UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 2
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2004
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 of Incorporation) (I.R.S. Employer Identification No.)
777 Westchester Avenue, White Plains, NY 10604
(Address of principal executive offices) (Zip Code)
914-249-9700
--------------------------------------------------------------------------------
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered: Common
Stock, $.01 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer. Yes X No_
The aggregate market value of the outstanding shares of the Registrant's Common
Stock, par value $.01 per share and Class B Capital Stock, par value $.01 per
share held by non-affiliates as of June 30, 2004 was approximately $83,228,000.
The number of shares outstanding of each of the Registrant's Common Stock and
Class B Stock as of March 10, 2005:
Class Outstanding
Common Stock, par value $.01 per share 16,736,262 shares
Class B Capital Stock, par value $.01 per share 1,200,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 2005 Annual
Meeting of Stockholders are incorporated herein by reference into Part III
hereof.
EXPLANATORY NOTE
GP Strategies Corporation (the "Company or we") filed its Annual Report on Form
10-K for the fiscal year ended December 31, 2004 (the "Initial Form 10-K") with
the Securities and Exchange Commission (the "Commission") on March 17, 2005, and
Amendment No. 1 on Form 10-K/A on April 4, 2005.
At the time of the Initial Form 10-K filing, we elected to rely on an exemptive
order of the Commission, made available to companies with fiscal years ending
between November 15, 2004 and February 28, 2005, to defer the inclusion in our
Initial Form 10-K, for up to 45 days, of our management's report, and the report
of our independent registered public accounting firm, on the effectiveness of
our internal control over financial reporting. Those reports are being included
in Item 9A of our Initial Form 10-K by the filing of this Amendment No. 2 on
Form 10-K/A.
Except for the matters disclosed in Amendment No. 1 and Amendment No. 2 on Form
10-K/A, the Initial Form 10-K continues to speak as of March 17, 2005, which was
the date of its initial filing with the Commission, and we have not updated the
disclosures contained therein to reflect events that have occurred since the
date of that initial filing.
Item 9A: Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed by it in its reports filed or
submitted pursuant to the Securities Exchange Act of 1934, as amended (Exchange
Act), is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and that
information required to be disclosed by the Company in its Exchange Act reports
is accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Under the supervision and with the participation of our management, including
the Company's Chief Executive Officer and Chief Financial Officer, the Company
carried out an evaluation of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15(e) as of December 31, 2004. Based upon that evaluation and the material
weaknesses described below, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were not
effective as of such date.
(b) Management's Annual Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Exchange Act
Rule 13a-15(f). Under the supervision and with the participation of our
management, the Company carried out an evaluation of the effectiveness of the
design and operation of the Company's internal control over financial reporting
as of December 31, 2004, based on the framework in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO").
In conducting the aforementioned evaluation and assessment, management
identified the following material weaknesses in internal control over financial
reporting as of December 31, 2004:
The Company's policies and procedures did not provide for adequate
management oversight and review of the Company's income tax accounting.
1
This lack of adequate management oversight and review of the Company's
income tax accounting resulted in material errors in the Company's income
tax provision, which were identified and corrected prior to the issuance
of the accompanying 2004 consolidated financial statements. This
deficiency represents more than a remote likelihood that a material
misstatement of the Company's annual or interim financial statements
would not have been prevented or detected.
The Company's policies and procedures did not provide for adequate
management oversight and review of the Company's consolidated financial
statements and footnote disclosures. In addition, the Company did not
have adequate technical resources to ensure the timely completion and
review of its consolidated financial statements and footnote disclosures.
These deficiencies resulted in material errors in the consolidated
financial statements, primarily the number of weighted average common
shares outstanding used in the earnings per share calculation, the
presentation of cash flows from operating and financing activities, and
certain financial statement footnote disclosures related to income taxes
and stock-based compensation, which were identified and corrected prior
to the issuance of the accompanying 2004 consolidated financial
statements. These deficiencies represent more than a remote likelihood
that a material misstatement of the Company's annual or interim financial
statements would not have been prevented or detected.
Based on the material weaknesses described above, management concluded that the
Company's internal control over financial reporting was not effective as of
December 31, 2004. This assessment is based on management's conclusion that as
of December 31, 2004, there was more than a remote likelihood that a material
misstatement of the Company's annual or interim financial statements would not
be prevented or detected on a timely basis by Company employees in the normal
course of performing their assigned functions.
Management's assessment of the effectiveness of its internal control over
financial reporting as of December 31, 2004 has been audited by KPMG LLP, an
independent registered public accounting firm, whose report appears below.
(c) Changes in Internal Control over Financial Reporting
There was no change in the Company's internal control over financial reporting
during the fourth quarter of 2004 that materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Regarding the material weaknesses described in Management's Annual Report on
Internal Control Over Financial Reporting above, the Company has, subsequent to
December 31, 2004, revised its processes and procedures to prepare the
consolidated income tax provision and the consolidated financial statements and
footnote disclosures, and implemented additional management review controls over
the related processes. The Company expects to hire additional technical
resources to dedicate to the Company's financial reporting requirements.
(d) Limitations of Effectiveness of Controls
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. The design of any control system is based,
in part, upon the benefits of the control system relative to its costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
2
include the realities that judgments in decision-making can be faulty, and that
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of control. In
addition, over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Also, the design of any control system is based in part upon
certain assumptions about the likelihood of future events. Because of these
inherent limitations, misstatements due to error or fraud may occur and not be
detected. The Company's controls and procedures are designed to provide a
reasonable level of assurance of achieving their objectives.
(e) Report of the Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
GP Strategies Corporation:
We have audited management's assessment, included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting (Item
9A(b)), that GP Strategies Corporation did not maintain effective internal
control over financial reporting as of December 31, 2004, because of the effect
of the material weaknesses identified in management's assessment related to
inadequate management oversight and review of the Company's income tax
accounting and preparation of its consolidated financial statements and footnote
disclosures, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). GP Strategies Corporation's management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
3
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weaknesses have been identified and included
in management's assessment as of December 31, 2004:
The Company's policies and procedures did not provide for adequate
management oversight and review of the Company's income tax accounting.
This lack of adequate management oversight and review of the Company's
income tax accounting resulted in material errors in the Company's income
tax provision.
The Company's policies and procedures did not provide for adequate
management oversight and review of the Company's consolidated financial
statements and footnote disclosures. In addition, the Company did not
have adequate technical resources to ensure the timely completion and
review of its consolidated financial statements and footnote disclosures.
These deficiencies resulted in material errors in the consolidated
financial statements, primarily the number of weighted average common
shares outstanding used in the earnings per share calculation, the
presentation of cash flows from operating and financing activities, and
certain financial statement footnote disclosures related to income taxes
and stock-based compensation.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
GP Strategies Corporation and subsidiaries as of December 31, 2004 and 2003, and
the related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2004. The aforementioned material
weaknesses were considered in determining the nature, timing, and extent of
audit tests applied in our audit of the 2004 consolidated financial statements,
and this report does not affect our report dated March 16, 2005, which expressed
an unqualified opinion on those consolidated financial statements.
In our opinion, management's assessment that GP Strategies Corporation did not
maintain effective internal control over financial reporting as of December 31,
2004, is fairly stated, in all material respects, based on the criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our
opinion, because of the effect of the material weaknesses described above on the
achievement of the objectives of the control criteria, GP Strategies Corporation
has not maintained effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
/S/ KPMG LLP
Baltimore, Maryland
April 25, 2005
4
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GP STRATEGIES CORPORATION
Dated: April 29, 2005 Scott N. Greenberg
Chief Financial Officer
5
Index to Exhibit
Exhibit No. Document
23 Consent of KPMG LLP, Independent Registered Public Accounting
Firm