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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    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: 001-34871
 GTSI CORP.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    54-1248422
(I.R.S. Employer
Identification No.)2553 Dulles View Drive, Suite 100, Herndon, VA
(Address of principal executive offices)
    
    20171-5219
(Zip Code)
 703-502-2000
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting Company þ(Do not check if a smaller reporting company)
 o þ




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##### 



GTSI Corp.
Form 10-Q for the Quarter Ended March 31, 2011
INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements Unaudited Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
2011 and 2010
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2011 and 2010
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. Reserved
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    27SIGNATURES
    
    
    28Exhibit 31.1Exhibit 31.2Exhibit 32




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GTSI CORP.
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
  March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,112
    
    
    $
    4,049Accounts receivable, net
    
    
    74,796
    
    
    
    154,891Inventory
    
    
    6,389
    
    
    
    13,708Deferred costs
    
    
    2,793
    
    
    
    6,991Other current assets
    
    
    4,090
    
    
    
    2,462Total current assets
    
    
    127,180
    
    
    
    182,101Depreciable assets, net
    
    
    6,588
    
    
    
    7,452Long-term receivables and other assets
    
    
    18,845
    
    
    
    14,291Total assets
    
    $
    152,613
    
    
    $
    203,844LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    34,098
    
    
    $
    50,870Accounts payable  floor plan
    
    
    8,462
    
    
    
    35,172Accrued liabilities
    
    
    9,958
    
    
    
    14,887Deferred revenue
    
    
    3,714
    
    
    
    3,661Total current liablilites
    
    
    56,232
    
    
    
    104,590Other liabilities
    
    
    3,063
    
    
    
    3,044Total liabilities
    
    
    59,295
    
    
    
    107,634Commitments and contingencies (See Note 12)Stockholders equityPreferred stock  $0.25 par value, 680,850 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock  $0.005 par value, 20,000,000 shares authorized; 10,056,650 issued and 9,635,664
outstanding at March 31, 2011; and 10,056,650 issued and 9,625,728 outstanding at December 31,
2010
    
    
    50
    
    
    
    50Capital in excess of par value
    
    
    53,870
    
    
    
    53,985Retained earnings
    
    
    41,322
    
    
    
    43,995Treasury stock, 366,504 shares at March 31, 2011 and 346,119 shares at December 31, 2010, at cost
    
    
    (1,924
    )
    
    
    (1,820
    )Total stockholders equity
    
    
    93,318
    
    
    
    96,210Total liabilities and stockholders equity
    
    $
    152,613
    
    
    $
    203,844
   1




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GTSI CORP.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months EndedMarch 31,2011
    
    
    2010SALESProduct
    
    $
    58,538
    
    
    $
    88,714Service
    
    
    7,886
    
    
    
    10,716Financing
    
    
    3,911
    
    
    
    2,38470,335
    
    
    
    101,814COST OF SALESProduct
    
    
    49,967
    
    
    
    80,454Service
    
    
    5,973
    
    
    
    6,980Financing
    
    
    1,406
    
    
    
    86157,346
    
    
    
    88,295GROSS MARGIN
    
    
    12,989
    
    
    
    13,519SELLING, GENERAL & ADMINISTRATIVE
EXPENSES
    
    
    18,295
    
    
    
    22,214LOSS FROM OPERATIONS
    
    
    (5,306
    )
    
    
    (8,695
    )INTEREST AND OTHER INCOME, NETInterest and other income
    
    
    30
    
    
    
    155Equity income from affiliates
    
    
    1,104
    
    
    
    1,472Interest expense
    
    
    (150
    )
    
    
    (178
    )Interest and other income, net
    
    
    984
    
    
    
    1,449LOSS BEFORE INCOME TAXES
    
    
    (4,322
    )
    
    
    (7,246
    )INCOME TAX BENEFIT
    
    
    1,649
    
    
    
    2,658NET LOSS
    
    $
    (2,673
    )
    
    $
    (4,588
    )LOSS PER SHAREBasic
    
    $
    (0.28
    )
    
    $
    (0.48
    )Diluted
    
    $
    (0.28
    )
    
    $
    (0.48
    )WEIGHTED AVERAGE SHARES OUTSTANDINGBasic
    
    
    9,632
    
    
    
    9,617Diluted
    
    
    9,632
    
    
    
    9,617
   2




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GTSI CORP.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months EndedMarch 31,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,673
    )
    
    $
    (4,588
    )Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation and amortization
    
    
    929
    
    
    
    962Loss on sale of depreciable assets
    
    
    
    
    
    
    12Stock-based compensation
    
    
    (192
    )
    
    
    453Equity income, net of distributions in 2011
and 2010 of $0 and $868, respectively
    
    
    (1,104
    )
    
    
    (604
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    80,096
    
    
    
    96,574Inventory
    
    
    7,319
    
    
    
    4,219Other assets
    
    
    (899
    )
    
    
    (738
    )Accounts payable
    
    
    (16,772
    )
    
    
    (52,002
    )Accrued liabilities
    
    
    (4,929
    )
    
    
    (8,700
    )Other liabilities
    
    
    71
    
    
    
    (881
    )Net cash provided by operating activities
    
    
    61,846
    
    
    
    34,707CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of depreciable assets
    
    
    (46
    )
    
    
    (147
    )Net cash used in investing activities
    
    
    (46
    )
    
    
    (147
    )CASH FLOWS FROM FINANCING ACTIVITES:Payments on floor plan, net
    
    
    (26,710
    )
    
    
    (18,395
    )Common stock purchases
    
    
    (27
    )
    
    
    (433
    )Net cash used in financing activities
    
    
    (26,737
    )
    
    
    (18,828
    )NET INCREASE IN CASH
    
    
    35,063
    
    
    
    15,732CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    4,049
    
    
    
    7,894CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    39,112
    
    
    $
    23,626
   3




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GTSI CORP.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation and First Quarter 2011 Results of Operations
 Basis of Presentation
    First Quarter 2011 Results of Operations
   2. New Accounting Pronouncements
   4




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3. Accounts Receivable
  March 31, 2011
    
    
    December 31, 2010Trade accounts receivable
    
    $
    52,149
    
    
    $
    103,800Unbilled trade accounts receivable
    
    
    8,548
    
    
    
    21,948Lease receivables, net
    
    
    2,241
    
    
    
    2,478Finance receivables, net
    
    
    8,772
    
    
    
    23,351Vendor and other receivables
    
    
    3,785
    
    
    
    4,027Total accounts receivable
    
    $
    75,495
    
    
    $
    155,604Less: Allowance for doubtful
accounts
    
    
    (112
    )
    
    
    (98
    )Sales return allowance
    
    
    (587
    )
    
    
    (615
    )Accounts receivable, net
    
    $
    74,796
    
    
    $
    154,891
 4. Long-term receivables and other assets
  March 31, 2011
    
    
    December 31, 2010Lease receivables, net
    
    $
    1,862
    
    
    $
    1,062Finance receivables, net
    
    
    3,721
    
    
    
    1,123Equity Investment in EyakTek
    
    
    11,719
    
    
    
    10,615Other Assets
    
    
    1,543
    
    
    
    1,491Long-term receivables and
other assets
    
    $
    18,845
    
    
    $
    14,291
 5. Lease and Finance Receivables
 Leases
   5




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March 31, 2011
    
    
    December 31, 2010Future minimum lease
payments receivable
    
    $
    4,723
    
    
    $
    3,673Unearned income
    
    
    (620
    )
    
    
    (133
    )$
    4,103
    
    
    $
    3,540
  March 31, 2011
    
    
    December 31, 2010Future minimum finance
payments receivable
    
    $
    14,535
    
    
    $
    25,382Unearned income
    
    
    (2,042
    )
    
    
    (908
    )$
    12,493
    
    
    $
    24,474
 6. Transferred Receivables and Financed Lease Debt
 Transfers and Servicing
 7. Credit Agreement and Amended Credit Agreement
    Total Credit Agreement
    
    $
    100,000Borrowing base limitation
    
    
    (62,132
    )Total borrowing capacity
    
    
    37,868Less: non-interest bearing advances (floor plan loans)
    
    
    (8,462
    )Less: letters of credit
    
    
    (5,115
    )Total unused availability
    
    $
    24,291
  6




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
    
    Maintain Tangible Net Worth not less than or equal to $45 million as of the end of each
fiscal month
 
    
    Maintain Ratio of Total Liabilities to Tangible Net Worth not greater than 5.25 to 1.00
as of the end of each fiscal month
 
    
    Maintain Current Ratio not less than (i) 1.20 to 1.00 as of the last business day of the
fiscal months of January, February, March, April, May, June, October, November and December
and (ii) 1.15 to 1.00 as of the last business day of the fiscal months of July, August and
September
 
    
    Maintain minimum Total Debt Service Coverage Ratio of 1.25 to 1.00 as of the end
of each fiscal month
    8. Stockholders Equity
 Purchase of Capital Stock
     7




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Stock-Based Compensation
 Stock Incentive Plans
   Stock Options
  Weighted Average
    
    
    AggregateShares
    
    
    Weighted Average
    
    
    Remaining
    
    
    Intrinsic Value(in thousands)
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    (in thousands)Outstanding at
January 1, 2011
    
    
    964
    
    
    $
    7.79Granted
    
    
    100
    
    
    
    4.73Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (40
    )
    
    
    6.28Expired
    
    
    (276
    )
    
    
    8.75Outstanding at
March 31, 2011
    
    
    748
    
    
    $
    7.12
    
    
    
    3.59
    
    
    $
    1,000Exercisable at
March 31, 2011
    
    
    471
    
    
    $
    8.32
    
    
    
    2.05
    
    
    $
    
   8




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Restricted Shares
  Weighted AverageShares
    
    
    Grant-Date Fair(in thousands)
    
    
    ValueNonvested at January 1, 2011
    
    
    85
    
    
    $
    8.35Granted
    
    
    
    
    
    
    Vested
    
    
    (16
    )
    
    
    11.94Forfeited
    
    
    (15
    )
    
    
    7.40Nonvested at March 31, 2011
    
    
    54
    
    
    $
    7.59
 Stock
Appreciation Rights (SARs)
  Weighted Average
    
    
    AggregateShares
    
    
    Weighted Average
    
    
    Remaining
    
    
    Intrinsic Value(in thousands)
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    (in thousands)Outstanding at
January 1, 2011
    
    
    381
    
    
    $
    9.60Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (37
    )
    
    
    9.60Expired
    
    
    (84
    )
    
    
    9.60Outstanding at
March 31, 2011
    
    
    260
    
    
    $
    9.60
    
    
    
    2.87
    
    
    $
    Exercisable at
March 31, 2011
    
    
    186
    
    
    $
    9.60
    
    
    
    2.52
    
    
    $
    
  Stock Compensation Expense and Unrecognized Compensation
   9. Accrued Liabilities
  March 31, 2011
    
    
    December 31, 2010Accrued commissions and
bonuses
    
    $
    772
    
    
    $
    3,805Accrued income taxes
    
    
    
    
    
    
    254Future contractual lease
obligations
    
    
    3,720
    
    
    
    4,733Other
    
    
    5,466
    
    
    
    6,095Total accrued liabilities
    
    $
    9,958
    
    
    $
    14,887
  9




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10. Loss Per Share
    Three months endedMarch 312011
    
    
    2010Basic loss per shareNet loss
    
    $
    (2,673
    )
    
    $
    (4,588
    )Weighted average shares outstanding
    
    
    9,632
    
    
    
    9,617Basic loss per share
    
    $
    (0.28
    )
    
    $
    (0.48
    )Diluted loss per share:Net loss
    
    $
    (2,673
    )
    
    $
    (4,588
    )Weighted average shares outstanding
    
    
    9,632
    
    
    
    9,617Incremental shares attributable to the
assumed
exercise of outstanding stock options
    
    
    N/A
    
    
    
    N/AWeighted average shares and equivalents
    
    
    9,632
    
    
    
    9,617Diluted loss per share
    
    $
    (0.28
    )
    
    $
    (0.48
    )
 11. Income Taxes
     10




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12. Commitments and Contingencies
 Product Warranties
  Three months endedMarch 312011
    
    
    2010Accrued warranties at beginning of period
    
    $
    229
    
    
    $
    215Charges made against warranty liabilities
    
    
    (0
    )
    
    
    (0
    )Adjustments to warranty reserves
    
    
    (24
    )
    
    
    (1
    )Accruals for additional warranties sold
    
    
    5
    
    
    
    8Accrued warranties at end of period
    
    $
    210
    
    
    $
    222
 Maintenance Warranties
  Three months endedMarch 312011
    
    
    2010Deferred warranty revenue at beginning of period
    
    $
    1,883
    
    
    $
    798Deferred warranty revenue recognized
    
    
    (873
    )
    
    
    (181
    )Revenue deferred for additional warranties sold
    
    
    183
    
    
    
    12Deferred warranty revenue at end of period
    
    $
    1,193
    
    
    $
    629
 Letters of Credit
   Employment Agreements
  Contingencies
    11




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13. Related Party Transactions
    12




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Three Months ended March 31,2011
    
    
    2010Revenues
    
    $
    66,882
    
    
    $
    94,485Gross margin
    
    $
    8,562
    
    
    $
    9,192Net income
    
    $
    2,984
    
    
    $
    3,979
       13




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14. Subsequent Event
   14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Disclosure Regarding Forward-Looking Statements
  
    
    GTSIs ability to comply with its obligations under the October 19, 2010 administrative
agreement with the SBA and the outcome of the continuing related Federal Government
investigations
 
    
    Adverse effects of possible increased governmental and regulatory scrutiny or negative
publicity
 
    
    Our continuing disputes with EyakTek and its other members
 
    
    Possible future reduction of EyakTeks financial performance
 
    
    Adverse effects of possible delay in the Federal Budget process or a Federal Government
shutdown
 
    
    Our ability to retain or attract key management personnel
 
    
    Changes in Federal government fiscal spending
 
    
    Our ability to comply with our Amended Credit Agreement may impact our ability to
continue to operate our business
 
    
    Our reliance on a small number of large transactions for significant portions of our
sales and gross margins
 
    
    Our ability to shift our business model from a reseller of products to a high-end
solutions provider
 
    
    Any issue that compromises our relationship with agencies of the Federal government
would cause serious harm to our business
 
    
    Our ability to meet the covenants under our Amended Credit Agreement in future periods
 
    
    Negativity to our business due to the current global economic and credit conditions
 
    
    Possible infrastructure failures
 
    
    Any material weaknesses in our internal control over financial reporting
 
    
    Possible changes in accounting standards and subjective assumptions may significantly
affect our financial results
 
    
    Continued net losses, if we fail to align costs with our sales levels
  15




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
    
    Our quarterly sales and cash flows are volatile, which makes our future financial
results difficult to forecast
 
    
    Unsatisfactory performance by third parties with which we work could hurt our
reputation, operating results and competitiveness
 
    
    Our ability to adapt to consolidation within the OEM market place
 
    
    Our ability to remain compliant with OEM certification requirements
 
    
    Our dependence on certain strategic partners
 
    
    Our ability to integrate any potential future acquisitions, strategic investments or
mergers
 
    
    Our ability to enter new lines of business
  Overview
       16




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SBA Agreement
  Possible Material Trends, Demands, Commitments, Events and Uncertainties
  
    
    The ramifications of the SBA suspension continued to impact our sales and operating
expenses during the three months ended March 31, 2011 and will likely have an adverse
effect on our sales and operating expenses during the three months ended June 30, 2011
along with the remainder of 2011; mainly due to open sales positions from the higher than
expected rate of voluntary separations over the past six months. Management has taken
action in an effort to minimize the adverse effect on our future business including the
active recruitment of open sales positions. As of late April 2011, all key open sales
positions have been filled with the last two new hires joining the Company by mid May 2011.
During the three months ended March 31, 2011, the Company incurred additional SG&A
expenses of approximately $0.2 million and $0.6 million related to legal and monitoring
expenses, respectively, in connection with the SBA Agreement. If the Company fails to
generate additional sales, mitigate impacted opportunities and reduce operating costs to
offset for reduced sales and added administrative costs related to our obligations and
restrictions under the SBA Agreement it may have a material adverse effect on the Companys
business, results of operations and financial condition in future periods. The Company
expects to incur additional SG&A expenses during the year ended December 31, 2011 related
to legal, professional and monitoring expenses in connection with the SBA Agreement.
 
    
    Resolution of our continuing disputes with EyakTek and its other members may have a
material adverse effect on our financial performance, as discussed in Part II. Other
Information Item 1 Legal Proceedings. While the outcome of these continuing disputes
with EyakTek and its other members is currently unknown, possible outcomes may include a
buyout of our equity interests in EyakTek, the dissolution of EyakTek, the continuation of
EyakTek under its current Operating Agreement or under a modified Operating Agreement or
some other alternative agreed upon by the various parties involved or ruled by the
arbitrator. The sale of our equity interest in EyakTek or EyakTeks dissolution would
result in GTSI having no future equity income from EyakTek as reported in our unaudited
condensed consolidated statements of operations. In the past, including for the years
ended December 31, 2010, 2009 and 2008, EyakTeks equity income has had a material positive
impact on GTSIs financial performance. We believe that GTSIs continuing disputes with
EyakTek and its other members may have a material adverse affect on our financial
performance. During the three months ended March 31, 2011, the Company incurred legal fees
of approximately $0.3 million related to the various EyakTek legal matters and will
continue to incur legal expenses until a resolution is reached.
 
    
    We depend heavily on Federal Government contracts. The Federal Governments delay in
passage of the budget for 2011 has delayed the appropriations process for many of the
Federal agencies which has negatively impacted our financial results for the three months
ended March 31, 2011 and may continue to impact our financial results throughout 2011.
 
    
    In the near term, we face some uncertainties due to the current business environment. We
have continued to experience a longer contracting process with DOD agencies, which is one
of our traditionally stronger markets. This delay, along with an overall decrease in
Federal Government IT spending may have an adverse effect on our financial condition,
operating performance, revenue, income or liquidity.
 
    
    A shift of expenditures away from programs that we support may cause Federal Government
agencies to reduce their purchases under contracts, to exercise their right to terminate
contracts at any time without penalty or to decide not to exercise options to renew
contracts.
 
    
    With the Sun/Oracle merger and the continued consolidation within the OEM market place,
we are likely to see continued pricing pressure from our partners in the market place.
  17




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
    
    Total sales decreased $31.5 million.
 
    
    Gross margin decreased $0.5 million.
 
    
    Selling, General & Administrative expenses decreased $3.9 million.
 
    
    Interest and other income decreased $0.5 million.
 
    
    Loss before income taxes decreased $2.9 million.
 
    
    Cash provided by operations increased $27.1 million.
 Critical Accounting Estimates and Policies
 Form 10-K
 Historical Results of Operations
  Three months endedMarch2011
    
    
    2010Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    81.5
    %
    
    
    86.7
    %Gross margin
    
    
    18.5
    %
    
    
    13.3
    %Selling, general, and administrative expenses
    
    
    26.0
    %
    
    
    21.8
    %Loss from operations
    
    
    (7.5
    )%
    
    
    (8.5
    )%Interest and other income, net
    
    
    1.4
    %
    
    
    1.4
    %Loss before taxes
    
    
    (6.1
    )%
    
    
    (7.1
    )%Income tax benefit
    
    
    2.3
    %
    
    
    2.6
    %Net loss
    
    
    (3.8
    )%
    
    
    (4.5
    )%
  18




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##### Table of Contents



Three months endedMarchSales by Type
    
    2011
    
    
    2010Hardware
    
    $
    44.9
    
    
    
    63.8
    %
    
    $
    72.8
    
    
    
    71.5
    %Software
    
    
    13.6
    
    
    
    19.4
    %
    
    
    15.9
    
    
    
    15.6
    %Service
    
    
    7.9
    
    
    
    11.2
    %
    
    
    10.7
    
    
    
    10.5
    %Financing
    
    
    3.9
    
    
    
    5.6
    %
    
    
    2.4
    
    
    
    2.4
    %Total
    
    $
    70.3
    
    
    
    100.0
    %
    
    $
    101.8
    
    
    
    100.0
    %
 Three months endedMarch 31,Sales by Vendor (based on YTD 2011 sales)
    
    2011
    
    
    2010Cisco
    
    $
    11.9
    
    
    
    17.0
    %
    
    $
    21.0
    
    
    
    20.7
    %Hewlett Packard
    
    
    11.3
    
    
    
    16.1
    %
    
    
    13.4
    
    
    
    13.2
    %Dell
    
    
    7.0
    
    
    
    10.0
    %
    
    
    12.5
    
    
    
    12.2
    %Microsoft
    
    
    6.1
    
    
    
    8.6
    %
    
    
    3.1
    
    
    
    3.1
    %Oracle
    
    
    5.0
    
    
    
    7.1
    %
    
    
    6.9
    
    
    
    6.7
    %Others, net of reserves and adjustments
    
    
    29.0
    
    
    
    41.2
    %
    
    
    44.9
    
    
    
    44.1
    %Total
    
    $
    70.3
    
    
    
    100.0
    %
    
    $
    101.8
    
    
    
    100.0
    %
 Three Months Ended March 31, 2011 Compared With the Three Months Ended March 31, 2010
 Sales
     19




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##### Table of Contents



Transfers and Servicing
  Gross Margin
     Selling, General & Administrative Expenses (SG&A)
   20




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##### Table of Contents



Interest and Other Income, Net
  Income Taxes
    Income Taxes
 Seasonal Fluctuations
   Liquidity and Capital Resources
 Cash flows for the three months ended March 31,
 (in millions)
    
    2011
    
    
    2010
    
    
    ChangeCash provided by operating activities
    
    $
    61.8
    
    
    $
    34.7
    
    
    $
    27.1Cash used in investing activities
    
    $
    (0.0
    )
    
    $
    (0.1
    )
    
    $
    0.1Cash used by financing activities
    
    $
    (26.7
    )
    
    $
    (18.8
    )
    
    $
    (7.9
    )
  21




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##### Table of Contents



Amended Credit Agreement
   Total Credit Agreement
    
    $
    100,000Borrowing base limitation
    
    
    (62,132
    )Total borrowing capacity
    
    
    37,868Less: non-interest bearing advances (floor plan loans)
    
    
    (8,462
    )Less: letters of credit
    
    
    (5,115
    )Total unused availability
    
    $
    24,291
     22




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##### Table of Contents



Liquidity
    Capital Requirements
   New Accounting Pronouncements
   23




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    24




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
      EyakTek Arbitration and Certain Related Matters
   25




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##### Table of Contents



Other Matters
   26




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##### Table of Contents



Item 1A. Risk Factors
  Compliance with OEM certification requirements may have a material adverse effect on the Company.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
       
 Item 3. Defaults Upon Senior Securities
  
 Item 4. RESERVED
 
 Item 5. Other Information
  
 Item 6. Exhibits
   27




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##### Table of Contents



SIGNATURES
  GTSI Corp.Date: May 12, 2011
    
    /s/ STERLING E. PHILLIPS, JR.

Sterling E. Phillips, Jr.Chief Executive OfficerDate: May 12, 2011
    
    /s/ PETER WHITFIELD

Peter WhitfieldSenior Vice President and Chief Financial Officer
  28




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##### Table of Contents



ExhibitNumber

    
    Description10.1
    
    
    Employment Agreement dated January 24, 2011 between the Registrant
and Sterling Phillips * (1)10.2
    
    
    Board appointment dated January 26, 2011 * (2)10.3
    
    
    Bonus arrangement dated February 11, 2011 between the Registrant and
Peter Whitfield * (3)10.4
    
    
    First and second amendment to the Amended and Restated Credit
Agreement with Castle Pines Capital LLC and Wells Fargo Capital
Finance, LLC (4)31.1
    
    
    Section 302 Certification of Chief Executive Officer (filed herewith)31.2
    
    
    Section 302 Certification of Chief Financial Officer (filed herewith)32
    
    
    Section 906 Certification of Chief Executive Officer and Chief
Financial Officer (filed herewith)
 
 *
    
    Management contracts and compensatory plans and arrangements required to be filed pursuant to
Item 15 (c).(1)
    
    Incorporated by reference to the Registrants current report on Form 8-K dated January 24, 2011(2)
    
    Incorporated by reference to the Registrants current report on Form 8-K dated January 26, 2011(3)
    
    Incorporated by reference to the Registrants current report on Form 8-K dated February 11,
2011(4)
    
    Incorporated by reference to the Registrants current report on Form 8-K dated February 24,
2011  29