-----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, RrMXE054rrP7wsRwu2u1HVB8KSS0UYtmTQ9Dpjn97ejAewZT2F/dwBp1orbnU9Gb 1CFDLp1CRLI7B1uXlkYYvg== 0000950152-00-004072.txt : 20000516 0000950152-00-004072.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950152-00-004072 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 001-09410 FILM NUMBER: 631080 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, INCORPORATED 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 2000 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) (IRS 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, 2000 ------------------- ------------------ Common stock, par value $.01 per share 20,875,056 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COMPUTER TASK GROUP, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
QUARTER ENDED MARCH 31, MARCH 26, 2000 1999 -------- -------- (amounts in thousands, except per share data) Revenue $95,995 $116,618 Direct costs 69,516 78,197 Selling, general and administrative expenses 27,877 30,405 Restructuring charge 5,695 -- ------- -------- Operating income (loss) (7,093) 8,016 Interest and other income 50 432 Interest and other expense (832) (252) ------- -------- Income (loss) before income taxes (7,875) 8,196 Provision (benefit) for income taxes (3,104) 3,497 ------- -------- Net income (loss) $(4,771) $ 4,699 ======= ======== Net income (loss) per share: Basic $ (0.30) $ 0.29 ======= ======== Diluted $ (0.29) $ 0.28 ======= ======== Weighted average shares outstanding: Basic 16,076 16,424 Diluted 16,259 16,827
The accompanying notes are an integral part of these consolidated financial statements. 2 3 COMPUTER TASK GROUP, INCORPORATED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2000 1999 ---------- ------------ (Unaudited) (Audited) (amounts in thousands) ASSETS - ----------------------------------------------------------------------------------------------------- Current Assets: Cash and temporary cash investments $ 8,931 $ 10,684 Accounts receivable, net of allowances and reserves 79,498 80,773 Prepaids and other 3,601 2,821 Deferred income taxes 2,977 3,041 - ----------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 95,007 97,319 Property and equipment, net of accumulated depreciation and amortization 13,553 13,483 Acquired intangibles, net of accumulated amortization of $10,865,000 and $9,151,000, respectively 82,112 84,008 Deferred income taxes 3,739 3,685 Other assets 645 664 - ----------------------------------------------------------------------------------------------------- TOTAL ASSETS $195,056 $199,159 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------- Current Liabilities: Accounts payable $ 10,299 $ 10,834 Accrued compensation 21,530 27,567 Income taxes payable 6,257 10,423 Advance billings on contracts 712 761 Other current liabilities 13,731 12,532 - ----------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 52,529 62,117 Long-term debt 41,680 31,380 Deferred compensation benefits 9,982 9,953 Other long-term liabilities 762 785 - ----------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 104,953 104,235 Shareholders' Equity: Common stock, par value $.01 per share, 150,000,000 shares authorized; 27,017,824 shares issued 270 270 Capital in excess of par value 111,461 110,895 Retained earnings 77,275 82,046 Less: Treasury stock of 6,142,768 and 6,141,823 shares, at cost (31,300) (31,279) Stock Trusts of 4,760,808 and 4,823,173 shares, at cost (61,040) (61,306) Unearned portion of restricted stock to related parties (36) (43) Other comprehensive income: Foreign currency adjustment (5,654) (4,786) Minimum pension liability adjustment (873) (873) - ----------------------------------------------------------------------------------------------------- Accumulated other comprehensive income (6,527) (5,659) - ----------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 90,103 94,924 - ----------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $195,056 $199,159 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 4 COMPUTER TASK GROUP, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
QUARTER ENDED MARCH 31, MARCH 26, 2000 1999 ---------- -------- (amounts in thousands) Cash flows from operating activities: Net income (loss) $ (4,771) $ 4,699 Adjustments: Depreciation expense 1,159 1,063 Amortization expense 1,822 434 Deferred compensation expense 29 91 Changes in assets and liabilities, net of assets acquired and liabilities assumed: (Increase) decrease in accounts receivable 439 (11,022) Increase in prepaids and other (829) (384) Decrease in deferred income taxes 10 6 Decrease in other assets 19 109 Decrease in accounts payable (324) (1,230) Decrease in accrued compensation (6,025) (259) Increase (decrease) in income taxes payable (3,938) 2,511 Increase (decrease) in advance billings on contracts (49) 474 Increase in other current liabilities 1,268 819 Increase (decrease) in other long-term liabilities (23) 6 -------- -------- Net cash used in operating activities (11,213) (2,683) - ------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisition -- (86,775) Additions to property and equipment (1,304) (1,690) - ------------------------------------------------------------------------------------------------------- Net cash used in investing activities (1,304) (88,465) - ------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Short-term borrowings, net -- 44,300 Proceeds from long-term revolving debt, net 10,300 -- Proceeds from Employee Stock Purchase Plan 255 279 Purchase of stock for treasury (21) (12) Purchase of stock by Stock Trusts -- (949) Proceeds from other stock plans, inclusive of related tax benefit 584 930 -------- -------- Net cash provided by financing activities 11,118 44,548 - ------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and temporary cash investments (354) (781) -------- -------- Net decrease in cash and temporary cash investments (1,753) (47,381) Cash and temporary cash investments at beginning of year 10,684 57,748 - ------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of quarter $ 8,931 $ 10,367 ======== ========
The accompanying notes are an integral part of these consolidated 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 ("CTG" or "the Company"), all normal recurring adjustments necessary to present fairly the financial position, results of operations and 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 cash flows of the Company. It is suggested that these consolidated 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. 3. Comprehensive Income At March 31, 2000, accumulated other comprehensive income totaled $(6,527,000), including an adjustment of $(868,000) related to foreign currency translation made in the first quarter of 2000. 5 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE QUARTER ENDED MARCH 31, 2000 Forward-Looking Statements Statements included in this Management's Discussion and Analysis of Results of Operations and Financial Condition and elsewhere in this document that do not relate to present or historical conditions are "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21F of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents that are filed with the Securities and Exchange Commission. Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Forward-looking statements may include, without limitation, statements relating to the Company's plans, strategies, objectives, expectations and intentions and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts," "intends," "possible," "expects," "estimates," "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. Among the important factors on which such statements are based are assumptions concerning the anticipated growth of the information technology industry, the continued need of current and prospective customers for the Company's services, the availability of qualified professional staff, and price and wage inflation. Results of Operations To better understand the financial trends of the Company, the following table sets forth data as contained on the consolidated statements of operations, with the information calculated as a percentage of consolidated revenues.
Quarter ended: March 31, March 26, (percentage of revenue) 2000 1999 - ----------------------- --------- --------- Revenue 100.0% 100.0% Direct costs 72.4% 67.1% Selling, general, and administrative expenses 29.1% 26.0% Restructuring charge 5.9% -- - ------------------------------------------------------------------------------------ Operating income (loss) (7.4)% 6.9% Interest and other income (expense), net (0.8)% 0.1% - ----------------------------------------------------------------------------------- Income (loss) before income taxes (8.2)% 7.0% Provision (benefit) for income taxes (3.2)% 3.0% - ----------------------------------------------------------------------------------- Net income (loss) (5.0)% 4.0% ===== =====
6 7 CTG recorded first quarter 2000 revenue of $96.0 million, a decrease of 17.7 percent when compared to first quarter 1999 revenue of $116.6 million. The quarter to quarter revenue decrease is a result of revenue generated from the completion of year 2000 remediation services in 1999, and an industry-wide slowdown in demand for services in 2000. North American revenue decreased by $19.6 million or 20.3 percent in 2000 as compared to 1999, while revenue from European operations decreased by $1.0 million, or 5.3 percent. The 1999 to 2000 quarter-to-quarter revenue decline was impacted by the strengthening of the U.S. dollar as compared to the currencies of the Netherlands, Belgium, the United Kingdom, and Luxembourg. If there had been no change in these foreign currency exchanges rates from the first quarter of 1999 to 2000, total consolidated revenues would have been $2.3 million higher, resulting in a quarter-to-quarter consolidated revenue decline of 15.7 percent. This additional $2.3 million increase in revenue in Europe would have increased the European revenue growth rate to 6.5 percent. In March 2000, the Company renewed a contract with IBM for six months as one of IBM's national technical service providers for the United States. In the first quarter of 2000, IBM continued to be the Company's largest customer, accounting for $27.1 million or 28.2 percent of total revenue as compared to $34.3 million or 29.4 percent of first quarter 1999 revenue. Although revenues from IBM have been constrained in 2000, CTG expects to continue to derive a significant portion of its revenue from IBM throughout the remainder of 2000 and in future years. While the decline in revenue from IBM has had an adverse effect on the Company's revenues and profits, the Company believes a simultaneous loss of all IBM business is unlikely to occur due to the existence of the national contract, the diversity of the projects performed for IBM, and the number of locations and divisions involved. Direct costs, defined as costs for billable staff, were 72.4 percent of revenue in the first quarter of 2000 as compared to 67.1 percent of first quarter 1999 revenue. The increase in direct costs as a percentage of revenue in 2000 as compared to 1999 is primarily due to the IT services industry spending slowdown mentioned above and the retention of a higher percentage of non-billable staff in 2000 in anticipation of the IT services market recovering. Selling, general and administrative expenses were 29.1 percent of revenue in the first quarter of 2000 as compared to 26.0 percent of revenue in the first quarter of 1999. While selling, general and administrative expenses decreased year over year, the increase as a percentage of revenue from 1999 to 2000 is primarily due to the revenue decline discussed above, and a continued strategic investment in e-business and enterprise wide solutions. Additionally, goodwill amortization expense related to the acquisition of Elumen Solutions, Inc. (Elumen) increased selling, general and administrative expense year over year. In the first quarter of 2000, the Company recorded an after-tax restructuring charge of $3.8 million, or $0.23 per diluted share. On a pre-tax basis, the charge was $5.7 million, and consisted primarily of severance and related costs of $4.2 million for approximately 400 employees, costs associated with the consolidation of facilities of $0.7 million, and $0.8 million for other exit costs related to the restructuring plan. At March 31, 2000, approximately $3.7 million of the total charge of $5.7 million is included in other current liabilities on the consolidated balance sheet. The Company expects to complete its restructuring plan within the next twelve months. Operating income (loss) was (7.4) percent of revenue in 2000 compared to 6.9 percent of revenue in 1999. The quarter-to-quarter decrease is primarily due to the factors discussed above. Excluding the restructuring charge, the operating loss from North American operations was $2.3 million, while European operations recorded operating income of $0.9 million. 7 8 Interest and other income (expense) was $(0.8) million in 2000 and $0.2 million in 1999. The decrease is due to additional interest expense on indebtedness associated with the acquisition of Elumen, which occurred late in the first quarter of 1999. Income (loss) before income taxes was (8.2) percent of revenue in the first quarter of 2000 as compared to 7.0 percent of revenue in 1999. The provision (benefit) for income taxes was (39.4) percent in 2000 and 42.7 percent in 1999. Net income (loss) for the first quarter of 2000 was (5.0) percent of revenue or $(0.29) per diluted share, compared to 4.0 percent of revenue or $0.28 per diluted share in 1999. Diluted earnings per share were calculated using 16.3 million and 16.8 million equivalent shares outstanding in 2000 and 1999, respectively. Financial Condition Cash used in operating activities was $11.2 million for the first quarter. Net loss totaled $4.8 million, and non-cash adjustments for depreciation expense, amortization expense, and deferred compensation expense totaled $3.0 million. Accounts receivable decreased $0.4 million as compared to December 31, 1999, as a result of a decrease in revenue, offset by slower accounts receivable turnover in the first quarter of 2000. Prepaid and other assets increased $0.8 million due to payments made in the first quarter of 2000 that will be amortized throughout the remainder of the year. Accounts payable decreased $0.3 million primarily due to the timing of certain payments. Accrued compensation decreased $6.0 million due to the timing of the U.S. biweekly payroll and fewer total employees. Income taxes payable decreased $3.9 million due to the taxable loss incurred in the first quarter of 2000. Other current liabilities increased $1.3 million, primarily due to the restructuring charge recorded in the first quarter of 2000. Net property and equipment increased $0.1 million. Additions to property and equipment were $1.3 million, offset by depreciation expense of $1.2 million. The Company has no material commitments for capital expenditures at March 31, 2000. Financing activities provided $11.1 million of cash in the first quarter of 2000. Net proceeds from long-term revolving debt totaled $10.3 million. The Company received $0.3 million from employees for stock purchased under the Employee Stock Purchase Plan, and $0.6 million from other stock plans, inclusive of the related tax benefit. At March 31, 2000, including unsecured lines of credit, the Company had approximately $132.0 million in total credit, of which $41.7 million was outstanding. On October 26, 1994, the Company authorized the repurchase of 2.0 million shares and on July 21, 1995 authorized the repurchase of another 1.4 million shares of its Common Stock. At March 31, 2000, approximately 3.2 million shares have been repurchased under the authorizations, leaving 0.2 million shares authorized for future purchases. The Company believes existing internally available funds, cash generated by operations, and available borrowings will be sufficient to meet foreseeable working capital, stock repurchase and capital expenditure requirements and to allow for future internal growth and expansion. 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, 2000, at the Company's Headquarters, 800 Delaware Avenue, Buffalo, New York at 10:00 a.m. The Company submitted for shareholder approval the election of Class II and III directors, and to approve and ratify the adoption by the Board of Directors of the Computer Task Group, Incorporated Equity Award Plan, and to authorize for issuance 2,000,000 shares of the Company's Common Stock to be used for awards thereunder. Election of Directors o Two Class II directors (George B. Beitzel and Richard L. Crandall) were elected to hold office for two years until the 2002 annual meeting of shareholders and until their successors are elected and qualified, and two Class III directors (Gale S. Fitzgerald and Barbara Z. Shattuck) were elected to hold offices for three years until the 2003 annual meeting of shareholders and until their successors are elected and qualified. The results of the voting are as follows:
Total Vote Total Vote Class II Directors For Against ------------------ ---------- ----------- George B. Beitzel 18,670,373 511,436 Richard L. Crandall 18,884,620 297,189 Total Vote Total Vote Class III Directors For Against ------------------- ---------- ----------- Gale S. Fitzgerald 18,860,992 320,817 Barbara Z. Shattuck 18,880,401 301,408
o The Class I directors of the Company, whose terms of office extend until the 2001 annual meeting of shareholders and until their successors are elected and qualified, are Randolph A. Marks and R. Keith Elliott. Computer Task Group, Incorporated Equity Award Plan Total Vote For 12,501,348 Total Vote Against 3,778,212 Total Votes Abstained 81,336 Broker Non-Votes 2,820,913 9 10 Item 6. Exhibits And Reports On Form 8-K
Exhibit Description Page ------- ----------- ---- 11. Statement re: computation of earnings per share 11 27. a.) Financial Data Schedule - March 31, 2000 12 b.) Financial Data Schedule - March 26, 1999 13
* * * * * * * 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/ James R. Boldt -------------------------------------------------- James R. Boldt Principal Accounting and Financial Officer Title: Vice President and Chief Financial Officer Date: May 12, 2000 10 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 COMPUTER TASK GROUP, INCORPORATED COMPUTATION OF DILUTED EARNINGS PER SHARE UNDER THE TREASURY STOCK METHOD SET FORTH IN STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE" (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED MARCH 31, MARCH 26, 2000 1999 --------- --------- Weighted-average number of shares outstanding during period 16,076 16,424 Common Stock equivalents - Incremental shares under stock options plans 183 403 -------- ------- Number of shares on which diluted earnings per share is based 16,259 16,827 ======== ======= Net income (loss) for the period $ (4,771) $ 4,699 ======== ======= Diluted earnings (loss) per share $ (0.29) $ 0.28 ======== ======= Basic earnings (loss) per share $ (0.30) $ 0.29 ======== =======
EX-27.A 3 EXHIBIT 27(A)
5 0000023111 COMPUTER TASK GROUP, INC. 1 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 8,931,000 0 81,744,000 2,246,000 0 95,007,000 40,495,000 26,942,000 195,056,000 52,529,000 0 0 0 270,000 89,833,000 195,056,000 0 95,995,000 0 69,516,000 33,572,000 0 653,000 (7,875,000) (3,104,000) 0 0 0 0 (4,771,000) (0.30) (0.29)
EX-27.B 4 EXHIBIT 27(B)
5 0000023111 COMPUTER TASK GROUP, INC. 1 3-MOS DEC-31-1999 JAN-01-1999 MAR-26-1999 10,367,000 0 94,873,000 1,169,000 0 110,302,000 43,769,000 28,941,000 215,772,000 114,053,000 0 0 0 270,000 89,998,000 215,772,000 0 116,618,000 0 78,197,000 30,405,000 0 243,000 8,196,000 3,497,000 0 0 0 0 4,699,000 0.29 0.28
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