-----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, Lo1aJ4mrlsAE9RLr/WnWApvH8XSfHWa6MOUpcLTWei1euQcP+biN0M0ufq+gX7I9 WGOkytCvTtWexspcF7POPQ== 0000914317-00-000242.txt : 20000331 0000914317-00-000242.hdr.sgml : 20000331 ACCESSION NUMBER: 0000914317-00-000242 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 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-K SEC ACT: SEC FILE NUMBER: 000-07282 FILM NUMBER: 587825 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 [ ] 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 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 No.) 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 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------- ------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Par value $.10 per share) (Title of class) Series A Preferred Stock Purchase Rights (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as of March 28, 2000, was approximately $575,620,000. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of March 28, 2000: 33,152,206 shares. DOCUMENTS INCORPORATED BY REFERENCE There is incorporated herein by reference the registrant's (i) Annual Report to Shareholders for the year ended December 3l, l999, in Part II of this Report and (ii) Proxy Statement for the 2000 Annual Meeting of Shareholders, expected to be filed with the Securities and Exchange Commission on or before April 7, 2000, in Part III hereof. PART I Item 1. Business General The Company provides a wide range of information technology services and solutions to major corporations. Historically a professional services staffing firm, the Company has, over the past six years, developed the technological and managerial infrastructure to offer its clients value added service, e-business solutions, human resource e-procurement solutions, enterprise network management, software products, outsourcing, customer relationship management and knowledge transfer. The Company markets solutions to both existing and potential clients with the objective of becoming a preferred provider of comprehensive information technology services and solutions for such clients. The Company believes that the range of services and solutions that it offers, combined with its worldwide network of 50 offices and subsidiary organizations, provides it with significant competitive advantages in the information technology marketplace. The Company's clients primarily are Global 1000 companies with significant information technology budgets and recurring staffing or software development needs. In 1999, the Company provided information technology services to 785 clients. During 1999, the Company's largest client, AT&T, accounted for 7.4% of the Company's consolidated revenues. The Company's next largest client, Prudential, accounted for 7.0% of the Company's consolidated revenues with no other client accounting for more than 4.1% of such revenues. With the trend in the commercial market moving towards fully integrated information systems solutions, the Company offers its clients a broad range of business and technical services as a service outsourcer and systems integrator capable of providing complex total solutions. This 3 total solutions approach comprises proprietary software and tools, proven processes and methodologies, tested project management practices and resource management and procurement programs. The Company offers a range of information technology services and solutions, which include (1) e-Business Solutions, (2) Consolidated Hiring Internet Management Efficiency System ("CHIMES"), (3) enterprise network management, (4) software products, (5) outsourcing, (6) professional services staffing, (7) knowledge transfer and (8) the solution for the millenium change. (1) e-Business Solutions: The Company has the capability to develop and implement open computer e-Business strategy, architecture, and engineering design, implementation and operational services. Such services include customer relationship management (CRM), project management, selection of viable systems platforms, creation of migration plans, development of customized software applications, and systems and database integrations. G. Triad Development Corp. ("G. Triad"), a wholly-owned subsidiary of the Company, provides comprehensive web application development and Internet- working solutions, as well as network engineering and server management. G. Triad's development practice specializes in information design. Windows NT systems administration, data driven web site development, systems integration project management and knowledge in ColdFusion. (2) CHIMES: As an electronic market-maker, CHIMES, Inc. ("CHIMES"), a wholly owned subsidiary of the Company, is a leading provider of e-Procurement Solutions for Human Resource Acquisition and Management. CHIMES' Centralized Vendor Management ("CVM") offering procures the top professionals on demand by utilizing proven supply chain management techniques. CVM manages the entire process, simplifying billing and timesheet administration, and coordinating the activities of all the customer's vendors. CHIMES uses scalable ISO 9002 compliant procedures and browser based software. (3) Enterprise Network Management: eB Networks, Inc., a wholly-owned subsidiary of the Company, specializes in building and implementing strategic network infrastructure to assist companies in achieving e Business objectives. EB Networks' service offerings include infrastructure architecture, enterprise management, security, operating systems integration and high availability internet. (4) Software Products: Princeton Softech, Inc. ("Princeton"), a wholly-owned subsidiary of the Company, is a software products and services company that delivers leveraging technologies for enterprise-scale e-Business solutions. Princeton's component-based development tools enable customers to synchronize IT and business objectives while moving at eSpeed through the application lifecycle. Princeton's eData distribution and management and intelligent archiving technologies allow organizations to optimize data availability and deploy application data to the point of best business leverage. Over 2,000 of the world's largest companies in more than 30 countries use Princeton's products and services. (5) Outsourcing: Spurred by global competition and rapid technological change, large companies, in particular, are downsizing and outsourcing for reasons ranging from cost reduction to capital asset improvement and from improved technology introduction to better strategic focus. In response to this trend, the Company has created a group of regional outsourcing centers with 24 hour/7day a week support, which are fully equipped with the latest technology and communications, as well as a complete staff that includes experienced project managers, technicians and operators. These professionals facilitate essential data functions including: applications development, systems maintenance, data network management, voice network administration and help desk operations. (6) Professional Services Staffing: Providing highly skilled software professionals to augment the internal information management staffs of major corporations remains the Company's primary business. The Company offers its clients centralized vendor management, supplying their staffing needs from among the Company's over 2,600 software professionals. 5 The Company is committed to expanding its professional services staffing operations in conjunction with its solutions business. (7) Knowledge Transfer: The Company's Education Division offers custom-designed and/or existing training programs to enhance the competencies of client staff in specific technologies, languages, methodologies and applications. The prevailing focus of the Company is to assist clients through instructor-led, on-site training and consulting in the transition IT organization of Global 1000 corporations. To support these changing technologies, the Company has developed extensive curriculum offerings in Operating Systems, Mainframe Technology, Client/Server and Open Systems, Object Orientation, Application Development, Information Engineering, Internet /Intranet, and ERP packages. (8) Solution for the Millennium Change: The Company's Signature 2000 offering combines an internally developed proprietary software toolkit, skilled resources, proven methodologies, experienced project management, as well as significant millennium project experience. It analyzes, locates, reports on, and then restructures all programs and database definitions affected by the absence of a century date field to permit processing of dates after December 31, 1999. The solution is customized for each particular enterprise and deals with all collateral issues. In effect, Signature 2000 provides the Company with an opportunity to facilitate field expansion, and century data windowing, while simultaneously performing other systems upgrades such as language conversions and platform migrations. In addition, Signature 2000 provides the Company a fully integrated testing solution across all phases of the testing life cycle, including Testing Processes, Software Products and experienced management and technical resources. The Company also provides a workstations solution of the Year 2000, including Asset Management, assessment and correction of spreadsheets and databases, correction to the workstations clocks, and third-party vendor compliancy assessment. Personnel As of December 3l, 1999, the Company had a staff of 4,149, of whom more than 2,600 were IT professionals. The Company devotes significant resources to recruitment of qualified professionals and provides continuing in-house training and education, and a career path management development program within the Company. Competition The Company competes in the commercial information technology services market which is highly competitive and served by numerous firms, many of which serve only their respective local markets. The market includes participants in a variety of market segments, including systems consulting and integration firms, professional services companies, application software firms, temporary employment agencies, the professional service groups of computer equipment companies, facilities management and management information systems ("MIS") outsourcing companies, certain "Big Five" accounting firms, and general management consulting firms. The Company's competitors also include companies such as Andersen Consulting, Technology Solutions Corporation, Cambridge Technology Partners, Inc., Cap Gemini America, Business System Group, the consulting division of Computer Sciences Corporation, Analysts International Corp., CIBER, Inc., Computer Task Group Inc., and Keane Inc. 6 Many participants in the information technology consulting and software solutions market have significantly greater financial, technical and marketing resources and generate greater revenues than the Company. The Company believes that the principal competitive factors in the commercial information technology services industry include responsiveness to client needs, speed of application software development, quality of service, price, project management capability and technical expertise. Pricing has its greatest importance as a competitive factor in the area of professional service staffing. The Company believes that its ability to compete also depends in part on a number of competitive factors outside its control, including the ability of its competitors to hire, retain and motivate skilled technical and management personnel, the ownership by competitors of software used by potential clients, the price at which others offer comparable services and the extent of its competitors' responsiveness to customer needs. Item 2. Properties The Company's Corporate and Financial Headquarters, as well as its Eastern Regional Office, comprising approximately 63,000 square feet, are located at 49 Old Bloomfield Avenue, Mountain Lakes, New Jersey. The Mountain Lakes leases are for terms expiring December 31, 2002, at a current annual rental of approximately $1,500,000. As of December 3l, l999, the Company also maintained facilities 7 in Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Washington and Washington D.C., as well as international operations located in Europe and Canada, with an aggregate of approximately 382,000 square feet. The leases for these facilities are at a current annual aggregate rental of approximately $6,000,000. These leases expire at various times with no lease commitment longer than December 31, 2009. Item 3. Legal Proceedings There are no material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None. 8 Executive Officers of the Company The following table sets forth certain information with respect to the executive officers of the Company, who are elected to serve until the next annual meeting of the Board of Directors and until their successors are elected and qualify. All the positions listed are or were held by such officers with the Company. PERIOD NAME AGE TITLE POSITION HELD - ---- --- ----- ------------- John J. Cassese 55 Chairman of the Board 1982 - Present and President Director 1969 - Present William J. Murphy 55 Executive Vice President 1997 - Present and CFO Director 1999 - Present Michael J. Shea 39 Controller 1995 - Present Vice President 1996 - Present 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters --------------------------------------------------------------------- The information required by this item is contained under the caption "Market and Dividend Information" in the Company's Annual Report to Shareholders for the year ended December 3l, 1999, which material is incorporated by reference in this Form 10-K Annual Report. Item 6. Selected Financial Data The information required by this item is contained under the caption "Selected Financial Data" in the Company's Annual Report to Shareholders for the year ended December 3l, 1999, which material is incorporated by reference in this Form 10-K Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation ------------------------------------------------------------------------ The information required by this item is contained under the caption "Management's Discussion and Analysis" in the Company's Annual Report to Shareholders for the year ended December 3l, 1999, which material is incorporated by reference in this Form 10-K Annual Report. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The information required by this item is contained under the caption "Management's Discussion and Analysis" in the Company's Annual Report to Shareholders for the year ended December 3l, 1999, which material is incorporated by reference in this Form 10-K Annual Report. 10 Item 8. Financial Statements and Supplementary Data ------------------------------------------- The financial statements together with the report thereon by Grant Thornton LLP, Independent Certified Public Accountants, appearing in the Company's Annual Report to Shareholders for the year ended December 31, 1999, are incorporated herein by reference. Such information is listed in Item 14(a)1 of this Form 10-K Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ---------------------------------------------------------------------- There have been no disagreements with the Company's independent accountants involving accounting and financial disclosure matters. 11 PART III Item 10. Directors and Executive Officers of the Registrant -------------------------------------------------- (a) The information called for by Item 10 with respect to identification of directors of the Company is incorporated herein by reference to the material under the caption "Election of Directors" in the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders which is expected to be filed with the Securities and Exchange Commission on or before April 7, 2000 (the "2000 Proxy Statement"). (b) The information called for by Item 10 with respect to executive officers of the Company is included in Part I herein under the caption "Executive Officers of the Company". Item 11. Executive Compensation ---------------------- The information called for by Item 11 with respect to management remuneration and transactions is incorporated herein by reference to the material under the caption "Executive Compensation" in the 2000 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- The information called for by Item 12 with respect to security ownership of certain beneficial owners and management is incorporated herein by reference to the material under the caption "Certain Holders of Voting Securities" in the 2000 Proxy Statement. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- None 12 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ---------------------------------------------------------------- (a) 1. The following consolidated financial statements, appearing in the Company's 1999 Annual Report to Shareholders, are incorporated herein by reference. - Consolidated balance sheets as of December 3l, 1999 and 1998 - Consolidated statements of income for each of the three years in the period ended December 31, 1999 - Consolidated statement of shareholders' equity for each of the three years in the period ended December 31, 1999 - Consolidated statements of cash flows for each of the three years in the period ended December 31, 1999 - Notes to consolidated financial statements - Report of independent certified public accountants on the consolidated financial statements 2. Schedule II - Valuation and qualifying accounts for the years ended December 31, 1999, 1998 and 1997. - Report of independent certified public accountants on the financial statements schedule. All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 3. The exhibit index 4. Consent of Grant Thornton LLP (b) No reports on Form 8K have been filed during the quarter for which this report is filed. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMPUTER HORIZONS CORP. Date: March 30, 2000 By:/s/John J. Cassese ------------------ John J. Cassese, Chairman of the Board and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. COMPUTER HORIZONS CORP. Date: March 30, 2000 By:/s/John J. Cassese ------------------ John J. Cassese, Chairman of the Board and President (Principal Executive Officer) and Director Date: March 30, 2000 By: /s/ William J. Murphy, ---------------------- William J. Murphy, Executive Vice President and CFO (Principal Financial Officer) and Director Date: March 30, 2000 By: /s/ Michael J. Shea ------------------- Michael J. Shea Vice President and Controller (Principal Accounting Officer) Date: March 30, 2000 By:/s/Thomas J. Berry ------------------ Thomas J. Berry, Director Date: March 30, 2000 By:/s/William M. Duncan ------------------- William M. Duncan, Director Date: March 30, 2000 By:/s/Rocco J. Marano ------------------ Rocco J. Marano, Director Date: March 30, 2000 By:/s/Earl Mason ------------- Earl Mason, Director 14 EXHIBIT INDEX Exhibit Description Incorporated by Reference to 3(a-1) Certificate of Incorporation as Exhibit 3(a) to Registration amended through 1971. Statement on Form S-1 (File No. 2--42259). 3(a-2) Certificate of Amendment dated Exhibit 3(a-2) to Form 10K May 16, 1983 to Certificate of for the fiscal year ended Incorporation. February 28, 1983. 3(a-3) Certificate of Amendment dated Exhibit 3(a-3) to Form 10K June 15, 1988 to Certificate of for the fiscal year ended Incorporation. December 31, 1988. 3(a-4) Certificate of Amendment dated Exhibit 3(a-4) to Form 10K July 6, 1989 to Certificate of for the fiscal year ended Incorporation. December 31, 1994. 3(a-5) Certificate of Amendment dated Exhibit 3(a-5) to Form 10K February 14, 1990 to Certificate for the fiscal year ended of Incorporation. December 31, 1989. 3(a-6) Certificate of Amendment dated Exhibit 3(a-6) to Form 10K May 1, 1991 to Certificate of for the fiscal year ended Incorporation. December 31, 1994. 3(a-7) Certificate of Amendment dated Exhibit 3(a-7) to Form 10K July 12, 1994 to Certificate of for the fiscal year ended Incorporation. December 31, 1994. 3(b) Bylaws, as amended and Exhibit 3(b) to Form 10K for presently in effect. the year ended December 31, 1988. 4(a) Rights Agreement dated as of Exhibit 1 to Registration July 6, 1989 between the Statement on Form 8-A dated Company and Chemical Bank, as July 7, 1989. Rights Agent ("Rights Agreement") which includes the form of Rights Certificate as Exhibit B. 4(b) Amendment No. 1 dated as of Exhibit 1 to Amendment No. February 13, 1990 to Rights 1 on Form 8 dated February Agreement. 13, 1990 to Registration Statement on Form 8-A. 15 16 17 4(c) Amendment No. 2 dated as of Exhibit 4(c) to Form 10K August 10, 1994 to Rights for the fiscal year ended Agreement. December 31, 1994. 4(d) Employee's Savings Plan and Exhibit 4.4 to Registration Amendment Number One. Statement on Form S-8 dated December 5, 1995. 4(e) Employee's Savings Plan Trust Exhibit 4.5 to Registration Agreement as Amended and Statement on Form S-3 dated Restated Effective January 1, December 5, 1995. 1996. 4(f) Amendment No. 3 Exhibit 4.1 to Form 8-K dated dated as fo July 13, 1999 July 13, 1999 to Rights Agreement 10(a) Employment Agreement dated as Exhibit 10(a) to Form 10K for of February 16, 1990 between the the year ended December 31, Company and John J. Cassese. 1989. 10(b) Employment Agreement dated as Exhibit 10(g) to Form S-3 of January 1, 1997 between the dated August 14, 1997. Company and William J. Murphy. 10(c) Employment Agreement dated as Exhibit 10(c) to Form 10K for of March 6, 1997 between the the year ended December 31, Company and Michael J. Shea. 1996. 10(d) 1991 Directors' Stock Option Exhibit 10(g) to Form 10-K Plan, as amended. for the year ended December, 31, 1994 10(e) 1994 Incentive Stock Option and Exhibit 10(h) to Form 10K Appreciation Plan. for the fiscal year ended December 31, 1994. 10(f) $15,000,000 Discretionary Line of Exhibit 10(h) to Form S-3 Credit payable to Chase Manhattan dated August 14, 1997 Bank dated as of June 30, 1998. 10(g) $10,000,000 Discretionary Line Exhibit 10(h) to Form 10K of Credit from PNC Bank dated for the fiscal year ended as of June 5, 1998 December 31, 1996 10(h) 1999 Employee Stock Purchase Plan Exhibit 99.1 to Form S-8 dated March 17, 1999 10(i) Amendment to the employment agreement dated as of March 24, 2000 between the Company and William J. Murphy 10(j) $15,000,000 Discretionary Line of Credit payable to Chase Manhattan Bank dated as of June 30, 1998, as amended on March 15, 2000 (increased to $30,000,000). 13 Annual Report to Security Holders. 21 List of Subsidiaries. 16 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS ON SCHEDULE Board of Directors and Shareholders Computer Horizons Corp. In connection with our audit of the consolidated financial statements of Computer Horizons Corp. and Subsidiaries referred to in our report dated February 21, 2000 (except for Note 5, as to which the date is March 15, 2000), which is included in the 1999 Annual Report to Shareholders and incorporated by reference in this Form 10-K, we have also audited Schedule II for each of the years ended December 31, 1999, 1998 and 1997. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therin. /S/ GRANT THORNTON LLP - ---------------------- GRANT THORNTON LLP Edison, New Jersey February 21, 2000 (except for Note 5, as to which the date is March 15, 2000)
Computer Horizons Corp. and Subsidiaries SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 1999, 1998 and 1997 Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Balance at beginning Charged to cost Deductions - Balance at end Description of period and expenses describe (1) of period ----------- --------- ------------ ------------ --------- Year ended December 31, 1999 Allowance for doubtful accounts $ 3,209,000 $ 3,367,000 $ 757,000 $ 5,819,000 =========== =========== =========== =========== Year ended December 31, 1998 Allowance for doubtful accounts $ 1,742,000 $ 1,676,000 $ 209,000 $ 3,209,000 =========== =========== =========== =========== Year ended December 31, 1997 Allowance for doubtful accounts $ 1,203,000 $ 575,000 $ 36,000 $1,742,000 =========== =========== =========== ===========
Notes (1) Uncollectible accounts written off, net of recoveries. 17
Computer Horizons Corp. and Subsidiaries SELECTED FINANCIAL DATA Year ended December 31, 1999 1998 1997 1996 1995 --------- --------- ----------- --------- ------ ----------------(dollar amounts in thousands, except per share data)------------- Revenues $ 534,594 $ 514,921 $ 350,310 $ 261,411 $ 224,809 Costs and expenses: Direct costs 365,310 326,795 233,574 180,410 156,125 Selling, general and administrative 131,087 109,505 73,563 59,000 48,234 Amortization of intangibles 6,202 3,530 602 677 603 Restructuring charges 6,355 -- -- -- -- Merger-related expenses -- 4,272 976 -- -- Income from operations 25,640 70,819 41,595 21,324 19,847 Other income (expense): Interest income 1,353 5,334 1,700 404 346 Interest expense (1,355) (750) (276) (507) (667) Equity in net earnings of joint venture -- (90) 13 885 361 Gain on sale of joint venture -- 4,180 -- -- -- Income before income taxes 25,638 79,493 43,032 22,106 19,887 Income taxes 11,013 35,906 18,498 9,031 8,572 ------------ ------------ ------------ ------------ ------------ Net income $ 14,625 $ 43,587 $ 24,534 $ 13,075 $ 11,315 ============ ============ ============ ============ ============ Earnings per share: Basic $ 0.47 $ 1.41 $ 0.89 $ 0.50 $ 0.47 ============ ============ ============ ============ ============ Diluted $ 0.46 $ 1.35 $ 0.85 $ 0.47 $ 0.44 ============ ============ ============ ============ ============ Weighted average number of shares outstanding: Basic 30,940,000 30,925,000 27,567,000 26,380,000 24,312,000 ============ ============ ============ ============ ============ Diluted 31,647,000 32,230,000 28,999,000 27,932,000 25,823,000 ============ ============ ============ ============ ============
Computer Horizons Corp. and Subsidiaries SELECTED FINANCIAL DATA (continued) Year ended December 31, 1999 1998 1997 1996 1995 --------- --------- ----------- --------- ------ ---------------------(in thousands, except per share data)------------------ Analysis (%) Revenues 100.0% 100.0% 100.0% 100.0% 100.0% Gross margin 31.7 36.6 33.3 31.0 30.5 Selling, general and administrative 24.5 21.3 21.0 22.5 21.4 Amortization of intangibles 1.2 0.7 0.1 0.3 0.3 Restructuring charges 1.2 -- -- -- -- Merger-related expenses -- 0.8 0.3 -- -- Income from operations 4.8 13.8 11.9 8.2 8.8 Interest income/(expense) - net -- 0.9 0.4 -- (0.1) Equity in net earnings of joint venture -- -- -- 0.3 0.1 Gain on sale of joint venture -- 0.8 -- -- -- Income before income taxes 4.8 15.5 12.3 8.5 8.8 Income taxes 2.1 7.0 5.3 3.5 3.8 Net income 2.7 8.5 7.0 5.0 5.0 Revenue growth YOY 3.8 47.0 34.0 16.3 29.8 Net income growth (decline) YOY (66.4) 77.7 87.6 15.6 58.7 Return on equity, average 5.7 20.2 18.9 19.9 25.0 Effective tax rate 43.0 45.2 43.0 40.9 43.1 At year-end Total assets $ 347,994 $ 296,052 $ 217,625 $ 96,610 $ 63,096 Working capital 129,857 158,760 160,370 55,052 42,553 Long-term debt 4,100 -- -- 1,442 3,324 Shareholders' equity 262,652 246,534 185,974 73,747 57,931 Stock price $ 16.19 $ 26.63 $ 45.50 $ 25.67 $ 16.89 P/E multiple 34 19 51 51 36 Employees 4,149 4,834 3,794 3,228 2,830 Clients (during year) 785 768 549 556 538 Offices (worldwide) 50 55 49 49 45
Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth certain operating data as a percentage of consolidated revenues for the period indicated: Year Ended December 31, 1999 1998 1997 Revenues 100.0% 100.0% 100.0% Cost and expenses: Direct costs 68.3 63.4 66.7 Selling, general, and administrative 24.5 21.3 21.0 Amortization of intangibles 1.2 0.7 0.1 Restructuring charges 1.2 -- -- Merger-related expenses -- 0.8 0.3 Income from operations 4.8 13.8 11.9 Other income (expense): Interest income/(expense), net -- 0.9 0.4 Gain on sale of joint venture -- 0.8 -- Income before income taxes 4.8 15.5 12.3 Income taxes: Current 3.0 7.7 5.6 Deferred (0.9) (0.7) (0.3) Net income 2.7 8.5 7.0 Management's Discussion and Analysis of Financial Condition and Results of Operations Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Revenues Revenues increased to $534.6 million in the year ended December 31, 1999 from $514.9 million in the year ended December 31, 1998, an increase of $19.7 million, or 3.8%. E-Solutions Group revenues increased to $101.6 million in the year ended December 31, 1999 from $55.2 million in the year ended December 31,1998, an increase of $46.4 million or 84.1%. IT Services revenues, including Year 2000 revenues, decreased to $433.0 million in the year ended December 31, 1999 from $459.7 million in the year ended December 31, 1998, a decrease of $26.7 million or 5.8%. Year 2000 services revenues decreased to $44.5 million in the year ended December 31, 1999, from $136.0 million in the year ended December 31, 1998, a decrease of $91.5 million or 67.3%. The Company's Year 2000 business accounted for approximately 8% of total revenues in the year ended December 31, 1999 versus approximately 26% of total revenues in 1998. 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, increased to $388.5 million in the year ended December 31, 1999, from $323.7 million in the year ended December 31, 1998, an increase of $64.8 million. Direct Costs Direct costs increased to $365.3 million in the year ended December 31, 1999 from $326.8 million in the year ended December 31, 1998. Gross margin decreased to 31.7% in the year ended December 31, 1999 from 36.6% in the year ended December 31, 1998. This 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 during 1999. The Company's margins are subject to fluctuation due to a number of factors, including the level of salary and other compensation-related expenses necessary to attract and retain qualified technical personnel and the mix of IT Services versus E-solutions business during the year. Selling, General, and Administrative Selling, general and administrative expenses (excluding amortization expense, restructuring charges and merger-related expenses) increased to $131.1 million in the year ended December 31, 1999 from $109.5 million in the year ended December 31, 1998, an increase of $21.6 million or 19.7%. The increase in selling, general and administrative expenses was primarily a result of salaries and commissions for additional sales and recruiting personnel and, to a lesser extent, growth in the administrative infrastructure of certain subsidiaries. During 1998, the Company incurred merger-related expenses of approximately $4.3 million or 0.8% of revenues. Management's Discussion and Analysis of Financial Condition and Results of Operations Amortization of Intangibles Amortization of intangibles increased to $6.2 million in the year ended December 31, 1999 from $3.5 million in the year ended December 31, 1998, an increase of $2.7 million or 77.1%. This increase in amortization of intangibles was primarily due to the additional acquisitions of G. Triad Enterprises, Inc., Integrated Computer Management and Select Software Tools plc. Restructuring Charges During the third quarter of 1999, the Company recorded a restructuring charge of approximately $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. This provision includes an accrued payment of approximately $4.0 million as of December 31, 1999 relating to future costs associated with continuing rent and severance commitments. Income from Operations Income from operations, excluding restructuring charges in 1999 and merger-related expenses in 1998, decreased to $32.0 million in the year ended December 31, 1999 from $75.1 million in the year ended December 31, 1998, a decrease of $43.1 million or 57.4%. Operating margins, excluding restructuring charges in 1999 and merger- related expenses in 1998, decreased to 6.0% in the year ended December 31, 1999 from 14.6% in the year ended December 31, 1998. The decrease was primarily due to decreases in the Company's higher margin Year 2000 business and personnel investments in the E-Solutions business in 1999. 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 For the year ended December 31, 1999, other income decreased $8.7 million. This reduction in other income was due to a decrease in the Company's cash position during 1999, primarily as a result of several acquisitions and the stock repurchase program. In addition, other income in 1998 included a gain on the sale of the Company's Birla Horizons Joint Venture ($4.2 million or $0.06 per share). Provision for Income Taxes The effective tax rate for Federal, state, and local income taxes was 43.0% and 45.2% in the years ended December 31,1999 and 1998, respectively. The decrease in the 1999 effective tax rate was primarily due to less non-deductible acquisition costs than in 1998. Net Income Net income decreased to $14.6 million in the year ended December 31, 1999 from $43.6 million in the year ended December 31, 1998, a decrease of $29.0 million or 66.5%. Net income per share (diluted) decreased to $0.46 in the year ended December 31, 1999 from $1.35 in the year ended December 31, 1998. The effect of restructuring charges amounted to $0.11 per share in 1999, with no effect in 1998. Management's Discussion and Analysis of Financial Condition and Results of Operations Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Revenues Revenues increased to $514.9 million in the year ended December 31, 1998 from $350.3 million in the year ended December 31, 1997, an increase of $164.6 million, or 47%. IT Services' revenues increased to $459.7 million in the year ended December 31, 1998 from $334.7 million in the year ended December 31, 1997, an increase of $125.0 million, or 37.3%. Year 2000 services, included in IT Services revenues, totaled $136.0 million in the year ended December 31, 1998 and $72.1 million in the year ended December 31, 1997. The Company's Year 2000 business accounted for approximately 26.4% of total revenues in the year ended December 31, 1998 versus approximately 21% of total revenues in 1997. E-Solutions Group revenue increased to $55.2 million in the year ended December 31, 1998 from $15.6 million in the year ended December 31, 1997, an increase of $39.6 million, or 253.8%. Direct Costs Direct costs increased to $326.8 million in the year ended December 31, 1998 from $233.6 million in the year ended December 31, 1997. Gross margin increased to 36.6% in the year ended December 31, 1998 from 33.3% in the year ended December 31, 1997. The increase in gross margin was primarily due to stable margins in the Company's staffing business and an increase in the Company's higher margin Year 2000 business. The Company's margins are subject to fluctuation due to a number of factors, including the level of salary and other compensation-related expenses necessary to attract and retain qualified technical personnel and the mix of IT Services versus E-Solutions business during the year. Selling, General, and Administrative Selling, general and administrative expenses (excluding amortization of intangibles and merger-related expenses) increased to $109.5 million in the year ended December 31, 1998 from $73.6 million in the year ended December 31, 1997, an increase of $35.9 million or 48.8%. The increase in selling, general and administrative expenses was primarily a result of salaries and commissions for additional sales and recruiting personnel and, to a lesser extent, growth in the Company's administrative infrastructure. During 1998, the Company incurred merger-related expenses of approximately $4.3 million or 0.8% of revenues, an increase from $1.0 million, or 0.3% of revenues in 1997 and amortization expense of approximately $3.5 million or 0.7% of revenues, an increase from $0.6 million or 0.2% of revenues in 1997. Management's Discussion and Analysis of Financial Condition and Results of Operations Amortization of Intangibles Amortization of intangibles increased to $3.5 million in the year ended December 31, 1998 from $0.6 million in the year ended December 31, 1997, an increase of $2.9 million. This increase is primarily attributable to the acquisitions of Enterprise Solutions Group, RPM Consulting and Infomatics Search Group. Income from Operations Income from operations, excluding merger-related expenses, increased to $75.1 million in the year ended December 31, 1998 from $42.6 million in the year ended December 31, 1997, an increase of $32.5 million or 76.3%. Operating margins increased to 14.6% in the year ended December 31, 1998 from 12.2% in the year ended December 31, 1997. This increase was primarily due to an increase in the Company's higher margin Year 2000 business and the acquisition of a high margin products company. 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 Other income increased to $8.7 million in the year ended December 31, 1998 from $1.4 million in the year ended December 31,1997, an increase of $7.3 million. This increase was primarily the result of the sale of the Company's Birla Horizons Joint Venture ($0.06 per share), as well as increased interest income resulting from the follow-on offering of approximately $84 million completed in the third quarter of 1997. Provision for Income Taxes The effective tax rate for Federal, state, and local income taxes was 45.2% and 43.0% in the years ended December 31,1998 and 1997, respectively. The increase in the 1998 effective tax rate was primarily due to an increase in non-deductible merger-related expenses incurred in 1998. Net Income Net income increased to $43.6 million in the year ended December 31, 1998 from $24.5 million in the year ended December 31, 1997, an increase of $19.1 million, or 78.0%. Net income per share (diluted) increased to $1.35 in the year ended December 31, 1998 from $0.85 in the year ended December 31, 1997. The effect of merger-related expenses amounted to $0.11 per share in 1998, compared to $0.03 per share in 1997. All net income per share and share amounts have been adjusted to reflect a three-for-two common stock split, effected as a 50% stock distribution, distributed on June 9, 1997. Liquidity and Capital Resources Computer Horizons finances its operations primarily through cash generated from operations, borrowings against bank lines of credit and the public sale of its common stock. At December 31, 1999, the Company had $129.9 million in working capital, of which $17.1 million was cash and cash equivalents. There was $15.0 million in borrowings outstanding against one of the Company's bank lines of credit. Net cash used in operating activities for the year ended December 31, 1999 totaled $19.5 million, primarily attributable to an increase in accounts receivable. The significant increase in accounts receivable during 1999 was primarily attributable to delays in billing to customers resulting from the implementation of an enterprise-wide information system. Net cash provided by operating activities was $15.8 million and $17.0 million, for the years ended December 31, 1998 and 1997, respectively, consisting primarily of net income, offset in part by an increase in accounts receivable. Management's Discussion and Analysis of Financial Condition and Results of Operations Net cash used in investing activities was $14.3 million, $55.6 million and $22.1 million in the years ended December 31, 1999, 1998, and 1997, respectively. Net cash used in investing activities in 1999 consisted primarily of $14.0 million used for the acquisitions of the assets of SELECT Software Tools plc, Integrated Computer Management, G. Triad Enterprises, Inc., SPP and Unibase. Net cash used in investing activities in 1998 consisted primarily of $50.4 million used for the acquisitions of the assets of Enterprise Solutions Group, RPM Consulting, and Infomatics Search Group. In addition, the Company used approximately $6.0 million relating to the Company's new accounting/information system. Net cash used in investing activities in 1997 consisted primarily of the purchase of short term investments, as well as the Company's acquisitions of the assets of Millennium Computer Technology for approximately $5 million on December 31, 1997. For the year ended December 31, 1999 net cash used in financing activites was $2.1 million, primarily resulting from $15.0 million in borrowings against the Company's bank lines of credit, partially offset by $12.8 million used to repurchase the Company's stock. Net cash used in 1998 totaled $0.6 million and resulted primarily from repayments of notes to banks, offset by cash received from the exercise of stock options. Net cash provided by financing activities in the year ended December 31, 1997, was $83.4 million, consisting of $83.7 million in net proceeds from the Company's public offering of common stock. At December 31, 1999, the Company had a current ratio position of 2.6 to 1, long-term debt of $4.1 million and $15.0 million of outstanding borrowing under its two unsecured discretionary lines of credit of $30.0 million and $10.0 million. The Company believes that its cash and cash equivalents, lines of credit and internally generated funds will be sufficient to meet its working capital needs through 2001. The Company's billed accounts receivable were $128.2 million and $83.4 million at December 31, 1999 and December 31, 1998, respectively. Billed days sales outstanding were 84 days at December 31, 1999 and 57 days at December 31, 1998, based on annual sales. Year 2000 The Company utilizes a wide variety of complex information technologies to conduct daily business operations. The Company examined all systems that could be significantly affected by the Year 2000. Concurrently, a review was being conducted to select a new accounting/information system to support the future growth of the Company. As a result, the Company chose a new system that addressed, among other areas, Year 2000 compliance. The new system was implemented in late 1998. The total cost of the Year 2000 project was approximately $10 million, of which approximately $9 million was capitalized. The project was funded through operating cash flows. As of the date of this filing, the Company has not experienced any material year 2000 problems or disruptions from any internal systems or outside vendors. Management's Discussion and Analysis of Financial Condition and Results of Operations Market Risk Exposure The Company has financial instruments that are subject to interest rate risk, principally short-term investments. Historically, the Company has not experienced material gains or losses due to interest rate changes when selling short-term investments. Based on the current holdings of short-term investments, the exposure to interest rate risk is not material. Additionally, the Company had $15 million in outstanding borrowings against a bank line of credit at December 31, 1999, which has a floating LIBOR interest rate. Foreign Currency Exposure The Company's international operations expose it to translation risk when the local currency financial statements are translated to U.S. dollars. As currency exchange rates fluctuate, translation of the statements of income of international business into U.S. dollars will affect the comparability of revenues and expenses between years. None of the components of the Company's consolidated statements of income was materially affected by exchange rate fluctuations in 1999, 1998 or 1997. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS COMPUTER HORIZONS CORP. December 31, 1999 and 1998 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Shareholders Computer Horizons Corp. We have audited the accompanying consolidated balance sheets of Computer Horizons Corp. and Subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Computer Horizons Corp. and Subsidiaries as of December 31, 1999 and 1998 and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/GRANT THORNTON LLP - --------------------- GRANT THORNTON LLP Edison, New Jersey February 21, 2000 (except for Note 5, as to which the date is March 15, 2000)
Computer Horizons Corp. and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, ASSETS 1999 1998 ---- ---- ---------(in thousands)--------- Current assets: Cash and cash equivalents (Note 1) $17,072 $ 51,796 Short-term investments (Note 1) -- 11,259 Accounts receivable (Note 3) 172,806 135,447 Deferred income tax benefit (Note 7) 8,945 4,987 Refundable income taxes 5,499 -- Other 4,459 2,049 -------- -------- Total current assets 208,781 205,538 -------- -------- Property and equipment: Furniture, equipment and other 38,365 26,469 Less accumulated depreciation 18,144 11,141 ------ -------- 20,221 15,328 ------ -------- Other assets - net: Goodwill (Note 1) 94,349 66,315 Deferred income tax benefit (Note 7) 2,458 1,348 Purchased software (Note 1) 9,306 1,663 Other 12,879 5,860 ------ --------- 118,992 75,186 ------- -------- Total Assets $347,994 $296,052 ======== =======
The accompanying notes are an integral part of these statements.
December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 ---- ---- ---------(in thousands)--------- Current liabilities: Current portion of long-term debt (Note 5) $19,502 -- Accrued payroll, payroll taxes and benefits 17,764 $ 24,262 Accounts payable 17,741 5,258 Income taxes payable -- 6,437 Restructuring reserve 4,003 -- Deferred revenue 9,576 6,719 Other accrued expenses 10,338 4,102 ------ ---------- Total current liabilities 78,924 46,778 ------ -------- Long-term debt 4,100 -- Other liabilities 2,318 2,740 ----- --------- 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 33,149,595 shares and 32,351,580 shares at December 31, 1999 and 1998, respectively 3,315 3,235 Additional paid-in capital 138,821 128,821 Accumulated comprehensive income 385 (762) Retained earnings 138,568 123,943 281,089 255,237 ------- ------- Less shares held in treasury, at cost; 1,780,721 and 1,061,662 shares at December 31, 1999 and 1998, respectively (18,437) (8,703) -------- --------- Total shareholders' equity 262,652 246,534 ------- ------- Total Liabilities and Shareholders' Equity $347,994 $296,052 ======= =======
Computer Horizons Corp. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Year ended December 31, ------------------------------------------------- 1999 1998 1997 ------(in thousands, except per share data)------ Revenues $ 534,594 $ 514,921 $ 350,310 ------------ ------------ ------------ Costs and expenses: Direct costs 365,310 326,795 233,574 Selling, general and administrative 131,087 109,505 73,563 Amortization of intangibles 6,202 3,530 602 Restructuring charges 6,355 -- -- Merger-related expenses -- 4,272 976 ------------ ------------ ------------ 508,954 444,102 308,715 ------------ ------------ ------------ Income from operations 25,640 70,819 41,595 ------------ ------------ ------------ Other income (expense): Interest income 1,353 5,334 1,700 Interest expense (1,355) (750) (276) Equity in net earnings/(loss) of joint venture (Note 4) -- (90) 13 Gain on sale of joint venture (Note 4) -- 4,180 -- ------------ ------------ ------------ (2) 8,674 1,437 ------------ ------------ ------------ Income before income taxes 25,638 79,493 43,032 ------------ ------------ ------------ Income taxes (Notes 1 and 7): Current 16,081 39,645 19,448 Deferred (5,068) (3,739) (950) ------------ ------------ ------------ 11,013 35,906 18,498 ------------ ------------ ------------ Net Income $ 14,625 $ 43,587 $ 24,534 ============ ============ ============ Earnings per share (Notes 1 and 8): Basic $ 0.47 $ 1.41 $ 0.89 ============ ============ ============ Diluted $ 0.46 $ 1.35 $ 0.85 ============ ============ ============ Weighted average number of shares outstanding: Basic 30,940,000 30,925,000 27,567,000 ============ ============ ============ Diluted 31,647,000 32,230,000 28,999,000 ============ ============ ============
The accompanying notes are an integral part of these statements.
Computer Horizons Corp. and Subsidiaries CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Years ended December 31, 1999, 1998 and 1997 Addi- Accumulat- Common stock tional ed other Treasury stock -------------------- paid-in comprehen- Retained Shares Amount capital sive income earnings Shares Amount Total ------ ------ ------- ----------- -------- ------ ------ ----- ---------------------------------------(dollars in thousands)---------------------------------------- Balance, December 31 1996 19,510,314 1,951 30,773 290 55,381 1,786,883 14,648 $73,747 Net income for the year 24,534 24,534 Other comprehensive income Foreign currency translation adjustments (206) (206) ------- Total comprehensive income 24,328 Three-for-two stock split declared May 1997 8,861,715 886 (886) Stock options exercised 375,040 38 1,759 (94,630) (776) 2,573 Tax benefits related to stock option plans 2,610 2,610 Sale of common stock, net of expenses 2,500,000 250 83,462 83,712 Dividends paid (Spargo) (996) (996) ---------- ----- ------- ---- ------- --------- ------- ------- Balance, December 31, 1997 31,247,069 $3,125 $117,718 $ 84 $ 78,919 1,692,253 $13,872 $185,974 ---------- ----- ------- ---- ------- --------- ------- ------- Net income for the year 43,587 43,587 Other comprehensive income: Foreign currency translation adjustments (846) (846) ----- Total comprehensive income 42,741 Increase resulting from immaterial pooling 954,213 95 170 2,607 2,872 Stock options exercised 2,265 (250) (399) (510,209) (4,182) 3,533 Tax benefits related to stock option plans 2,998 2,998 Stock issuance costs (20) (20) Issuance of common stock for purchase of assets 148,033 15 8,205 (120,382) (987) 9,207 Dividends paid (Spargo) (771) (771) ---------- ----- ------- ---- ------- --------- ------- ------- Balance, December 31, 1998 32,351,580 $3,235 $128,821 $(762) $123,943 1,061,662 $8,703 $246,534 ---------- ----- ------- ---- ------- --------- ------- -------
Net income for the year 14,625 14,625 Other comprehensive income: Foreign currency translation adjustments 1,147 1,147 ----- Total comprehensive income 15,772 Stock options exercised (14) (230,684) (1,890) 1,876 Other issuance of common stock 32,816 3 3 Tax benefits related to stock option plans 99 99 Stock warrants exercised (76) (9,250) (76) -- Issuance of common stock for purchase of assets 765,199 77 9,840 (5,575) (48) 9,965 Employee Stock Purchase Program 151 (122,432) (1,004) 1,155 Purchase of Treasury Shares 1,087,000 12,752 (12,752) ---------- ----- ------- ---- ------- --------- ------- ------- Balance, December 31, 1999 33,149,595 $3,315 $138,821 $385 $138,568 1,780,721 $18,437 $262,652 ========== ===== ======= ==== ======= ========= ====== =======
The accompanying notes are an integral part of this statement.
Computer Horizons Corp. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31, --------------------------------- 1999 1998 1997 ---- ---- ---- -------------------(in thousands)------------------- Cash flows from operating activities Net income $ 14,625 $ 43,587 $ 24,534 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes (5,068) (3,665) (950) Depreciation 5,463 3,218 1,857 Loss on disposal of fixed assets -- -- (26) Gain on sale of joint venture -- (3,125) Amortization of intangibles 6,202 4,145 602 Provision for bad debts 3,367 1,676 575 Changes in assets and liabilities, net of acquisitions: Accounts receivable (36,009) (43,085) (22,850) Other current assets (2,036) (572) (108) Other assets (5,898) (1,462) (64) Refundable income taxes (5,499) -- -- Accrued payroll, payroll taxes and benefits (6,498) 5,784 4,887 Accounts payable 10,750 415 328 Income taxes payable (6,547) 4,544 5,187 Other accrued expenses 8,650 (1,529) 2,370 Other liabilities (1,030) 5,866 626 -------- -------- -------- Net cash (used in) provided by operating activities (19,528) 15,797 16,968 -------- -------- -------- Cash flows from investing activities Purchases of furniture and equipment (7,924) (11,122) (2,480) Acquisitions, net of cash (13,955) (51,948) (5,467) Changes in goodwill (3,670) 262 -- Changes in other assets -- -- (968) Proceeds from sale of joint venture -- 4,695 -- Purchases of short-term investments 11,259 2,556 (13,165) -------- -------- -------- Net cash used in investing activities (14,290) (55,557) (22,080) -------- -------- -------- Cash flows from financing activities Notes payable - banks, net 7,502 (2,313) -- Long-term debt 100 (1,000) (1,903) Dividends paid (Spargo) -- (771) (996) Stock issuance cost -- (20) -- Stock options exercised 1,989 3,533 2,573 Purchase of treasury shares (12,752) -- -- Other stock issuances (11) -- -- Stock issued on employee stock option plan 1,155 -- -- Issuance of common stock for purchase of assets (36) -- -- Proceeds from issuance of stock -- -- 83,712 -------- -------- -------- Net cash (used in)/provided by financing activities (2,053) (571) 83,386 -------- -------- --------
Foreign currency gains/(losses) 1,147 41 (315) Net (decrease)/increase in cash and cash equivalents (34,724) (40,290) 77,959 Cash and cash equivalents at beginning of year 51,796 92,086 14,127 -------- -------- -------- Cash and cash equivalents at end of year $ 17,072 $ 51,796 $ 92,086 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 811 $ 132 $ 249 Income taxes 28,025 35,111 13,694 Details of acquisition: Fair value of assets $ 46,853 $ 70,590 $ 5,590 Liabilities 32,898 20,177 242 -------- -------- -------- Cash paid for acquisition $ 13,955 $ 50,413 $ 5,348 ======== ======== ========
The accompanying notes are an integral part of these statements. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1999, 1998 and 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Computer Horizons Corp. is a strategic e-Business solutions and professional services company. The Company enables its Global 1000 customer base to realize competitive advantages through two major divisions, CHC eB-Solutions and IT Services. Combined, Computer Horizons provides enterprise application services, e-business solutions, customized Web development and Web enablement of strategic applications, Customer Relationship Management (CRM), network services, e-procurement solutions for Human Resource acquisition and management (CHIMES), strategic outsourcing and managed resourcing, as well as software and relational database products. Principles of Consolidation The consolidated financial statements include the accounts of Computer Horizons Corp. and its wholly-owned subsidiaries (the "Company"). The Company's investment in a joint venture (Note 4) was accounted for under the equity method of accounting. All material intercompany accounts and transactions have been eliminated. Revenue Recognition The Company recognizes revenues as professional services are performed. On fixed fee engagements, revenue and gross profit adjustments are made to reflect revisions in estimated total costs and contract values. Estimated losses are recorded when identified. Recruitment Costs Recruitment costs are charged to operations as incurred. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 1 (continued) Cash and Cash Equivalents Cash and cash equivalents include highly liquid instruments with a maturity of three months or less at the time of purchase and consist of the following at December 31: 1999 1998 ---- ---- -------(in thousands)------- Cash $10,762 $ 7,170 Money market funds 4,830 24,689 Demand obligations 1,480 17,962 Commercial paper -- 1,975 -------- ------- $17,072 $51,796 ====== ====== Short-term Investments The Company considers investments with an original maturity of more than three months, at the time of purchase, as short-term investments and classifies them as held to maturity. At December 31, 1999, short-term investments maturing within one year consist of commercial paper valued at cost which approximates fair value. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, regardless of the degree of such risk, consist principally of cash and cash equivalents, short-term investments and trade accounts receivable. In addition, as of December 31, 1999, the Company had $15 million of debt outstanding with a floating Libor interest rate. The Company invests the majority of its excess cash in money market funds, commercial paper and demand obligations of high-credit, high-quality financial institutions or companies, with certain limitations as to the amount that can be invested in any one entity. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 1 (continued) The Company maintains its cash balances principally in five financial institutions located in the United States, Canada and the United Kingdom. The balances in U.S. banks are insured by the Federal Deposit Insurance Corporation up to $100,000 for each entity at each institution. The balance in the Canadian bank is insured by the Canadian Deposit Insurance Corporation up to $60,000 Canadian (approximately $42,000 US). There is no depository insurance in the United Kingdom. At December 31, 1999, uninsured amounts held by the Company at these financial institutions total approximately $16,312,000. The Company's customers are generally very large, Global 1000 companies in many industries and with wide geographic dispersion. The Company's largest customer accounts for approximately 7.9% of billed accounts receivable at December 31, 1999. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. The Company's largest client accounted for 7.4%, 8.8% and 11.2%, respectively, of the Company's consolidated revenues in 1999, 1998 and 1997. Fair Value of Financial Instruments The carrying value of financial instruments (principally consisting of cash and cash equivalents, short-term investments, accounts receivable and payable and long-term debt) approximates fair value because of the short maturities or, as to long-term debt, the rates currently offered to the Company. Property and Equipment and Depreciation Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from three to seven years. Goodwill and Purchased Software Goodwill, the cost in excess of the fair value of net assets acquired, is being amortized by the straight-line method, for periods ranging from twenty to thirty years. Accumulated amortization is $10,303,000 and $6,301,000 at December 31, 1999 and 1998, respectively. Purchased software is being amortized by the straight-line method, for a period of five years. Accumulated amortization is $3,742,000 at December 31, 1999. On an ongoing basis, management reviews the valuation and amortization of goodwill and purchased software. As part of this review, the Company estimates the value of future cash flows to determine that no impairment has occurred. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 1 (continued) Income Taxes The Company and its domestic subsidiaries file a consolidated Federal income tax return. The foreign subsidiaries file in each of their local jurisdictions. Deferred income taxes result from temporary differences between income reported for financial and income tax purposes. These temporary differences result primarily from the allowance for doubtful accounts provision and certain accrued expenses which are deductible, for tax purposes, only when paid. Tax benefits from early disposition of the stock by optionees under incentive stock options and from exercise of non-qualified options are credited to additional paid-in capital. The Company provides United States income taxes on the earnings of foreign subsidiaries, unless they are considered permanently invested outside the United States. As of December 31, 1999, there is no cumulative amount of earnings on which United States income taxes have not been provided. Earnings Per Share Basic earnings per share 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. 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. Use of Estimates in Financial Statements In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Computer Horizons Corp. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 1 (continued) Foreign Currency Translation For operations outside the United States that prepare financial statements in currencies other than the United States dollar, results of operations and cash flows are translated at the average exchange rates during the period, and assets and liabilities are translated at end of period exchange rates. Translation adjustments are included as a separate component of shareholders' equity. New Accounting Pronouncements In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes new accounting and reporting standards for derivative financial instruments and for hedging activities. SFAS 133 requires an entity to measure all derivatives at fair value and to recognize them in the balance sheet as an asset or liability, depending on the entity's rights or obligations under the applicable derivative contract. SFAS No. 133 is effective for financial statements for fiscal years beginning after June 1999. The impact of adopting SFAS 133 is not expected to be material to the consolidated financial statements or notes to consolidated financial statements. NOTE 2 - ACQUISITIONS 1999 On October 18, 1999, the Company acquired G. Triad Enterprises, Inc.("G.Triad"), a New Jersey based Internet / Intranet development firm, for approximately $14.5 million in cash and stock. The acquisition was accounted for as a purchase. The resulting goodwill of approximately $14 million is being amortized to operations over a 20-year period. Had the acquisition of G. Triad occured on January 1, 1999, the effect on revenues and net income would have been immaterial. On May 6, 1999, the Company acquired all the common stock of Integrated Computer Management ("ICM"), a New Jersey-based solutions company that provides technology consulting, packaged software integration, customer software development, systems integration and advanced learning solutions, for stock, cash and promissory notes totaling approximately $17 million. The acquisition was accounted for as a purchase. The resulting goodwill of approximately $15 million is being amortized to operations over a 20-year period. Had the acquisition of ICM occurred on January 1, 1999, the effect on revenues and net income would have been immaterial. Princeton On June 1, 1999, Princeton Softech Inc. ("Princeton"), a wholly-owned subsidiary of the Company, acquired the software products, intellectual property rights and certain other assets of SELECT Software Tools plc ("Select"), a London-based software firm, for approximately $8 million cash plus the assumption of certain liabilities such as severance, certain payments due to a vendor under a contract that the Company expected to derive no future benefit, and certain other assumed liabilities in connection with its acquisition. These liabilities had the effect of increasing the value of the intangible assets (purchased software) that were acquired. The amount of such liabilities aggregated $3,100,000 of which approximately $1,800,000 had been paid prior to December 31, 1999. Substantially all of the accrued severance (which was for employees that had been made redundant upon acquisition in the United Kingdom) had been paid prior to December 31, 1999. The remaining accrued liabilities of approximately $1,300,000 consist primarily of payments due pursuant to the contract discussed above. The acquisition was accounted for as a purchase. The cost of the purchased software and other intangibles approximates $12 million, and is being amortized to operations over a five-year period. Had the acquisition of Select occurred on January 1, 1999, the effect on revenues and net income would have been immaterial. Computer Horizons Corp. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 2 (continued) On May 7, 1999, Princeton purchased the distribution rights in Australia held by its former distributor, SPP. No tangible assets of SPP were acquired. The aggregate cash purchase price was approximately $740,000 of which approximately $672,000 was paid prior to year-end. The transaction was accounted for using purchase accounting, and the aggregate cash purchase price of $740,000 was allocated to distribution rights which is being amortized to operations over a 48 month period. Had the acquisition occurred on January 1, 1999, the effect on revenues and net income would have been immaterial. On April 14, 1999, Princeton purchased all of the capital stock of Unibase, its French distributor. The aggregate cash purchase price was approximately $1,424,000 including approximately $92,000 of fees and expenses relating to such transaction. The transaction was accounted for using purchase accounting. The excess of purchase price over tangible assets acquired of approximately $1,090,000 was allocated to distribution rights which are being amortized to operations over a 48 month period. Had the acquisition of Unibase occurred on January 1, 1999, the effect on revenues and net income would have been immaterial. 1998 On September 25, 1998, the Company acquired the assets of Enterprise Solutions Group, LLC ("ESG"), a Cincinnati, Ohio-based technology organization that provides training and educational services as well as consulting services for Global 1000 companies. The acquisition was accounted for as a purchase. The total adjusted purchase price was approximately $8,883,000 in cash and common stock. Approximately $1,550,000 is to be paid out in two payments, approximately $1 million was paid in January of 2000 and the remaining $550,000 owed in January of 2001 has been accrued. Had the acquisition of ESG occurred on January 1, 1998 the effect on revenues and net income would have been immaterial. On August 4, 1998, the Company acquired the assets of RPM Consulting ("RPM"), a Maryland based provider of network consulting services, specializing in architecting, designing and upgrading large enterprise networks. The purchase agreement was for a combination of cash and common stock totaling approximately $27,700,000, and two earnout payments (totaling $2.2 million) based on pretax profit margins which were paid during 1999. The acquisition was accounted for as a purchase. Had the acquisition of which were paid off during 1999 RPM occurred on January 1, 1998, the effect on revenues and net income would have been immaterial. On July 2, 1998, the Company's Canadian subsidiary acquired the net assets of Infomatics Search Group ("ISG"), a Toronto, Canada based information technology service firm, offering both professional staffing and career placement services. The acquisition was accounted for as a purchase. The total purchase price was approximately $21,600,000 in cash. The purchase agreement includes an earnout clause equal to two times increases in prior period adjusted earnings (as defined in the purchase agreement) to be earned in 1999 and 2000. There was no earnout adjustment for 1998. Had the acquisition of ISG occurred on January 1, 1998, the effect on revenues and net income would have been immaterial. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 2 (continued) On June 24, 1998, the Company acquired all of the common stock of Spargo Consulting PLC ("Spargo"), an information technology consultancy service provider, organized under the laws of the United Kingdom for 1,887,000 shares of Computer Horizon stock. This transaction was accounted for as a pooling of interests and, accordingly, the consolidated financial statements for the periods presented have been restated to include the accounts of Spargo. On February 27, 1998, the Company acquired all of the common stock of Princeton Softech, Inc. ("Princeton") in exchange for 954,213 shares of Computer Horizons stock. Princeton specializes in relational databases, data synchronization, intelligent data migration and data management tools, and is based in Princeton, New Jersey. This transaction was accounted for as an immaterial pooling of interests and the results of Princeton have been included since January 1, 1998. NOTE 3 - ACCOUNTS RECEIVABLE Accounts receivable consist of the following at December 31: 1999 1998 ---- ---- --------(in thousands)------- Billed $128,197 $ 83,394 Unbilled 50,428 55,262 ------ -------- 178,625 138,656 Less allowance for doubtful accounts 5,819 3,209 ----- --------- $172,806 $135,447 ======= ======= NOTE 4 - GAIN ON SALE OF JOINT VENTURE In 1995, the Company entered into a software development and services joint venture with the Birla Group, a large multinational conglomerate located in India. The Company's total investment in Birla Horizons International ("BHI") was $1,672,000 at December 31, 1997, representing the initial cost plus equity in the undistributed net earnings since formation, and was included in other noncurrent assets. BHI provided consultants to the Company at a total cost of $3,437,000 and $5,017,000 in 1998 and 1997, respectively. Approximately $992,000 was included in accounts payable as of December 31, 1998. During the fourth quarter of 1998, the Company sold its 50% interest to the Birla Group for a cash payment of $5,750,000. Accordingly, a gain of $4,180,000 was recognized. The impact on net income was $1,975,000 or $0.06 per share. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 5 - LONG-TERM DEBT AND LINES OF CREDIT As of December 31, 1999, debt consisted of the following (in thousands): 1999 Line of Credit $15,000 Debt pertaining to acquisitions 8,000 Other 602 ------ 23,602 ------ Less current maturities 19,502 ------ Long-term debt due in 2001 $4,100 ====== At December 31, 1999, the Company has two bank lines of credit in the amounts of $30 million and $10 million expiring March 31, 2000 and May 31, 2000, respectively, of which $15 million was outstanding at December 31, 1999. On March 15, 2000 the $30 million bank line of credit was extended to April 28, 2000. Under the first line of credit, the Company has a standby letter of credit in the amount of $903,000. At December 31, 1999, the unused lines of credit amounted to $24 million. In addition to the above, the Company's subsidiary G. Triad also has a line of credit in the amount of $50,000. This line is backed by G. Triad's business assets approximating $1.7 million. As of December 31, 1999 there was no outstanding balance due on the line of credit. ICM, another subsidiary, has two letters of credit in the amounts of $149,609 and $76,800. These letters expire on March 31, 2000 and September 30, 2000, respectively. The $149,609 letter of credit was renewed for $101,414 and will expire on March 31, 2001. There were no outstanding balances at December 31, 1999. The Company financed part of the acquisition of ICM by issuing ten promissory notes totaling $8 million, bearing interest at 7%. Four million of the notes come due on May 6, 2000 and the remainder are payable on May 6, 2001. The Company also has a $320,000 Canadian (approximately $222,000 US) demand loan outstanding with a Canadian bank as of December 31, 1999. NOTE 6 - SHAREHOLDERS' EQUITY Authorized Shares On May 6, 1998, the Company approved an amendment to the Company's Certificate of Incorporation increasing the authorized number of shares of the Company's common stock from 60,000,000 to 100,000,000. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 6 (continued) Stock Splits The Board of Directors of the Company declared a three-for-two common stock split in the form of a 50% stock distribution on May 7, 1997, for shareholders of record as of May 22, 1997. The distribution was paid on June 9, 1997. An amount equal to the $0.10 par value of the common shares distributed has been retroactively transferred from additional paid-in capital to common stock. All references in the financial statements with regard to number of shares of common stock, common stock prices and per share amounts have been restated to reflect the above-mentioned stock split. Stock Options and SFAS No. 123 Pro Forma Disclosure In 1994, the Company adopted a stock option plan which provides for the granting, to officers and key employees, of options for the purchase of a maximum of 7,594,000 shares of common stock and stock appreciation rights (SARs). Options and SARs generally expire five years from the date of grant and become exercisable in specified amounts during the life of the respective options. No SARs have been granted as of December 31, 1999. This plan, which replaces the Company's 1985 Plan, will terminate on June 15, 2004. There were 3,400,000 and 4,789,000 shares available for option at December 31, 1999 and 1998. In 1998, the Company amended the non-qualified Directors' Stock Option Plan, providing that each new director of the Company who is not an employee of the Company (i) shall immediately receive options to purchase 10,000 shares of its common stock and (ii) shall receive annual grants to purchase 10,000 shares of its common stock. The plan expires on March 4, 2001. There were 454,000 shares available for option at December 31, 1999. The exercise price per share on all options and/or SARs granted may not be less than the fair value at the date of the option grant. Accordingly, no compensation cost has been recognized for the plans. Had compensation cost for the plans been determined based on the fair value of the options at the grant dates and been consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 6 (continued) 1999 1998 1997 ---- ---- ---- Net income As reported $ 14,625,000 $43,587,000 $24,534,000 Pro forma $ 12,721,000 $39,516,000 $21,623,000 Earnings per share Basic As reported $0.47 $1.41 $0.89 Pro forma $0.41 $1.28 $0.78 Diluted As reported $0.46 $1.35 $0.85 Pro forma $0.40 $1.23 $0.75
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions used for grants in 1999, 1998 and 1997, respectively: expected volatility of 77%, 127% and 61%; risk-free interest rates of 6.52%, 6.00% and 5.47%; and expected lives of 5.0, 4.5 and 5.0 years. A summary of the status of the Company's stock option plans as of December 31, 1999, 1998 and 1997, and changes during the years ending on those dates is presented below:
1999 1998 1997 ---------------------- ---------------------- ---------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares price Shares price ---------------------- ------- -------- ---------------------- (000) (000) (000) Outstanding - January 1 2,410 $13.94 2,035 $9.97 2,200 $ 7.03 Granted 1,571 11.75 1,634 26.39 333 23.39 Exercised (230) 5.97 (512) 6.88 (462) 5.37 Canceled/forfeited (151) 14.67 (747) 35.09 (36) 13.36 ----- ----- ----- ----- ----- ------- Outstanding - December 31 3,600 13.46 2,410 13.94 2,035 9.97 ===== ===== ====== ===== ===== ======= Options exercisable - December 31 1,547 13.61 1,003 10.84 833 7.10 ===== ===== ===== ===== ===== ======= Weighted average fair value of options granted during the $7.78 $ 13.03 $ 23.30 year
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 6 (continued) The following information applies to options outstanding at December 31, 1999:
Options outstanding Options exercisable -------------------------------------------- ------------------- Weighted Outstanding Average Weighted Exercisable Weighted as of Remaining average as of average December 31, Contractual exercise December 31, exercise Range of exercise prices 1999 life price 1999 price ------------------------ ----------- ----------- ----------- ----------- --------- (000's) (000's) $ 0.00 - $ 9.99 627 3.3 $ 4.45 562 $ 4.36 10.00 - 14.99 1,651 3.8 11.21 199 12.77 15.00 - 19.99 303 6.0 16.79 207 16.68 20.00 and over 1,019 3.8 21.49 579 21.75 ----- ----- ------- ----- ----- 3,600 3.9 13.46 1,547 13.61 ===== ===== ======= ===== =====
Certain officers have the right to borrow from the Company against the exercise price of options exercised. As of December 31, 1999, total borrowings pertaining to one officer, amounted to $100,000. The Company has issued warrants to purchase shares of its common stock to two outside business/ legal consulting firms. There were no warrants issued in either 1999 or 1998. Warrants for 8,625 shares were granted in 1997 . The exercise price is the fair value at the date of grant. As of December 31, 1999, 9,250 warrants were exercised and 29,375 warrants were outstanding. Shareholder Rights Plan In July 1989, the Board of Directors declared a dividend distribution of .131 preferred stock purchase right on each outstanding share of common stock of the Company. The rights were amended on February 13, 1990. Each right will, under certain circumstances, entitle the holder to buy one one-hundredth (1/100) of a share of Series A preferred stock at an exercise price of $30.00 per one one-hundredth (1/100) share, subject to adjustment. Each one one-hundredth (1/100) of a share of Series A preferred stock has voting, dividend and liquidation rights and preferences substantively equivalent to one share of common stock. The rights will be exercisable and transferable separately from the common stock only if a person or group acquires 20% or more, subject to certain exceptions, of the Company's outstanding common stock or announces a tender offer that would result in the ownership of 20% or more of the common Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 6 (continued) stock. If a person becomes the owner of at least 20% of the Company's common shares (an "Acquiring Person"), each holder of a right other than the Acquiring Person is entitled, upon payment of the then current exercise price per right (the "Exercise Price"), to receive shares of common stock (or common stock equivalents) having a market value equal to twice the Exercise Price. Additionally, if the Company subsequently engages in a merger or other business combination with the Acquiring Person in which the Company is not the surviving corporation, or in which the outstanding shares of the Company's common stock are changed or exchanged, or if more than 50% of the Company's assets or earning power is sold or transferred, a right would entitle a Computer Horizon Corp. shareholder, other than the Acquiring Person and its affiliates, to purchase upon payment of the Exercise Price, shares of the Acquiring Person having a market value of twice the Exercise Price. Prior to a person becoming an Acquiring Person, the rights may be redeemed at a redemption price of one cent per right, subject to adjustment. The rights are subject to amendment by the Board. No shareholder rights have become exercisable. The rights originally would have expired on July 16, 1999, however, the Board of Directors approved the adoption of a new Shareholder Rights Plan to replace the existing plan. The terms of the new Rights Plan are substantially the same as the original plan. The new rights will expire on July 15, 2009. Repricing of Stock Options On October 16, 1998, the Company's Board of Directors approved the repricing of approximately 732,000 stock options that had been granted to employees earlier in the year. This decision was made in response to competitive pressures and as a means to retain key employees. No compensation expense was recorded as a result of the above referenced repricing. NOTE 7 - INCOME TAXES The following is a geographical breakdown of the Company's income before taxes: Year ended December 31, ---------------------------------------------- 1999 1998 1997 ---- ---- ---- -------------------(in thousands)------------------- Domestic $ 31,650 $ 72,714 $ 40,169 Foreign (6,012) 6,779 2,863 -------- -------- -------- $ 25,638 $ 79,493 $ 43,032 ======== ======== ======== Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 7 (continued) The provision for income taxes consists of the following for the years ended December 31:
1999 1998 1997 ---- ---- ---- -------------(in thousands)----------- Current Federal $ 12,348 $ 28,539 $ 13,927 State 2,865 8,334 4,558 Foreign 868 2,772 963 -------- -------- -------- Total current 16,081 39,645 19,448 Deferred Federal (2,403) (2,926) (703) State (330) (794) (244) Foreign (2,335) (19) (3) -------- -------- -------- Total deferred (5,068) (3,739) (950) -------- -------- -------- $ 11,013 $ 35,906 $ 18,498 ======== ======== ========
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 7 (continued) Deferred tax assets and liabilities consist of the following at December 31:
1999 1998 ---- ---- -------(in thousands)---- Deferred tax liabilities Depreciation and amortization $ (1,044) -- Capitalized Software development costs (241) $ (290) Other -- (466) -------- -------- Total deferred tax liabilities (1,285) (756) -------- -------- Deferred tax assets Accrued insurance 123 293 Foreign net operating losses 2,336 -- Accrued payroll and benefits 2,593 1,982 Deferred revenue 2,712 2,346 Allowance for doubtful accounts 1,968 1,059 Depreciation and amortization -- 715 Accrued severance and lease costs 2,052 -- Other 904 696 -------- -------- Total deferred tax assets 12,688 7,091 ======== ======== Net deferred tax assets $ 11,403 $ 6,335 ======== ========
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 7 (continued) A reconciliation of income taxes, as reflected in the accompanying statements, with the statutory Federal income tax rate of 35% for the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ---- ---- ---- -----------(in thousands)-------- Statutory Federal income taxes $ 8,973 $ 27,822 $ 15,061 State and local income taxes, net of Federal tax benefit 1,648 4,901 2,804 Foreign taxes provided at rates other than the U.S. statutory rate 98 122 (37) Amortization of goodwill 282 203 203 Equity in net earnings of joint venture -- 343 Merger-related expenses -- 1,673 Other, net 12 842 467 -------- -------- -------- $ 11,013 $ 35,906 $ 18,498 ======== ======== ========
Certain foreign subsidiaries of the Company have net operating loss carryforwards at December 31, 1999, totaling approximately $7,200,000, $264,000 expires in 2005, $1,136,000 expires in 2006 and the remainder has no expiration. During 1998, the Company completed a business combination which, for financial statement purposes, has been accounted for as a pooling-of-interests. For income tax purposes the Company believes the transaction qualifies as a taxable purchase that gives rise to future tax deductions. Since the tax structure of the transaction is subject to determination by the tax authorities, the Company has not recorded any potential tax impact in its financial statements. When resolved, the Company will record a deferred tax asset net of an appropriate valuation allowance. The net benefit will be reflected as an increase in additional paid-in-capital. Any adjustments to the valuation allowance will be charged or credited to income. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 8 - EARNINGS PER SHARE DISCLOSURES
For the year ended ------------------------------------- Per Income Shares share (numerator) (denominator) amount ------------- --------------- --------- --------(in 000's, except share and per share data)---- December 31, 1999 Net income $14,625 ======= Basic earnings per share Income available to common stockholders $14,625 30,940,000 $0.47 ==== Effect of diluted securities Options 707,000 ------- Diluted earnings per share Income available to common stock- holders plus assumed conversions $14,625 31,647,000 $0.46 ====== ========== ==== December 31, 1998 Net income $43,587 ====== Basic earnings per share Income available to common stockholders $43,587 30,925,000 $1.41 ==== Effect of diluted securities Options 1,305,000 ----------- Diluted earnings per share Income available to common stock- holders plus assumed conversions $43,587 32,230,000 $1.35 ====== ========== ==== December 31, 1997 Net income $24,534 ====== Basic earnings per share Income available to common stockholders $24,534 27,567,000 $0.89 ==== Effect of diluted securities Options 1,432,000 ----------- Diluted earnings per share Income available to common stock- holders plus assumed conversions $24,534 28,999,000 $0.85 ====== ========== ====
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 8 (continued) The computation of diluted earnings per share excludes options with exercise prices greater than the average market price. During 1999, there were 1,322,000 excluded options outstanding at December 31, 1999 with exercise prices of $15.53 to $28.13 per share. All options to purchase shares of common stock were included in the computation of diluted earnings per share in 1998. During 1997 options to purchase 8,713 shares of common stock, ranging from $25.67 to $35.58, per share were outstanding but were not included in the computation of diluted earnings per share because the option's exercise price was greater than the average market price of common shares. NOTE 9 - SEGMENT INFORMATION In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS No. 131 was effective for financial statements for fiscal years beginning after December 15, 1997. Financial statement disclosures for all prior periods have been restated. The Company has changed its segment breakout and 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 consists of income before income taxes, excluding interest income, interest expense, amortization of intangibles, restructuring charges, merger related expenses, equity in earnings of joint venture and gain on sale of joint venture , amounting to $12.6 million, $(1.0) million and $0.1 million in 1999, 1998 and 1997, respectively. Long-term assets includes goodwill, property, plant and equipment and purchased software. 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. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 9 (continued)
BY LINE OF BUSINESS 1999 1998 1997 ---- ---- ---- ------------(in thousands)-------------- REVENUE IT Services $ 433,044 $ 459,740 $ 334,729 E-Solutions Group 101,550 55,181 15,581 Corporate and other -- -- -- --------- --------- --------- Total Revenue $ 534,594 $ 514,921 $ 350,310 ========= ========= ========= OPERATING INCOME IT Services 46,549 69,918 40,454 E-Solutions Group (8,352) 8,793 2,706 Corporate and other -- (90) 13 --------- --------- --------- Total Operating Income $ 38,197 $ 78,621 $ 43,173 ========= ========= ========= ASSETS IT Services 183,694 151,111 92,528 E-Solutions Group 111,417 57,802 6,109 Corporate and other 52,883 87,139 118,988 --------- --------- --------- Total Assets $ 347,994 $ 296,052 $ 217,625 ========= ========= ========= DEPRECIATION EXPENSE IT Services 1,094 810 935 E-Solutions Group 1,851 681 150 Corporate and other 2,518 1,727 772 --------- --------- --------- Total Depreciation $ 5,463 $ 3,218 $ 1,857 ========= ========= =========
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 9 (continued)
BY GEOGRAPHIC AREA 1999 1998 1997 ---- ---- ---- --------------------(in thousands)-------------------- REVENUE United States $480,131 $ 476,252 $ 334,334 Europe 26,134 23,651 15,581 Australia 757 -- -- Canada 27,572 15,018 395 ------ ------------ ----------- Total Revenue $534,594 $ 514,921 $ 350,310 ======= =========== ========= LONG-TERM ASSETS United States 102,562 63,478 22,395 Europe 1,623 334 323 Australia 55 -- -- Canada 19,636 19,494 72 ------ ------------ ------------ Total Long-Term Assets $123,876 $ 83,306 $ 22,790 ======= ============ ==========
NOTE 10 - SAVINGS PLAN AND OTHER RETIREMENT PLANS The Company maintains a defined contribution savings plan covering eligible employees. The Company makes contributions up to a specific percentage of participants' contributions. The Company contributed approximately $1,440,000, $704,000 and $469,000 in 1999, 1998 and 1997, respectively. In 1995, the Company instituted a Supplemental Executive Retirement Plan whereby key executives are entitled to receive lump-sum payments (or, if they elect, a ten-year payout) upon reaching the age of 65 and being in the employ of the Company. The maximum commitment if all plan members remain in the employ of the Company until age 65 is approximately $13.1 million. Benefits accrue and vest based on a formula which includes total years with the Company and total years possible until age 65. The plan is nonqualified and not formally funded. Life insurance policies on the members are purchased to assist in funding the cost. The deferred compensation expense is charged to operations during the remaining service lives of the members and amounted to approximately nil, $285,000 and $183,000 in 1999, 1998 and 1997, respectively. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 10 (continued) During 1999 the Company adopted an Employee Stock Purchse Plan to provide substantially all employees who have completed one year of service an opportunity to purchase shares of its common stock through payroll deductions, up to 10 percent of eligible compensation. Quarterly, participant account balances are used to purchase shares of stock at 85 percent of its fair market value on either the first or the last trading day of each calendar quarter. A total of 250,000 shares are available for purchase under the plan. There were 122,432 shares purchased under the plan in 1999. In addition, the Company adopted a Deferred Compensation Plan for Key Executives that permits the individuals to defer a portion of their annual salary or bonus for a period of at least five years. There is no effect on the Company's operating results since any amounts deferred would have previously been expensed. Amounts deferred have been included in accrued payroll and amounted to $4.0 million and $2.8 million as of December 31, 1999, and 1998 respectively. NOTE 11 - COMMITMENTS Leases The Company leases office space under long-term operating leases expiring through 2006. As of December 31, 1999, approximate minimum rental commitments were as follows: Year ending (in thousands) 2000 $ 13,382 2001 12,848 2002 11,972 2003 10,394 2004 9,349 Thereafter 3,251 -------- $ 61,196 ======== Office rentals are subject to escalations based on increases in real estate taxes and operating expenses. Aggregate rent expense for operating leases approximated $7,500,000, $5,136,000 and $3,721,000, in the years ended December 31, 1999, 1998 and 1997, respectively. Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 13 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited) For the years ended December 31, 1999 and 1998, selected quarterly financial data is as follows:
Quarters -------------------------------------------------------------------- First Second Third Fourth ------------- ------------- ------------- ----------- --------------(in thousands, except per share data)----------------- 1999 Revenues $ 138,141 $ 142,874 $ 135,061 $ 118,518 Direct costs 90,720 95,830 95,017 83,743 Selling, general and administrative 29,941 33,164 33,833 34,148 Amortization of intangibles 1,192 1,520 1,629 1,861 Restructuring charges -- -- 6,355 -- Income/(loss) from operations 16,288 12,360 (1,773) (1,234) Interest income/(exp.) - net 266 124 (232) (161) Income/(loss) before income taxes 16,554 12,484 (2,005) (1,395) Income taxes (benefit) 7,035 5,243 (842) (423) Net income/(loss) 9,519 7,241 (1,163) (972) Earnings/(loss) per share: Basic 0.30 0.24 (0.04) (0.03) Diluted 0.30 0.23 (0.04) (0.03)
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 13 (continued)
Quarters --------------------------------------------------------------- First Second Third Fourth ------------- ------------- ------------- ----------- --------------(in thousands, except per share data)------------- 1998 Revenues $111,512 $123,735 $ 136,633 $ 143,041 Direct costs 70,748 79,619 86,587 89,841 Selling, general and administrative 24,199 25,751 28,075 31,480 Amortization of intangibles 240 493 1,052 1,745 Merger-related expenses 1,328 2,209 735 -- Income from operations 14,997 15,663 20,184 19,975 Interest income - net 1,333 1,526 951 774 Equity in net loss of joint venture (90) -- -- -- Gain on sale of joint venture -- -- -- 4,180 Income before income taxes 16,240 17,189 21,135 24,929 Income taxes 7,603 7,653 9,316 11,334 Net income 8,637 9,536 11,819 13,595 Earnings per share: Basic $0.28 $0.31 $0.38 $0.44 Diluted $0.27 $0.30 $0.37 $0.42
Computer Horizons Corp. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) December 31, 1999, 1998 and 1997 NOTE 14 - Restructuring Charges During the third quarter of 1999, the Company recorded a restructuring charge of approximately $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. This provision includes an accrued payment of approximately $4.0 million relating to future costs associated with continuing rent and severance commitments. Remaining Recorded Paid at Dec. 31, 1999 -------- ------- ---------------- SEVERANCE US $ 1,172 ($1,021) $ 151 Europe 1,127 (775) 352 Canada 122 (89) 33 ------- ------- ------- Total Severance $ 2,421 ($1,885) $ 536 ======= ======= ======= LEASE OBLIGATIONS US 3,564 (254) 3,310 Canada 101 (25) 76 ------- ------- ------- Total Lease Obligations $ 3,665 ($ 279) $ 3,386 ======= ======= ======= GENERAL OFFICE CLOSURE Canada $ 269 $ (188) $ 81 ------- ------- ------- TOTAL $ 6,355 ($2,352) $ 4,003 ======= ======= ======= Computer Horizons Corp. and Subsidiaries MARKET AND DIVIDEND INFORMATION Years ended December 31, 1999 and 1998 The Company's common stock is quoted on the Nasdaq National Market, under the symbol CHRZ. The range of high and low closing stock prices, as reported by the Nasdaq National Market, for each of the quarters for the years ended December 31, 1999 and 1998 is as follows: 1999 1998 ---------------------- --------------------- High Low High Low ----- ----- ---- ---- Quarter First $28.63 $10.63 $ 52.19 $ 39.50 Second 19.25 9.50 51.75 30.38 Third 14.25 10.88 43.75 23.38 Fourth 18.56 11.06 28.63 18.13 The Company plans to reinvest its earnings in future growth opportunities and, therefore, does not anticipate paying cash dividends in the near future and has not paid any to date. As of December 31, 1999, there were approximately 1,207 holders of record of common stock. EX-10 2 EXHIBIT 10i Amendment to Employment Agreement Dated January 1, 1997 (the "Agreement") By and Between William J. Murphy (the "Executive") And Computer Horizons Corp. (the "Company") WHEREAS, the Company desires to continue to employ the Executive as its Chief Financial Officer and Executive Vice President, and the Executive is willing to serve the Company in such capacity; WHEREAS, the Company and the Executive desire to amend the terms and conditions of such employment; NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements herein contained and in the Agreement, the Company and the Executive agree as follows: 1. The following sentence shall be added to the end of paragraph 2 of this Agreement. "Thereafter, this Agreement shall automatically renew on January 1 of each year until terminated pursuant to the terms of this Agreement." 2. The parties regard the Agreement as having renewed on January 1, 2000. IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed and the Executive has hereunto set his hand as of the date first set forth above. By: /s/John J. Cassese ------------------ John J. Cassese, President /s/William J. Murphy -------------------- William J. Murphy Dated: 3/24/00 EXHIBIT 10j $30,000,000 New York, New York March 15, 2000 NOTE 1. For value received, the undersigned, by this promissory note (the "Note") unconditionally promises to pay to the order of THE CHASE MANHATTAN BANK (the "Bank") at any of its banking offices in New York, New York, in lawful money of the United States and immediately available funds, the principal amount of THIRTY MILLION DOLLARS ($30,000,000) or the aggregate unpaid principal balance of all advances made by the Bank to the undersigned, whichever is less, together with interest on each advance, in like money and funds, at a rate determined by the Bank in its sole discretion at the time of such advance. Each advance shall be payable on the maturity date thereof, as agreed between the Borrower and the Bank on the date of such advance, provided that no advance may mature after April 28, 2000 (the "Final Maturity Date"). Interest shall be payable on the maturity date of each advance and upon any prepayment of any advance. 2. If all or any portion of any advance shall not be paid when due (whether as stated, by acceleration or otherwise) such advance shall bear interest, for the period from the due date of such advance until the maturity date thereof, at the rate per annum which is equal to 2% above on the rate which would otherwise be applicable herunder and thereafter until the unpaid principal amount thereof shall be paid in full, at the rate per annum which is equal to 2% above the rate of interest publicly announced by the Bank from time to time in New York, New York as its prime rate. Each change in the interest rate hereon resulting from a change in the prime rate of the Bank shall become effective as of the opening of business on the day on which such change in such prime rate occurs. Interest shall be calculated on the basis of a 360 day year for actual days elapsed. Anything in this Note to the contrary notwithstanding, the Bank shall not be permitted to charge or receive, and the undersigned shall not be obligated to pay, interest in excess of the maximum rate from time to time permitted by applicable law; provided, however, if the maximum rate permitted by law changes, the rate hereunder shall change, without notice to the undersigned, on the same day the maximum rate pemitted by law changes. 3. the undersigned may not prepay any advance unless it shall reimburse the Bank on demand for any loss incurred or to be incurred by it in the reemployment of the funds released by any such prepayment. Such loss shall be the difference, as determined by the Bank, between the cost of obtaining the funds for the advance or advances (or portion thereof) prepaid and any lesser amount which may be realized by the Bank in reemploying the funds received in prepayment during the period from the date of prepayment to the maturity date of each advance prepaid. 4. If any amount becomes due and payable under this Note on a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of the State of New York, the maturity thereof shall be extended to the next succeeding business day and interest thereon shall be payable during such extension at the rate applicable to the Note prior to such extension. 5. The undersigned shall pay all reasonable out-of-pocket costs and expenses incurred by the Bank in connection with the preparation, development and execution of this note and any amendment, supplement or modification hereto, including, without limitation, the fees and disbursements of counsel to the Bank (which may include allocation of the cost of in-house counsel to the Bank). 6. Upon occurrence, with respect to any maker, endorser or guarantor of any of the following: default in payment of this Note or any other obligation of any nature or description to the Bank (collectively, the "Obligation"; any other violation of any covenant or condition of any of the Obligations; calling a meeting of any creditors; filing of a voluntary or involuntary petition under the Federal Bankruptcy Code which, in the case of an involuntary petition, is not dismissed, discharged or bonded within 60 days of the date of such petition; insolvency; entry of a judgment; failure to pay or remit any tax when assessed or due unless contested in good faith by appropriate proceedings for which adequate reserves are being provided; death (in the case of an individual), termination (in the case of a partnership) or dissolution (in the case of a corporation); granting a security interest in any property; suspension or liquidation of usual business; failing to furnish financial information or to permit inspection of books or records; making any misrepresentation to the Bank in obtaining credit; or, in the Bank's opinion, impairment of financial responsibility; then the Obligations shall be due and payable immediately without notice or demand. 7. The undersigned agrees to indemnify the Bank for, and to hold the Bank harmless from, any loss or expense which the Bank may sustain or incur, including any interest payment by the Bank to lenders of funds borrowed by it in order to make or maintain the loans evidenced hereby as a consequence of (a) default by the undersigned in payment of the principal amount of, or interest on, this Note and (b) payment by the undersigned on a day other than the maturity date of any advance as a result of acceleration of the obligations hereunder or otherwise. This covenant shall survive payment of this Note. 8. Each advance, and each payment made on account of the principal thereof, shall be endorsed by the Holder on an attachment hereto on the date such advance is made or a payment in immediately available funds is received. This Note shall be used to record all advances and payments of principal made hereunder until it is surrendered to the undersigned by the Bank and it shall continue to be used even though there may be periods prior to such surrender when no amount of principal or interest is owing hereunder. 9. The Bank shall have a continuing lien and/or right of set-off on deposits (general and special) and credits with the Bank of every maker, endorser and guarantor, and may apply all or part of same to the Obligation (whether contingent or unmatured ), at any time or times, without notice. The Bank shall have a continuing lien on all property of every maker, endorser and guarantor and the proceeds therof held or received by or for the Bank for any purpose. Any notice of disposition of property shall be deemed reasonable if mailed at least 5 days before such disposition to the last address of such maker, endorser or guarantor on the Bank's records. Each maker, endorser and guarantor agrees to pay the costs and expenses (including, without limitation, reasonable attorneys' fees) of enforcing the Obligations. Each maker, endorser and guarantor waives protest and, in any litigation (whether or not relating to the Obligations) in which the Bank and any of them shall be adverse parties, waives the right to interpose any set-off or counterclaim of any nature or description and any defense based upon any statue of limitations or any claim of laches. Time for payment extended by law shall be included in the computation of interest. 10. The undersigned hereby irrevocably (a) submits, in any legal proceeding relating to this Note, to the non-exclusive in personam jurisdiction of any state or United States court of competent jurisdiction sitting in the State of New York and agrees to suit being brought in any such court, (b) agrees to service of process in any such legal proceeding by mailing of copies thereof (by registered or certified mail, if practicable) postage prepaid, or by telex, to the undersigned at the last known address of the undersigned on the books of the Bank, and (c) agrees that nothing contained herein shall affect the Bank's right to effect service of process in any other manner permitted by law; and the undersigned and the Bank hereby irrevocably waive, in any such legal proceeding, trial by jury. 11. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. COMPUTER HORIZONS CORP. By: /s/ Michael J. Shea --------------------- Michael J. Shea Vice President Controller EX-21 3 Exhibit 21 The Company's only active subsidiaries are each wholly owned and are included in the consolidated financial statements of the Company, and their jurisdictions of incorporation are as follows: Name of Subsidiary Jurisdiction of Incorporation CHC Consulting Services Limited England and Wales CHC International England and Wales Computer Horizons (Canada) Corp. Toronto, Canada Horizons Technologies, Inc. Delaware Strategic Outsourcing Systems, Inc. Delaware Princeton Softech, Inc. New Jersey G. Triad Development Corp. New Jersey Integrated Computer Management New Jersey CHIMES, Inc. Delaware EX-23 4 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated February 21, 2000 (except for Note 5, as to which the date is March 15, 2000), accompaning the consolidated financial statements incorporated by reference in the Annual Report of Computer Horizons Corp. on Form 10-K for the year ended December 31, 1999 and our report dated February 21,1999 (except for Note 5, as to which the date is March 15, 2000) accompanying the financial statement schedule included in that Form 10-K. We hereby consent to the incorporation by reference of said report in the Registration Statements of Computer Horizons Corp.on Forms S-3 (File No. 333-33665, effective September 24, 1997, File No. 333-44417, effective February 27, 1998, and File No. 333-48877, effective March 30, 1998) and on Forms S-8 (File No. 033-41726, effective July 16, 1991, File No. 033-59437, effective May 18, 1995, File No. 033-64763, effective December 5, 1995 and File No. 333-60751, effective August 5, 1998, and File No. 333-74579, effective March 17, 1999). /s/ GRANT THORNTON LLP - ---------------------- GRANT THORNTON LLP Edison, New Jersey March 29, 2000 EX-27 5 FDS --
5 1,000 12-MOS DEC-31-1999 DEC-31-1999 17,072 0 172,806 5,819 0 208,781 38,365 18,144 347,994 78,924 0 0 0 3,315 259,337 347,994 0 534,594 0 508,954 0 0 (2) 25,638 11,013 14,625 0 0 0 14,625 0.47 0.46
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