UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
 
 For the quarterly period ended September 30, 2017March 31, 2018
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 52-0845774
(State of Incorporation) (I.R.S. Employer Identification No.)
70 Corporate Center 
  
11000 Broken Land Parkway, Suite 200, Columbia, MD 21044
(Address of principal executive offices) (Zip Code)
 
(443) 367-9600

Registrant’s telephone number, including area code:
 
 
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   ý No   ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   ý No   ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company in Rule 12b-2 of the Exchange Act. 
Large accelerated filer   ¨Accelerated filer   x
Non-accelerated filer   ¨
Smaller reporting company  ¨Emerging growth company  ¨ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes   ¨ No   ý
 
The number of shares outstanding of the registrant’s common stock as of October 27, 2017April 17, 2018 was as follows:
Class Outstanding 
Common Stock, par value $.01 per share 16,783,621 shares16,493,753 





GP STRATEGIES CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS
  Page
   
Part I.Financial Information 
   
Item 1.Financial Statements (Unaudited) 
   
 
Condensed Consolidated Balance Sheets – September 30, 2017March 31, 2018 and December 31, 20162017
1
   
 
Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2018 and Nine Months Ended September 30, 2017 and 2016
2
   
 
Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2018 and Nine Months Ended September 30, 2017 and 2016
3
   
 
Condensed Consolidated Statements of Cash Flows – NineThree Months Ended September 30,March 31, 2018 and 2017 and 2016
4
   
 
Notes to Condensed Consolidated Financial Statements
5
   
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
1920
   
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
3028
   
Item 4.
Controls and Procedures
3028
   
Part II.
Other Information
3129
   
Item 1.
Legal Proceedings
3129
   
Item 1A.
Risk Factors
3129
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3129
   
Item 6.
Exhibits
3230
   
Signatures
3331
 

Part I. Financial Information
Item 1. Financial Statements 
GP STRATEGIES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
September 30, 2017 (Unaudited) December 31, 2016March 31, 2018 (Unaudited)
December 31, 2017
Assets 
  
 

 
Current assets:   




Cash$18,020
 $16,346
$16,945

$23,612
Accounts and other receivables, less allowance for doubtful accounts of $1,004 in 2017 and $1,091 in 201696,460
 105,549
Costs and estimated earnings in excess of billings on uncompleted contracts52,590
 39,318
Accounts and other receivables, less allowance for doubtful accounts of $2,157 in 2018 and $2,492 in 2017107,640

119,335
Unbilled revenue43,350

42,958
Prepaid expenses and other current assets18,368
 11,481
19,191

14,212
Total current assets185,438
 172,694
187,126

200,117
Property, plant and equipment22,564
 20,053
21,872

21,466
Accumulated depreciation(17,155) (15,506)(16,920)
(16,343)
Property, plant and equipment, net5,409
 4,547
4,952

5,123
Goodwill144,374
 127,772
154,590

144,835
Intangible assets, net9,318
 5,825
8,838

8,363
Other assets6,535
 4,763
7,569

6,569
$351,074

$315,601
$363,075

$365,007
Liabilities and Stockholders’ Equity 
  
 

 
Current liabilities: 
  
 

 
Short-term borrowings$27,506
 $17,694
$43,706

$37,696
Current portion of long-term debt12,000
 12,000
12,000

12,000
Accounts payable and accrued expenses76,162
 64,596
74,889

78,280
Billings in excess of costs and estimated earnings on uncompleted contracts16,621
 18,545
Deferred revenue22,563

22,356
Total current liabilities132,289
 112,835
153,158

150,332
Long-term debt19,000
 28,000
13,000

16,000
Other noncurrent liabilities10,078
 7,270
9,895

10,621
Total liabilities161,367
 148,105
176,053

176,953
   




Stockholders’ equity: 
  
 

 
Common stock, par value $0.01 per share172
 172
172

172
Additional paid-in capital107,675
 106,569
107,369

107,256
Retained earnings106,938
 93,845
108,835

106,599
Treasury stock at cost(10,528) (11,628)(17,134)
(11,118)
Accumulated other comprehensive loss(14,550) (21,462)(12,220)
(14,855)
Total stockholders’ equity189,707
 167,496
187,022

188,054
$351,074

$315,601
$363,075

$365,007
 
See accompanying notes to condensed consolidated financial statements.

GP STRATEGIES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		Three Months Ended 
 March 31,
2017 2016 2017 20162018 2017
Revenue$124,097
 $121,978
 $377,705
 $363,276
$125,032
 $122,447
Cost of revenue105,451
 101,974
 317,236
 305,001
107,353
 103,059
Gross profit18,646

20,004

60,469

58,275
17,679

19,388
Selling, general and administrative expenses14,553
 11,996
 40,785
 36,245
14,584
 12,994
Gain (loss) on change in fair value of contingent consideration, net268
 (3) 369
 (74)
Restructuring charges435
 —
Gain on change in fair value of contingent consideration, net2,552
 197
Operating income4,361

8,005

20,053

21,956
5,212

6,591
Interest expense511
 366
 1,483
 970
686
 438
Other income (expense)74
 (28) (108) 601
Other expense164
 75
Income before income tax expense3,924

7,611

18,462

21,587
4,362

6,078
Income tax expense643
 2,809
 5,232
 8,072
1,730
 1,992
Net income$3,281

$4,802

$13,230

$13,515
$2,632

$4,086
          
Basic weighted average shares outstanding16,750
 16,646
 16,736
 16,694
16,619
 16,741
Diluted weighted average shares outstanding16,896
 16,747
 16,856
 16,800
16,713
 16,841
          
Per common share data: 
  
  
  
 
  
Basic earnings per share$0.20
 $0.29
 $0.79
 $0.81
$0.16
 $0.24
Diluted earnings per share$0.19
 $0.29
 $0.78
 $0.80
$0.16
 $0.24
 
See accompanying notes to condensed consolidated financial statements.

GP STRATEGIES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
 
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		Three Months Ended 
 March 31,
2017 2016 2017 20162018 2017
Net income$3,281
 $4,802
 $13,230
 $13,515
$2,632
 $4,086
Foreign currency translation adjustments2,575
 (1,950) 7,051
 (6,062)2,432
 1,011
Change in fair value of interest rate cap, net of tax(28) —
 (137) —
148
 —
Change in fair value of interest rate swap, net of tax$21
 $—
 $(2) $—
55
 (55)
Comprehensive income$5,849
 $2,852
 $20,142
 $7,453
$5,267
 $5,042
 
See accompanying notes to condensed consolidated financial statements.

GP STRATEGIES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
NineThree Months Ended September 30,March 31, 2018 and 2017 and 2016
(Unaudited, in thousands)
2017 20162018 2017
Cash flows from operating activities: 
  
 
  
Net income$13,230
 $13,515
$2,632
 $4,086
Adjustments to reconcile net income to net cash provided by operating activities: 
  
 
  
(Gain) loss on change in fair value of contingent consideration, net(369) 74
Gain on change in fair value of contingent consideration, net(2,552) (197)
Depreciation and amortization5,153
 4,969
1,842
 1,443
Deferred income taxes(421) (1,596)(108) 118
Non-cash compensation expense4,876
 4,456
1,409
 1,458
Changes in other operating items: 
  
 
  
Accounts and other receivables11,805
 (1,054)12,817
 5,753
Costs and estimated earnings in excess of billings on uncompleted contracts(11,670) (8,655)
Unbilled revenue227
 (7,570)
Prepaid expenses and other current assets(6,232) (4,793)(6,024) (330)
Accounts payable and accrued expenses8,145
 10,791
1,643
 (2,481)
Billings in excess of costs and estimated earnings on uncompleted contracts(3,203) (4,361)
Contingent consideration payments in excess of fair value on acquisition date—
 (540)
Deferred revenue(2,485) 2,047
Other(140) (908)5
 (209)
Net cash provided by operating activities21,174
 11,898
9,406
 4,118
      
Cash flows from investing activities: 
  
 
  
Additions to property, plant and equipment(2,324) (1,184)(370) (525)
Acquisitions, net of cash acquired(11,112) (2,161)(10,000) (3,193)
Other investing activities(981) (2,037)(834) (344)
Net cash used in investing activities(14,417) (5,382)(11,204) (4,062)
      
Cash flows from financing activities: 
  
 
  
Proceeds from short-term borrowings9,749
 10,765
6,022
 5,820
Repayment of long-term debt(9,000) (10,000)(3,000) (3,000)
Contingent consideration payments(967) (2,085)
Change in negative cash book balance(2,813) (1,651)(261) (2,313)
Tax withholding payments for employee stock-based compensation in exchange for shares surrendered(604) (400)
Repurchases of common stock in the open market(2,419) (7,959)(7,790) (1,674)
Premium paid for interest rate cap(474) —
Other financing activities120
 175
(50) (134)
Net cash used in financing activities(6,408) (11,155)(5,079) (1,301)
      
Effect of exchange rate changes on cash and cash equivalents1,325
 (696)210
 351
Net increase (decrease) in cash1,674
 (5,335)
Net decrease in cash(6,667) (894)
Cash at beginning of period16,346
 21,030
23,612
 16,346
Cash at end of period$18,020
 $15,695
$16,945
 $15,452
      
Supplemental disclosures of cash flow information:      
Cash paid during the period for interest$1,381
 $947
$624
 $175
Cash paid during the period for income taxes4,874
 6,228
1,460
 491
Accrued contingent consideration5,613
 410
 See accompanying notes to condensed consolidated financial statements.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)


(1)Basis of Presentation

GP Strategies Corporation is a global performance improvement solutions provider of training, e-Learningdigital learning solutions, management consulting and engineering services. References in this report to “GP Strategies,” the “Company,” “we” and “our” are to GP Strategies Corporation and its subsidiaries, collectively.
 
The accompanying condensed consolidated balance sheet as of September 30, 2017March 31, 2018 and the condensed consolidated statements of operations, comprehensive income and cash flows for the three and nine months ended September 30,March 31, 2018 and 2017 and 2016 have not been audited, but have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016,2017, as presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2017. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. The results for the 20172018 interim period are not necessarily indicative of results to be expected for the entire year.
 
The condensed consolidated financial statements include the operations of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
 
(2)Recent Accounting Standards

Accounting Standard Adopted

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation—Stock Compensation (Topic 718) ("ASU 2016-09"), which simplifies several areas of accounting for share-based compensation arrangements. Upon adoption, ASU 2016-09 requires that excess tax benefits or deficiencies for share-based payments be recorded as income tax expense or benefit and reflected within operating cash flows rather than being recorded within equity and reflected within financing cash flows. The standard also requires companies to make an accounting policy election on whether to account for forfeitures on share-based payments by 1) recognizing forfeitures as they occur; or 2) estimating the number of awards expected to be forfeited and periodically adjusting the estimate, as was previously required. The standard is effective for annual and interim reporting periods of public companies beginning after December 15, 2016, although early adoption was permitted. We adopted ASU 2016-09 on January 1, 2017 and elected to make an accounting policy change to recognize forfeitures as they occur. The impact of adoption on the condensed consolidated balance sheet was a cumulative-effect adjustment of $0.1 million, decreasing opening retained earnings. We recognized an income tax benefit of $0.2 million relating to excess tax benefits on stock-based compensation awards during the nine months ended September 30, 2017 and could experience volatility in our effective income tax rate in the future as a result of this accounting change. We also elected to prospectively apply the change in presentation on the statement of cash flows and did not reclassify excess tax benefits on stock-based compensation from financing to operating cash flows for the prior period presented.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)

Accounting Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The ASU’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for public companies for annual and interim periods beginning after December 15, 2017, which requires us to adopt the standard in the first quarter of 2018. Companies can elect to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with a cumulative effect adjustment recognized at the date of adoption. We plan to adopt the standard effective January 1, 2018 using the modified retrospective approach with a cumulative effect adjustment at the date of adoption. We have performed an assessment of the impact of the ASU and developed a transition plan, including necessary changes to policies, processes and internal controls. While our assessment is substantially complete, we are currently still evaluating the quantitative impact of the changes to our financial statements and preparing for the expanded disclosure requirements. Based on our assessment to date, we believe the new standard will result in a change in revenue recognition on certain fixed price projects from a proportional performance method, where revenue is currently recognized over contract performance, to a point in time method, where revenue would be recognized upon completion of our performance obligations. This change could result in a shift in the timing of revenue recognition, causing quarter to quarter revenue fluctuations, however, an estimate of the magnitude of the impact to our consolidated financial statements cannot be made at this time.
In February 2016, the FASB issued ASU No. 2016-02, Leases. This standard will require all leases with durations greater than twelve months to be recognized on the balance sheet as a right-of-use asset and a lease liability. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. We believeplan to adopt the standard effective January 1, 2019. We expect the adoption of this standard to increase the assets and liabilities recorded on our condensed consolidated balance sheet and increase the level of disclosures related to leases. We also expect that adoption of the new standard will have a significantrequire changes to our internal controls to support recognition and disclosure requirements under the new standard. We are currently evaluating ASU No. 2016-02 and the impact of its adoption on our consolidated balance sheets because we will need to recognize substantially all of our operating leases as right-of-use assets and lease liabilities on our balance sheet. Although we have not completed our assessment, we do not expect the adoption of ASU 2016-02 to materially change the recognition and measurement of lease expense within the consolidated statements of operations.financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The standard will remove step 2 from the goodwill impairment test. Under the ASU, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for public companies for annual reporting periods beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating ASU 2017-04 and the impact of its adoption on our consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. The standard will ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. ASU 2017-12 is effective for public companies for annual reporting periods beginning after December 15, 2018 but early adoption is permitted. We are currently evaluating ASU 2017-12 and the impact of its adoption on our consolidated financial statements.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)

Accounting Standard Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification (ASC) Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We adopted ASC Topic 606 on January 1, 2018 using the modified retrospective method. Under this transition method, we applied the new standard to contracts that were not completed as of the adoption date and recognized a cumulative effect adjustment which reduced retained earnings by $0.4 million on January 1, 2018. The comparative prior period information has not been restated and continues to be presented according to accounting standards in effect for those periods. The primary impact of ASU No. 2014-09 on our financial statements is a change in revenue recognition on a small portion of our contracts from a proportional performance method, where revenue was previously recognized over contract performance, to a point in time method, where revenue is now recognized upon completion of our performance obligations. While we don't believe the adoption of ASU 2014-09 will materially impact our overall financial statements, the change in timing of revenue recognition on certain contracts could result in quarter to quarter fluctuations in revenue. See Note 3 for further details regarding our revenue recognition accounting policies and other required disclosures.

The cumulative effect of the changes made to our January 1, 2018 balance sheet for the adoption of the new revenue standard was as follows (in thousands):
 Balance at December 31, 2017 Adjustments due to ASC Topic 606 Balance at January 1, 2018
Assets: 
    
Prepaid expenses and other current assets$14,212
 $2,059
 $16,271
Other assets6,569
 132
 6,701
Liabilities and Stockholders’ Equity: 
   

Deferred revenue22,356
 2,587
 24,943
Retained earnings106,599
 (396) 106,203

The following tables summarize the current period impacts of adopting ASC Topic 606 on our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2018.

Selected condensed consolidated statement of operations line items, which were impacted by the adoption of the new standard, are as follows for the three months ended March 31, 2018 (in thousands):
 As reported Balances without Adoption of Topic 606 Effect of Adoption - Higher (Lower)
Revenue$125,032
 $125,049
 $(17)
Cost of revenue107,353
 107,554
 (201)
Gross profit17,679
 17,495
 184
Income tax expense1,730
 1,684
 46
Net income2,632
 2,494
 138
      
Per common share data: 
    
Basic earnings per share$0.16
 $0.15
 $0.01
Diluted earnings per share$0.16
 $0.15
 $0.01

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)

The adoption of ASC Topic 606 did not have a significant impact on our condensed consolidated statement of comprehensive income for the three months ended March 31, 2018.
Selected condensed consolidated balance sheet line items, which were impacted by the adoption of the new standard, are as follows as of March 31, 2018 (in thousands):
 As reported Balances without adoption of ASC Topic 606 Effect of Adoption - Higher (Lower)
Assets: 
    
Prepaid expenses and other current assets$19,191
 $16,934
 $2,257
Other assets7,569
 7,483
 86
Total assets363,075
 360,732
 2,343
Liabilities and Stockholders’ Equity: 
    
Accounts payable and accrued expenses74,889
 75,090
 (201)
Deferred revenue22,563
 19,761
 2,802
Retained earnings108,835
 109,093
 (258)
Total liabilities and stockholders' equity363,075
 360,732
 2,343
The adoption of ASC Topic 606 did not impact our total cash flows from operating, investing or financing activities. In addition, the impact to the individual line items within the operating activities section of our condensed consolidated statement of cash flows was not significant for the three months ended March 31, 2018.


(3)Revenue

Significant Accounting Policy
We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (ASC Topic 606), which we adopted on January 1, 2018, using the modified retrospective method. Revenue is measured based on the consideration specified in a contract with a customer. Most of our contracts with customers contain transaction prices with fixed consideration, however, some contracts may contain variable consideration in the form of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties and other similar items. When a contract includes variable consideration, we evaluate the estimate of variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. This can result in recognition of revenue over time as we perform services or at a point in time when the deliverable is transferred to the customer, depending on an evaluation of the criteria for over time recognition in ASC Topic 606. Further details regarding our revenue recognition for various revenue streams are discussed below.
Nature of goods and services
Over 90% of our revenue is derived from services provided to our customers for training, consulting, technical, engineering and other services. Less than 10% of our revenue is derived from various other offerings including custom magazine publications and assembly of glovebox portfolios for automotive manufacturers, licenses of software and other intellectual property, and software as a service (SaaS) arrangements.
Our primary contract vehicles are time-and-materials, fixed price (including fixed-fee per transaction) and cost-reimbursable contracts. Each contract has different terms based on the scope, deliverables and complexity of the engagement, requiring us to make judgments and estimates about recognizing revenue.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)

Under time-and-materials and cost-reimbursable contracts, the contractual billing schedules are based on the specified level of resources we are obligated to provide. Revenue under these contract types are recognized over time as services are performed as the client simultaneously receives and consumes the benefits provided by our performance throughout the engagement. The time and materials incurred for the period is the measure of performance and, therefore, revenue is recognized in that amount.
For fixed price contracts which typically involve a discrete project, such as development of training content and materials, design of training processes, software implementation, or engineering projects, the contractual billing schedules are not necessarily based on the specified level of resources we are obligated to provide. These discrete projects generally do not contain milestones or other measures of performance. The majority of our fixed price contracts meet the criteria in ASC Topic 606 for over time revenue recognition. For these contracts, revenue is recognized using a percentage-of-completion method based on the relationship of costs incurred to total estimated costs expected to be incurred over the term of the contract. We believe this methodology is a reasonable measure of proportional performance since performance primarily involves personnel costs and services provided to the customer throughout the course of the projects through regular communications of progress toward completion and other project deliverables. In addition, the customer is required to pay us for the proportionate amount of our fees in the event of contract termination. A small portion of our fixed price contracts do not meet the criteria in ASC Topic 606 for over time revenue recognition. For these projects, we defer revenue recognition until the performance obligation is satisfied, which is generally when the final deliverable is provided to the client. The direct costs related to these projects are capitalized and then recognized as cost of revenue when the performance obligation is satisfied.
For fixed price contracts, when total direct cost estimates exceed revenues, the estimated losses are recognized immediately. The use of the percentage-of-completion method requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed, and anticipated changes in estimated salaries and other costs. Estimates of total contract costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. When revisions in estimated contract revenues and costs are determined, such adjustments are recorded in the period in which they are first identified. Adjustments to our contracts were not material, individually or in the aggregate, to our unaudited condensed consolidated financial statements for the three-month periods ended March 31, 2018 and 2017.

For certain fixed-fee per transaction contracts, such as delivering training courses or conducting workshops, revenue is recognized during the period in which services are delivered in accordance with the pricing outlined in the contracts.

For certain fixed-fee per transaction and fixed price contracts in which the output of the arrangement is measurable, such as for the shipping of publications and print materials, revenue is recognized when the deliverable is met and the product is delivered based on the output method of performance. 

Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. On March 31, 2018, we had $276.5 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize over 95 percent of our remaining performance obligations as revenue within the next twelve months. We did not apply any of the practical expedients permitted by ASC Topic 606 in determining the amount of our performance obligations as of March 31, 2018.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)

Revenue by Category
The following series of tables presents our revenue disaggregated by various categories (dollars in thousands).
 Three Months Ended March 31,
 
Workforce
Excellence
 Business Transformation Services Consolidated
 2018 2017 2018 2017 2018 2017
Revenue by type of service:           
Managed learning services$48,902
 $45,329
 $—
 $—
 $48,902
 $45,329
Engineering & technical services25,529
 26,213
 —
 —
 25,529
 26,213
Sales enablement—
 —
 23,850
 24,617
 23,850
 24,617
Organizational development—
 —
 26,751
 26,287
 26,751
 26,287
 $74,431
 $71,542
 $50,601
 $50,904
 $125,032
 $122,446
            
Revenue by geographic region:           
Americas$45,440
 $44,940
 $44,182
 $46,398
 $89,622
 $91,338
Europe Middle East Africa24,957
 23,591
 8,497
 5,753
 33,454
 29,344
Asia Pacific7,711
 7,130
 72
 112
 7,783
 7,242
Eliminations(3,677) (4,119) (2,150) (1,359) (5,827) (5,478)
 $74,431
 $71,542
 $50,601
 $50,904
 $125,032
 $122,446
            
Revenue by client market sector:           
Automotive$2,838
 $2,258
 $24,346
 $24,857
 $27,184
 $27,115
Financial & Insurance21,103
 18,586
 4,070
 5,459
 25,173
 24,045
Manufacturing8,679
 8,275
 4,609
 4,261
 13,288
 12,536
Energy / Oil & Gas7,642
 9,050
 1,475
 987
 9,117
 10,037
U.S. Government6,454
 6,153
 2,386
 2,543
 8,840
 8,696
UK Government5,486
 6,730
 —
 —
 5,486
 6,730
Information & Communication3,299
 3,980
 2,375
 2,722
 5,674
 6,702
Aerospace7,598
 5,039
 761
 1,513
 8,359
 6,552
Electronics Semiconductor3,683
 4,363
 51
 395
 3,734
 4,758
Life Sciences1,849
 1,724
 2,708
 2,495
 4,557
 4,219
Other5,800
 5,384
 7,820
 5,672
 13,620
 11,056
 $74,431
 $71,542
 $50,601
 $50,904
 $125,032
 $122,446
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled revenue (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheet. Amounts charged to our clients become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project. When billings occur after the work has been performed, such unbilled amounts will generally be billed and collected within 60 to 120 days but typically no longer than over the next twelve months. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within the next twelve months. These assets and liabilities are reported on the condensed consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the three-month period ended March 31, 2018 were not materially impacted by any other factors.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)

Revenue recognized for the three months ended March 31, 2018, that was included in the contract liability balance at the beginning of the year was $16.8 million, and primarily represented revenue from services performed during the current period for which we received advance payment from clients in a prior period.

Contract Costs
Costs to fulfill contracts which do not meet the over time revenue recognition criteria are capitalized and recognized to cost of revenue when the performance obligation is satisfied and revenue is recognized. Such costs are included in prepaid expenses and other current assets on the condensed consolidated balance sheet and totaled $2.3 million as of March 31, 2018. Recognition of such contract costs totaled $1.6 million for the first quarter of 2018 and is included in cost of revenue on the condensed consolidated statements of operations.

Applying the practical expedient in ASC Topic 606, we recognize the incremental costs of obtaining contracts (i.e. sales commissions) as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Substantially all of our sales commission arrangements have an amortization period of one year or less. As of March 31, 2018, we did not have any capitalized sales commissions.


(3)(4)Significant Customers & Concentration of Credit Risk

We have a market concentration of revenue in both the automotive sector and financial services & insurance sector. Revenue from the automotive industrysector accounted for approximately 22% of our consolidated revenue for both of the nine-monththree-month periods ended September 30, 2017March 31, 2018 and 2016.2017. In addition, we have a concentration of revenue from a single automotive customer, which accounted for approximately 15% and 13% of our consolidated revenue for both of the nine-month periodsthree months ended September 30,March 31, 2018 and 2017, and 2016.respectively. As of September 30, 2017,March 31, 2018, accounts receivable from a single automotive customer totaled $10.9$14.6 million, or 11%14%, of our consolidated accounts receivable balance.

Revenue from the financial services & insurance industrysector accounted for approximately 20% and 21% of our consolidated revenue for both of the nine monthsthree-month periods ended September 30, 2017March 31, 2018 and 2016, respectively.2017. In addition, we have a concentration of revenue from a single financial services customer, which accounted for approximately 14% and 15% of our consolidated revenue for both of the nine monthsthree-month periods ended September 30,March 31, 2018 and 2017, and 2016, respectively. As of September 30, 2017,March 31, 2018, billed and unbilled accounts receivable from a single financial services customer totaled $28.3$25.3 million, or 19%17%, of our consolidated accounts receivable and costs and estimated earnings in excess of billings on uncompleted contractsunbilled revenue balances.

No other single customer accounted for more than 10% of our consolidated revenue for the ninethree months ended September 30,March 31, 2018 or 2017 or 2016 or consolidated accounts receivable balance as of September 30, 2017.March 31, 2018.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)



(4)(5)Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
 
Our dilutive common stock equivalent shares consist of stock options and restricted stock units computed under the treasury stock method, using the average market price during the period. Performance-based restricted stock unit awards are included in the computation of diluted shares based on the probable outcome of the underlying performance conditions being achieved. The following table presents instruments which were not dilutive and were excluded from the computation of diluted EPS in each period, as well as the dilutive common stock equivalent shares which were included in the computation of diluted EPS: 
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 (In thousands)
Non-dilutive instruments—
 —
 17
 59
        
Dilutive common stock equivalents146
 101
 120
 106


GP STRATEGIES CORPORATION AND SUBSIDIARIES
 Three Months Ended 
 March 31,
 2018 2017
 (In thousands)
Non-dilutive instruments7
 35
    
Dilutive common stock equivalents94
 100

Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)

(5)(6)Acquisitions

YouTrainHula Partners
On August 31, 2017,January 2, 2018 we acquired the entire share capitalbusiness and certain assets of YouTrain Limited ("YouTrain"), an independent training company delivering IT, digital and life sciences skills training in Scotland and North West England.Hula Partners, a provider of SAP Success Factors Human Capital Management (HCM) implementation services. The upfront purchase price was $4.9$10.0 million which was paid in cash at closing. In addition, the purchase price is subject to a completion accounts adjustment which is expected to be settled during the fourth quarter of 2017. The preliminary purchase price allocation is subject to change and is expected to be finalized in the fourth quarter of 2017. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. NoneAll of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired YouTrainHula Partners business is included in the Learning SolutionsBusiness Transformation Services segment and the results of its operations have been included in the condensed consolidated financial statements beginning September 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations. The acquired YouTrain business is included in our United Kingdom subsidiary and its functional currency is the British Pound Sterling. The purchase price allocation below was translated into U.S. dollars based on the exchange rate in effect on the date of acquisition.
The following table summarizes the fair value of the purchase price and purchase price allocation for the acquisition (dollars in thousands).
Cash purchase price $4,898
  
Estimated completion accounts payment 180
  
Total purchase price $5,078
  
    Amortization
Purchase price allocation:  
 Period
Cash $673
  
Accounts receivable and other current assets 248
  
Fixed assets 215
  
Customer-related intangible assets 1,313
 5 years
Goodwill 3,228
  
Total assets 5,677
  
     
Accounts payable and accrued expenses 322
  
Billings in excess of costs and estimated
    earnings on uncompleted contracts		 28
  
Deferred tax liability 249
  
Total liabilities 599
  
     
Net assets acquired $5,078
  

CLS Performance Solutions Limited
On August 31, 2017, we acquired the business and certain assets of CLS Performance Solutions Limited ("CLS"), an independent provider of Enterprise Resource Planning (ERP) end user adoption and training services in the United Kingdom. The upfront purchase price was $0.4 million which was paid in cash at closing. In addition, the purchase agreement requires up to an additional $2.1 million of consideration contingent upon the achievement of certain earnings targets during the twelve-month period following the completion of the acquisition. The total estimated fair value of the purchase consideration was $1.3 million which consists primarily of intangible assets of $0.3 million being amortized over three years from the acquisition date and goodwill of $1.0 million. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. None of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired CLS business is included in the Performance Readiness Solutions segment, and the results of its operations have been included in the consolidated financial statements beginning September 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)

McKinney Rogers
On February 1, 2017, we acquired the business and certain assets of McKinney Rogers, a provider of strategic consulting services with offices in New York and London. This acquisition will expand our solutions offerings, giving us the ability to leverage McKinney Rogers' intellectual property and consulting methodologies to help our global client base meet strategic business goals. The upfront purchase price was $3.3 million in cash. In addition, the purchase agreement requires up to an additional $18.0 million of consideration, $6.0 million of which was contingent upon the achievement of certain earnings targets during the five-month period ended April 30, 2017 and $12.0 million of which is contingent upon the achievement of certain earnings targets during the three twelve-month periods following completion of the acquisition. In July 2017, we paid the seller $1.0 million in respect of the contingent consideration for the five-month period ended April 30, 2017. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. We expect that all of the goodwill recorded for financial statement purposes will be deductible for tax purposes, except that the contingent consideration is only deductible when paid. If the actual contingent consideration payments are less than the estimated fair value as of the acquisition date, a portion of goodwill will not be deductible for tax purposes. The acquired McKinney Rogers business is included in the Performance Readiness Solutions segment, and the results of its operations have been included in the consolidated financial statements beginning February 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

The following table summarizes the fair value of the purchase price and purchase price allocation for the acquisition (dollars in thousands).

Cash purchase price $3,259
  
Fair value of contingent consideration 4,505
  
Total purchase price $7,764
�� 
    Amortization
Purchase price allocation:  
 Period
Technology-related intangible assets $2,704
 5 years
Customer-related intangible assets 653
 5 years
Marketing-related intangible assets (tradename) 121
 3 years
Goodwill 5,196
  
Total assets 8,674
  
     
Accrued expenses 44
  
Billings in excess of costs and estimated
    earnings on uncompleted contracts		 866
  
Total liabilities 910
  
     
Net assets acquired $7,764
  

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)

Emantras
Effective April 1, 2017, we acquired the business and certain assets of Emantras, a digital education company that provides engaging learning experiences and effective knowledge delivery through award-winning digital and mobile solutions with offices in Fremont, California and Chennai, India. This acquisition strengthens our eLearning development capabilities, allowing us to better serve our customer base with the latest digital learning solutions. The upfront purchase price was $3.2 million in cash. In addition, the purchase agreement requires up to an additional $0.3 million of consideration, contingent upon the achievement of an earnings target during the twelve-month period following completion of the acquisition, plus a percentage of any earnings in excess of the specified earnings target. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. We expect that all of the goodwill recorded for financial statement purposes will be deductible for tax purposes, except that the contingent consideration is only deductible when paid. If the actual contingent consideration payments are less than the estimated fair value as of the acquisition date, a portion of goodwill will not be deductible for tax purposes. The acquired Emantras business is included in the Learning Solutions segment, and the results of its operations have been included in the consolidated financial statements beginning April 1, 2017.January 2, 2018. The pro-forma impact of the acquisition is not material to our results of operations.
The following table summarizes the fair value of the purchase price and purchase price allocation for the acquisition (dollars in thousands).
Cash purchase price $3,191
  
Fair value of contingent consideration 220
  
Total purchase price $3,411
  
    Amortization
Purchase price allocation:  
 Period
Fixed assets $50
  
Customer-related intangible assets 818
 4 years
Goodwill 3,156
  
Total assets 4,024
  
     
Accrued expenses 558
  
Billings in excess of costs and estimated
    earnings on uncompleted contracts		 55
  
Total liabilities 613
  
     
Net assets acquired $3,411
  
Amortization
Purchase price allocation:
Period
Customer-related intangible assets1,367
4 years
Marketing-related intangible assets106
2 years
Goodwill8,527
Total assets10,000

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)

Contingent Consideration
Accounting Standards Codification (“ASC”)ASC Topic 805 requires that contingent consideration be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the condensed consolidated statement of operations. We estimate the fair value of contingent consideration liabilities using an appropriate valuation methodology, typically either an income-based approach or a simulation model, such as the Monte Carlo model, depending on the structure of the contingent consideration arrangement. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are reasonable; however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the condensed consolidated statements of operations, and could cause a material impact to, and volatility in, our operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates and changes in the timing and amount of revenue and/or earnings projections.

Below is a summary of the potential maximum contingent consideration we may be required to pay in connection with completed acquisitions as of September 30, 2017March 31, 2018 (dollars in thousands):
Acquisition:Original range of potential undiscounted payments As of September 30, 2017 Maximum contingent consideration due inOriginal range of potential undiscounted payments As of March 31, 2018 Maximum contingent consideration due in
 201720182019-2020Total 201820192020Total
Maverick$0 - $10,000 $5,000
$5,000
$—
$10,000
$0 - $10,000 $5,902
$—
$—
$5,902
McKinney Rogers$0 - $18,000 967
4,000
8,000
12,967
$0 - $18,000 —
4,000
4,000
8,000
Emantras —
*
—
—
 *
—
—
—
CLS$0 - $2,132 —
2,132
—
2,132
$0 - $2,312 2,312
—
—
2,312
 $5,967
$11,132
$8,000
$25,099
 $8,214
$4,000
$4,000
$16,214
    
* There is no maximum contingent consideration payable to the seller.
Below is a summary of the changes in the recorded amount of contingent consideration liabilities from December 31, 20162017 to September 30, 2017March 31, 2018 (dollars in thousands):
Liability as of
December 31,
     
Change in
Fair Value of
Contingent
 
Foreign
Currency
 
Liability as of
September 30,
Liability as of
December 31,
     
Change in
Fair Value of
Contingent
 
Foreign
Currency
 
Liability as of
March 31,
Acquisition:2016 Additions Payments Consideration Translation 20172017 Additions Payments Consideration Translation 2018
Maverick$5,258
 $—
 —
 $775
 $—
 $6,033
$1,979
 $—
 $—
 $(1,325) $—
 $654
McKinney Rogers—
 4,505
 (967) (1,156) —
 2,382
1,501
 —
 —
 (1,168) —
 333
Emantras—
 220
 —
 5
 —
 225
76
 —
 —
 (76) —
 —
CLS—
 888
 —
 7
 33
 928
669
 —
 —
 17
 26
 712
Total$5,258

$5,613
 $(967)
$(369)
$33

$9,568
$4,225

$—
 $—

$(2,552)
$26

$1,699
As of September 30, 2017March 31, 2018 and December 31, 2016,2017, contingent consideration considered a current liability and included in accounts payable totaled $5.3$1.4 million and $3.6$2.7 million, respectively. As of September 30, 2017March 31, 2018 and December 31, 20162017 we also had accrued contingent consideration totaling $4.3$0.3 million and $1.7$1.5 million respectively, related to acquisitions which are included in other long-term liabilities on the condensed consolidated balance sheets and represent the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date.



GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)


(6)(7)Intangible Assets

Goodwill
 
Changes in the carrying amount of goodwill by reportable business segment for the ninethree months ended September 30, 2017March 31, 2018 were as follows (in thousands):
Learning
Solutions
 
Professional
& Technical
Services
 Sandy Training & Marketing 
Performance
Readiness
Solutions
 TotalWorkforce Excellence Business Transformation Services Total
Balance as of December 31, 2016$49,079
 $42,364
 $653
 $35,676
 $127,772
Balance as of December 31, 2017$96,330
 $48,505
 $144,835
Acquisitions6,384
 —
 —
 6,301
 12,685
—
 8,527
 8,527
Foreign currency translation3,041
 616
 —
 260
 3,917
778
 450
 1,228
Balance as of September 30, 2017$58,504

$42,980

$653

$42,237

$144,374
Balance as of March 31, 2018$97,108

$57,482

$154,590
 
Intangible Assets Subject to Amortization
 
Intangible assets with finite lives are subject to amortization over their estimated useful lives. The primary assets included in this category and their respective balances were as follows (in thousands):
 Gross Carrying Amount Accumulated Amortization Net Carrying Amount
September 30, 2017  
Customer relationships$16,280
 $(10,385) $5,895
Intellectual property and other4,298
 (875) 3,423
 $20,578

$(11,260)
$9,318
      
December 31, 2016 
  
  
Customer relationships$14,595
 $(9,855) $4,740
Intellectual property and other2,311
 (1,226) 1,085
 $16,906

$(11,081)
$5,825

GP STRATEGIES CORPORATION AND SUBSIDIARIES
 Gross Carrying Amount Accumulated Amortization Net Carrying Amount
March 31, 2018  
Customer relationships$16,432
 $(10,610) $5,822
Intellectual property and other4,404
 (1,388) 3,016
 $20,836

$(11,998)
$8,838
      
December 31, 2017 
  
  
Customer relationships$16,330
 $(11,140) $5,190
Intellectual property and other4,298
 (1,125) 3,173
 $20,628

$(12,265)
$8,363

Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)

(7)(8)Stock-Based Compensation

We recognize compensation expense for stock-based compensation awards issued to employees that are expected to vest.on a straight-line basis over the requisite service period. Compensation cost is based on the fair value of awards as of the grant date.
 
The following table summarizes the pre-tax stock-based compensation expense included in reported net income (in thousands): 
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
2017 2016 2017 20162018 2017
Non-qualified stock options$1
 $6
 $6
 $81
$—
 $4
Restricted stock units891
 801
 2,569
 2,011
630
 716
Board of Directors stock grants93
 86
 248
 233
68
 76
Total stock-based compensation expense$985

$893

$2,823

$2,325
$698

$796
 
Pursuant to our 2011 Stock Incentive Plan (the “2011 Plan”), we may grant awards of non-qualified stock options, incentive stock options, restricted stock, stock units, performance shares, performance units and other incentives payable in cash or in shares of our common stock to officers, employees or members of the Board of Directors. As of September 30, 2017,March 31, 2018, we had non-qualified stock options and restricted and performance stock units outstanding under these plans as discussed below.plans.

Non-Qualified Stock Options
Summarized information for the Company’s non-qualified stock options is as follows:
 Number of options 
Weighted
average exercise price
 
Weighted
average
remaining
contractual term
 
Aggregate
intrinsic value
Stock Options   
Outstanding at December 31, 201667,550
 $15.34
    
Granted—
 —
    
Exercised(59,050) 15.11
    
Forfeited(100) 19.38
    
Expired(400) 19.38
    
Outstanding at September 30, 20178,000
 $16.80
 0.67 $112,000
Exercisable at September 30, 20177,400
 $16.59
 0.64 $106,000

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)

Restricted Stock Units
In addition to stock options, we issue restricted stock units to key employees and members of the Board of Directors. The stock units vest to the recipients at various dates, up to five years, based on fulfilling service requirements. We recognize the value of the market price of the underlying stock on the date of grant as compensation expense over the requisite service period. Upon vesting, the stock units are settled in shares of our common stock. Summarized share information for our restricted stock units is as follows:
 Nine Months Ended September 30, 2017 
Weighted
average
grant date
fair value
 (In shares) (In dollars)
Outstanding and unvested, beginning of period207,016
 $29.85
Granted55,350
 24.62
Vested(41,668) 20.61
Forfeited(4,947) 25.21
Outstanding and unvested, end of period215,751
 $30.40

Performance Stock Units

We issue performance-based stock units to certain executives under a long-term incentive program. Under the program, a target level of equity compensation is set for each officer. The total equity compensation is divided into performance-based and time-based restricted stock units. Under the program, the Compensation Committee sets the performance-based goals within the first 90 days of each year. Vesting of performance-based stock units (PSU's) is contingent upon the employee's continued employment and the Company's achievement of certain performance goals during a three-year performance period. The performance goals are established by the Compensation Committee for a three-year performance period based on financial targets, including an average annual return on invested capital ("ROIC") and average annual growth in earnings before interest, taxes, depreciation and amortization (adjusted to exclude the effect of acquisitions, dispositions, and certain other nonrecurring or extraordinary items) ("Adjusted EBITDA"). We recognize compensation expense for PSU's on a straight line basis over the performance period based on the probable outcome of achievement of the financial targets. At the end of each reporting period, we estimate the number of PSU's expected to vest, based on the probability and extent to which the performance goals will be met, and take into account these estimates when calculating the expense for the period. If the number of shares expected to be earned changes during the performance period, we will make a cumulative adjustment to compensation expense based on the revised number of shares expected to be earned.

Summarized share information for our performance-based restricted stock units is as follows:
  Nine Months Ended September 30, 2017 
Weighted
average
grant date
fair value
  (In shares) (In dollars)
Outstanding and unvested, beginning of period 124,394
 $31.08
Granted 104,590
 23.65
Vested —
 —
Forfeited —
 —
Outstanding and unvested, end of period 228,984
 $27.69



GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
September 30, 2017
(Unaudited)



(8)(9)Debt and Financial Instruments

On December 15, 2016, we entered intoWe have a Fifth Amended and Restated Financing and Security Agreement (the “Credit Agreement”). The Credit Agreementcredit agreement with a bank which provides for a revolving credit facility up to a maximum principal amount of $100 million expiring on December 31, 2021 and for a term loan in the principal amount of $40 million maturing on April 30, 2020.2020 (the "Credit Agreement"). The Credit Agreement is secured by substantially all of our assets.
The maximum interest rate on the Credit Agreement is the daily one-month LIBOR market index rate (for borrowings in Dollars and Sterling) or the daily one month EURIBOR (for borrowings in Euros) plus 2.50%. Based on our financial performance, the interest rate can be reduced to a minimum rate of the daily one-month LIBOR market index rate plus 1.25%, with the rate being determined based on our maximum leverage ratio for the preceding four quarters. Each unpaid advance on the revolving loan will bear interest until repaid. The term loan is payable in monthly installments of principal in the amount of $1.0 million plus applicable interest, beginning on January 1, 2017. We may prepay the term loan or the revolving loan, in whole or in part, at any time without premium or penalty, subject to certain conditions. Amounts repaid or prepaid on the term loan may not be reborrowed.
The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our and our subsidiaries’ (subject to certain exceptions) ability to, among other things, grant liens, make investments, incur indebtedness, merge or consolidate, dispose of assets or make acquisitions. We are also required to maintain compliance with a minimum fixed charge coverage ratio and a maximum leverage ratio. We were in compliance with all of the financial covenants under the Credit Agreement as of September 30, 2017.March 31, 2018. As of September 30, 2017,March 31, 2018, our total long-term debt outstanding under the term loan was $31.0$25.0 million. In addition, there were $27.5$43.7 million of borrowings outstanding and $67.2$50.3 million of available borrowings under the Credit Agreement. For the ninethree months ended September 30, 2017,March 31, 2018, the weighted average interest rate on our borrowings was 2.8%3.4%.
In March 2017, we entered into an interest rate swap agreement which effectively fixed our interest rate on the remaining $37 million outstanding on our term loan to a fixed LIBOR of 1.59% plus the applicable margin under the Credit Agreement. We have designated the interest rate swap, which expires on April 1, 2020, as a cash flow hedge and have applied hedge accounting. The fair value of the derivative liabilityasset associated with the interest rate swap was less than$0.2 million and $0.1 million as of September 30,March 31, 2018 and December 31, 2017, respectively, and is included in other liabilitiesassets on the condensed consolidated balance sheet. The derivative liabilityasset is classified within Level 2 of the fair value hierarchy in which fair value is measured using quoted prices in active markets for similar assets and liabilities.
In April 2017, we entered into an interest rate cap agreement and paid a premium of $0.5 million which caps the daily one-month LIBOR at 2.0% for an aggregate notional amount of $20.0 million of our variable rate debt under our credit facility. The interest rate cap agreement matures on December 31, 2021. We have designated the interest rate cap as a cash flow hedge and have applied hedge accounting. The fair value of the derivative asset associated with the interest rate cap was $0.2$0.5 million and $0.3 million as of September 30,March 31, 2018 and December 31, 2017, respectively, and is included in other assets on the condensed consolidated balance sheet. The derivative asset is classified within Level 2 of the fair value hierarchy in which fair value is measured using quoted prices in active markets for similar assets and liabilities.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)

(9)(10)Income Taxes

Income tax expense was $5.2$1.7 million, or an effective income tax rate of 28.3%39.7%, for the ninethree months ended September 30, 2017March 31, 2018 compared to $8.1$2.0 million, or an effective income tax rate of 37.4%32.8%, for the ninethree months ended September 30, 2016.March 31, 2017. The decreaseincrease in the effective income tax rate in 20172018 compared to 20162017 is primarily due to a change$0.9 million increase, or an effective income tax rate of 19.7%, to the provisional estimate recorded in the mixfourth quarter of taxable2017 relating to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings, imposed by the Tax Cuts and Jobs Act (the "Tax Act") that was enacted on December 22, 2017. The increase is partially offset by a decrease in the U.S. statutory tax rate from 35% to 21% and other discrete items. Excluding the discrete items included in tax expense in the first quarter of 2018, the Company's effective income from higher taxing jurisdictions to lower taxing jurisdictions.tax rate was 25.9%. Income tax expense for the quarterly periods is based on an estimated annual effective tax rate which includes the U.S. federal, state and local, and non-U.S. statutory rates, permanent differences, and other items that may have an impact on income tax expense.

The increase to the provisional estimate of the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings during the first quarter of 2018 is the result of further analysis of earnings and profits related to the calculation of the transition tax. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts.

The Tax Act creates a new requirement that Global Intangible Low-Taxed Income (“GILTI”) earned by a controlled foreign corporation (“CFC”) must be included in the gross income of the U.S. shareholder. Because of the complexity of the new GILTI tax rules, we are continuing to evaluate these provisions of the Tax Act and whether taxes due on future U.S. inclusions related to GILTI should be recorded as a current-period expense when incurred, or factored into the company’s measurement of its deferred taxes. At March 31, 2018, because the Company is still evaluating the GILTI provisions, the Company has included tax expense related to GILTI for the current year in its estimated annual effective tax rate and has not provided additional GILTI on deferred items.

An uncertain tax position taken or expected to be taken in a tax return is recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Interest and penalties related to income taxes are accounted for as income tax expense. As of September 30, 2017,March 31, 2018, we had no uncertain tax positions reflected on our condensed consolidated balance sheet. The Company files income tax returns in U.S. federal, state and local jurisdictions, and various non-U.S. jurisdictions, and is subject to audit by tax authorities in those jurisdictions. Tax years 20132014 through 20162017 remain open to examination by these tax jurisdictions, and earlier years remain open to examination in certain of these jurisdictions which have longer statutes of limitations.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)




(10)(11)Stockholders’ Equity

Changes in stockholders’ equity during the ninethree months ended September 30, 2017March 31, 2018 were as follows (in thousands):
Common
stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Treasury
stock
at cost
 
Accumulated
other
comprehensive
loss
 
Total
stockholders’
equity
Common
stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Treasury
stock
at cost
 
Accumulated
other
comprehensive
loss
 
Total
stockholders’
equity
Balance at December 31, 2016$172
 $106,569
 $93,845
 $(11,628) $(21,462) $167,496
Cumulative effect adjustment of adopting ASU 2016-09—
 234
 (137) —
 —
 97
Adjusted balance at December 31, 2016172
 106,803
 93,708
 (11,628) (21,462) 167,593
Balance at December 31, 2017$172
 $107,256
 $106,599
 $(11,118) $(14,855) $188,054
Cumulative effect adjustment of adopting ASU 2014-09—
 —
 (396) —
 —
 (396)
Adjusted balance at December 31, 2017172
 107,256
 106,203
 (11,118) (14,855) 187,658
Net income—
 —
 13,230
 —
 —
 13,230
—
 —
 2,632
 —
 —
 2,632
Foreign currency translation adjustment—
 —
 —
 —
 7,051
 7,051
—
 —
 —
 —
 2,432
 2,432
Change in fair value of interest rate cap, net of tax—
 —
 —
 —
 (137) (137)—
 —
 —
 —
 148
 148
Change in fair value of interest rate swap, net of tax—
 —
 —
 —
 (2) (2)—
 —
 —
 —
 55
 55
Repurchases of common stock—
 —
 —
 (2,419) —
 (2,419)—
 —
 —
 (7,261) —
 (7,261)
Stock-based compensation expense—
 2,823
 —
 —
 —
 2,823
—
 698
 —
 —
 —
 698
Issuance of stock for employer contributions to retirement plan—
 11
 —
 2,042
 —
 2,053
—
 4
 —
 707
 —
 711
Net issuances of stock pursuant to stock compensation plans and other—
 (1,962) —
 1,477
 —
 (485)—
 (589) —
 538
 —
 (51)
Balance at September 30, 2017$172

$107,675

$106,938

$(10,528)
$(14,550)
$189,707
Balance at March 31, 2018$172

$107,369

$108,835

$(17,134)
$(12,220)
$187,022

Stock Repurchase Program

We have a share repurchase program under which we may repurchase shares of our common stock from time to time in the open market, subject to prevailing business and market conditions and other factors. During the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, we repurchased approximately 101,000312,000 and 340,00070,000 shares, respectively, of our common stock in the open market for a total cost of approximately $2.4$7.3 million and $8.0$1.7 million, respectively. As of September 30, 2017,March 31, 2018, there was approximately $3.6$4.5 million available for future repurchases under the buyback program.

GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)



(11)(12)Restructuring

The following table shows the balances and activity for our restructuring liability (in thousands):
  Total
Liability as of December 31, 2017 $2,840
Payments (1,211)
Additional restructuring charges 435
Liability as of March 31, 2018 $2,064

In December 2017, we announced a new organizational structure and plan to improve operating results by increasing organic growth and reducing operating costs. During the fourth quarter of 2017, we initiated restructuring and transition activities to improve operational efficiency, reduce costs and better position the company to drive future revenue growth and we recorded restructuring charges, consisting primarily of severance expense of $3.3 million for the fourth quarter ended December 31, 2017. During the three months ended March 31, 2018, we recorded an additional $0.4 million of restructuring charges, consisting primarily of severance expense, which is included in restructuring charges on the condensed consolidated statements of operations. The total remaining liability under these restructuring activities was $2.1 million as of March 31, 2018, of which $1.7 million is included in accounts payable and accrued expenses and $0.4 million is included in other noncurrent liabilities on the condensed consolidated balance sheet. We expect these restructuring activities to be substantially completed in the first half of 2018.


(13)Business Segments

As of September 30, 2017,March 31, 2018, we operated through fourtwo reportable business segments: (i) Workforce Excellence and (ii) Business Transformation Services. In December 2017, we announced a new organizational structure and plan to improve operating results by increasing organic growth and reducing operating costs. Effective January 1, 2018, we re-organized into two operating segments aligned by complementary service lines and supported by a new business development organization aligned by industry sector. The Workforce Excellence segment includes the majority of the former Learning Solutions (ii)and Professional & Technical Services (iii)segments. The Business Transformation Services segment includes the majority of the former Performance Readiness Solutions and Sandy Training & Marketing and (iv) Performance Readiness Solutions.segments. Certain business units transferred between the
former operating segments to better align with the service offerings of the two new segments. Each of our two reportable segments represents an operating segment under U.S. GAAP.ASC Topic 280, Segment Reporting. We test our goodwill at the reporting unit level, or one level below an operating segment, under ASC Topic 350, Intangibles - Goodwill and Other. In connection with the new organizational structure that went into effect on January 1, 2018, we determined that we have four reporting units for purposes of goodwill impairment testing, which represent our four practices which are organized byone level below the operating groups primarily based upon the markets served bysegments, as discussed below.

Our two segments each group and/or the services performed. Each operating group consistsconsist of business unitstwo global practice areas which are focused on providing specificsimilar and/or complementary products and services to certain classes of customers oracross our diverse customer base and within targeted markets. Within each practice are various service lines having specific areas of expertise. Marketing and communications, sales, accounting, finance, legal, human resources, information systems and other administrative services are organized at the corporate level. Business development and sales resources are aligned with operating groupsby industry sector to support existing customer accounts and new customer development.

development across both segments. We have reclassified the segment financial information herein for the prior year periods to reflect the changes in our segments and conform to the current year's presentation. Further information regarding our business segments is discussed below.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
March 31, 2018
(Unaudited)

Learning Solutions.Workforce Excellence. The Workforce Excellence segment advises and partners with leading organizations in designing, implementing, operating and supporting their talent management and workforce strategies, enabling them to gain greater competitive edge in their markets. This segment consists of two practices:

Managed Learning Solutions segment delivers training, curriculumServices - this practice focuses on creating value for our customers by delivering a suite of talent management and learning design, development, operational and support services that can be delivered as large scale outsourcing arrangements, managed services contracts and project-based service engagements. The Managed Learning Services offerings include strategic learning and development consulting services, digital learning content design and development eLearningsolutions and a suite of managed learning operations services, system hosting,including: managed facilitation and delivery, managed training business process outsourcingadministration and consultinglogistics, help desk support, tuition reimbursement management services, globally. This segment serves large companies in the electronicsevent management and semiconductors, healthcare, software, financial services and other industries, as well as government agencies. This segment also provides apprenticeship and vocational skills training for the United Kingdom government. The ability to deliver a wide range of training services on a global basis allows this segment to take over the entire learning function for the client, including their training personnel.vendor management.
ProfessionalEngineering & Technical Services.Services The Professional & Technical Services segment provides training, consulting, engineering and- this practice focuses on capital intensive, inherently hazardous and/or highly complex technical services including leanin support of both U.S. government and global commercial industries. Our products and services include design, development and delivery of technical work-based learning, CapEx (plant launch) initiatives, engineering design and construction management, fabrication, and management services, operational excellence consulting, emergency preparedness, safety and regulatory compliance, chemical demilitarization services, homeland security services, emergency management support services along with all forms of technical documentation. We deliver world-class asset management and environmental services primarilyperformance improvement consulting to large companies in the manufacturing, steel, pharmaceutical, energy and petrochemical industries; federal and state government agencies; and large government contractors.a host of industries. Our proprietary EtaPRO™EtaPRO® Performance and Condition Monitoring System provides a suite of real-time softwaredigital solutions for power generationhundreds of facilities and is installed onin power-generating units acrossaround the world. In addition to providing custom training solutions, this segment providesWe also provide thousands of technical courses in a web-based trainingoff the shelf delivery format through our GPiLEARN™ portal, which offers a variety of courses to power plant personnel in the U.S. and other countries. This segment also provides services to users of alternative fuels, including designing and constructing liquefied natural gas (LNG), liquid to compressed natural gas (LCNG), compressed natural gas (CNG) and hydrogen fueling stations, as well as supplying equipment.GPiLEARN+™ portal.
 
Sandy Training & Marketing.Business Transformation Services. The Sandy Training & MarketingBusiness Transformation Services segment works with organizations to execute complex business strategies by linking business systems, process and people’s performance to clear and measurable results. We have a holistic methodology to establishing direction and closing the gap between strategy and execution.  Our approach equips business leaders and teams with the tools and capability to deliver high-performance results. This segment consists of two practices:

Sales Enablement - this practice provides custom product sales training and has been a leader in serving manufacturing customers in the U.S.service technical training, primarily to automotive industry for over 30 years. Sandy provides custom product sales trainingmanufacturers, designed to better educate the customer salesforces as well as the service technicians with respect to new vehicleproduct features and designs, in effect rapidly increasing the salesforce and technicians knowledge base and enabling them to address detailedretail customer queries.needs. Furthermore, Sandythis segment helps our clients assess their customer relationship marketing strategy and connect with their customers on a one-to-one basis, including  through custom print and digital publications. This segment also providesWe have been a custom product sales and service technical training services to automotive manufacturers as well asprovider and leader in serving manufacturing customers in other industries.the U.S. automotive industry for over 40 years.
Performance Readiness Solutions.Organizational Development - this practice works with organizations to design and execute an integrated people performance system.  This segment provides performance consultingtranslates to helping organizations set strategy, carry that strategy through every level of the organization and ensure that their people have the right skills, knowledge, tools, processes and technology to enable the transformation and achieve business results. Solutions include strategy, leadership, employee engagement and culture consulting, services, including platformenterprise technology implementation and adoption end-user training, change management, knowledge management, customer product training outsourcing, training contentsolutions, learner experience design and development, and sales enablement solutions. This segment also offers organizationalorganization design and business performance solutions, including leadership development training and employee engagement tools and services. Industries served include manufacturing, aerospace, healthcare, life sciences, consumer products, financial, telecommunications, services and higher education, as well as government agencies.consulting.
 
We do not allocate the following items to the segments: selling, general & administrative expenses, restructuring charges, other income (expense),expense, interest expense, gain (loss) on change in fair value of contingent consideration and income tax expense. Inter-segment revenue is eliminated in consolidation and is not significant.


GP STRATEGIES CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
 
September 30, 2017March 31, 2018
(Unaudited)

The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue to consolidated revenue and operating results to consolidated income before income tax expense (in thousands):
 Three Months Ended 
 September 30,		Nine Months Ended 
 September 30,
 2017
20162017 2016
Revenue:      
Learning Solutions$54,801
 $51,379
$157,950
 $153,991
Professional & Technical Services24,443
 25,111
75,404
 76,964
Sandy Training & Marketing22,730
 26,612
75,694
 75,810
Performance Readiness Solutions22,123
 18,876
68,657
 56,511
 $124,097

$121,978
$377,705

$363,276
Gross profit: 
  
 
  
Learning Solutions$10,425
 $9,796
$29,289
 $29,072
Professional & Technical Services1,721
 3,596
10,457
 11,586
Sandy Training & Marketing3,245
 3,619
10,196
 9,900
Performance Readiness Solutions3,255
 2,993
10,527
 7,717
     Total gross profit18,646
 20,004
60,469
 58,275
Selling, general and administrative expenses14,553
 11,996
40,785
 36,245
Gain (loss) on change in fair value of contingent consideration, net268
 (3)369
 (74)
Operating income4,361

8,005
20,053

21,956
Interest expense511
 366
1,483
 970
Other income (expense)74
 (28)(108) 601
Income before income tax expense$3,924
 $7,611
$18,462
 $21,587
 Three Months Ended 
 March 31,
 2018
2017
Revenue:   
Workforce Excellence$74,431
 $71,543
Business Transformation Services50,601
 50,904
 $125,032

$122,447
Gross profit: 
  
Workforce Excellence$11,109
 $13,007
Business Transformation Services6,570
 6,381
     Total gross profit17,679
 19,388
Selling, general and administrative expenses14,584
 12,994
Restructuring charges435
 —
Gain on change in fair value of contingent consideration, net2,552
 197
Operating income5,212

6,591
Interest expense686
 438
Other expense164
 75
Income before income tax expense$4,362
 $6,078

(14)Subsequent Event

On May 1, 2018, we acquired the entire share capital of IC Acquisition Corporation, a Delaware corporation, and its subsidiary, IC Axon Inc., a Canadian corporation (IC Axon). IC Axon develops science-driven custom learning solutions for pharmaceutical and life science customers. The upfront purchase price is $30.0 million in cash, subject to a working capital adjustment to be calculated within 90 days following the closing of the acquisition. In addition, the purchase agreement requires up to an additional $3.5 million of consideration, contingent upon the achievement of an earnings target during a twelve-month period subsequent to the closing of the acquisition.


Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 

Results of Operations
 
General Overview
 
We are a global performance improvement solutions provider of training, e-Learningdigital learning solutions, management consulting and engineering services that seeks to improve the effectiveness of organizations by providing services and products that are customized to meet the specific needs of clients. Clients include Fortune 500 companies and governmental and other commercial customers in a variety of industries. We believe we are a global leader in performance improvement, with over fourfive decades of experience in providing solutions to optimize workforce performance.
 
As of September 30, 2017,March 31, 2018, we operated through fourtwo reportable business segments: (i) Workforce Excellence and (ii) Business Transformation Services. In December 2017, we announced a new organizational structure and plan to improve operating results by increasing organic growth and reducing operating costs. Effective January 1, 2018, we re-organized into two operating segments aligned by complementary service lines and supported by a new business development organization aligned by industry sector. The Workforce Excellence segment includes the majority of the former Learning Solutions (ii)and Professional & Technical Services (iii)segments. The Business Transformation Services segment includes the majority of the former Performance Readiness Solutions and Sandy Training & Marketing and (iv) Performance Readiness Solutions.segments. Certain business units transferred between the former operating segments to better align with the service offerings of the two new segments. Each of our two reportable segments represents an operating segment under U.S. GAAP.ASC Topic 280, Segment Reporting. We test our goodwill at the reporting unit level, or one level below an operating segment, under ASC Topic 350, Intangibles - Goodwill and Other. In connection with the new organizational structure that went into effect on January 1, 2018, we determined that we have four reporting units for purposes of goodwill impairment testing, which represent our four practices which are organized byone level below the operating group primarily based upon the markets served bysegments, as discussed below.

Our two segments each group and/or the services performed. Each operating group consistsconsist of business unitstwo global practice areas which are focused on providing specificsimilar and/or complementary products and services to certain classes of customers oracross our diverse customer base and within targeted markets. Within each practice are various service lines having specific areas of expertise. Marketing and communications, sales, accounting, finance, legal, human resources, information systems and other administrative services are organized at the corporate level. Business development and sales resources are aligned with operating groupsby industry sector to support existing customer accounts and new customer development.
development across both segments. We have reclassified the segment financial information herein for the prior year periods to reflect the changes in our segments and conform to the current year's presentation. Further information regarding our business segments is discussed below.

Learning Solutions.Workforce Excellence. The Workforce Excellence segment advises and partners with leading organizations in designing, implementing, operating and supporting their talent management and workforce strategies, enabling them to gain greater competitive edge in their markets. This segment consists of two practices:

Managed Learning Solutions segment delivers training, curriculumServices - this practice focuses on creating value for our customers by delivering a suite of talent management and learning design, development, operational and support services that can be delivered as large scale outsourcing arrangements, managed services contracts and project-based service engagements. The Managed Learning Services offerings include strategic learning and development consulting services, digital learning content design and development eLearningsolutions and a suite of managed learning operations services, system hosting,including: managed facilitation and delivery, managed training business process outsourcingadministration and consultinglogistics, help desk support, tuition reimbursement management services, globally. This segment serves large companies in the electronicsevent management and semiconductors, healthcare, software, financial services and other industries, as well as government agencies. This segment also provides apprenticeship and vocational skills training for the United Kingdom government. The ability to deliver a wide range of training services on a global basis allows this segment to take over the entire learning function for the client, including their training personnel.vendor management.
ProfessionalEngineering & Technical Services.Services The Professional & Technical Services segment provides training, consulting, engineering and- this practice focuses on capital intensive, inherently hazardous and/or highly complex technical services including leanin support of both U.S. government and global commercial industries. Our products and services include design, development and delivery of technical work-based learning, CapEx (plant launch) initiatives, engineering design and construction management, fabrication, and management services, operational excellence consulting, emergency preparedness, safety and regulatory compliance, chemical demilitarization services, homeland security services, emergency management support services along with all forms of technical documentation. We deliver world-class asset management and environmental services primarilyperformance improvement consulting to large companies in the manufacturing, steel, pharmaceutical, energy and petrochemical industries; federal and state government agencies; and large government contractors.a host of industries. Our proprietary EtaPRO™EtaPRO® Performance and Condition Monitoring System provides a suite of real-time softwaredigital solutions for power generationhundreds of facilities and is installed onin power-generating units acrossaround the world. In addition to providing custom training solutions, this segment providesWe also provide thousands of technical courses in a web-based trainingoff the shelf delivery format through our GPiLEARN™ portal, which offersGPiLEARN+™ portal.

Business Transformation Services. The Business Transformation Services segment works with organizations to execute complex business strategies by linking business systems, process and people’s performance to clear and measurable results. We have a variety of coursesholistic methodology to power plant personnel inestablishing direction and closing the U.S.gap between strategy and other countries.execution.  Our approach equips business leaders and teams with the tools and capability to deliver high-performance results. This segment also provides services to usersconsists of alternative fuels, including designing and constructing liquefied natural gas (LNG), liquid to compressed natural gas (LCNG), compressed natural gas (CNG) and hydrogen fueling stations, as well as supplying equipment.two practices:

Sandy Training & Marketing.Sales Enablement The Sandy Training & Marketing segment- this practice provides custom product sales training and has been a leader in serving manufacturing customers in the U.S.service technical training, primarily to automotive industry for over 30 years. Sandy provides custom product sales trainingmanufacturers, designed to better educate the customer salesforces as well as the service technicians with respect to new vehicleproduct features and designs, in effect rapidly increasing the salesforce and technicians knowledge base and enabling them to address detailedretail customer queries.needs. Furthermore, Sandythis segment helps our clients assess their customer relationship marketing strategy and connect with their customers on a one-to-one basis, including  through custom print and digital publications. This segment also providesWe have been a custom product sales and service technical training services to automotive manufacturers as well asprovider and leader in serving manufacturing customers in other industries.the U.S. automotive industry for over 40 years.
Performance Readiness Solutions.Organizational Development - this practice works with organizations to design and execute an integrated people performance system.  This segment provides performance consultingtranslates to helping organizations set strategy, carry that strategy through every level of the organization and ensure that their people have the right skills, knowledge, tools, processes and technology to enable the transformation and achieve business results. Solutions include strategy, leadership, employee engagement and culture consulting, services, including platformenterprise technology implementation and adoption end-user training, change management, knowledge management, customer product training outsourcing, training contentsolutions, learner experience design and development, and sales enablement solutions. This segment also offers organizationalorganization design and business performance solutions, including leadership development training and employee engagement tools and services. Industries served include manufacturing, aerospace, healthcare, life sciences, consumer products, financial, telecommunications, services and higher education, as well as government agencies.consulting.


Acquisitions

Hula Partners
On January 2, 2018, we acquired the business and certain assets of Hula Partners, a provider of SAP Success Factors Human Capital Management (HCM) implementation services. The purchase price was $10.0 million which was paid in cash at closing. The goodwill recognized is due to the expected synergies from combining operations of the acquiree with the Company. All of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired Hula Partners business is included in the Business Transformation Services segment and the results of its operations have been included in the consolidated financial statements beginning January 2, 2018. The pro-forma impact of the acquisition is not material to our results of operations.

YouTrain
On August 31, 2017, we acquired the entire share capital of YouTrain Limited ("YouTrain"), an independent training company
delivering IT, digital and life sciences skills training in Scotland and North West England. The upfront purchase price was $4.9 million which was paid in cash at closing. In addition, the purchase price is subject toclosing and a completion accounts adjustment which is estimated to be an additional payment of $0.2 million which is expectedwas paid to be settledthe sellers during the fourth quarter of 2017. The preliminary purchase price allocation is subject to change and is expected to be finalized in the fourth quarter of 2017. The goodwill recognized is due to the expected synergies from combining operations of the acquiree with the Company. None of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired YouTrain business is included in the Learning SolutionsWorkforce Excellence segment and the results of its operations have been included in the consolidated financial statements beginning September 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

CLS Performance Solutions Limited
On August 31, 2017, we acquired the business and certain assets of CLS Performance Solutions Limited ("CLS"), an independent provider of Enterprise Resource Planning (ERP) end user adoption and training services in the United Kingdom. The upfront purchase price was $0.4 million which was paid in cash at closing. In addition, the purchase agreement requires up to an additional $2.1$2.3 million of consideration contingent upon the achievement of certain earnings targets during the twelve-month period following the completion of the acquisition. The total estimated fair value of the purchase consideration was $1.3 million which consists primarily of intangible assets of $0.3 million being amortized over three years from the acquisition date and goodwill of $1.0 million. The goodwill recognized is due to the expected synergies from combining operations of the acquiree with the Company. None of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired CLS business is included in the Performance Readiness SolutionsBusiness Transformation Services segment, and the results of its operations have been included in the consolidated financial statements beginning September 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

Emantras
Effective April 1, 2017, we acquired the business and certain assets of Emantras, a digital education company that provides engaging learning experiences and effective knowledge delivery through award-winning digital and mobile solutions with offices in Fremont, California and Chennai, India. This acquisition strengthens our eLearning development capabilities, allowing us to better serve our customer base with the latest digital learning solutions. The upfront purchase price was $3.2 million in cash. In addition, the purchase agreement requires up to an additional $0.3 million of consideration, contingent upon the achievement of an earnings target during the twelve-month period ending June 30, 2018, plus a percentage of any earnings in excess of the specified earnings target. The acquired Emantras business is included in the Workforce Excellence segment, and the results of its operations have been included in the consolidated financial statements beginning April 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

McKinney Rogers
On February 1, 2017, we acquired the business and certain assets of McKinney Rogers, a provider of strategic consulting services with offices in New York and London. This acquisition will expandexpands our solutions offerings, giving us the ability to leverage McKinney Rogers' intellectual property and consulting methodologies to help our global client base meet strategic business goals. The upfront purchase price was $3.3 million in cash. In addition, the purchase agreement requires up to an additional $18.0 million of consideration, $6.0 million of which was contingent upon the achievement of certain earnings targets during the five-month period ended April 30, 2017 and $12.0 million of which is contingent upon the achievement of certain earnings targets during the three twelve-month periods following completion of the acquisition. In July 2017, we paid the seller $1.0 million in respect of the contingent consideration for the five-month period ended April 30, 2017. The goodwill recognized is due toFor the expected synergies from combining operationstwelve-month period ended January 31, 2018, McKinney Rogers did not achieve the minimum earnings target and therefore, there was zero contingent consideration payable in respect of the acquiree with the Company. We expect that allfirst twelve-month period following completion of the goodwill recorded for financial statement purposes will be deductible for tax purposes, except that the contingent consideration is only deductible when paid. If the actual contingent consideration payments are less than the estimated fair value as of the acquisition date, a portion of goodwill will not be deductible for tax purposes.acquisition. The acquired McKinney Rogers business is included in the Performance Readiness SolutionsBusiness Transformation Services segment and the results of its operations have been included in the consolidated financial statements beginning February 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

Emantras
Effective April 1, 2017, we acquired the business and certain assets of Emantras, a digital education company that provides engaging learning experiences and effective knowledge delivery through award-winning digital and mobile solutions with offices in Fremont, California and Chennai, India. This acquisition strengthens our eLearning development capabilities, allowing us to better serve our customer base with the latest digital learning solutions. The upfront purchase price was $3.2 million in cash. In addition, the purchase agreement requires up to an additional $0.3 million of consideration, contingent upon the achievement of an earnings target during the twelve-month period following completion of the acquisition, plus a percentage of any earnings in excess of the specified earnings target. The goodwill recognized is due to the expected synergies from combining operations of the acquiree with the Company.We expect that all of the goodwill recorded for financial statement purposes will be deductible for tax purposes, except that the contingent consideration is only deductible when paid. If the actual contingent consideration payments are less than the estimated fair value as of the acquisition date, a portion of goodwill will not be deductible for tax purposes. The acquired Emantras business is included in the Learning Solutions segment, and the results of its operations have been included in the consolidated financial statements beginning April 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.


Maverick Solutions
Effective October 1, 2016, we acquired the business and certain assets of Maverick Solutions, a U.S.-based provider of Enterprise Resource Planning (ERP) product training services. This acquisition strengthens our eLearning development capabilities, allowing us to better serve our customer base with the latest digital learning solutions. The upfront purchase price was $4.6 million in cash. In addition, the purchase agreement requires up to an additional $10.0 million of consideration, contingent upon the achievement of certain earnings targets during the two twelve-month periods following completion of the acquisition. The acquired Maverick Solutions business is included in the Performance Readiness Solutions segment and the results of its operations have been included in the consolidated financial statements beginning October 1, 2016. The pro-forma impact of the acquisition is not material to our results of operations.

Jencal Training
On March 1, 2016, we acquired the share capital of Jencal Training Limited (Jencal Training) and its subsidiary B2B Engage Limited (B2B), an independent provider of vocational skills training in the United Kingdom. The upfront purchase price was $2.5 million in cash. In addition, we paid an additional $0.2 million of deferred consideration in the fourth quarter of 2016. The acquired Jencal Training business is included in the Learning Solutions segment and the results of its operations have been included in the consolidated financial statements beginning March 1, 2016. The pro-forma impact of the acquisition is not material to our results of operations.

Operating Highlights
 
Three Months ended September 30, 2017March 31, 2018 Compared to the Three Months ended September 30, 2016March 31, 2017
 
Our revenue increased $2.1$2.6 million or 1.7%2.1% during the thirdfirst quarter of 20172018 compared to the thirdfirst quarter of 2016.2017. The net increase is due to a $3.4$2.9 million increase in our Learning SolutionsWorkforce Excellence segment and a $3.2 million increase in our Performance Readiness Solutions segment, partially offset by a $3.9 million decrease in our Sandy Training & Marketing segment and a $0.7$0.3 million decline in our Professional & TechnicalBusiness Transformation Services segment. Foreign currency exchange rate changes resulted in a total $0.3$4.1 million increase in U.S. dollar reported revenue during the thirdfirst quarter of 2017.2018. The changes in revenue and gross profit are discussed in further detail below by segment.

Operating income, the components of which are discussed below, decreased $3.6$1.4 million or 45.5%20.9% to $4.4$5.2 million for the thirdfirst quarter of 20172018 compared to $8.0$6.6 million for the thirdfirst quarter of 2016.2017. The net decrease in operating income is primarily due to a $1.4$1.7 million decrease in gross profit, a $2.6$1.6 million increase in selling, general and administrative expenses and $0.4 million of restructuring charges, offset by a $0.3$2.4 million increase in the gain on change in fair value of contingent consideration during the thirdfirst quarter of 2017.2018.

For the three months ended September 30, 2017,March 31, 2018, we had income before income tax expense of $3.9$4.4 million compared to $7.6$6.1 million for the three months ended September 30, 2016.March 31, 2017. Net income was $3.3$2.6 million, or $0.19$0.16 per diluted share, for the three months ended September 30, 2017,March 31, 2018, compared to net income of $4.8$4.1 million, or $0.29$0.24 per diluted share, for the three months ended September 30, 2016.March 31, 2017. Diluted weighted average shares outstanding were 16.916.7 million for the thirdfirst quarter of 20172018 compared to 16.716.8 million for the thirdfirst quarter of 2016.2017.
 
Revenue
(Dollars in thousands)Three months ended
 September 30,
 2017 2016
Learning Solutions$54,801
 $51,379
Professional & Technical Services24,443
 25,111
Sandy Training & Marketing22,730
 26,612
Performance Readiness Solutions22,123
 18,876
 $124,097
 $121,978
(Dollars in thousands)Three months ended
 March 31,
 2018 2017
Workforce Excellence$74,431
 $71,543
Business Transformation Services50,601
 50,904
 $125,032
 $122,447
 
Learning SolutionsWorkforce Excellence revenue increased $3.4$2.9 million or 6.7%4.0% during the thirdfirst quarter of 20172018 compared to the thirdfirst quarter of 2016.2017. The revenue increase is due to the following:
A $2.3a $3.3 million net increase in e-Learning content developmentrevenue due to favorable changes in foreign currency exchange rates; and training business process outsourcing (BPO) services;
A $0.5a $1.3 million increase in revenue increase attributable tocontributed by the acquisitions completed in this segment within the last twelve months (consisting of $1.0 million of revenue from the YouTrain acquisition completed on August 31, 2017 and $0.3 million of revenue from the Emantras acquisition completed on April 1, 2017;2017); offset by
a $0.3 million net decrease in revenue in our Managed Learning Services practice (we experienced a net increase in revenue in the U.S. for digital learning and training content development services which was more than offset by decrease in vocational skills training services provided to the UK government); and

Aa $1.4 million net decrease in revenue in our Engineering & Technical Services practice primarily due to a decrease in software license and implementation services in our Energy business unit and a reduction in revenue from a contract with a foreign oil and gas client which was terminated in the fourth quarter of 2017.
Business Transformation Services revenue decreased $0.3 million revenue increase attributableor 0.6% during the first quarter of 2018 compared to the YouTrainfirst quarter of 2017. The revenue decrease is due to the following:
a $3.5 million net decrease in our Organizational Development practice due to a decline in platform adoption, strategic consulting and leadership development services;
a $0.8 million net decrease in our Sales Enablement practice primarily due to the completion of non-recurring vehicle launch events in 2017; offset by
a $3.2 million increase in revenue contributed by the acquisitions completed in this segment within the last twelve months (consisting of $1.4 million of revenue from the Hula Partners acquisition completed on January 2, 2018, $1.4 million from the CLS acquisition completed on August 31, 2017;2018 and $0.4 million of revenue from the McKinney Rogers acquisition completed on February 1, 2018); and
A $0.3a $0.8 million net increase in revenue due to favorable changes in foreign currency exchange rates.
Professional & Technical Services revenue decreased $0.7Gross Profit
(Dollars in thousands)Three months ended
 March 31,
 2018 2017
   % Revenue   % Revenue
Workforce Excellence$11,109
 14.9% $13,007
 18.2%
Business Transformation Services6,570
 13.0% 6,381
 12.5%
 $17,679
 14.1% $19,388
 15.8%
Workforce Excellence gross profit of $11.1 million or 2.7% during14.9% of revenue for the thirdfirst quarter of 2018 decreased by $1.9 million or 14.6% compared to gross profit of $13.0 million or 18.2% of revenue for the first quarter of 2017 compared to the third quarter of 2016. The revenue decrease isprimarily due to the following:
Aa $1.3 million cumulativedecrease in gross profit for vocational skill training services provided to the UK government as a result of the lower revenue adjustmentnoted above;
a $1.1 million decrease in gross profit for software license and implementation services in our energy business;
a $0.7 million decrease in gross profit in our oil and gas business primarily due to lower revenues and ongoing costs to support the closeout of a contract performance dispute resulting in an increase in estimated costs to complete a project forwith a foreign oil &and gas client duringwhich was terminated in the thirdfourth quarter of 2017; partially offset by
Aa $0.6 million increase to gross profit due to favorable changes in foreign currency exchange rates; and
a net $0.6 million increase in engineering and technical training services.
Sandy Training & Marketing revenue decreased $3.9 million or 14.6% during the third quarter of 2017 compared to the third quarter of 2016. The net decrease isgross profit primarily due to the following:
A net $4.0 million decreasemargin improvements in training services for automotive clients primarily due to the completion of a non-recurring vehicle launch event that contributed to higher revenue in 2016;our other business units within this segment and
A $0.4 million decrease in glovebox portfolio revenue; partially offset by
A $0.5 million increase in magazine publications revenue due to a partial shipment of publications during the third quarter of 2017 for which the prior year publication was entirely delivered cost savings initiatives implemented in the fourth quarter of 2016.2017.
Performance Readiness Solutions revenue increased $3.2 million or 17.2% during the third quarter of 2017 compared to the third quarter of 2016. The revenue increase is due to the following:
A $2.1 million increase attributable to the Maverick acquisition completed on October 1, 2016;
A $1.2 million increase attributable to the McKinney Rogers acquisition completed on February 1, 2017;
A $0.3 million increase attributable to the CLS acquisition completed on August 31, 2017; and
A $0.3 million increase in technical training services largely due to a new contract with an aerospace client; partially offset by
A $0.7 million net revenue decrease primarily in leadership development services.
Gross Profit
(Dollars in thousands)Three months ended
 September 30,
 2017 2016
   % Revenue   % Revenue
Learning Solutions$10,425
 19.0% $9,796
 19.1%
Professional & Technical Services1,721
 7.0% 3,596
 14.3%
Sandy Training & Marketing3,245
 14.3% 3,619
 13.6%
Performance Readiness Solutions3,255
 14.7% 2,993
 15.9%
 $18,646
 15.0% $20,004
 16.4%
Learning SolutionsBusiness Transformation Services gross profit of $10.4$6.6 million or 19.0%13.0% of revenue for the thirdfirst quarter of 20172018 increased by $0.6$0.2 million or 6.4%3.0% compared to gross profit of $9.8$6.4 million or 19.1%12.5% of revenue for the thirdfirst quarter of 2016 primarily due to2017. Despite the slight revenue increase noted above.

Professional & Technical Services gross profit of $1.7 million or 7.0% of revenue for the third quarter of 2017 decreased by $1.9 million or 52.1% compared to gross profit of $3.6 million or 14.3% of revenue for the third quarter 2016. The decrease is primarily due to a $2.6 million gross profit reduction (which includes the $1.3 million cumulative revenue adjustment noted above and a $1.3 million contract loss reserve) due to a contract performance dispute resulting in an increase in estimated costs to complete a project for a foreign oil & gas client during the third quarter of 2017. Excluding this reduction,segment, gross profit increased $0.7 millionprimarily due to an increase in revenue on projects with higher margin revenue streams during third quarter of 2017margins replacing projects with lower margins within our Sales Enablement practice compared to the third quarter of 2016.
Sandy Training & Marketing gross profit of $3.2 million or 14.3% of revenue for the third quarter of 2017 decreased by $0.4 million or 10.3% when compared to gross profit of $3.6 million or 13.6% of revenue for the third quarter of 2016 due to the revenue decrease noted above.

Performance Readiness Solutions gross profit of $3.3 million or 14.7% of revenue for the third quarter of 2017 increased by $0.3 million or 8.8% when compared to gross profit of $3.0 million or 15.9% of revenue for the third quarter of 2016 primarily due to gross profit contributed by acquisitions.prior year.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses increased $2.6$1.6 million or 21.3%12.2% from $12.0$13.0 million for the thirdfirst quarter of 20162017 to $14.6 million for the thirdfirst quarter of 2017.2018. The increase in SG&A expenses is primarily due to the following:
a $1.3$1.2 million increase in third party costs relating to our new financial system implementation which we anticipate will go live in 2018, the fourth quarter of 2018;
a $0.6$0.3 million increase in labor and benefits expense for internal resources charging into G&A to develop training and process maps in support of the ERP implementation;
a $0.4 million of labor and benefits expense relating to new business development personnel as well as marketing personnel, some of which represents new investments and some of which results from centralizing marketing resources that were previously recorded in cost of revenue;
a $0.3 million increase due to increases in foreign currency exchange rates compared to the prior year; and
a $0.2 million increase in amortization expense for intangible assets; partially offset by
a $0.2$0.5 million increasedecrease in bad debt expenseexpense; and

a $0.3 million net increasedecrease in miscellaneousSG&A expense as a result of the restructuring efforts initiated in the fourth quarter of 2017.

Restructuring charges

During the fourth quarter of 2017, we initiated restructuring and transition activities to improve operational efficiency, reduce costs and better position the company to drive future revenue growth and we recorded restructuring charges, consisting primarily of severance expense, of $3.3 million for the year ended December 31, 2017. During the three months ended March 31, 2018, we incurred an additional $0.4 million of restructuring charges, consisting primarily of severance expense, which is included in restructuring charges on the condensed consolidated statements of operations. The total remaining liability under these restructuring activities was $2.1 million as of March 31, 2018, of which $1.7 million is included in accounts payable and accrued expenses and $0.4 million is included in other expenses.noncurrent liabilities on the condensed consolidated balance sheet. We expect these restructuring activities to be substantially completed in the first half of 2018.

Change in Fair Value of Contingent Consideration
 
We recognized a $0.3$2.6 million net gain on the change in fair value of contingent consideration related to acquisitions during the thirdfirst quarter of 20172018 compared to a negligible lossnet gain $0.2 million in the thirdfirst quarter of 2016. Changes2017. The increase in the gain is primarily due to a $1.3 million gain related to the earnout for the Maverick acquisition and a $1.1 million gain related to the earnout for the McKinney Rogers acquisition due to a decrease in projected earnings for these acquired businesses compared to our prior forecasts, resulting in a lower fair value of the liabilities as of March 31, 2018. See Note 6 for further details regarding our accounting for contingent consideration obligations result from changes in discount periods and rates and changes in the timing and amount of revenue and/or earnings projections.consideration.

Interest Expense
 
Interest expense increased to $0.5$0.7 million for the thirdfirst quarter of 20172018 from $0.4 million for the thirdfirst quarter of 2016.2017. The increase in interest expense is due to both an increase in interest rates and higher borrowings under the Credit Agreement.
 
Other Income (Expense)Expense
 
Other incomeexpense increased $0.1 million during the thirdfirst quarter of 2017 primarily due to an increase in income from a joint venture.foreign currency losses. Other income (expense)expense consists primarily of income from a joint venture and foreign currency gains and losses. For both of the quarters ended September 30, 2017 and 2016, we had net foreign currency losses totaling less than $0.1 million. Foreign currency gains and losses primarily relate to the effect of exchange rates on intercompany receivables and payables and third party receivables and payables that are denominated in currencies other than the functional currency of our foreign subsidiaries.
 
Income Tax Expense
 
Income tax expense was $0.6$1.7 million for the thirdfirst quarter of 20172018 compared to $2.8$2.0 million for the thirdfirst quarter of 2016.2017. The effective income tax rate was 16.4%39.7% and 36.9%32.8% for the three months ended September 30,March 31, 2018 and 2017, and 2016, respectively. The decreaseincrease in the effective income tax rate in 20172018 compared to 20162017 is primarily due to a change$0.9 million increase, or an effective income tax rate of 19.7%, to the provisional estimate recorded in the mixfourth quarter of taxable income2017 relating to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings, imposed by the Tax Cuts and Jobs Act (the "Tax Act") that was enacted on December 22, 2017. The increase is partially offset by a decrease in the U.S. statutory tax rate from higher taxing jurisdictions35% to lower taxing jurisdictions, coupled with lower projected U.S. income21% and certainother discrete items. Excluding the discrete items that occurredincluded in tax expense in the thirdfirst quarter of 2017.2018, the Company's effective income tax rate was 25.9%. Income tax expense for the quarterly periods is based on an estimated annual effective tax rate which includes the U.S. federal, state and local, and non-U.S. statutory rates, permanent differences, and other items that may have an impact on income tax expense.

Nine Months ended September 30, 2017 ComparedThe increase to the Nine Months ended September 30, 2016
Our revenue increased $14.4 million or 4.0%provisional estimate of the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings during the nine months ended September 30, 2017 compared to nine months ended September 30, 2016. The net increase in revenuefirst quarter of 2018 is due to a $12.1 million increase in our Performance Readiness Solutions segmentthe result of further analysis of earnings and a $4.0 million increase in our Learning Solutions segment, partially offset by a $1.6 million decrease in our Professional & Technical Services segment and a $0.1 million decrease in our Sandy Training & Marketing segment. Foreign currency exchange rate declines resulted in a total $6.6 million decrease in U.S. dollar reported revenue during the nine months ended September 30, 2017 across all segments. The changes in revenue and gross profit are discussed in further detail below by segment.

Operating income, the components of which are discussed in detail below, decreased $1.9 million or 8.7% to $20.1 million for the nine months ended September 30, 2017 compared to $22.0 million for the same period in 2016. The net decrease in operating income is primarily due to a $4.5 million increase in SG&A expenses, partially offset by a $2.2 million net increase in gross profit and a $0.4 million increase in the gain on change in fair value of contingent consideration.

For the nine months ended September 30, 2017, we had income before income tax expense of $18.5 million compared to $21.6 million for the nine months ended September 30, 2016. Net income was $13.2 million, or $0.78 per diluted share, for the nine months ended September 30, 2017, compared to net income of $13.5 million, or $0.80 per diluted share, for the nine months ended

September 30, 2016. Diluted weighted average shares outstanding were 16.9 million for the nine months ended September 30, 2017 compared to 16.8 million for the same period in 2016.

Revenue
(Dollars in thousands)Nine months ended
 September 30,
 2017 2016
Learning Solutions$157,950
 $153,991
Professional & Technical Services75,404
 76,964
Sandy Training & Marketing75,694
 75,810
Performance Readiness Solutions68,657
 56,511
 $377,705
 $363,276
Learning Solutions revenue increased $4.0 million or 2.6% during the nine months ended September 30, 2017 comparedprofits related to the same period in 2016. The revenue increase is duecalculation of the transition tax. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the following:
A $6.7 million net increase in e-Learning content development and training business process outsourcing (BPO) services;
A $0.8 million increase attributable to the Jencal Training acquisition completed on March 1, 2016;
A $0.9 million revenue increase attributable to the Emantras acquisition completed on April 1, 2017; and
A $0.3 million increase attributable to the YouTrain acquisition completed on August 31, 2017; partially offset by
A $4.7 million decrease in revenue due to unfavorable changes in foreign currency exchange rates.
Professional & Technical Services revenue decreased $1.6 million or 2.0% during the nine months ended September 30, 2017 compared to the same period in 2016. The net decrease in revenue is due to the following:
A $1.3 million cumulative revenue adjustment due to a contract performance dispute resulting in an increase in estimated costs to complete a project for a foreign oil & gas client during the third quarter of 2017;
A $0.5 million net decrease in engineering and technical training services;
A $0.5 million net decrease in training services for energy clients;
A $1.3 million decrease in revenue due to unfavorable changes in foreign currency exchange rates; partially offset by
A $2.0 million increase in alternative fuels design and build projects.
Sandy Training & Marketing revenue decreased $0.1 million or 0.2% during the nine months ended September 30, 2017 compared to the same period in 2016. The net decrease is primarily due to the following:
A net $0.6 million decrease in training services for automotive clients primarily due to the completion of a non-recurring vehicle launch event that contributed to higher revenue in 2016; and
A $0.2 million decrease in glovebox portfolio revenue; partially offset by
A $0.7 million increase in magazine publications revenue due to an increase in the volume and scope of publications delivered.
Performance Readiness Solutions revenue increased $12.1 million or 21.5% during the nine months ended September 30, 2017 compared to the same period in 2016. The net decrease is primarily due to the following:

A $5.6 million increase attributable to the Maverick acquisition completed on October 1, 2016;
A $4.6 million increase attributable to the McKinney Rogers acquisition completed on February 1, 2017;
A $0.3 million increase attributable to the CLS acquisition completed on August 31, 2017;
A $1.9 million increase in technical training services largely due to a new contract with an aerospace client; and
A $1.0 million increase in platform adoption training services; partially offset by
A $0.7 million net decrease primarily in leadership development services; and
A $0.6 million decrease in revenue due to unfavorable changes in foreign currency exchange rates.

Gross Profit
(Dollars in thousands)Nine months ended
 September 30,
 2017 2016
   % Revenue   % Revenue
Learning Solutions$29,289
 18.5% $29,072
 18.9%
Professional & Technical Services10,457
 13.9% 11,586
 15.1%
Sandy Training & Marketing10,196
 13.5% 9,900
 13.1%
Performance Readiness Solutions10,527
 15.3% 7,717
 13.7%
 $60,469
 16.0% $58,275
 16.0%
Learning Solutions gross profit of $29.3 million or 18.5% of revenue for the nine months ended September 30, 2017 increased by $0.2 million or 0.7% when compared to gross profit of $29.1 million or 18.9% of revenue for the same period in 2016 primarily due to the revenue increase noted above.

Professional & Technical Services gross profit of $10.5 million or 13.9% of revenue for the nine months ended September 30, 2017 decreased by $1.1 million or 9.7% when compared to gross profit of $11.6 million or 15.1% of revenue for the same period in 2016. The decrease is primarily due to a $2.6 million gross profit reduction (which includes the $1.3 million cumulative revenue adjustment noted above and a $1.3 million contract loss reserve) due to a contract performance dispute resulting in an increase in estimated costs to complete a project for a foreign oil & gas client during the third quarter of 2017. Excluding this reduction, gross profit increased $1.5 million due to an increase in higher margin revenue streams during the nine months ended September 30, 2017 as compared to the same period in 2016.

Sandy Training and Marketing gross profit of $10.2 million or 13.5% of revenue for the nine months ended September 30, 2017 increased by $0.3 million or 3.0% when compared to gross profit of $9.9 million or 13.1% of revenue for the same period in 2016. Despite the slight revenue decline in this segment, gross profit increased due to a decrease in lower margin projects.
Performance Readiness Solutions gross profit of $10.5 million or 15.3% of revenue for the nine months ended September 30, 2017 increased by $2.8 million or 36.4% when compared to gross profit of $7.7 million or 13.7% of revenue for the same period in 2016. The increase in gross profit is primarily due to a $1.4 million increase attributable to acquisitions and the remaining $1.4 million increase is primarily due to the organic revenue growth noted above and a decrease in costs due to cost cutting measures.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $4.5 million or 12.5% from $36.2 million for the nine months ended September 30, 2016 to $40.8 million for the same period in 2017. The increase in SG&A expenses is primarily due to a $2.9 million increase in costs relating to our new financial system implementation which we anticipate will go live in 2018, a $0.4 million increase in bad debt expense, a $0.3 million increase in amortization expense, a $0.2 million increase in legal costs primarily related to acquisitions and a net increase in other costs of $0.7 million primarily due to increased labor and benefits.

Change in Fair Value of Contingent Consideration
We recognized a net gain on the change in fair value of contingent consideration related to acquisitions of $0.4 million compared to a net loss of $0.1 million for the nine months ended September 30, 2017 and 2016, respectively. Changes in the fair value of contingent consideration obligations result from changes in discount periods, changes in the timing and amount of revenue and/or earnings estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

Interest Expense
Interest expense increased $0.5 million from $1.0 million for the nine months ended September 30, 2016 to $1.5 million for the same period in 2017. The increase in interest expense is primarily due to both an increase in interest rates and higher borrowings under the Credit Agreement.

Other Income (Expense)
Other expense was $0.1 million for the nine months ended September 30, 2017 compared to other income of $0.6 million for the same period in 2016 and consisted primarily of income from a joint venture and foreign currency gains and losses. During the nine months ended September 30, 2017, we had a $0.1 million decrease in income from a joint venture compared to the corresponding period in 2016. In addition, we had a $0.2 million net foreign currency loss for the nine months ended September 30, 2017 compared to a $0.3 million net foreign currency gain during the same period in 2016. Foreign currency gains and losses primarily relate to the effect of exchange rates on intercompany receivables and payables and third party receivables and payables that are denominated in currencies other than the functional currency of our foreign subsidiaries.
Income Tax Expense
Income tax expense was $5.2 million for the nine months ended September 30, 2017 compared to $8.1 million for the same period in 2016. The effective income tax rate was 28.3% and 37.4% for the nine months ended September 30, 2017 and 2016, respectively. The decrease in the effective income tax rate in 2017 compared to 2016 is primarily due to a change in the mix of taxable income from higher taxing jurisdictions to lower taxing jurisdictions. Income tax expense for the quarterly periods is based on an estimated annual effective tax rate which includes the U.S. federal, state and local, and non-U.S. statutory rates, permanent differences, and other items that may have an impact on income tax expense.provisional amounts.

Liquidity and Capital Resources
 
Working Capital
 
Our working capital was $53.1$34.0 million at September 30, 2017March 31, 2018 compared to $59.9$49.8 million at December 31, 2016.2017. As of September 30, 2017March 31, 2018 we had $27.5$43.7 million of short-term borrowings and $31.0$25.0 million of long-term debt outstanding. We believe that cash generated from operations and borrowings available under our Credit Agreement ($67.250.3 million of available borrowings as of September 30, 2017)March 31, 2018) will be sufficient to fund our working capital and other requirements for at least the next twelve months.
 
As of September 30, 2017,March 31, 2018, the amount of cash and cash equivalents held outside of the U.S. by foreign subsidiaries was $17.9$16.9 million. AtThe 2017 Tax Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the present time,U.S. taxation of these amounts, we intend to continue to invest these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not anticipate repatriating these balancesexpect to fund domestic operations. We would be requiredincur any significant, additional taxes related to accrue for and pay taxes in the U.S. in the event we repatriated these funds.such amounts.

Stock Repurchase Program

We have a share repurchase program under which we may repurchase shares of our common stock from time to time in the open market, subject to prevailing business and market conditions and other factors. During the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, we repurchased approximately 101,000312,000 and 340,00070,000 shares, respectively, of our common stock in the open market for a total cost of approximately $2.4$7.3 million and $8.0$1.7 million, respectively. As of September 30, 2017,March 31, 2018, there was approximately $3.6$4.5 million available for future repurchases under the buyback program.
 

Acquisition-Related Payments
 
Below is a summary of the potential maximum contingent consideration we may be required to pay in connection with completed acquisitions as of September 30, 2017March 31, 2018 (dollars in thousands):
Acquisition:Original range of potential undiscounted payments As of September 30, 2017 Maximum contingent consideration due inOriginal range of potential undiscounted payments As of March 31, 2018 Maximum contingent consideration due in
 201720182019-2020Total
   201820192020Total
Maverick$0 - $10,000 $5,000
$5,000
$—
$10,000
$0 - $10,000 $5,902
$—
$—
$5,902
McKinney Rogers$0 - $18,000 967
4,000
8,000
12,967
$0 - $18,000 —
4,000
4,000
8,000
Emantras —
*
—
—
 *
—
—
—
CLS$0 - $2,132 —
2,132
—
2,132
$0 - $2,312 2,312
—
—
2,312
 $5,967
$11,132
$8,000
$25,099
 $8,214
$4,000
$4,000
$16,214
    
* There is no maximum contingent consideration payable to the seller.

On May 1, 2018, we acquired the entire share capital of IC Acquisition Corporation, a Delaware corporation, and its subsidiary, IC Axon Inc., a Canadian corporation (IC Axon). IC Axon develops science-driven custom learning solutions for pharmaceutical and life science customers. The upfront purchase price is $30.0 million in cash, subject to a working capital adjustment to be calculated within 90 days following the closing of the acquisition. In addition, the purchase agreement requires up to an additional $3.5 million of consideration, contingent upon the achievement of an earnings target during a twelve-month period subsequent to the closing of the acquisition.


Significant Customers & Concentration of Credit Risk
 
We have a market concentration of revenue in both the automotive sector and financial services & insurance sector. Revenue from the automotive industrysector accounted for approximately 22% of our consolidated revenue for both of the nine-monththree-month periods ended September 30, 2017March 31, 2018 and 2016.2017. In addition, we have a concentration of revenue from a single automotive customer, which accounted for approximately 15% and 13% of our consolidated revenue for both of the nine-month periodsthree months ended September 30,March 31, 2018 and 2017, and 2016.respectively. As of September 30, 2017,March 31, 2018, accounts receivable from a single automotive customer totaled $10.9$14.6 million, or 11%14%, of our consolidated accounts receivable balance.

Revenue from the financial services & insurance industrysector accounted for approximately 20% and 21% of our consolidated revenue for both of the nine monthsthree-month periods ended September 30, 2017March 31, 2018 and 2016, respectively.2017. In addition, we have a concentration of revenue from a single financial services customer, which accounted for approximately 14% and 15% of our consolidated revenue for both of the nine monthsthree-month periods ended September 30, 2017March 31, 2018 and 2016, respectively.2017. As of September 30, 2017,March 31, 2018, billed and unbilled accounts receivable from a single financial services customer totaled $28.3$25.3 million, or 19%17%, of our consolidated accounts receivable and costs and estimated earnings in excess of billings on uncompleted contractsunbilled revenue balances. No other single customer accounted for more than 10% of our consolidated revenue for the ninethree months ended September 30,March 31, 2018 or 2017 or 2016 or consolidated accounts receivable balance as of September 30, 2017.

March 31, 2018.

Cash Flows
 
NineThree Months ended September 30, 2017March 31, 2018 Compared to the NineThree Months ended September 30, 2016March 31, 2017
 
Our cash and cash equivalents balance increased $1.7decreased $6.7 million from $16.3$23.6 million as of December 31, 20162017 to $18.0$16.9 million as of September 30, 2017.March 31, 2018. The increasedecrease in cash and cash equivalents during the ninethree months ended September 30, 2017March 31, 2018 resulted from cash provided by operating activities of $21.2$9.4 million, cash used in investing activities of $14.4$11.2 million, cash used in financing activities of $6.4$5.1 million and a positive effect of exchange ratesrate changes on cash of $1.3$0.2 million.
 
Cash provided by operating activities was $21.2$9.4 million for the ninethree months ended September 30, 2017March 31, 2018 compared to $11.9$4.1 million for the same period in 2016.2017. The increase in cash from operations is primarily due to a net favorable change in working capital balances during the ninethree months ended September 30, 2017March 31, 2018 compared to the same period in 2016.2017.
 
Cash used in investing activities was $14.4$11.2 million for the ninethree months ended September 30, 2017March 31, 2018 compared to $5.4$4.1 million for the same period in 2016.2017. The increase in cash used is primarily due to $9.0a $6.8 million increase in cash paid to complete acquisitions and a $1.1$0.5 million increase in fixed asset additions.other investing activities primarily for capitalized software development costs.
 
Cash used in financing activities was $6.4$5.1 million for the ninethree months ended September 30, 2017March 31, 2018 compared to $11.2$1.3 million for the same period in 2016.2017. The decreaseincrease in cash used in financing activities is primarily due a $5.5$6.1 million decreaseincrease in cash used for share repurchases during the ninethree months ended September 30, 2017March 31, 2018 compared to the same period in 2016,2017, partially offset by $0.5 million ofa $2.0 decrease in the change in negative cash paid for a premium on an interest rate cap agreement which is discussed more fully below.book balances.
 
Debt

On December 15, 2016, we entered intoWe have a Fifth Amended and Restated Financing and Security Agreement (the “Credit Agreement”). The Credit Agreementcredit agreement with a bank which provides for a revolving credit facility up to a maximum principal amount of $100 million expiring on December 31, 2021 and for a term loan in the principal amount of $40 million maturing on April 30, 2020 and(the "Credit Agreement"). The Credit Agreement is secured by substantially all of our assets.

The maximum interest rate on the Credit Agreement is the daily one-month LIBOR market index rate (for borrowings in Dollars and Sterling) or the daily one month EURIBOR (for borrowings in Euros) plus 2.50%. Based on our financial performance, the interest rate can be reduced to a minimum rate of the daily one-month LIBOR market index rate plus 1.25%, with the rate being determined based on our maximum leverage ratio for the preceding four quarters. Each unpaid advance on the revolving loan will bear interest until repaid. The term loan is payable in monthly installments equal to $1.0 million plus applicable interest, beginning on January 1, 2017. We may prepay the term loan or the revolving loan, in whole or in part, at any time without premium or penalty, subject to certain conditions. Amounts repaid or prepaid on the term loan may not be reborrowed.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our and our subsidiaries’ (subject to certain exceptions) ability to, among other things, grant liens, make investments, incur indebtedness, merge or consolidate, dispose of assets, make acquisitions. We are also required to maintain compliance with a minimum fixed charge coverage ratio of 1.5 to 1.0 and a maximum leverage ratio of 3.0 to 1.0. As of September 30, 2017,March 31, 2018, our fixed coverage charge ratio was 1.71.8 to 1.0 and our leverage ratio was 1.51.7 to 1.0, all of which were in compliance with the Credit Agreement.

As of September 30, 2017,March 31, 2018, our total long-term debt outstanding under the term loan was $31.0$25.0 million. In addition, there were $27.5$43.7 million of borrowings outstanding and $67.2$50.3 million of available borrowings under the Credit Agreement. For the ninethree months ended September 30, 2017,March 31, 2018, the weighted average interest rate on our borrowings was 2.8%3.4%.

In March 2017, we entered into an interest rate swap agreement which effectively fixed our interest rate on the remaining $37 million outstanding on our term loan to a fixed LIBOR of 1.59% plus the applicable margin under the Credit Agreement. We have designated the interest rate swap, which expires on April 1, 2020, as a cash flow hedge and have applied hedge accounting. The fair value of the derivative liabilityasset associated with the interest rate swap was less than$0.2 million and $0.1 million as of September 30,March 31, 2018 and December 31, 2017, respectively, and is included in other liabilitiesassets on the condensed consolidated balance sheet.

In April 2017, we entered into an interest rate cap agreement and paid a premium of $0.5 million which caps the daily one-month LIBOR at 2.0% for an aggregate notional amount of $20.0 million of our variable rate debt under our credit facility. The interest rate cap agreement matures on December 31, 2021. We have designated the interest rate cap as a cash flow hedge and have applied hedge accounting. The fair value of the derivative asset associated with the interest rate cap was $0.2$0.5 million and $0.3 million as of September 30,March 31, 2018 and December 31, 2017, respectively, and is included in other assets on the condensed consolidated balance sheet.

Off-Balance Sheet Commitments
 
As of September 30, 2017March 31, 2018, we did not have any off-balance sheet commitments except for operating leases and letters of credit entered into in the normal course of business.
 
Accounting Standards Issued

We discuss recently issued accounting standards in Note 2 to the accompanying Condensed Consolidated Financial Statements.condensed consolidated financial statements.

Forward-Looking Statements
 
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward looking statements. Forward–looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. We use words such as “expects,” “intends,” “believes,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “plans” and similar expressions to indicate forward-looking statements, but their absence does not mean a statement is not forward-looking. Because these forward-looking statements are based upon management’s expectations and assumptions and are subject to risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including, but not limited to, those factors set forth in Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20162017 and those other risks and uncertainties detailed in our periodic reports and registration statements filed with the Securities and Exchange Commission. We caution that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict these new risk factors, nor can we assess the effect, if any, of the new risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ from those expressed or implied by these forward-looking statements.
 
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, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report.



Item 3.    Quantitative and Qualitative Disclosure About Market Risk
 
Interest rate risk

We are exposed to interest rate risk related to our outstanding debt obligations. Borrowings under our Credit Agreement bear interest based on a variable rate. The maximum interest rate on our borrowings under the Credit Agreement is the daily one-month LIBOR market index rate (for borrowings in Dollars and Sterling) or the daily one month EURIBOR (for borrowings in Euros) plus 2.50%. Based on our financial performance, the interest rate can be reduced to a minimum rate of the daily one-month LIBOR market index rate plus 1.25%, with the rate being determined based on our maximum leverage ratio for the preceding four quarters. As such, we are exposed to interest rate risk relating to the fluctuations in the LIBOR rate. In an effort to manage our exposure to this risk, we entered into interest rate derivative contracts discussed in further detail below.
In March 2017, we entered into an interest rate swap agreement which effectively fixed our interest rate on the remaining $37 million outstanding on our term loan to a fixed LIBOR of 1.59% plus the applicable margin under the Credit Agreement. We have designated the interest rate swap, which expires on April 1, 2020, as a cash flow hedge and have applied hedge accounting. The fair value of the derivative liabilityasset associated with the interest rate swap was less than $0.2 million and $0.1 million as of September 30,March 31, 2018 and December 31, 2017, respectively, and is included in other liabilitiesassets on the condensed consolidated balance sheet.
In April 2017, we entered into an interest rate cap agreement and paid a premium of $0.5 million which caps the daily one-month LIBOR at 2.0% for an aggregate notional amount of $20.0 million of our variable rate debt under our credit facility. The interest rate cap agreement matures on December 31, 2021. We have designated the interest rate cap as a cash flow hedge and have applied hedge accounting. The fair value of the derivative asset associated with the interest rate cap was $0.2$0.5 million and $0.3 million as of September 30,March 31, 2018 and December 31, 2017, respectively, and is included in other assets on the condensed consolidated balance sheet.

 
Item 4.    Controls and Procedures
 
Disclosure Controls and Procedures 
 
We maintain a comprehensive set of disclosure controls and procedures (as defined in Rules 13a-15(e) and under the Securities Exchange Act of 1934 (“Exchange Act”)) designed to provide reasonable assurance that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective in providing reasonable assurance of the achievement of the objectives described above.
 
Internal Control Over Financial Reporting
 
During the quarter ended September 30, 2017,March 31, 2018, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d—15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
 

PART II. OTHER INFORMATION
 
Item 1. Legal Proceedings
 
None.
 
Item 1A. Risk Factors
 
The Company has no material changes to the disclosure on this matter made in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
2017.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about the Company's share repurchase activity for the three months ended September 30, 2017:March 31, 2018: 
  Issuer Purchases of Equity Securities
  
Total number
of shares purchased
  
Average
price paid per share
 
Total number
of shares
purchased as
part of publicly announced program
 
Approximate
dollar value of
shares that may yet
be purchased under the program (1)
Month     
July 1 - 31, 2017 —
  $—
 —
 $3,631,000
August 1 - 31, 2017 13,338
(2) $28.41
 —
 $3,631,000
September 1 - 30, 2017 —
  $—
 —
 $3,631,000
  Issuer Purchases of Equity Securities
  
Total number
of shares purchased
  
Average
price paid per share
 
Total number
of shares
purchased as
part of publicly announced program
 
Approximate
dollar value of
shares that may yet
be purchased under the program (1)
Month     
January 1 - 31, 2018 64,933
(2) $24.48
 64,751
 $10,160,000
February 1 - 28, 2018 190,000
  $23.27
 190,000
 $5,729,000
March 1 - 31, 2018 58,794
(2) $21.86
 56,801
 $4,487,000
 
(1)We have a share repurchase program under which we may repurchase shares of our common stock from time to time in the open market subject to prevailing business and market conditions and other factors. There is no expiration date for the repurchase program.
(2)Includes shares surrendered by employees to satisfy minimum tax withholding obligations on restricted stock units which vested and shares surrendered to exercise stock options and satisfy the related minimum tax withholding obligations during the thirdfirst quarter of 2017.2018.






Item 6.Exhibits

10.1
Amendment to Fifth Amended and Restated Financing and Security Agreement.*
31.1
Certification of Chief Executive Officer of the Company dated November 2, 2017May 3, 2018 pursuant to Securities and Exchange Act Rule 13d-14(a)/15(d-14(a), as adopted pursuant to Section 302 and 404 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of Executive Vice President and Chief Financial Officer of the Company dated November 2, 2017May 3, 2018 pursuant to Securities and Exchange Act Rule 13d-14(a)/15(d-14(a), as adopted pursuant to Section 302 and 404 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Chief Executive Officer and Chief Financial Officer of the Company dated November 2, 2017May 3, 2018 pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101The following materials from GP Strategies Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements.*
*Filed herewith.


SIGNATURES
 
Pursuant to the requirements 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
  
November 2, 2017May 3, 2018/s/  Scott N. Greenberg
 Scott N. Greenberg
 Chief Executive Officer
  
November 2, 2017May 3, 2018/s/  Sharon Esposito-MayerMichael R. Dugan
 Sharon Esposito-MayerMichael R. Dugan
 Executive Vice President and Chief Financial Officer

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