SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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F O R M 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For Quarter Ended September 27, 1995 Commission File Number 0-7282
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COMPUTER HORIZONS CORP.
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(Exact name of registrant as specified in its charter)
New York 13-2638902
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
49 Old Bloomfield Avenue, Mountain Lakes, New Jersey 07046-1495
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (201) 402-7400
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Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report)
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 twelve 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.
X
--- --
Yes No
As of October 20, 1995, the issuer had 10,314,753 shares of common stock
outstanding.
<PAGE>
COMPUTER HORIZONS CORP.
Index
Part I Financial Information
Consolidated Balance Sheets
September 27, 1995 and December 31, 1994
Consolidated Statements of Income
Three Months and Nine Months Ended
September 27, 1995 and 1994
Consolidated Statements of Cash Flows
Nine Months Ended September 27, 1995
and 1994
Notes to Consolidated Financial
Statements
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Part II Other Information
Signatures
<PAGE>
<TABLE>
<CAPTION>
COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
Sept. 27, Dec. 31,
1995 1994
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(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $ 9,544 $ 2,278
Accounts receivable, net of allowance for doubtful
accounts of $740,000 and $566,000 at September 27,
1995 and December 31, 1994, respectively ................. 38,612 30,636
Deferred income tax benefit ................................. 863 771
Other ....................................................... 1,896 1,108
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TOTAL CURRENT ASSETS ................................. 50,915 34,793
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PROPERTY AND EQUIPMENT ......................................... 7,579 5,983
Less accumulated depreciation ............................... 4,121 3,348
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3,458 2,635
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OTHER ASSETS-NET:
Goodwill .................................................... 11,297 11,065
Other ....................................................... 2,118 657
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TOTAL OTHER ASSETS ................................... 13,415 11,722
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TOTAL ASSETS ................................................... $67,788 $49,150
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - banks ....................................... $ -- $ 3,200
Current portion of long-term debt ........................... 1,428 1,556
Accrued payroll, payroll taxes and benefits ................. 9,354 7,305
Accounts payable ............................................ 1,232 560
Income taxes payable ........................................ 1,179 880
Other accrued expenses ...................................... 771 808
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TOTAL CURRENT LIABILITIES ............................ 13,964 14,309
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LONG-TERM DEBT ................................................. 2,860 4,288
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OTHER LIABILITIES .............................................. 521 636
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<PAGE>
<CAPTION>
COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued)
Sept. 27, Dec. 31,
1995 1994
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(in thousands)
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par; authorized and unissued 200,000
shares, including 50,000 Series A
Common stock, $.10 par; authorized 30,000,000 shares; issued
12,050,375 shares and 10,715,922 shares at September 27,
1995 and December 31, 1994, respectively ................. 1,205 1,072
Additional paid-in capital .................................. 27,384 13,642
Retained earnings............................................ 36,502 29,851
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65,091 44,565
Less shares held in treasury, at cost: 1,786,883 shares
at September 27, 1995 and December 31, 1994 .............. 14,648 14,648
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TOTAL SHAREHOLDERS' EQUITY ........................... 50,443 29,917
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................... $67,788 $49,150
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 27, 1995 SEPT. 27, 1994 SEPT. 27, 1995 SEPT. 27, 1994
---------------- ----------------- ------------------ ------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $51,467 100.0% $39,136 100.0% $143,731 100.0% $108,585 100.0%
------- ----- ------- ----- -------- ----- -------- -----
COSTS AND EXPENSES:
Direct costs 35,696 69.4% 27,854 71.2% 101,292 70.5% 77,131 71.0%
Selling, administrative and
general 10,922 21.2% 8,426 21.5% 30,438 21.2% 23,565 21.7%
------- ----- ------- ----- -------- ----- -------- -----
46,618 90.6% 36,280 92.7% 131,730 91.7% 100,696 92.7%
------- ----- ------- ----- -------- ----- -------- -----
INCOME FROM OPERATIONS 4,849 9.4% 2,856 7.3% 12,001 8.3% 7,889 7.3%
------- ----- ------- ----- -------- ----- -------- -----
OTHER INCOME (expense):
Interest income 101 0.2% 24 0.0% 195 0.1% 80 0.1%
Interest expense (137) -0.2% (173) -0.4% (571) -0.4% (538) -0.6%
Equity in Joint Venture net
earnings 124 0.2% 220 0.2%
------- ----- ------- ----- -------- ----- -------- -----
88 0.2% (149) -0.4% (156) -0.1% (458) -0.5%
------- ----- ------- ----- -------- ----- -------- -----
INCOME BEFORE INCOME TAXES 4,937 9.6% 2,707 6.9% 11,845 8.2% 7,431 6.8%
------- ----- ------- ----- -------- ----- -------- -----
INCOME TAXES:
Current 2,240 4.4% 1,199 3.1% 5,286 3.7% 3,279 3.0%
Deferred (107) -0.2% 15 0.0% (92) -0.1% 86 0.1%
------- ----- ------- ----- -------- ----- -------- -----
2,133 4.2% 1,214 3.1% 5,194 3.6% 3,365 3.1%
------- ----- ------- ----- -------- ----- -------- -----
NET INCOME $ 2,804 5.4% $1,493 3.8% $6,651 4.6% $4,066 3.7%
======= ===== ====== ===== ====== ===== ====== =====
EARNINGS PER SHARE:
Net income $0.26 $0.16 $0.66 $0.43
======= ====== ====== ======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 10,945,000 9,513,000 10,134,000 9,523,000
========== ========= ========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
------------------------
Sept. 27, Sept. 27,
1995 1994
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(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES ............. $ 1,873 $ 232
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........... (1,596) (1,287)
Acquisitions, net ............................. (668) (252)
Increase in other assets ...................... (1,461) (274)
Repayment of loans to Officers ................ 608
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(3,725) (1,205)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - banks, net ......... (3,200)
Payments of long-term debt ..................... (1,556) (1,555)
Stock options exercised ........................ 594 831
Proceeds from common stock offering, net ....... 13,280
Purchase of treasury stock ..................... (1,296)
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9,118 (2,020)
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(INCREASE) DECREASE IN CASH AND
CASH EQUIVALENTS ........................... 7,266 (2,993)
Cash and cash equivalents at beginning
of year ........................................ 2,278 4,370
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD .................................. $ 9,544 $ 1,377
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
COMPUTER HORIZONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarters Ended September 27, 1995 and 1994
The information furnished reflects all adjustments which, in the
opinion of the Company, are necessary to present fairly its consolidated
financial position and the results of its operations and changes in financial
position for the periods indicated.
Reference is made to the Company's annual financial statements for the
year ended December 3l, l994, for a description of the accounting policies,
which have been continued without change. Also refer to the footnotes with those
annual statements for additional details of the Company's financial condition,
results of operations and changes in cash flows. Except for the common stock
split described below, the details in those notes have not changed except as a
result of normal transactions in the interim.
On April 25, 1995, the Company declared a three-for-two common stock
split in the form of a 50% stock distribution to shareholders of record on May
9, 1995, payable on May 30, 1995. An amount equal to the $0.10 par value of the
common shares distributed was transferred from additional paid-in capital to
common stock.
On June 7, 1995, the Company sold 1,140,000 shares of its common stock
in a public offering, realizing net proceeds of approximately $13,300,000.
On October 19, 1995, the Company entered into an agreement to pay $2.5
million in full settlement of the final contingency consideration relating to
the acquisition of Unified Systems Solutions, Inc. $1.0 million was paid with
the signing of the agreement, an additional $1.0 million is scheduled to be paid
in April 1996, with the final $0.5 million payable in April 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Quarters Ended September 27, 1995 and 1994
Revenues for both the third quarter and nine months ended September 27,
1995 increased 32% in comparison to the same periods in 1994. This increase is
attributable to continued growth in the professional staffing business, along
with accelerating demand in the solutions business.
As a percentage of revenues, direct costs improved for the third
quarter of 1995 (69.4% vs. 71.2%) and for the nine month period (70.5% vs.
71.0%) when compared to 1994. The Company is committed to maintaining and
improving gross margins through cost control and providing more value added
services.
Selling, administrative and general expenses have also moved in a
favorable direction in 1995. As a percent of revenues, they were 21.2% in the
third quarter of 1995, in comparison to 21.5% in 1994. For the nine month period
ended September 27, 1995, SG&A costs were 21.2% vs. 21.7% in 1994. This decrease
is attributable to tighter cost controls and higher consolidated revenues during
each period.
Other income/expense improved in the third quarter and the first nine
months of 1995, primarily due to our equity in the operating results of our
newly formed Birla Horizons joint venture, as well as to additional interest
income received relating to the funds provided by the public offering.
Income before income taxes for the third quarter of 1995 increased by
82% ($4,937,000 vs. $2,707,000) when compared to last year, while pre-tax
margins increased to 9.6% from 6.9%. For the nine month period, income before
income taxes was up 59% ($11,845,000 vs. $7,431,000) with margins increasing to
8.2% from 6.8%. These margin improvements are primarily the result of improved
direct cost margin percentages, lower SG&A expense as a percent of revenue, and
an improvement in other income/expense.
The effective tax rate for Federal, state and local income taxes was
43.2% and 43.8% for the three and nine months ended September 27, 1995, compared
to 44.8% and 45.3% for the comparable 1994 periods. After accounting for non-tax
benefited charges such as goodwill amortization and certain travel and
entertainment deduction limitations, the Company's standard income tax rate
approximates 42%.
Net income increased by 88% ($2,804,000 vs. $1,493,000) for the third
quarter and 64% ($6,651,000 vs. $4,066,000) for the nine months ended September
27, 1995.
Earnings per share increased 63% for the third quarter of 1995 ($.26
vs. $.16) and 53% for the nine months ($.66 vs. $.43). Each period's earnings
per share have been restated to reflect the 50% stock distribution declared by
the Company on April 25, 1995 (see Notes to Consolidated Financial Statements).
<PAGE>
As of September 27, 1995, the Company had a current ratio position of
3.6 to 1, a cash position of $9.5 million and available lines of credit of $25.0
million. On June 7, 1995, the Company sold 1,140,000 shares of its common stock
in a public offering generating approximately $13.3 million in cash. These
proceeds were used to repay outstanding indebtedness and provide the Company
with additional working capital.
The Company continuously reviews its future cash requirements, together
with its available lines of credit and internally generated funds. The Company
believes it will meet all working capital obligations and fund further
development of its business for at least the next 12 months.
<PAGE>
PART II Other Information
Item 6.
b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
Signatures
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.
<TABLE>
<S> <C>
COMPUTER HORIZONS CORP.
---------------------------------------
(Registrant)
DATE: October 20, 1995 /s/ John J. Cassese
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John Cassese, Chairman of the Board
and President
DATE: October 20, 1995 /s/ Bernhard Hubert
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Bernhard Hubert, Executive Vice
President and Chief Financial Officer
(Principal Financial Officer)
DATE: October 20, 1995 /s/ Michael J. Shea
------------------------------------ -------------------------------------
Michael J. Shea, CPA
Chief Accounting Officer and Controller
(Principal Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-27-1995
<CASH> 9544
<SECURITIES> 0
<RECEIVABLES> 39,352
<ALLOWANCES> 740
<INVENTORY> 0
<CURRENT-ASSETS> 50,915
<PP&E> 7,579
<DEPRECIATION> 4,121
<TOTAL-ASSETS> 67,788
<CURRENT-LIABILITIES> 13,964
<BONDS> 2,860
<COMMON> 1,205
0
0
<OTHER-SE> 49,238
<TOTAL-LIABILITY-AND-EQUITY> 67,788
<SALES> 0
<TOTAL-REVENUES> 143,731
<CGS> 0
<TOTAL-COSTS> 101,292
<OTHER-EXPENSES> 30,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 376
<INCOME-PRETAX> 11,845
<INCOME-TAX> 5,194
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,651
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
