SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 14, 2004
GSE Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-26494 52-1868008
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(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
9189 Red Branch Road, Columbia, MD 21045
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (410) 772-3500
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(Former name or former address, if changed since last report)
Item 5. Other Events
http://www.gses.com
AT THE COMPANY
John V. Moran
Chief Executive Officer
FOR IMMEDIATE RELEASE
GSE Systems Announces Year End 2003 Financial Results and New Credit
Facility with Wachovia Bank Columbia, Maryland, April 14, 2004-- GSE Systems,
Inc. (GSE) (AMEX:GVP), a leading global provider of real-time simulation and
training solutions to the energy, process, manufacturing and government sectors,
reported that revenue for its continuing simulation business for the three and
twelve months ended December 31, 2003 was $8.4 million and $25.0 million,
respectively. This compares to revenue of $4.9 million and $20.2 million for
comparable periods in 2002, respectively. The Company sold its Process
Automation Business in September 2003, and the results of this business have
been classified as discontinued operations.
The Company's loss from continuing operations was $816,000 in the fourth quarter
2003 and $1.9 million for the year ended December 31, 2003. The loss from
discontinued operations was $370,000 for the fourth quarter and $1.7 million for
the year. In total, the Company reported a net loss of $1.2 million or $0.38 per
diluted share for the fourth quarter 2003 and a net loss of $3.5 million or
$0.87 per diluted share for the year ended December 31, 2003. This compares to a
net loss of $6.4 million or $1.10 per diluted share for the fourth quarter 2002
and a net loss of $5.9M or $1.05 per diluted share for the full year 2002.
Fourth quarter and year end results are shown on the attached schedule.
In conjunction with the sale of the Process Automation business and the October
2003 change in ownership of GSE, the Company restructured its corporate
functions in the fourth quarter 2003, outsourcing most of these functions to
General Physics Corporation, a wholly-owned subsidiary of GP Strategies
Corporation, effective January 1, 2004. The management services contract with
General Physics is anticipated to save the Company over $600,000 in 2004;
however, the Company incurred significant severance costs in the fourth quarter
of 2003 relating to the reduction of its corporate staff. In addition, the
Company's fourth quarter 2003 results also reflect the write off of the
Company's investment in RedStorm Scientific Inc. and additional interest expense
relating to the beneficial conversion of the Company's subordinated debt to
common stock.
The Company's continuing business, focused primarily on the Company's core
simulation technologies, showed strong improvement throughout the year with
revenue increasing 23.7% over 2002. Sales to the domestic nuclear market were
strong in 2003 as customers purchased upgrades to simulation tools and advanced
models. The trend of US nuclear plants to introduce more automated control
systems in their plants also resulted in several simulator upgrades, a trend the
Company expects to continue in 2004. Sales to the fossil, process and government
sectors also improved in 2003 over 2002, with the award of several new
contracts. The Company established new working relationships with fossil plant
Digital Control System providers, which the Company believes will provide it
greater market access, as plants replace their control systems and require
corresponding plant specific simulators both to train operators and to validate
the new control systems prior to commissioning in the plant.
As a result of the sale of the Process Automation Business, the Company
eliminated its bank debt in September 2003, and entered 2004 with a positive
cash position. The Company also recently successfully negotiated a new $1.5M
revolving credit facility with Wachovia Bank to provide additional working
capital, which facility replaced the Company's existing credit facility.
The Company believes that its focused marketing efforts helped increase the
Company's backlog of contracts at the end of 2003 to $30.4 million, a 59%
increase over 2002 and a five year high. In addition, new domestic and
international contracts were awarded in the fourth quarter, which the Company
anticipates will provide a stable revenue base for 2004.
John V. Moran, GSE's Chief Executive Officer stated, "Overall, GSE is positioned
well for 2004. Particularly encouraging is our elimination of debt, our new
banking relationship with Wachovia and GSE's robust backlog of contracted work.
I also believe that there are also some very positive indications that
simulation is taking hold in the process and manufacturing sectors, which are
two of the Company's targeted growth areas."
* * *
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
solutions leverage proven technologies to deliver real-world business advantages
to the process and power industries worldwide including specialty chemical, food
and beverage, petroleum refining, pharmaceutical, and fossil and nuclear power
generation. GSE Systems is headquartered in Columbia, Maryland. Our global
locations include offices in 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, 2003,
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)
CONDENSED STATEMENTS OF OPERATIONS
Three months ended Year ended
December 31, December 31,
2003 2002 2003 2002
Contract revenue $ 8,360 $ 4,949 $ 25,019 $ 20,220
Cost of revenue 6,194 4,763 19,175 16,660
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Gross profit 2,166 186 5,844 3,560
Operating expenses 2,403 1,725 6,835 6,901
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Operating loss (237) (1,539) (991) (3,341)
Other Expense, net (508) (83) (777) (18)
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Loss from continuing operations before income taxes (745) (1,622) (1,768) (3,359)
Provision (benefit) for income taxes 71 (365) 93 891
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Loss from continuing operations (816) (1,257) (1,861) (4,250)
Loss from discontinued operations, net of income taxes (370) (5,159) (1,409) (1,693)
Loss on sale of discontinued operations - - (262) -
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Income (loss) from discontinued operations (370) (5,159) (1,671) (1,693)
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Net income (loss) $ (1,186) $ (6,416) $ (3,532) $ (5,943)
========= ========== ========== ==========
Basic earnings (loss) per common share:
Continuing operations $ (0.34) $ (0.22) $ (0.61) $ (0.76)
Discontinued operations (0.04) (0.88) (0.26) (0.29)
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$ (0.38) $ (1.10) $ (0.87) $ (1.05)
--========== --======== ---========= ---==========
Weighted average shares outstanding - Basic 8,248,918 5,869,138 6,542,000 5,863,134
============ =========== =========== ============
Diluted earnings (loss) per common share
Continuing operations $ (0.34) $ (0.22) $ (0.61) $ (0.76)
Discontinued operations (0.04) (0.88) (0.26) (0.29)
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$ (0.38) $ (1.10) $ (0.87) $ (1.05)
============ =========== ========== =============
Weighted average shares outstanding - Diluted 8,248,918 5,869,138 6,542,000 5,863,134
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Selected balance sheet data
December 31, 2003 December 31, 2002
Cash and cash equivalents $ 1,388 $ 1,617
Current assets 12,953 17,202
Total assets 16,536 28,894
Current liabilities $ 10,416 $ 11,166
Long-term liabilities 441 9,617
Stockholders' equity 5,679 8,111