GTSI's CEO-in-waiting sees smooth transition ahead

As GTSI Corp.’s Jim Leto prepares to step down as chief executive officer on Feb. 15, his successor, Scott Friedlander, says the transition will be a smooth one as the two executives began developing four years ago when Leto joined the company.

“Jim has allowed me run the company day in and day out as president and chief operating officer since December 2007” while Leto focused of CEO activities such as liaison with the board of directors, Friedlander told Washington Technology today.

He said almost from day one Leto had a human capital plan, which included everything from outside coaches, cascading goals throughout the corporation and developmental action planning.

“Inside that human capital plan was a very defined succession plan if I were to be the right guy” to succeed Leto, Friedlander said, although there was no specific date within the four- to five-year plan for him to assume the role of CEO.

“As things continued to mature in the company and improve in all regards in terms of human capital, our strategic plan, our operational ability and our financial health, I think Jim felt more and more comfortable and confident in my ability and in the ability of the executive team as well,” he said.

He said GTSI was in trouble financially and structurally when Leto took over as CEO four years ago.

“We struggled,” he said. “Obviously the first elements were getting the company back to health, stabilizing the company, locking down the financial elements of it, getting the company right-sized, if you will. And getting the infrastructure set and the strategic plan set.”

“I think we did that,” Friedlander said. Under Leto’s leadership, “I think we have maneuvered through the waters very well. We’ve adjusted our model.”

“And obviously the last two years proved that the first two years of the four-year total we did the right thing,” he said, and added that GTSI is now a healthy company with positive cash flow.

While GTSI reported lower net earnings for its last reported quarter, which ended Sept. 30, the company said it took an income tax expense of $3.2 million that was not taken in the same quarter in 2008 because the company reverted to full taxpayer status. GTSI's net earnings were $3.8 million on revenue of $209.7 million, compared to net earnings of $8.2 million in the same 2008 quarter, when revenue was $257.1 million.

Expenses also are dropping, according to the company’s quarterly report. Selling, general and administrative expenses for the quarter were $23.8 million, down from the $27.5 million for the same period in 2008.

The company’s gross margins remain the same at about 14 percent.

Friedlander said he believes his first year at the helm will be a good year for GTSI as he leads the company toward its three-year goal of becoming a mid-tier systems integrator that remains true to its core strengths even as it extends its services capabilities.

He called Leto a tremendous coach and mentor, whose legacy was already recognized at last week’s national company meeting with a standing ovation.

“He is leaving a company that today is making money, cash-flow positive, has a new corporate facility, a ton of good energy around it and is adjusting course in a market that is not simple to maneuver through,” he said. “It’s because of him that the company in many, many ways has stabilized the way it has.”

Friedlander said he is in no rush to name his successor as COO or make any executive changes until at least the second half of the year. “It will all be tied to what I’d call the strategic plan and the operational plan,” he said.

“We have a strong, strong executive group and we have a very strong next tier, if you will, from what I’ll call directors and vice presidents in the company,” he said. “So I am really comfortable with where we are today.”