GTSI Reports Third Quarter Results

November 5, 2009 7:00 AM EST

Expense Containment and Profitability Lead the Way

HERNDON, Va.--(BUSINESS WIRE)-- GTSI (R) Corp. (NASDAQ: GTSI), an enterprise IT infrastructure solutions and services provider to the government, released financial and operational results for the third quarter of 2009.

"The conditions in the government market were as hyper competitive as I have seen in all my years," said Jim Leto, GTSI's Chief Executive Officer. "With influences from multiple sources, we found ourselves in the final weeks of the quarter losing large transactions to companies willing to accept deals at very low gross margins. While this quarter is not what we anticipated, we have maintained a lower cost structure and delivered profitability, which has been difficult in these economic times." As a result, the Company no longer projects for 2009 an increase over 2008 in sales.

Third Quarter Highlights

    --  Awarded Perimeter Security and Communications contract for the Port of
        Oakland
    --  Won Army Authentication Identification Technology (AIT) IV contract with
        the Department of the Army
    --  Sharp declines in quarter-ended inventory to lowest levels in years
    --  Strong growth in new financial services business
    --  Voluntary turnover 6%

Professional Services

During the quarter, GTSI adjusted its strategy for professional services. By aligning all of the customer focused and service and sale revenue activities under Scott Friedlander, GTSI's President and Chief Operating Officer, the Company expects to promote greater collaboration throughout the organization and focus on a core set of featured solutions. In addition to the reporting change, the professional services team has been challenged to improve utilization.

"We are seeking to accelerate growth in our services business by moving towards enhanced engineering services around next generation computing platforms. This phase of our services strategic plan is expected to enable us to maintain our existing service offerings, at lower costs, and expand into higher margin opportunities. To bolster this initiative and reshape our services model, we have hired Sandy Gillespie, a top-flight executive, tenured government service focused professional who brings tremendous skills to GTSI from Raytheon and Lockheed Martin" said Leto.

Financial Update

For the third quarter of 2009, GTSI reported sales of $209.7 million and earnings before taxes of $7.1 million as compared to sales of $257.1 million and earnings before taxes of $8.2 million. In order to provide a valid comparison of net income and earnings per share it is important to note that in 2009 GTSI reverted to full taxpayer status. An income tax expense of $3.2 million was recorded in the current quarter as compared to no income tax expense in 2008. As a result, the GTSI recorded net income for the quarter of $3.8 million ($0.39 per diluted share) as compared net income of $8.2 million ($0.83 per diluted share) reported in the third quarter of 2008. Selling, general and administrative expenses for the quarter were $23.8 million, down sharply from the $27.5 million for the same period in 2008.

Gross margin dollars in the third quarter of 2009 were $28.9 million with gross margin percentage of 14% in the period, compared to $34.8 million with a gross margin percentage of 14% in the third quarter of 2008.

"We continue to gain efficiencies in our business model allowing us to realize greater savings in our operating expenses," said Peter Whitfield, Chief Financial Officer for GTSI. "As a result of entering into a $135 million credit and floor planning facility with Castle Pines Credit earlier this year, combined with the fact that we have not been in the line for the past seven months, we have seen a dramatic shift in cash and borrowings by nearly $38 million since the end of 2008."

Conference Call

An investor conference call to discuss results for the quarter ended September 30, 2009 is scheduled for 8:30 a.m. Eastern Time November 5, 2009. Interested parties are invited to participate by calling 800-593-9034 or 334-323-7224, 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 November 5, 2010. 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, November 14, 2009. To access the replay, please dial 877-919-4059 or 334-323-7226, pass code 30139618.

About GTSI Corp.

GTSI Corp. provides a Technology Lifecycle Management (TLM) approach to IT infrastructure solutions delivered through industry-leading professional and financial services. GTSI employs a proactive, strategic methodology that streamlines technology lifecycle management, from initial assessment to acquisition, implementation, refresh, and disposal. TLM allows customers to implement solutions quickly and cost-effectively. GTSI's certified engineers and project managers leverage strategic partnerships with technology innovators. These experts use proven, repeatable processes to design, deploy, manage, and support simple to complex solutions, to meet client's current and future requirements and business objectives. GTSI is headquartered in Northern Virginia, outside of Washington, D.C. and was named as one of "Best Places to Work" in 2009. 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 and lender agreements, 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 annual 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 Corp. Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

                                   Three Months Ended

                                   September 30,         2009 vs 2008

                                     2009       2008     Variance    Percentage

SALES

Product                            $ 189,234  $ 233,545  $ (44,311)  -19.0%

Service                              13,985     15,331     (1,346)   -8.8%

Financing                            6,465      8,183      (1,718)   -21.0%

                                     209,684    257,059    (47,375)  -18.4%

COST OF SALES

Product                              169,550    209,896    40,346    19.2%

Service                              8,745      8,890      145       1.6%

Financing                            2,475      3,498      1,023     29.2%

                                     180,770    222,284    41,514    18.7%

GROSS MARGIN                         28,914     34,775     (5,861)   -16.9%

SELLING, GENERAL & ADMINISTRATIVE    23,836     27,541     3,705     13.5%
EXPENSES

INCOME FROM OPERATIONS               5,078      7,234      (2,156)   -29.8%

INTEREST AND OTHER INCOME, NET       1,979      969        1,010     104.2%

INCOME BEFORE TAXES                  7,057      8,203      (1,146)   -14.0%

INCOME TAX (PROVISION) BENEFIT       (3,236)    24         (3,260)   -13583.3%

NET INCOME                         $ 3,821    $ 8,227    $ (4,406)   -53.6%

EARNINGS PER SHARE

Basic                              $ 0.40     $ 0.84     $ (0.44)    -52.4%

Diluted                            $ 0.39     $ 0.83     $ (0.44)    -53.0%

WEIGHTED AVERAGE SHARES
OUTSTANDING

Basic                                9,651      9,791      (140)     -1.4%

Diluted                              9,787      9,885      (98)      -1.0%

GTSI Corp. Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

                                   Nine Months Ended

                                   September 30,         2009 vs 2008

                                     2009       2008     Variance    Percentage

SALES

Product                            $ 466,822  $ 504,196  $ (37,374)  -7.4%

Service                              40,835     40,599     236       0.6%

Financing                            10,700     14,254     (3,554)   -24.9%

                                     518,357    559,049    (40,692)  -7.3%

COST OF SALES

Product                              421,566    454,080    32,514    7.2%

Service                              25,669     23,422     (2,247)   -9.6%

Financing                            3,525      5,961      2,436     40.9%

                                     450,760    483,463    32,703    6.8%

GROSS MARGIN                         67,597     75,586     (7,989)   -10.6%

SELLING, GENERAL & ADMINISTRATIVE    71,128     76,243     5,115     6.7%
EXPENSES

LOSS FROM OPERATIONS                 (3,531)    (657)      (2,874)   -437.4%

INTEREST AND OTHER INCOME, NET       3,251      848        2,403     283.4%

(LOSS) INCOME BEFORE TAXES           (280)      191        (471)     -246.6%

INCOME TAX (PROVISION) BENEFIT       (89)       61         (150)     -245.9%

NET (LOSS) INCOME                  $ (369)    $ 252      $ (621)     -246.4%

(LOSS) EARNINGS PER SHARE

Basic                              $ (0.04)   $ 0.03     $ (0.07)    -233.3%

Diluted                            $ (0.04)   $ 0.03     $ (0.07)    -233.3%

WEIGHTED AVERAGE SHARES
OUTSTANDING

Basic                                9,737      9,749      (12)      -0.1%

Diluted                              9,737      9,874      (137)     -1.4%

GTSI Corp. Unaudited Consolidated Balance Sheet

(In thousands)

                                                   Change from December 31, 2008

                      September 30,  December 31,

                      2009           2008          Variance     Percentage

ASSETS

Current assets:

Cash and cash         $ 15,359       $ -           $ 15,359     100.0   %
equivalents

Accounts receivable,    216,023        190,740       25,283     13.3    %
net

Inventory               21,368         13,491        7,877      58.4    %

Deferred costs          2,787          7,849         (5,062  )  -64.5   %

Other current assets    9,182          7,807         1,375      17.6    %

Total current assets    264,719        219,887       44,832     20.4    %

Depreciable assets,     11,669         13,664        (1,995  )  -14.6   %
net

Long-term
receivables and         41,369         14,078        27,291     193.9   %
other assets

TOTAL ASSETS          $ 317,757      $ 247,629     $ 70,128     28.3    %

LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:

Borrowings under      $ -            $ 22,387      $ 22,387     100.0   %
credit facility

Accounts payable        113,197        103,553       (9,644  )  -9.3    %

Accounts payable -      60,250         -             (60,250 )  -100.0  %
Floor plan

Financed lease debt,    1,759          6,538         4,779      73.1    %
current portion

Accrued liabilities     21,563         17,857        (3,706  )  -20.8   %

Deferred revenue        2,436          2,079         (357    )  -17.2   %

Total current           199,205        152,414       (46,791 )  -30.7   %
liabilities

Long-term financed      184            2,530         2,346      92.7    %
lease debt

Other liabilities       29,894         2,571         (27,323 )  -1062.7 %

Total liabilities       229,283        157,515       (71,768 )  -45.6   %

Total stockholder's     88,474         90,114        1,640      1.8     %
equity

TOTAL LIABILITIES
AND STOCKHOLDERS'     $ 317,757      $ 247,629     $ (70,128 )  -28.3   %
EQUITY

    Source: GTSI Corp.

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