- -------
Net sales $36,616 $39,242 $44,713
======= ======= =======
Quarter Ended
---------------------------------
September 30, June 30, September 30,
2002 2002 2001
------- ------- -------
Net sales $36,616 $39,242 $44,713
Costs of sales 33,190 34,337 40,030
------- ------- -------
Gross margin 3,426 4,905 4,683
Selling, general and
administrative expenses (1) (2)
(3) (6,927) (4,737) (3,576)
Interest expense (654) (675) (1,111)
Investment and other income
(loss), net 169 (303) 342
Loss on investments (153)
Restructuring reversals 9 140 206
Gain on marketable securities 391 846 1,049
------- ------- -------
(Loss) income before income
taxes (3,739) 176 1,593
Income tax expense (148) (113) (746)
------- ------- -------
Net (loss) income $(3,887) $ 63 $ 847
======= ======= =======
Net (loss) income per share
Basic and diluted (4) $ (.25) $ .01 $ .06
------- ------- -------
(1) Includes goodwill amortization of $0.6 million for the three
months ended September 30, 2001.
(2) Includes a non-cash credit on a deferred compensation plan of
$0.3 million, $0.3 million and $2.8 million for the three
months ended September 30, 2002, June 30, 2002 and September
30, 2001, respectively.
(3) Includes severance and related expenses of approximately $2.0
million for the quarter ended September 30, 2002.
(4) Includes an addition to a then existing put obligation of $0.2
million for the quarter ended June 30, 2002, deemed to be a
dividend for the purposes of the basic and diluted income
(loss) per share calculation.
An unaudited comparative summary of GP Strategies' consolidated
net sales and net (loss) income for the nine months ended September
30, 2002 and September 30, 2001 is as follows (in thousands):
Nine Months Ended
-------------------------
September 30, September 30,
2002 2001
-------- --------
General Physics $108,393 $135,392
Other 7,691 8,782
-------- --------
Net sales $116,084 $144,174
======== ========
Nine Months Ended
-------------------------
September 30, September 30,
2002 2001
-------- --------
Net sales $116,084 $144,174
Costs of sales 102,305 126,158
-------- --------
Gross margin 13,779 18,016
Selling, general and administrative
expenses (1) (2) (3) (16,204) (15,072)
Interest expense (2,083) (3,666)
Investment and other (loss) income, net (569) 1,123
Loss on investments (153)
Restructuring reversals 363 606
Gain on marketable securities 1,677 1,476
-------- --------
(Loss) income before income taxes (3,190) 2,483
Income tax expense (429) (1,146)
-------- --------
Net (loss) income $ (3,619) $ 1,337
======== ========
Net (loss) income per share
Basic and diluted $ (.24) $ .10
-------- --------
(1) Includes goodwill amortization of $1.9 million for the nine
months ended September 30, 2001.
(2) Includes a non-cash credit on a deferred compensation plan of
$1.2 million for the nine months ended September 30, 2002 and
$3.0 million for the nine months ended September 30, 2001.
(3) Includes severance and related expenses of approximately $2.0
million for the nine months ended September 30, 2002.