-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EMyaVxmBGVUBm0n/LFMejUXOS/Mylllhjq1zRsjDprt+UdQZLymTPr52YfmduwJK oBkPtz4iiHJH4oqKHc5LuA== 0000950152-95-000980.txt : 19950517 0000950152-95-000980.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950152-95-000980 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER TASK GROUP INC CENTRAL INDEX KEY: 0000023111 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 160912632 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09410 FILM NUMBER: 95537961 BUSINESS ADDRESS: STREET 1: 800 DELAWARE AVE CITY: BUFFALO STATE: NY ZIP: 14209 BUSINESS PHONE: 7168828000 MAIL ADDRESS: STREET 1: 800 DELAWARE AVE CITY: BUFFALO STATE: NY ZIP: 14209 FORMER COMPANY: FORMER CONFORMED NAME: MARKS BAER INC DATE OF NAME CHANGE: 19690128 10-Q 1 COMPUTER TASK GROUP 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 Commission file number 1-9410 ----------- COMPUTER TASK GROUP, INCORPORATED - ------------------------------------------------------------------------------ (Exact name of Registrant as specified in its charter) New York 16-0912632 - ---------------------------- ----------------------------------- (State of incorporation) (I.R.S. Employer Identification No.) 800 Delaware Avenue, Buffalo, New York 14209 - -------------------------------------- ------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (716) 882-8000 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 ------- ------- Number of shares of common stock outstanding: Shares outstanding Title of each class at March 31, 1995 ------------------- ------------------ Common stock, par value $.01 per share 10,012,926 2 PART I. FINANCIAL INFORMATION ------------------------------- ITEM 1. FINANCIAL STATEMENTS COMPUTER TASK GROUP, INCORPORATED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Quarter Ended March 31, April 1, 1995 1994 ---------- ---------- (Amounts in thousands except per share data) Revenue $ 82,226 $ 77,006 Direct costs 60,325 55,750 Selling, general and administrative expenses 18,960 19,081 --------- --------- Operating income 2,941 2,175 Interest and other income 127 277 Interest and other expense 410 224 --------- --------- Income before income taxes 2,658 2,228 Provision for income taxes 1,064 980 --------- --------- Net income $ 1,594 $ 1,248 ========= ========= Net income per share $ 0.19 $ 0.12 ========= ========= Weighted average shares outstanding 8,473 10,643 The accompanying notes are an integral part of these financial statements.
2 3 COMPUTER TASK GROUP, INCORPORATED CONSOLIDATED BALANCE SHEET
March 31, December 31, 1995 1994 ---------- -------------- (Audited) (Amounts in thousands) Current Assets: Cash and temporary cash investments $ 3,823 $ 5,112 Accounts receivable, net of allowance for doubtful accounts 72,693 55,373 Prepaids and other 3,111 2,004 Deferred income taxes 2,418 2,809 Income taxes receivable - 2,895 -------- -------- Total Current Assets 82,045 68,193 Property and equipment, net of accumulated depreciation and amortization 17,120 17,790 Acquired intangibles, net of accumulated amortization 6,436 6,267 Deferred income taxes 2,270 2,345 Other assets 840 895 -------- -------- Total Assets $108,711 $ 95,490 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 2,296 $ 2,296 Accounts payable 9,076 9,287 Accrued compensation 13,336 5,999 Short-term borrowings 6,700 4,500 Income taxes payable 1,585 - Advance billings on contracts 3,004 1,717 Other current liabilities 4,672 5,547 -------- -------- Total Current Liabilities 40,669 29,346 Long-term debt 5,574 6,114 Deferred compensation benefits 6,807 6,626 Other long-term liabilities 2,649 2,746 -------- -------- Total Liabilities 55,699 44,832 Shareholders' Equity: Common stock, par value $.01 per share 127 127 Capital in excess of par value 87,542 87,327 Retained earnings 7,328 5,734 Foreign currency adjustment (1,966) (2,441) Less: Treasury stock, at cost (24,413) (24,413) Less: Loans to employees (495) (557) Less: Stock Employee Compensation Trust (14,881) (14,881) Less: Minimum pension liability adjustment (230) (238) -------- -------- Total Shareholders' Equity 53,012 50,658 -------- -------- Total Liabilities and Shareholders' Equity $108,711 $ 95,490 ======== ======== The accompanying notes are an integral part of these financial statements.
3 4 COMPUTER TASK GROUP, INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Quarter Ended March 31, April 1, 1995 1994 --------- --------- (Amounts in thousands) Cash flows from operating activities: Net income $ 1,594 $ 1,248 Adjustments: Depreciation and amortization expense 1,569 1,315 Realized and unrealized net gain on securities - (89) Deferred compensation expense 133 306 Changes in assets and liabilities: Increase in accounts receivable (16,722) (2,043) Increase in prepaids and other (957) (794) Decrease in deferred income taxes 466 275 Increase (decrease) in income taxes receivable/payable 4,498 (78) Decrease in other assets 62 61 Decrease in accounts payable (532) (273) Increase in accrued compensation 7,128 5,386 Increase in advance billings on contracts 1,287 499 Increase (decrease) in other current liabilities (1,123) 958 Decrease in other long term liabilities (41) (409) ------- ------- Net cash (used in) provided by operating activities (2,638) 6,362 Cash flows from investing activities: Additions to property and equipment (579) (1,019) Purchases of marketable securities - (1,026) Proceeds from sales of marketable securities - 4,567 ------- ------- Net cash (used in) provided by investing activities (579) 2,522 Cash flows from financing activities: Net increase in short-term borrowings 2,200 443 Principal payments on long-term debt (540) (545) Proceeds from Employee Stock Purchase Plan 86 316 Purchase of treasury stock - (3,515) Proceeds from other stock plans 190 50 ------- ------- Net cash (used in) provided by financing activities 1,936 (3,251) Effect of exchange rate changes on cash and temporary cash investments (8) (30) ------- ------- Net (decrease) increase in cash and temporary cash investments (1,289) 5,603 Cash and temporary cash investments at beginning of year 5,112 5,355 ------- ------- Cash and temporary cash investments at end of quarter $ 3,823 $10,958 ======= ======= The accompanying notes are an integral part of these financial statements.
4 5 COMPUTER TASK GROUP, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Financial Statements The consolidated financial statements included herein reflect, in the opinion of the management of Computer Task Group, Incorporated (the Company), all normal recurring adjustments necessary to present fairly the financial position, results of operations and of cash flows for the periods presented. 2. Basis of Presentation The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. Management believes that the information and disclosures provided herein are adequate to present fairly the financial position, results of operations and of cash flows of the Company. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K filed with the SEC. Certain amounts in the prior year's consolidated statements of income and of cash flows have been reclassified to conform with the current year presentation. 5 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1995 Results of Operations - --------------------- The Company reported first quarter revenues of $82.2 million, the highest quarterly revenues in its history, and net income of $1.6 million, an increase of 28 percent over 1994 first quarter net income of $1.2 million. First quarter 1995 revenue was 7 percent or $5.2 million greater than first quarter 1994 revenue of $77.0 million. Included in first quarter 1994 revenue is $7.6 million of revenue from businesses that were sold during the second half of 1994. Revenue from ongoing operations increased $12.8 million or 18 percent over the comparable period in 1994. The majority of the increase is from North American operations. The North American increase is primarily attributable to an increase in billable staff. The Company's billable staff increased 21 percent from the first quarter of 1994 to the first quarter of 1995, and increased by 124 or 3.4 percent from the end of 1994 to the end of the first quarter. European revenue increased by $1.9 million or 30 percent. In local currency, European revenue increased 22 percent in the Netherlands, 17 percent in Belgium and 7 percent in the United Kingdom, which accounts for approximately $1.1 million of the increase. The remaining $.8 million of the increase is due to foreign exchange as the U. S. dollar weakened against other currencies in the first quarter. IBM continues to be the Company's largest customer, accounting for $16.8 million or 22.7 percent of first quarter revenue. Revenue from IBM accounted for 24.4 percent of first quarter 1994 revenue. It is the Company's goal to increase annual revenue by 10 percent in 1995 as compared to 1994 revenue from ongoing operations and the results in the first quarter are in line with this objective. Direct costs (defined as costs for billable staff) were 73.4 percent of revenue compared to 72.4 percent of revenue in the first quarter of 1994 and 74.2 percent of revenue for the full year in 1994. The increase in direct costs compared to the first quarter of 1994 as a percentage of revenues is a result of the continued competitive pricing pressures within the marketplace from both clients and competitors. The Company has also continued to increase the percentage of billable hours on software support projects as a result of increased opportunities in that area. These projects typically command lower rates than other professional software business. Selling, general and administrative expenses were $19.0 million in the first quarter of 1995 and $19.1 million in the first quarter of 1994. The Company is focused on containing these expenses and reducing them as a percentage of revenue. Although the decrease was $ 0.1 million or .5 percent, selling, general and administrative expenses decreased from 24.8 percent to 23.1 percent as a percentage of revenue. This decrease is primarily attributed to increased revenues. Operating income was $2.9 million in the first quarter of 1995 compared to $2.2 million in the first quarter of 1994. It increased as a percentage of revenue from 2.8 percent to 3.6 percent , due to the reduction in SG&A expenses as a percentage of revenue. Operating income from ongoing operations in North America increased $.7 million or 33 percent. European operations showed a $.3 million profit versus break-even in the first quarter of 1994. 6 7 Interest and other income decreased $150,000 or 54 percent. The Company liquidated its investment portfolio during the first half of 1994, resulting in a decrease in investment income in 1995. The Company also reported net realized and unrealized gains on securities of $89,000 in the first quarter of 1994. Interest and other expense increased $186,000 or 83 percent. The Company's average daily bank borrowings increased during the first quarter due to increased accounts receivable and the repurchase of the Company's stock during 1994 to establish its Stock Employee Compensation Trust. There were no material gains or losses due to foreign exchange on currency. Income before income taxes increased by $.4 million from $2.2 million or 2.9 percent of revenue in the first quarter of 1994 to $2.6 million or 3.2 percent of revenue in the first quarter of 1995. The provision for income taxes for the first quarter of 1995 was 40 percent compared to 44 percent in the first quarter of 1994. The reduction in the income tax rate is primarily due to the earnings in Europe, because there were annual losses in the prior year for which no tax benefit was provided. Net income for the quarter was $1.6 million or $0.19 per share, compared to $1.2 million or $0.12 per share for the first quarter of 1994. Although net income increased 28 percent, earnings per share increased 58 percent because weighted average shares outstanding decreased from 10.6 million to 8.5 million. During 1994, the Company and its Stock Employee Compensation Trust purchased approximately 2.5 million of its common shares. These shares are not considered outstanding for purposes of calculating earnings per share. The Company expects to continue to increase billable headcount to meet market demand. It is the Company's goal to reduce direct costs as a percentage of revenue. The Company continues to review its operations and may dispose of any businesses that are not strategic. Financial Condition - ------------------- During the quarter, the Company's working capital increased by $2.5 million to $41.4 million. Accounts receivable increased $16.7 million, offset by a $7.1 million increase in accrued compensation and a $4.5 million decrease in income taxes recoverable. Cash and temporary cash investments also decreased $1.3 million and the Company borrowed a net additional $2.2 million in short-term borrowings. Cash used in operations was $2.6 million for the quarter. The $16.7 million increase in accounts receivable is a result of the increase in revenue and issues related to installing a new billing system and shifting responsibility for collections within the Company. Accrued compensation increased $7.1 million because the quarter ended in the middle of the Company's payroll cycle, rather than at the end as it did at year end. Prepaid assets increased $1.0 million due to the prepayment of items that will be expensed in the remainder of the year. At year end, the Company was due net tax refunds of $2.9 million and these were received during the first quarter. At the end of the first quarter, the Company has income taxes payable of $1.6 million. Current and noncurrent deferred income taxes decreased by $.5 million as a result of the payment of restructuring expenses which are deductible for tax purposes when paid. Advance billings on contracts increased $1.3 million due to the timing of billings in accordance with terms of contractual agreements. Other current liabilities decreased $1.1 million, primarily attributable to payments of restructuring expenses and severance costs. Amounts accrued for restructuring and severance and other costs were $.6 million and $1.6 million, respectively, at the end of 1994 and $.4 million and $1.2 million, respectively, at the end of the first quarter of 1995. Severance costs related to the 1993 restructuring plan of $.2 million were charged against the restructuring accrual in the first quarter. Severance costs of $.4 million related to 7 8 terminations which occurred during 1994 were paid during the first quarter. The remaining $.5 million decrease in other current liabilities is a result of foreign currency translation and normal operating activities of the Company. Net property and equipment decreased $.7 million. Additions to property and equipment were $.6 million offset by year-to-date depreciation of $1.2 million. Additions decreased by $.4 million compared to the first quarter of 1994 because the Company was equipping its recruiting centers during the beginning of 1994. Net acquired intangibles increased $.2 million, caused by $.5 million in translation adjustments reflecting the weakening of the U.S. dollar during the quarter offset by year-to-date amortization of $.3 million. Financing activities provided $1.9 million of cash for the quarter. The Company repaid $.5 million of long-term debt in accordance with its various loan agreements and borrowed an additional $2.2 million of short-term borrowings to fund working-capital requirements. As of the end of the quarter, the Company is in compliance with all applicable debt agreement financial ratios and covenants, the most restrictive being the maintenance of a minimum current ratio of 1.5 to 1. During the first quarter, the Company received $.1 million from employees for 13,000 shares of stock purchased under the Employee Stock Purchase Plan. The Company also received $62,000 in proceeds from the repayment of loans under its Management Stock Purchase Plan and $128,000 for the exercise of stock options. The Company has $53.8 million in aggregate lines of credit, $11.4 million of which was borrowed at the end of the quarter. 8 9 PART II. OTHER INFORMATION --------------------------- Item 4 - Submission Of Matters To A Vote Of Security Holders --------------------------------------------------- The annual meeting of shareholders was held on April 26, 1995 at the Company's Headquarters, 800 Delaware Avenue, Buffalo, New York at 10:00 a.m. Election of Directors - Three Class I directors (Gale S. Fitzgerald, Chairman and Chief Executive Officer, Paul W. Joy and Randolph A. Marks) were elected to hold office for two years until the 1997 annual meeting of shareholders and until their successors are elected and qualified. The results of the voting are as follows: Total Vote Total Vote For Withheld ---------- ---------- Gale S. Fitzgerald 7,212,208 509,277 Paul W. Joy 7,267,678 453,807 Randolph A. Marks 7,219,710 501,775 - The Class I directors of the Company, whose terms of office extend until the 1996 annual meeting of shareholders and until their successors are elected and qualified are G. David Baer, Executive Vice President, George B. Beitzel and Richard F. Crandall. Amendment of the Company's 1991 Employee Stock Option Plan - An amendment to the Company 1991 Employee Stock Option Plan to increase the number of shares available under the Plan by 500,000 including a provision for a one-time grant of 5,000 stock options to new outside members of the Board of Directors was approved by shareholders. The total vote for the amendment was 5,445,454 and the total vote withheld was 2,276,031. - The total number of the Company's common shares issued and outstanding and entitled to be voted at the annual meeting of shareholders was 10,008,824. The total number of shares voted at the annual meeting was 7,721,485 or 77.1 percent of the total issued and outstanding. 9 10 Item 6 - Exhibits And Reports On Form 8-K -------------------------------- Exhibit Description Page ------- ----------- ---- 11. Statement re: computation of earnings per share 11 27 Financial Data Schedule * * * * * * * * SIGNATURE --------- Pursuant to the requirements 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 TASK GROUP, INCORPORATED By: /s/ Samuel D. Horgan ----------------------------- Samuel D. Horgan Principal Accounting and Financial Officer Title: Vice President - Finance Date: May 12, 1995 10 EX-11 2 COMPUTER TASK GROUP 10-Q EXHIBIT 11 1 EXHIBIT 11 ---------- COMPUTER TASK GROUP, INCORPORATED --------------------------------- Computation of fully diluted earnings per share under treasury stock method set forth in Accounting Principles Board Opinion No. 15. 11 2 COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE UNDER TREASURY STOCK METHOD SET FORTH IN ACCOUNTING PRINCIPLES BOARD OPINION NO. 15 (amounts in thousands)
Quarter Ended March 31, April 1, 1995 1994 --------- -------- Average number of shares outstanding during period 9,997 10,630 Add -- Incremental shares under stock options plans 246 13 Less -- Incremental shares held by Stock Employee Compensation Trust 1,770 - ------- ------- Number of shares on which fully diluted earnings per share based 8,473 10,643 ------- ------- Net income for the period $ 1,594 $ 1,248 Primary earnings per share $ 0.19 $ 0.12 Fully diluted earnings per share $ 0.19 $ 0.12
12 EX-27 3 COMPUTER TASK GROUP 10-Q EXHIBIT 27
5 0000023111 Computer Task Group 1 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 3,823,000 0 73,710,000 1,017,000 0 82,045,000 49,336,000 32,216,000 108,711,000 40,669,000 7,870,000 127,000 0 0 52,885,000 108,711,000 0 82,226,000 0 60,325,000 18,960,000 0 410,000 2,658,000 1,064,000 0 0 0 0 1,594,000 .19 .19
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