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, 1999
or
[ ] 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 (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 13, 1999:
Common Stock 11,020,291 shares
Class B Capital 356,250 shares
GP STRATEGIES CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets -
March 31, 1999 and December 31, 1998 1
Consolidated Condensed Statements of Operations-
Three Months Ended March 31, 1999 and 1998 3
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 4
Notes to Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Qualification Relating to Financial Information 19
Part II. Other Information 20
Signatures 21
PART I. FINANCIAL INFORMATION
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31,
1999 1998
ASSETS (uaudited) *
Current assets
Cash and cash equivalents $ 8,688 $ 6,807
Marketable securities 733 741
Accounts and other receivables 59,487 55,531
Inventories 2,232 2,362
Costs and estimated earnings
in excess of billings on uncompleted contracts 24,509 15,395
Prepaid expenses and other current assets 5,328 5,344
-------- --------
Total current assets 100,977 86,180
-------- --------
Investments and advances 21,492 23,071
-------- --------
Property, plant and equipment, net 15,057 14,474
Intangible assets, net of accumulated amortization
of $35,820 and $34,967 80,384 81,358
-------- --------
Deferred tax asset 3,249 3,290
-------- --------
Other assets 2,426 2,532
-------- --------
$223,585 $210,905
======== ========
* The Consolidated Condensed Balance Sheet as of December 31, 1998 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,
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) *
Current liabilities
Current maturities of long-term debt $ 3,208 $ 3,180
Short-term borrowings 37,723 30,723
Accounts payable and accrued expenses 30,724 24,089
Billings in excess of costs and estimated
earnings on uncompleted contracts 9,952 14,199
-------- -----------
Total current liabilities 81,607 72,191
-------- ---------
Long-term debt less current maturities 18,006 18,379
-------- ----------
Stockholders' equity
Common stock 114 111
Class B capital stock 4
Additional paid in capital 166,283 164,217
Accumulated deficit (36,785) (39,397)
Accumulated other comprehensive income 204 99
Note receivable from stockholder (1,805) (1,742)
Treasury stock, at cost (4,043) (2,956)
-------- ----------
Total stockholders' equity 123,972 120,335
-------- ---------
$223,585 $210,905
======== ========
* The Consolidated Condensed Balance Sheet as of December 31, 1998 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,
1999 1998
Sales $ 65,929 $ 62,859
Costs of goods sold 56,072 53,394
--------- --------
Gross margin 9,857 9,465
Selling, general and administrative expenses (6,018) (7,690)
Interest expense (951) (888)
Investment and other income, net 479 443
Gain on trading securities 25 739
--------- --------
Income before income taxes 3,392 2,069
Income tax expense (780) (278)
--------- ---------
Net income $ 2,612 $ 1,791
========= =========
Net income per share
Basic $ .23 $ .17
--------- ---------
Diluted .21 .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,
1999 1998
Cash flows from operating activities:
Net income $ 2,612 $1,791
Adjustments to reconcile net income to net cash
used in operating activities:
Issuance of stock for profit incentive plan 321 296
Depreciation and amortization 1,771 1,535
Gain on trading securities (25) (739)
Equity (gain) loss on investments (335) 430
Proceeds from sale of trading securities 50 959
Changes in other operating items (10,484) (9,565)
--------- -------
Net cash used in operating activities (6,090) (5,293)
--------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (1,501) (1,321)
Additions to intangible assets (552)
Reduction in (additions to) investments and
other assets, net 2,262 (1,021)
--------- -------
Net cash provided by (used for) investing activities 761 (2,894)
--------- -------
Cash flows from financing activities:
Net proceeds from short-term borrowings 7,000 8,436
Proceeds from note receivable 828
Payments of long-term debt (345) (154)
Exercise of common stock options and warrants 814 34
Repurchase of treasury stock (1,087) (156)
--------- -------
Net cash provided by financing activities 7,210 8,160
--------- -------
GP STRATEGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
Three months
ended March 31,
1999 1998
Net increase (decrease) in cash and cash
equivalents $ 1,881 $ (27)
Cash and cash equivalents at the
beginning of the periods 6,807 12,375
-------- --------
Cash and cash equivalents at the end
of the periods $ 8,688 $ 12,348
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest $ 1,197 $ 1,046
========= ========
Income taxes $ 439 $ 430
========== =========
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 per share (EPS) for the periods ended March 31, 1999 and 1998
are as follows (in thousands, except per share amounts):
Three months
ended March 31,
1999 1998
Basic EPS
Net income $ 2,612 $ 1,791
Weighted average shares
Outstanding 11,237 10,725
Basic earnings per share $ .23 $ .17
-------- --------
Diluted EPS
Net income $ 2,612 $ 1,791
Weighted average shares
outstanding 11,237 10,725
Dilutive effect of stock options
and warrants 1,469 1,351
-------- ---------
Weighted average shares
outstanding, diluted 12,706 12,076
-------- --------
Diluted earnings per share $ .21 $ .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.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. Inventories
Inventories are valued at the lower of cost or market, principally
using the first-in,first-out (FIFO) method.Inventories consists of the following
(in thousands):
March 31, December 31,
1999 1998
Raw materials $ 781 $ 811
Work in process 250 272
Finished goods 1,201 1,279
-------- --------
$ 2,232 $ 2,362
======== ========
3. Long-term debt
Long-term debt consists of the following (in thousands):
March 31, December 31,
1999 1998
8% Swiss bonds due 2000 $ 2,284 $ 2,359
5% convertible bonds due 1999 1,869 1,858
Term loan 14,625 14,813
Other 2,436 2,529
--------- ---------
21,214 21,559
Less current maturities (3,208) (3,180)
--------- ----------
$ 18,006 $ 18,379
======== ========
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Comprehensive income
The following are the components of comprehensive income (in thousands):
Three months ended
March 31, March 31,
1999 1998
--------- --------
Net income $ 2,612 $ 1,791
Other comprehensive income (loss) before tax:
Net unrealized gain (loss) on
available-for-sale-securities 200 (362)
Foreign currency translation adjustment (28)
-------- --------
Other comprehensive income (loss), before tax 172 (362)
-------- --------
Income tax (expense) benefit relating to items
of other comprehensive income (67) 123
-------- --------
Comprehensive income, net of tax $ 2,717 $ 1,552
======== ========
The components of accumulated other comprehensive income are as follows:
March 31, December 31,
1999 1998
Net unrealized gain on
available-for-sale-securities $ 1,898 $ 1,698
Foreign currency translation adjustment (866) (838)
--------- --------
Accumulated other comprehensive income
before tax 1,032 860
Accumulated income tax expense related to
items of other comprehensive income (828) (761)
--------- --------
Accumulated other comprehensive income,
net of tax $ 204 $ 99
========= ========
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 500 companies, government, utilities and other commercial customers.
GP, which through December 31, 1998 comprised the Performance Improvement Group,
has been resegmented during 1999 and now operates in three business segments.
The Manufacturing Services Group provides technology based training to leading
companies in the automotive, steel and food and beverage industries, as well as
to the government sector. The Process and Energy Group provides engineering,
consulting and technical training to the power, chemical, energy and
pharmaceutical industries as well as government facilities. The Information
Technology Group provides information training programs and solutions, including
Enterprise Solutions and comprehensive career training and transition programs.
The Optical Plastics Group, which is the Company's wholly-owned
subsidiary MXL Industries, Inc. (MXL), manufactures and distributes coated and
molded plastic products. For the three months ended March 31, 1998, the Company
also had the Distribution Group, which included the operations of the Five Star
Group, Inc. (Five Star), a distributor of home decorating, hardware and
finishing products. Effective September 30, 1998, the "Other" segment consists
solely of the operations of the Company's Hydro Med Sciences division. On
September 30, 1998, the Company sold substantially all the operating assets of
Five Star to American Drug Company (ADC). Prior to the above transaction, the
Company sold a 16.5% interest in ADC to the management of Five Star, bringing
its interest in ADC to approximately 38%. Therefore as of September 30, 1998,
the Company no longer consolidated the balance sheet and results of operations
of ADC but instead accounts for ADC as an equity investment.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Business segments (continued)
Financial information for the three months ended March 31, 1998, has
been restated to show all sales from the Performance Improvement segment
reclassified to the Manufacturing Services, Process and Energy, and Information
Technology segments. 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 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,
--------------------------------
1999 1998
--------- ---------
Sales
Manufacturing Services $24,500 $18,741
Process and Energy 21,893 17,553
Information Technology 16,602 2,906
Optical Plastics 2,729 2,785
Distribution 20,431
Other 205 443
------- ---------
$65,929 $62,859
------- -------
Gross margin
Manufacturing Services $ 4,170 $ 2,420
Process and Energy 3,089 2,493
Information Technology 1,760 293
Optical Plastics 716 825
Distribution 3,271
Other 122 163
------- ---------
$ 9,857 $ 9,465
------- -------
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,
------------------------------------
1999 1998
--------- ---------
United States $51,270 $62,405
Canada 8,329
United Kingdom 4,784
Latin America 1,546 454
--------- ---------
$65,929 $62,859
------- -------
Information about the Company's long-lived assets in different
geographic regions, is as follows (in thousands):
March 31, December 31,
1999 1998
United States $10,877 $10,704
Canada 2,493 1,989
United Kingdom 1,641 1,731
Latin America 46 50
------- -------
$15,057 $14,474
------- -------
GP STRATEGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Related party transaction
On January 11, 1999, in conjunction with the purchase of an aggregate
of 100,000 shares of Class B Common Stock, the Company received a note
receivable from a senior executive officer for $891,000. As of December 31, 1998
the Company also had a note receivable of $1,742,000 from this senior executive
officer. On March 15, 1999, such senior executive officer repaid $828,267 of
such loans using proceeds from the sale of 43,593 shares of Common Stock to the
Company. As of March 31, 1999, the aggregate amount of indebtedness outstanding
was $1,805,000. The loans accrue interest at the prime rate and all principal
and interest are due and payable on October 28, 1999 and January 11, 2000,
respectively. The loans are secured by the shares of Class B Common Stock
acquired as well as certain other assets of the senior executive officer.
7. Subsequent event
On May 5, 1999, the Company announced that its Board of Directors had
authorized the purchase of up to 500,000 shares of the Company's common stock.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had net income before income taxes of $3,392,000 for the
quarter ended March 31, 1999 compared to net income before income taxes of
$2,069,000 for the quarter ended March 31, 1998. The improved operating results
were primarily due to increased operating profits of $2,093,000 earned by the
Company's principal operating subsidiary, General Physics Corporation (GP),
during the first quarter of 1999, as compared to the first quarter of 1998. The
increased operating profits were partially offset by a $739,000 gain on trading
securities (GTS Duratek, Inc.) in the three months ended March 31, 1998,
compared to a $25,000 gain in the three months ended March 31, 1999.
Sales
For the quarter ended March 31, 1999, consolidated sales increased by
$3,070,000 to $65,929,000 from $62,859,000 in the corresponding quarter of 1998.
The increased sales were primarily the result of increased sales generated by GP
in all segments of its business (see Note 5 to the Consolidated Condensed
Financial Statements). GP's sales for the quarter ended March 31, 1999, included
net sales from acquisitions completed in June and July 1998. The Company
believes that net sales in the second quarter may be less than what they would
otherwise have been due to the anticipated results of the Information Technology
segment. Included in the March 31,1998 net sales were $20,431,000 of net sales
relating to the Five Star Group, Inc. (Five Star), which comprised the
Distribution Group through September 30, 1998. On September 30,1998, the Company
sold substantially all the operating assets of Five Star to American Drug
Company (ADC). Prior to the above transaction, the Company sold a 16.5% interest
in ADC to the management of Five Star, bringing its interest in ADC to
approximately 38%. Therefore as of September 30, 1998, the Company no longer
consolidated the balance sheet and results of operations of ADC but instead
accounts for ADC as an equity investment.
Gross margin
Consolidated gross margin of $9,857,000, or 15% of sales, for the
quarter ended March 31, 1999, increased by $392,000 compared to the consolidated
gross margin of $9,465,000, or 15% of sales, for the quarter ended March 31,
1998. The increased gross margin in 1999 was principally the result of increased
gross margin of $3,822,000 generated by GP, due to increased sales, partially
offset by the $3,271,000 of gross margin earned by Five Star for the quarter
ended March 31, 1998.
Selling, general and administrative expenses
For the three months ended March 31, 1999, selling, general and
administrative (SG&A) expenses were $6,018,000 compared to $7,690,000 incurred
in the first quarter of 1998. The reduced SG&A expenses for the quarter ended
March 31,1999 were the result of the sale of substantially all the operating
assets of Five Star to ADC on September 30, 1998, partially offset by increased
SG&A expenses incurred by GP due to its overall growth and acquisitions.
Income tax expense
In the quarter ended March 31, 1999, the Company recorded an income tax
expense of $780,000, which represents the applicable federal, state and local
and foreign tax expense. In the quarter ended March 31, 1998, the Company
recorded an income tax expense of $278,000, which represents primarily state and
local income taxes.
Recent accounting pronouncements
In June 1998, the FASB issued Statement of Financial Accounting
Standard No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities." This Statement establishes accounting and reporting standards for
derivatives as either assets or liabilities in the activities. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company will adopt SFAS 133, when effective, which is
currently anticipated to be by January 1, 2000. The Company is still evaluating
its position with respect to the use of derivative instruments.
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (Y2K) approaches. The "Y2K"
problem is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two-digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company is utilizing both internal and external resources to
identify, correct or reprogram and test systems for Y2K compliance. GP, the
Company's principal operating subsidiary, has evaluated its computer systems
over the past six months and believes that its business applications are Y2K
compliant, except as noted below. It has also identified various ancillary
programs that need to be updated and has contracted with third parties for this
work to be completed within the next six months. It is expected that the cost of
these modifications will be approximately $50,000.
In addition, the information systems and technology management group of
GP is examining their exposure to the Y2K in other areas of technology. These
areas include telephone and E-mail systems, operating systems and applications
in free standing personal computers, local area networks and other areas of
communication. A failure of these systems, which may impact the ability of GP to
service their customers could have a material effect on their results of
operations. These issues are being handled by the information and technology
team at GP by identifying the problems and obtaining from vendors and service
providers either the necessary modifications to the software or assurances that
the systems will not be disrupted. GP believes that the cost of the programming
and equipment upgrades will not exceed $300,000. In addition, certain personal
computers and other equipment that is not Y2K compliant will be upgraded or
replaced through GP's normal process of equipment upgrades. GP believes that the
evaluation and implementation process will be complete no later than the third
quarter of 1999. Over the next year, GP intends to continue to plan and
implement other information technology projects in the ordinary course of
business.
GP expects to finance these expenditures from a combination of working
capital and operating leases for a portion of the new computer equipment.
Therefore, GP does not expect the Y2K issue to have a material adverse impact on
its financial position or results of operations.
The other operations of the Company, including MXL and the corporate
office, will be Y2K compliant by the second quarter of 1999. The Company
believes that the only material application that is not Y2K compliant at this
time is MXL's manufacturing system. MXL anticipates that they will be Y2K
compliant by June 30, 1999. The cost will be approximately $25,000.
Like other companies, the Company relies on its customers for revenues
and on its vendors for various products and services; these third parties all
face the Y2K issue. An interruption in the ability of any of them to provide
goods or services, or to pay for goods or services provided to them, or an
interruption in the business operations of its customers causing a decline in
demand for services, could have a material adverse effect on the Company in
turn. In addition, the Company has significant equity investments which all face
the Y2K issue as well. An interruption in their ability to operate could cause a
significant impact on their market value, which in turn would have a material
adverse effect on the Company. In the event of non-remediation of the Y2K issues
by the Company or certain of its vendors, the worst case scenario would be
disruption of the Company's operations, possibly impacting the provision of
services to customers and the Company's ability to bill or collect revenues.
The Company's business units are communicating with their principal
customers and vendors about their Y2K readiness, and expect this process to be
completed no later than the third quarter of 1999. None of the responses
received to date suggests that any significant customer or vendor expects the
Y2K issue to cause an interruption in its operations, which would have a
material adverse impact on the Company. However, because so many firms are
exposed to the risk of failure not only of their own systems, but of the systems
of other firms, the ultimate effect of the Y2K issue is subject to a very high
degree of uncertainty.
Management believes that the Company's efforts to mitigate its Y2K
risks will avoid significant business interruptions. Contingency planning is an
ongoing process. While the Company's overall Y2K contingency plan is now being
developed, existing disaster recovery documentation and procedures remain the
first line of defense. Some Y2K specific plans have been developed and are being
reviewed and tested. The principal Y2K operational contingency plans are
expected to be completed and tested by September 1999.
In addition, there is a risk, the probability of which the Company is
not in a position to estimate, that the transition to the Y2K will cause
wholesale, perhaps prolonged, failures of electrical generation, banking,
telecommunications or transportation systems in the United States or abroad,
disrupting the general infrastructure of business and the economy at large. The
effect of such disruptions on the Company could be material.
The statements in this section regarding the effect of the Y2K and the
Company's responses to it are forward-looking statements. They are based on
assumptions that the Company believes to be reasonable in light of its current
knowledge and experience. A number of contingencies could cause actual results
to differ materially from those described in forward-looking statements made by
or on behalf of the Company.
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 beginning in
1999 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,
the risk that qualified personnel will not continue to be available,
technological risks, risks associated with the Company's acquisition strategy
and its ability to manage growth, risks associated with changing economic
conditions, risks of conducting international operations, the risk that the
Company's preparations with respect to the risks presented by the year 2000
issue will not be adequate, the Company's ability to comply with financial
covenants in connection with various loan agreements and 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
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had cash, cash equivalents and
marketable securities totaling $9,421,000. The Company has sufficient cash, cash
equivalents and marketable securities, marketable 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. At March 31, 1999, approximately
$27,277,000 was available to the Company under its credit agreements.
For the quarter ended March 31, 1999, the Company's working capital
increased by $5,381,000 to $19,370,000, reflecting the effect of increased cash
and cash equivalents and increased accounts receivables and costs and estimated
earnings in excess of billings on uncompleted contracts, partially offset by
increased accounts payable and short-term borrowings.
The increase in cash and cash equivalents of $1,881,000 in 1999
resulted from cash provided by investing activities of $761,000 and cash
provided by financing activities of $7,210,000, partially offset by cash used
for operations of $6,090,000. Cash provided by financing activities consisted
primarily of proceeds from short-term borrowings. Net cash provided by investing
activities includes approximately $2,000,000 received on the sale of real
estate, offset by $1,501,000 of additions to property, plant and equipment.
The Company is required to meet certain financial covenants pursuant to
its loan agreements, and is currently in compliance with these covenants.
The Company does not anticipate having to replace major facilities in
the near term. As of March 31, 1999, the Company has not contractually committed
itself for any major capital expenditures.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
QUALIFICATION RELATING TO FINANCIAL INFORMATION
March 31, 1999
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 1999
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
none
b. Reports
Form 8-K filed on January 13, 1999 reporting an event under
Item 1.
GP STRATEGIES CORPORATION AND SUBSIDIARIES
March 31, 1999
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 17, 1999 Jerome I. Feldman
President &
Chief Executive Officer
DATE: May 17, 1999 Scott N. Greenberg
Executive Vice President &
Chief Financial Officer
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