-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ERacMZRhyFPoPBWcUwPpMyLeYgwd73dhvH4xZsUT1+dbPFptTcSGk2RWC6HI2qV9 78y0fYULZo6nYZfpDL6SGg== 0000912057-00-024887.txt : 20000516 0000912057-00-024887.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024887 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER HORIZONS CORP CENTRAL INDEX KEY: 0000023019 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 132638902 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07282 FILM NUMBER: 635986 BUSINESS ADDRESS: STREET 1: 49 OLD BLOOMFIELD AVE CITY: MOUNTAIN LAKES STATE: NJ ZIP: 07046-1495 BUSINESS PHONE: 9732994000 MAIL ADDRESS: STREET 1: 49 0LD BLOOMFIELD AVE CITY: MOUNTAIN LAKES STATE: NJ ZIP: 07046-1495 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------- FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------------------------- For Quarter Ended March 31, 2000 Commission File Number 0-7282 COMPUTER HORIZONS CORP. ----------------------- (Exact name of registrant as specified in its charter) New York 13-2638902 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 49 Old Bloomfield Avenue, Mountain Lakes, New Jersey 07046-1495 --------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (973) 299-4000 -------------- Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) 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 twelve 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. X ------- Yes No As of May 12, 2000 the issuer had 31,660,780 shares of common stock outstanding. COMPUTER HORIZONS CORP. Index Page No. Part I Financial Information Consolidated Balance Sheets March 31, 2000 and December 31, 1999 3 Consolidated Statements of Income (Loss) Three Months Ended March 31, 2000 and March 31, 1999 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and March 31, 1999 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II Other Information 11 Signatures 11 2 COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) (Unaudited)
March 31, December 31, 2000 1999 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 19,099 $ 17,072 Accounts receivable, net of allowance for doubtful accounts of $3,649,000 and $5,819,000 at March 31, 2000 and December 31, 1999, respectively 169,926 172,806 Deferred income tax benefit 8,543 8,945 Refundable income taxes 7,725 5,499 Other 779 4,459 --------- --------- TOTAL CURRENT ASSETS 206,072 208,781 --------- --------- PROPERTY AND EQUIPMENT 39,325 38,365 Less accumulated depreciation (19,678) (18,144) --------- --------- 19,647 20,221 --------- --------- OTHER ASSETS - NET: Goodwill 93,646 94,349 Deferred income tax benefit 2,458 2,458 Purchased software 8,724 9,306 Other 13,258 12,879 --------- --------- TOTAL OTHER ASSETS 118,086 118,992 --------- --------- TOTAL ASSETS $ 343,805 $347,994 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable, current $ 29,184 $ 19,502 Accrued payroll, payroll taxes and benefits 16,652 17,764 Accounts payable 11,318 17,741 Restructuring reserve 3,113 4,003 Deferred revenue 9,037 9,576 Other accrued expenses 8,087 10,338 --------- --------- TOTAL CURRENT LIABILITIES 77,391 78,924 --------- --------- LONG-TERM DEBT 4,024 4,100 --------- --------- OTHER LIABILITIES 1,934 2,318 --------- --------- SHAREHOLDERS' EQUITY: Preferred stock, $.10 par; authorized and unissued 200,000 shares, including 50,000 Series A Common stock, $.10 par, authorized 100,000,000 shares; issued 33,152,206 shares at March 31, 2000 and 33,149,595 shares at December 31, 1999 respectively 3,577 3,315 Additional paid-in capital 138,923 138,821 Accumulated comprehensive income (234) 385 Retained earnings 134,890 138,568 --------- --------- 277,156 281,089 --------- --------- Less shares held in treasury, at cost; 1,601,785 shares and 1,780,721 shares at March 31, 2000 and December 31, 1999, respectively (16,700) (18,437) --------- --------- TOTAL SHAREHOLDERS' EQUITY 260,456 262,652 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 343,805 $ 347,994 ========= =========
3 COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) (dollars in thousands, except per share data)
THREE MONTHS ENDED --------------------------------------------------- March 31, 2000 March 31, 1999 ---------------------- ---------------------- REVENUES: IT Services $ 80,892 70.8% $ 117,899 85.3% E-Solutions Group 33,390 29.2% 20,242 14.7% --------- ------ --------- ------ 114,282 100.0% 138,141 100.0% --------- ------ --------- ------ COSTS AND EXPENSES: Direct costs - Services 64,788 56.7% 82,028 59.4% Direct costs - E-Solutions Group 18,227 15.9% 8,692 6.3% Selling, general and administrative 33,160 29.0% 29,941 21.7% Amortization of intangibles 1,776 1.6% 1,192 0.8% --------- ------ --------- ------ 117,951 103.2% 121,853 88.2% --------- ------ --------- ------ INCOME / (LOSS) FROM OPERATIONS (3,669) -3.2% 16,288 11.8% --------- ------ --------- ------ OTHER INCOME (EXPENSE): Interest income 141 0.1% 438 0.3% Interest expense (407) -0.3% (172) -0.1% --------- ------ --------- ------ (266) -0.2% 266 0.2% --------- ------ --------- ------ INCOME / (LOSS) BEFORE INCOME TAXES (3,935) -3.4% 16,554 12.0% --------- ------ --------- ------ INCOME (BENEFIT) / TAXES: Current (2,094) -1.8% 7,928 5.7% Deferred 402 0.4% (893) -0.6% --------- ------ --------- ------ (1,692) -1.4% 7,035 5.1% --------- ------ --------- ------ NET INCOME / (LOSS) (2,243) -2.0% 9,519 6.9% ========= ====== ========= ====== EARNINGS / (LOSS) PER SHARE: Basic $ (0.07) $ 0.30 ========= ========= Diluted $ (0.07) $ 0.30 ========= ========= WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 31,482,000 31,221,000 ========== ========== Diluted 31,482,000 31,833,000 ========== ==========
Note: Certain reclassifications have been made to the prior periods to conform to the 2000 presentation. 4 COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (dollars in thousands)
Three Months Ended ------------------------ March 31, March 31, 2000 1999 -------- -------- CASH FLOWS USED IN OPERATING ACTIVITIES $ (8,607) $(28,397) -------- -------- CASH FLOWS (USED IN) / PROVIDED BY INVESTING ACTIVITIES Sales of short-term investments -- 8,809 Purchases of property and equipment (454) (2,771) Increase in other assets -- (1,416) -------- -------- (454) 4,622 -------- -------- CASH FLOWS PROVIDED BY / (USED IN) FINANCING ACTIVITIES Increase in borrowings 9,682 -- Decrease in long-term debt (76) -- Repurchase of common stock -- (6,578) Stock options exercised 2,101 1,193 -------- -------- 11,707 (5,385) -------- -------- Foreign currency (loss) / gain (619) 37 -------- -------- NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 2,027 (29,123) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 17,072 51,796 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,099 $ 22,673 ======== ========
5 COMPUTER HORIZONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarters Ended March 31, 2000 and March 31, 1999 1. BASIS OF PRESENTATION The information furnished reflects all adjustments which, in the opinion of the Company, are necessary to present fairly its consolidated financial position and the results of its operations and changes in financial position for the periods indicated. Reference is made to the Company's annual financial statements for the year ended December 31, 1999, for a description of the accounting policies, which have been continued without change. Also refer to the footnotes with those annual statements for additional details of the Company's financial condition, results of operations and changes in cash flows. The details in those notes have not changed except as a result of normal transactions in the interim. 2. EARNINGS PER SHARE Basic Earnings Per Share ("EPS") is based on the weighted average number of common shares outstanding without consideration of common stock equivalents. Diluted earnings per share is based on the weighted average number of common and common equivalent shares outstanding, except the three month period ended March 31, 2000 where the effect would have been antidilutive. The calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the year. In accordance with SFAS No.128, the table below presents both basic and diluted earnings per share:
Three Months Ended ------------------------------- March 31, March 31, 2000 1999 ------------ ------------ Numerator: Net income /(loss)(in thousands) $ (2,243) $ 9,519 Denominator: Denominator for basic earnings per share Weighted average shares outstanding 31,482,000 31,221,000 Effect of stock options -- 612,000 Diluted potential earnings /(loss)per share: Denominator for diluted earnings per share Adjusted weighted average shares Outstanding and assumed conversions 31,482,000 31,833,000 Basic earnings /(loss) per share $ (0.07) $ 0.30 Diluted earnings /(loss) per share $ (0.07) $ 0.30
6 COMPUTER HORIZONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarters Ended March 31, 2000 and March 31, 1999 The computation of diluted earnings per share excludes options with exercise prices greater than the average market price. During 2000, there were 962,866 excluded options outstanding at March 31, 2000 with exercise prices of $17.31 to $25.67 per share. All options to purchase shares of common stock were included in the computation of diluted earnings per share in the first quarter of 1999. 3. SEGMENT INFORMATION The Company has identified two segments: IT Services and the E-Solutions Group. The IT Services segment consists largely of the professional services traditionally rendered by the Company and primarily related to legacy and client server environments. IT Services is primarily Staffing, Outsourcing, and Y2K. The E-Solutions Group consists of e-products, e-services and e-commerce components. Broadly defined, revenue is derived from product sales and services that enable customers to conduct business electronically. Operating income / (loss) consists of income before income taxes, excluding interest income, interest expense and amortization of intangibles amounting to $2.0 million and $0.9 million in the first quarters of 2000 and 1999 respectively. Corporate services, consisting of general and administrative services are provided to the segments from a centralized location. Such costs are allocated to the segments based on either revenue or headcount. Three Months Ended ------------------------- March 31, March 31, 2000 1999 --------- --------- REVENUE: IT Services $ 80,892 $ 117,899 E-Solutions Group 33,390 20,242 Corporate and other -- -- --------- --------- TOTAL 114,282 138,141 --------- --------- OPERATING INCOME / (LOSS): IT Services 1,726 16,792 E-Solutions Group (3,619) 688 Corporate and other -- -- --------- --------- TOTAL (1,893) 17,480 --------- --------- ASSETS: IT Services 180,236 193,363 E-Solutions Group 108,184 58,354 Corporate and other 55,385 46,231 --------- --------- TOTAL 343,805 297,948 --------- --------- 7 COMPUTER HORIZONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarters Ended March 31, 2000 and March 31, 1999 4. RESTRUCTURING CHARGES During the third quarter of 1999, the Company recorded a restructuring charge of $6.4 million primarily related to the consolidating and closing of certain facilities, generally used for Year 2000 and other legacy related services, as well as attendant reduction of related staff levels. As of March 31, 2000 this provision includes an accrued payment of approximately $3.1 million relating to future payments associated with continuing rent and severance commitments.
Remaining at Remaining at Dec. 31, 1999 Paid March 31, 2000 ------------- ---- -------------- Severance: United States $ 151 $ (77) $ 74 Europe 352 -- 352 Canada 33 -- 33 ------ ------ ------ Total Severance $ 536 $ (77) $ 459 ------ ------ ------ Lease Obligations: United States $3,310 $ (807) $2,503 Canada 76 -- 76 ------ ------ ------ Total Lease Obligations $3,386 $ (807) $2,579 ------ ------ ------ General Office Closure: ------ ------ ------ Canada $ 81 $ (6) $ 75 ------ ------ ------ ------ ------ ------ Total $4,003 $ (890) $3,113 ------ ------ ------
8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the Quarters Ended March 31, 2000 and March 31, 1999 REVENUES. Revenues decreased to $114.3 million in the first quarter of 2000 from $138.1 million in the first quarter of 1999, a decrease of $23.8 million or 17.2%. The E-Solutions Group increased to $33.4 million in the first quarter of 2000 from $20.2 million in the first quarter of 1999, an increase of $13.2 million or 65.3%. IT Services revenues, including Year 2000 revenues, decreased to $80.9 million in the first quarter of 2000 from $117.9 million in the first quarter of 1999, a decrease of $37.0 million or 31.4%. Year 2000 services revenues decreased to $0.5 million in the first quarter of 2000 from $18.0 million in the first quarter of 1999, a decrease of $17.5 million. The Company's Year 2000 business accounted for 0.4% of total revenues in the first quarter of 2000 versus 13.0% of total revenues in the first quarter of 1999. As anticipated, the decline in Year 2000 business is reflective of the completion of code remediation assignments for major customers. IT Services revenues, excluding Year 2000 services, decreased to $80.5 million in the first quarter of 2000 from $99.9 million in the first quarter of 1999, a decrease of $19.4 million. DIRECT COSTS. Direct costs decreased to $83.0 million in the first quarter of 2000 from $90.7 million in the first quarter of 1999. Gross margin decreased to 27.4% in the first quarter of 2000 from 34.3% in the first quarter of 1999. The decrease in gross margin was primarily due to a decrease in the Company's higher margin Year 2000 business and significant investments in the E-Solutions business. The Company's margins are subject to fluctuations due to a number of factors, including the level of salary and other compensation necessary to attract and retain qualified technical personnel. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased to $33.2 million in the first quarter of 2000 from $29.9 million in the comparable 1999 period. As a percentage of revenues, selling, general and administrative expenses increased to 29.0% of revenues in the first quarter of 2000 from 21.7% of revenues in the first quarter of 1999. INCOME FROM OPERATIONS. Operating margins decreased to a loss of 3.2% in the first quarter 2000 from a profit of 11.8% in the comparable 1999 period. This decrease was primarily due to the Y2K revenue decline and its related impact on the buying habits of our customers, along with investments in the E-Solutions business in 2000. The Company's business is labor-intensive and, as such, is sensitive to inflationary trends. This sensitivity applies to client billing rates, as well as to payroll costs. OTHER INCOME/EXPENSE. Other income/(expense) decreased to ($0.3) million in the first quarter of 2000 compared to other income of $0.3 million in the first quarter of 1999. This decrease in other income was primarily the result of decreased interest income. PROVISION FOR INCOME TAXES. The effective tax rate for Federal, state and local income taxes was 43.0% for the first quarter of 2000. For the comparable 1999 period, the rate was 42.5%. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the Quarters Ended March 31, 2000 and March 31, 1999 NET INCOME/LOSS. Net loss for the first quarter of 2000 was $2.2 million, or $0.07 loss per diluted share compared to net income of $9.5 million, or $0.30 earnings per diluted share for the first quarter of 1999, a decrease of $11.7 million. LIQUIDITY AND CAPITAL RESOURCES. At March 31, 2000, the Company had $128.7 million in working capital, of which $19.1 million was cash, cash equivalents and short-term investments. There was $25.0 million in borrowings outstanding against one of the Company's bank lines of credit. Net cash used by operating activities in the first three months of 2000 was $8.6 million, consisting primarily of a decrease in accounts payable and the net loss for the quarter. During the first three months of 1999, net cash used in operating activities was $28.4 million, consisting primarily an increase in accounts receivable, offset in part by net income. The significant increase in accounts receivable during the first three months of 1999 was primarily attributable to delays in billing to customers, resulting from the implementation of an enterprise-wide information system. Net cash used in investing activities in the first three months of 2000 was $0.5 million, consisting of purchases of equipment. During the first three months of 1999, cash provided by investing activities was $4.6 million, consisting of the sales of short-term investments offset in part by the purchase of equipment. Net cash provided by financing activities was $11.7 million for the first three months of 2000, primarily consisting of borrowings against the Company's line of credit. For the first three months of 1999, net cash used in financing activities was $5.4 million, consisting primarily of the repurchase of 510,000 shares of the Company's common stock. At March 31, 2000, the Company had a current ratio position of 2.7 to 1. The Company believes that its cash and cash equivalents and short-term investments, lines of credit and internally generated funds will be sufficient to meet its working capital needs through 2000. CERTAIN DISCLOSURES This report contains certain forward-looking statements for purposes of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ materially. Such statements are based upon, among other things, assumptions made by, and information currently available to management, including management's own knowledge and assessment of the Company's industry and competition. 10 PART II Other Information Item 6. b) None Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMPUTER HORIZONS CORP. ----------------------- (Registrant) DATE: May 15, 2000 /s/ John J. Cassese ----------------------------------- John J. Cassese Chairman of the Board and President DATE: May 15, 2000 /s/ William J. Murphy ----------------------------------- William J. Murphy Executive Vice President and Chief Financial Officer (Principal Financial Officer) and Director DATE: May 15, 2000 /s/ Michael J. Shea ----------------------------------- Michael J. Shea, Vice President and Controller (Principal Accounting Officer) 11 EX-27.1 2 EXHIBIT 27.1
5 1,000 3-MOS DEC-31-2000 MAR-31-2000 19,099 0 169,926 3,649 0 779 39,325 19,678 343,805 77,391 0 0 0 3,577 256,879 343,805 0 114,282 0 83,015 34,936 0 (266) (3,935) (1,692) (2,243) 0 0 0 (2,243) (0.07) (0.07)
EX-27.2 3 EXHIBIT 27.2
5 1,000 3-MOS DEC-31-1999 MAR-31-1999 22,673 2,450 172,523 4,223 0 205,138 32,157 15,059 297,948 42,961 0 0 0 3,235 247,470 297,948 0 138,141 0 90,720 31,133 0 266 16,554 7,035 9,519 0 0 0 9,519 0.30 0.30
-----END PRIVACY-ENHANCED MESSAGE-----