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 March 31, 1997 Commission File Number 0-7282
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 April 29, 1997, the issuer had 16,266,205 shares of common stock
outstanding.
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COMPUTER HORIZONS CORP.
Index
Part I Financial Information
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
Consolidated Statements of Income
Three Months Ended March 31, 1997
and March 29, 1996
Condensed Consolidated Statements of
Cash Flows - Three Months Ended
March 31, 1997 and March 29, 1996
Notes to Consolidated Financial Statements
Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Part II Other Information
Signatures
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COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31,
1997 1996
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(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................. $ 6,450 $10,937
Accounts receivable, net of allowance for doubtful
accounts of $1,465,000 and $1,203,000 at March 31, 1997
and December 31, 1996, respectively ...................... 64,606 54,280
Deferred income tax benefit ................................ 830 1,024
Other ...................................................... 397 962
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TOTAL CURRENT ASSETS ............................... 72,283 67,203
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PROPERTY AND EQUIPMENT ....................................... 9,832 9,449
Less accumulated depreciation .............................. 5,639 5,228
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4,193 4,221
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OTHER ASSETS - NET:
Goodwill ................................................... 13,173 13,322
Deferred income tax benefit ................................ 726 583
Other ...................................................... 2,659 3,083
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TOTAL OTHER ASSETS ................................. 16,558 16,988
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TOTAL ASSETS ................................................. $93,034 $88,412
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt .......................... $ 1,867 $ 1,867
Accrued payroll, payroll taxes and benefits ................ 9,415 11,963
Accounts payable ........................................... 778 1,122
Income taxes payable ....................................... 3,296 940
Other accrued expenses ..................................... 868 749
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TOTAL CURRENT LIABILITIES .......................... 16,224 16,641
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LONG-TERM DEBT ............................................... 1,432 1,432
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OTHER LIABILITIES ............................................ 1,596 1,525
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COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(CONTINUED)
March 31, December 31,
1997 1996
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(in thousands)
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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
18,020,586 shares and 17,874,536 shares at March 31, 1997
and December 31, 1996, respectively ...................... 1,802 1,787
Additional paid-in capital ................................. 31,556 30,685
Retained earnings .......................................... 55,072 50,990
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88,430 83,462
Less 1,786,883 shares held in treasury, at cost ............ 14,648 14,648
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TOTAL SHAREHOLDERS' EQUITY ......................... 73,782 68,814
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $93,034 $88,412
======= =======
See notes to consolidated financial statements.
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COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED
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MARCH 31, 1997 MARCH 29, 1996
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(in thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES ................................ $ 69,749 100.0% $ 57,031 100.0%
-------- ----- -------- -----
COSTS AND EXPENSES:
Direct costs ....................... 47,899 68.7% 39,368 69.0%
Selling, general
and administrative .............. 14,955 21.4% 12,120 21.3%
-------- ----- -------- -----
62,854 90.1% 51,488 90.3%
-------- ----- -------- -----
INCOME FROM OPERATIONS .................. 6,895 9.9% 5,543 9.7%
-------- ----- -------- -----
OTHER INCOME (expense):
Interest income .................... 112 0.2% 103 0.2%
Interest expense ................... (77) -0.1% (144) -0.3%
Equity in Joint Venture net earnings 150 0.2% 213 0.4%
-------- ----- -------- -----
185 0.3% 172 0.3%
-------- ----- -------- -----
INCOME BEFORE INCOME TAXES .............. 7,080 10.2% 5,715 10.0%
-------- ----- -------- -----
INCOME TAXES:
Current ............................ 2,947 4.2% 2,437 4.3%
Deferred ........................... 51 0.1% (24) 0.0%
-------- ----- -------- -----
2,998 4.3% 2,413 4.2%
-------- ----- -------- -----
NET INCOME .............................. $ 4,082 5.9% $ 3,302 5.8%
======== ===== ======== =====
EARNINGS PER SHARE:
Net income $0.24 $0.20
======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 17,071,000 16,880,000
========== ==========
See notes to consolidated financial statements.
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COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
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March 31, March 29,
1997 1996
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(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES ................. ($ 5,414) ($ 614)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment ............... (383) (314)
(Increase) / decrease in other assets ............. 424 (278)
-------- --------
41 (592)
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CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised ........................... 886 803
-------- --------
886 803
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . (4,487) (403)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....... 10,937 9,166
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........... $ 6,450 $ 8,763
======== ========
See notes to consolidated financial statements.
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COMPUTER HORIZONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarters Ended March 31, 1997 and March 29, 1996
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 31, 1996, 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. The details in those notes have
not changed except as a result of normal transactions in the interim.
Impact of Accounting Pronouncement, Not Yet Adopted
In February, 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share", which requires public companies to present basic
earnings per share (EPS) and, if applicable, diluted earnings per share, instead
of primary and fully diluted EPS. Basic EPS is calculated by dividing the net
income by the weighted average number of shares outstanding for the period,
without consideration for common stock equivalents. Diluted EPS is computed
similarly to fully diluted EPS under the provisions of APB Opinion No. 15.
Revision of the EPS standard had two objectives -- to simplify the earnings per
share calculation and to make the EPS standard applicable to US entities
comparable to the standards of most other countries and to the international
standard, which was also recently revised.
Although presentation of this new format is required for periods ending
after December 15, 1997, early application is not permitted. Staff Accounting
Bulletin No. 74, however, requires public companies to discuss the expected
impact of adopting the new accounting pronouncement. Had EPS been calculated
under SFAS No. 128, the Company's Pro-Forma Basic EPS and Diluted EPS would have
been as follows:
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March 31, 1997 March 29, 1996
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Pro-forma earnings per share:
Basic ............................... $ 0.25 $ 0.21
Diluted ............................. 0.24 0.20
Pro-forma weighted average number of
shares outstanding:
Basic ............................... 16,188,000 15,716,000
Diluted ............................. 17,071,000 16,880,000
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Quarters Ended March 31, 1997 and March 29, 1996
For the first quarter ended March 31, 1997, revenues were $69.7
million, a 22% increase over the first quarter of 1996. Year 2000 services
revenues, which were less than $1 million in the first quarter of 1996, exceeded
$11 million for this year's first quarter. Staffing business continues strong,
with revenue for the first quarter totaling $49 million, up well over 30%
compared to last year's first quarter. Solutions revenues, excluding Year 2000
services, were $9.5 million, down significantly ($9.3 million) when compared to
last year's first quarter.
Direct cost, as a percentage of revenues, was 68.7% in the first
quarter, 300 basis points lower than a year ago. In general, gross margins are
firm in staffing and superior for the Year 2000 business. Year 2000 business
accounted for 16% of total revenues in the first quarter of 1997 versus 2% in
the first quarter of 1996.
Selling, general and administrative spending levels are at a percentage
of revenue substantially equal to the first quarter of 1996.
With gross profit margins improving and relatively stable SG&A expenses
as a percentage of revenue, 1997's operating margin improved to 9.9% from 9.7%
last year.
Total other income in the first quarter was $185,000 versus $172,000 in
the prior year first quarter. The net increase was impacted by two factors.
During the 1997 first quarter there was reduced interest expense and increased
interest income. However, this was offset by a decrease in earnings from the
Birla Horizons Indian joint venture. The decline in Birla income in 1997
reflects significant investments the joint venture is making in the Year 2000
and solutions side of the business. These investments and reduced income levels
are expected to continue into the second half of 1997.
Income before income taxes increased by 24% in the first quarter of
this year as compared to last year's first quarter, $7.1 million vs. $5.7
million. As a percentage of revenues, income before income taxes improved to
10.2% from 10.0% last year.
Net income totaled $4.1 million and 5.9% of revenues, up by 24% from
last year's $3.3 million. Earnings per share were $0.24 versus $0.20 last year,
an increase of 20%. Shares outstanding were slightly higher at 17.1 million in
the first quarter of 1997 versus 16.9 million a year ago.
As of March 31, 1997, the Company had a current ratio position of 4.5
to 1, including cash and cash equivalents of $6.5 million, and had available
bank lines of credit of $25.0 million. The Company's long-term debt, inclusive
of current maturities, is only $3.3 million, or less than 5% of shareholders'
equity. The Company believes that its cash, lines of credit and internally
generated funds will be sufficient to meet its working capital needs for at
least the next 12 months.
In the twelve month period ending March 31, 1997, the Company acquired
$1.4 million of capital assets. Although there are no material, firm commitments
for capital spending over the next twelve months, the Company anticipates a
spending level in line with that of the previous twelve 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 and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPUTER HORIZONS CORP.
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(Registrant)
DATE: May 1, 1997 /s/John J. Cassese
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John J. Cassese
Chairman of the Board
and President
DATE: May 1, 1997 /s/William J. Murphy
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William J. Murphy
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
DATE: May 1, 1997 /s/Michael J. Shea
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Michael J. Shea
Vice President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,450
<SECURITIES> 0
<RECEIVABLES> 66,071
<ALLOWANCES> 1,465
<INVENTORY> 0
<CURRENT-ASSETS> 72,283
<PP&E> 9,832
<DEPRECIATION> 5,639
<TOTAL-ASSETS> 93,034
<CURRENT-LIABILITIES> 16,224
<BONDS> 1,432
0
0
<COMMON> 1,802
<OTHER-SE> 71,980
<TOTAL-LIABILITY-AND-EQUITY> 93,034
<SALES> 0
<TOTAL-REVENUES> 69,749
<CGS> 0
<TOTAL-COSTS> 47,899
<OTHER-EXPENSES> 14,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (35)
<INCOME-PRETAX> 7,080
<INCOME-TAX> 2,998
<INCOME-CONTINUING> 4,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,082
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
