EX-99.1 2 a05-14527_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

GTSI Reports Second Quarter Results

 

Company experiences major disruptions with ERP conversion

 

CHANTILLY, VA. – August 9, 2005 – GTSIÒ Corp. (Nasdaq: GTSI), a leading government technology solutions aggregator, today announced financial results for the quarter ended June 30, 2005, and monthly sales (see attached tables).

 

For the second quarter 2005, GTSI reported sales of $160.7 million, a 32.8% decline over the same period a year ago, and a net loss of $8.1 million ($0.88 per diluted share).  Selling, general, and administrative expenses were $29.4 million, up 19.4%, driven primarily by the intense efforts to shore up GTSI’s supply chain operations, additional personnel associated with the company’s growth initiative, as well as direct and indirect expenses related to the implementation of an enterprise resource planning (ERP) system.

 

Gross margin dollars were down $4.9 million in the second quarter of 2005 versus the second quarter of 2004, while gross margin percentage was up 1.3 percentage points for the same comparative periods.

 

“Clearly, the quarter’s financial results were disappointing and failed, by a large margin, to meet our expectations.  We endured tremendous challenges throughout our company as we implemented a new ERP system, and encountered difficulties in the delivery of product to our customers,” said Dendy Young, Chairman and Chief Executive Officer of GTSI.  “While the ERP data conversion went well, the company experienced numerous fulfillment and distribution problems.  Our sales organization, passionate on behalf of their customers, diverted their attention from new business to hand-managing orders through our new system.  Throughout the process I have been impressed with the dedication and commitment of my fellow GTSI employees.  And I am extremely grateful for the patience our customers have shown during this painful period.”

 

“Recent operations and bookings results show signs of stability after three very difficult months,” added Mr. Young.  “We feel that the most trying times are behind us and we are optimistic about the selling cycle ahead.  GTSI management continues to be acutely aware of the current imbalance between gross margin dollars and SG&A.  We are continuing to focus our attention and efforts on improving the overall productivity of the organization.”

 

Post-Peak Buying Season Plan

 

A new customer-focused plan is being designed by Scott Friedlander, Executive Vice President of Sales, who was recently promoted to oversee all sales activities for GTSI.  The goal is to reconfigure the customer sales teams and technology practices into a “one team, one goal” by fully integrating all of the revenue and margin generating areas of GTSI.   “For some time we have been operating our revenue generating teams in a multi-layered approach,” said Mr. Friedlander.  “Our goal is to eliminate duplications within the organization and position our sales teams to focus more on selling and less on back office functions.”  Tom Mutryn, Senior Vice President and Chief Financial Officer, added, “The ERP implementation exposed certain weaknesses in our supply chain processes.  We have made needed investments by bringing in a

 


 

full complement of resources to tackle these problems and have addressed the critical issues.  Going forward, the operations functions will be simplified to better support the revenue-generating team.  In the end, the only thing that matters is efficiently filling orders for our customers.  Working with Scott and his team, we are excited about the new direction for GTSI sales.”

 

Financial Update

 

Mr. Mutryn further commented, “GTSI continues to have a very strong balance sheet with no long-term debt and stockholders’ equity of $79.8 million ($8.63 per basic and diluted share (1)).  In addition to the expenses associated with year-over-year personnel growth, the company continued to invest in company-wide training and the deployment of the new ERP system, which resulted in a significant impact on the bottom line.”

 

The company’s ERP system went live on April 19th.

 

“Due to a myriad of problems associated with extracting data from the new ERP platform, we suspended monthly reporting on May 31st,” said Mr. Mutryn.  “We are now able to provide monthly results for April, May, and June.”

 

Sales for June 2005 were $86.3 million, representing a 7.2% decline of average daily sales from June 2004 of $93.0 million.  Month-end total backlog for June was $129.1 million or a 16.7% decrease versus $155 million for the same period last year while net bookings for June 2005 totaled $79.4 million as compared to $115.1 million for June 2004, a 31% decline.

 

As a company that generates 90+% of its sales from the federal government end-users, it is important to note that GTSI generally achieves more than two-thirds of its sales during the second half of the year due to the federal government’s fiscal year-end of September 30th.   Although we anticipate, based on the seasonality of our business, improved results in the third and fourth quarters of CY 2005, we expect our annual results to be a net loss for 2005.

 

Share Buyback Program

 

During the quarter GTSI embarked upon a share buyback program approved by its Board of Directors.  The company has repurchased 280,120 shares as of July 31, 2005 at an average cost of $8.39.  “The company stands ready to continue the share buyback program and to facilitate the purchase of blocks of stock,” said Mr. Mutryn. “We believe this is a wise use of our cash, while the market continues to undervalue our stock.”

 

If and when the company repurchases shares, it will do so on the open market, through block trades or otherwise.  The amount of share repurchases, and the timing of purchases, will be based upon capital requirements, general business conditions, and other factors.  The company may hold the repurchased shares in treasury for general corporate purchases, including issuances under GTSI’s employee stock purchase plan.

 

Conference Call

 

An investor conference call to discuss first quarter results is scheduled for 11:00 a.m. Eastern Time August 9, 2005.  Interested parties are invited to participate by calling 800-353-6469 or 334-323-9855, pass code is GTSI.  In addition, you may access the webcast on GTSI’s Investor Relations page (www.gtsi.com/ir).  Webcast will be available for replay through August 9, 2006.  To listen to the live call on the Internet, go to the web site at least 15 minutes early to register, download and install any necessary audio software.  A replay will be available following the conclusion of the call until 6:00 pm Eastern Time, August 12, 2005.  To access the replay, please dial 877-919-4059 or 334-323-7226, pass code 37499254.

 

(1) Shareholders’ equity of $79.8 million divided by common stock shares outstanding of 9,249m at June 30, 2005 equals $8.63 per share.

 


 

About GTSI Corp.

 

GTSI Corp. is the leading information technology product and solutions aggregator, combining best of breed products and services to produce solutions that meet government’s evolving needs. For more than two decades, GTSI has focused exclusively on Federal, State, and Local government customers worldwide, offering a broad range of products and services, an extensive contract portfolio, flexible financing options, global integration and worldwide distribution. GTSI’s unique Technology Practices consisting of certified experts, deliver solutions to support government’s critical transformation efforts.  Additionally, GTSI focuses on systems integrators on behalf of government programs. GTSI is headquartered in Northern Virginia, outside of Washington, D.C. Further information about the Company is available at www.GTSI.com/About.

 

Except for historical information, all of the statements, expectations, beliefs, and assumptions contained in the foregoing are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that involve a number of risks and uncertainties. It is possible that the assumptions made by management — including, but not limited to, those relating to revenue, margins, operating results, and net income, and the effect of new contracts as well as new vendor relationships — may not materialize. Actual results may differ materially from those projected or implied in any forward-looking statements.  In addition to the above factors, other important factors that could cause actual results to differ materially are those listed in the Company’s most recent report on Form 10–K and included from time to time in other documents filed by the Company with the Securities and Exchange Commission.

 

GTSI and GTSI.com are registered trademarks of GTSI Corp. in the U.S. and other countries.  All trade names are the property of their respective owners.

 

GTSI Contact:

Paul Liberty

Area Vice President, Corporate Affairs & Investor Relations

703.502.2540

paul.liberty@gtsi.com

 

### ### ###

 


 

GTSI Corp.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

June 30,

 

Change from 2004

 

 

 

2005

 

2004

 

Actual

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

160,683

 

$

238,990

 

$

(78,307

)

-32.8

%

Cost of sales

 

144,077

 

217,453

 

(73,376

)

-33.7

%

Gross margin

 

16,606

 

21,537

 

(4,931

)

-22.9

%

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

29,393

 

24,622

 

4,771

 

19.4

%

Loss from operations

 

(12,787

)

(3,085

)

(9,702

)

-314.5

%

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

354

 

519

 

(165

)

-31.8

%

Loss before income taxes

 

(12,433

)

(2,566

)

(9,867

)

-384.5

%

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

(4,288

)

(1,013

)

(3,275

)

323.3

%

Net loss

 

$

(8,145

)

$

(1,553

)

$

(6,592

)

-424.5

%

 

 

 

 

 

 

 

 

 

 

Basic net loss per share

 

$

(0.88

)

$

(0.18

)

$

(0.70

)

-388.9

%

Diluted net loss per share

 

$

(0.88

)

$

(0.18

)

$

(0.70

)

-388.9

%

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

9,249

 

8,573

 

676

 

7.9

%

Diluted

 

9,249

 

8,573

 

676

 

7.9

%

 


 

 

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

Change from 2004

 

 

 

2005

 

2004

 

Actual

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

317,684

 

$

417,612

 

$

(99,928

)

-23.9

%

Cost of sales

 

282,999

 

377,994

 

(94,995

)

-25.1

%

Gross margin

 

34,685

 

39,618

 

(4,933

)

-12.5

%

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

57,684

 

46,319

 

11,365

 

24.5

%

Loss from operations

 

(22,999

)

(6,701

)

(16,298

)

-243.2

%

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

1,083

 

1,851

 

(768

)

-41.5

%

Loss before income taxes

 

(21,916

)

(4,850

)

(17,066

)

-351.9

%

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

(7,961

)

(1,915

)

(6,046

)

315.7

%

Net loss

 

$

(13,955

)

$

(2,935

)

$

(11,020

)

-375.5

%

 

 

 

 

 

 

 

 

 

 

Basic net loss per share

 

$

(1.53

)

$

(0.34

)

$

(1.19

)

-350.0

%

Diluted net loss per share

 

$

(1.53

)

$

(0.34

)

$

(1.19

)

-350.0

%

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

9,126

 

8,564

 

562

 

6.6

%

Diluted

 

9,126

 

8,564

 

562

 

6.6

%

 


 

GTSI Corp.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

June 30,

 

December 31,

 

Change from

 

% Change from

 

 

 

2005

 

2004

 

December 31, 2004

 

December 31, 2004

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash

 

$

292

 

$

397

 

$

(105

)

-26.4

%

Accounts receivable

 

164,534

 

210,606

 

(46,072

)

-21.9

%

Merchandise inventory

 

70,072

 

59,184

 

10,888

 

18.4

%

Other current assets

 

19,521

 

9,616

 

9,905

 

103.0

%

Total current assets

 

254,419

 

279,803

 

(25,384

)

-9.1

%

Property and equipment, net

 

15,605

 

15,183

 

422

 

2.8

%

Other assets

 

1,648

 

1,400

 

248

 

17.7

%

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

271,672

 

$

296,386

 

$

(24,714

)

-8.3

%

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Notes payable to banks

 

$

—

 

$

1,179

 

$

(1,179

)

-100.0

%

Accounts payable

 

165,645

 

173,218

 

(7,573

)

-4.4

%

Accrued liabilities

 

14,051

 

14,734

 

(683

)

-4.6

%

Deferred revenue

 

7,250

 

9,216

 

(1,966

)

-21.3

%

Accrued warranties

 

1,625

 

2,429

 

(804

)

-33.1

%

Total current liabilities

 

188,571

 

200,776

 

(12,205

)

-6.1

%

Other liabilities

 

3,269

 

3,473

 

(204

)

-5.9

%

Total liabilities

 

191,840

 

204,249

 

(12,409

)

-6.1

%

Stockholders’ equity

 

79,832

 

92,137

 

(12,305

)

-13.4

%

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

271,672

 

$

296,386

 

$

(24,714

)

-8.3

%

 


 

GTSI Corp.

 

 

 

Business Days
in Month (1)

 

Sales ($ in
Millions)

 

Year-over-Year
Change
Average Daily
Sales

 

Month-End Total
Backlog ($ in
Millions)

 

Year-over-Year
Change

 

Monthly
Bookings ($
in Millions)

 

Year-over-Year
Change
Average Daily
Bookings

 

June 2003

 

21

 

81.0

 

-17.6

%

106.2

 

-10.3

%

100.4

 

-1.1

%

July 2003

 

22

 

75.5

 

1.8

%

116.5

 

-4.4

%

85.8

 

10.4

%

August 2003

 

21

 

65.4

 

-17.1

%

131.6

 

0.3

%

80.5

 

-8.2

%

September 2003

 

21

 

132.2

 

4.9

%

228.3

 

12.1

%

228.9

 

13.3

%

October 2003

 

23

 

113.0

 

8.1

%

192.9

 

19.7

%

77.6

 

25.0

%

November 2003

 

18

 

93.2

 

4.7

%

144.0

 

35.1

%

44.3

 

18.7

%

December 2003

 

22

 

106.3

 

24.2

%

102.8

 

12.6

%

65.1

 

-6.4

%

January 2004

 

21

 

58.4

 

14.4

%

89.6

 

-3.1

%

45.2

 

-13.4

%

February 2004

 

19

 

52.3

 

-6.3

%

83.1

 

-2.4

%

45.8

 

-5.4

%

March 2004

 

23

 

67.9

 

-10.9

%

98.0

 

35.7

%

82.8

 

33.3

%

April 2004

 

22

 

73.8

 

52.8

%

123.0

 

37.0

%

98.8

 

49.9

%

May 2004

 

20

 

72.2

 

19.5

%

132.9

 

53.1

%

82.1

 

43.0

%

June 2004

 

22

 

93.0

 

9.6

%

155.0

 

46.0

%

115.1

 

9.4

%

July 2004

 

21

 

89.5

 

24.2

%

173.0

 

48.5

%

107.5

 

31.3

%

August 2004

 

22

 

84.9

 

23.9

%

192.8

 

46.5

%

104.7

 

24.2

%

September 2004

 

21

 

156.2

 

18.2

%

257.0

 

12.6

%

220.4

 

-3.7

%

October 2004

 

21

 

107.7

 

4.4

%

207.8

 

7.7

%

58.5

 

-17.4

%

November 2004

 

20

 

93.2

 

-10.0

%

152.7

 

6.0

%

38.1

 

-22.6

%

December 2004

 

21

 

127.0

 

25.2

%

86.8

 

-15.6

%

61.1

 

-1.7

%

January 2005

 

21

 

54.8

 

-6.2

%

83.1

 

-7.3

%

51.1

 

13.1

%

February 2005

 

19

 

43.0

 

-17.8

%

95.5

 

14.9

%

55.4

 

21.0

%

March 2005

 

23

 

59.2

 

-12.8

%

107.3

 

9.5

%

71.0

 

-14.3

%

April 2005

 

21

 

33.9

 

-51.9

%

123.9

 

0.7

%

50.5

 

-46.5

%

May 2005

 

22

 

40.8

 

-48.6

%

136.0

 

2.3

%

52.9

 

-41.4

%

June 2005

 

22

 

86.3

 

-7.2

%

129.1

 

-16.7

%

79.4

 

-31.0

%

 

(1) All percentage calculations are based on data per business day calculations