EX-99.1 2 ch6799ex991.htm EXHIBIT 99.1

Exhibit 99.1

Message 

COMPUTER HORIZONS REPORTS SECOND QUARTER 2006 RESULTS

MOUNTAIN LAKES, N.J., Aug. 9 /PRNewswire-FirstCall/ -- Computer Horizons Corp. (Nasdaq: CHRZ), a strategic solutions and professional services company, today announced its financial results for the second quarter and six months ended June 30, 2006.

Financial Highlights and Update on Strategic Alternatives Review
During the second quarter of 2006, CHC recorded consolidated revenues of $63.3 million, an 8.3 percent decline over the comparable period in 2005. CHC's Commercial unit continued a deliberate de-emphasis on certain under- performing business and a migration of some project-based work to our lower rate and lower cost off-site development centers, which contributed to the fall-off in revenues; nonetheless, gross and operating margins continue to be positive and to improve. The Company's Federal unit underperformed in revenues during the quarter due in part to re-direction of funding to more Defense and Homeland Security oriented projects, and to the time required to ramp up new business development resources. During the quarter, CHC appointed new top management at the Federal Unit. Through it all, the unit has maintained healthy margins. Chimes continues to grow, albeit somewhat less than expected due mostly to delays in implementation of new customers, and margins remain healthy.

During the second quarter, CHC reassessed the carrying value of goodwill associated with its Federal unit as of June 30, 2006. This review disclosed an impairment which required a non-cash write down of $15.0 million. Excluding the goodwill write-down, the Company reported consolidated net income for the quarter of $1.0 million, which compared favorably with performance in 2005, when the company yielded net income before taxes of $66,000. Including equity-based compensation expense of $95,000 and the goodwill write-down, the Company reported a net loss for the period of $14.1 million, or $(0.44) per diluted share. Gross margin stands at 34.4 percent, an improvement over the first quarter of 2006.

For the first six months of 2006, CHC recorded consolidated revenues of $126.9 million, a 6.4 percent decline over the comparable period in 2005. The Company reported a consolidated net loss of $13.3 million, or $(0.41) per diluted share, for the period. Net income for the first six months of 2006 included a charge associated with the write-down of goodwill in our Federal Government unit of $15.0 million. Excluding this charge, the Company reported consolidated net income for the six-month period of $1.8 million, which compared favorably with performance in the comparable period of 2005 when the Company reported net income of $574,000, which included a special credit (benefit) of $675,000, pertaining to bad debt recovery. The net loss for the six-month period also included equity-based compensation expenses of $378,000.

Commenting on second quarter 2006 performance, Dennis J. Conroy, president and chief executive officer of CHC, noted, “While some of the revenue decline was a result of our de-emphasis of low margin business in the Commercial segment, we were disappointed by overall top line results for the quarter and full six months.  However, we are encouraged by the operating performance and margins in our Commercial business, the continued growth of Chimes, and new leadership at Federal.  Moreover, we continue our work with Jefferies Broadview to finalize the review of all strategic alternatives to maximize shareholder value.”

Commenting on CHC’s financial position, Barbara Moss, CHC’s chief financial officer, said, “Our financial position remained healthy during the second quarter with cash of $36.2 million (including $17.2 million of Chimes pass through cash), no debt and $58 million in working capital.”

Looking Forward
Commenting on full year 2006 outlook, Mr. Conroy noted, "With six months of operating performance behind us, CHC now expects full year consolidated revenues in the range of $260 to $265 million, and full year diluted earnings in the range of $0.10 to $0.15 per share. With the non-cash goodwill impairment we expect to record a loss of $0.25 to $0.30 per share for the full year."



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

 

SIX  MONTHS ENDED

 

 

 






 






 

 

 

June 30, 2006

 

June 30, 2005

 

June 30, 2006

 

June 30, 2005

 

 

 



 



 



 



 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

45,643

 

$

50,650

 

$

91,482

 

$

99,321

 

Federal

 

 

9,626

 

 

11,404

 

 

19,952

 

 

22,943

 

Chimes

 

 

8,056

 

 

7,012

 

 

15,497

 

 

13,375

 

 

 



 



 



 



 

Total Revenues

 

 

63,325

 

 

69,066

 

 

126,931

 

 

135,639

 

Gross Profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

9,624

 

 

9,208

 

 

19,256

 

 

18,726

 

Federal

 

 

4,330

 

 

5,279

 

 

8,969

 

 

10,694

 

Chimes

 

 

7,834

 

 

6,816

 

 

15,098

 

 

12,868

 

 

 



 



 



 



 

Total Gross Profit

 

 

21,788

 

 

21,303

 

 

43,323

 

 

42,288

 

%

 

 

34.4

%

 

30.8

%

 

34.1

%

 

31.2

%

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

3,984

 

 

2,306

 

 

7,721

 

 

4,912

 

Federal

 

 

712

 

 

1,133

 

 

1,763

 

 

2,456

 

Chimes

 

 

1,429

 

 

1,607

 

 

2,691

 

 

2,796

 

 

 



 



 



 



 

Total Operating Income

 

 

6,125

 

 

5,046

 

 

12,175

 

 

10,164

 

%

 

 

9.7

%

 

7.3

%

 

9.6

%

 

7.5

%

Corporate Allocation:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

3,882

 

 

3,930

 

 

8,019

 

 

8,003

 

Federal

 

 

383

 

 

409

 

 

815

 

 

852

 

Chimes

 

 

774

 

 

612

 

 

1,528

 

 

1,206

 

 

 



 



 



 



 

Total Corporate Allocation

 

 

5,039

 

 

4,951

 

 

10,362

 

 

10,061

 

%

 

 

8.0

%

 

7.2

%

 

8.2

%

 

7.4

%

Total Income / (Loss) before Income Taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

102

 

 

(1,624

)

 

(298

)

 

(3,091

)

Federal

 

 

329

 

 

724

 

 

948

 

 

1,604

 

Chimes

 

 

655

 

 

995

 

 

1,163

 

 

1,590

 

 

 



 



 



 



 

Total Income / (Loss) before Income Taxes

 

$

1,086

 

$

95

 

$

1,813

 

$

103

 

 

 



 



 



 



 

%

 

 

1.7

%

 

0.1

%

 

1.4

%

 

0.1

%




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

 

 

THREE MONTHS ENDED

 

SIX  MONTHS ENDED

 

 

 






 






 

 

 

June 30, 2006

 

June 30, 2005

 

June 30, 2006

 

June 30, 2005

 

 

 



 



 



 



 

Total Segment Income / (Loss) Before Income Taxes:

 

$

1,086

 

$

95

 

$

1,813

 

$

103

 

 

 



 



 



 



 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Special (charges) / credits*

 

 

(280

)

 

115

 

 

(280

)

 

790

 

Goodwill impairment

 

 

(15,000

)

 

—  

 

 

(15,000

)

 

 

 

Amortization of intangibles

 

 

(233

)

 

(264

)

 

(466

)

 

(614

)

Net interest income

 

 

445

 

 

120

 

 

780

 

 

295

 

 

 



 



 



 



 

Total adjustments

 

 

(15,068

)

 

(29

)

 

(14,966

)

 

471

 

 

 



 



 



 



 

Consolidated Income / (Loss) Before Income Taxes

 

$

(13,982

)

$

66

 

$

(13,153

)

$

574

 

 

 



 



 



 



 



* For the three and six months ended June 30, 2006, $67,000 of the $280,000 of special charges relates to salary and travel expenses that are included in SG&A on the consolidated statement of operations.

Highlights from the Commercial Sector

Revenues for the second quarter were $45.6 million, a 9.9 percent decrease from the second quarter of 2005, and flat sequentially as the division continued to de-emphasize low gross margin business while emphasizing more profitable services, clients and geographies. The decrease in revenue is also partially attributed to the continued transition of a greater percentage of its solutions business to its nearshore center, where billing rates are lower.

 

 

Gross margin increased 290 basis points over the second quarter of 2005 and remained consistent sequentially.

 

 

SG&A expenses decreased 18.3 percent from the second quarter of 2005.

 

 

Net operating income increased 72.5 percent from the second quarter of 2005 and 6.5 percent sequentially as a result of executing on its strategic initiatives.

 

 

The division was added to four new preferred vendor lists and renewed at several others throughout the quarter.

 

 

The division announced its intent to add hundreds of new jobs in Montreal through its agreement with Invest Quebec which affords the division certain financial incentives through 2016.

 

 

The division also completed its implementation of an enterprise wide applicant tracking system which promises to improve fill rates and gross margins through real time access to a greater candidate population.

Highlights from the Federal Government Sector 

Revenues for the second quarter were $9.6 million, a 15.6 percent decline from the comparable period in 2005.

 

 

RGII’s gross and operating margins remain healthy.  The Federal unit contributed $712,000 of operating income in the second quarter, excluding the goodwill write-down.

 

 

RGII was awarded additional business from the FAA as well as two Blanket Purchase Agreements with the Department of Homeland Security for program management services and the US Air Force Surgeon General’s Office for Information Assurance Services.  Each of the BPAs provide opportunity to participate in limited competition task order RFQs issued by the covered organizations.

 

 

Funded backlog as of June 30, 2006 for RGII was approximately $13.8 million and contracted (unfunded) backlog approximated $108.0 million.




Chimes, Inc. Highlights

Chimes reported $8.0 million in revenue for the second quarter of 2006, a 14.9 percent increase from the comparable period in 2005, and an 8.3 percent increase over the first quarter of 2006.

 

 

Chimes contributed operating income of more than $1.4 million in the second quarter of 2006.

 

 

Four new customer implementations took place during the second quarter.

 

 

During the second quarter, Chimes expanded business at four existing customers through its payroll service offering; launched early this year.

 

 

Two new awards were obtained for workforce services business during the second quarter with companies in the telecommunications and healthcare sectors.

Computer Horizons Corp. will conduct a conference call webcast at 10:00 AM (ET) today to discuss second quarter results.  The call will be broadcast live via the Internet and can be accessed at http://www.computerhorizons.com (click on investor section).  A replay of the call will be available beginning at approximately 1:00 PM (ET) today, through 12:00 AM (ET) on August 16, 2006.  The replay may also be accessed via the Internet at http://www.computerhorizons.com (click on investor section), or by calling 877-519-4471 (973-341-3080 from outside the United States).  The confirmation code is 7627805.

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

 

 

TTTlfelice@computerhorizons.com

 




COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited – In thousands except per share data)

 

 

THREE MONTHS ENDED

 

SIX MONTHS ENDED

 

 

 






 






 

 

 

Jun. 30
2006

 

Jun. 30
2005

 

Jun. 30
2006

 

Jun. 30
2005

 

 

 



 



 



 



 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

45,643

 

$

50,650

 

$

91,482

 

$

99,321

 

Federal

 

 

9,626

 

 

11,404

 

 

19,952

 

 

22,943

 

Chimes

 

 

8,056

 

 

7,012

 

 

15,497

 

 

13,375

 

 

 



 



 



 



 

Total

 

 

63,325

 

 

69,066

 

 

126,931

 

 

135,639

 

Direct Costs

 

 

41,537

 

 

47,763

 

 

83,608

 

 

93,351

 

 

 



 



 



 



 

Gross Profit

 

 

21,788

 

 

21,303

 

 

43,323

 

 

42,288

 

Selling, General & Admin.

 

 

20,763

 

 

21,208

 

 

41,577

 

 

42,185

 

Special Charges / (Credits)

 

 

219

 

 

(115

)

 

213

 

 

(790

)

Goodwill impairment

 

 

15,000

 

 

—  

 

 

15,000

 

 

—  

 

Amortization of Intangibles

 

 

233

 

 

264

 

 

466

 

 

614

 

 

 



 



 



 



 

Income / (Loss) from Operations

 

 

(14,427

)

 

(54

)

 

(13,933

)

 

279

 

Net Interest Income

 

 

445

 

 

120

 

 

780

 

 

295

 

Income / (Loss) Before Income Taxes

 

 

(13,982

)

 

66

 

 

(13,153

)

 

574

 

Income (Taxes) / Benefit

 

 

(69

)

 

(22

)

 

(140

)

 

(200

)

 

 



 



 



 



 

Net Income / (Loss)

 

$

(14,051

)

$

44

 

$

(13,293

)

$

374

 

 

 



 



 



 



 

Earnings / (Loss) per share - Basic

 

$

(0.44

)

$

0.00

 

$

(0.41

)

$

0.01

 

 

 



 



 



 



 

Weighted Average Number of Shares Outstanding - Basic

 

 

32,247,000

 

 

31,272,000

 

 

32,280,000

 

 

31,232,000

 

 

 



 



 



 



 

Earnings (Loss) per share - Diluted

 

$

(0.44

)

$

0.00

 

$

(0.41

)

$

0.01

 

 

 



 



 



 



 

Weighted Average Number of Shares Outstanding - Diluted

 

 

32,247,000

 

 

31,451,000

 

 

32,280,000

 

 

31,488,000

 

 

 



 



 



 



 




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

 

 

June 30,
2006

 

December 31,
2005

 

 

 



 



 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents*

 

$

36,224

 

$

46,365

 

Accounts receivable, less allowance for doubtful accounts

 

 

50,784

 

 

48,124

 

Refundable income taxes

 

 

6,704

 

 

6,430

 

Other receivables

 

 

2,591

 

 

—  

 

Prepaid expenses and other

 

 

3,422

 

 

4,108

 

 

 



 



 

Total Current Assets

 

 

99,725

 

 

105,027

 

Property and equipment, net

 

 

4,368

 

 

5,065

 

Other assets - net:

 

 

 

 

 

 

 

Goodwill

 

 

10,034

 

 

27,625

 

Intangibles

 

 

1,472

 

 

1,938

 

Deferred income taxes

 

 

1,484

 

 

—  

 

Other assets

 

 

3,260

 

 

3,687

 

 

 



 



 

Total Assets

 

$

120,343

 

$

143,342

 

 

 



 



 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable*

 

$

22,637

 

$

36,252

 

Accrued payroll, payroll taxes and benefits

 

 

11,070

 

 

10,548

 

Income taxes payable

 

 

1,150

 

 

1,150

 

Restructuring reserve

 

 

643

 

 

1,668

 

Deferred compensation

 

 

577

 

 

—  

 

Deferred income taxes

 

 

1,511

 

 

—  

 

Other accrued expenses

 

 

4,136

 

 

4,005

 

 

 



 



 

Total Current Liabilities

 

 

41,724

 

 

53,623

 

Deferred compensation

 

 

1,653

 

 

2,468

 

Change of Control Payable

 

 

2,316

 

 

2,938

 

Other liabilities

 

 

222

 

 

286

 

 

 



 



 

Total Liabilities

 

 

45,915

 

 

59,315

 

Shareholders’ Equity:

 

 

 

 

 

 

 

Common stock

 

 

3,315

 

 

3,315

 

Additional paid in capital

 

 

146,638

 

 

148,083

 

Accumulated comprehensive loss

 

 

(136

)

 

(643

)

Retained earnings / (deficit)

 

 

(73,785

)

 

(60,492

)

 

 



 



 

 

 

 

76,032

 

 

90,263

 

Less treasury shares

 

 

(1,604

)

 

(6,236

)

 

 



 



 

Total Shareholders’ Equity

 

 

74,428

 

 

84,027

 

Total Liabilities and Shareholders’ Equity

 

$

120,343

 

$

143,342

 

 

 



 



 



* Cash and cash equivalents at June 30, 2006 and December 31, 2005 include approximately $17.2 million and $29.4 million, respectively, of cash to be disbursed to Chimes vendors (i.e., accounts payable) in accordance with the client payment terms.




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

 

 

June 30, 2006

 

June 30, 2005

 

 

 



 



 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income / (loss)

 

$

(13,293

)

$

374

 

 

 



 



 

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

 

 

 

 

 

 

 

Deferred taxes

 

 

27

 

 

76

 

Depreciation

 

 

1,372

 

 

2,046

 

Amortization of intangibles

 

 

466

 

 

614

 

Provision for bad debts

 

 

289

 

 

388

 

Gain on sale of assets

 

 

—  

 

 

(327

)

FAS 123 R option expense

 

 

378

 

 

—  

 

Goodwill impairment

 

 

15,000

 

 

—  

 

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,949

)

 

(175

)

Prepaid expenses and other current assets

 

 

796

 

 

1,959

 

Other assets

 

 

426

 

 

(40

)

Refundable income taxes

 

 

(274

)

 

(790

)

Accrued payroll, payroll taxes and benefits

 

 

522

 

 

254

 

Accounts payable

 

 

(13,615

)

 

7,593

 

Income taxes payable

 

 

—  

 

 

107

 

RGII contingency payments

 

 

—  

 

 

(1,851

)

Other accrued expenses, change of control and restructuring reserve

 

 

(1,536

)

 

(4,502

)

Deferred compensation

 

 

(238

)

 

(2

)

Supplemental executive retirement plan

 

 

—  

 

 

(115

)

Other liabilities

 

 

(174

)

 

(131

)

 

 



 



 

Net cash provided by / (used in) operating activities

 

 

(12,803

)

 

5,478

 

 

 



 



 

Cash flows from investing activities

 

 

 

 

 

 

 

Deferred merger costs

 

 

—  

 

 

(2,426

)

Proceeds from sale of assets

 

 

—  

 

 

563

 

Purchases of furniture and equipment

 

 

(674

)

 

(1,523

)

 

 



 



 

Net cash provided by / (used in) investing activities

 

 

(674

)

 

(3,386

)

 

 



 



 

Cash flows from financing activities

 

 

 

 

 

 

 

Stock options exercised

 

 

2,582

 

 

175

 

Stock issued on employee stock purchase plan

 

 

247

 

 

357

 

 

 



 



 

Net cash provided by / (used in) financing activities

 

 

2,829

 

 

532

 

 

 



 



 

Foreign currency gains/ (losses)

 

 

507

 

 

(419

)

 

 



 



 

Net increase/ (decrease) in cash and cash equivalents

 

 

(10,141

)

 

2,205

 

Cash and cash equivalents at beginning of year

 

 

46,365

 

 

33,649

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

36,224

 

$

35,854

 

 

 



 



 

# # #

SOURCE  Computer Horizons Corp.
           -0-                                                                      08/09/2006
           /CONTACT:   David Reingold, Investor Relations, +1-973-299-4105, dreingold@computerhorizons.com, or Lauren Felice, Marketing, +1-973-299-4061, TTTlfelice@computerhorizons.com, both of Computer Horizons Corp. /
           /Web site:  http://www.computerhorizons.com /
           (CHRZ)