http://www.gses.com
AT THE COMPANY
John V. Moran
Chief Executive Officer
FOR IMMEDIATE RELEASE
GSE Systems Announces Second Quarter Results
Columbia, Maryland, August 9, 2005-- GSE Systems, Inc. (GSE) (Amex - GVP), a
leading global provider of real-time simulation and training solutions to the
power, process, manufacturing and Government sectors, reported second quarter
2005 results today. Total contract revenue for the three and six months ended
June 30, 2005 was $6.7 million and $13.0 million, respectively. This compares to
$7.6 million and $15.2 million for the comparable periods in 2004, respectively.
The Company's net loss was $556,000 or $.06 per diluted share in the second
quarter 2005 and the net loss for the six months ended June 30, 2005 was $1.6
million or $.18 per diluted share. This compares with net income of $276,000 or
$.03 per diluted share in the second quarter 2004 and net income of $340,000 or
$.04 per diluted share in the six months ended June 30, 2004.
As compared to the Company's first quarter 2005 results, revenue for the three
months ended June 30, 2005 increased 6.7% and net loss decreased by 46.6%.
The Company's revenue and profitability in 2005 have been impacted by the lower
volume of orders logged in 2004 coupled with the delay of two large
international simulator contracts. In addition, the Company's efforts to broaden
its simulation business base continued in 2005. Examples of these efforts
include the following:
* The Company spent $345,000 in the first half of 2005 developing its
military simulation business. In the second quarter 2005, GSE
qualified as a prime contractor on the US Navy's Seaport-e procurement
program for all engineering, program management and financial
services. This allows GSE to bid on a broad range of simulation task
orders as they are released by the Navy. In addition, the Company is
in final negotiations with a provider of command and control software
that is installed in over 150 Homeland Security Emergency Operations
Centers (EOC). GSE's Real-time Emergency Management Interactive
Training System (REMITS) will be integrated with their software to
simulate emergency situations and enable EOC staffs to train without
requiring human participation in the field.
* The Company spent $309,000 in the first six months of 2005 developing
its new simulator training center business. The business focuses on
the construction of turn-key simulation training centers in developing
parts of the world. GSE would provide the simulators as well as the
training content for these centers.
* Revenue from fossil power plant training simulator projects increased
39.8% in the six months ended June 30, 2005 to $1.5 million as
compared to the same period in 2004. The Company spent $70,000 in the
first six months of 2005 on business development efforts in the fossil
power area.
Other highlights for the quarter also included the following:
- On June 20, 2005, the Board of Directors of GP Strategies Corporation,
which owns 57% of the Company's common stock, approved plans to
spin-off its interest in GSE through a special dividend to the GP
Strategies' stockholders. The GP Strategies stockholders will receive
in the spin-off a pro-rata share of the Company's common stock based
on the number of shares of GP Strategies common stock and Class B
stock held on the record date, which will be determined on a future
date. The Company has filed with the Securities and Exchange
Commission a registration statement relating to the shares of the
Company to be distributed by GP Strategies in the spin-off. The
Company anticipates that the record date will be set and the spin-off
will occur shortly after such registration statement is declared
effective.
- The Company developed an important financial relationship with Dolphin
Equity Partners.
- GSE was selected as the simulator vendor for the novel Pebble Bed
Modular Nuclear Reactor System. - The Company was awarded
approximately $1 million in contracts in the Process Simulation
sector.
John V. Moran, GSE's Chief Executive Officer said, "I am pleased that the
Company's second quarter 2005 revenue has increased from the first quarter 2005
revenue, and that second quarter 2005 net loss decreased from the first quarter
2005. Our project margin also improved. We anticipate these trends to continue.
We are also seeing positive signs that our business development efforts are
beginning to pay off."
The Company plans to schedule an investor conference call after the anticipated
spin-off has been completed.
GSE Systems, Inc. provides real-time simulation and training solutions. The
company has over three decades of experience, over 250 applications, and 100
customers in more than 25 countries. Our software, hardware and integrated
training solutions leverage proven technologies to deliver real-world business
advantages to the energy, process, manufacturing and government sectors
worldwide. GSE Systems is headquartered in Columbia, Maryland. Our global
locations include offices in Georgia, Sweden, Japan and China. Information about
GSE Systems is available via the Internet at http://www.gses.com.
This news release contains forward-looking statements that involve risks and
uncertainties. We use words such as "expects", "intends" and "anticipates" to
indicate forward looking statements. The actual future results of GSE Systems
may differ materially due to a number of factors, including but not limited to,
delays in introduction of products or enhancements, size and timing of
individual orders, rapid technological changes, market acceptance of new
products and competition. These and other factors are more fully discussed in
the Company's annual report on Form 10-K for the year ended December 31, 2004,
periodic reports and registration statements filed with the Securities and
Exchange Commission.
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.
GSE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
CONDENSED STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
----------------------------- ----------------------------
2005 2004 2005 2004
-------------- -------------- ------------- --------------
Contract revenue $ 6,717 $ 7,597 $ 13,010 $ 15,158
Cost of revenue 5,077 5,760 10,315 11,544
-------------- -------------- ------------- --------------
Gross profit 1,640 1,837 2,695 3,614
Operating expenses 2,014 1,504 4,092 3,057
-------------- -------------- ------------- --------------
Operating income (loss) (374) 333 (1,397) 557
Other expense, net (157) - (225) (143)
-------------- -------------- ------------- --------------
Income (loss) before provision (benefit) for income taxes (531) 333 (1,622) 414
Provision (benefit) for income taxes 25 57 (24) 74
-------------- -------------- ------------- --------------
Net income (loss) $ (556) $ 276 $ (1,598) $ 340
============== ============== ============= ==============
Basic earnings (loss) per common share: $ (0.06) $ 0.03 $ (0.18) $ 0.04
============== ============== ============= ==============
Weighted average shares outstanding - Basic 8,999,706 8,949,706 8,998,049 8,949,706
============== ============== ============= ==============
Diluted earnings (loss) per common share $ (0.06) $ 0.03 $ (0.18) $ 0.04
============== ============== ============= ==============
Weighted average shares outstanding - Diluted 8,999,706 9,013,608 8,998,049 9,015,370
============== ============== ============= ==============
Selected balance sheet data
(unaudited)
June 30, 2005 December 31, 2004
------------------- -------------------------
Cash and cash equivalents $ 249 $ 868
Current assets 10,746 10,439
Total assets 14,388 14,228
Current liabilities $ 7,772 $ 7,781
Long-term liabilities 2,510 502
Stockholders' equity 4,106 5,945