10-Q

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 September 29, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from                 to                

Commission File No. 1-9410

COMPUTER TASK GROUP, INCORPORATED

(Exact name of registrant as specified in its charter)

New York	16-0912632
(State or other jurisdiction of incorporation or organization)	(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  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “an emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐(Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ☐    NO  ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:
	Shares outstanding at
Title of each class	October 20, 2017
Common stock, par value $.01 per share	15,491,816

SEC Form 10-Q Index

Section		Page
Part I Financial Information
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	24
Part II Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

(Unaudited)

	For the Quarter Ended					For the Three Quarters Ended
	September 29, 2017		September 30, 2016			September 29, 2017		September 30, 2016
Revenue	$	74,039	$	78,065		$	226,566	$	247,401
Direct costs		61,010		64,193			185,651		203,072
Selling, general and administrative expenses		12,619		14,567			38,482		42,060
Goodwill impairment		—		15,785			—		37,329
Operating income (loss)		410		(16,480	)		2,433		(35,060	)
Interest and other income		18		140			71		165
Interest and other expense		129		63			278		247
Income (loss) before income taxes		299		(16,403	)		2,226		(35,142	)
Provision (benefit) for income taxes		259		(220	)		1,001		639
Net income (loss)	$	40	$	(16,183	)	$	1,225	$	(35,781	)
Net income (loss) per share:
Basic	$0.00		$	(1.03	)	$	0.08	$	(2.30	)
Diluted	$0.00		$	(1.03	)	$	0.08	$	(2.30	)
Weighted average shares outstanding:
Basic		15,013		15,649			15,150		15,586
Diluted		15,316		15,649			15,408		15,586
Cash dividend per common share	$	—	$	0.06		$	—	$	0.18

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

(Unaudited)

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Net Income (loss)	$	40		$	(16,183	)	$	1,225		$	(35,781	)
Foreign currency adjustment		671			129			2,150			299
Change in pension loss, net of taxes of $14 and $17 in the    2017 and 2016 third quarters, respectively, and    $43 and $48 in the first three quarters of 2017 and 2016,    respectively		(205	)		(9	)		(718	)		(25	)
Other comprehensive income		466			120			1,432			274
Comprehensive income (loss)	$	506		$	(16,063	)	$	2,657		$	(35,507	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share balances)

(Unaudited)

	September 29,			December 31,
	2017			2016
Assets
Current Assets:
Cash and cash equivalents	$	11,446		$	9,407
Accounts receivable, net of allowances of $376 and $469 in 2017 and 2016,    respectively		66,409			71,355
Prepaid and other current assets		2,331			2,010
Income taxes receivable		853			—
Total current assets		81,039			82,772
Property, equipment and capitalized software, net		6,236			5,863
Deferred income taxes		6,052			6,886
Cash surrender value of life insurance		32,463			31,024
Investments		407			370
Total assets	$	126,197		$	126,915
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	$	6,307		$	6,973
Accrued compensation		21,548			17,365
Advance billings on contracts		2,013			935
Other current liabilities		3,948			4,638
Total current liabilities		33,816			29,911
Long-term debt		—			4,725
Deferred compensation benefits		13,385			12,993
Other long-term liabilities		673			467
Total liabilities		47,874			48,096
Shareholders’ Equity:
Common stock, par value $0.01 per share, 150,000,000 shares authorized;    27,017,824 shares issued in 2017 and 2016		270			270
Capital in excess of par value		120,276			123,947
Retained earnings		85,448			84,223
Less: Treasury stock of 11,527,430 and 11,077,779 shares at cost, in    2017 and 2016, respectively		(112,340	)		(112,858	)
Accumulated other comprehensive loss		(15,331	)		(16,763	)
Total shareholders’ equity		78,323			78,819
Total liabilities and shareholders’ equity	$	126,197		$	126,915

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

	For the Three Quarters Ended
	September 29, 2017			September 30, 2016
Cash flow from operating activities:
Net income (loss)	$	1,225		$	(35,781	)
Adjustments to reconcile net income (loss) to net cash provided by    operating activities:
Depreciation and amortization expense		1,152			1,267
Equity-based compensation expense		782			1,322
Deferred income taxes		791			(541	)
Deferred compensation		127			85
Goodwill impairment		—			37,329
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		7,333			(1,730	)
Increase in prepaid and other current assets		(275	)		(956	)
Increase in cash surrender value of life insurance		(1,439	)		(1,064	)
Decrease in accounts payable		(1,117	)		(2,044	)
Increase in accrued compensation		3,313			6,076
Increase in advance billings on contracts		923			404
Decrease in other current liabilities		(796	)		(147	)
Decrease in income taxes payable		(928	)		(138	)
Increase in other long-term liabilities		206			88
Net cash provided by operating activities		11,297			4,170
Cash flow from investing activities:
Additions to property and equipment		(406	)		(1,529	)
Additions to capitalized software		(942	)		(370	)
Life insurance proceeds		—			394
Deferred compensation plan investments, net		(45	)		(119	)
Net cash used in investing activities		(1,393	)		(1,624	)
Cash flow from financing activities:
Proceeds from long-term debt		39,955			37,245
Payments on long-term debt		(44,680	)		(37,970	)
Proceeds from stock option plan exercises		741			229
Excess tax benefits from equity-based compensation		—			22
Taxes remitted for shares withheld from equity-based compensation    transactions		(285	)		(347	)
Proceeds from Employee Stock Purchase Plan		116			161
Change in cash overdraft, net		93			(226	)
Dividends paid		—			(2,844	)
Purchase of stock for treasury		(4,845	)		—
Net cash used in financing activities		(8,905	)		(3,730	)
Effect of exchange rates on cash and cash equivalents		1,040			168
Net increase (decrease) in cash and cash equivalents		2,039			(1,016	)
Cash and cash equivalents at beginning of year		9,407			10,801
Cash and cash equivalents at end of quarter	$	11,446		$	9,785

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COMPUTER TASK GROUP, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Financial Statements

The condensed 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 condensed consolidated financial position, results of operations, comprehensive income (loss), and cash flows for the periods presented.

The Company's fiscal year-end is December 31. During the year, the quarters generally consist of a 13-week fiscal period where the last day of each of the first three quarters is a Friday. The 2017 third quarter began on July 1, 2017 and ended on September 29, 2017. The 2016 third quarter began on July 2, 2016 and ended September 30, 2016. There were 63 billable days in both the third quarters of 2017 and 2016, and 191 and 192 billable days in the 2017 and 2016 year-to-date periods, respectively.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. There are no unconsolidated entities, or off-balance sheet arrangements other than certain guarantees supporting office leases and the performance under government contracts in the Company's European operations. All inter-company accounts have been eliminated.

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires the Company's management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, the valuation allowance for deferred tax assets, actuarial assumptions including discount rates and expected rates of return on assets, as applicable, for the Company's defined benefit plans, the allowance for doubtful accounts receivable, assumptions underlying stock option valuation, investment valuation, legal matters, other contingencies, and progress toward completion and direct profit or loss on contracts. Management believes that the information and disclosures provided herein are adequate to present fairly the condensed consolidated financial position, results of operations, comprehensive income (loss), and cash flows of the Company. These condensed consolidated financial statements should 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.

The Company operates in one industry segment, providing IT services to its clients. At the highest level, CTG delivers services that are considered either IT solutions or IT and other staffing. CTG provides these primary services to all of the markets that it serves. The services provided typically encompass the IT business solution life cycle, including phases for planning, developing, implementing, managing, and ultimately maintaining the IT solution. A typical customer is an organization with large, complex information and data processing requirements.

IT solutions and IT and other staffing revenue as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
IT solutions		29.6	%		28.3	%		29.8	%		29.4	%
IT and other staffing		70.4	%		71.7	%		70.2	%		70.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

The Company promotes a significant portion of its services through five vertical market focus areas: Technology Service Providers, Manufacturing, Healthcare (which includes services provided to healthcare providers, health insurers (payers), and life sciences companies), Financial Services, and Energy. The Company focuses on these five vertical

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areas as it believes that these areas are either higher growth markets than the general IT services market and the general economy, or are areas that provide greater potential for the Company’s growth due to the size of the vertical market. The remainder of CTG’s revenue is derived from general markets.

CTG’s revenue by vertical market as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Technology service providers		33.3	%		36.4	%		33.1	%		35.2	%
Manufacturing		24.2	%		24.6	%		25.3	%		24.1	%
Healthcare		16.6	%		17.1	%		17.0	%		18.5	%
Financial services		9.5	%		7.7	%		8.5	%		7.6	%
Energy		4.9	%		4.9	%		4.9	%		5.4	%
General markets		11.5	%		9.3	%		11.2	%		9.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid for a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants. The Company utilizes a fair value hierarchy for its assets and liabilities, as applicable, based upon three levels of input, which are:

Level 1—quoted prices in active markets for identical assets or liabilities (observable)

Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable or can be supported by observable market data for essentially the full term of the asset or liability (observable)

Level 3—unobservable inputs that are supported by little or no market activity, but are significant to determining the fair value of the asset or liability (unobservable)

At September 29, 2017 and December 31, 2016, the carrying amounts of the Company’s cash of $11.4million and $9.4 million, respectively, approximated fair value.

The Company is also allowed to elect an irrevocable option to measure, on a contract-by-contract basis, specific financial instruments and certain other items that are currently not being measured at fair value. The Company did not elect to apply the fair value provisions of this accounting standard for any specific contracts during the quarters ended September 29, 2017 or September 30, 2016.

Life Insurance Policies

The Company has purchased life insurance on the lives of a number of former employees who are plan participants in the non-qualified defined benefit Executive Supplemental Benefit Plan. In total, there are policies on 20 individuals, whose average age is 74 years old.  Those policies have generated cash surrender value. At September 29, 2017 and December 31, 2016, these insurance policies had gross cash surrender values of $30.6 million and $30.1 million, respectively, which are included on the consolidated balance sheet in “Cash surrender value of life insurance” under non-current assets. There are no loans outstanding against these policies.

At September 29, 2017 and December 31, 2016, the total death benefit for the remaining policies was approximately $42.1 million and $41.1 million, respectively. Currently, upon the death of all of the remaining plan participants, the Company would expect to receive approximately $41.5 million after the payment of obligations, and, under current tax regulations, record a non-taxable gain of approximately $10.9 million.

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Taxes Collected from Customers

In instances where the Company collects taxes from its customers for remittance to governmental authorities, primarily in its European operations, revenue and expenses are not presented on a gross basis in the condensed consolidated financial statements as such taxes are recorded in the Company's accounts on a net basis.

Cash and Cash Equivalents, and Cash Overdrafts

For purposes of the statement of cash flows, cash and cash equivalents are defined as cash on hand, demand deposits, and short-term, highly liquid investments with a maturity of three months or less. As the Company does not fund its bank accounts for the checks it has written until the checks are presented to the bank for payment, the "change in cash overdraft, net," line item as presented on the condensed consolidated statements of cash flows represents the increase or decrease in outstanding checks in a given period.

Property, Equipment and Capitalized Software Costs

Property, equipment and capitalized software at September 29, 2017 and December 31, 2016 are summarized as follows:     

(amounts in thousands)	September 29, 2017			December 31, 2016
Property, equipment and capitalized software	$	23,257		$	21,918
Accumulated depreciation and amortization		(17,021	)		(16,055	)
Property, equipment and capitalized software, net	$	6,236		$	5,863

The Company recorded $0.1 million and $0.9 million of capitalized software costs during the quarter and three quarters ended September 29, 2017, respectively, and $0.1 million and $0.4 million of capitalized software costs during the quarter and three quarters ended September 30, 2016. The increase in the 2017 periods as compared with 2016 is due to the purchase of software licenses, which the Company implemented in the first half of 2017. As of those dates, the Company had capitalized a total of $2.1 million and $1.0 million, respectively, for software projects developed for commercial use. Amortization periods range from two to five years, and are evaluated periodically for propriety. Amortization expense totaled approximately $0.1 million and $0.2 million in the quarter and three quarters ended September 29, 2017, and approximately $0.1 million in both the quarter and three quarters ended September 30, 2016. Accumulated amortization for these projects totaled $0.5 million and $0.3 million as of September 29, 2017 and September 30, 2016, respectively.

The Company is in the process of negotiating the sale of its corporate administrative building. The Company does not expect to record a loss on the sale of the building.

Guarantees

The Company has a number of guarantees in place in its European operations that support office leases and performance under government contracts. AtSeptember 29, 2017 and December 31, 2016, these guarantees totaled approximately $1.2 million and $1.1 million, respectively, and generally have expiration dates ranging from October 2017 through December 2024.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is only permitted in years beginning after December 31, 2016.

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The Company currently records approximately 96.8% of its annual revenue on a time-and-material or progress-billing basis, with the remaining 3.2% recorded under a proportional method of accounting using an inputs methodology for fixed price projects.  For the 96.8% of the Company’s revenue recorded under the time-and-material or progress billings methods of accounting, the Company does not expect this new standard to change the timing or the amount of revenue that is currently recorded.  The Company is currently evaluating the 3.2% of revenue recorded under its fixed price projects to determine if the manner or timing of revenue recognition would change for existing projects.  However, the Company does not expect the impact of adopting this new accounting guidance to have a material impact on its consolidated operating results, but does expect the new standard to increase the Company’s accounting policy disclosures upon adoption.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classifications of Deferred Taxes,” which amended accounting guidance related to the presentation of deferred tax liabilities and assets. The amended guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. This guidance was effective for the Company for the quarter ended March 31, 2017. Upon adoption of this guidance in the 2017 first quarter, the Company reclassified approximately $0.9 million as of both March 31, 2017 and December 31, 2016 from current to non-current assets.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),”which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Topic 842 supersedes the previous leases standard, ASC 840, Leases. This guidance is effective for reporting periods beginning after December 15, 2018; however, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amended accounting guidance related to seven aspects of the accounting for share-based payments award transactions. This guidance became effective for the quarter ended March 31, 2017, and the Company recorded less than $0.2 million and approximately $0.3 million of additional tax expense for tax shortfalls in the quarter and three quarters ended September 29, 2017, respectively, that previously would have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. Additionally, the Company recorded $0.3 million in both of the periods ended September 29, 2017 and September 30, 2016, respectively, for taxes remitted for shares withheld from equity-based compensation transactions on the condensed consolidated statements of cash flows in the “cash flow from financing activities” section.

3. Goodwill Impairment

Previously, in accordance with current accounting guidance for “Intangibles - Goodwill and Other,” the Company performed goodwill impairment testing at least annually (in the Company’s fourth quarter), unless indicators of impairment existed in interim periods. The goodwill that was recorded on the Company's condensed consolidated balance sheet related to CTG’s Healthcare Solutions (CTGHS) reporting unit. The Company used the two-step approach to test goodwill for potential impairment. Step One compared the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value is found to exceed the estimated fair value, Step Two must be performed. Step Two compared the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeded the implied fair value of its goodwill, an impairment loss was recognized in an amount equal to the excess.

During the 2016 first quarter, the Company determined that goodwill impairment indicators existed which required an interim impairment analysis. The impairment indicator was a significant and sustained decrease in the Company’s overall market capitalization, as the Company’s stock price during the 2016 first quarter fell by as much as 29% from its value at December 31, 2015. As a result of this indicator, the Company conducted an interim analysis of CTGHS to determine if an impairment existed. In performing the assessment, the Company estimated the fair value of CTGHS based on a combination of the income and market approaches. The income approach uses a discounted cash flow (DCF) method that utilizes the

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present value of expected future cash flows to estimate fair value of the reporting unit. The future cash flows for CTGHS was projected based on our estimates of future revenue, operating income and other factors such as working capital and capital expenditures, and a discount rate used in the present value calculation. As part of our projections, the Company took into account expected industry and market conditions for the healthcare industry, as well as trends currently affecting CTGHS. The market approach utilizes multiples of revenue and earnings before interest expense, taxes, depreciation and amortization (EBITDA) to estimate the fair value of the reporting unit. The market multiples used for CTGHS were based on competitor and industry data, along with the market multiples for the Company and other factors. The Company also completed a comparison of its overall market capitalization to the market value of CTGHS and the Company’s other non-reporting business units. Based upon the analysis performed, the Company determined that the fair value of CTGHS was less than its carrying value, which required the Company to perform a Step Two goodwill impairment test.

As a result of the 2016 first quarter Step Two analysis, the Company determined the implied fair value of its goodwill balance was below the carrying value. Accordingly, the Company recorded a non-tax deductible goodwill impairment charge of $21.5 million to reduce the value of its goodwill balance to the implied fair value.

During the 2016 third quarter, the Company determined that goodwill impairment indicators existed which required another interim impairment analysis. These impairment indicators were the unexpected declining revenue and profits in the CTGHS business unit, the resignation of both the sales leader (who was the Company’s former CEO) and the delivery leader of CTGHS in the 2016 third quarter, effectively leaving the business unit without executive leadership, and a continued decrease in the Company’s overall market capitalization.  As a result of these indicators, the Company conducted an interim analysis of CTGHS to determine if an impairment existed. In performing the assessment, the Company again performed the procedures it had previously performed in the 2016 first quarter, as detailed above. The most significant changes in the Step One analysis from the 2016 first quarter to the 2016 third quarter were reductions in the estimates of future revenue and operating income based upon the unexpected negative trends experienced in the third quarter, as well as the resulting reductions in the revenue and EBITDA market multiples that correlated to the decline in the Company’s overall market capitalization.  Based upon the analysis performed, the Company determined that the fair value of CTGHS was less than its carrying value, which required the Company to perform a Step Two goodwill impairment test.

As a result of the 2016 third quarter Step Two analysis, the Company determined the implied fair value of its goodwill balance was below the carrying value. Accordingly, the Company recorded a non-tax deductible goodwill impairment charge in the 2016 third quarter of $15.8 million that reduced the value of its goodwill balance to the implied fair value, or $0.0 as of September 30, 2016.

4. Net Income (Loss) Per Share

Basic and diluted earnings (loss) per share (EPS) for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended					For the Three Quarters Ended
(amounts in thousands, except per-share data)	September 29, 2017		September 30, 2016			September 29, 2017		September 30, 2016
Weighted-average number of shares outstanding    during period		15,013		15,649			15,150		15,586
Common stock equivalents from incremental shares    under equity-based compensation plans		303		—			258		—
Number of shares on which diluted earnings    per share is based		15,316		15,649			15,408		15,586
Net income (loss)	$	40	$	(16,183	)	$	1,225	$	(35,781	)
Net income (loss) per share
Basic	$	0.00	$	(1.03	)	$	0.08	$	(2.30	)
Diluted	$	0.00	$	(1.03	)	$	0.08	$	(2.30	)

Weighted-average shares represent the average number of issued shares less treasury shares, and shares held in the Stock Trusts for the 2016 periods, and for the basic EPS calculations, unvested restricted stock.

Certain options representing 1.0 million and 1.6 million shares of common stock were outstanding at September 29, 2017 and September 30, 2016, respectively, but were not included in the computation of diluted earnings per share as their effect on the computation would have been anti-dilutive.

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5. Investments

The Company’s investments consist of mutual funds which are part of the Computer Task Group, Incorporated Non-qualified Key Employee Deferred Compensation Plan. At both September 29, 2017 and December 31, 2016, the Company’s investment balances, which are classified as trading securities, totaled approximately $0.4 million, and are measured at fair value. As there is an active trading market for these funds, fair value was determined using Level 1 inputs (see note 2 for “Fair Value”). Unrealized gains and losses on these securities are recorded in earnings and were nominal in both the 2017 and 2016 second quarter and year-to-date periods.

6. Debt

In October 2015, the Company entered into its current unsecured revolving credit agreement which replaced a demand line of credit and allows the Company to borrow up to $40.0 million. The agreement also allows under its provisions for the Company to borrow up to $17.5 million against the cash surrender value of the Company's life insurance policies. The new agreement expires in October 2018, and has interest rates ranging from 0 to 50 basis points over the prime rate, and 150 to 200 basis points over LIBOR. The Company can borrow under the agreement at either the prime rate or a LIBOR rate option, at its discretion. At September 29, 2017 and December 31, 2016, there was $0.0 million and $4.7 million, respectively, outstanding under the revolving credit agreement.

The maximum amounts outstanding under the credit agreement in the 2017 and 2016 third quarters was $4.2 million and $4.6 million, respectively, while borrowings during those quarters averaged $2.3 million and $2.0 million, respectively, and carried weighted average interest rates of 2.9% and 3.5%, respectively.

Under the agreement, the Company is required to meet certain financial covenants in order to maintain borrowings under its revolving credit line, pay dividends (if any are declared), and make acquisitions. The covenants are measured quarterly, and at September 29, 2017, included a leverage ratio (total outstanding debt divided by earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for non-cash charges (including goodwill impairments) as necessary) which must be no greater than 2.75 to 1, a calculation of minimum tangible net worth (total shareholders' equity less goodwill and intangible assets) which must be no less than $48.6 million, and total annual expenditures for property, equipment and capitalized software must be no more than $5.0 million. The Company was in compliance with these covenants at September 29, 2017 as the leverage ratio was 0.0, the minimum tangible net worth was $76.9 million, and capital expenditures for property, equipment and capitalized software were $1.3 million in the 2017 year-to-date period.

7. Accumulated Other Comprehensive Loss

The components that make up accumulated other comprehensive loss on the condensed consolidated balance sheets at September 29, 2017 and December 31, 2016 are as follows: 

(amounts in thousands)	September 29, 2017			December 31, 2016
Foreign currency	$	(6,294	)	$	(8,444	)
Pension loss, net of tax of $792 in 2017, and $835 in 2016		(9,037	)		(8,319	)
Accumulated other comprehensive loss	$	(15,331	)	$	(16,763	)

During the 2017 and 2016 third quarters and first three quarters, actuarial losses were amortized to expense as follows:

	For the Quarter Ended						For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Amortization of actuarial losses	$	87		$	71		$	246		$	215
Income tax		(14	)		(17	)		(43	)		(48	)
Net of tax	$	73		$	54		$	203		$	167

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The amortization of both prior service cost and actuarial losses are included in determining net periodic pension cost. See note 9, "Deferred Compensation and Other Benefits" for additional information.

8. Income Taxes

The Company’s effective tax rate (“ETR”) is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The Company’s normal annual ETR typically ranges from 38% to 40% of pre-tax income. The 2017 third quarter and year-to-date ETR was 86.6% and 45.0%, respectively, and 2016 third quarter ETR was a benefit of 1.3% and the 2016 year-to-date ETR was (1.8)%.

The ETR was higher than the normal range in the 2017 third quarter and year-to-date primarily due lower pre-tax income and the adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which required the company to record approximately $0.2 million in the 2017 third quarter, and $0.3 million in the 2017 year-to-date period of additional tax expense for shortfalls in the quarter that would previously have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. This additional tax expense was partially offset by tax benefits for the Work Opportunity Tax Credit (WOTC) and Credit for Increasing Research Activities (R&D).

The ETR was lower than the normal range in the 2016 third quarter primarily due to the non-deductible goodwill impairment charge totaling $15.8 million taken in the quarter, which, when considered in the tax provision resulted in reduced taxable loss, and also due to the Work Opportunity Tax Credit (WOTC) and the Research and Development tax credit (R&D). The 2016 year-to-date ETR was lower than the normal range due to the non-deductible goodwill impairment charges totaling $37.3 million taken in the 2016 first and third quarters, which, when considered in the tax provision resulted in net taxable income, and due to the WOTC and the R&D credits.

At September 29, 2017, the undistributed earnings of foreign subsidiaries totaled approximately $23.6 million, which are considered to be indefinitely reinvested, and accordingly, no provision for taxes has been provided thereon. Given the complexities of the foreign tax calculations, it is not practicable to compute the tax liability that would be due upon distribution of those earnings in the form of dividends or liquidation or sale of the foreign subsidiaries.

9. Deferred Compensation and Other Benefits

The Company maintains a non-qualified defined benefit Executive Supplemental Benefit Plan (ESBP) that provides certain former key executives with deferred compensation benefits, based on years of service and base compensation, payable during retirement. The plan was amended as of November 30, 1994, to freeze benefits for the participants in the plan at that time.

Net periodic pension cost for the quarters and three quarters ended September 29, 2017 and September 30, 2016 for the ESBP was as follows:

	For the Quarter Ended				For the Three Quarters Ended
(amounts in thousands)	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016
Interest cost	$	55	$	60	$	165	$	182
Amortization of actuarial loss		40		43		118		129
Net periodic pension cost	$	95	$	103	$	283	$	311

The ESBP is deemed to be unfunded as the Company has not specifically identified assets to be used to discharge the deferred compensation benefit liabilities. The Company has purchased insurance on the lives of certain plan participants in amounts deemed to be sufficient to reimburse the Company for the costs associated with the plan for those participants (see note 2 for “Life Insurance Policies”). The Company does not anticipate making contributions to the plan other than for benefit payments as required in 2017 and future years. In the 2017 third quarter and year-to-date periods, the Company made benefit payments totaling approximately $0.1 million and $0.5 million, respectively, and expects to make payments in 2017 totaling approximately $0.7 million.

The Company also retained a contributory defined benefit plan for its previous employees located in the Netherlands (NDBP) when the Company disposed of its subsidiary, CTG Nederland, B.V. Benefits paid are a function of a percentage of career average pay. This plan was curtailed for additional contributions in January 2003. Net periodic pension cost was

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approximately $15,000 and $44,000 in the 2017third quarter and year-to-date periods, respectively, and $18,000 and $55,000 in the corresponding 2016 periods, respectively.

The Company does not anticipate making contributions to the NDBP in 2017. The assets for the NDBP are held by Aegon, a financial services firm located in the Netherlands. The Company maintains a contract with Aegon to insure future benefit payments of the NDBP; however, due to certain terms of the agreement and potential obligations to the Company, the NDBP has not been settled. The benefit payments to be made in 2017 are expected to be paid by Aegon from plan assets. The assets for the plan are included in a general portfolio of government bonds, a portion of which is allocated to the NDBP based upon the estimated pension liability associated with the plan. The fair market value of the plan’s assets equals the contractual value of the NDBP at any point in time. The fair value of the assets is determined using a Level 3 methodology (see note 2 for “Fair Value”). In 2017, the plan investments have a targeted minimum return to the Company of 4.0%, which is consistent with historical returns and the 4.0% return guaranteed to the participants of the plan. The Company, in conjunction with Aegon, intends to maintain the current investment strategy of investing plan assets solely in government bonds throughout 2017.

The change in the fair value of plan assets for the NDBP for the three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 30, 2016
Fair value of plan assets at beginning of period	$	6,920		$	7,106
Return on plan assets		217			216
Contributions		—			—
Benefits paid		(119	)		(113	)
Effect of exchange rate changes		852			207
Fair value of plan assets at end of quarter	$	7,870		$	7,416

During 2017, the Company determined that its fully funded pension plan related to Belgium employees, which the Company had historically accounted for as a defined contribution plan, should have been reported as a defined benefit plan. The impact of the error on the historical financial statements was immaterial. The Company recorded an increase to noncurrent assets and an offsetting adjustment primarily to direct costs of approximately $0.3 million, and an increase in income tax expense and deferred tax liabilities of approximately $0.1 million to correct the accounting during the 2017 third quarter.

Net periodic pension cost for the quarters and three quarters ended September 29, 2017 for the Belgium pension plan was as follows:

	For the Quarter Ended			For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 29, 2017
Service cost	$	70			$	210
Interest cost	$	39			$	117
Expected return on assets	$	(79	)		$	(238	)
Net periodic pension cost	$	30			$	89

The change in the fair value of plan assets for the three quarters ended September 29, 2017 was as follows:

	For the Three Quarters Ended
(amounts in thousands)	September 29, 2017
Fair value of plan assets at beginning of period	$	8,520
Return on plan assets		225
Contributions		343
Benefits paid		(10	)
Effect of exchange rate changes		1,075
Fair value of plan assets at end of quarter	$	10,153

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The Company maintains the Key Employee Non-Qualified Deferred Compensation Plan for certain key executives. Company contributions to this plan, if any, are based on annually defined financial performance objectives. Cash contributions made to this plan in the 2017 first quarter for amounts earned in 2016 totaled $0.1 million, while contributions to the plan in the 2016 first quarter for amounts earned in 2015 totaled $0.2 million. The investments in the plan are included in the total assets of the Company, and are discussed in note 5, “Investments.” Participants in the plan have the ability to purchase stock units from the Company at current market prices using their available investment balances within the plan. In exchange for the cash received, the Company releases shares out of treasury stock equivalent to the number of share units purchased by the participants. These shares of common stock are not entitled to any voting rights, but will receive dividends in the event any are paid. The shares are being held by the Company, and will be released to the participants as prescribed by their payment elections under the plan. There were no stock units purchased in 2017, while 5,000 share units were purchased in the 2016 first quarter and none were purchased in the 2016 second or third quarter.

The Company maintains the Non-Employee Director Deferred Compensation Plan for its non-employee directors. Contributions in the 2017 third quarter and year-to-date periods were $0.1 million and $0.3 million, respectively. At the time the contributions were made, the non-employee directors elected to purchase stock units from the Company at current market prices using their available investment balance within the plan. Consistent with the Key Employee Non-Qualified Deferred Compensation Plan, in return for funds received, the Company released shares out of treasury stock equivalent to the number of share units purchased by the participants. These shares of common stock are not entitled to any voting rights, but will receive dividends in the event any are paid. The shares are being held by the Company, and will be released to the participants as prescribed by their payment elections under the plan.

10. Equity-based Compensation

During the 2017 second quarter and first quarter, the Company granted restricted stock totaling 316,165 shares and 7,500 shares, respectively, which were funded out of treasury stock. No stock option or restricted stock grants were issued during the 2017 third quarter. Restricted stock and stock units totaling 512,650 shares were granted in the 2016 first quarter of which 10,000 shares were issued out of treasury stock and 502,650 shares were issued out of the Computer Task Group, Inc. Stock Compensation Employee Trust.  No stock option or restricted stock grants were issued during the 2016 second or third quarter.

Of the 316,165 shares granted in the 2017 second quarter, 196,015 shares represented performance grants with a market condition that were granted to senior management on May 15, 2017. The closing price of the Company’s stock on that day was $5.75 per share.  Under these grant agreements, the Company’s stock price must increase 50% to $8.63 for a 30-day period within a three-year period from the date of grant for 50% of the grants to vest. The Company’s stock price must increase 100% to $11.50 for a 30-day period within a three-year period from the date of grant for the remaining 50% of the grants to vest.  

For these performance grants, the price on the date of grants was $5.75 per share, the expected volatility was 36.2%, the expected dividend yield is zero, and the risk-free rate of return was 1.49%.  Given these assumptions, the tranche of the grants that will vest with a 50% increase in the stock price have a value using a binomial model of $1.63 per share, and a derived service period of 1.22 years.  For the tranche of the grants that will vest with a 100% increase in the stock price, the value of the shares is $0.95 per share and have a derived service period of 1.79 years.  The Company is expensing these grants over the derived service period as noted for each tranche of a grant.

The remaining 2017 grants totaling 120,150 shares vest over a period of four years, with 25% of the grant vesting one year from the date of grant, and another 25% vesting each year thereafter until the grant is fully vested to the employee. The Company recognizes compensation expense for these grants over the expected term of the grant, or four years.

The restricted shares granted are considered outstanding, can be voted, and are eligible to receive dividends in the event any are paid. However, the restricted shares do not include a non-forfeitable right for the holder to receive dividends and none will be paid in the event the awards do not vest. Accordingly, only vested shares of outstanding restricted stock are included in the basic earnings per share calculation. The shares and share units were granted from the 2010 Equity Award Plan and the 1991 Restricted Stock plan.

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The Company also granted 24,900 stock options during the 2017 second quarter on May 15, 2017.  The options have a fair value of $1.85 per share using a Black-Scholes valuation model.  The assumptions used to calculate that fair value include the price on date of grant of $5.75, an expected life of 4.2 years, expected volatility of 36.9%, an expected dividend yield of zero, and a risk free rate of 1.81%.  The options vest ratably over four years, and are being expensed over that period.  The options were granted from the 2010 Equity Award Plan.

11. Treasury Stock

During the 2016 fourth quarter, the Company’s Board of Directors authorized the repurchase of up to $10.0 million of the Company’s stock over a two year period of time.  This repurchase authorization replaced the previously outstanding authorization.  The Company purchased 276,000 shares for treasury during the 2017 third quarter, and 916,000 shares for treasury during the 2017 year-to-date period. At September 29, 2017, the Company had approximately $4.0 million left in its current stock repurchase authorization. During the 2017 third quarter and year-to-date periods, the Company issued 31,000 shares and 644,000, respectively, out of treasury stock primarily to fulfill the share requirements from purchases of stock in the Non-Employee Director Deferred Compensation Plan, stock option exercises, and restricted stock grants.

The Company did not purchase any shares for treasury during the 2016 third quarter or year-to-date periods. At September 30, 2016, approximately 0.5 million shares remained authorized for future purchases. During the 2016 third quarter and year-to-date periods the Company issued 45,000 shares and 305,000 shares, respectively, out of treasury stock primarily to fulfill the share requirements from stock option exercises and restricted stock grants.

During the 2016 second quarter, the Company terminated its Stock Employee Compensation Trust (SECT) and Omnibus Stock Trust, and recorded the remaining shares in those trusts, totaling approximately 2.8 million shares, as treasury stock.  The trusts had previously been established to fund employee stock plans and benefit programs.

12. Significant Customers

In the 2017 third quarter, International Business Machines Corporation (IBM) was the Company’s largest customer and accounted for $18.6 million or 25.1% of consolidated revenue compared with $24.4 million or 31.3% of consolidated revenue in the comparable 2016 period. In the 2017 year-to-date period, IBM accounted for $57.9 million or 25.5% of consolidated revenue compared with $75.5 million or 30.5% of consolidated revenue in the comparable 2016 period. During the 2017 third quarter, the National Technical Services Agreement with IBM was extended for two years and now expires on December 31, 2019. The Company’s accounts receivable from IBM at September 29, 2017 and December 31, 2016 totaled $21.2 million and $28.0 million, respectively.

In the 2017 third quarter, SDI International (SDI) was the Company’s second largest customer and accounted for $8.4 million or 11.3% of consolidated revenue compared with $8.6 million or 11.0% of consolidated revenue in the comparable 2016 period. In the 2017 year-to-date period, SDI accounted for $27.2 million or 12.0% of consolidated revenue compared with $25.2 million or 10.2% of consolidated revenue in the comparable 2016 period. SDI acts as a vendor manager for Lenovo, and all of the Company's revenue generated through SDI is for employees working at Lenovo. The Company’s accounts receivable from SDI at September 29, 2017 and December 31, 2016 totaled $5.2 million and $5.6 million, respectively.

No other customer accounted for 10% or more of the Company's revenue during the 2017 or 2016 third quarter or year-to-date periods.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Quarter and Three Quarters Ended September 29, 2017

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements made by the management of Computer Task Group, Incorporated (CTG, the Company or the Registrant) that are subject to a number of risks and uncertainties. These forward-looking statements are based on information as of the date of this report. The Company assumes no obligation to update these statements based on information from and after the date of this report. Generally, forward-looking statements include words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “could,” “may,” “might,” “should,” “will” and words and phrases of similar impact. The forward-looking statements include, but are not limited to, statements regarding future operations, industry trends or conditions and the business environment, and statements regarding future levels of or trends in business strategy and expectations, new business opportunities, cost control initiatives, business wins, market demand, revenue, operating expenses, capital expenditures, and financing.  The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including the following: (i) the availability to CTG of qualified professional staff,  (ii) domestic and foreign industry competition for customers and talent, (iii) increased bargaining power of large customers, (iv) the Company's ability to protect confidential client data, (v) the partial or complete loss of the revenue the Company generates from International Business Machines Corporation (IBM) and SDI International (SDI), (vi) the uncertainty of customers' implementations of cost reduction projects, (vii) the effect of healthcare reform and initiatives, (viii) the mix of work between staffing and solutions, (ix) currency exchange risks, (x) risks associated with operating in foreign jurisdictions, (xi) renegotiations, nullification, or breaches of contracts with customers, vendors, subcontractors or other parties, (xii) the impact of current and future laws and government regulation, as well as repeal or modification of such, affecting the information technology (IT) solutions and staffing industry, taxes and the Company's operations in particular, (xiii) industry and economic conditions, including fluctuations in demand for IT services, (xiv) consolidation among the Company's competitors or customers, (xv) the need to supplement or change the Company’s IT services in response to new offerings in the industry or changes in customer requirements for IT products and solutions, (xvi) the risks associated with acquisitions, and (xvii) the risks described in Item 1A of the Company’s most recently filed annual report on Form 10-K, and from time to time in the Company's reports filed with the Securities and Exchange Commission (SEC).

Industry Trends

The Company operates in one industry segment, providing IT services to its clients. At the highest level, CTG delivers services that are considered either IT solutions or IT and other staffing. The market demand for the Company’s services is heavily dependent on IT spending by major corporations, organizations and government entities in the markets and regions that it serves. The pace of technological change and changes in business requirements and practices of the Company’s clients all have a significant impact on the demand for the services that CTG provides. Competition for new engagements and pricing pressure has been and, management believes, will continue to be strong.

IT solutions and IT and other staffing revenue as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
IT solutions		29.6	%		28.3	%		29.8	%		29.4	%
IT and other staffing		70.4	%		71.7	%		70.2	%		70.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

The Company promotes a significant portion of its services through five vertical market focus areas: Technology Service Providers, Manufacturing, Healthcare (which includes services provided to healthcare providers, health insurers (payers), and life sciences companies), Financial Services, and Energy. The Company focuses on these five vertical areas as it believes that these areas either are higher growth markets than the general IT services market and the general economy, or are areas that provide greater potential for the Company’s growth due to the size of the vertical market. The remainder of CTG’s revenue is derived from general markets.

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The Company’s revenue by vertical market as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Technology service providers		33.3	%		36.4	%		33.1	%		35.2	%
Manufacturing		24.2	%		24.6	%		25.3	%		24.1	%
Healthcare		16.6	%		17.1	%		17.0	%		18.5	%
Financial services		9.5	%		7.7	%		8.5	%		7.6	%
Energy		4.9	%		4.9	%		4.9	%		5.4	%
General markets		11.5	%		9.3	%		11.2	%		9.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

The IT services industry is extremely competitive and characterized by continuous changes in customer requirements and improvements in technologies. The Company’s competition varies significantly by geographic region, as well as by the type of service provided. Many of the Company’s competitors are larger than CTG, and have greater financial, technical, sales and marketing resources. In addition, the Company frequently competes with a client’s own internal IT staff. Our industry is impacted by the growing use of lower-cost offshore delivery capabilities (primarily India and other parts of Asia). Regularly, new IT products and services are introduced which may render our existing IT solutions and IT staffing services obsolete. The economic conditions in the markets we serve are continuously changing and may negatively affect our business if we cannot adapt to negative conditions as they occur. There can be no assurance that CTG will be able to continue to compete successfully with existing or future competitors or that future competition will not have a material adverse effect on our results of operations and financial condition.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, when the services have been rendered, when the price is determinable, and when collectability of the amount due is reasonably assured. For time-and-material contracts, revenue is recognized as hours are incurred and costs are expended. For contracts with periodic billing schedules, primarily monthly, revenue is recognized as services are rendered to the customer. Revenue for fixed-price contracts is recognized per the proportional method of accounting using an input-based approach. On a given project, actual salary and indirect labor costs incurred are measured and compared with the total estimate of costs of such items at the completion of the project. Revenue is recognized based upon the percentage-of-completion calculation of total incurred costs to total estimated costs. The Company infrequently works on fixed-price projects that include significant amounts of material or other non-labor related costs that could distort the percent complete within a percentage-of-completion calculation. The Company’s estimate of the total labor costs it expects to incur over the term of the contract is based on the nature of the project and our experience on similar projects, and includes management judgments and estimates that affect the amount of revenue recognized on fixed-price contracts in any accounting period.  Losses on fixed-price projects are recorded when identified.

The Company’s revenue from contracts accounted for under time-and-material, progress billing and percentage-of-completion methods as a percentage of consolidated revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:  

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Time-and-material		85.3	%		86.1	%		85.5	%		86.8	%
Progress billing		11.4	%		11.0	%		11.3	%		10.5	%
Percentage-of-completion		3.3	%		2.9	%		3.2	%		2.7	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

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Results of Operations

The table below sets forth data as contained in the condensed consolidated statements of operations with the percentage information calculated as a percentage of consolidated revenue.

For the Quarter Ended:	September 29, 2017						September 30, 2016
	(amounts in thousands)
Revenue		100.0	%	$	74,039			100.0	%	$	78,065
Direct costs		82.4	%		61,010			82.2	%		64,193
Selling, general and administrative expenses		17.0	%		12,619			18.7	%		14,567
Goodwill impairment		—	%		—			20.2	%		15,785
Operating income (loss)		0.6	%		410			(21.1	)%		(16,480	)
Interest and other income (expense), net		(0.2	)%		(111	)		0.1	%		77
Income (loss) before income taxes		0.4	%		299			(21.0	)%		(16,403	)
Provision (benefit) for income taxes		0.3	%		259			(0.3	)%		(220	)
Net income (loss)		0.1	%	$	40			(20.7	)%	$	(16,183	)
For the Three Quarters Ended:	September 29, 2017						September 30, 2016
	(amounts in thousands)
Revenue		100.0	%	$	226,566			100.0	%	$	247,401
Direct costs		81.9	%		185,651			82.1	%		203,072
Selling, general and administrative expenses		17.0	%		38,482			17.0	%		42,060
Goodwill impairment		—	%		—			15.1	%		37,329
Operating income (loss)		1.1	%		2,433			(14.2	)%		(35,060	)
Interest and other expense, net		(0.1	)%		(207	)		—	%		(82	)
Income (loss) before income taxes		1.0	%		2,226			(14.2	)%		(35,142	)
Provision for income taxes		0.4	%		1,001			0.3	%		639
Net income (loss)		0.6	%	$	1,225			(14.5	)%	$	(35,781	)

The Company recorded revenue in the 2017 and 2016 periods as follows:

For the Quarter Ended:	September 29, 2017					September 30, 2016					Year-over-Year Change
	(amounts in thousands)
North America		73.0	%	$	54,082		78.5	%	$	61,282		(11.7	)%
Europe		27.0	%		19,957		21.5	%		16,783		18.9	%
Total		100.0	%	$	74,039		100.0	%	$	78,065		(5.2	)%
For the Three Quarters Ended:	September 29, 2017					September 30, 2016					Year-over-Year Change
	(amounts in thousands)
North America		74.4	%	$	168,561		78.7	%	$	194,649		(13.4	)%
Europe		25.6	%		58,005		21.3	%		52,752		10.0	%
Total		100.0	%	$	226,566		100.0	%	$	247,401		(8.4	)%

There were 63 billable days in both the 2017 and 2016 third quarters. Reimbursable expenses billed to customers and included in revenue totaled $0.8 million and $0.9 million in the 2017 and 2016 third quarters, respectively.

There were 191 and 192 billable days in the 2017 and 2016 year-to-date periods, respectively. Reimbursable expenses billed to customers and included in revenue totaled $2.5 million and $3.2 million in the 2017 and 2016 year-to-date periods, respectively.

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The revenue decrease in North America in the 2017 third quarter and year-to-date periods as compared with the corresponding 2016 periods was due to a significant decrease in demand for the Company's IT solutions business, primarily in the Company’s healthcare vertical market, as well as a significant decrease in demand for our IT and other staffing services business, primarily in our technology service providers vertical market.

On a consolidated basis, IT solutions revenue decreased $0.2 million or 1.0% in the 2017 third quarter, and $5.2 million or 7.2% in the 2017 year-to-date period as compared with the corresponding 2016 periods. The Company’s healthcare vertical market grew from 2008-2012 primarily from installing EHR systems in hospitals and health systems, and then began to decline beginning in 2013.  As of today, EHR installations are largely complete. In late 2014, the Company began to see significant reductions in billable resources at a number of its larger healthcare clients, which further decreased IT solutions revenue in the Company’s healthcare vertical market as existing projects ended. This decrease in spending on healthcare IT projects continued in the first three quarters of 2017 for the customers that we serve.

On a consolidated basis, IT and other staffing revenue decreased $3.8 million or 6.8% in the 2017 third quarter, and $15.6 million or 8.9% in the 2017 year-to-date period as compared with the corresponding 2016 periods. The Company had previously been informed by its largest staffing client that there would be significant reductions in both requirements and billable rates for certain of the employees provided to this client beginning in the 2016 fourth quarter.  These reductions in requirements and bill rates were completed by the end of the 2017 first quarter. Additionally, the Company continued to experience a significant reduction in demand from its largest staffing clients in the 2017 second and third quarter. The Company’s headcount was approximately 3,250 employees at September 29, 2017, which was an 8.5% decrease from approximately 3,550 employees at September 30, 2016, and a 5.8% decrease from approximately 3,450 employees at December 31, 2016.

Revenue in the Company’s European operations in the 2017 third quarter and year-to-date periods as compared with the corresponding 2016 periods significantly increased primarily due to an increase in IT solutions and staffing work across a number of the Company’s vertical markets.  

The revenue increase in Europe in the countries in which the Company operates (Belgium, Luxembourg, and the United Kingdom) in the 2017 third quarter was impacted in part by the relative strength of the U.S. dollar as compared with the currencies of Belgium, Luxembourg, and the United Kingdom. In Belgium and Luxembourg, where a significant portion of the Company’s revenue from its European operations is generated, the functional currency is the Euro, while in the United Kingdom the functional currency is the British Pound. In the 2017 third quarter as compared with the 2016 third quarter, the average value of the Euro increased 5.3% while the average value of the British Pound decreased 0.3%. If there had been no change in these exchange rates from the 2016 third quarter to the 2017 third quarter, total European revenue would have been approximately $1.0 million lower, or $19.0 million as compared with the $20.0 million reported. Operating income in the 2017 third quarter was not significantly impacted by the changes in the exchange rates year-over-year. In the 2017 year-to-date period as compared with the corresponding 2016 period, the average value of the Euro decreased 0.2% while the average value of the British Pound decreased 8.5%. If there had been no change in these exchange rates from the first three quarters of 2016 to the corresponding 2017 period, total European revenue would have been approximately $0.5 million higher, or $58.5 million as compared with the $58.0 million reported. Operating income in the 2017 year-to-date period was not significantly impacted by the changes in the exchange rates year-over-year.

The Company continues to assess the potential impact, if any, that the United Kingdom’s proposed exit from the European Union will have on the Company’s operations.  As the total revenue generated by our British subsidiary is immaterial as compared with the Company’s total consolidated revenue, we do not expect the impact of the proposed exit to have a material impact on the Company’s operations.

In the 2017 third quarter, International Business Machines Corporation (IBM) was the Company’s largest customer and accounted for $18.6 million or 25.1% of consolidated revenue compared with $24.4 million or 31.3% of consolidated revenue in the comparable 2016 period. In the 2017 year-to-date period, IBM accounted for $57.9 million or 25.5% of consolidated revenue compared with $75.5 million or 30.5% of consolidated revenue in the comparable 2016 period. During the 2017 third quarter, the National Technical Services Agreement with IBM was extended for two years and now expires on December 31, 2019. The Company’s accounts receivable from IBM at September 29, 2017 and December 31, 2016 totaled $21.2 million and $28.0 million, respectively.

In the 2017 third quarter, SDI International (SDI) was the Company’s second largest customer and accounted for $8.4 million or 11.3% of consolidated revenue compared with $8.6 million or 11.0% of consolidated revenue in the

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comparable 2016 period.  In the 2017 year-to-date period, SDI accounted for $27.2 million or 12.0% of consolidated revenue compared with $25.2 million or 10.2% of consolidated revenue in the comparable 2016 period. SDI acts as a vendor manager for Lenovo, and all of the Company's revenue generated through SDI is for employees working at Lenovo. The Company’s accounts receivable from SDI at September 29, 2017 and December 31, 2016 totaled $5.2 million and $5.6 million, respectively.

No other customer accounted for 10% or more of the Company's revenue during the 2017 or 2016 third quarters or year-to-date periods.

Direct costs, defined as the costs for billable staff including billable out-of-pocket expenses, were 82.4% of revenue in the 2017 third quarter as compared with 82.2% of revenue in the 2016 third quarter, and 81.9% of revenue in the 2017 year-to-date period as compared with 82.1% of revenue in the corresponding 2016 period. The Company’s direct costs as a percentage of revenue increased in the 2017 third quarter as compared with the 2016 corresponding period due to a significant increase in fringe benefit costs primarily medical expense, in the 2017 third quarter.  The increase in medical expense, which totaled approximately $1.0 million in direct costs, was due to much higher utilization of the Company’s self-insured medical plan during the quarter.  Direct costs decreased slightly in the 2017 year-to-date period as compared with the corresponding 2016 period primarily due to an improvement in employee utilization year-over-year, offset by the additional medical expense in 2017.

Selling, general and administrative (“SG&A”) expenses were 17.0% of revenue in the 2017 third quarter as compared with 18.7% in the corresponding 2016 period, and 17.0% of revenue in both the 2017 and 2016 year-to-date periods.The decrease in SG&A expenses as a percentage of revenue in the 2017 third quarter as compared with the 2016 third quarter is due to severance costs incurred totaling $1.5 million in the 2016 third quarter. In the 2017 year-to-date period, SG&A expenses included severance of approximately $0.4 million incurred in the 2017 second quarter, additional costs associated with our operating units as the Company continues to make investments in sales, recruiting and delivery resources in order to focus on long-term growth, and the loss of operating leverage resulting from lower year-over-year revenue.  The 2016 year-to-date period includes the $1.5 million in severance noted above incurred in the 2016 third quarter.

During the 2016 first quarter, the Company determined that a goodwill impairment indicator existed which required an interim impairment analysis. As a result of the analysis, the Company determined the implied fair value of its goodwill balance was below the carrying value. Accordingly, the Company recorded a non-tax-deductible goodwill impairment of $21.5 million to reduce the value of its goodwill balance to the implied fair value.  Additionally, during the 2016 third quarter, the Company determined that another goodwill impairment indicator existed which required an interim impairment analysis. As a result of the analysis, the Company determined the implied fair value of its goodwill balance was again below the carrying value. Accordingly, the Company recorded a non-tax deductible goodwill impairment of $15.8 million to reduce the value of its goodwill balance to the implied fair value, which reduced the Company’s goodwill balance to $0.0 at September 30, 2016.  

Operating income (loss) was 0.6% of revenue in the 2017 third quarter, as compared with (21.1)% of revenue in the 2016 third quarter, and 1.1% of revenue in the 2017 year-to-date period compared with (14.2)% in the corresponding 2016 period. Operating income in the 2017 third quarter was impacted by a total of $1.2 million of additional medical costs for high utilization of the Company self-insured medical plan. Operating income in the 2017 year-to-date period was impacted by the $1.2 million in medical costs and $0.8 million of severance costs. The significant loss in the 2016 third quarter and year-to-date period was due to the goodwill impairment and severance charges noted above.

The Company’s effective tax rate (“ETR”) is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The Company’s normal annual ETR typically ranges from 38% to 40% of pre-tax income. The 2017 third quarter and year-to-date ETR was 86.6% and 45.0%, respectively, and 2016 third quarter ETR was a benefit of 1.3% and the 2016 year-to-date ETR was (1.8)%.

The ETR was higher than the normal range in the 2017 third quarter and year-to-date period primarily due to lower pre-tax income and the adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 required the company to record approximately $0.2 million in the 2017 third quarter, and $0.3 million in the 2017 year-to-date period of additional tax expense for shortfalls in the quarter that would previously have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. This additional tax expense was partially offset by tax benefits for the Work Opportunity Tax Credit (WOTC) and Credit for Increasing Research Activities (R&D).

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The ETR was lower than the normal range in the 2016 third quarter primarily due to the non-deductible goodwill impairment charge totaling $15.8 million taken in the quarter, which, when considered in the tax provision resulted in reduced taxable loss, and also due to the Work Opportunity Tax Credit (WOTC) and the Research and Development tax credit (R&D). The 2016 year-to-date ETR was lower than the normal range due to the non-deductible goodwill impairment charges totaling $37.3 million taken in the 2016 first and third quarters, which, when considered in the tax provision resulted in net taxable income, and due to the WOTC and the R&D credits.

Net income (loss) was 0.1% of revenue or $0.00 per diluted share in the 2017 third quarter, as compared with (20.7)% of revenue or $(1.03) per diluted share in the 2016 third quarter, and 0.6% or $0.08 per diluted share in the 2017 year-to-date period compared with (14.5)% or $(2.30) in the 2016 year-to-date period.  Diluted earnings per share was calculated using 15.3 million and 15.6 million weighted-average equivalent shares outstanding for the quarters ended September 29, 2017 and September 30, 2016, respectively, and 15.4 million and 15.6 million weighted-average equivalent shares outstanding for the three quarters ended September 29, 2017 and September 30, 2016.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires the Company’s management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting policies, along with the underlying assumptions and judgments made by the Company’s management in their application, have a significant impact on the Company’s condensed consolidated financial statements. The Company identifies its critical accounting policies as those that are the most pervasive and important to the portrayal of the Company’s financial position and results of operations, and that require the most difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain. The Company’s critical accounting policies are those related to income taxes, specifically relating to the valuation allowance for deferred income taxes.

Income Taxes—Valuation Allowances on Deferred Tax Assets

At September 29, 2017, the Company had a total of approximately $5.9 million of non-current deferred tax assets, net of deferred tax liabilities, recorded on its consolidated balance sheet. The deferred tax assets, net, primarily consist of deferred compensation, loss carryforwards and state taxes. The changes in deferred tax assets and liabilities from period to period are determined based upon the changes in differences between the basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for tax purposes, as measured by the expected tax rates when these differences are estimated to reverse. The Company has made certain assumptions regarding the timing of the reversal of these assets and liabilities, and whether taxable income in future periods will be sufficient to recognize all or a part of any gross deferred tax asset of the Company.

At September 29, 2017, the Company had deferred tax assets recorded resulting from net operating losses in previous years totaling approximately $1.1 million. The Company has analyzed each jurisdiction’s tax position, including forecasting potential taxable income in future periods and the expiration of the net operating loss carryforwards as applicable, and determined that it is unclear whether all of these deferred tax assets will be realized at any point in the future. Accordingly, at September 29, 2017, the Company had offset a portion of these assets with a valuation allowance totaling $1.0 million, resulting in a net deferred tax asset from net operating loss carryforwards of $0.1 million.

The Company’s deferred tax assets and their potential realizability are evaluated each quarter to determine if any changes should be made to the valuation allowance. Any change in the valuation allowance in the future could result in a change in the Company’s ETR. A 1% change in the ETR in the 2017 third quarter and year-to-date period would have increased or decreased net income by approximately $3,000 and $22,300, respectively.

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Other Estimates

The Company has also made a number of estimates and assumptions relating to the reporting of its assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements pursuant to the rules and regulations of the SEC, the FASB, and other regulatory authorities. Such estimates primarily relate to the valuation of stock options and restricted stock for recording equity-based compensation expense, allowances for doubtful accounts receivable, investment valuation, legal matters, and estimates of progress toward completion and direct profit or loss on contracts, as applicable. As future events and their effect on the Company's operating results cannot be determined with precision, actual results could differ from these estimates. Changes in the economic climates in which the Company operates may affect these estimates and will be reflected in the Company’s financial statements in the event they occur.

Financial Condition and Liquidity

Cash provided by operating activities was $11.3 million in the 2017 year-to-date period (2017 period), compared with cash provided by operating activities of $4.2 million in the 2016 year-to-date period (2016 period). In the 2017 period, net income was $1.2 million, while other non-cash adjustments, primarily consisting of depreciation expense, equity-based compensation, deferred income taxes, and deferred compensation totaled $2.9 million. In the 2016 period, the net loss was $(35.8) million, while the corresponding non-cash adjustments totaled $39.5 million.

The accounts receivable balance decreased $7.3 million in the 2017 period, and increased $1.7 million in the 2016 period. The decrease in the accounts receivable balance in the 2017 period primarily resulted from a decrease in days sales outstanding (DSO) of three days to 82 days from 85 days at December 31, 2016, and due to a decrease in revenue of 8.4% in the 2017 period as compared with the prior period. The increase in the accounts receivable balance in the 2016 period primarily resulted from DSO increasing 10 days to 86 days at September 30, 2016 from 76 days at December 31, 2015, offset by a decrease in revenue in 2016 as compared with 2015.

Prepaid and other current assets increased $0.3 million and $1.0 million in the 2017 and 2016 periods, respectively, due to payments made in the first quarter of the respective year that are then expensed throughout the year.   The cash surrender value of life insurance increased $1.4 million and $1.1 million in the 2017 and 2016 periods, respectively, due to normal valuation increases.

Accrued compensation increased $3.3 million and $6.1 million in the 2017 and 2016 periods, respectively.  Accrued compensation changed in each period due to the timing of the U.S. bi-weekly payroll that was paid on September 29, 2017 and September 30, 2016 as compared with December 31, 2016 and 2015.  Advance billings on contracts increased $0.9 million and $0.4 million in the 2017 and 2016 periods, respectively, due to the timing of invoices sent to clients under contracts in progress at September 29, 2017 and December 31, 2016.

Investing activities used $1.4 million and $1.6 million of cash in the 2017 and 2016 periods, respectively. The Company used cash for additions to property, equipment, and capitalized software of $1.3 million in the 2017 period and $1.9 million in the 2016 period. The Company has commitments to spend approximately $0.7 million on capital expenditures as of September 29, 2017, primarily for renovations to the Company’s corporate headquarters to accommodate additional employees and the Company’s data center pending the sale of the Company’s administrative office building. The Company expects the amount to be spent proportionately in the last three months of 2017 on additions to property, equipment and capitalized software to be slightly higher than the amount proportionally spent in the first three quarters of 2017. Net payments to the Company's deferred compensation plans were less than $0.1 million in the 2017 period as compared with $0.1 million in the 2016 period.

The Company is in the process of negotiating the sale of its corporate administrative building. The current list price for the property is $2.6 million. As the carrying value of building at September 29, 2017 was approximately $1.6 million, the Company does not expect to record a loss on the sale of the building.

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Financing activities used $8.9 million of cash in the 2017 period and $3.7million in the 2016 period. Cash repaid under the Company’s revolving line of credit to fund working capital obligations netted to $(4.7) million in the 2017 period and $(0.7) million in the 2016 period. The Company recorded $0.7million in the 2017 period and $0.3 million in the 2016 period from the proceeds from stock option exercises. Payments made to taxing authorities that represent the value of shares withheld for taxes in employee equity-based compensation transactions totaled $0.3 million in boththe 2017 and 2016 periods. Cash overdrafts relate to the amount of outstanding checks at a point in time, and netted to less than $0.1 million and $(0.2) million in the 2017 and 2016 periods, respectively. The Company paid dividends totaling $0.0 million and $2.8 million in the 2017 and 2016 periods, respectively.  The Company suspended the payment of its dividend in the 2016 fourth quarter.  The Company also used approximately $4.8 million to purchase 916,000 shares for treasury under its buyback program in the 2017 period. No shares were purchased for treasury under the buyback program in the 2016 period. As of September 29, 2017, $4.0 million was available under the Company's authorization to purchase shares in future periods.

The Company’s unsecured revolving credit agreement allows the Company to borrow up to $40.0 million. The agreement also allows under its provisions for the Company to borrow up to $17.5 million against the cash surrender value of the Company's life insurance policies. The new agreement expires in October 2018, and has interest rates ranging from 0 to 50 basis points over the prime rate, and 150 to 200 basis points over LIBOR. The Company can borrow under the agreement with either a prime or LIBOR rate of interest at its discretion. At September 29, 2017 and December 31, 2016, there was $0.0 and $4.7 million, respectively, outstanding under the revolving credit agreement.

The maximum amount outstanding under the credit agreement in the 2017 third quarter was $4.2 million, while borrowings during the quarter averaged $2.3 million and carried a weighted average interest rate of 2.9%.

Under the agreement, the Company is required to meet certain financial covenants in order to maintain borrowings under its revolving credit line, pay dividends (if any are declared), and make acquisitions. The covenants are measured quarterly, and at September 29, 2017, included a leverage ratio (total outstanding debt divided by earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for non-cash charges (including goodwill impairments, as necessary) which must be no greater than 2.75 to 1, a calculation of minimum tangible net worth (total shareholders' equity less goodwill and intangible assets) which must be no less than $48.6 million, and total annual expenditures for property, equipment and capitalized software, which must be no more than $5.0 million. The Company was in compliance with these covenants at September 29, 2017 as the leverage ratio was 0.0, the minimum tangible net worth was $76.9 million, and capital expenditures for property, equipment and capitalized software were $1.3 million in the 2017 period.

Of the total cash and cash equivalents reported on the consolidated balance sheet at September 29, 2017 of $11.4 million, approximately $10.8 million was held by the Company’s foreign operations and is considered to be indefinitely reinvested in those operations. The Company has not repatriated any of its cash and cash equivalents from its foreign operations in the past five years, and does not intend to do so in the foreseeable future as the funds are required to meet the working capital needs of its foreign operations.

The Company believes existing internally available funds, cash potentially generated from future operations, funds available under the Company's revolving line of credit totaling $39.7 million, and funds available to be borrowed against the cash surrender value of our life insurance policies of $17.5 million, will be sufficient to meet foreseeable working capital and capital expenditure needs, fund stock repurchases, pay a dividend (if any are declared), fund acquisitions, and allow for future internal growth and expansion.

Off-Balance Sheet Arrangements

The Company did not have off-balance sheet arrangements or transactions in the 2017 or 2016 year-to-date periods other than guarantees in our European operations that support office leases and the performance under government contracts. These guarantees totaled approximately $1.2 million at September 29, 2017.

Contractual Obligations

The Company did not enter into any significant contractual obligations during the quarter ended September 29, 2017.

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Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is only permitted in years beginning after December 31, 2016.

The Company currently records approximately 96.8% of its annual revenue on a time-and-material or progress-billing basis, with the remaining 3.2% recorded under a proportional method of accounting using an inputs methodology for fixed price projects.  For the 96.8% of the Company’s revenue recorded under the time-and-material or progress billing methods of accounting, the Company does not expect this new standard to change the timing or the amount of revenue that is currently recorded.  The Company is currently evaluating the 3.2% of revenue recorded under its fixed price projects to determine if the manner or timing of revenue recognition would change for existing projects.  However, the Company does not expect the impact of adopting this new accounting guidance to have a material impact on its consolidated operating results, but does expect the new standard to increase our accounting policy disclosures upon adoption.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classifications of Deferred Taxes,” which amended accounting guidance related to the presentation of deferred tax liabilities and assets. The amended guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. This guidance was effective for the Company for the quarter ended March 31, 2017. Upon adoption of this guidance in the 2017 first quarter, the Company reclassified approximately $0.9 million as of both March 31, 2017 and December 31, 2016, respectively, from current to non-current assets.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),”which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Topic 842 supersedes the previous leases standard, ASC 840, Leases. This guidance is effective for reporting periods beginning after December 15, 2018; however, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amended accounting guidance related to seven aspects of the accounting for share-based payments award transactions. This guidance became effective for the quarter ended March 31, 2017. The Company recorded approximately $0.2 million and $0.3 million, respectively, of additional tax expense for tax shortfalls in the quarter and three quarters ended September 29, 2017 that previously would have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. Additionally, the Company recorded $0.3 million in both of the periods ended September 29, 2017 and September 30, 2016 for taxes remitted for shares withheld from equity-based compensation transactions on the condensed consolidated statements of cash flows in the “cash flow from financing activities” section.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company’s primary market risk exposure consists of foreign currency exchange risk associated with the Company’s European operations.

Revenue in the Company’s European operations in the 2017 third quarter and year-to-date period as compared with the corresponding 2016 periods was impacted due to the strength relative to the U.S. dollar of the currencies of Belgium,

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Luxembourg, and the United Kingdom, the countries in which the Company’s European subsidiaries operate. In Belgium and Luxembourg, where a significant portion of the Company’s revenue from its European operations is generated, the functional currency is the Euro, while in the United Kingdom the functional currency is the British Pound. In the 2017 third quarter as compared with the 2016 third quarter, the average value of the Euro increased 5.3% while the average value of the British Pound decreased 0.3%. If there had been no change in these exchange rates from the 2016 third quarter to the 2017 third quarter, total European revenue would have been approximately $1.0 millionlower, or $19.0 million as compared with the $20.0 million reported. Operating income in the 2017 third quarter was not significantly impacted by the changes in the exchange rates year-over-year. In the 2017 year-to-date period as compared with the corresponding 2016 period, the average value of the Euro decreased 0.2% while the average value of the British Pound decreased 8.5%. If there had been no change in these exchange rates from the first three quarters of 2016 to the corresponding 2017 period, total European revenue would have been approximately $0.5 million higher, or $58.5 million as compared with the $58.0 million reported. Operating income in the 2017 year-to-date period was not significantly impacted by the changes in the exchange rates year-over-year.

The Company has historically not used any market risk sensitive instruments to hedge its foreign currency exchange risk. The Company believes the market risk related to intercompany balances in future periods will not have a material effect on its results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management has evaluated, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this periodic report.

Changes in Internal Control Over Financial Reporting

The Company reviews the effectiveness of its internal controls on a continuous basis, and makes changes as necessary. There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report, which ended on September 29, 2017, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

There were no material changes in the Company's risk factors from those previously disclosed in the Company's Form 10-K for the period ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the 2016 fourth quarter, the Company’s Board of Directors authorized the repurchase of up to $10.0 million of stock over the subsequent two-year period.  During October 2017 (subsequent to quarter-end), the Company’s Board authorized the addition of $10.0 million to the repurchase program, bringing the total amount that could be repurchased under the program to $20.0 million.  This share repurchase authorization replaced the Company’s previous share repurchase program.  The information below does not include shares withheld by or surrendered to the Company either to satisfy the exercise cost for the cashless exercise of employee stock options, or to satisfy tax withholding obligations associated with equity awards as the number of shares is minor.

Period	Total Number of Shares Purchased		Average Price Paid Per Share **		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Amount that May Yet be Purchased under the Plan or Program
July 1 - July 31		71,401	$	5.77		71,401	$	5,044,372
August 1 - August 31		128,105	$	5.31		128,105	$	4,364,667
September 1 - September 29		76,355	$	5.42		76,355	$	3,961,679
Total		275,861				275,861

** Excludes broker commissions

Item 3. Default Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Restated By-laws

On October 20, 2017, the Board of Directors adopted the Restated By-laws of the Company, which amended the By-laws to make updates to the advance notice and director qualification provisions in Article I and Article III of the Restated By-laws:

(i) to increase the notice period for shareholder proposals to be not earlier than 120 days and not later than 90 days prior to the one-year anniversary of the date of the preceding year’s annual meeting of shareholders, unless the meeting is convened more than 30 days prior to or delayed by more than 60 days after the anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, in which case the notice of shareholder proposals must be received by the Company not earlier than 120 days and not later than 90 days prior to the date of the annual meeting or, if the first public announcement of the date of the annual meeting is less than 100 days prior to the date of the annual meeting, then the notice of shareholder proposals must be received by the Company not later than the 10^th day following the day on which public announcement of the meeting is first made;

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(ii) to provide that notice of a shareholder’s intent to nominate persons for election as directors must be received by the Company not earlier than 120 days and not later than 90 days prior to the one-year anniversary of the date of the preceding year’s annual meeting of shareholders, unless the meeting is convened more than 30 days prior to or delayed by more than 60 days after the anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, in which case the notice of a shareholder’s intent to nominate persons for election as directors must be received by the Company not earlier than 120 days and not later than 90 days prior to the date of the annual meeting or, if the first public announcement of the date of the annual meeting is less than 100 days prior to the date of the annual meeting, then the notice of a shareholder’s intent to nominate persons for election as directors must be received by the Company not later than the 10^th day following the day on which public announcement of the meeting is first made; and

(iii) to provide that a director nominee must provide a written representation and agreement to the Company that he or she currently intends to serve the full term for which the nominee is standing for election, if elected.  

In addition to the amendments described above, the Restated By-laws made various clarifications, technical corrections, and administrative and non-substantive changes. The foregoing description is qualified in its entirety by reference to the Restated By-laws filed as Exhibit 3.1 hereto.

2018 Annual Meeting

On October 20, 2017, the Board of Directors set July 26, 2018 as the date of the Company’s 2018 annual meeting of shareholders and set June 12, 2018 as the record date for determining shareholders entitled to vote at the annual meeting.    

In accordance with Rule 14a-5(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company has determined that proposals to be considered for inclusion in the Company's proxy statement for the annual meeting pursuant to Rule 14a-8 of the Exchange Act must be received at the Company’s principal executive offices not later than December 1, 2017.  For all shareholder proposals made outside of Rule 14a-8 of the Exchange Act and for all shareholder nominations for director, our Restated By-laws require shareholders to give the Company advance notice of any proposal or director nomination to be submitted at an annual meeting of shareholders. The Restated By-laws prescribe the information to be contained in any such notice.  To be timely, a shareholder’s notice with respect to a proposal made outside of Rule 14a-8 or director nomination for the annual meeting must be given, either by personal delivery or by United States mail, postage prepaid, to and received by the Secretary of the Company no earlier than March 28, 2018 and no later than April 27, 2018.

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Item 6. Exhibits

Exhibit	Description	Reference
3.1	Restated By-Laws	#
10.1	2010 Equity Award Plan as Amended	#
31. (a)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	#
31. (b)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	#
32.	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	##
101.INS	XBRL Instance Document	#
101.SCH	XBRL Taxonomy Extension Schema Document	#
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	#
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	#
101.LAB	XBRL Taxonomy Extension Label Linkbase	#
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	#

# Filed herewith

## Furnished herewith

27

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/ John M. Laubacker
	John M. Laubacker
Title:	Chief Financial Officer

Date: October 26, 2017

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EX-3.1

Exhibit 3.1

RESTATED

BY-LAWS

OF

COMPUTER TASK GROUP, INCORPORATED

(LAST AMENDED – 10/20/2017)

ARTICLE I

Shareholders’ Action

Section 1.  Annual Meeting.    An annual meeting of the shareholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place within or without the State of New York each calendar year on such date and at such time as may be designated by the Board of Directors.

Section 2.  Special Meetings.  Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, special meetings of the shareholders for any purpose or purposes may be called only by, and shall be held at such place, date and hour as shall be designated by, (i) the Chairman of the Board, (ii) the President or (iii) the Board of Directors.

Section 3.  Order of Business and Procedure.

(A)  Annual Meetings.  At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or (iii) brought before the meeting by a shareholder in accordance with the procedure set forth below.  Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given written notice thereof, either by personal delivery or by United States mail, postage prepaid, to and received by the Secretary of the Corporation by the close of business at the principal executive offices of the Corporation not later than 90 and not earlier than 120 days prior to the one-year anniversary of the date of the preceding year’s annual meeting of shareholders; provided, however, that, subject to the last sentence of this Section 3(A), if the meeting is convened more than 30 days prior to or delayed by more than 60 days after one-year anniversary of the date of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, notice by the shareholder of record to be timely must be so received not earlier than the close of business on the 120th day prior to the date of the annual meeting and not later than the close of business on the later of (1) the 90th day before such annual meeting

or (2) if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made.  In no event shall an adjournment or postponement of an annual meeting of shareholders for which notice has been given, commence a new time period (or extend any time period) for the giving of a notice by a shareholder under this Section 3(A).Nothing in this Section 3(A) shall be deemed to affect any rights of shareholders to request inclusion of non-binding proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Any such notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting: (1) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and in the event that such business includes a proposal to amend either the Certificate of Incorporation or By-laws of the Corporation, the language of the proposed amendment; (2) a description of all agreements, arrangements and understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder, and (3) any material interest of any shareholder in such business.

Any such notice shall also set forth as to the shareholder giving the notice and the beneficial owner or owners, if any, or other persons on whose behalf the proposal is made or acting in concert therewith (each, a “party”): (1) the name and address of such party, (2) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business; (3)the class, series, and number of shares of the Corporation that are owned, directly or indirectly, beneficially and of record by each such party; (4) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or providing for a settlement payment or mechanism based on the price of any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation; (5)any proxy, contract, arrangement, understanding or relationship pursuant to which any party, either directly or acting in concert with another person or persons, has a right to vote, directly or indirectly, any shares of any security of the Corporation; (6) any short interest or other borrowing arrangement in any security of the Corporation held by each such party (for purposes of this Section 3(A), a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (7) any rights to dividends on the shares of the Corporation owned beneficially directly or indirectly by each such party that are separated or separable from the underlying shares of the Corporation, (8) any proportionate interest in shares of the Corporation or Derivative

Instruments held, directly or indirectly, by a general or limited partnership in which any party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (9) any performance-related fees (other than an asset-based fee) that each such party is directly or indirectly entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of each such party’s immediate family sharing the same household (which information set forth in this paragraph shall be supplemented by such shareholder or such beneficial owner or other person, as the case may be, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date); (10) any other informationrelating to each such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) (whether or not such party intends to deliver a proxy statement or conduct its own proxy solicitation); and (11) a statement as to whether or not each such party will deliver a proxy statement and form of proxy to holders of at least the percentage of voting power of all of the shares of Common Stock reasonably believed by such party, as the case may be, to be sufficient under applicable law to approve the proposal.For purposes of these By-laws, a person shall be deemed to be “acting in concert” with another person if such person knowingly acts toward a common goal relating to the management, governance or control of the corporation in parallel with such other person where (A) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making process and (B) at least one additional factor suggests that persons intend to act in parallel, which additional factors may include attending meetings, conducting discussions or making or soliciting invitations to act in parallel.

A shareholder providing notice of a business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 3(A) shall be true and correct as of the record date for such annual meeting and as of the date that is 10 business days prior to such annual meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for such annual meeting (in the case of the update and supplement required to be made as of the record date), and not later than five business days prior to the date for such annual meeting, if practicable (or, if not practicable, on the first practicable date prior to) or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof).

No business shall be conducted at an annual meeting except in accordance with the procedures set forth in these By-laws, and the chairman of any annual meeting of shareholders shall have the power and the duty to determine whether any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these By-laws and, if any proposed business is not in compliance

with these By-laws, to declare that such proposed business shall not be presented for shareholder action at the meeting and shall be disregarded.

(B)  Special Meetings.  At a special meeting of the shareholders, only such business as is specified in the notice of such special meeting given by or at the direction of (i) the Chairman of the Board, (ii) the President or (iii) the Board of Directors shall come before such meeting.

(C)  Other Procedural Matters.  All other matters of procedure at every meeting of shareholders shall be determined by the chairman of the meeting.

Section 4.  Quorum.  At every meeting of the shareholders, except as otherwise provided by law or these By-laws, a quorum must be present for the transaction of business and a quorum shall consist of the holders of record of not less than one-third of the outstanding shares of the Corporation entitled to vote, present either in person or by proxy.  When a quorum is once present to organize a meeting, it is not broken by the subsequent departure or withdrawal of any shareholders.

Section 5.  Adjournments or Postponements.  Before any meeting of shareholders is called to order, the Board of Directors shall have the power to postpone such meeting of shareholders to another place, if any, date and time.  After any meeting of shareholders is called to order, (i) the Board of Directors, (ii) the chairman of such meeting, or (iii) the holders of a majority of shares entitled to vote who are present in person or by proxy at such meeting, whether or not they constitute a quorum, shall have the power to adjourn the meeting to another place, if any, date and time.  Subject to any notice required by law, at any adjourned or postponed meeting at which a quorum is present any business may be transacted which might have been transacted on the original date of the meeting.

Section 6. Voting; Proxies.  Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, each holder of record of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation shall be entitled at each meeting of shareholders of such number of votes, if any, for each share of such stock as may be fixed pursuant to resolutions adopted by the Board pursuant to Article 4 of the Certificate of Incorporation and each holder of record of Common Stock shall be entitled at each meeting of shareholders to one vote for each share of such stock, in each case registered in such holder’s name on the books of the Corporation on the record date designated by the Board of Directors.  Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, all questions that shall come before a meeting of shareholders shall be decided by a majority of the votes cast.  A shareholder may vote either in person or by written proxy signed by such shareholder or such shareholder’s attorney-in-fact and delivered to the secretary of the meeting.  No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy.  Every proxy shall be revocable at the pleasure of the person executing it or his personal

representatives, unless it is entitled “irrevocable proxy,” in which event its revocability shall be determined by the law of the State of New York in effect at the time.

Section 7.  Inspectors of Elections.  Two inspectors of election, neither of whom shall be a candidate for the office of director if directors are to be elected at such meeting, may be appointed by the Board of Directors in advance of any meeting of shareholders or by the person presiding at such meeting, and shall be appointed by the person presiding if such appointment is requested by a shareholder present at such meeting and entitled to vote thereat.  Such inspectors shall serve at such meeting and any adjournments thereof.  Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.

Section 8.  Shareholders’ List.  A list of shareholders as of the record date, certified by the corporate officer responsible for its preparation or by the transfer agent, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder.  If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.

Section 9.  Action Without a Meeting.  Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon.

ARTICLE II

Notice of Meetings

Section 1.  Shareholders’ Meetings.  Written notice of every meeting of shareholders shall be given in the manner required by law not less than ten (10) nor more than fifty (50) days before the date of the meeting to each shareholder of record entitled to vote at the meeting.  If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or if he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, then directed to him at such other address.  The notice shall state the place, date and hour of the meeting and, unless it is the annual meeting, shall indicate that it is being issued by or at the direction of the person or persons calling the meeting.  Notice of a special meeting shall also state the purpose or purposes for which the meeting is called.  If at any meeting, action is proposed to be taken which would, if taken, entitle shareholders fulfilling statutory procedural requirements to receive payment for their shares, the notice of meeting shall include a statement of that purpose and to that effect, specifically designating the applicable statutory provisions.

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communications, if any, by which shareholders may be deemed to be present in person or by proxy and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken, unless the Board of Directors fixes a new record date for the adjourned meeting.  When a meeting is adjourned or postponed to another time or place, if the date of such adjourned or postponed meeting is more than 50 days after the scheduled date of such adjourned or postponed meeting, the Board of Directors shall fix a new record date, which shall not be more than 50 nor less than 10 days before the date of such postponed meeting.  When a meeting is adjourned to another time or place and the time and place, if any, thereof, and the means of remote communications, if any, by which shareholders may be deemed to be present in person or by proxy and vote at such adjourned meeting is not announced at the meeting at which the adjournment is taken, or when a meeting is postponed to another time and place, or if a new record date is fixed by the Board of Directors for an adjourned or postponed meeting, the Board of Directors shall give notice of the place, if any, date, and time of the adjourned or postponed meeting to each shareholder entitled to vote at such adjourned or postponed meeting as of the applicable record date fixed by the Board of Directors for notice of such adjourned or postponed meeting.  

Section 2.  Board Meetings.  Written notice of each special meeting of the Board of Directors, stating the place, date and hour thereof, shall be given by the President, the Secretary or an Assistant Secretary, or by any member to each other member, not less than twenty-four (24) hours before the meeting by mailing the same to each member at his residence or usual place of business, by delivering the same to each member personally or by facsimile or electronic transmission of the same.  A notice of each regular meeting shall not be required.   Notwithstanding the foregoing, the first meeting of a newly elected Board of Directors may be held without notice immediately after the annual meeting of shareholders, if a quorum of the Board is present.

Section 3.  Committee Meetings.  Unless the Board otherwise directs, notice requirements for meetings of committees of the Board shall be the same as notice requirements for meetings of the Board itself.

Section 4.  Waiver of Notice.  Notice of a shareholders’ meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting.  Notice of a meeting of the Board of Directors or a committee thereof need not be given to any director who submits a signed waiver of notice, whether before or after the meeting. The attendance of any shareholder at a shareholders’ meeting, in person or by proxy, without protesting at the commencement of such meeting the lack of notice of such meeting, and the attendance of any director at a meeting of the Board or a committee thereof without protesting prior thereto or at its commencement the lack of notice to him, shall constitute a waiver of notice by such director.

ARTICLE III

Directors

Section 1.  Number, Qualification and Election.  Subject to the rights of the holders of any class or series of capital stock having a preference over the Common Stock as to dividends or upon liquidation, the number of directors of the Corporation shall be fixed from time to time by the vote of a majority of the entire Board.  The directors, other than those who may be elected by the holders of shares of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into two classes as nearly equal in number as possible (but with not less than three directors in each class or such lesser number as may be permitted by law), as determined by the Board, one class of directors to be originally elected for a term expiring at the annual meeting of shareholders to be held in 1987 and another class of directors to be originally elected for a term expiring at the annual meeting of shareholders to be held in 1988, with each class to hold office until its successors are elected and qualified.  At each annual meeting of the shareholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the second year following the year of their election.

Notwithstanding the immediately preceding paragraph, in the event that the number of directors of the Corporation (i) shall be fixed at nine or a greater number or (ii) shall be fixed at a number that would, under law, permit the directors to be divided into three classes, then, at the next succeeding annual meeting of the shareholders of the Corporation (the “Three-Class Annual Meeting”), the directors, other than those who may be elected by the holders of any class or series of capital stock having a preference over the Common Stock as to dividends or upon liquidation, shall be divided into three classes, as nearly equal in number as possible (but with no less than three directors in each class or such lesser number as may be permitted by law) as shall be provided in or pursuant to the By-laws of the Corporation.  At the Three-Class Annual Meeting, one class shall be originally elected for a term expiring at the second succeeding annual meeting and another class shall be originally elected for a term expiring at the third succeeding annual meeting.  The class of directors whose term, pursuant to the immediately preceding paragraph, would not have expired until the annual meeting next succeeding the Three-Class Annual Meeting shall complete the term for which such class was originally elected.  At each annual meeting of the shareholders subsequent to the Three-Class Annual Meeting, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring in the third year following the year of their election.

In any election of directors, the persons receiving a plurality of the votes cast, up to the number of directors to be elected in such election, shall be deemed elected.

No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director or cause, directly or indirectly, a decrease in the number of classes of directors, except as required by law.  All the directors shall be at least 21 years of age.

Section 2.  Notification of Nominations.  Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors may be made by or at the direction of the Board of Directors or by any shareholder entitled to vote for the election of directors who complies with the procedures set forth in this Section 2.  Any shareholder entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if written notice of such shareholder’s intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to and received by the Secretary of the Corporation by the close of business at the principal executive offices of the Corporation (i) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the 10th day following the date  public announcement of the date of such meeting is first made and (ii) with respect to an election to be held at an annual meeting of shareholders, not less than 90 and not earlier than 120 days prior to the one-year anniversary of the date of the preceding year’s annual meeting of shareholders; provided, however, that, subject to the last sentence of this paragraph, if the meeting is convened more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, notice by the shareholder of record to be timely must be so received not earlier than the close of business on the 120th day prior to the date of the annual meeting and not later than the close of business on the later of (1) the 90th day before the date of such annual meeting or (2) if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made.  Notwithstanding anything in the preceding sentence to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there has been no public announcement naming all of the nominees for director or indicating the increase in the size of the Board of Directors made by the Corporation at least 10 days before the last day a shareholder may deliver a notice of nomination in accordance with the preceding sentence, a notice by a shareholder of record required by this Section 2 shall also be considered timely, but only with respect to nominees for any new positions created by such increase in the number of directors, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting of shareholders for which notice has been given, commence a new time period (or extend any time period) for the giving of a notice by a shareholder under this Section 2.

Each such notice shall set forth as to the shareholder giving the notice and the beneficial owner or owners, if any, or other persons on whose behalf the nomination

is made or acting in concert therewith (each, a “party”): (1) the name and address of such party; (2) a representation that the shareholder giving the notice is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (3)the class, series, and number of shares of the Corporation that are owned, directly or indirectly, beneficially and of record by each such party; (4) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or providing for a settlement payment or mechanism based on the price of any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation;(5)any proxy, contract, arrangement, understanding or relationship pursuant to which any party, either directly or acting in concert with another person or persons, has a right to vote, directly or indirectly, any shares of any security of the Corporation; (6) any short interest or other borrowing arrangement in any security of the Corporation held by each such party (for purposes of this Section 2, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (7) any rights to dividends on the shares of the Corporation owned beneficially directly or indirectly by each such party that are separated or separable from the underlying shares of the Corporation, (8) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which any party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (9) any performance-related fees (other than an asset-based fee) that each such party is directly or indirectly entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of each such party’s immediate family sharing the same household (which information set forth in this paragraph shall be supplemented by such shareholder or such beneficial owner or other person, as the case may be, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date); (10) any other informationrelating to each such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act (whether or not such party intends to deliver a proxy statement or conduct its own proxy solicitation); and (11) a statement as to whether or not each such party will deliver a proxy statement and form of proxy to holders of at least the percentage of voting power of all of the shares of Common Stock reasonably believed by such party, to be sufficient to elect the persons proposed to be nominated by the shareholder.

Each such notice shall also set forth as to each person whom the shareholder proposes to nominate for election or reelection as a director: (1) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the  nomination or nominations are to be made by the shareholder; (2) the name and address of each such nominee; (3) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board of Directors; (4) a written representation and agreement of each nominee (in the form provided by the Secretary of the Corporation upon written request) that such nominee would be in compliance, if elected as a director of the Corporation, and will comply with all corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation; (5) the consent of each nominee to serve as a director of  the Corporation if so electedand (ifapplicable) to being named in the Corporation’s proxy statement and form of proxy as a nominee; and (6) the written representation and agreement of each nominee that such nominee currently intends to serve as a director of the Corporation for thefull term for which such person would be standing for election, if elected.

A shareholder providing notice of a nomination for the election of a director shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2 shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than five business days prior to the date for the meeting, if practicable (or, if not practicable, on the first practicable date prior to) any adjournment or postponement thereof (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof).

A person shall not be eligible for election or re-election as a director at an annual meeting unless (x) the person is nominated by a shareholder in accordance with, and complies with all the terms and conditions of, this Section 2; or (y) the person is nominated by or at the direction of the Board of Directors or a duly authorized committee thereof. The chairman of the meeting shall have the power and the duty to determine whether a nomination has been made in accordance with the procedures set forth in these By-laws and, if any proposed nomination is not in compliance with these By-laws, to declare that such nomination shall not be presented for shareholder action at the meeting and shall be disregarded.

Notwithstanding the foregoing provisions of this Section 2, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and

regulations thereunder with respect to matters set forth in this Section 2. Nothing in this Section 2 shall be deemed to affect any rights of shareholders to request inclusion of non-binding proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 3.  Resignation.  Any director of the Corporation may resign at any time by giving his resignation to the Secretary of the Corporation.  Unless otherwise specified therein, the acceptance of a resignation shall not be necessary to make it effective.

Section 4.  Removal.  Subject to the rights of the holders of any class or series of capital stock having a preference over the Common Stock as to dividends or upon liquidation, any director may be removed from office (i) without cause by the affirmative vote of the holders of at least 66 2/3% of the combined voting power of the then outstanding shares of stock of all classes and series of the Corporation entitled to vote generally in the election of directors (“Voting Stock”), voting together as a single class, (ii) for cause by the affirmative vote of the holders of at least a majority of the then outstanding Voting Stock or (iii) for cause by the affirmative vote of a majority of the entire Board of Directors.  For purposes of this Section 4, “cause” shall mean the willful and continuous failure of a director substantially to perform such director’s duties to the Corporation (other than any such failure resulting from incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation.

Section 5.  Newly Created Directorships and Vacancies.  Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall only be filled by the vote of the Board of Directors; provided, that, if the number of directors then in office is less than a quorum, such newly-created directorships and vacancies shall be filled by the vote of a majority of the remaining directors then in office.  Any director elected in accordance with the preceding sentence of this paragraph shall hold office until the next annual meeting of shareholders and until such director’s successor shall have been elected and qualified.

Section 6.  Compensation.  No director as such shall receive any compensation, either by way of salary, fees for attendance at meetings, or otherwise, or shall be reimbursed for his expenses, except pursuant to authorization of the Board of Directors.  This section shall not preclude any director from serving the Corporation in any other capacity or from receiving compensation for such services and reimbursement for his related expenses.

Section 7.  Meetings.  Meetings of the Board of Directors shall be held at such times and at such places as may be determined by action of the Board of Directors or, in the absence of such action, by a majority of the entire Board then in office or by the

Chairman of the Board, or by the President, or in his absence any Vice President, pursuant to such notice as is required by Article II of these By-laws.

Section 8.  Quorum.  At all meetings of the Board of Directors, except as otherwise provided by law, the Certificate of Incorporation or these By-laws, a quorum shall be required for the transaction of business and shall consist of not less than one-half of the entire Board, and the vote of a majority of the directors present shall decide any question that may come before the meeting.  A majority of the directors present at any meeting, although less than a quorum, may adjourn the same from time to time, without notice other than announcement at the meeting.

Section 9.  Procedure.  The Board of Directors, by resolution or resolutions adopted by a majority of the entire Board, shall appoint one of the directors as the Chairman of the Board.  The Chairman of the Board, or in his or her absence, such director as appointed as chair of the meeting by the majority of the directors present at such meeting, shall preside over meetings of the Board of Directors.  The order of business and all other matters of procedure at every meeting of directors may be determined by the presiding officer.

Section 10.  Committees of the Board.  The Board of Directors, by resolution or resolutions adopted by a majority of the entire Board, may designate from among its members one or more committees, including an executive committee, each consisting of one or more directors, and each of which, to the extent provided in the applicable resolution, shall have all the authority of the Board, except insofar as its exercise of such authority may be inconsistent with any provision of law, the Certificate of Incorporation or these By-laws.  The Board may designate one or more directors as alternate members of a committee, who may replace any absent member or members at any meeting of such committee.  The committees shall keep regular minutes of their proceedings and make the same available to the Board upon request.

Section 11.  Action Without a Meeting.  Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members then in office of the Board or the committee consent in writing to the adoption of a resolution authorizing the action.  The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee.

Section 12.  Presence at Meeting by Telephone.  Members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time.   Participation in a meeting by such means shall constitute presence in person at such meeting.

ARTICLE IV

Officers

Section 1.  Offices; Term of Office.  The Board of Directors shall  annually, at the first meeting of the Board after the annual meeting of shareholders,  appoint or elect a Chief Executive Officer, a President, one or more Vice Presidents, a  Secretary, and a Treasurer and may also appoint the Chairman of the Board as an officer of the Corporation.  The Board of Directors may from time to time elect or appoint such additional officers as it may determine.  Such additional officers shall have such authority and perform such duties as the Board of Directors may from time to time prescribe.

The Chairman of the Board (if appointed as an officer), the Chief Executive Officer, the President, each Vice President, the Secretary, and the Treasurer shall, unless otherwise determined by the Board of Directors, hold office until the first meeting of the Board following the next annual meeting of shareholders and until their successors have been elected or appointed and qualified.  Each additional officer appointed or elected by the Board of Directors shall hold office for such term as shall be determined from time to time by the Board of Directors and until his successor has been elected or appointed and qualified.  Any officer, however, may be removed or have his authority suspended by the Board of Directors at any time, with or without cause.  If the office of any officer becomes vacant for any reason, the Board of Directors shall have the power to fill such vacancy.

Section 2.  Chairman of the Board.  If appointed as an officer, the Chairman of the Board shall be the chief executive officer of the Corporation and, in such capacity, shall have the general powers and duties of supervision and management of the Corporation.  Whether or not appointed as an officer, he or she shall preside at all meetings of shareholders and of the Board of Directors and shall be entitled to vote upon all questions.

Section 3. Chief Executive Officer.  If the Chairman of the Board is not appointed as an officer, the Chief Executive Officer shall be the chief executive officer of the Corporation and, in such capacity, shall have the have the general powers and duties of supervision and management of the Corporation.  He or she shall perform all duties and have all powers that are commonly incident to the office of chief executive officer or which are delegated to him or her by the Board of Directors and, if appointed as an officer, the Chairman of the Board.  In the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the shareholders.

Section 3.  The President.  In the absence of the Chairman of the Board and the Chief Executive Officer, the President shall preside at all meetings of the shareholders.  Subject only to the direction of the Board of Directors, the Chairman of the Board (if appointed as an officer) and the Chief Executive Officer, he shall have the general powers and duties of supervision and management of the operations and the administration of the Corporation, and shall perform all such other duties as are properly required of him by the Board of Directors, the Chairman of the Board (if appointed as an officer) and the Chief Executive Officer.

Section 4.  The Vice Presidents.  The Vice Presidents may be designated by such title or titles as the Board of Directors may determine, and each Vice President in such order of seniority as may be determined by the Board shall, in the absence or at the request of the President, perform the duties and exercise the powers of the President.  The Vice Presidents also shall have such powers and perform such duties as usually pertain to their office or as are properly delegated or assigned to them by the Board of Directors.

Section 5.  The Secretary.  The Secretary shall issue notices of meetings of shareholders and of directors when such notices are required by law or these By-laws.  He shall attend all meetings of the shareholders and of the Board of Directors and keep the minutes thereof.  He shall affix the corporate seal to such instruments as require the seal, and shall perform such other duties as usually pertain to his office or as are properly assigned to him by the Board of Directors.

Section 6.  The Treasurer.  The Treasurer shall have the care and custody of all monies and securities of the Corporation.  He shall cause to be entered in records of the Corporation to be kept for that purpose full and accurate accounts of all monies received by him and paid by him on account of the Corporation.  He shall make and sign such reports, statements and documents as may be required of him by the Board of Directors or by the laws of the United States, the State of New York or any other state or country, and shall perform such other duties as usually pertain to his office or as are properly assigned to him by the Board of Directors.

Section 7.  Temporary Transfer of Powers and Duties.  In case of the absence or illness of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate and assign, for the time being, the powers and duties of any officer to any other officer or to any director.

Section 8.  Compensation.  The compensation of all officers shall be fixed by the Board of Directors or a committee thereof.  The compensation of other employees shall be fixed by the Chief Executive Officer or other officers or employees, subject to any limitations prescribed by the Board of Directors or a committee thereof.

ARTICLE V

Indemnification of Directors and Officers

Section 1.  Right of Indemnification.  Each director and officer of the corporation, whether or not then in office, and any person whose testator or intestate was such a director or officer, shall be indemnified by the corporation for the defense of, or in connection with, civil or criminal actions or proceedings, or appeals therein, in accordance with and to the fullest extent permitted by law.

Section 2.  Other Rights of Indemnification.  The right of indemnification herein provided shall not be deemed exclusive of any other rights to which any such director, officer or other person may now or hereafter be otherwise entitled and specifically, without limiting the generality of the foregoing, shall not be deemed exclusive of any rights, pursuant to statute or otherwise, of any such director, officer or other person in any such action or proceeding to have assessed or allowed in his favor, against the corporation or otherwise, his costs and expenses incurred therein or in connection therewith or any part thereof.

ARTICLE VI

Shares

Section 1.  Certificated Or Uncertificated Shares. The shares of the Corporation may be represented by certificates or they may be uncertificated shares.  Unless otherwise provided by the articles of incorporation, the Board of Directors may provide by resolution that some or all of any or all classes and series of the Corporation’s shares shall be uncertificated shares, provided that any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the Corporation.

           Section 2.  Certificated Shares -- Signatures.  If shares of the Corporation are represented by certificates, the certificates shall be signed by the Chairman or a vice-chairman of the Board or the President or a vice-president and the Secretary or an assistant secretary or the Treasurer or an assistant treasurer of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof.  The  signatures of the officers upon a certificate may be facsimiles if : (1) the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee, or (2) the shares are listed on a registered national securities exchange.  In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to hold his or her office before the certificate is issued, it may be issued by the Corporation with the same effect as if he or she held the office at the date of issue.

                 Section 3.  Certificated Shares -- Required Statements.  If shares of the Corporation are represented by certificates, each certificate representing shares shall state

upon its face: (1) the Corporation is formed under the laws of New York; (2) the name of the person or persons to whom the shares are issued; (3) the number and class of shares, and the designation of the series, if any, which the certificate represents.  If the Corporation is authorized to issue more than one class of shares, then any certificate representing shares issued by the Corporation shall set forth upon the face or back of the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge, a full statement of the designation, relative rights, preferences and limitations of each class authorized to be issued and, if the Corporation is authorized to issue preferred shares in series, the designation, relative rights, preferences and limitations of each such series so far as the same have been fixed and the authority of the Board of Directors to designate and fix the relative rights, preferences and limitations of other series.

                 Section 4.  Uncertificated Shares -- Required Notices.  Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates under Section  3 of this Article.  Except as otherwise expressly provided by law, the rights and obligations of holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical.

                 Section 5.  Transfer of Shares.  

(a)If shares of the Corporation are represented by certificates, the shares shall be transferable on the records of the Corporation by the holder thereof, in person or by duly authorized attorney, upon the surrender of the certificate representing the shares to be transferred, properly endorsed.

(b)Whether shares of the Corporation are represented by certificates or are uncertificated, the Corporation shall be entitled to treat the holder of record of any share as the owner thereof and accordingly not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of New York.

(c)The Board of Directors, to the extent permitted by law, shall have the power to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares and may appoint one or more transfer agents and registrars of the shares of the Corporation.

  Section 6.  Lost, Stolen or Destroyed Certificates.  In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

Section 7.  Fixing Record Date.  For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action the Board may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty (50) nor less than ten (10) days before the date of such meeting, nor more than fifty (50) days prior to any other action.  If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or if no notice is given, the day on which the meeting is held.

ARTICLE VII

Miscellaneous

Section 1.  Corporate Seal.  The seal of the Corporation shall be circular in form with the name of the Corporation and the year of its Incorporation thereon, and such seal as impressed on the margin hereof is hereby adopted as the corporate seal of the Corporation.

Section 2.  Fiscal Year.  The fiscal year of the Corporation shall be the calendar year unless otherwise provided by the Board of Directors.

Section 3.  Amendments.  Any By-laws may be adopted, repealed, altered or amended by the Board of Directors at any meeting thereof or by written consent pursuant to Article III, Section II, provided that such proposed action in respect thereof shall be stated in the notice of such meeting or request for written consent, and provided further that any amendment to the By-laws increasing or decreasing the number of directors of the Corporation shall require the affirmative vote of a majority of the entire Board of Directors.  The shareholders of the Corporation shall have the power to adopt, amend, alter or repeal any provision of these By-laws only to the extent and in the manner provided in the Certificate of Incorporation of the Corporation.

ARTICLE VIII

Dispute Resolution

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action asserting a claim arising pursuant to any provision of the New York Business Corporation Law or the Certificate of Incorporation or By-laws of the Corporation (as either may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the New York State Supreme Court for the County of Erie within the State of New York (or, if the New York State Supreme Court does not have jurisdiction, the United States District Court for the Western District of New York (Buffalo Division)), in all cases subject to the court’s having personal jurisdiction over any indispensable parties named as defendants.  Failure to enforce the foregoing provisions would cause the Corporation irreparable harm, and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. Any person or entity owning, purchasing or otherwise acquiring interest in shares of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII.

EX-10.1

Exhibit 10.1

COMPUTER TASK GROUP, INCORPORATED

2010 EQUITY AWARD PLAN

(as amended and restated as of August 26, 2017)

Table of Contents

	Page
Section 1. Purpose	1
Section 2. Definitions	1
Section 3. Administration	4
Section 4. Common Stock Subject to the Plan	5
Section 5. Eligibility to Receive Awards	6
Section 6. Stock Options	6
Section 7. Stock Appreciation Rights	8
Section 8. Restricted Stock Awards	10
Section 9. Performance Awards	10
Section 10. Other Stock-Based Awards	12
Section 11. Securities Law Requirement	12
Section 12. Restrictions on Transfer; Representations of Participant; Legends	13
Section 13. Single or Multiple Agreements	13
Section 14. Rights of a Stockholder	13
Section 15. No Right to Continue Employment or Service	13
Section 16. Withholding	13
Section 17. Indemnification	13
Section 18. Non-Assignability	14
Section 19. Nonuniform Determinations	14
Section 20. Adjustments	14
Section 21. Termination and Amendment	14
Section 22. Severability	15
Section 23. Effect on Other Plans	15
Section 24. Effective Date of the Plan	15
Section 25. Governing Law	15
Section 26. Gender and Number	15
Section 27. Acceleration of Exercisability and Vesting	15
Section 28. Modification of Awards	15
Section 29. No Strict Construction	15
Section 30. Successors	15
Section 31. Plan Provisions Control	16
Section 32. Headings	16
Section 33. Code Section 409A	16
Section 34. Change in Control	16

i

COMPUTER TASK GROUP, INCORPORATED

2010 EQUITY AWARD PLAN

(amended and restated as of August 26, 2017)

Section 1.Purpose. The purpose of The Computer Task Group, Incorporated 2010 Equity Award Plan (the “Plan”) is to promote the success of The Computer Task Group, Incorporated (the “Company”) and the interests of its stockholders by attracting, motivating, retaining and rewarding employees, directors and officers of, and key advisers and consultants to, the Company and its Subsidiaries.

Section 2.Definitions. For purposes of this Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context.

2.1 “Board” means the Board of Directors of the Company.

2.2 “Change in Control” means:

With respect to awards granted on or after February 19, 2014, any one of the following occurrences:

(a) The adoption of a plan relating to the Company’s dissolution or liquidation, with all material contingencies satisfied or waived, and the taking of a substantial step to implement such dissolution or liquidation;

(b) The Company merges or consolidates, or otherwise reorganizes with or into one or more entities that are not wholly-owned Subsidiaries, as a result of which less than two-thirds of the outstanding voting securities of the surviving or resulting entity immediately after the reorganization are, or will be, beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly through one or more holding companies or other entities, by stockholders of the Company immediately before such reorganization (for purposes of such determination, it shall be deemed (i) that no change in the beneficial ownership of the Company’s securities will have occurred from the record date for such approval until the consummation of such reorganization and (ii) that such beneficial owners (other than affiliates of the Company, which shall be included in such determination) hold no securities of the other parties to such reorganization);

(c) The sale of substantially all of the Company’s business and/or assets to a person or entity that is not a Subsidiary;

(d) The consummation of any transaction, the result of which is that any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any person described in and satisfying the conditions of Rule 13d-1(b)(1) thereunder), other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any of its Subsidiaries or any Person holding common shares of the Company for or pursuant to the terms of any such employee benefit plan, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly through one or more holding companies or other entities, of securities of the Company representing more than 33.3% of the combined voting power of the Company’s then outstanding securities entitled to then vote generally in the election of directors of the Company; or

(e) During any period not longer than two consecutive years, the first day on which individuals who at the beginning of such period constituted the Board cease to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each new Board member was approved by a vote of at least three-quarters of the Board members then still in office who were Board members at the beginning of such period (including for these purposes, new members whose election or nomination was so approved); and

With respect to awards granted prior to February 19, 2014, any one of the following occurrences:

(a) Approval by the stockholders of the Company of the dissolution or liquidation of the Company;

(b) Approval by the stockholders of the Company of an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities that are not wholly-owned Subsidiaries, as a result of which less than

1

two-thirds of the outstanding voting securities of the surviving or resulting entity immediately after the reorganization are, or will be, beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly through one or more holding companies or other entities, by stockholders of the Company immediately before such reorganization (for purposes of such determination, it shall be deemed (i) that no change in the beneficial ownership of the Company’s securities will have occurred from the record date for such approval until the consummation of such reorganization and (ii) that such beneficial owners (other than affiliates of the Company, which shall be included in such determination) hold no securities of the other parties to such reorganization);

(c) Approval by the stockholders of the Company of the sale of substantially all of the Company’s business and/or assets to a person or entity that is not a Subsidiary;

(d) Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any person described in and satisfying the conditions of Rule 13d-1(b)(1) thereunder), other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any of its Subsidiaries or any Person holding common shares of the Company for or pursuant to the terms of any such employee benefit plan, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly through one or more holding companies or other entities, of securities of the Company representing more than [33.3]% of the combined voting power of the Company’s then outstanding securities entitled to then vote generally in the election of directors of the Company; or

(e) During any period not longer than two consecutive years, individuals who at the beginning of such period constituted the Board cease to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each new Board member was approved by a vote of at least three-quarters of the Board members then still in office who were Board members at the beginning of such period (including for these purposes, new members whose election or nomination was so approved).

2.3 “Code” means the Internal Revenue Code of 1986, as amended.

2.4 “Committee” shall have the meaning provided in Section 3 of the Plan.

2.5 “Common Stock” means the common stock, $.01 par value, of the Company or such class of equity securities of any Successor having the power to vote generally for directors and to participate in the profits of such Successor by way of dividend after all holders of preferred securities have received such dividends to which they may be entitled.

2.6 “Company” shall have the meaning set forth in Section 1 of the Plan and shall include, where applicable, any Successor as defined in Section 2.2(c) of the Plan.

2.7 “Continuous Service” means that the Participant’s service with the Company or any Subsidiary, whether as an employee, officer, director, adviser, or consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or any Subsidiary as an employee, officer, director, adviser or consultant, or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service. For example, a change in status from an employee of the Company to a consultant of a Subsidiary or a director will not constitute an interruption of Continuous Service. The Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Committee, including sick leave, military leave or any other personal leave.

2.8 “Disability” means (a) as it relates to the exercise of an Incentive Stock Option after termination of employment, a disability within the meaning of Section 22(e)(3) of the Code, and (b) for all other purposes, shall have the meaning given that term by the group disability insurance, if any, maintained by the Company for its employees or otherwise shall mean the complete inability of the Participant, with or without a reasonable accommodation, to perform his or her duties with the Company or any Subsidiary on a full-time basis as a result of

2

physical or mental illness or personal injury he or she has incurred for more than 12 weeks in any 52 week period, whether consecutive or not, as determined by an independent physician selected with the approval of the Company or any Subsidiary and the Participant.

2.9 “Effective Date” shall have the meaning provided in Section 24 of the Plan.

2.10 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.11 “Fair Market Value” means, if the Common Stock of the Company is listed on a national securities exchange, the last reported sale price on the principal national securities exchange on which the Common Stock is listed or admitted to trading on the trading day for which the determination is being made (or, if the date of determination is not a trading day, the immediately preceding trading day) or, if the Common Stock is not listed or admitted to trading on a national securities exchange, then the average of the closing bid and asked prices on the day for which the determination is being made in the over-the-counter market as reported by the Nasdaq Stock Market, Inc. (“NASDAQ”) (or, if the date of determination is not a trading day, the immediately preceding trading day) or, if bid and asked prices for the Common Stock on such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board or a committee thereof, or, if none of the foregoing is applicable, then the fair market value of the Common Stock as determined in good faith by the Committee in its sole discretion.

2.12 “Immediate Family” shall have the meaning provided in Section 18 of the Plan.

2.13 “Incentive Stock Option” means a stock option granted under the Plan which is intended to be designated as an “incentive stock option” within the meaning of Section 422 of the Code.

2.14 “Non-Qualified Stock Option” means a stock option granted under the Plan which is not intended to be an Incentive Stock Option, including any stock option that provides (as of the time such option is granted) that it will not be treated as an Incentive Stock Option nor as an option described in Section 423(b) of the Code.

2.15 “Other Stock-Based Award” means awards (other than Stock Options, Stock Appreciation Rights, Restricted Stock Awards and Performance Awards) denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock and granted pursuant to Section 10.

2.16 “Outside Director” means a member of the Board who is not employed by the Company or any Subsidiary.

2.17 “Participant” shall mean any employee, director or officer of, or key adviser or consultant to, the Company or any Subsidiary to whom an award is granted under the Plan.

2.18 “Performance Award” means an award made pursuant to Section 9, including awards of performance units, performance shares and performance cash.

2.19 “Performance Criteria” means the performance criteria described in Section 9.1 which are the basis for Performance Goals.

2.20 “Performance Goal” means the performance goal or goals applicable to a Performance Award pursuant to Section 9.1 as determined by the Committee.

2.21 “Performance Period” means a period of time, as may be determined in the discretion of the Committee, over which performance is measured for the purpose of determining a Participant’s right to and the payment value of an award.

3

2.22 “Plan Year” means the twelve-month period beginning on January 1 and ending on December 31; provided, however, the first Plan Year shall be the short Plan Year beginning on the Effective Date and ending on December 31, 2010.

2.23 “Restricted Stock Award” means an award of shares of Common Stock pursuant to Section 8.

2.24 “Retirement” means (a) the voluntary termination of employment by a Participant (other than an Outside Director) not resident in the European Union who: (i) has attained age 55 and has ten or more years of service with the Company and/or any Subsidiary or (ii) has attained age 65; or (b) in the case of any Outside Director, such Outside Director’s ceasing to be a member of the Board for any reason.

2.25 “Stock Appreciation Right” means an award made pursuant to Section 7.

2.26 “Stock Option” means any option to purchase Common Stock granted pursuant to Section 6.

2.27 “Subsidiary” means: (i) as it relates to Incentive Stock Options, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Stock Option, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain; and (ii) for all other purposes, an entity, domestic or foreign, of which not less than 50% of the total voting power is held by the Company or by a Subsidiary, whether or not such entity now exists or is hereafter organized or acquired by the Company or by a Subsidiary.

2.28 “Term of the Plan” means the period beginning on the Effective Date and ending on the earlier to occur of (i) the date the Plan is terminated by the Board in accordance with Section 21 and (ii) the day before the tenth anniversary of the Effective Date.

Section 3.Administration. The Plan shall be administered by the Compensation Committee of the Board or such other committee or subcommittee as may be appointed by the Board from time to time for the purpose of administering this Plan; provided, however, that such committee shall consist of two or more members of the Board, each of whom shall qualify as a “Non-employee Director” within the meaning of Rule 16b-3 of the Exchange Act and as an “independent director” under applicable stock exchange or NASDAQ rules, and also qualify as an “outside director” within the meaning of Section l62(m) of the Code and regulations pursuant thereto. For purposes of the Plan, the Board acting in this capacity or the Committee described in the preceding sentence shall be referred to as the “Committee”. The Committee shall have the power and authority to grant to eligible persons pursuant to the terms of the Plan: (1) Stock Options, (2) Stock Appreciation Rights, (3) Restricted Stock Awards, (4) Performance Awards, (5) Other Stock-Based Awards, or (6) any combination of the foregoing.

The Committee shall have authority in its discretion to interpret the provisions of the Plan and all awards granted thereunder and to decide all questions of fact arising in its application. Except as otherwise expressly provided in the Plan, the Committee shall have authority to select the persons to whom awards shall be made under the Plan; to determine whether and to what extent awards shall be made under the Plan; to determine the types of award to be made and the amount, size, terms and conditions of each such award; to determine the time when the awards shall be granted; to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an award under the Plan shall be deferred either automatically or at the election of the Participant; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and to make all other determinations necessary or advisable for the administration of the Plan. Notwithstanding anything in the Plan to the contrary, in the event that the Committee determines that it is advisable to grant awards which shall not qualify for the exception for performance-based compensation from the tax deductibility limitations of Section 162(m) of the Code, the Committee may make such grants or awards, or may amend the Plan to provide for such grants or awards, without satisfying the requirements of Section 162(m) of the Code.

The Committee also shall have authority in its discretion to vary the terms of the Plan to the extent necessary to comply with foreign, federal, state or local law. Notwithstanding anything in the Plan to the contrary, with respect

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to any Participant or eligible person who is resident outside of the United States, the Committee may, in its sole discretion, amend the terms of the Plan in order to conform such terms with the requirements of local law or to meet the objectives of the Plan. The Committee may, where appropriate, establish one or more sub-plans for this purpose.

All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons who participate in the Plan.

All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. The Committee may delegate to any designated officers or other employees of the Company any of its duties under the Plan pursuant to such conditions or limitations as the Committee may establish from time to time. Notwithstanding the foregoing, in no event may the Committee delegate authority to any person to take any action which would contravene the requirements of Rule 16b-3 of the Exchange Act or the requirements of Section 162(m) of the Code.

Section 4.Common Stock Subject to the Plan.

4.1Share Reserve. Subject to the following provisions of this Section 4 and to such adjustment as may be made pursuant to Section 20, the maximum number of shares available for issuance under the Plan shall be equal to 3,750,000 shares of Common Stock. During the terms of the awards under the Plan, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such awards.

4.2Source of Shares. Such shares may consist in whole or in part of authorized and unissued shares or treasury shares or any combination thereof as the Committee may determine. Any shares subject to an option or right granted or awarded under the Plan which for any reason expires or is terminated unexercised, becomes unexercisable, or is forfeited or otherwise terminated, surrendered or cancelled as to any shares, or if any shares are not delivered because an award under the Plan is settled in cash, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. No awards may be granted following the end of the Term of the Plan.  Notwithstanding the preceding sentence, shares that are withheld in payment of the exercise price of a Stock Option or taxes, and shares subject to a Stock Appreciation Right that are not delivered upon exercise thereof, shall be deemed to be delivered for purposes of the Plan and therefore will not be deemed to remain or to become available under the Plan.

4.3Code Section 162(m) Limitation. The total number of shares of Common Stock for which Stock Options and Stock Appreciation Rights may be granted to any employee during any 12 month period shall not exceed 500,000 shares in the aggregate, subject to adjustment pursuant to Section 20. The total number of shares of Common Stock for which Restricted Stock Awards, Performance Awards and Other Stock-Based Awards that are subject to the attainment of performance criteria in order to protect against the loss of deductibility under Section 162(m) of the Code may be granted to any employee during any 12 month period shall not exceed 500,000 shares in the aggregate, subject to adjustment pursuant to Section 20. With respect to awards denominated in cash (including Performance Awards) the maximum aggregate payout to any employee during any 12 month period shall not exceed $5,000,000.

4.4Minimum Vesting Limitation. Notwithstanding anything to the contrary in the Plan, this Section 4.4 shall apply to awards granted under the Plan on and after May 6, 2015. No Stock Option or Stock Appreciation Right shall be exercisable prior to the first anniversary of the date of grant thereof, and no Restricted Stock Award, Performance Award or Other Stock-Based Award shall vest any earlier than the first anniversary of the date of grant thereof, except that an award may provide for accelerated vesting, exercisability or the lapse of restrictions on shares applicable to such award upon a Change in Control or upon termination of a Participant’s Continuous Service due to death, Disability or Retirement. The Committee may grant awards with exercisability and vesting conditions, and that provide for the lapsing of restrictions, that do not meet the requirements set forth in the preceding sentence so long as the aggregate number of shares of Common Stock under such awards does not exceed 5 percent of the maximum number of shares of Common Stock made available under the Plan as specified in Section 4.1 above (subject to adjustment as set forth in Section 20).

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Section 5.Eligibility to Receive Awards. An award may be granted to any employee, director, or officer of, or adviser or consultant to, the Company or any Subsidiary, who is responsible for or contributes to the management, growth or success of the Company or any Subsidiary, provided that bona fide services shall be rendered by consultants or advisers to the Company or its Subsidiaries and such services must not be in connection with the offer and sale of securities in a capital-raising transaction and must not directly or indirectly promote or maintain a market for the Company’s securities. Subject to the preceding sentence and Section 6.8, the Committee shall have the sole authority to select the persons to whom an award is to be granted hereunder and to determine what type of award is to be granted to each such person. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period.

Section 6.Stock Options. A Stock Option may be an Incentive Stock Option or a Non-Qualified Stock Option. Only employees of the Company or any Subsidiary of the Company are eligible to receive Incentive Stock Options. To the extent that any Stock Option is not designated as or does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. Stock Options may be granted alone or in addition to other awards granted under the Plan. The terms and conditions of each Stock Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written Stock Option agreement between the Company and the Participant or notice from the Company to the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. No person shall have any rights under any Stock Option granted under the Plan unless and until the Company and the person to whom such Stock Option shall have been granted shall have executed and delivered an agreement expressly granting the Stock Option to such person and containing provisions setting forth the terms and conditions of the Stock Option. The terms and conditions of each Incentive Stock Option shall be such that each Incentive Stock Option issued hereunder shall constitute and shall be treated as an “incentive stock option” as defined in Section 422 of the Code. The terms and conditions of each Non-Qualified Stock Option will be such that each Non-Qualified Stock Option issued hereunder shall not constitute nor be treated as an “incentive stock option” as defined in Section 422 of the Code or an option described in Section 423(b) of the Code and will be a “non-qualified stock option” for federal income tax purposes. The terms and conditions of any Stock Option granted hereunder need not be identical to those of any other Stock Option granted hereunder. The Stock Option agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

6.1Type of Option. Each Stock Option agreement shall identify the Stock Option represented thereby as an Incentive Stock Option or a Non-Qualified Stock Option, as the case may be.

6.2Option Price. The Stock Option exercise price shall be fixed by the Committee and specified in each Stock Option agreement; provided, however, that the exercise price shall not be less than 100% (or 110% in the case of an Incentive Stock Option granted to an employee referred to in Section 6.7(ii) below) of the Fair Market Value of the shares of Common Stock subject to the Stock Option on the date the Stock Option is granted.

6.3Vesting and Exercise Term. Each Stock Option agreement shall state the period or periods of time within which the Stock Option may be exercised, in whole or in part, which shall be such period or periods of time as may be determined by the Committee, provided that no Incentive Stock Option shall be exercisable after ten years from the date of grant thereof (or, in the case of an Incentive Stock Option granted to an employee referred to in Section 6.7(ii) below, such term shall in no event exceed five years from the date on which such Incentive Stock Option is granted). Each Stock Option agreement shall also state any conditions which must be satisfied before all or a portion of the Stock Option may be exercised. In so doing, the Committee may specify that a Stock Option may not be exercised until the completion of a service period or until Performance Goals are satisfied.

6.4Payment for Shares. Subject to any vesting period specified in the Stock Option agreement, a Stock Option shall be deemed to be exercised when written notice of such exercise, in a form determined by the Committee, has been given to the Company in accordance with the terms of the Stock Option agreement by the Participant entitled to exercise the Stock Option and full payment for the shares of Common Stock with respect to which the Stock Option is exercised has been received by the Company. The Committee, in its sole discretion, may permit all or part of the payment of the exercise price (and taxes required to be withheld as provided in Section 16) to be made, to the extent permitted by applicable statutes and regulations, either: (i) in cash, by check or wire transfer, (ii) by tendering

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previously acquired shares of Common Stock having an aggregate Fair Market Value at the time of exercise equal to the total exercise price and such taxes, (iii) by withholding shares of Common Stock which otherwise would be acquired on exercise having an aggregate Fair Market Value at the time of exercise equal to the total exercise price and such taxes, (iv) delivery (including by facsimile or by electronic mail) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price and any tax withholding obligations that may arise in connection with such exercise (otherwise known as a “broker-assisted cashless exercise”) (v) by a combination of (i), (ii), (iii) and (iv) above, or (vi) in any other form of legal consideration as provided for under the terms of the Stock Option. No shares of Common Stock shall be issued to any Participant upon exercise of a Stock Option until the Company receives full payment therefor as described above. Upon the receipt of notice of exercise and full payment for the shares of Common Stock, the shares of Common Stock shall be deemed to have been issued and the Participant shall be entitled to receive such shares of Common Stock and shall be a stockholder with respect to such shares, and the shares of Common Stock shall be considered fully paid and nonassessable. No adjustment will be made for a dividend or other right for which the record date is prior to the date on which the Common Stock is issued, except as provided in Section 20 of the Plan. Each exercise of a Stock Option shall reduce, by an equal number, the total number of shares of Common Stock that may thereafter be purchased under such Stock Option.

6.5Rights upon Termination of Continuous Service. Except as otherwise provided in an applicable Stock Option agreement or as otherwise determined by the Committee, in the event that a Participant’s Continuous Service terminates for any reason, other than death, Disability or Retirement, any rights of the Participant under any Stock Option shall immediately terminate; provided, however, that the Participant (or any successor or legal representative) shall have the right to exercise the Stock Option to the extent that the Stock Option was exercisable at the time of termination, until the earlier of (i) the date that is three months after the effective date of such termination of Continuous Service, or such other date as determined by the Committee in its sole discretion, or (ii) the expiration of the term of the Stock Option.

Notwithstanding the foregoing, the Participant (or any successor or legal representative) shall not have any rights under any Stock Option, to the extent that such Stock Option has not previously been exercised, and the Company shall not be obligated to sell or deliver shares of Common Stock (or have any other obligation or liability) under such Stock Option if the Committee shall determine in its sole discretion that the Participant’s Continuous Service shall have been terminated for “Cause” (as such term is defined in the Participant’s Stock Option agreement), which determination shall be made in good faith. In the event of such determination, the Participant (or any successor or legal representative) shall have no right under any Stock Option, to the extent that such Stock Option has not previously been exercised, to purchase any shares of Common Stock. Any Stock Option may be terminated entirely by the Committee at the time or at any time subsequent to a determination by the Committee under this Section 6.5 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock under such Stock Option.

Unless otherwise determined by the Committee, in the event that a Participant’s Continuous Service terminates as a result of Retirement prior to the expiration of the Stock Option and without the Participant having fully exercised the Stock Option, the Participant or his or her successor or legal representative shall have the right to exercise the Stock Option, to the extent such Stock Option was exercisable at the time of Retirement, within the next 12 months following Retirement, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the term of the Stock Option.

Unless otherwise determined by the Committee, in the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability prior to the expiration of the Stock Option and without the Participant having fully exercised the Stock Option, the Participant or his or her successor or legal representative shall have the right to exercise the Stock Option, to the extent such Stock Option was exercisable at the time of such event, within the next 12 months following such event, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the term of the Stock Option.

6.6No Repricing. Subject to Section 20, the exercise price for a Stock Option may never be less than 100% of the Fair Market Value of the shares of Common Stock subject to the Stock Option on the date the Stock Option is

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granted. Notwithstanding anything in the Plan to the contrary, the repricing of a Stock Option is prohibited without prior approval of the Company’s stockholders by a majority of votes cast in favor of such proposal. For this purpose, a “repricing” means any of the following (or any other action that has the same effect as any of the following): (A) changing the terms of a Stock Option to lower its exercise price; (B) any other action that is treated as a “repricing” under generally accepted accounting principles; and (C) repurchasing for cash or canceling a Stock Option at a time when its exercise price is greater than the Fair Market Value of the underlying shares of Common Stock in exchange for another award, unless the cancellation and exchange occurs in connection with a change in capitalization or other similar change permitted under Section 20. Such cancellation and exchange would be considered a “repricing” regardless of whether it is treated as a “repricing” under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Participant.

6.7Special Incentive Stock Option Rules. Notwithstanding the foregoing, in the case of an Incentive Stock Option, each Stock Option agreement shall contain such other terms, conditions and provisions as the Committee determines necessary or desirable in order to qualify such Stock Option as an Incentive Stock Option under the Code including, without limitation, the following:

(i) To the extent that the aggregate Fair Market Value (determined as of the time the Stock Option is granted) of the Common Stock, with respect to which Incentive Stock Options granted under this Plan (and all other plans of the Company and its Subsidiaries) become exercisable for the first time by any person in any calendar year, exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options.

(ii) No Incentive Stock Option shall be granted to any employee if, at the time the Incentive Stock Option is granted, the employee (by reason of the attribution rules applicable under Section 424(d) of the Code) owns more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary unless at the time such Incentive Stock Option is granted the Stock Option exercise price is at least 110% of the Fair Market Value (determined as of the time the Incentive Stock Option is granted) of the shares of Common Stock subject to the Incentive Stock Option and such Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date of grant.

If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option shall thereafter be treated as a Non-Qualified Stock Option.

6.8Conversion of Director Fees. The Board may, at its sole discretion, permit an Outside Director to receive all or a portion of his or her annual retainer fee, any fees for attending meetings of the Board or committees thereof, committee chairmanship fees or any other fees payable to an Outside Director in the form of a Stock Option. The terms and conditions of such Stock Option, including (without limitation) the method for converting the annual retainer fee or any other fee payable to an Outside Director into a Stock Option, the date of grant, the vesting schedule, if any, and the time period for an Outside Director to elect such a Stock Option shall be determined solely by the Board. The Board’s decision shall be final, binding and conclusive.

Section 7.Stock Appreciation Rights. Stock Appreciation Rights entitle Participants to increases in the Fair Market Value of shares of Common Stock. The terms and conditions of each Stock Appreciation Right granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant or notice from the Company to the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. The agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

7.1Award. Stock Appreciation Rights shall entitle the Participant, subject to such terms and conditions determined by the Committee, to receive upon exercise thereof an award equal to all or a portion of the excess of: (i) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise, over (ii) a specified price which shall not be less than 100% of the Fair Market Value of the Common Stock at the time the right is granted or, if connected with a previously issued Stock Option, not less than 100% of the Fair Market Value of the Common Stock at the time such Stock Option was granted. Such amount may be paid by the Company in cash, Common Stock (valued at its then Fair Market Value) or any combination thereof, as the Committee may

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determine. Stock Appreciation Rights may be, but are not required to be, granted in connection with a previously or contemporaneously granted Stock Option, provided that such Stock Appreciation Rights shall be subject to the same terms and conditions as apply to the underlying Stock Option to which they relate. Stock Options surrendered in the exercise of Stock Appreciation Rights shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised.

7.2Term. Each agreement shall state the period or periods of time within which the Stock Appreciation Right may be exercised, in whole or in part, subject to such terms and conditions prescribed for such purpose by the Committee. The Committee shall have the power to permit an acceleration of previously established exercise terms upon such circumstances and subject to such terms and conditions as the Committee deems appropriate. Stock Appreciation Rights granted in connection with a previously or contemporaneously granted Stock Option may be exercised at the time the Stock Option vests but not later than the expiration date of such Stock Option.

7.3Rights upon Termination of Continuous Service. In the event that a Participant’s Continuous Service terminates for any reason, other than death, Disability or Retirement, any rights of the Participant under any Stock Appreciation Right shall immediately terminate; provided, however, the Participant (or any successor or legal representative) shall have the right to exercise the Stock Appreciation Right to the extent that the Stock Appreciation Right was exercisable at the time of termination, until the earlier of (i) the date that is three months after the effective date of such termination of Continuous Service, or such other date as determined by the Committee in its sole discretion, or (ii) the expiration of the term of the Stock Appreciation Right.

Notwithstanding the foregoing, the Participant (or any successor or legal representative) shall not have any rights under any Stock Appreciation Right, to the extent that such Stock Appreciation Right has not previously been exercised, and the Company shall not be obligated to pay or deliver any cash, Common Stock or any combination thereof (or have any other obligation or liability) under such Stock Appreciation Right if the Committee shall determine in its sole discretion that the Participant’s Continuous Service shall have been terminated for “Cause” (as such term is defined in the Participant’s Stock Appreciation Right agreement), which determination shall be made in good faith. In the event of such determination, the Participant (or any successor or legal representative) shall have no right under such Stock Appreciation Right, to the extent that such Stock Appreciation Right has not previously been exercised. Any Stock Appreciation Right may be terminated entirely by the Committee at the time of or at any time subsequent to the determination by the Committee under this Section 7.3 which has the effect of eliminating the Company’s obligations under such Stock Appreciation Right.

Unless otherwise determined by the Committee, in the event that a Participant’s Continuous Service terminates as a result of Retirement prior to the expiration of his or her Stock Appreciation Right and without having fully exercised his or her Stock Appreciation Right, the Participant or his or her successor or legal representative shall have the right to exercise any Stock Appreciation Right, to the extent such Stock Appreciation Right was exercisable at the time of Retirement, within the next 12 months following Retirement, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the Stock Appreciation Right.

Unless otherwise determined by the Committee, in the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability prior to the expiration of his or her Stock Appreciation Right and without having fully exercised his or her Stock Appreciation Right, the Participant or his or her successor or legal representative shall have the right to exercise any Stock Appreciation Right, whether or not the Stock Appreciation Right was exercisable at the time of such event, within the next 12 months following such event, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the Stock Appreciation Right.

7.4No Repricing. Notwithstanding anything in the Plan to the contrary, the repricing of a Stock Appreciation Right is prohibited without any prior approval of the Company’s stockholders. For this purpose, a “repricing” means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of a Stock Appreciation Right to lower its base price: (ii) any other action that is treated as a “repricing” under generally accepted accounting principles; and (iii) repurchasing for cash or canceling a Stock Appreciation Right at a time when its base price is greater than the Fair Market Value of the underlying shares of Common Stock in exchange for another award, unless the cancellation and exchange occurs in connection with a change in capitalization or other similar change permitted under Section 20. Such cancellation and exchange would be considered a “repricing”

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regardless of whether it is treated as a “repricing” under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Participant.

Section 8.Restricted Stock Awards. Restricted Stock Awards shall consist of shares of Common Stock restricted against transfer (“Restricted Stock”) and subject to a substantial risk of forfeiture. The terms and conditions of each Restricted Stock Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant or notice from the Company to the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. The agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

8.1Vesting Period. Restricted Stock Awards shall be subject to the restrictions described in the preceding paragraph over such vesting period as the Committee determines. To the extent the Committee deems necessary or appropriate to protect against loss of deductibility pursuant to Section 162(m) of the Code, Restricted Stock Awards to any Participant may also be conditioned upon the achievement of Performance Goals in the same manner as provided in Section 9 with respect to Performance Awards. The Committee may, in its sole discretion, provide for the lapse of restrictions in installments or otherwise and may waive or accelerate the restriction lapse at its discretion. Except as otherwise provided in a Restricted Stock Award agreement, the Participant shall have all the rights of a stockholder during the vesting period.

8.2Restriction upon Transfer. Shares awarded may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, except as herein provided or as provided in any agreement entered into between the Company and a Participant in connection with the Plan, during the vesting period applicable to such shares.

8.3Restricted Stock Units. Restricted Stock Awards may be granted in the form of restricted stock units that are not issued until the vesting conditions are satisfied. Until the shares of Common Stock are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units to acquire shares of Common Stock except that the Committee may in its discretion provide for the payment of dividend equivalents on outstanding restricted stock units. Restricted stock units may be settled in shares of Common Stock or cash.

8.4Termination of Continuous Service. Except as otherwise provided in the written agreement relating to the Participant’s Restricted Stock Award, in the event that a Participant’s Continuous Service terminates for any reason other than death or Disability, any rights of the Participant or his or her successors or legal representatives under any Restricted Stock Award that remains subject to restrictions shall immediately terminate and any Restricted Stock Award with unlapsed restrictions shall be forfeited to the Company without payment of any consideration. Unless otherwise determined by the Committee, in the event that a Participant’s Continuous Service terminates due to death or Disability, all unvested Restricted Stock Awards under the Plan shall immediately vest and shall no longer be subject to any restrictions.

8.5Conversion of Director Fees. The Board may, at its sole discretion, permit an Outside Director to receive all or a portion of his or her annual retainer fee, any fees for attending meetings of the Board or committees thereof, committee chairmanship fees or any other fees payable to an Outside Director in the form of a Restricted Stock Award. The terms and conditions of such Restricted Stock Award, including (without limitation) the method for converting the annual retainer fee or any other fee payable to an Outside Director into a Restricted Stock Award, the date of grant, the vesting schedule, if any, and the time period for an Outside Director to elect such a Restricted Stock Award shall be determined solely by the Board. The Board’s decision shall be final, binding and conclusive.

Section 9.Performance Awards. Performance Awards may be made by reference to performance units, performance shares or performance cash and may, at the discretion of the Committee, be awarded upon the satisfaction of Performance Goals. The vesting or settlement of Performance Awards may also, in the discretion of the Committee, be conditioned upon the achievement of Performance Goals. The terms and conditions of each Performance Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant or notice from the Company to the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view

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of the terms and conditions approved by the Committee from time to time. When the Committee desires a Performance Award to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee shall establish the Performance Goals for the respective Performance Award prior to or within 90 days of the beginning of the Performance Period relating to such Performance Goal, or at such other date as may be permitted or required for the Performance Award to qualify as “performance-based compensation” under Section 162(m) of the Code, and not later than after 25 percent of such Performance Period has elapsed, and such Performance Goals shall otherwise comply with the requirements of Section 162(m) of the Code. For all other Performance Awards, the Performance Goals must be established before the end of the respective Performance Period. The Committee may make grants of Performance Awards in such a manner that more than one Performance Period is in progress concurrently. For each Performance Period, the Committee shall establish the number of Performance Awards and their contingent values which may vary depending on the degree to which Performance Criteria established by the Committee are met. The Committee shall have the power to impose such other restrictions on Performance Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code as it may deem necessary or appropriate to ensure that such Performance Awards satisfy all such requirements.

9.1Performance Criteria. The Committee may establish Performance Goals applicable to Performance Awards based upon the Performance Criteria and other factors set forth below based upon performance of the Company as a whole or upon the performance of a Subsidiary, segment or division and either as an absolute measure or as a measure of comparative performance relative to a peer group of companies, an index, budget, prior period, or other standard selected by the Committee. Performance Criteria for the Company shall relate to the achievement of predetermined financial and operating objectives for the Company and its Subsidiaries on a consolidated basis. Performance Criteria for a Subsidiary, segment or division shall relate to the achievement of financial and operating objectives of such business unit for which the Participant is accountable. “Performance Criteria” means one or more of the following measures: revenue (or any component thereof), net income as a percentage of revenue, operating income, earnings per share, share price, operating margin as a percentage of revenue, strategic team goals, net operating profit after taxes, net operating profit after taxes per share, return on invested capital, return on assets or net assets, return on net assets employed before interest and taxes, total stockholder return, relative total stockholder return (as compared with a peer group of the Company established by the Committee prior to issuance of the Performance Award), earnings before or after income taxes, interest charges, depreciation, amortization and/or rental expense, net income, cash flow (or any component thereof), cash flow (or any component thereof) per share, free cash flow, free cash flow per share, revenue growth, cost containment or reduction, billings growth, customer satisfaction or any combination thereof, or such similar objectively determinable financial or other measures as may be adopted by the Committee. The Performance Goals may differ among Participants, including among similarly situated Participants. Performance Criteria shall be calculated in accordance with the Company’s financial statements or generally accepted accounting principles, on an operating basis, or under a methodology established by the Committee prior to the issuance of a Performance Award that is consistently applied and identified and may include adjustments for such matters as the Committee may determine prior to the issuance of the Performance Award. The Committee shall have the authority, to the extent consistent with the requirements for “performance-based compensation” under Section 162(m) of the Code, to make equitable adjustments to the Performance Goals in recognition of unusual or nonrecurring events affecting the Company or any Subsidiary or the financial statements of the Company or any Subsidiary in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles.

9.2Modification. If the Committee determines, in its discretion exercised in good faith, that the established Performance Goals are no longer suitable to the Company’s objectives because of a change in the Company’s business, operations, corporate structure, capital structure, or other conditions the Committee deems to be appropriate, the Committee may modify the Performance Goals to the extent it considers such modification to be necessary; provided, however, if the Committee still intends that such Performance Award continues to qualify as “performance-based compensation” under Section 162(m) of the Code, no such modification shall be made with respect to such Performance Award unless (i) such modification is made no later than the deadline established under Section 162(m) of the Code, and (ii) no Performance Award is paid under the modified Performance Goal until after the material terms of the modified Performance Goal are disclosed to and approved by the Company’s stockholders to the extent required by Section 162(m) of the Code.

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9.3Payment. The basis for the grant, vesting or payment, as applicable, of Performance Awards for a given Performance Period shall be the achievement of those Performance Goals determined by the Committee as specified in the Performance Award agreement. At any time prior to the payment of a Performance Award, unless otherwise provided by the Committee or prohibited by the Plan, the Committee shall have the authority to reduce or eliminate the amount payable with respect to the Performance Award, or to cancel any part or all of the Performance Award but, with respect to Performance Awards the Committee still intends to qualify as “performance-based compensation” under Section 162(m) of the Code, shall not have the authority in its discretion to increase the amount payable with respect to the Performance Award except as permitted under Section 20. The Committee’s determination with respect to a Performance Period of whether and to what extent a Performance Goal has been achieved, and, if so, of the amount of the Performance Award earned for the Performance Period shall be final and binding on the Company and all Participants, and, with respect to Performance Awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, these determinations shall be certified in writing before such Performance Awards are paid. Except as otherwise provided in the Performance Award agreement, all performance cash and performance unit awards shall be paid to the Participant in cash.

9.4Termination of Continuous Service. Except as otherwise provided in the written agreement relating to the Participant’s Performance Award, in the event that a Participant’s Continuous Service terminates for any reason other than death or Disability, any rights of the Participant or his or her successors or legal representatives under any outstanding Performance Awards shall immediately terminate and any outstanding Performance Awards shall be forfeited.

9.5 Dividends and Dividend Equivalents. Notwithstanding anything to the contrary in this Plan, (i) a Participant shall not receive payment of any dividends with respect to a grant of a Performance Award (which includes any Restricted Stock Award conditioned on the achievement of performance goals, as provided in Section 8) unless and until the Performance Award is earned; (ii) the Committee may in its discretion provide for the payment of dividend equivalents with respect to a grant of a Performance Award (which includes any Restricted Stock Award conditioned on the achievement of performance goals, as provided in Section 8); provided, however, that the Committee shall provide in such Performance Award agreement that the Participant shall not receive payment of any dividend equivalent unless and until the Performance Award has become earned; and (iii) if the payment or crediting of dividends or dividend equivalents is in respect of a Performance Award (which includes any Restricted Stock Award conditioned on the achievement of performance goals, as provided in Section 8) that is subject to Code Section 409A, then the payment or crediting of such dividends or dividend equivalents shall conform to the requirements of Code Section 409A.

Section 10.Other Stock-Based Awards. Other Stock-Based Awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, convertible or exchangeable debentures, or other rights convertible into shares of Common Stock and awards valued by reference to the value of securities of or the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other awards under the Plan or any other plan of the Company. The terms and conditions of each Other Stock-Based Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant or notice from the Company to the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time.

To the extent the Committee deems necessary or appropriate to protect against loss of deductibility pursuant to Section 162(m) of the Code, Other Stock-Based Awards to any Participant may also be conditioned upon the achievement of Performance Goals in the same manner as provided in Section 9 with respect to Performance Awards.

Section 11.Securities Law Requirements. No shares of Common Stock shall be issued upon the exercise or payment of any award unless and until:

12

(i) The shares of Common Stock underlying the award have been registered under the Securities Act of 1933, as amended (the “Act”), or the Company has determined that an exemption from the registration requirements under the Act is available or the registration requirements of the Act do not apply to such exercise or payment;

(ii) The Company has determined that all applicable listing requirements of any stock exchange or quotation system on which the shares of Common Stock are listed have been satisfied; and

(iii) The Company has determined that any other applicable provision of state or federal law, including without limitation applicable state securities laws, has been satisfied.

Section 12.Restrictions on Transfer; Representations of Participant; Legends. Regardless of whether the offering and sale of shares of Common Stock has been registered under the Act or has been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge, or other transfer of such shares, including the placement of appropriate legends on stock certificates, if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state, or any other law. As a condition to the Participant’s receipt of shares, the Company may require the Participant to represent that such shares are being acquired for investment, and not with a view to the sale or distribution thereof, except in compliance with the Act, and to make such other representations as are deemed necessary or appropriate by the Company and its counsel.

The Company may, but shall not be obligated to, register or qualify the sale of shares under the Act or any other applicable law. In the event of any public offering of Common Stock or other securities of the Company, it may be necessary for the Company to restrict for a period of time (during or following the offering process) the transfer of shares of Common Stock issued to a Participant under the Plan (including any securities issued with respect to such shares in accordance with Section 20 of the Plan). As a condition of the Participant’s receipt of shares, the Committee may require the Participant to agree not to effect any sale, transfer, pledge or other disposal of the Participant’s shares during such time and agrees to execute any “lock-up letter” or similar agreement requested by the Company or its underwriters.

Section 13.Single or Multiple Agreements. Multiple forms of awards or combinations thereof may be evidenced by a single agreement or notices or multiple agreements or notices, as determined by the Committee.

Section 14.Rights of a Stockholder. The recipient of any award under the Plan, unless otherwise provided by the Plan, shall have no rights as a stockholder with respect thereto unless and until shares of Common Stock are issued to him.

Section 15.No Right to Continue Employment or Service. Nothing in the Plan or any instrument executed or award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or any Subsidiary in the capacity in effect at the time the award was granted or shall affect the right of the Company or any Subsidiary to terminate (i) the employment of an employee with or without notice and with or without cause, (ii) the service of a consultant or adviser pursuant to the terms of such consultant’s or adviser’s agreement with the Company or any Subsidiary or (iii) the service of a director pursuant to the Bylaws of the Company or any Subsidiary and any applicable provisions of the corporate law of the state in which the Company or any Subsidiary is incorporated, as the case may be.

Section 16.Withholding. The Company’s obligations hereunder in connection with any award shall be subject to applicable foreign, federal, state and local withholding tax requirements. Foreign, federal, state and local withholding tax due under the terms of the Plan may be paid in cash or shares of Common Stock (either through the surrender of already-owned shares of Common Stock, the withholding of shares of Common Stock otherwise issuable upon the exercise or payment of such award or by broker-assisted cashless exercise) having a Fair Market Value equal to the required withholding and upon such other terms and conditions as the Committee shall determine; provided, however, the Committee, in its sole discretion, may require that such taxes be paid in cash.

Section 17.Indemnification. No member of the Board or the Committee, nor any officer or employee of the Company or a Subsidiary acting on behalf of the Board or the Committee, shall be personally liable for any action,

13

determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company or any Subsidiary acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

Section 18.Non-Assignability. No right or benefit hereunder shall in any manner be subject to the debts, contracts, liabilities or torts of the person entitled to such right or benefit. No award under the Plan shall be assignable or transferable by the Participant except by will, by the laws of descent and distribution and by such other means as the Committee may approve from time to time, and all awards shall be exercisable, during the Participant’s lifetime, only by the Participant.

However, the Participant, with the approval of the Committee, may transfer a Non-Qualified Stock Option for no consideration to or for the benefit of the Participant’s Immediate Family (including, without limitation, to a trust for the benefit of the Participant’s Immediate Family or to a partnership or limited liability company for one or more members of the Participant’s Immediate Family), subject to such limits as the Committee may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Non-Qualified Stock Option prior to such transfer. The foregoing right to transfer a Non-Qualified Stock Option shall apply to the right to consent to amendments to the Stock Option agreement and, in the discretion of the Committee, shall also apply to the right to transfer ancillary rights associated with the Non-Qualified Stock Option. The term “Immediate Family” shall mean the Participant’s spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren (and, for this purpose, shall also include the Participant).

At the request of the Participant and subject to the approval of the Committee, Common Stock purchased upon exercise of a Non-Qualified Stock Option may be issued or transferred into the name of the Participant and his or her spouse jointly with rights of survivorship.

Except as set forth above or in a Stock Option agreement, any attempted assignment, sale, transfer, pledge, mortgage, encumbrance, hypothecation, or other disposition of an award under the Plan contrary to the provisions hereof, or the levy of any execution, attachment, or similar process upon an award under the Plan shall be null and void and without effect.

Section 19.Nonuniform Determinations. The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive awards, the form, amount and timing of such awards, the terms and provisions of such awards and the agreements evidencing same, and the establishment of values and performance targets) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.

Section 20.Adjustments. In the event of any change in the outstanding shares of Common Stock, without the receipt of consideration by the Company, by reason of a stock dividend, stock split, reverse stock split or distribution, recapitalization, merger, reorganization, reclassification, consolidation, split-up, spin-off, combination of shares, exchange of shares, partial or complete liquidation of the Company, or other change in corporate structure affecting the Common Stock and not involving the receipt of consideration by the Company, the Committee or the Board shall make appropriate adjustments in (a) the aggregate number of shares of Common Stock (i) available for issuance under the Plan, (ii) for which grants or awards may be made to any Participant or to any group of Participants (e.g., Outside Directors), (iii) which are available for issuance under Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Performance Awards and Other Stock-Based Awards, (iv) covered by outstanding unexercised awards and grants denominated in shares or units of Common Stock, and (v) underlying Stock Options granted pursuant to Section 6.8 or Restricted Stock Awards granted pursuant to Section 8.5, (b) the exercise or other applicable price related to outstanding awards or grants and (c) the appropriate Fair Market Value and other price determinations relevant to outstanding awards or grants and shall make such other adjustments as may be appropriate under the circumstances; provided, that the number of shares subject to any award or grant always shall be a whole number.

Section 21.Termination and Amendment. The Board may terminate or amend the Plan or any portion thereof at any time and the Committee may amend the Plan to the extent provided in Section 3, without approval of the stockholders of the Company, unless stockholder approval is required by Rule 16b-3 of the Exchange Act,

14

applicable stock exchange or NASDAQ or other quotation system rules, applicable Code provisions, or otherapplicable laws or regulations. No amendment, termination or modification of the Plan shall affect any award theretofore granted in any material adverse way without the consent of the recipient.

Section 22.Severability. If any of the terms or provisions of this Plan, or awards made under this Plan, conflict with the requirements of Section 162(m) or Section 422 of the Code with respect to awards subject to or governed by Section 162(m) or Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Section 162(m) or Section 422 of the Code. With respect to an Incentive Stock Option, if this Plan does not contain any provision required to be included herein under Section 422 of the Code (as the same shall be amended from time to time), such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out herein.

Section 23.Effect on Other Plans. Participation in this Plan shall not affect an employee’s eligibility to participate in any other benefit or incentive plan of the Company or any Subsidiary and any awards made pursuant to this Plan shall not be used in determining the benefits provided under any other plan of the Company or any Subsidiary unless specifically provided.

Section 24.Effective Date of the Plan. The Plan shall become effective on May 12, 2010 (the “Effective Date”), subject to approval of the stockholders of the Company to the extent required by applicable Code provisions or other applicable law.

Section 25.Governing Law. This Plan and all agreements executed in connection with the Plan, and all disputes and controversies related thereto, shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to its conflicts of law doctrine that would apply any other law.

Section 26.Gender and Number. Words denoting the masculine gender shall include the feminine gender, and words denoting the feminine gender shall include the masculine gender. Words in the plural shall include the singular, and the singular shall include the plural.

Section 27.Acceleration of Exercisability and Vesting. The Committee shall have the power to accelerate the time at which an award may first be exercised or the time during which an award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the award stating the time at which it may first be exercised or the time during which it will vest, unless such award is subject to the provisions of Section 409A of the Code.

Section 28.Modification of Awards. Within the limitations of the Plan and subject to Sections 20 and 34, the Committee may modify outstanding awards or accept the cancellation of outstanding awards for the granting of new awards in substitution therefor. Notwithstanding the preceding sentence, except for any adjustment described in Section 20 or 34, no modification of an award shall, without the consent of the Participant, alter or impair any rights or obligations under any award previously granted under the Plan in any material adverse way without the affected Participant’s consent. For purposes of the preceding sentence, any modification to any of the following terms or conditions of an outstanding unexercised award or grant shall be deemed to be a material modification: (i) the number of shares of Common Stock covered by such award or grant, (ii) the exercise or other applicable price or Fair Market Value determination related to such award or grant, (iii) the period of time within which the award or grant vests and is exercisable and the terms and conditions of such vesting and exercise, (iv) the type of award or Stock Option, and (v) the restrictions on transferability of the award or grant and of any shares of Common Stock issued in connection with such award or grant.

Section 29.No Strict Construction. No rule of strict construction shall be applied against the Company, the Committee, or any other person in the interpretation of any of the terms of the Plan, any agreement executed in connection with the Plan, any award granted under the Plan, or any rule, regulation or procedure established by the Committee.

Section 30. Successors. This Plan is binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase, or otherwise.

15

Section 31.Plan Provisions Control. The terms of the Plan govern all awards granted under the Plan, and in no event will the Committee have the power to grant any award under the Plan which is contrary to any of the provisions of the Plan. In the event any provision of any award granted under the Plan shall conflict with any term in the Plan, the term in the Plan shall control.

Section 32. Headings. The headings used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize, or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions had been used in the Plan.

Section 33. Code Section 409A. It is intended that the Stock Options awarded pursuant to Section 6, Stock Appreciation Rights awarded pursuant to Section 7, and Restricted Stock Awards awarded pursuant to Section 8 not constitute a “deferral of compensation” within the meaning of Section 409A of the Code. It is further intended that the Performance Awards and Other Stock Awards granted pursuant to Sections 9 and 10 not constitute a “deferral of compensation” within the meaning of Section 409A of the Code or otherwise shall comply with the requirements of Section 409A of the Code and the Treasury regulations and other interpretive guidance issued thereunder in all material respects. The Plan shall be interpreted for all purposes and operated to the extent necessary in order to comply with the intent expressed in this Section 33. Notwithstanding the foregoing, the Company shall not be required to assume any increased economic burden in connection therewith. Although the Company intends to administer the Plan so that it will comply with the requirements of Section 409A of the Code, the Company does not represent or warrant that the Plan will comply with Section 409A of the Code or any other provision of federal, state, local, or non-United States law. Neither the Company nor any of its Subsidiaries, nor its or their respective directors, officers, employees, or advisers, shall be liable to any Participant (or any other individual claiming a benefit through the Participant) for any tax, interest, or penalties the Participant might owe as a result of participation in the Plan.

Section 34.Change in Control. Except as otherwise provided in the applicable award agreement, or in any other agreement between the Company or a Subsidiary and the Participant, or as determined by the Board in its sole discretion, in the event of a Change in Control, (i) the vesting of all Stock Options shall be accelerated in full (provided such awards have not already terminated or expired), (ii) the restrictions applicable to all outstanding Restricted Stock Awards shall lapse and such awards shall be settled in full within 45 days of the Change in Control, and (iii) all Performance Awards will become vested at the target performance level (as specified by the Committee) and will be settled within 45 days of the Change in Control unless such Performance Awards are subject to the provisions of Code Section 409A.

Except as otherwise provided in the applicable award agreement, or in any other agreement between the Company or a Subsidiary and the Participant, or as determined by the Board in its sole discretion, if any Stock Option or other right to acquire Common Stock under the Plan has been fully accelerated but is not exercised prior to the consummation of a Change in Control approved by the Board (other than a Change in Control described in Section 2.2(e)), such Stock Option or right will terminate, subject to any provision that has been expressly made by the Committee for the survival, substitution, exchange or other settlement of such Stock Option or right.

16

EX-31.A

Exhibit 31 (a)

CERTIFICATION

I, Arthur W. Crumlish, certify that:

1. I have reviewed this report on Form 10-Q of Computer Task Group, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2017	/s/ Arthur W. Crumlish
	Arthur W. Crumlish President and Chief Executive Officer

EX-31.B

Exhibit 31 (b)

CERTIFICATION

I, John M. Laubacker, certify that:

1. I have reviewed this report on Form 10-Q of Computer Task Group, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2017	/s/ John M. Laubacker
	John M. Laubacker Treasurer and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Computer Task Group, Incorporated, a New York corporation (the “Company”), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarter ended September 29, 2017 as filed with the Securities and Exchange Commission (the “Form 10-Q”) that:

(1) the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Computer Task Group, Incorporated and will be retained by Computer Task Group, Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

Date: October 26, 2017	/s/ Arthur W. Crumlish
	Arthur W. Crumlish President and Chief Executive Officer

Date: October 26, 2017	/s/ John M. Laubacker
	John M. Laubacker Treasurer and Chief Financial Officer

XML

Document and Entity Information Document - shares	9 Months Ended
	Sep. 29, 2017	Oct. 20, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 29, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	CTG
Entity Registrant Name	COMPUTER TASK GROUP INC
Entity Central Index Key	0000023111
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		15,491,816

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Income Statement [Abstract]
Revenue	$ 74,039	$ 78,065	$ 226,566	$ 247,401
Direct costs	61,010	64,193	185,651	203,072
Selling, general and administrative expenses	12,619	14,567	38,482	42,060
Goodwill impairment		15,785		37,329
Operating income (loss)	410	(16,480)	2,433	(35,060)
Interest and other income	18	140	71	165
Interest and other expense	129	63	278	247
Income (loss) before income taxes	299	(16,403)	2,226	(35,142)
Provision (benefit) for income taxes	259	(220)	1,001	639
Net income (loss)	$ 40	$ (16,183)	$ 1,225	$ (35,781)
Net income (loss) per share:
Basic	$ 0.00	$ (1.03)	$ 0.08	$ (2.30)
Diluted	$ 0.00	$ (1.03)	$ 0.08	$ (2.30)
Weighted average shares outstanding:
Basic	15,013	15,649	15,150	15,586
Diluted	15,316	15,649	15,408	15,586
Cash dividend per common share		$ 0.06		$ 0.18

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net Income (loss)	$ 40	$ (16,183)	$ 1,225	$ (35,781)
Foreign currency adjustment	671	129	2,150	299
Change in pension loss, net of taxes of $14 and $17 in the 2017 and 2016 third quarters, respectively, and $43 and $48 in the first three quarters of 2017 and 2016, respectively	(205)	(9)	(718)	(25)
Other comprehensive income	466	120	1,432	274
Comprehensive income (loss)	$ 506	$ (16,063)	$ 2,657	$ (35,507)

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Taxes attributable to change in pension loss	$ 14	$ 17	$ 43	$ 48

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 31, 2016
Current Assets:
Cash and cash equivalents	$ 11,446	$ 9,407
Accounts receivable, net of allowances of $376 and $469 in 2017 and 2016, respectively	66,409	71,355
Prepaid and other current assets	2,331	2,010
Income taxes receivable	853
Total current assets	81,039	82,772
Property, equipment and capitalized software, net	6,236	5,863
Deferred income taxes	6,052	6,886
Cash surrender value of life insurance	32,463	31,024
Investments	407	370
Total assets	126,197	126,915
Current Liabilities:
Accounts payable	6,307	6,973
Accrued compensation	21,548	17,365
Advance billings on contracts	2,013	935
Other current liabilities	3,948	4,638
Total current liabilities	33,816	29,911
Long-term debt	0	4,725
Deferred compensation benefits	13,385	12,993
Other long-term liabilities	673	467
Total liabilities	47,874	48,096
Shareholders’ Equity:
Common stock, par value $0.01 per share, 150,000,000 shares authorized; 27,017,824 shares issued in 2017 and 2016	270	270
Capital in excess of par value	120,276	123,947
Retained earnings	85,448	84,223
Less: Treasury stock of 11,527,430 and 11,077,779 shares at cost, in 2017 and 2016, respectively	(112,340)	(112,858)
Accumulated other comprehensive loss	(15,331)	(16,763)
Total shareholders’ equity	78,323	78,819
Total liabilities and shareholders’ equity	$ 126,197	$ 126,915

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Accounts receivable, allowances	$ 376	$ 469
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	27,017,824	27,017,824
Treasury stock, shares	11,527,430	11,077,779

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016
Cash flow from operating activities:
Net Income (loss)	$ 1,225	$ (35,781)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	1,152	1,267
Equity-based compensation expense	782	1,322
Deferred income taxes	791	(541)
Deferred compensation	127	85
Goodwill impairment		37,329
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	7,333	(1,730)
Increase in prepaid and other current assets	(275)	(956)
Increase in cash surrender value of life insurance	(1,439)	(1,064)
Decrease in accounts payable	(1,117)	(2,044)
Increase in accrued compensation	3,313	6,076
Increase in advance billings on contracts	923	404
Decrease in other current liabilities	(796)	(147)
Decrease in income taxes payable	(928)	(138)
Increase in other long-term liabilities	206	88
Net cash provided by operating activities	11,297	4,170
Cash flow from investing activities:
Additions to property and equipment	(406)	(1,529)
Additions to capitalized software	(942)	(370)
Life insurance proceeds		394
Deferred compensation plan investments, net	(45)	(119)
Net cash used in investing activities	(1,393)	(1,624)
Cash flow from financing activities:
Proceeds from long-term debt	39,955	37,245
Payments on long-term debt	(44,680)	(37,970)
Proceeds from stock option plan exercises	741	229
Excess tax benefits from equity-based compensation		22
Taxes remitted for shares withheld from equity-based compensation transactions	(285)	(347)
Proceeds from Employee Stock Purchase Plan	116	161
Change in cash overdraft, net	93	(226)
Dividends paid		(2,844)
Purchase of stock for treasury	(4,845)
Net cash used in financing activities	(8,905)	(3,730)
Effect of exchange rates on cash and cash equivalents	1,040	168
Net increase (decrease) in cash and cash equivalents	2,039	(1,016)
Cash and cash equivalents at beginning of year	9,407	10,801
Cash and cash equivalents at end of quarter	$ 11,446	$ 9,785

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Financial Statements

9 Months Ended

Sep. 29, 2017

Financial Statements [Abstract]

Financial Statements

1. Financial Statements

The condensed 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 condensed consolidated financial position, results of operations, comprehensive income (loss), and cash flows for the periods presented.

The Company's fiscal year-end is December 31. During the year, the quarters generally consist of a 13-week fiscal period where the last day of each of the first three quarters is a Friday. The 2017 third quarter began on July 1, 2017 and ended on September 29, 2017. The 2016 third quarter began on July 2, 2016 and ended September 30, 2016. There were 63 billable days in both the third quarters of 2017 and 2016, and 191 and 192 billable days in the 2017 and 2016 year-to-date periods, respectively.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 29, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. There are no unconsolidated entities, or off-balance sheet arrangements other than certain guarantees supporting office leases and the performance under government contracts in the Company's European operations. All inter-company accounts have been eliminated.

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires the Company's management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, the valuation allowance for deferred tax assets, actuarial assumptions including discount rates and expected rates of return on assets, as applicable, for the Company's defined benefit plans, the allowance for doubtful accounts receivable, assumptions underlying stock option valuation, investment valuation, legal matters, other contingencies, and progress toward completion and direct profit or loss on contracts. Management believes that the information and disclosures provided herein are adequate to present fairly the condensed consolidated financial position, results of operations, comprehensive income (loss), and cash flows of the Company. These condensed consolidated financial statements should 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.

The Company operates in one industry segment, providing IT services to its clients. At the highest level, CTG delivers services that are considered either IT solutions or IT and other staffing. CTG provides these primary services to all of the markets that it serves. The services provided typically encompass the IT business solution life cycle, including phases for planning, developing, implementing, managing, and ultimately maintaining the IT solution. A typical customer is an organization with large, complex information and data processing requirements.

IT solutions and IT and other staffing revenue as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
IT solutions		29.6	%		28.3	%		29.8	%		29.4	%
IT and other staffing		70.4	%		71.7	%		70.2	%		70.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

The Company promotes a significant portion of its services through five vertical market focus areas: Technology Service Providers, Manufacturing, Healthcare (which includes services provided to healthcare providers, health insurers (payers), and life sciences companies), Financial Services, and Energy. The Company focuses on these five vertical areas as it believes that these areas are either higher growth markets than the general IT services market and the general economy, or are areas that provide greater potential for the Company’s growth due to the size of the vertical market. The remainder of CTG’s revenue is derived from general markets.

CTG’s revenue by vertical market as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Technology service providers		33.3	%		36.4	%		33.1	%		35.2	%
Manufacturing		24.2	%		24.6	%		25.3	%		24.1	%
Healthcare		16.6	%		17.1	%		17.0	%		18.5	%
Financial services		9.5	%		7.7	%		8.5	%		7.6	%
Energy		4.9	%		4.9	%		4.9	%		5.4	%
General markets		11.5	%		9.3	%		11.2	%		9.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid for a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants. The Company utilizes a fair value hierarchy for its assets and liabilities, as applicable, based upon three levels of input, which are:

Level 1—quoted prices in active markets for identical assets or liabilities (observable)

Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable or can be supported by observable market data for essentially the full term of the asset or liability (observable)

Level 3—unobservable inputs that are supported by little or no market activity, but are significant to determining the fair value of the asset or liability (unobservable)

At September 29, 2017 and December 31, 2016, the carrying amounts of the Company’s cash of $11.4million and $9.4 million, respectively, approximated fair value.

The Company is also allowed to elect an irrevocable option to measure, on a contract-by-contract basis, specific financial instruments and certain other items that are currently not being measured at fair value. The Company did not elect to apply the fair value provisions of this accounting standard for any specific contracts during the quarters ended September 29, 2017 or September 30, 2016.

Life Insurance Policies

The Company has purchased life insurance on the lives of a number of former employees who are plan participants in the non-qualified defined benefit Executive Supplemental Benefit Plan. In total, there are policies on 20 individuals, whose average age is 74 years old.  Those policies have generated cash surrender value. At September 29, 2017 and December 31, 2016, these insurance policies had gross cash surrender values of $30.6 million and $30.1 million, respectively, which are included on the consolidated balance sheet in “Cash surrender value of life insurance” under non-current assets. There are no loans outstanding against these policies.

At September 29, 2017 and December 31, 2016, the total death benefit for the remaining policies was approximately $42.1 million and $41.1 million, respectively. Currently, upon the death of all of the remaining plan participants, the Company would expect to receive approximately $41.5 million after the payment of obligations, and, under current tax regulations, record a non-taxable gain of approximately $10.9 million.

Taxes Collected from Customers

In instances where the Company collects taxes from its customers for remittance to governmental authorities, primarily in its European operations, revenue and expenses are not presented on a gross basis in the condensed consolidated financial statements as such taxes are recorded in the Company's accounts on a net basis.

Cash and Cash Equivalents, and Cash Overdrafts

For purposes of the statement of cash flows, cash and cash equivalents are defined as cash on hand, demand deposits, and short-term, highly liquid investments with a maturity of three months or less. As the Company does not fund its bank accounts for the checks it has written until the checks are presented to the bank for payment, the "change in cash overdraft, net," line item as presented on the condensed consolidated statements of cash flows represents the increase or decrease in outstanding checks in a given period.

Property, Equipment and Capitalized Software Costs

Property, equipment and capitalized software at September 29, 2017 and December 31, 2016 are summarized as follows:     

(amounts in thousands)	September 29, 2017			December 31, 2016
Property, equipment and capitalized software	$	23,257		$	21,918
Accumulated depreciation and amortization		(17,021	)		(16,055	)
Property, equipment and capitalized software, net	$	6,236		$	5,863

The Company recorded $0.1 million and $0.9 million of capitalized software costs during the quarter and three quarters ended September 29, 2017, respectively, and $0.1 million and $0.4 million of capitalized software costs during the quarter and three quarters ended September 30, 2016. The increase in the 2017 periods as compared with 2016 is due to the purchase of software licenses, which the Company implemented in the first half of 2017. As of those dates, the Company had capitalized a total of $2.1 million and $1.0 million, respectively, for software projects developed for commercial use. Amortization periods range from two to five years, and are evaluated periodically for propriety. Amortization expense totaled approximately $0.1 million and $0.2 million in the quarter and three quarters ended September 29, 2017, and approximately $0.1 million in both the quarter and three quarters ended September 30, 2016. Accumulated amortization for these projects totaled $0.5 million and $0.3 million as of September 29, 2017 and September 30, 2016, respectively.

The Company is in the process of negotiating the sale of its corporate administrative building. The Company does not expect to record a loss on the sale of the building.

Guarantees

The Company has a number of guarantees in place in its European operations that support office leases and performance under government contracts. AtSeptember 29, 2017 and December 31, 2016, these guarantees totaled approximately $1.2 million and $1.1 million, respectively, and generally have expiration dates ranging from October 2017 through December 2024.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is only permitted in years beginning after December 31, 2016.

The Company currently records approximately 96.8% of its annual revenue on a time-and-material or progress-billing basis, with the remaining 3.2% recorded under a proportional method of accounting using an inputs methodology for fixed price projects.  For the 96.8% of the Company’s revenue recorded under the time-and-material or progress billings methods of accounting, the Company does not expect this new standard to change the timing or the amount of revenue that is currently recorded.  The Company is currently evaluating the 3.2% of revenue recorded under its fixed price projects to determine if the manner or timing of revenue recognition would change for existing projects.  However, the Company does not expect the impact of adopting this new accounting guidance to have a material impact on its consolidated operating results, but does expect the new standard to increase the Company’s accounting policy disclosures upon adoption.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classifications of Deferred Taxes,” which amended accounting guidance related to the presentation of deferred tax liabilities and assets. The amended guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. This guidance was effective for the Company for the quarter ended March 31, 2017. Upon adoption of this guidance in the 2017 first quarter, the Company reclassified approximately $0.9 million as of both March 31, 2017 and December 31, 2016 from current to non-current assets.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),”which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Topic 842 supersedes the previous leases standard, ASC 840, Leases. This guidance is effective for reporting periods beginning after December 15, 2018; however, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amended accounting guidance related to seven aspects of the accounting for share-based payments award transactions. This guidance became effective for the quarter ended March 31, 2017, and the Company recorded less than $0.2 million and approximately $0.3 million of additional tax expense for tax shortfalls in the quarter and three quarters ended September 29, 2017, respectively, that previously would have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. Additionally, the Company recorded $0.3 million in both of the periods ended September 29, 2017 and September 30, 2016, respectively, for taxes remitted for shares withheld from equity-based compensation transactions on the condensed consolidated statements of cash flows in the “cash flow from financing activities” section.

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Goodwill Impairment

9 Months Ended

Sep. 29, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill Impairment

3. Goodwill Impairment

Previously, in accordance with current accounting guidance for “Intangibles - Goodwill and Other,” the Company performed goodwill impairment testing at least annually (in the Company’s fourth quarter), unless indicators of impairment existed in interim periods. The goodwill that was recorded on the Company's condensed consolidated balance sheet related to CTG’s Healthcare Solutions (CTGHS) reporting unit. The Company used the two-step approach to test goodwill for potential impairment. Step One compared the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value is found to exceed the estimated fair value, Step Two must be performed. Step Two compared the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeded the implied fair value of its goodwill, an impairment loss was recognized in an amount equal to the excess.

During the 2016 first quarter, the Company determined that goodwill impairment indicators existed which required an interim impairment analysis. The impairment indicator was a significant and sustained decrease in the Company’s overall market capitalization, as the Company’s stock price during the 2016 first quarter fell by as much as 29% from its value at December 31, 2015. As a result of this indicator, the Company conducted an interim analysis of CTGHS to determine if an impairment existed. In performing the assessment, the Company estimated the fair value of CTGHS based on a combination of the income and market approaches. The income approach uses a discounted cash flow (DCF) method that utilizes the present value of expected future cash flows to estimate fair value of the reporting unit. The future cash flows for CTGHS was projected based on our estimates of future revenue, operating income and other factors such as working capital and capital expenditures, and a discount rate used in the present value calculation. As part of our projections, the Company took into account expected industry and market conditions for the healthcare industry, as well as trends currently affecting CTGHS. The market approach utilizes multiples of revenue and earnings before interest expense, taxes, depreciation and amortization (EBITDA) to estimate the fair value of the reporting unit. The market multiples used for CTGHS were based on competitor and industry data, along with the market multiples for the Company and other factors. The Company also completed a comparison of its overall market capitalization to the market value of CTGHS and the Company’s other non-reporting business units. Based upon the analysis performed, the Company determined that the fair value of CTGHS was less than its carrying value, which required the Company to perform a Step Two goodwill impairment test.

As a result of the 2016 first quarter Step Two analysis, the Company determined the implied fair value of its goodwill balance was below the carrying value. Accordingly, the Company recorded a non-tax deductible goodwill impairment charge of $21.5 million to reduce the value of its goodwill balance to the implied fair value.

During the 2016 third quarter, the Company determined that goodwill impairment indicators existed which required another interim impairment analysis. These impairment indicators were the unexpected declining revenue and profits in the CTGHS business unit, the resignation of both the sales leader (who was the Company’s former CEO) and the delivery leader of CTGHS in the 2016 third quarter, effectively leaving the business unit without executive leadership, and a continued decrease in the Company’s overall market capitalization.  As a result of these indicators, the Company conducted an interim analysis of CTGHS to determine if an impairment existed. In performing the assessment, the Company again performed the procedures it had previously performed in the 2016 first quarter, as detailed above. The most significant changes in the Step One analysis from the 2016 first quarter to the 2016 third quarter were reductions in the estimates of future revenue and operating income based upon the unexpected negative trends experienced in the third quarter, as well as the resulting reductions in the revenue and EBITDA market multiples that correlated to the decline in the Company’s overall market capitalization.  Based upon the analysis performed, the Company determined that the fair value of CTGHS was less than its carrying value, which required the Company to perform a Step Two goodwill impairment test.

As a result of the 2016 third quarter Step Two analysis, the Company determined the implied fair value of its goodwill balance was below the carrying value. Accordingly, the Company recorded a non-tax deductible goodwill impairment charge in the 2016 third quarter of $15.8 million that reduced the value of its goodwill balance to the implied fair value, or $0.0 as of September 30, 2016.

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Net Income (Loss) Per Share

9 Months Ended

Sep. 29, 2017

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

4. Net Income (Loss) Per Share

Basic and diluted earnings (loss) per share (EPS) for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended					For the Three Quarters Ended
(amounts in thousands, except per-share data)	September 29, 2017		September 30, 2016			September 29, 2017		September 30, 2016
Weighted-average number of shares outstanding    during period		15,013		15,649			15,150		15,586
Common stock equivalents from incremental shares    under equity-based compensation plans		303		—			258		—
Number of shares on which diluted earnings    per share is based		15,316		15,649			15,408		15,586
Net income (loss)	$	40	$	(16,183	)	$	1,225	$	(35,781	)
Net income (loss) per share
Basic	$	0.00	$	(1.03	)	$	0.08	$	(2.30	)
Diluted	$	0.00	$	(1.03	)	$	0.08	$	(2.30	)

Weighted-average shares represent the average number of issued shares less treasury shares, and shares held in the Stock Trusts for the 2016 periods, and for the basic EPS calculations, unvested restricted stock.

Certain options representing 1.0 million and 1.6 million shares of common stock were outstanding at September 29, 2017 and September 30, 2016, respectively, but were not included in the computation of diluted earnings per share as their effect on the computation would have been anti-dilutive.

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Investments

9 Months Ended

Sep. 29, 2017

Investments [Abstract]

Investments

5. Investments

The Company’s investments consist of mutual funds which are part of the Computer Task Group, Incorporated Non-qualified Key Employee Deferred Compensation Plan. At both September 29, 2017 and December 31, 2016, the Company’s investment balances, which are classified as trading securities, totaled approximately $0.4 million, and are measured at fair value. As there is an active trading market for these funds, fair value was determined using Level 1 inputs (see note 2 for “Fair Value”). Unrealized gains and losses on these securities are recorded in earnings and were nominal in both the 2017 and 2016 second quarter and year-to-date periods.

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Debt

9 Months Ended

Sep. 29, 2017

Debt Disclosure [Abstract]

Debt

6. Debt

In October 2015, the Company entered into its current unsecured revolving credit agreement which replaced a demand line of credit and allows the Company to borrow up to $40.0 million. The agreement also allows under its provisions for the Company to borrow up to $17.5 million against the cash surrender value of the Company's life insurance policies. The new agreement expires in October 2018, and has interest rates ranging from 0 to 50 basis points over the prime rate, and 150 to 200 basis points over LIBOR. The Company can borrow under the agreement at either the prime rate or a LIBOR rate option, at its discretion. At September 29, 2017 and December 31, 2016, there was $0.0 million and $4.7 million, respectively, outstanding under the revolving credit agreement.

The maximum amounts outstanding under the credit agreement in the 2017 and 2016 third quarters was $4.2 million and $4.6 million, respectively, while borrowings during those quarters averaged $2.3 million and $2.0 million, respectively, and carried weighted average interest rates of 2.9% and 3.5%, respectively.

Under the agreement, the Company is required to meet certain financial covenants in order to maintain borrowings under its revolving credit line, pay dividends (if any are declared), and make acquisitions. The covenants are measured quarterly, and at September 29, 2017, included a leverage ratio (total outstanding debt divided by earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for non-cash charges (including goodwill impairments) as necessary) which must be no greater than 2.75 to 1, a calculation of minimum tangible net worth (total shareholders' equity less goodwill and intangible assets) which must be no less than $48.6 million, and total annual expenditures for property, equipment and capitalized software must be no more than $5.0 million. The Company was in compliance with these covenants at September 29, 2017 as the leverage ratio was 0.0, the minimum tangible net worth was $76.9 million, and capital expenditures for property, equipment and capitalized software were $1.3 million in the 2017 year-to-date period.

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 29, 2017

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

7. Accumulated Other Comprehensive Loss

The components that make up accumulated other comprehensive loss on the condensed consolidated balance sheets at September 29, 2017 and December 31, 2016 are as follows: 

(amounts in thousands)	September 29, 2017			December 31, 2016
Foreign currency	$	(6,294	)	$	(8,444	)
Pension loss, net of tax of $792 in 2017, and $835 in 2016		(9,037	)		(8,319	)
Accumulated other comprehensive loss	$	(15,331	)	$	(16,763	)

During the 2017 and 2016 third quarters and first three quarters, actuarial losses were amortized to expense as follows:

	For the Quarter Ended						For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Amortization of actuarial losses	$	87		$	71		$	246		$	215
Income tax		(14	)		(17	)		(43	)		(48	)
Net of tax	$	73		$	54		$	203		$	167

The amortization of both prior service cost and actuarial losses are included in determining net periodic pension cost. See note 9, "Deferred Compensation and Other Benefits" for additional information.

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Income Taxes

9 Months Ended

Sep. 29, 2017

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The Company’s effective tax rate (“ETR”) is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The Company’s normal annual ETR typically ranges from 38% to 40% of pre-tax income. The 2017 third quarter and year-to-date ETR was 86.6% and 45.0%, respectively, and 2016 third quarter ETR was a benefit of 1.3% and the 2016 year-to-date ETR was (1.8)%.

The ETR was higher than the normal range in the 2017 third quarter and year-to-date primarily due lower pre-tax income and the adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which required the company to record approximately $0.2 million in the 2017 third quarter, and $0.3 million in the 2017 year-to-date period of additional tax expense for shortfalls in the quarter that would previously have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. This additional tax expense was partially offset by tax benefits for the Work Opportunity Tax Credit (WOTC) and Credit for Increasing Research Activities (R&D).

The ETR was lower than the normal range in the 2016 third quarter primarily due to the non-deductible goodwill impairment charge totaling $15.8 million taken in the quarter, which, when considered in the tax provision resulted in reduced taxable loss, and also due to the Work Opportunity Tax Credit (WOTC) and the Research and Development tax credit (R&D). The 2016 year-to-date ETR was lower than the normal range due to the non-deductible goodwill impairment charges totaling $37.3 million taken in the 2016 first and third quarters, which, when considered in the tax provision resulted in net taxable income, and due to the WOTC and the R&D credits.

At September 29, 2017, the undistributed earnings of foreign subsidiaries totaled approximately $23.6 million, which are considered to be indefinitely reinvested, and accordingly, no provision for taxes has been provided thereon. Given the complexities of the foreign tax calculations, it is not practicable to compute the tax liability that would be due upon distribution of those earnings in the form of dividends or liquidation or sale of the foreign subsidiaries.

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Deferred Compensation and Other Benefits

9 Months Ended

Sep. 29, 2017

Compensation And Retirement Disclosure [Abstract]

Deferred Compensation and Other Benefits

9. Deferred Compensation and Other Benefits

The Company maintains a non-qualified defined benefit Executive Supplemental Benefit Plan (ESBP) that provides certain former key executives with deferred compensation benefits, based on years of service and base compensation, payable during retirement. The plan was amended as of November 30, 1994, to freeze benefits for the participants in the plan at that time.

Net periodic pension cost for the quarters and three quarters ended September 29, 2017 and September 30, 2016 for the ESBP was as follows:

	For the Quarter Ended				For the Three Quarters Ended
(amounts in thousands)	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016
Interest cost	$	55	$	60	$	165	$	182
Amortization of actuarial loss		40		43		118		129
Net periodic pension cost	$	95	$	103	$	283	$	311

The ESBP is deemed to be unfunded as the Company has not specifically identified assets to be used to discharge the deferred compensation benefit liabilities. The Company has purchased insurance on the lives of certain plan participants in amounts deemed to be sufficient to reimburse the Company for the costs associated with the plan for those participants (see note 2 for “Life Insurance Policies”). The Company does not anticipate making contributions to the plan other than for benefit payments as required in 2017 and future years. In the 2017 third quarter and year-to-date periods, the Company made benefit payments totaling approximately $0.1 million and $0.5 million, respectively, and expects to make payments in 2017 totaling approximately $0.7 million.

The Company also retained a contributory defined benefit plan for its previous employees located in the Netherlands (NDBP) when the Company disposed of its subsidiary, CTG Nederland, B.V. Benefits paid are a function of a percentage of career average pay. This plan was curtailed for additional contributions in January 2003. Net periodic pension cost was approximately $15,000 and $44,000 in the 2017 third quarter and year-to-date periods, respectively, and $18,000 and $55,000 in the corresponding 2016 periods, respectively.

The Company does not anticipate making contributions to the NDBP in 2017. The assets for the NDBP are held by Aegon, a financial services firm located in the Netherlands. The Company maintains a contract with Aegon to insure future benefit payments of the NDBP; however, due to certain terms of the agreement and potential obligations to the Company, the NDBP has not been settled. The benefit payments to be made in 2017 are expected to be paid by Aegon from plan assets. The assets for the plan are included in a general portfolio of government bonds, a portion of which is allocated to the NDBP based upon the estimated pension liability associated with the plan. The fair market value of the plan’s assets equals the contractual value of the NDBP at any point in time. The fair value of the assets is determined using a Level 3 methodology (see note 2 for “Fair Value”). In 2017, the plan investments have a targeted minimum return to the Company of 4.0%, which is consistent with historical returns and the 4.0% return guaranteed to the participants of the plan. The Company, in conjunction with Aegon, intends to maintain the current investment strategy of investing plan assets solely in government bonds throughout 2017.

The change in the fair value of plan assets for the NDBP for the three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 30, 2016
Fair value of plan assets at beginning of period	$	6,920		$	7,106
Return on plan assets		217			216
Contributions		—			—
Benefits paid		(119	)		(113	)
Effect of exchange rate changes		852			207
Fair value of plan assets at end of quarter	$	7,870		$	7,416

During 2017, the Company determined that its fully funded pension plan related to Belgium employees, which the Company had historically accounted for as a defined contribution plan, should have been reported as a defined benefit plan. The impact of the error on the historical financial statements was immaterial. The Company recorded an increase to noncurrent assets and an offsetting adjustment primarily to direct costs of approximately $0.3 million, and an increase in income tax expense and deferred tax liabilities of approximately $0.1 million to correct the accounting during the 2017 third quarter.

Net periodic pension cost for the quarters and three quarters ended September 29, 2017 for the Belgium pension plan was as follows:

	For the Quarter Ended			For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 29, 2017
Service cost	$	70			$	210
Interest cost	$	39			$	117
Expected return on assets	$	(79	)		$	(238	)
Net periodic pension cost	$	30			$	89

The change in the fair value of plan assets for the three quarters ended September 29, 2017 was as follows:

	For the Three Quarters Ended
(amounts in thousands)	September 29, 2017
Fair value of plan assets at beginning of period	$	8,520
Return on plan assets		225
Contributions		343
Benefits paid		(10	)
Effect of exchange rate changes		1,075
Fair value of plan assets at end of quarter	$	10,153

The Company maintains the Key Employee Non-Qualified Deferred Compensation Plan for certain key executives. Company contributions to this plan, if any, are based on annually defined financial performance objectives. Cash contributions made to this plan in the 2017 first quarter for amounts earned in 2016 totaled $0.1 million, while contributions to the plan in the 2016 first quarter for amounts earned in 2015 totaled $0.2 million. The investments in the plan are included in the total assets of the Company, and are discussed in note 5, “Investments.” Participants in the plan have the ability to purchase stock units from the Company at current market prices using their available investment balances within the plan. In exchange for the cash received, the Company releases shares out of treasury stock equivalent to the number of share units purchased by the participants. These shares of common stock are not entitled to any voting rights, but will receive dividends in the event any are paid. The shares are being held by the Company, and will be released to the participants as prescribed by their payment elections under the plan. There were no stock units purchased in 2017, while 5,000 share units were purchased in the 2016 first quarter and none were purchased in the 2016 second or third quarter.

The Company maintains the Non-Employee Director Deferred Compensation Plan for its non-employee directors. Contributions in the 2017 third quarter and year-to-date periods were $0.1 million and $0.3 million, respectively. At the time the contributions were made, the non-employee directors elected to purchase stock units from the Company at current market prices using their available investment balance within the plan. Consistent with the Key Employee Non-Qualified Deferred Compensation Plan, in return for funds received, the Company released shares out of treasury stock equivalent to the number of share units purchased by the participants. These shares of common stock are not entitled to any voting rights, but will receive dividends in the event any are paid. The shares are being held by the Company, and will be released to the participants as prescribed by their payment elections under the plan.

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Equity-based Compensation

9 Months Ended

Sep. 29, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Equity-Based Compensation

10. Equity-based Compensation

During the 2017 second quarter and first quarter, the Company granted restricted stock totaling 316,165 shares and 7,500 shares, respectively, which were funded out of treasury stock. No stock option or restricted stock grants were issued during the 2017 third quarter. Restricted stock and stock units totaling 512,650 shares were granted in the 2016 first quarter of which 10,000 shares were issued out of treasury stock and 502,650 shares were issued out of the Computer Task Group, Inc. Stock Compensation Employee Trust.  No stock option or restricted stock grants were issued during the 2016 second or third quarter.

Of the 316,165 shares granted in the 2017 second quarter, 196,015 shares represented performance grants with a market condition that were granted to senior management on May 15, 2017. The closing price of the Company’s stock on that day was $5.75 per share.  Under these grant agreements, the Company’s stock price must increase 50% to $8.63 for a 30-day period within a three-year period from the date of grant for 50% of the grants to vest. The Company’s stock price must increase 100% to $11.50 for a 30-day period within a three-year period from the date of grant for the remaining 50% of the grants to vest.  

For these performance grants, the price on the date of grants was $5.75 per share, the expected volatility was 36.2%, the expected dividend yield is zero, and the risk-free rate of return was 1.49%.  Given these assumptions, the tranche of the grants that will vest with a 50% increase in the stock price have a value using a binomial model of $1.63 per share, and a derived service period of 1.22 years.  For the tranche of the grants that will vest with a 100% increase in the stock price, the value of the shares is $0.95 per share and have a derived service period of 1.79 years.  The Company is expensing these grants over the derived service period as noted for each tranche of a grant.

The remaining 2017 grants totaling 120,150 shares vest over a period of four years, with 25% of the grant vesting one year from the date of grant, and another 25% vesting each year thereafter until the grant is fully vested to the employee. The Company recognizes compensation expense for these grants over the expected term of the grant, or four years.

The restricted shares granted are considered outstanding, can be voted, and are eligible to receive dividends in the event any are paid. However, the restricted shares do not include a non-forfeitable right for the holder to receive dividends and none will be paid in the event the awards do not vest. Accordingly, only vested shares of outstanding restricted stock are included in the basic earnings per share calculation. The shares and share units were granted from the 2010 Equity Award Plan and the 1991 Restricted Stock plan.

The Company also granted 24,900 stock options during the 2017 second quarter on May 15, 2017.  The options have a fair value of $1.85 per share using a Black-Scholes valuation model.  The assumptions used to calculate that fair value include the price on date of grant of $5.75, an expected life of 4.2 years, expected volatility of 36.9%, an expected dividend yield of zero, and a risk free rate of 1.81%.  The options vest ratably over four years, and are being expensed over that period.  The options were granted from the 2010 Equity Award Plan.

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Treasury Stock

9 Months Ended

Sep. 29, 2017

Treasury Stock [Abstract]

Treasury Stock

11. Treasury Stock

During the 2016 fourth quarter, the Company’s Board of Directors authorized the repurchase of up to $10.0 million of the Company’s stock over a two year period of time.  This repurchase authorization replaced the previously outstanding authorization.  The Company purchased 276,000 shares for treasury during the 2017 third quarter, and 916,000 shares for treasury during the 2017 year-to-date period. At September 29, 2017, the Company had approximately $4.0 million left in its current stock repurchase authorization. During the 2017 third quarter and year-to-date periods, the Company issued 31,000 shares and 644,000, respectively, out of treasury stock primarily to fulfill the share requirements from purchases of stock in the Non-Employee Director Deferred Compensation Plan, stock option exercises, and restricted stock grants.

The Company did not purchase any shares for treasury during the 2016 third quarter or year-to-date periods. At September 30, 2016, approximately 0.5 million shares remained authorized for future purchases. During the 2016 third quarter and year-to-date periods the Company issued 45,000 shares and 305,000 shares, respectively, out of treasury stock primarily to fulfill the share requirements from stock option exercises and restricted stock grants.

During the 2016 second quarter, the Company terminated its Stock Employee Compensation Trust (SECT) and Omnibus Stock Trust, and recorded the remaining shares in those trusts, totaling approximately 2.8 million shares, as treasury stock.  The trusts had previously been established to fund employee stock plans and benefit programs.

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Significant Customers

9 Months Ended

Sep. 29, 2017

Risks And Uncertainties [Abstract]

Significant Customers

12. Significant Customers

In the 2017 third quarter, International Business Machines Corporation (IBM) was the Company’s largest customer and accounted for $18.6 million or 25.1% of consolidated revenue compared with $24.4 million or 31.3% of consolidated revenue in the comparable 2016 period. In the 2017 year-to-date period, IBM accounted for $57.9 million or 25.5% of consolidated revenue compared with $75.5 million or 30.5% of consolidated revenue in the comparable 2016 period. During the 2017 third quarter, the National Technical Services Agreement with IBM was extended for two years and now expires on December 31, 2019. The Company’s accounts receivable from IBM at September 29, 2017 and December 31, 2016 totaled $21.2 million and $28.0 million, respectively.

In the 2017 third quarter, SDI International (SDI) was the Company’s second largest customer and accounted for $8.4 million or 11.3% of consolidated revenue compared with $8.6 million or 11.0% of consolidated revenue in the comparable 2016 period. In the 2017 year-to-date period, SDI accounted for $27.2 million or 12.0% of consolidated revenue compared with $25.2 million or 10.2% of consolidated revenue in the comparable 2016 period. SDI acts as a vendor manager for Lenovo, and all of the Company's revenue generated through SDI is for employees working at Lenovo. The Company’s accounts receivable from SDI at September 29, 2017 and December 31, 2016 totaled $5.2 million and $5.6 million, respectively.

No other customer accounted for 10% or more of the Company's revenue during the 2017 or 2016 third quarter or year-to-date periods.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 29, 2017

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. There are no unconsolidated entities, or off-balance sheet arrangements other than certain guarantees supporting office leases and the performance under government contracts in the Company's European operations. All inter-company accounts have been eliminated.

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires the Company's management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, the valuation allowance for deferred tax assets, actuarial assumptions including discount rates and expected rates of return on assets, as applicable, for the Company's defined benefit plans, the allowance for doubtful accounts receivable, assumptions underlying stock option valuation, investment valuation, legal matters, other contingencies, and progress toward completion and direct profit or loss on contracts. Management believes that the information and disclosures provided herein are adequate to present fairly the condensed consolidated financial position, results of operations, comprehensive income (loss), and cash flows of the Company. These condensed consolidated financial statements should 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.

Concentration Risk, Credit Risk

The Company operates in one industry segment, providing IT services to its clients. At the highest level, CTG delivers services that are considered either IT solutions or IT and other staffing. CTG provides these primary services to all of the markets that it serves. The services provided typically encompass the IT business solution life cycle, including phases for planning, developing, implementing, managing, and ultimately maintaining the IT solution. A typical customer is an organization with large, complex information and data processing requirements.

IT solutions and IT and other staffing revenue as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
IT solutions		29.6	%		28.3	%		29.8	%		29.4	%
IT and other staffing		70.4	%		71.7	%		70.2	%		70.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

The Company promotes a significant portion of its services through five vertical market focus areas: Technology Service Providers, Manufacturing, Healthcare (which includes services provided to healthcare providers, health insurers (payers), and life sciences companies), Financial Services, and Energy. The Company focuses on these five vertical areas as it believes that these areas are either higher growth markets than the general IT services market and the general economy, or are areas that provide greater potential for the Company’s growth due to the size of the vertical market. The remainder of CTG’s revenue is derived from general markets.

CTG’s revenue by vertical market as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Technology service providers		33.3	%		36.4	%		33.1	%		35.2	%
Manufacturing		24.2	%		24.6	%		25.3	%		24.1	%
Healthcare		16.6	%		17.1	%		17.0	%		18.5	%
Financial services		9.5	%		7.7	%		8.5	%		7.6	%
Energy		4.9	%		4.9	%		4.9	%		5.4	%
General markets		11.5	%		9.3	%		11.2	%		9.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid for a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants. The Company utilizes a fair value hierarchy for its assets and liabilities, as applicable, based upon three levels of input, which are:

Level 1—quoted prices in active markets for identical assets or liabilities (observable)

Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable or can be supported by observable market data for essentially the full term of the asset or liability (observable)

Level 3—unobservable inputs that are supported by little or no market activity, but are significant to determining the fair value of the asset or liability (unobservable)

At September 29, 2017 and December 31, 2016, the carrying amounts of the Company’s cash of $11.4million and $9.4 million, respectively, approximated fair value.

The Company is also allowed to elect an irrevocable option to measure, on a contract-by-contract basis, specific financial instruments and certain other items that are currently not being measured at fair value. The Company did not elect to apply the fair value provisions of this accounting standard for any specific contracts during the quarters ended September 29, 2017 or September 30, 2016.

Life Insurance Policies

Life Insurance Policies

The Company has purchased life insurance on the lives of a number of former employees who are plan participants in the non-qualified defined benefit Executive Supplemental Benefit Plan. In total, there are policies on 20 individuals, whose average age is 74 years old.  Those policies have generated cash surrender value. At September 29, 2017 and December 31, 2016, these insurance policies had gross cash surrender values of $30.6 million and $30.1 million, respectively, which are included on the consolidated balance sheet in “Cash surrender value of life insurance” under non-current assets. There are no loans outstanding against these policies.

At September 29, 2017 and December 31, 2016, the total death benefit for the remaining policies was approximately $42.1 million and $41.1 million, respectively. Currently, upon the death of all of the remaining plan participants, the Company would expect to receive approximately $41.5 million after the payment of obligations, and, under current tax regulations, record a non-taxable gain of approximately $10.9 million.

Taxes Collected from Customers

In instances where the Company collects taxes from its customers for remittance to governmental authorities, primarily in its European operations, revenue and expenses are not presented on a gross basis in the condensed consolidated financial statements as such taxes are recorded in the Company's accounts on a net basis.

Cash and Cash Equivalents, and Cash Overdrafts

For purposes of the statement of cash flows, cash and cash equivalents are defined as cash on hand, demand deposits, and short-term, highly liquid investments with a maturity of three months or less. As the Company does not fund its bank accounts for the checks it has written until the checks are presented to the bank for payment, the "change in cash overdraft, net," line item as presented on the condensed consolidated statements of cash flows represents the increase or decrease in outstanding checks in a given period.

Property, Equipment and Capitalized Software Costs

Property, Equipment and Capitalized Software Costs

Property, equipment and capitalized software at September 29, 2017 and December 31, 2016 are summarized as follows:     

(amounts in thousands)	September 29, 2017			December 31, 2016
Property, equipment and capitalized software	$	23,257		$	21,918
Accumulated depreciation and amortization		(17,021	)		(16,055	)
Property, equipment and capitalized software, net	$	6,236		$	5,863

The Company recorded $0.1 million and $0.9 million of capitalized software costs during the quarter and three quarters ended September 29, 2017, respectively, and $0.1 million and $0.4 million of capitalized software costs during the quarter and three quarters ended September 30, 2016. The increase in the 2017 periods as compared with 2016 is due to the purchase of software licenses, which the Company implemented in the first half of 2017. As of those dates, the Company had capitalized a total of $2.1 million and $1.0 million, respectively, for software projects developed for commercial use. Amortization periods range from two to five years, and are evaluated periodically for propriety. Amortization expense totaled approximately $0.1 million and $0.2 million in the quarter and three quarters ended September 29, 2017, and approximately $0.1 million in both the quarter and three quarters ended September 30, 2016. Accumulated amortization for these projects totaled $0.5 million and $0.3 million as of September 29, 2017 and September 30, 2016, respectively.

The Company is in the process of negotiating the sale of its corporate administrative building. The Company does not expect to record a loss on the sale of the building.

Guarantees

Guarantees

The Company has a number of guarantees in place in its European operations that support office leases and performance under government contracts. AtSeptember 29, 2017 and December 31, 2016, these guarantees totaled approximately $1.2 million and $1.1 million, respectively, and generally have expiration dates ranging from October 2017 through December 2024.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is only permitted in years beginning after December 31, 2016.

The Company currently records approximately 96.8% of its annual revenue on a time-and-material or progress-billing basis, with the remaining 3.2% recorded under a proportional method of accounting using an inputs methodology for fixed price projects.  For the 96.8% of the Company’s revenue recorded under the time-and-material or progress billings methods of accounting, the Company does not expect this new standard to change the timing or the amount of revenue that is currently recorded.  The Company is currently evaluating the 3.2% of revenue recorded under its fixed price projects to determine if the manner or timing of revenue recognition would change for existing projects.  However, the Company does not expect the impact of adopting this new accounting guidance to have a material impact on its consolidated operating results, but does expect the new standard to increase the Company’s accounting policy disclosures upon adoption.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classifications of Deferred Taxes,” which amended accounting guidance related to the presentation of deferred tax liabilities and assets. The amended guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. This guidance was effective for the Company for the quarter ended March 31, 2017. Upon adoption of this guidance in the 2017 first quarter, the Company reclassified approximately $0.9 million as of both March 31, 2017 and December 31, 2016 from current to non-current assets.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),”which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Topic 842 supersedes the previous leases standard, ASC 840, Leases. This guidance is effective for reporting periods beginning after December 15, 2018; however, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amended accounting guidance related to seven aspects of the accounting for share-based payments award transactions. This guidance became effective for the quarter ended March 31, 2017, and the Company recorded less than $0.2 million and approximately $0.3 million of additional tax expense for tax shortfalls in the quarter and three quarters ended September 29, 2017, respectively, that previously would have been recorded to capital in excess of par value on the Company’s condensed consolidated balance sheet. Additionally, the Company recorded $0.3 million in both of the periods ended September 29, 2017 and September 30, 2016, respectively, for taxes remitted for shares withheld from equity-based compensation transactions on the condensed consolidated statements of cash flows in the “cash flow from financing activities” section.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 29, 2017

Accounting Policies [Abstract]

Summary of IT Solutions and IT and Other Staffing Revenue as Percentage of Total Revenue

IT solutions and IT and other staffing revenue as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
IT solutions		29.6	%		28.3	%		29.8	%		29.4	%
IT and other staffing		70.4	%		71.7	%		70.2	%		70.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Revenue by Vertical Market as Percentage of Total Revenue

CTG’s revenue by vertical market as a percentage of total revenue for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended						For the Three Quarters Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Technology service providers		33.3	%		36.4	%		33.1	%		35.2	%
Manufacturing		24.2	%		24.6	%		25.3	%		24.1	%
Healthcare		16.6	%		17.1	%		17.0	%		18.5	%
Financial services		9.5	%		7.7	%		8.5	%		7.6	%
Energy		4.9	%		4.9	%		4.9	%		5.4	%
General markets		11.5	%		9.3	%		11.2	%		9.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Schedule of Property, Equipment and Capitalized Software

Property, equipment and capitalized software at September 29, 2017 and December 31, 2016 are summarized as follows:     

(amounts in thousands)	September 29, 2017			December 31, 2016
Property, equipment and capitalized software	$	23,257		$	21,918
Accumulated depreciation and amortization		(17,021	)		(16,055	)
Property, equipment and capitalized software, net	$	6,236		$	5,863

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Net Income (Loss) Per Share (Tables)

9 Months Ended

Sep. 29, 2017

Earnings Per Share [Abstract]

Basic and Diluted Earning (Loss) Per Share (EPS)

Basic and diluted earnings (loss) per share (EPS) for the quarters and three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Quarter Ended					For the Three Quarters Ended
(amounts in thousands, except per-share data)	September 29, 2017		September 30, 2016			September 29, 2017		September 30, 2016
Weighted-average number of shares outstanding    during period		15,013		15,649			15,150		15,586
Common stock equivalents from incremental shares    under equity-based compensation plans		303		—			258		—
Number of shares on which diluted earnings    per share is based		15,316		15,649			15,408		15,586
Net income (loss)	$	40	$	(16,183	)	$	1,225	$	(35,781	)
Net income (loss) per share
Basic	$	0.00	$	(1.03	)	$	0.08	$	(2.30	)
Diluted	$	0.00	$	(1.03	)	$	0.08	$	(2.30	)

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 29, 2017

Accumulated Other Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The components that make up accumulated other comprehensive loss on the condensed consolidated balance sheets at September 29, 2017 and December 31, 2016 are as follows: 

(amounts in thousands)	September 29, 2017			December 31, 2016
Foreign currency	$	(6,294	)	$	(8,444	)
Pension loss, net of tax of $792 in 2017, and $835 in 2016		(9,037	)		(8,319	)
Accumulated other comprehensive loss	$	(15,331	)	$	(16,763	)

Schedule of Net Benefit Costs

During the 2017 and 2016 third quarters and first three quarters, actuarial losses were amortized to expense as follows:

	For the Quarter Ended						For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Amortization of actuarial losses	$	87		$	71		$	246		$	215
Income tax		(14	)		(17	)		(43	)		(48	)
Net of tax	$	73		$	54		$	203		$	167

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Deferred Compensation and Other Benefits (Tables)

9 Months Ended

Sep. 29, 2017

Defined Benefit Plan Disclosure [Line Items]

Schedule of Net Periodic Pension Cost

Net periodic pension cost for the quarters and three quarters ended September 29, 2017 and September 30, 2016 for the ESBP was as follows:

	For the Quarter Ended				For the Three Quarters Ended
(amounts in thousands)	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016
Interest cost	$	55	$	60	$	165	$	182
Amortization of actuarial loss		40		43		118		129
Net periodic pension cost	$	95	$	103	$	283	$	311

Schedule of Change in Fair Value of Plan Assets

The change in the fair value of plan assets for the three quarters ended September 29, 2017 was as follows:

	For the Three Quarters Ended
(amounts in thousands)	September 29, 2017
Fair value of plan assets at beginning of period	$	8,520
Return on plan assets		225
Contributions		343
Benefits paid		(10	)
Effect of exchange rate changes		1,075
Fair value of plan assets at end of quarter	$	10,153

NDBP [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of Change in Fair Value of Plan Assets

The change in the fair value of plan assets for the NDBP for the three quarters ended September 29, 2017 and September 30, 2016 was as follows:

	For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 30, 2016
Fair value of plan assets at beginning of period	$	6,920		$	7,106
Return on plan assets		217			216
Contributions		—			—
Benefits paid		(119	)		(113	)
Effect of exchange rate changes		852			207
Fair value of plan assets at end of quarter	$	7,870		$	7,416

Belgium Pension Plan [Member]

Defined Benefit Plan Disclosure [Line Items]

Schedule of Net Periodic Pension Cost

Net periodic pension cost for the quarters and three quarters ended September 29, 2017 for the Belgium pension plan was as follows:

	For the Quarter Ended			For the Three Quarters Ended
(amounts in thousands)	September 29, 2017			September 29, 2017
Service cost	$	70			$	210
Interest cost	$	39			$	117
Expected return on assets	$	(79	)		$	(238	)
Net periodic pension cost	$	30			$	89

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Financial Statements - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Billable days	63 days	63 days	191 days	192 days

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Summary of Significant Accounting Policies - Basis of Presentation and Consolidation (Details)	9 Months Ended
	Sep. 29, 2017 segment Market
Accounting Policies [Abstract]
Number of operating segments | segment	1
Number of vertical market focus areas | Market	5

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Summary of Significant Accounting Policies - Summary of IT Solutions and IT and Other Staffing Revenue as Percentage of Total Revenue (Details) - Product Concentration Risk [Member] - Sales Revenue, Services, Net [Member]	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Product Information [Line Items]
Revenue, percent	100.00%	100.00%	100.00%	100.00%
IT Solutions [Member]
Product Information [Line Items]
Revenue, percent	29.60%	28.30%	29.80%	29.40%
IT and Other Staffing [Member]
Product Information [Line Items]
Revenue, percent	70.40%	71.70%	70.20%	70.60%

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Summary of Significant Accounting Policies - Revenue by Vertical Market as Percentage of Total Revenue (Details) - Customer Concentration Risk [Member] - Sales Revenue, Services, Net [Member]	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Concentration Risk [Line Items]
Total revenue	100.00%	100.00%	100.00%	100.00%
Technology Service Providers [Member]
Concentration Risk [Line Items]
Total revenue	33.30%	36.40%	33.10%	35.20%
Manufacturing [Member]
Concentration Risk [Line Items]
Total revenue	24.20%	24.60%	25.30%	24.10%
Healthcare [Member]
Concentration Risk [Line Items]
Total revenue	16.60%	17.10%	17.00%	18.50%
Financial Services [Member]
Concentration Risk [Line Items]
Total revenue	9.50%	7.70%	8.50%	7.60%
Energy [Member]
Concentration Risk [Line Items]
Total revenue	4.90%	4.90%	4.90%	5.40%
General Markets [Member]
Concentration Risk [Line Items]
Total revenue	11.50%	9.30%	11.20%	9.20%

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Summary of Significant Accounting Policies - Fair Value (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 31, 2016	Dec. 29, 2016	Sep. 30, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Cash and cash equivalents	$ 11,446	$ 9,407	$ 9,407	$ 9,785	$ 10,801

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Summary of Significant Accounting Policies - Life Insurance Policies (Details)	9 Months Ended
	Sep. 29, 2017 USD ($) Individual	Dec. 31, 2016 USD ($)
Accounting Policies [Abstract]
Number of former employees covered under insurance policies | Individual	20
Average age of former employees covered under insurance policies	74 years
Gross cash surrender values of life insurance	$ 30,600,000	$ 30,100,000
Loans on cash surrender value	0
Gross death benefit of life insurance contracts	42,100,000	$ 41,100,000
Life insurance proceeds to be received upon the death of participants	41,500,000
Life insurance gain to be recognized upon death of participants	$ 10,900,000

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Summary of Significant Accounting Policies - Schedule of Property, Equipment and Capitalized Software (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 31, 2016
Property Plant And Equipment Net By Type [Abstract]
Property, equipment, and capitalized software	$ 23,257	$ 21,918
Accumulated depreciation and amortization	(17,021)	(16,055)
Property, equipment and capitalized software, net	$ 6,236	$ 5,863

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Summary of Significant Accounting Policies - Property, Equipment and Capitalized Software Costs - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016	Dec. 31, 2016
Property Plant And Equipment [Line Items]
Capitalized computer software, additions	$ 100	$ 100	$ 900	$ 400
Capitalized software developed for internal use	23,257		23,257		$ 21,918
Depreciation and amortization expense			1,152	1,267
Capitalized software costs, accumulated amortization	500	300	500	300
Capitalized Software [Member]
Property Plant And Equipment [Line Items]
Capitalized software developed for internal use	2,100	1,000	2,100	1,000
Depreciation and amortization expense	$ 100	$ 100	$ 200	$ 100
Capitalized Software [Member] | Minimum [Member]
Property Plant And Equipment [Line Items]
Property, equipment and capitalized software, useful life			2 years
Capitalized Software [Member] | Maximum [Member]
Property Plant And Equipment [Line Items]
Property, equipment and capitalized software, useful life			5 years

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Summary of Significant Accounting Policies - Guarantees (Details) - USD ($) $ in Millions	Sep. 29, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Current carrying value of guarantees	$ 1.2	$ 1.1

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Summary of Significant Accounting Policies - Recently Issued Accounting Standards (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 29, 2017	Sep. 29, 2017	Sep. 30, 2016	Mar. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Reclassification of deferred tax current assets to non-current assets				$ 900	$ 900
Taxes remitted for shares withheld from equity-based compensation transactions		$ 285	$ 347
ASU 2016-09 [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Additional tax expense	$ 200	300
Taxes remitted for shares withheld from equity-based compensation transactions		$ 300	$ 300
Sales Revenue, Net [Member] | Time and Material or Progress Billing Method of Accounting [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Revenue, percent		96.80%
Sales Revenue, Net [Member] | Proportional Method of Accounting [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Revenue, percent		3.20%

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Goodwill Impairment - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Apr. 01, 2016	Sep. 30, 2016
Goodwill [Line Items]
Goodwill impairment charge	$ 15,785,000	$ 21,500,000	$ 37,329,000
Goodwill	$ 0.0		$ 0.0
Maximum [Member]
Goodwill [Line Items]
Percentage of decrease in stock price		(29.00%)

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Net Income (Loss) Per Share - Schedule of Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Weighted-average number of shares outstanding during period	15,013	15,649	15,150	15,586
Common stock equivalents from incremental shares under equity-based compensation plans	303		258
Number of shares on which diluted earnings per share is based	15,316	15,649	15,408	15,586
Net income (loss)	$ 40	$ (16,183)	$ 1,225	$ (35,781)
Net income (loss) per share, basic	$ 0.00	$ (1.03)	$ 0.08	$ (2.30)
Net income (loss) per share, diluted	$ 0.00	$ (1.03)	$ 0.08	$ (2.30)

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Net Income (Loss) Per Share - Additional Information (Details) - shares shares in Millions	9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016
Employee Stock Option [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities not included in the computation of earnings per share	1.0	1.6

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Investments - Additional Information (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 31, 2016
Investments [Abstract]
Trading securities	$ 407	$ 370

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Debt - (Details) - USD ($)	1 Months Ended	9 Months Ended
	Oct. 31, 2015	Sep. 29, 2017	Sep. 30, 2016	Dec. 31, 2016
Line of Credit Facility [Line Items]
Long-term debt		$ 0		$ 4,725,000
Maximum amount outstanding		4,200,000	$ 4,600,000
Average amount outstanding		$ 2,300,000	$ 2,000,000
Weighted-average interest rate		2.90%	3.50%
Debt covenants, Maximum leverage ratio		275.00%
Debt covenants, Minimum tangible net worth		$ 48,600,000
Debt covenants, Maximum capital expenditures		$ 5,000,000
Leverage ratio		0.0
Tangible net worth		$ 76,900,000
Capital expenditures		$ 1,300,000
Unsecured Revolving Credit Agreement [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 40,000,000
Line of credit facility, expiration date		2018-10
Life Insurance Loan Capacity [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 17,500,000
Prime Rate [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.00%
Prime Rate [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.50%
London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	2.00%

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Accumulated Other Comprehensive Loss - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Sep. 29, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]
Foreign currency	$ (6,294)	$ (8,444)
Pension loss, net of tax of $792 in 2017, and $835 in 2016	(9,037)	(8,319)
Accumulated other comprehensive loss	$ (15,331)	$ (16,763)

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Accumulated Other Comprehensive Loss - Schedule of Accumulated Other Comprehensive Loss (Parenthetical) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 29, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]
Tax on pension loss	$ 792	$ 835

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Accumulated Other Comprehensive Loss - Schedule of Net Benefit Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Postemployment Benefits [Abstract]
Amortization of actuarial losses	$ 87	$ 71	$ 246	$ 215
Income tax	(14)	(17)	(43)	(48)
Net of tax	$ 73	$ 54	$ 203	$ 167

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Apr. 01, 2016	Sep. 29, 2017	Sep. 30, 2016
Income Taxes Disclosure [Line Items]
Effective income tax rate	86.60%	(1.30%)		45.00%	(1.80%)
Goodwill impairment charge		$ 15,785,000	$ 21,500,000		$ 37,329,000
Undistributed earnings of foreign subsidiaries	$ 23,600,000			$ 23,600,000
Provision for income taxes				0
ASU 2016-09 [Member]
Income Taxes Disclosure [Line Items]
Additional tax expense	$ 200,000			$ 300,000
Minimum [Member]
Income Taxes Disclosure [Line Items]
Effective income tax rate				38.00%
Maximum [Member]
Income Taxes Disclosure [Line Items]
Effective income tax rate				40.00%

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Deferred Compensation and Other Benefits - Schedule of Net Periodic Pension Cost for ESBP (Details) - Deferred Compensation and Other Benefits [Member] - Executive Officer [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016
Net periodic pension cost for the Executive Supplemental Benefit Plan
Interest cost	$ 55	$ 60	$ 165	$ 182
Amortization of actuarial loss	40	43	118	129
Net periodic pension cost	$ 95	$ 103	$ 283	$ 311

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Deferred Compensation and Other Benefits - Additional Information (Details) - USD ($)	3 Months Ended					9 Months Ended
	Sep. 29, 2017	Mar. 31, 2017	Sep. 30, 2016	Jul. 01, 2016	Apr. 01, 2016	Sep. 29, 2017	Sep. 30, 2016	Jun. 30, 2017
ESBP [Member]
Deferred Compensation Text Details [Line Items]
Benefit plan, employer contributions	$ 100,000					$ 500,000
Estimated 2017 full year benefit payments								$ 700,000
NDBP [Member]
Deferred Compensation Text Details [Line Items]
Net periodic pension cost	15,000		$ 18,000			$ 44,000	$ 55,000
Targeted minimum return						4.00%
Guaranteed return						4.00%
Belgium Pension Plan [Member]
Deferred Compensation Text Details [Line Items]
Net periodic pension cost	30,000					$ 89,000
Increase to noncurrent assets and offsetting adjustment to direct costs						300,000
Increase in income tax expense and deferred tax liabilities						$ 100,000
Key Employee Non Qualified Deferred Compensation Plan [Member]
Deferred Compensation Text Details [Line Items]
Benefit plan, employer contributions		$ 100,000			$ 200,000
Key Employee Non Qualified Deferred Compensation Plan [Member] | Deferred Compensation and Other Benefits [Member]
Deferred Compensation Text Details [Line Items]
Common stock units issued under plan			0	0	5,000	0
Non Employee Director Deferred Compensation Plan [Member]
Deferred Compensation Text Details [Line Items]
Benefit plan, employer contributions	$ 100,000					$ 300,000

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Deferred Compensation and Other Benefits - Schedule of Change in Fair Value of Plan Assets for NDBP (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 29, 2017	Sep. 30, 2016
Reconciliation of Fair Value of Plan Assets
Fair value of plan assets at beginning of period	$ 8,520
Return on plan assets	225
Contributions	343
Benefits paid	(10)
Effect of exchange rate changes	1,075
Fair value of plan assets at end of quarter	10,153
NDBP [Member]
Reconciliation of Fair Value of Plan Assets
Fair value of plan assets at beginning of period	6,920	$ 7,106
Return on plan assets	217	216
Benefits paid	(119)	(113)
Effect of exchange rate changes	852	207
Fair value of plan assets at end of quarter	$ 7,870	$ 7,416

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Deferred Compensation and Other Benefits - Schedule of Net Periodic Pension Cost (Details) - Belgium Pension Plan [Member] - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 29, 2017	Sep. 29, 2017
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 70	$ 210
Interest cost	39	117
Expected return on assets	(79)	(238)
Net periodic pension cost	$ 30	$ 89

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Deferred Compensation and Other Benefits - Schedule of Change in Fair Value of Plan Assets (Details) $ in Thousands	9 Months Ended
	Sep. 29, 2017 USD ($)
Reconciliation of Fair Value of Plan Assets
Fair value of plan assets at beginning of period	$ 8,520
Return on plan assets	225
Contributions	343
Benefits paid	(10)
Effect of exchange rate changes	1,075
Fair value of plan assets at end of quarter	$ 10,153

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Equity-based Compensation - Additional Information (Details) - $ / shares		3 Months Ended						9 Months Ended
	May 15, 2017	Sep. 29, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2016	Jul. 01, 2016	Apr. 01, 2016	Sep. 29, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and stock units, granted		0	316,165	7,500	0	0	512,650
Stock options granted		0			0	0
Restricted stock, restricted stock units and stock options granted, description								Restricted stock and stock units totaling 512,650 shares were granted in the 2016 first quarter of which 10,000 shares were issued out of treasury stock and 502,650 shares were issued out of the Computer Task Group, Inc. Stock Compensation Employee Trust. No stock option or restricted stock grants were issued during the 2016 second or third quarter.
Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and stock units, granted	196,015
Closing price of company's stock granted to senior management			$ 5.75
Expected volatility			36.20%
Expected dividend yield			0.00%
Risk-free rate of return			1.49%
Performance Shares [Member] | Share-based Compensation Award, Tranche One [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Closing price of company's stock granted to senior management			$ 8.63
Percentage of shares to be increased before vesting period			50.00%
Shares performance period			30 days
Vesting period			3 years
Shares vesting percentage			50.00%
Derived services period			1 year 2 months 20 days
Performance Shares [Member] | Share-based Compensation Award, Tranche One [Member] | Binomial Model [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share price to be increased before vesting period			$ 1.63
Performance Shares [Member] | Stock Vesting, Two Year From Grant Date [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Closing price of company's stock granted to senior management			$ 11.50
Percentage of shares to be increased before vesting period			100.00%
Shares performance period			30 days
Vesting period			3 years
Shares vesting percentage			50.00%
Derived services period			1 year 9 months 15 days
Performance Shares [Member] | Stock Vesting, Two Year From Grant Date [Member] | Binomial Model [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share price to be increased before vesting period			$ 0.95
Non Performance Shares [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and stock units, granted			120,150
Vesting period			4 years
Shares vesting percentage			25.00%
Non Performance Shares [Member] | Share-based Compensation Award, Tranche One [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares vesting percentage			25.00%
Non Performance Shares [Member] | Stock Vesting, Two Year From Grant Date [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares vesting percentage			25.00%
Non Performance Shares [Member] | Stock Vesting, Three Year From Grant Date [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares vesting percentage			25.00%
Non Performance Shares [Member] | Stock Vesting, Four Year From Grant Date [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares vesting percentage			25.00%
Treasury Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and stock units, granted							502,650
Stock Trusts [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and stock units, granted							10,000
Employee Stock Option [Member] | 2010 Equity Award Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	24,900
Expected volatility	36.90%
Expected dividend yield	0.00%
Risk-free rate of return	1.81%
Stock options granted. fair value	$ 1.85
Stock option vest, fair value	$ 5.75
Expected term	4 years 2 months 13 days

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Treasury Stock - Additional Information (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 29, 2017	Dec. 31, 2016	Sep. 30, 2016	Sep. 29, 2017	Sep. 30, 2016	Jul. 01, 2016
Equity Class Of Treasury Stock [Line Items]
Stock repurchase program, authorized amount		$ 10,000,000
Stock repurchase program, period		2 years
Treasury stock purchase, shares	276,000		0	916,000	0
Shares authorized to repurchase, remaining amount	$ 4,000,000			$ 4,000,000
Issued treasury stock, shares	31,000		45,000	644,000	305,000
Remaining shares authorized for repurchase			500,000		500,000
Remaining shares from the trusts recorded as treasury stock	11,527,430	11,077,779		11,527,430
Stock Employee Compensation Trust (SECT) and Omnibus Stock Trust [Member]
Equity Class Of Treasury Stock [Line Items]
Remaining shares from the trusts recorded as treasury stock						2,800,000

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Significant Customers - Additional Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 29, 2017 USD ($) Customer	Sep. 30, 2016 USD ($) Customer	Sep. 29, 2017 USD ($) Customer	Sep. 30, 2016 USD ($) Customer	Dec. 31, 2016 USD ($)
Segment Reporting Information [Line Items]
Revenue	$ 74,039	$ 78,065	$ 226,566	$ 247,401
Accounts receivable, net	$ 66,409		$ 66,409		$ 71,355
Number of major customer | Customer	0	0	0	0
Customer Concentration Risk [Member] | Sales Revenue, Services, Net [Member]
Segment Reporting Information [Line Items]
Revenue percent	100.00%	100.00%	100.00%	100.00%
IBM [Member]
Segment Reporting Information [Line Items]
Revenue	$ 18,600	$ 24,400	$ 57,900	$ 75,500
Extended period of services agreement			2 years
Services agreement expiration date			Dec. 31, 2019
Accounts receivable, net	$ 21,200		$ 21,200		28,000
IBM [Member] | Customer Concentration Risk [Member] | Sales Revenue, Services, Net [Member]
Segment Reporting Information [Line Items]
Revenue percent	25.10%	31.30%	25.50%	30.50%
SDI [Member]
Segment Reporting Information [Line Items]
Revenue	$ 8,400	$ 8,600	$ 27,200	$ 25,200
Accounts receivable, net	$ 5,200		$ 5,200		$ 5,600
SDI [Member] | Customer Concentration Risk [Member] | Sales Revenue, Services, Net [Member]
Segment Reporting Information [Line Items]
Revenue percent	11.30%	11.00%	12.00%	10.20%