UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Amendment No. 1)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 2002
Commission file number 1-9410
------
COMPUTER TASK GROUP, INCORPORATED
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 16-0912632
----------------------------- -------------------------------------
(State of incorporation) (IRS Employer Identification No.)
800 Delaware Avenue, Buffalo, New York 14209
------------------------------------------ -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 882-8000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock outstanding:
Shares outstanding
Title of Each Class At March 29, 2002
------------------- ------------------
Common stock, par value
$.01 per share 20,868,834
PARTS AND ITEMS AMENDED
The registrant hereby amends Part I. Financial Information, Items 1 and 2 and
Part II. Other Information, Item 6, in the registrant's quarterly report on Form
10-Q for the quarterly period ended March 29, 2002 to reflect the adoption of
Financial Accounting Standard (FAS) No. 142, "Goodwill and Other Intangible
Assets," which requires the cumulative effect of the change in accounting
principle to be recorded in the Company's financial results for the quarterly
period ended March 29, 2002.
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
COMPUTER TASK GROUP, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTER ENDED
MARCH 29, MARCH 30,
2002 2001
------------ ------------
(amounts in thousands,
except per share data)
Revenue $ 69,894 $ 84,763
Direct costs 50,149 61,183
Selling, general and administrative expenses 17,943 26,802
--------- ---------
Operating income (loss) 1,802 (3,222)
Interest and other income 80 271
Interest and other expense (1,140) (998)
--------- ---------
Income (loss) before income taxes and cumulative
effect of change in accounting principle 742 (3,949)
Provision (benefit) for income taxes 293 (2,569)
--------- ---------
Net income (loss) before cumulative effect of change
accounting principle 449 (1,380)
Cumulative effect of change in accounting principle (37,038) -
--------- ---------
Net loss $(36,589) $ (1,380)
========= =========
Basic net income (loss) per share:
Income (loss) before cumulative effect of change in accounting principle $ 0.03 $ (0.08)
Cumulative effect of change in accounting principle (2.24) -
--------- ---------
Basic loss per share $ (2.21) $ (0.08)
========= =========
Diluted net income (loss) per share:
Income (loss) before cumulative effect of change in accounting principle $ 0.03 $ (0.08)
Cumulative effect of change in accounting principle (2.19) -
--------- ---------
Diluted loss per share $ (2.16) $ (0.08)
Weighted average shares outstanding:
Basic 16,533 16,383
Diluted 16,970 16,383
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
COMPUTER TASK GROUP, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
MARCH 29, DECEMBER 31,
2002 2001
---------------------------------
(amounts in thousands)
ASSETS
-------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and temporary cash investments $ 2,103 $ 3,362
Accounts receivable, net of allowances and reserves 53,034 51,230
Prepaids and other 3,285 2,958
Deferred income taxes 1,045 1,089
-------------------------------------------------------------------------------------------------------------------
Total current assets 59,467 58,639
Property and equipment, net of
accumulated depreciation and amortization 11,081 13,082
Property held for sale 1,777 -
Goodwill, net of accumulated amortization 37,292 74,735
Deferred income taxes 2,578 2,660
Other assets 640 682
-------------------------------------------------------------------------------------------------------------------
Total assets $ 112,835 $ 149,798
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 9,094 $ 8,193
Accrued compensation 19,742 24,133
Income taxes payable 753 -
Advance billings on contracts 452 471
Other current liabilities 6,289 5,531
-------------------------------------------------------------------------------------------------------------------
Total current liabilities 36,330 38,328
Long-term debt 17,745 15,512
Deferred compensation benefits 8,855 8,794
Other long-term liabilities 537 537
-------------------------------------------------------------------------------------------------------------------
Total liabilities 63,467 63,171
Shareholders' Equity:
Common stock, par value $.01 per share, 150,000,000
shares authorized; 27,017,824 shares issued 270 270
Capital in excess of par value 111,507 111,500
Retained earnings 36,784 73,373
Less: Treasury stock of 6,148,990 and 6,147,810 shares at cost, respectively (31,416) (31,410)
Stock Trusts of 4,313,609 and 4,338,000 shares at cost, respectively (59,135) (59,239)
Other comprehensive income:
Foreign currency adjustment (8,059) (7,284)
Minimum pension liability adjustment (583) (583)
-------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income (8,642) (7,867)
-------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 49,368 86,627
-------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 112,835 $ 149,798
=========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
COMPUTER TASK GROUP, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
QUARTER ENDED
MARCH 29, MARCH 30,
2002 2001
------------ ------------
(amounts in thousands)
Cash flows from operating activities:
Net loss $ (36,589) $ (1,380)
Adjustments:
Depreciation expense 992 1,178
Amortization expense - 993
Change in accounting principle 37,038 -
Tax benefit on stock option exercises - 27
Deferred income taxes 126 8
Deferred compensation expense 61 33
Gain on sale of fixed assets - (15)
Changes in assets and liabilities:
Increase in accounts receivable (2,079) (7,009)
Increase in prepaids and other (493) (377)
Decrease in other assets 42 38
Increase (decrease) in accounts payable 945 (3,171)
Decrease in accrued compensation (4,353) (3,082)
Increase (decrease) in income taxes payable 905 (2,859)
Decrease in advance billings on contracts (19) (343)
Increase in other current liabilities 769 1,398
Decrease in other long-term liabilities - (12)
---------- ----------
Net cash used in operating activities (2,655) (14,573)
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (795) (436)
Proceeds from sales of fixed assets - 29
-------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (795) (407)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term revolving debt, net 2,233 30,300
Proceeds from Employee Stock Purchase Plan 103 153
Purchase of stock for treasury (6) (6)
Proceeds from other stock plans 8 124
---------- ----------
Net cash provided by financing activities 2,338 30,571
-------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and temporary cash investments (147) (729)
---------- ----------
Net increase (decrease) in cash and temporary cash investments (1,259) 14,862
Cash and temporary cash investments at beginning of quarter 3,362 2,562
-------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of quarter $ 2,103 $ 17,424
========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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 and cash flows
for the periods presented.
2. Basis of Presentation
The condensed consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission (the SEC). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the SEC rules
and regulations. Management believes that the information and disclosures
provided herein are adequate to present fairly the consolidated financial
position, results of operations and cash flows of the Company. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K filed with the SEC.
3. Comprehensive Income
Accumulated other comprehensive income totaled $(8,642,000) and
$(7,867,000) at March 29, 2002 and December 31, 2001, respectively. These
balances included adjustments of $(775,000) and $(962,000) related to foreign
currency translation made in the first quarter of 2002 and 2001, respectively.
Total comprehensive loss for the quarters ended March 29, 2002 and March 30,
2001 was $(37,364,000) and $(2,342,000), respectively.
4. Accounting Standards Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (FAS) No. 141, "Business Combinations," and FAS
No. 142, "Goodwill and Other Intangible Assets." These standards make
significant changes to the accounting for business combinations, goodwill, and
intangible assets. FAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations with limited exceptions for combinations
initiated prior to July 1, 2001. In addition, it clarifies the criteria for
recognition of intangible assets apart from goodwill. This statement is
effective for business combinations completed after June 30, 2001.
FAS No. 142 discontinues the practice of amortizing goodwill and
indefinite-lived intangible assets and initiates a review, at least annually,
for impairment. Intangible assets with a determinable useful life will continue
to be amortized over their useful lives. FAS No. 142 applies to existing
goodwill and intangible assets, and such assets acquired after June 30, 2001.
FAS No. 142 was effective for fiscal years beginning after December 15, 2001.
Accordingly, the Company adopted this standard as of January 1, 2002, and no
longer amortizes its existing goodwill after that date.
6
In conjunction with the adoption of FAS No. 142, the initial valuation of
the business unit for which the Company's goodwill relates was completed by an
independent appraisal company. Such valuation indicated that the carrying
value of the business unit was greater than the determined fair value. The
goodwill on the Company's balance sheet primarily relates to the acquisition
in February 1999 of the healthcare information technology services provider
Elumen Solutions, Inc. Although the revenues and profits for this unit dipped in
2000 and 2001, in 2002 the revenues and profits for that unit are similar to
when the acquisition was completed in 1999. However, the valuation of technology
companies in 1999 was relatively high as compared to the valuations at the
beginning of 2002. Accordingly, as a result of the independent appraisal based
upon the fair market values of similar companies and the subsequent independent
valuation of the implied goodwill, the Company recorded a $37.0 million
non-cash charge for impairment of goodwill in that business unit in the
Company's financial results for the quarterly period ended March 29, 2002.
There was no tax associated with this impairment as the amortization of this
goodwill was not deductible for tax purposes.
The effect of the amortization of the Company's existing goodwill on net
income (loss), and basic and diluted net income (loss) per share for the
quarters ended March 29, 2002 and March 30, 2001, respectively, is as follows:
For the quarter ended
March 29, March 30,
2002 2001
---- ----
NET LOSS:
Reported net loss $(36,589) $ (1,380)
Goodwill amortization - 993
-------- ----------
Adjusted net income (loss) $(36,589) $ (387)
======== ==========
BASIC NET LOSS PER SHARE:
Reported basic net loss per share $ (2.21) $ (0.08)
Goodwill amortization - (0.06)
-------- ----------
Adjusted basic net loss per share $ (2.21) $ (0.02)
======== ==========
DILUTED NET LOSS PER SHARE:
Reported diluted net loss per share $ (2.16) $ (0.08)
Goodwill amortization - 0.06
-------- ----------
Adjusted diluted net loss per share $ (2.16) $ (0.02)
======== ==========
Included in the net loss for the quarter ended March 29, 2002 is the charge
for the cumulative effect of a change in accounting principle related to the
adoption of FAS No. 142 of $37.0 million, or $2.24 per basic share and $2.19 per
diluted share. Without this charge, reported net income in 2002 would have been
$0.4 million, or $0.03 per basic and diluted share.
In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which addresses the accounting and reporting
for the impairment or disposal of long-lived assets. The Company adopted this
standard effective January 1, 2002. During the first quarter of 2002, the
Company began to actively market one of its owned properties for sale, and has
classified this property as held for sale on its condensed consolidated balance
sheet for March 29, 2002. As the Company does not anticipate a loss on the sale
of this property, no adjustment was made to the carrying value of this asset in
the first quarter of 2002.
7
During the first quarter of 2002, based upon new interpretive guidance
issued for the accounting for billable expenses under Emerging Issues Task Force
issue No. D-103, "Income Statement Characterization of Reimbursements Received
for Out-of-Pocket Expenses Incurred," the Company began to record its billable
expenses on a gross basis as both revenue and direct costs, rather than on a net
basis. Such costs totaled $1.9 million and $2.0 million in the first quarter of
2002 and 2001, respectively. The first quarter 2001 revenue and direct cost
balances on the condensed consolidated statement of operations have been
restated by $2.0 million from that which was previously reported.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE QUARTER ENDED MARCH 29, 2002
FORWARD-LOOKING STATEMENTS
Statements included in this Management's Discussion and Analysis of Results
of Operations and Financial Condition and elsewhere in this document that do not
relate to present or historical conditions are "forward-looking statements"
within the meaning of that term in Section 27A of the Securities Act of 1933, as
amended, and in Section 21F of the Securities Exchange Act of 1934, as amended.
Additional oral or written forward-looking statements may be made by the Company
from time to time, and such statements may be included in documents that are
filed with the Securities and Exchange Commission. Such forward-looking
statements involve risks and uncertainties that could cause results or outcomes
to differ materially from those expressed in such forward-looking statements.
Forward-looking statements may include, without limitation, statements relating
to the Company's plans, strategies, objectives, expectations and intentions and
are intended to be made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts,"
"intends," "possible," "expects," "estimates," "anticipates," or "plans" and
similar expressions are intended to identify forward-looking statements. Among
the important factors on which such statements are based are assumptions
concerning the anticipated growth of the information technology industry, the
continued need of current and prospective customers for the Company's services,
the availability of qualified professional staff, and price and wage inflation.
RESULTS OF OPERATIONS
To better understand the financial trends of the Company, the following
table sets forth data as contained on the condensed consolidated statements of
operations, with the percentage information calculated as a percentage of
consolidated revenues.
Quarter ended: March 29, March 30,
2002 2001
------ ------
Revenue 100.0% $ 69,894 100.0% $84,763
Direct costs 71.7% 50,149 72.2% 61,183
Selling, general, and administrative expenses 25.7% 17,943 31.6% 26,802
-------------------------------------------------------------------------------------------------
Operating income (loss) 2.6% 1,802 (3.8)% (3,222)
Interest and other expense, net (1.5)% (1,060) (0.9)% (727)
--------------------------------------------------------------------------------------------------
Income (loss) before income taxes and cumulative
effect of change in accounting principle 1.1% 742 (4.7)% (3,949)
Provision (benefit) for income taxes 0.5% 293 (3.1)% (2,569)
--------------------------------------------------------------------------------------------------
Net income (loss) before cumulative effect
of change in accounting principle 0.6% 449 (1.6)% (1,380)
Cumulative effect of change in accounting
principle (53.0)% (37,038) 0.0% -
--------------------------------------------------------------------------------------------------
Net loss (52.3)% $(36,589) (1.6)% $(1,380)
====== ======== ===== =======
8
CTG's first quarter 2002 revenue was $69.9 million, a decrease of 17.6
percent when compared to first quarter 2001 revenue of $84.8 million. The
year-over-year revenue decrease is a result of the ongoing recession in the
technology sector which has had a significant negative effect on customer
spending for information technology services. First quarter 2002 revenue,
however, approximated fourth quarter 2001 revenue of $72.2 million. This nominal
sequential decline is a reflection of improvements the Company continues to make
in its operations, including improving its fulfillment rate on client
requirements, which has largely offset the effects of the recession. North
American revenue decreased by $10.4 million or 14.6 percent in 2002 as compared
to 2001, while revenue from European operations decreased by $4.5 million, or
32.8 percent. The European decrease is also due to a general economic slowdown
in the countries in which the Company operates.
The 2001 to 2002 quarter-to-quarter revenue decline was slightly impacted
by the strengthening of the U.S. dollar as compared to the currencies of the
Netherlands, Belgium, the United Kingdom, and Luxembourg. If there had been no
change in these foreign currency exchange rates from the first quarter of 2001
to 2002, total consolidated revenues would have been $0.4 million higher.
In November 2000, the Company signed a contract with IBM for three years as
one of IBM's national technical service providers for the United States. In the
first quarter of 2002, IBM continued to be the Company's largest customer,
accounting for $13.8 million or 19.7 percent of total revenue as compared to
$24.0 million or 28.3 percent of first quarter 2001 revenue. Although revenues
from IBM have been constrained in 2002, the Company expects to continue to
derive a significant portion of its revenue from IBM throughout the remainder of
2002 and in future years. While the decline in revenue from IBM has had an
adverse effect on the Company's revenues and profits, the Company believes a
simultaneous loss of all IBM business is unlikely to occur due to the diversity
of the projects performed for IBM and the number of locations and divisions
involved.
Direct costs, defined as costs for billable staff including billable
out-of-pocket expenses, were 71.7 percent of revenue in the first quarter of
2002 as compared to 72.2 percent of first quarter 2001 revenue. The decrease in
direct costs as a percentage of revenue in 2002 as compared to 2001 is primarily
due to a concerted effort by the Company to increase the utilization of its
billable employees.
Selling, general and administrative (SG&A) expenses were 25.7 percent of
revenue in the first quarter of 2002 as compared to 31.6 percent of revenue in
the first quarter of 2001. During 2002, due to the adoption of FAS No. 142, the
Company discontinued the amortization of its existing goodwill. In the 2001
first quarter, such amortization totaled $1.0 million. If this amortization
expense was excluded from the 2001 balance, SG&A expense as a percentage of
revenue would have been 30.4 percent in 2001. The significant decline in SG&A
expense year-over-year is due to the Company continuing to align its cost
structure to the current level of revenue.
Operating income was 2.6 percent of revenue in 2002 compared to an
operating loss of 3.8 percent of revenue in 2001. Without the amortization
expense in 2001, the operating loss would have been 2.6 percent. The operating
income from North American operations was $3.0 million, while European
operations recorded an operating loss of $1.2 million.
Interest and other expense, net was 1.5 percent of revenue in 2002 and 0.9
percent in 2001. The increase as a percentage of revenue from 2001 to 2002 was
primarily due to the revenue decline discussed above. The provision (benefit)
for income taxes was 39.5 percent in 2002 and (65.1) percent in 2001. The
provision (benefit) rate in each year is calculated based upon the estimated tax
rate (benefit) for the entire year.
10
Excluding the cumulative effect of the change in accounting principle, the
net income (loss) for the first quarter of 2002 was 0.6 percent of revenue or
$0.03 per diluted share, compared to a loss of (1.6) percent of revenue or
$(0.08) per diluted share in 2001. Without the amortization expense, the net
loss in 2001 would have been (0.5) percent of revenue or $(0.02) per diluted
share. Diluted earnings per share were calculated using 17.0 million and 16.4
million equivalent shares outstanding in 2002 and 2001, respectively. The
increase in equivalent shares outstanding in 2002 is due to the dilutive effect
of outstanding stock options.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (FAS) No. 141, "Business Combinations," and FAS
No. 142, "Goodwill and Other Intangible Assets." These standards make
significant changes to the accounting for business combinations, goodwill, and
intangible assets. FAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations with limited exceptions for combinations
initiated prior to July 1, 2001. In addition, it clarifies the criteria for
recognition of intangible assets apart from goodwill. This statement is
effective for business combinations completed after June 30, 2001.
FAS No. 142 discontinues the practice of amortizing goodwill and
indefinite-lived intangible assets and initiates a review, at least annually,
for impairment. Intangible assets with a determinable useful life will continue
to be amortized over their useful lives. FAS No. 142 applies to existing
goodwill and intangible assets, and such assets acquired after June 30, 2001.
FAS No. 142 was effective for fiscal years beginning after December 15, 2001.
Accordingly, the Company adopted this standard as of January 1, 2002, and no
longer amortizes its existing goodwill after that date.
In conjunction with the adoption of FAS No. 142, the initial valuation of
the business unit for which the Company's goodwill relates was completed
by an independent appraisal company. Such valuation indicated that the
carrying value of the business unit was greater than the determined fair value.
The goodwill on the Company's balance sheet primarily relates to the acquisition
in February 1999 of the healthcare information technology services provider
Elumen Solutions, Inc. Although the revenues and profits for this unit dipped in
2000 and 2001, in 2002 the revenues and profits for that unit are similar to
when the acquisition was completed in 1999. However, the valuation of technology
companies in 1999 was relatively high as compared to the valuations at the
beginning of 2002. Accordingly, as a result of the independent appraisal based
upon the fair market values of similar companies and the subsequent independent
valuation of the implied goodwill, the Company recorded a $37.0 million
non-cash charge for impairment of goodwill in that business unit in the
Company's financial results for the quarterly period ended March 29, 2002.
There was no tax associated with this impairment as the amortization of this
goodwill was not deductible for tax purposes.
In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which addresses the accounting and reporting
for the impairment or disposal of long-lived assets. The Company adopted this
standard effective January 1, 2002. During the first quarter of 2002, the
Company began to actively market one of its owned properties for sale, and has
classified this property as held for sale on its condensed consolidated balance
sheet for March 29, 2002. As the Company does not anticipate a loss on the sale
of this property, no adjustment was made to the carrying value of this asset in
the first quarter of 2002.
During the first quarter of 2002, based upon new interpretive guidance
issued for the accounting for billable expenses under Emerging Issues Task Force
issue No. D-103, "Income Statement Characterization of Reimbursements Received
for Out-of-Pocket Expenses Incurred," the Company began to record its billable
expenses on a gross basis as both revenue and direct costs, rather than on a net
basis. Such costs totaled $1.9 million and $2.0 million in the first quarter of
2002 and 2001, respectively. The first quarter 2001 revenue and direct cost
balances on the condensed consolidated statement of operations have been
restated by $2.0 million from that which was previously reported.
11
FINANCIAL CONDITION
Cash used in operating activities was $2.7 million for the first quarter of
2002. Net loss totaled $36.6 million, while the non-cash adjustment for the
change in accounting principle totaled $37.0 million, and other non-cash
adjustments primarily consisting of depreciation expense and deferred income
taxes totaled $1.2 million. Accounts receivable increased by $2.1 million as
compared to December 31, 2001 due to the timing of the collection of outstanding
balances in the first quarter of 2002. Prepaid and other assets increased $0.5
million due to payments made in the first quarter of 2002 that will be amortized
throughout the remainder of the year. Accounts payable increased $0.9 million
primarily due to the timing of certain payments. Accrued compensation decreased
$4.4 million due to the timing of the US bi-weekly payroll, and fewer total
employees.
Net property and equipment and property held for sale decreased $0.2
million. Additions to property and equipment were $0.8 million, offset by
depreciation expense of $1.0. The Company has no material commitments for
capital expenditures at March 29, 2002.
Financing activities provided $2.3 million of cash in the first quarter of
2002. Net proceeds from long-term revolving debt totaled $2.2 million, and the
Company received $0.1 million from employees for stock purchased under the
Employee Stock Purchase Plan.
The Company is authorized to repurchase a total of 3.4 million shares of
its common stock for treasury and the Company's stock trusts. At March 29, 2002,
approximately 3.2 million shares have been repurchased under the authorizations,
leaving 0.2 million shares authorized for future purchases. No share purchases
were made in 2002.
The Company believes existing internally available funds, cash potentially
generated by operations, and available borrowings under the Company's revolving
line of credit will be sufficient to meet foreseeable working capital, capital
expenditure, and possible stock repurchase requirements, and to allow for future
internal growth and expansion.
12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is nominally exposed to market risk in the normal course of its
business operations. The Company has $17.5 million of borrowings at March 29,
2002 under a revolving credit agreement, which expose the Company to risk of
earnings or cash flow loss due to changes in market interest rates.
Additionally, as the Company sells its services in North America and in Europe,
financial results could be affected by weak economic conditions in those
markets.
13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on May 1, 2002, at the
Company's Headquarters, 800 Delaware Avenue, Buffalo, New York at
10:00 a.m.
The Company submitted for shareholder approval the election of two
Class II directors and three Class III directors, and to approve and
ratify an amendment to the Company's 2000 Equity Award Plan to
increase the number of shares of the Company's common stock authorized
for purchase under such plan by 1,000,000 shares.
Election of Directors
- Two Class II directors (George B. Beitzel and James R. Boldt) and
three Class III directors (Randall L. Clark, John M. Palms, and
Daniel J. Sullivan) were elected to hold office until the 2005
and 2003 annual meeting of shareholders, respectively, and until
their successors are elected and qualified. The results of the
voting are as follows:
Total Vote Total Vote
Director for Withheld
-------- ---------- ----------
George B. Beitzel (Class II) 17,813,703 1,375,930
James R. Boldt (Class II) 17,100,346 2,089,287
Randall L. Clark (Class III) 17,858,149 1,331,484
John M. Palms (Class III) 17,852,429 1,337,204
Daniel J. Sullivan (Class III) 17,880,035 1,309,598
- The Class I directors of the Company whose term of office extends
until the 2004 annual meeting of shareholders and until their
successors are elected and qualified are Randolph A. Marks and R.
Keith Elliott.
Computer Task Group, Incorporated 2000 Equity Award Plan
Total Vote For 14,078,775
Total Vote Against 3,928,088
Total Votes Abstained 1,182,770
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit Description Page
------- ----------- ----
11. Statement re: computation of earnings per share 18
99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 19
Reports On Form 8-K
-------------------
The following reports on Form 8-K were filed during the first quarter
of 2002:
Date Description
---- -----------
January 30, 2002 Press release entitled "CTG Announces 2001 Fourth
Quarter Conference Call Information."
February 12, 2002 Press release entitled "CTG Reports 2001 Fourth
Quarter and Annual Results."
* * * * * * *
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/ Gregory M. Dearlove
------------------------
Gregory M. Dearlove
Principal Accounting and
Financial Officer
Title: Vice President and
Chief Financial Officer
Date: November 11, 2002
15
CERTIFICATION
I, James R. Boldt, certify that:
1. I have reviewed this quarterly 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;
Date: November 11, 2002
/s/ James R. Boldt
--------------------------
James R. Boldt
Chairman, President and CEO
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CERTIFICATION
I, Gregory M. Dearlove, certify that:
1. I have reviewed this quarterly 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;
Date: November 11, 2002
/s/ Gregory M. Dearlove
--------------------------
Gregory M. Dearlove
Vice President and CFO
17