EX-99.1 2 ch5122ex991.htm EXHIBIT 99.1

Exhibit 99.1

 Message

 

COMPUTER HORIZONS REPORTS FOURTH QUARTER AND FULL YEAR 2005 RESULTS
Company Positioned for Growth and Profitability in 2006

MOUNTAIN LAKES, N.J., March 13 /PRNewswire-FirstCall/ -- Computer Horizons Corp. (Nasdaq: CHRZ), a strategic solutions and professional services company, today announced its financial results for the fourth quarter and full year ended December 31, 2005.

Financial Highlights and Update on Strategic Alternatives Review

In October of 2005, CHC shareholders elected a new Board, which appointed two new senior executives to lead the management team: Dennis J. Conroy, president and chief executive officer, and Brian A. Delle Donne, executive vice president and chief operating officer.  The new team concentrated during the fourth quarter on completing and addressing fiscal 2005 activities, and on repositioning CHC for improved performance in 2006.

Mr. Conroy commented, “Results for 2005, a year of turmoil for CHC with many external distractions, were not what any of us would have liked.  However, with a sound balance sheet and the recognition of restructuring costs and special charges behind us and, in front of us, the growing impact of our realignment initiatives and a brighter outlook for IT spending, we are increasingly optimistic. We expect a return to modest growth and profitability during 2006 and beyond. On a parallel track, we continue our work with Jefferies Broadview to explore all appropriate strategic alternatives to maximize value for the Company and all its constituencies.  We have made significant headway.  We are reviewing expressions of interest from various parties, and will continue to keep you apprised as this process unfolds.”

CHC recorded consolidated revenues for the fourth quarter of 2005 of $65.8 million, a three percent decrease from the fourth quarter of 2004.  The Company reported a net loss of $39.5 million, or $(1.24) per share, for the fourth quarter of 2005, compared with a net loss of $24.3 million, or $(0.78) per share, in the comparable period of 2004.  The fourth quarter 2005 net loss includes special charges of $36.6 million, or $(1.15) per share, related to expenses from the 2005 proxy contest/change of control payments, restructuring expenses, a loss on the sale of investments and an increase in the valuation allowance established for deferred tax assets.  The fourth quarter 2004 net loss includes special charges of $24.1 million, or $(0.71) per share, primarily relating to the impairment of goodwill.  Gross margin for the fourth quarter of 2005 improved to 31.3 percent, up from 29.9 percent in the comparable period in 2004. 

CHC recorded consolidated revenues for the full year 2005 of $268.8 million, a two percent increase over the comparable period in 2004.  The Company reported a net loss of $46.4 million, or $(1.48) per share, for the full year 2005, compared with a net loss of $25.2 million, or $(0.82) per share, in the comparable period of 2004.  Net loss for the full year of 2005 includes special charges of $41.8 million, or $(1.33) per share, related to expenses from the 2005 proxy contest/ change of control payments, restructuring expenses, a loss on the sale of investments, special expenses relating to the termination of the proposed merger with Analysts International and an increase in the valuation allowance established for deferred tax assets.  The net loss for the full year of 2004 included special charges of $23.1 million, or $(0.68) per share, primarily relating to the impairment of goodwill and restructuring charges. 

1


Commenting on CHC’s financial position, Michael J. Shea, chief financial officer of Computer Horizons, said, “Our balance sheet remains healthy, with no debt and $51.4 million in working capital. SG&A expenses increased in the fourth quarter as a result of several non-recurring costs and I anticipate a reduction in SG&A in the first quarter of 2006. With the realignment initiatives implemented during the fourth quarter, I believe we’ve entered 2006 on solid footing and we should continue to see an improvement in our financials as the year progresses.”

Repositioning the Business

During the fourth quarter, the new CHC executive team conducted a review of the Company’s strategic and operational strengths and weaknesses, and formulated a plan for improved performance. Mr. Conroy commented, “We discovered at CHC a foundation of talent, brand recognition and service offerings that enjoy rising market demand. We also discerned a need for: clearer, measured accountabilities; strengthened standards of performance; more sharply focused and clearly articulated service offerings; closer collaboration between sales and delivery; and, realigned goals and incentives.” 

As announced on December 1, 2005, CHC repositioned its Commercial Services unit to implement a set of strategic and tactical initiatives that address the above requirements, while at the same time, streamlining operations to reduce redundancies and inefficiencies. Similarly, the Federal business unit completed a restructuring and rationalization of its services, while working to strengthen business development.  With these steps and its conversion to an unrestricted services provider, the Federal business is poised for growth in 2006. Chimes moves into 2006 with an expanded suite of services, stronger focus on sales and continued emphasis on customer service.  Mr. Conroy comments: “In all three businesses, we have put in place some new leaders at sales and operating levels, altered compensation programs to facilitate profitable growth, and selectively invested to support operations.” 

The Company also took steps to lower operating overhead and recognized a related $1.5 million restructuring charge during the fourth quarter.  CHC expects an approximate $4.2 million reduction in annual costs, which is designed to deliver growth and profitability for 2006 and beyond.

Looking Forward

In light of the restructuring completed in the fourth quarter of 2005, the Company expects to report modest profitability in the first quarter of 2006.  For the full year 2006, the Company expects revenues to be in the range of $280 to $290 million.  Diluted earnings per share are expected to be in the range of $0.20 to $0.25 per share.

2


OPERATIONAL REVIEW BY BUSINESS SEGMENT

Condensed financial information is presented below for each of the Company’s business segments.  Total income /(loss) before income taxes excludes interest income/expense, amortization, and special charges / credit.  [See Reconciliation of Segments Income / (Loss) Before Income Taxes to Consolidated Income /(Loss) Before Income Taxes.]

(in thousands)

 

 

THREE MONTHS ENDED

 

TWELVE MONTHS ENDED

 

 

 

 

 

 

 

Dec. 31, 2005

 

Dec. 31, 2004

 

Dec. 31, 2005

 

Dec. 31, 2004

 

 

 

 

 

 

 

Revenues :

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

46,931

 

$

50,179

 

$

195,435

 

$

191,096

 

Federal

 

 

11,175

 

 

11,647

 

 

44,980

 

 

48,339

 

Chimes

 

 

7,674

 

 

5,808

 

 

28,421

 

 

23,092

 

 

 

 

 

 

 

Total Revenues

 

 

65,780

 

 

67,634

 

 

268,836

 

 

262,527

 

Gross Profit :

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

8,470

 

 

9,337

 

 

36,786

 

 

38,005

 

Federal

 

 

4,685

 

 

5,465

 

 

20,408

 

 

22,221

 

Chimes

 

 

7,456

 

 

5,419

 

 

27,483

 

 

21,696

 

 

 

 

 

 

 

Total Gross Profit

 

 

20,611

 

 

20,221

 

 

84,677

 

 

81,922

 

%

 

 

31.3

%

 

29.9

%

 

31.5

%

 

31.2

%

Operating Income :

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

818

 

 

1,387

 

 

8,155

 

 

8,350

 

Federal

 

 

1,097

 

 

1,223

 

 

4,449

 

 

6,468

 

Chimes

 

 

1,585

 

 

203

 

 

5,801

 

 

1,420

 

 

 

 

 

 

 

Total Operating Income

 

 

3,500

 

 

2,813

 

 

18,405

 

 

16,238

 

%

 

 

5.3

%

 

4.2

%

 

6.8

%

 

6.2

%

Corporate Allocation :

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

4,687

 

 

3,841

 

 

17,375

 

 

15,601

 

Federal

 

 

515

 

 

408

 

 

1,846

 

 

1,793

 

Chimes

 

 

860

 

 

493

 

 

2,848

 

 

2,065

 

 

 

 

 

 

 

Total Corporate Allocation

 

 

6,062

 

 

4,742

 

 

22,069

 

 

19,459

 

%

 

 

9.2

%

 

7.0

%

 

8.2

%

 

7.4

%

Total Income / (Loss) before Income Taxes :

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

(3,869

)

 

(2,454

)

 

(9,220

)

 

(7,251

)

Federal

 

 

582

 

 

815

 

 

2,603

 

 

4,675

 

Chimes

 

 

725

 

 

(290

)

 

2,953

 

 

(645

)

 

 

 

 

 

 

Total Income / (Loss) before Income Taxes

 

$

(2,562

)

$

(1,929

)

$

(3,664

)

$

(3,221

)

 

 

 

 

 

 

%

 

 

-3.9

%

 

-2.9

%

 

-1.4

%

 

-1.2

%

Reconciliation of Segments Income/(Loss) Before Income Taxes to Consolidated Income / (Loss) Before Income Taxes
(in thousands)

 

 

THREE MONTHS ENDED

 

TWELVE MONTHS ENDED

 

 

 

 

 

 

 

Dec. 31, 2005

 

Dec. 31, 2004

 

Dec. 31, 2005

 

Dec. 31, 2004

 

 

 

 

 

 

 

Total Segment Income / (Loss) Before Income Taxes :

 

$

(2,562

)

$

(1,928

)

$

(3,664

)

$

(3,220

)

 

 

 

 

 

 

Adjustments :

 

 

 

 

 

 

 

 

 

 

 

 

 

Change of Control Charges

 

 

(13,247

)

 

—  

 

 

(13,247

)

 

—  

 

Special (charges) / credits

 

 

(1,236

)

 

 

 

 

(5,728

)

 

939

 

Write-off of assets

 

 

—  

 

 

(910

)

 

—  

 

 

(910

)

Restructuring Charges

 

 

(1,459

)

 

(2,859

)

 

(2,175

)

 

(2,859

)

Goodwill Impairment

 

 

—  

 

 

(20,306

)

 

—  

 

 

(20,306

)

Amortization of intangibles

 

 

(233

)

 

(483

)

 

(1,080

)

 

(1,695

)

Net Loss on Investments

 

 

(1,180

)

 

—  

 

 

(1,180

)

 

—  

 

Net interest income

 

 

269

 

 

29

 

 

822

 

 

234

 

 

 

 

 

 

 

Total adjustments

 

 

(17,086

)

 

(24,529

)

 

(22,588

)

 

(24,597

)

 

 

 

 

 

 

Consolidated Income / (Loss) Before Income Taxes

 

$

(19,648

)

$

(26,457

)

$

(26,252

)

$

(27,817

)

 

 

 

 

 

 

3


Highlights from the Commercial Sector

 

•

Revenues for the fourth quarter were $46.9 million, a six percent  decrease from the fourth quarter of 2004 and a decrease of five percent sequentially as the Company deemphasized certain underperforming parts of the business, and heightened its focus on more profitable services and relationships.

 

 

 

 

•

The Company was added to three new preferred vendor lists and renewed at several others during the fourth quarter of 2005.

 

 

 

 

•

Total billable headcount at the end of the fourth quarter of 2005 was approximately 1,730 an eight percent decrease from the fourth quarter of  2004 and down seven percent from the third quarter of 2005.

 

 

 

 

•

CHC’s Commercial business entered 2006 well-positioned for a return to  profitability.

Highlights from the Federal Government Sector

 

•

Revenues for the fourth quarter were $11.2 million, a four percent decrease over the comparable period in 2004 and an increase of three percent over the third quarter of 2005.  The year-over-year revenue decrease is attributable to the transition of restricted contracts.  As previously announced, RGII anticipates the return to strong organic growth in 2006.

 

 

 

 

•

During the fourth quarter, RGII was awarded several multiple year contracts totalling over $16.4 million by the Dept. of the Navy - Naval Medical Information Management Center (NMIMC), and the Technology Management, Integration and Standards (TMI&S) Directorate.  RGII also supported a Hurricane Katrina relief project from its call center in Oklahoma City, OK which contributed over $1 million in revenue.

 

 

 

 

•

Funded backlog as of December 31, 2005 for RGII was approximately $15.7  million and contracted (unfunded) backlog approximated $118.7 million.

Chimes, Inc. Highlights

 

•

Chimes reported $7.7 million in revenue for the fourth quarter of 2005,  a 32 percent increase from the comparable period in 2004, and a four percent increase from the third quarter of 2005.

 

 

 

 

•

Two new customer implementations took place during the fourth quarter,  through Chimes’ Strategic Alliance partners.

 

 

 

 

•

Chimes expanded business at several existing customers.

 

 

 

 

•

Chimes pre-tax bottom-line results significantly improved, from a loss  of $(300,000) in the fourth quarter of 2004 to income of over $700,000  in the fourth quarter of 2005.

About Computer Horizons Corp.

Computer Horizons Corp. (Nasdaq: CHRZ) provides professional information technology (IT) services to a broad array of vertical markets, including financial services, healthcare, pharmaceutical, telecom, consumer packaged goods, as well as the Federal government, through its wholly-owned subsidiary, RGII Technologies, Inc. CHC’s wholly-owned subsidiary, Chimes, uses its proprietary technology to enable its Global 2000 customer base to align and integrate business planning with human resource management across an enterprise’s business functions. For more information on Computer Horizons, visit http://www.computerhorizons.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions.  Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.  Such forward-looking statements are based upon current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements including, but not limited to, risks associated with unforeseen technical difficulties, the ability to meet customer requirements, market acceptance of service offerings, changes in technology and standards, the ability to complete cost reduction initiatives, dependencies on certain technologies, delays, market acceptance and competition, as well as other risks described from time to time in the Company’s filings with the Securities and Exchange Commission, press releases and other communications.  All forward-looking statements included in this press release are based on information available to the Company on the date hereof.  The Company undertakes no obligation (and expressly disclaims any such obligation) to update forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to update reasons why actual results would differ from those anticipated in such forward-looking statements.

Corporate Contacts:

 

 

 

David Reingold/Lauren Felice

 

 

Investor Relations, Marketing

 

 

Computer Horizons Corp.

 

 

(973) 299-4105/4061

 

 

dreingold@computerhorizons.com

 

 

lfelice@computerhorizons.com

 

4


COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited - In thousands, except per share data)

 

 

THREE MONTHS ENDED

 

TWELVE MONTHS ENDED

 

 

 

 

 

 

 

Dec. 31, 2005

 

Dec. 31, 2004

 

Dec. 31, 2005

 

Dec. 31, 2004

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

46,931

 

$

50,179

 

$

195,435

 

$

191,096

 

Federal

 

 

11,175

 

 

11,647

 

 

44,980

 

 

48,339

 

Chimes

 

 

7,674

 

 

5,808

 

 

28,421

 

 

23,092

 

 

 

 

 

 

 

Total

 

 

65,780

 

 

67,634

 

 

268,836

 

 

262,527

 

Direct Costs

 

 

45,169

 

 

47,413

 

 

184,159

 

 

180,606

 

 

 

 

 

 

 

Gross Profit

 

 

20,611

 

 

20,221

 

 

84,677

 

 

81,921

 

Selling, General & Admin.

 

 

23,173

 

 

22,149

 

 

88,341

 

 

85,141

 

Change of Control Charges

 

 

13,247

 

 

—  

 

 

13,247

 

 

—  

 

Special Charges /(Credits)

 

 

1,236

 

 

 

 

 

 

 

 

 

 

Restructuring Charges

 

 

1,459

 

 

2,859

 

 

2,175

 

 

2,859

 

Write-off of assets

 

 

—  

 

 

910

 

 

—  

 

 

910

 

Goodwill impairment

 

 

—  

 

 

20,306

 

 

—  

 

 

20,306

 

Amortization of Intangibles

 

 

233

 

 

483

 

 

1,080

 

 

1,695

 

 

 

 

 

 

 

Income / (Loss) from Operations

 

 

(18,737

)

 

(26,486

)

 

(25,894

)

 

(28,051

)

Loss on Investments

 

 

(1,180

)

 

—  

 

 

(1,180

)

 

—  

 

Net Interest Income

 

 

269

 

 

29

 

 

822

 

 

234

 

 

 

 

 

 

 

Income / (Loss) Before Income Taxes

 

 

(19,648

)

 

(26,457

)

 

(26,252

)

 

(27,817

)

Income (Taxes) / Benefit

 

 

(19,808

)

 

2,210

 

 

(20,168

)

 

2,690

 

Minority Interest

 

 

—  

 

 

(23

)

 

—  

 

 

(45

)

 

 

 

 

 

 

Net Income / (Loss)

 

$

(39,456

)

$

(24,270

)

$

(46,420

)

$

(25,172

)

 

 

 

 

 

 

Earnings / (Loss) per share - Basic and Diluted

 

$

(1.24

)

$

(0.78

)

$

(1.48

)

$

(0.82

)

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding - Basic and Diluted

 

 

31,757,000

 

 

31,061,000

 

 

31,399,000

 

 

30,870,000

 

 

 

 

 

 

 

5


COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited - In thousands)

 

 

December 31, 2005

 

December 31, 2004

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current Assets :

 

 

 

 

 

 

 

Cash and cash equivalents*

 

$

46,365

 

$

33,649

 

Accounts receivable, less allowance for doubtful accounts

 

 

48,124

 

 

51,322

 

Deferred income taxes

 

 

—  

 

 

1,868

 

Refundable income taxes

 

 

6,430

 

 

4,088

 

Other receivables

 

 

—  

 

 

1,443

 

Prepaid expenses and other

 

 

4,108

 

 

4,107

 

 

 

 

 

Total Current Assets

 

 

105,027

 

 

96,477

 

Property and equipment, net

 

 

5,065

 

 

5,995

 

Other assets - net :

 

 

 

 

 

 

 

Goodwill

 

 

27,625

 

 

27,625

 

Intangibles

 

 

1,938

 

 

3,253

 

Deferred income taxes

 

 

—  

 

 

17,698

 

Other assets

 

 

3,687

 

 

8,036

 

 

 

 

 

Total Assets

 

$

143,342

 

$

159,084

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities :

 

 

 

 

 

 

 

Accounts payable*

 

$

36,252

 

$

7,615

 

Accrued payroll, payroll taxes and benefits

 

 

10,548

 

 

8,489

 

Income taxes payable

 

 

1,150

 

 

1,377

 

Restructuring reserve

 

 

1,668

 

 

3,351

 

RGII contingency payment

 

 

—  

 

 

1,851

 

Other accrued expenses

 

 

4,005

 

 

4,912

 

 

 

 

 

Total Current Liabilities

 

 

53,623

 

 

27,595

 

Deferred compensation

 

 

2,468

 

 

2,633

 

Change of Control Payable

 

 

2,938

 

 

—  

 

Supplemental executive retirement plan

 

 

—  

 

 

2,162

 

Other liabilities

 

 

286

 

 

913

 

 

 

 

 

Total Liabilities

 

 

59,315

 

 

33,303

 

Shareholders’ Equity :

 

 

 

 

 

 

 

Common stock

 

 

3,315

 

 

3,315

 

Additional paid in capital

 

 

148,083

 

 

151,281

 

Accumulated comprehensive loss

 

 

(642

)

 

(2,200

)

Retained earnings / (deficit)

 

 

(60,491

)

 

(14,072

)

 

 

 

 

 

 

 

90,265

 

 

138,324

 

Less treasury shares

 

 

(6,238

)

 

(12,543

)

 

 

 

 

Total Shareholders’ Equity

 

 

84,027

 

 

125,781

 

Total Liabilities and Shareholders’ Equity

 

$

143,342

 

$

159,084

 

 

 

 

 

* Cash and cash equivalents at December 31, 2005 and December 31, 2004 include approximately $29.4 million and $2.1 million, respectively, of cash to be disbursed to Chimes vendors (i.e., Accounts Payable) in accordance with the client payment terms.

6


COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - In thousands)

 

 

Dec. 31, 2005

 

Dec. 31, 2004

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income / (loss)

 

$

(46,420

)

$

(25,172

)

 

 

 

 

Adjustments to reconcile net loss to net cash provided by/(used in) operating activities:

 

 

 

 

 

 

 

Deferred taxes

 

 

19,567

 

 

(1,254

)

Depreciation

 

 

4,181

 

 

4,821

 

Amortization of intangibles

 

 

1,080

 

 

1,695

 

Provision for bad debts

 

 

1,632

 

 

969

 

Loss on Investments

 

 

1,264

 

 

—  

 

Gain on sale of assets

 

 

(327

)

 

—  

 

Goodwill impairment charge

 

 

—  

 

 

20,306

 

Write-off of assets

 

 

—  

 

 

910

 

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

 

 

1,566

 

 

(696

)

Other receivables

 

 

1,443

 

 

(1,040

)

Prepaid expenses and other current assets

 

 

(1

)

 

254

 

Other assets

 

 

4,349

 

 

(245

)

Refundable income taxes

 

 

(2,342

)

 

(4,088

)

Accrued payroll, payroll taxes and benefits

 

 

2,060

 

 

(49

)

Accounts payable

 

 

28,637

 

 

(1,072

)

Income taxes payable

 

 

(227

)

 

134

 

RGII contingency payments

 

 

(1,851

)

 

1,221

 

Other accrued expenses and restructuring reserve

 

 

(2,590

)

 

582

 

Change of control payable

 

 

2,938

 

 

—  

 

Deferred compensation

 

 

(165

)

 

530

 

Supplemental executive retirement plan

 

 

(2,162

)

 

480

 

Other liabilities

 

 

(627

)

 

317

 

 

 

 

 

Net cash provided by / (used in) operating activities

 

 

12,005

 

 

(1,397

)

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Proceeds from sale of assets

 

 

562

 

 

—  

 

Purchases of furniture and equipment

 

 

(3,252

)

 

(2,050

)

Acquisitions, net of cash acquired

 

 

—  

 

 

(14,714

)

Acquisition of goodwill

 

 

—  

 

 

(2,461

)

 

 

 

 

Net cash provided by / (used in) investing activities

 

 

(2,690

)

 

(19,225

)

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Stock options exercised

 

 

2,440

 

 

774

 

Stock issued on employee stock purchase plan

 

 

667

 

 

623

 

 

 

 

 

Net cash provided by / (used in) financing activities

 

 

3,107

 

 

1,397

 

 

 

 

 

Foreign currency gains/ (losses)

 

 

294

 

 

264

 

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

 

 

12,716

 

 

(18,961

)

Cash and cash equivalents at beginning of year

 

 

33,649

 

 

52,610

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

46,365

 

$

33,649

 

 

 

 

 
SOURCE  Computer Horizons Corp.
          -0-                                        03/13/2006
          /CONTACT:  David Reingold, +1-973-299-4105, dreingold@computerhorizons.com, or Lauren Felice, +1-973-299-4061, lfelice@computerhorizons.com, both of Computer Horizons Corp./
          /First Call Analyst: /
          /FCMN Contact: lfelice@computerhorizons.com /
          /Web site:  http://www.computerhorizons.com /
          (CHRZ)

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