UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarter ended March 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
Commission File Number: 1-7234
---------------------------------------------
GP STRATEGIES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1926739
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
9 West 57th Street, New York, NY 10019
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(Address of principal executive offices) (Zip code)
(212) 826-8500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during
the preceding 12 months (or for such shorter period) that the registrant was
required to file such reports and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------------
Number of shares outstanding of each of issuer's classes of common stock as of
May 8, 2001:
Common Stock 12,198,209 shares
Class B Capital 800,000 shares
GP STRATEGIES CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets -
March 31, 2001 and December 31, 2000 1
Consolidated Condensed Statements of Operations-
Three Months Ended March 31, 2001 and 2000 3
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 2001 and 2000 4
Notes to Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Qualification Relating to Financial Information 18
Part II. Other Information 19
Signatures 20
PART I. FINANCIAL INFORMATION
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31,
2001 2000
------- --------
ASSETS (unaudited) *
Current assets
Cash and cash equivalents $ 1,940 $ 2,487
Trading securities 5,446 8,830
Accounts and other receivables 48,627 46,388
Inventories 1,795 1,688
Costs and estimated earnings
in excess of billings on uncompleted contracts 11,426 12,515
Prepaid expenses and other current assets 4,384 3,955
---------- ----------
Total current assets 73,618 75,863
--------- ---------
Investments, advances and marketable securities 48,176 62,093
---------- ---------
Property, plant and equipment, net 9,786 9,787
----------- ----------
Intangible assets, net of accumulated amortization
of $32,501 and $31,618 59,103 59,992
---------- ----------
Other assets 4,052 4,843
----------- -----------
$194,735 $212,578
======== ========
* The Consolidated Condensed Balance Sheet as of December 31, 2000 has been
summarized from the Company's audited Consolidated Balance Sheet as of that
date.
See accompanying notes to the consolidated condensed financial statements.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(in thousands)
March 31, December 31,
2001 2000
---------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) *
Current liabilities
Current maturities of long-term debt $ 1,320 $ 1,311
Short-term borrowings 34,280 36,162
Accounts payable and accrued expenses 22,002 25,234
Billings in excess of costs and estimated
earnings on uncompleted contracts 12,107 11,322
--------- --------
Total current liabilities 69,709 74,029
-------- --------
Long-term debt less current maturities 17,676 16,301
-------- --------
Deferred tax liability 620 6,504
---------- --------
Other non-current liabilities 2,663 3,226
---------- --------
Stockholders' equity
Common stock 125 125
Class B capital stock 8 8
Additional paid in capital 180,238 179,955
Accumulated deficit (87,238) (86,994)
Accumulated other comprehensive income 18,747 27,237
Note receivable from stockholder (4,095) (4,095)
Treasury stock, at cost (3,718) (3,718)
---------- --------
Total stockholders' equity 104,067 112,518
--------- --------
$194,735 $212,578
======== ========
* The Consolidated Condensed Balance Sheet as of December 31, 2000 has been
summarized from the Company's audited Consolidated Balance sheet as of that
date.
See accompanying notes to the consolidated condensed financial statements.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three months
ended March 31,
--------------------------
2001 2000
---------- -------
Sales $ 49,114 $ 47,800
Costs of sales 42,755 43,438
--------- --------
Gross margin 6,359 4,362
Selling, general and administrative expenses (4,099) (5,291)
Interest expense (1,400) (1,290)
Investment and other income, net 490 331
Gain (loss) on trading securities (1,776) 331
---------- ----------
Loss before income taxes (426) (1,557)
Income tax benefit (expense) 182 (196)
---------- ----------
Net loss $ (244) $ (1,753)
========== =========
Net loss per share
Basic $ (.02) $ (.15)
--------- ----------
Diluted (.02) (.15)
--------- -----------
See accompanying notes to the consolidated condensed financial statements.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three months
ended March 31,
----------------------
2001 2000
----------- -----
Cash flows from operating activities:
Net loss $ (244) $ (1,753)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Issuance of stock for profit incentive plan 305 364
Depreciation and amortization 1,550 1,949
Loss (gain) on trading securities 1,776 (331)
Equity income in investments (241) (25)
Proceeds from sale of trading securities 1,608 429
Changes in other operating items (5,328) 3,674
-------- --------
Net cash provided by (used in) operating activities (574) 4,307
--------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (445) (127)
Proceeds from disposal of fixed assets 507
Reduction in investments and
other assets, net 777 5
--------- ----------
Net cash provided by investing activities 332 385
--------- ---------
Cash flows from financing activities:
Net repayments of short-term
borrowings (1,882) (5,523)
Proceeds from MXL mortgage 1,680
Payments of long-term debt (296) (469)
Proceeds from sale of Class B Stock 1,200
---------- ----------
Net cash used in financing activities (498) (4,792)
---------- ---------
Effect of exchange rate
changes on cash and cash equivalents 193 245
---------- ----------
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
Three months
ended March 31,
2001 2000
-------- ------
Net (decrease) increase in cash and cash
equivalents $ (547) $ 145
Cash and cash equivalents at the
beginning of the periods 2,487 4,068
--------- ---------
Cash and cash equivalents at the end
of the periods $ 1,940 $ 4,213
--------- --------
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest $ 1,173 $ 1,502
========= ========
Income taxes $ 109 $ 168
========== =========
See accompanying notes to the consolidated condensed financial statements.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Earnings per share
Earnings (loss) per share (EPS) for the periods ended March 31, 2001
and 2000 are as follows (in thousands, except per share amounts):
Three months
ended March 31,
-------------------
2001 2000
-------- ------
Basic and diluted EPS
Net loss $ (244) $ (1,753)
Weighted average shares
outstanding 12,917 11,813
-------- --------
Basic and diluted loss per share $ (.02) $ (.15)
-------- ---------
Basic earnings per share is based upon the weighted average number of common
shares outstanding, including Class B common shares, during the period. Class B
common stockholders have the same rights to share in profits and losses and
liquidation values as common stock holders. Diluted earnings per share is based
upon the weighted average number of common shares outstanding during the period,
assuming the issuance of common shares for all dilutive potential common shares
outstanding. Even though the Company still has stock options and warrants
outstanding, diluted earnings per share is the same as basic earnings per share
due to the Company's net loss, which makes the effect of such securities
anti-dilutive.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. Long-term debt
Long-term debt consists of the following (in thousands):
March 31, December 31,
2001 2000
--------- -------
Term loan $ 13,125 $ 13,313
Mortgage on MXL facility 1,680
Senior subordinated debentures 735 758
Subordinated convertible note 2,640 2,640
Other 816 901
-------- -----------
18,996 17,612
Less current maturities (1,320) (1,311)
-------- ----------
$ 17,676 $ 16,301
======== ========
On March 8, 2001, MXL Industries, Inc. ("MXL"), a wholly owned subsidiary of the
Company entered into a loan secured by a mortgage covering the real estate and
fixtures on its property in Pennsylvania in the amount of $1,680,000. The loan
requires monthly repayments of $8,333 plus accrued interest and matures on March
8, 2011 with interest at 2.5% above the one month LIBOR rate. The loan is
guaranteed by the Company. The proceeds of the loan were used to repay a portion
of the Company's short-term borrowings pursuant to its amended agreement
described below in Note 4.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. Comprehensive income (loss)
The following are the components of comprehensive income (loss) (in thousands):
Three months
ended March 31,
-----------------------
2001 2000
--------- -------
Net loss $ (244) $ (1,753)
-------- --------
Other comprehensive income (loss) before tax:
Net unrealized gain (loss) on
available-for-sale-securities (14,215) 1,264
Foreign currency translation adjustment 193 245
--------- ---------
Other comprehensive income (loss), before tax (14,022) 1,509
-------- ---------
Income tax expense (benefit) relating to items
of other comprehensive income 5,532 (57)
--------- ----------
Comprehensive loss, net of tax $ (8,734) $ (301)
========= =========
The components of accumulated other comprehensive income, net are as follows:
March 31, December 31,
2001 2000
------ -------
Net unrealized gain on
available-for-sale-securities $ 31,397 $ 45,612
Foreign currency translation adjustment (488) (681)
-------- ---------
Accumulated other comprehensive income
before tax 30,909 44,931
Accumulated income tax expense related to
items of other comprehensive income (12,162) (17,694)
-------- --------
Accumulated other comprehensive income,
net of tax $ 18,747 $ 27,237
======== ========
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Short-term borrowings
The Company and General Physics Canada Ltd. (GP Canada), an Ontario corporation
and a wholly-owned subsidiary of General Physics, entered into a credit
agreement, dated as of June 15, 1998 and as amended on August 29, 2000 (the
"Credit Agreement"), with various banks providing for a secured revolving credit
facility of $63,500,000 expiring on June 15, 2001 and a five-year term loan of
$15,000,000. The five year term loan is payable in 20 quarterly installments of
$187,500 commencing on October 1, 1998 with a final payment of $11,250,000 due
on June 15, 2003.
At March 31, 2001, the amount outstanding under the revolving credit facility is
$34,280,000 and is included in Short-term borrowings in the Consolidated
Condensed Balance Sheet. At March 31, 2001, the Company had $13,740,000
available to be borrowed under the Credit Agreement and was in compliance with
all of their financial covenants.
Based upon ongoing discussions with its banks and the fact that the Company has
been in compliance with all financial covenants under its amended and restated
agreement, the management of the Company believes that the credit facility will
either be extended or refinanced by June 15, 2001.
5. Business segments
The operations of the Company currently consist of the following four business
segments, by which the Company is managed.
The Company's principal operating subsidiary is General Physics Corporation
(GP). GP is a performance improvement company that assists productivity driven
organizations to maximize workforce performance by integrating people, processes
and technology. GP is a total solutions provider for strategic training,
engineering, consulting and technical support services to Fortune 1000
companies, government, utilities and other commercial customers. GP operates in
two business segments. The Manufacturing & Process Group provides technology
based training, engineering, consulting and technical services to leading
companies in the automotive, steel, power, oil and gas, chemical, energy,
pharmaceutical and food and beverage industries, as well as to the government
sector. The Information Technology Group provides IT training programs and
solutions, including Enterprise Solutions and comprehensive career training and
transition programs.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Business segments (Continued)
The Optical Plastics Group, which consists of MXL, manufactures and distributes
coated and molded plastic products.
The Hydro Med Group consists of Hydro Med Sciences, a drug delivery company
which is engaged in Phase III clinical trials for the treatment of prostate
cancer.
Financial information for the three months ended March 31, 2000, has been
restated to show all information for the Manufacturing Services Group and
Process and Energy Group that were combined into the Manufacturing and Process
Group.
The management of the Company does not allocate the following items by segment:
Investment and other income, net, interest expense, selling, general and
administrative expenses, depreciation and amortization expense, income tax
expense, significant non-cash items and long-lived assets. There are deminimis
inter-segment sales. The reconciliation of gross margin to net income (loss) is
consistent with the presentation on the Consolidated Condensed Statements of
Operations.
The following tables set forth the sales and gross margin of each of the
Company's operating segments (in thousands):
Three months
ended March 31,
-------------------------
2001 2000
------ -------
Sales
Manufacturing & Process $42,837 $36,994
Information Technology 3,218 7,748
Optical Plastics 3,057 2,958
Hydro Med and Other 2 100
-------- ---------
$49,114 $47,800
------- -------
Gross margin
Manufacturing & Process $ 5,358 $ 4,499
Information Technology 319 (818)
Optical Plastics 838 794
Hydro Med and Other (156) (113)
------- ---------
$ 6,359 $ 4,362
------- -------
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Business segments (continued)
Information about the Company's net sales in different geographic regions, which
are attributed to countries based on location of customers, is as follows (in
thousands):
Three months
ended March 31,
-------------------------
2001 2000
--------- -------
United States $ 45,385 $ 40,028
Canada 1,066 3,105
United Kingdom 1,759 3,638
Latin America and other 904 1,029
--------- ---------
$ 49,114 $ 47,800
-------- --------
Information about the Company's identifiable assets in different geographic
regions, is as follows (in thousands):
March 31, December 31,
2001 2000
----------- ---------
United States $184,355 $205,797
Canada 4,555 3,371
United Kingdom 2,891 1,928
Latin America and other 2,934 1,482
-------- ---------
$194,735 $212,578
-------- --------
6. Asset Impairment Charge and Restructuring Charges
During 1999, the Company adopted restructuring plans, primarily related to its
IT Business segment. The Company took steps in order to change the focus of the
IT group from open enrollment information technology training courses to project
oriented work for corporations, which was consistent with the focus of General
Physics Corporation's (GP) current business. In connection with the
restructuring, the Company recorded a charge of $7,374,000 in 1999.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Asset Impairment Charge and Restructuring Charges (Continued)
The Company believed at that time that the strategic initiatives and cost
cutting moves taken in 1999 and the first quarter of 2000 would enable the IT
Group to return to profitability in the last six months of 2000. However, those
plans were not successful, and the Company determined that it could no longer
bring the open enrollment IT business to profitability. Additionally there had
been further impairment to intangible and other assets. In July 2000, as a
result of the continued operating losses incurred by the IT Group, as well as
the determination that revenues would not increase to profitable levels, the
Company decided to close its open enrollment IT business in the third quarter of
2000. As a result, the Company recorded asset impairment charges of $19,245,000
related to write-offs of intangible assets, property, plant and equipment, and
other assets of the IT Group.
In addition, the Company recorded an $8,630,000 restructuring charge, net of
reversals, in 2000. During the period ended March 31, 2001 and the year ended
December 31, 2000, the Company utilized $1,354,000 and $3,884,000, respectively,
and reversed $373,000 during the period ended March 31, 2001. These reversals
are included in Selling, general and administrative expenses in the Consolidated
Condensed Statement of Operations for the period ended March 31, 2001. Of the
remaining $5,138,000 balance at March 31, 2001 and $6,865,000 at December 31,
2000, $2,474,000 and $3,639,000, respectively, were included in Accounts payable
and accrued expenses and $2,664,000 and $3,226,000, respectively, were included
in Other non-current liabilities in the Consolidated Condensed Balance Sheet.
The components of the 2000 and 1999 restructuring charges are as follows (in
thousands):
Severance Lease and
and related related Contractual
benefits obligations obligations Total
- -------------------------------------------------------------------------------
Balance December 31, 2000 $ 142 $ 5,298 $ 1,425 $ 6,865
- -------------------------------------------------------------------------------
Utilization (107) (945) (302) (1,354)
Reversal of restructuring
charges during 2001 (373) (373)
- -------------------------------------------------------------------------------
Balance March 31, 2001 $ 35 $ 3,980 $ 1,123 $ 5,138
- -------------------------------------------------------------------------------
The remaining amounts that had been accrued for severance and related benefits
and contractual obligations will be expended by December 31, 2001. Lease
obligations are presented at their present value, net of assumed sublets.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. Litigation
On January 4, 2001, the Company commenced an action alleging that MCI
Communications Corporation, Systemhouse, and Electronic Data Systems
Corporation, as successor to Systemhouse, committed fraud in connection with the
Company's 1998 acquisition of Learning Technologies from the defendants for
$24.3 million. The Company seeks actual damages in the amount of $117.9 million
plus interest, punitive damages in an amount to be determined at trial, and
costs. In February 2001, the defendants filed answers denying liability. No
counterclaims against the plaintiffs have been asserted. The case is currently
in discovery.
The complaint, which is pending in the New York State Supreme Court,
alleges that the defendants created a doctored budget to conceal the poor
performance of the United Kingdom operation of Learning Technologies. The
complaint also alleges that the defendants represented that Learning
Technologies would continue to receive business from Systemhouse even though
defendants knew that the sale of Systemhouse to EDS was imminent and that such
business would cease after such sale.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Overview
During the first three quarters of 2000, the Company had five operating business
segments. However, in the fourth quarter of 2000, as a result of organizational
and operational changes at General Physics and the shut down of the IT open
enrollment business in the third quarter of 2000, the Company combined the
Manufacturing Services Group with the Process and Energy Group. The discussion
and disclosure that follows assumes that the Manufacturing Services Group and
the Process & Energy segments were combined as of January 1, 2000 to form the
Manufacturing & Process Group. Two of these segments, the Manufacturing &
Process Group and the IT Group, are managed through the Company's principal
operating subsidiary General Physics, the third through its operating subsidiary
MXL Industries and the fourth through its subsidiary Hydro Med Sciences. In
addition, the Company holds a number of investments in publicly held companies,
including publicly traded stock in Millennium Cell Inc.
General Physics is a performance improvement company that assists productivity
driven organizations to maximize workforce performance by integrating people,
processes and technology. General Physics is a total solution provider for
strategic training, engineering, consulting and technical support services to
Fortune 1000 companies, government, utilities and other commercial customers.
General Physics consists of two segments: the Manufacturing & Process Group and
the IT Group.
The Company had a net loss before income taxes of $426,000 for the quarter ended
March 31, 2001 compared to net loss before taxes of $1,557,000 for the quarter
ended March 31, 2000. The loss in the first quarter of 2001 was attributable to
the $1,776,000 loss from trading securities of Millennium Cell Inc., offset by a
non-cash credit of $1,145,000 relating to the Company's Millennium Cell Deferred
Compensation Plan. The loss in the first quarter of 2000 was primarily due to
the operating losses incurred by the now closed open enrollment IT Group. The
Manufacturing and Process Group had operating profits in the quarter ended March
31, 2001, compared to the quarter ended March 31, 2000 due to increased sales
and gross margin percentage.
Sales
Three months
March 31,
-----------------------
2001 2000
--------- -------
Manufacturing & Process $42,837 $36,994
Information Technology 3,218 7,748
Optical Plastics 3,057 2,958
Hydro Med and Other 2 100
------- ---------
$49,114 $47,800
------- -------
For the quarter ended March 31, 2001, consolidated sales increased by $1,314,000
to $49,114,000 from $47,800,000 in the corresponding quarter of 2000. The
increased sales in 2001 within the Manufacturing & Process Group of GP was
primarily due to increased sales from GP's e-Learning subsidiary as well as
increased sales from utility customers. However, these were largely offset by
reduced sales in the IT Group resulting from the Company's decision to close the
IT open enrollment business in the third quarter of 2000 and focus on providing
training for Fortune 1000 manufacturing and process clients.
Gross margin
Three months
ended March 31,
---------------------------------------------
2001 % 2000 %
--------- ----- --------- ---
Manufacturing & Process $ 5,358 12.5 $ 4,499 12.2
Information Technology 319 9.9 (818) -
Optical Plastics 838 27.4 794 26.8
Hydro Med and Other (156) - (113) -
------- ---------
$ 6,359 12.9 $ 4,362 9.1
------- -------- ------- --------
Consolidated gross margin of $6,359,000 or 12.9% of sales, for the quarter ended
March 31, 2001, increased by $1,997,000 compared to the consolidated gross
margin of $4,362,000, or 9.1% of sales, for the quarter ended March 31, 2000.
The increased gross margin in 2001 occurred within all segments of GP, as a
result of increased sales and gross margin percentage. The negative gross margin
incurred by the IT Group in 2000 was the result of the continued decrease in
sales of the IT open enrollment business which was subsequently closed in the
third quarter of 2000, and the resulting inability of this segment to cover its
infrastructure and operating costs.
Selling, general and administrative expenses
For the three months ended March 31, 2001, selling, general and administrative
(SG&A) expenses were $4,099,000 compared to $5,291,000 in the first quarter of
2000. The reduction in SG&A of $1,192,000 in 2001 is attributable to a non-cash
credit of $1,145,000 relating to the Company's Millennium Cell Deferred
Compensation Plan and a reversal of the Company's restructuring charge of
$373,000, offset by legal and other costs related to the Company's IT business.
Interest expense
For the three months ended March 31, 2001, interest expense was $1,400,000
compared to $1,290,000 for the three months ended March 31, 2000. The increased
interest expense in 2001 was primarily attributable to an increase in the
Company's outstanding indebtedness.
Investment and other income, net
For the three months ended March 31, 2001, investment and other income, net was
$490,000 as compared to $331,000 for the quarter ended March 31, 2000. The
increase was primarily attributable to increased equity income recognized on
investments in 20% to 50% owned companies, partially offset by losses on the
Company's other investments.
Income tax expense
In the quarter ended March 31, 2001, the Company recorded an income tax benefit
of $182,000, which represents the Company's estimated effective federal, state
and local, and foreign tax rate. In the quarter ended March 31, 2000, the
Company recorded an income tax expense of $196,000, which represents the
applicable federal, state and local, and foreign tax expense.
Liquidity and capital resources
At March 31, 2001, the Company had cash and cash equivalents totaling
$1,940,000. The Company has sufficient cash and cash equivalents, marketable
securities, long-term investments and borrowing availability under existing and
potential lines of credit as well as the ability to obtain additional funds from
its operating subsidiaries in order to fund its working capital requirements.
For the quarter ended March 31, 2001, the Company's working capital increased by
$2,075,000 to $3,909,000, primarily reflecting the effect of increases in
Accounts and other receivables, offset by reductions in Accounts payable and
accrued expenses.
The decrease in cash and cash equivalents of $547,000 for the quarter ended
March 31, 2001 resulted from cash used in operations of $574,000 and financing
activities of $498,000, partially offset by cash provided by investing
activities of $332,000. Cash used in financing activities consisted primarily of
repayments of short-term borrowings and long-term debt, partially offset by
proceeds from the MXL mortgage.
Based upon the ongoing discussions with its banks and the fact that the Company
has been in compliance with all financial covenants under its amended and
restated agreement, the management of the Company believes that the credit
facility agreement will be either extended or refinanced by June 15, 2001 (See
Note 4).
Adoption of a Common European Currency
On January 1, 1999, eleven European countries adopted the Euro as their common
currency. From that date until January 1, 2002, debtors and creditors may choose
to pay or to be paid in Euros or in the former national currencies.
On and after January 1, 2002, the former national currencies will cease to be
legal tender.
The Company is currently reviewing its information technology systems and
upgrading them as necessary to ensure that they will be able to convert among
the former national currencies and the Euro, and process transactions and
balances in Euros, as required. The Company has sought and received assurances
from the financial institutions with which it does business that they will be
capable of receiving deposits and making payments both in Euros and in the
former national currencies. The Company does not expect that adapting its
information technology systems to the Euro will have a material impact on its
financial condition or results of operations. The Company is also reviewing
contracts with customers and vendors calling for payments in currencies that are
to be replaced by the Euro, and intends to complete in a timely way any required
changes to those contracts.
Adoption of the Euro is likely to have competitive effects in Europe, as prices
that had been stated in different national currencies become directly comparable
to one another. In addition, the adoption of a common monetary policy throughout
the countries adopting the Euro can be expected to have an effect on the economy
of the region. These competitive and economic effects cannot be predicted with
certainty, and there can be no assurance that they will not have a material
effect on the Company's business in Europe.
Forward-looking statements
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.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
QUALIFICATION RELATING TO FINANCIAL INFORMATION
March 31, 2001
The financial information included herein is unaudited. In addition,
the financial information does not include all disclosures required under
generally accepted accounting principles because certain note information
included in the Company's Annual Report has been omitted; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods. The results for the 2001
interim period are not necessarily indicative of results to be expected for the
entire year.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Amended Note dated April 1, 2001 in the amount
of $5,000,000 payable by Five Star Products, Inc. to JL
Distributors, Inc, a wholly owned subsidiary of GP Strategies
Corporation.
b. Reports
GP STRATEGIES CORPORATION AND SUBSIDIARIES
March 31, 2001
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
GP STRATEGIES CORPORATION
DATE: May 15, 2001 BY: Jerome I. Feldman
President &
Chief Executive Officer
DATE: May 15, 2001 BY: Scott N. Greenberg
Executive Vice President &
Chief Financial Officer