SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 24, 1998
COMPUTER HORIZONS CORP.
-----------------------
(Exact name of Registrant as specified in its Charter)
NEW YORK 0-7282 13-2638902
- --------------------------------------------------------------------------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
49 OLD BLOOMFIELD AVENUE, MOUNTAIN LAKES, NEW JERSEY 07046-1495
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(973) 299-4000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5: OTHER EVENTS
On June 24, 1998, the Registrant acquired ("the Acquisition") all of
the outstanding common shares in Spargo Consulting Inc. ("Spargo"), a United
Kingdom corporation. The Acquisition has been accounted for as a pooling of
interests and the financial statements included in the Registrant's 1997 Annual
Report on Form 10-K ("1997 Form 10-K") have been restated to reflect the
Acquisition. Set forth below is a revised version of "Item 8. Financial
Statements and Supplementary Data" and the financial statement schedule filed in
response to "Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K" included in the 1997 Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - AS RESTATED
December 31,
------------------------
1997 1996
-------- --------
-----(in thousands)-----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 92,086 $ 14,127
Short-term investments (Note 1) 13,165
Accounts receivable (Note 3) 81,547 58,462
Deferred income tax benefit (Note 7) 1,854 1,153
Other 1,087 1,104
-------- --------
Total current assets 189,739 74,846
-------- --------
Property and equipment:
Furniture, equipment and other 13,202 10,423
Less accumulated depreciation 7,502 5,788
-------- --------
5,700 4,635
-------- --------
Other assets - net:
Goodwill (Note 1) 17,090 13,322
Deferred income tax benefit (Note 7) 816 568
Other (Note 4) 4,280 3,239
-------- --------
22,186 17,129
-------- --------
Total Assets $217,625 $ 96,610
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
--------- ---------
-----(in thousands)------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 5) $ 1,473 $ 1,968
Accrued payroll, payroll taxes and benefits 18,231 13,367
Accounts payable 2,211 1,659
Income taxes payable 4,309 1,758
Other accrued expenses 3,145 1,042
--------- ---------
Total current liabilities 29,369 19,794
--------- ---------
Long-term debt (Note 5) 1,442
---------
Other liabilities (Note 9) 2,282 1,627
--------- ---------
Commitments (Note 10)
Shareholders' equity:
Preferred stock, $.10 par; authorized and unissued,
200,000 shares, including 50,000 Series A
Common stock, $.10 par; authorized, 60,000,000
shares; issued 31,247,069 shares and 28,372,029
shares at December 31, 1997 and 1996, respectively 3,125 2,837
Additional paid-in capital 117,718 29,887
Accumulated foreign currency gain 84 290
Retained earnings 78,919 55,381
--------- ---------
199,846 88,395
Less shares held in treasury, at cost; 1,692,253 and 1,786,883
shares at December 31, 1997 and 1996, respectively (13,872) (14,648)
--------- ---------
Total shareholders' equity 185,974 73,747
--------- ---------
Total Liabilities and Shareholders' Equity $ 217,625 $ 96,610
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME - AS RESTATED
Year ended December 31,
--------------------------------------------------
1997 1996 1995
--------------------------------------------------
---------(in thousands, except per share data)----
<S> <C> <C> <C>
Revenues $ 350,310 $ 261,411 $ 224,809
------------ ------------ ------------
Costs and expenses:
Direct costs 233,574 180,410 156,125
Selling, general and administrative 74,165 59,677 48,837
Merger-related costs 976
------------ ------------ ------------
308,715 240,087 204,962
------------ ------------ ------------
Income from operations 41,595 21,324 19,847
------------ ------------ ------------
Other income (expense):
Interest income 1,700 404 346
Interest expense (276) (507) (667)
Equity in net earnings of joint venture (Note 4) 13 885 361
------------ ------------ ------------
1,437 782 40
------------ ------------ ------------
Income before income taxes 43,032 22,106 19,887
------------ ------------ ------------
Income taxes (Notes 1 and 7):
Current 19,448 9,413 9,082
Deferred (950) (382) (510)
------------ ------------ ------------
18,498 9,031 8,572
------------ ------------ ------------
Net Income $ 24,534 $ 13,075 $ 11,315
============ ============ ============
Earnings per share (Notes 1 and 8):
Basic $ .89 $ .50 $ .47
============ ============ ============
Diluted $ .85 $ .47 $ .44
============ ============ ============
Weighted average number of shares outstanding:
Basic 27,567,000 26,380,000 24,312,000
============ ============ ============
Diluted 28,999,000 27,932,000 25,823,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY -AS RESTATED
Years ended December 31, 1997, 1996 and 1995
Addi- Accumulat-
Common stock tional ed foreign Treasury stock
----------------------- paid-in currency Retained --------------------
Shares Amount capital translation earnings Shares Amount
----------------------------------(dollars in thousands)----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994, 7,739,576 $ 774 $ 13,940 $ $ 29,851 1,786,883 $ 14,648
as previously reported
Pooling of interests with
CG Computer Services in 1997 167,901 17 46 966
Pooling of interests with
Spargo Consulting PLC in 1998 559,111 56 133 62 1,481
---------- -------- ---------- ------ -------- --------- --------
Balance, December 31, 1994, as restated
8,466,588 847 14,119 62 32,298 1,786,883 14,648
Three for two stock split declared
February 1995 3,366,505 336 (336)
December 1995 5,752,136 575 (575)
Stock options exercised 318,063 32 1,138
Sale of common stock, net of expenses 1,140,000 114 13,159
Foreign currency translation
adjustments (25)
Dividends paid (480)
Net income for the year 11,315
---------- -------- ---------- ------ -------- --------- --------
Balance, December 31, 1995, as restated
19,043,292 1,904 27,505 37 43,133 1,786,883 14,648
Stock options exercised 467,022 47 1,679
Tax benefits related to
stock option plans 1,589
Foreign currency translation
adjustments 253
Dividends paid (827)
Net income for the year 13,075
---------- -------- ---------- ------ -------- --------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY -AS RESTATED
Years ended December 31, 1997, 1996 and 1995
(continued)
Addi- Accumulat-
Common stock tional ed foreign Treasury stock
----------------------- paid-in currency Retained --------------------
Shares Amount capital translation earnings Shares Amount
----------------------------------(dollars in thousands)----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 19,510,314 $ 1,951 $ 30,773 $ 290 $ 55,381 1,786,883 $ 14,648
Three-for-two stock split
declared May 1997 8,861,715 886 (886)
Stock options exercised 375,040 38 1,759 (94,630) (776)
Tax benefits related to
stock option plans 2,610
Sale of common stock, net of
expenses 2,500,000 250 83,462
Foreign currency translation
adjustments (206)
Dividends paid (996)
Net income for the year 24,534
---------- -------- ---------- ------ -------- ---------- --------
Balance, December 31, 1997 31,247,069 $ 3,125 $ 117,718 $ 84 $ 78,919 1,692,253 $ 13,872
========== ======== ========== ====== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - AS RESTATED
----------------------------------
1997 1996 1995
-------- -------- --------
----------(in thousands)----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 24,534 $ 13,075 $ 11,315
Adjustments to reconcile net income to net cash provided by:
Operating activities:
Deferred taxes (950) (382) (510)
Depreciation 1,857 1,367 833
Profit/(loss) on disposal of fixed assets (26) (25)
Amortization of intangibles 602 587 505
Provision for bad debts 575 54 170
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (22,850) (9,323) (15,345)
Other current assets (108) (6) (570)
Other assets (64) (12) (12)
Accrued payroll, payroll taxes and benefits 4,887 1,535 3,358
Accounts payable 328 (776) 1,579
Income taxes payable 5,187 1,023 583
Other accrued expenses 2,370 (571) 639
Other liabilities 626 465 424
-------- -------- --------
Net cash provided by operating activities 16,968 7,011 2,969
-------- -------- --------
Cash flows from investing activities
Purchases of furniture and equipment (2,480) (1,543) (1,694)
Acquisitions, net of cash (5,467) (363) (2,966)
Change in other assets (968) (761) (1,673)
Purchases of short-term investments (13,165)
-------- -------- --------
Net cash used in investing activities (22,080) (2,667) (6,333)
-------- -------- --------
Cash flows from financing activities
Notes payable - banks, net (3,200)
Long-term debt (1,903) (2,420) (157)
Dividends paid (996) (827) (480)
Stock options exercised 2,573 1,727 1,170
Proceeds from issuance of stock 83,712 13,273
-------- -------- --------
Net cash provided by (used in) financing activities 83,386 (1,520) 10,606
-------- -------- --------
Effect of currency translation on cash (315) 160 (67)
-------- -------- --------
Net increase in cash and cash equivalents 77,959 2,984 7,175
Cash and cash equivalents at beginning of year 14,127 11,143 3,968
-------- -------- --------
Cash and cash equivalents at end of year $ 92,086 $ 14,127 $ 11,143
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - AS RESTATED
(continued)
----------------------------------
1997 1996 1995
-------- -------- --------
----------(in thousands)----------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 249 $ 470 $ 633
Income taxes 13,694 8,219 7,545
Details of acquisition:
Fair value of assets $ 5,590
Liabilities 242
--------
Cash paid for acquisition $ 5,348
========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Computer Horizons Corp. is a diversified information technology services
company that provides clients with resource augmentation and advanced
technology solutions to business problems through applications
development, client/senior migration, network management, emerging
technologies, and legacy systems maintenance, including its solutions to
the millennium date-change problem, Computer Horizons' Signature
2000(TM).
Principles of Consolidation
The consolidated financial statements include the accounts of Computer
Horizons Corp. and its wholly-owned subsidiaries (the "Company"). The
Company's investment in a joint venture (Note 4) is accounted for under
the equity method of accounting. All material intercompany accounts and
transactions have been eliminated.
Revenue Recognition
The Company recognizes revenues as professional services are performed.
On fixed fee engagements, revenue and gross profit adjustments are made
to reflect revisions in estimated total costs and contract values.
Estimated losses are recorded when identified.
Recruitment Costs
Recruitment costs are charged to operations as incurred.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 1 (continued)
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments with a
maturity of three months or less at the time of purchase and consist of the
following at December 31:
1997 1996
--------(in thousands)---------
Cash $ 6,901 $ 4,187
Money market funds 45,460 5,926
Commercial paper 21,924 1,247
Demand obligations 17,801 2,767
------- -------
$92,086 $14,127
======= =======
Short-term Investments
The Company classifies investments with an original maturity of more
than three months at the time of purchase as short-term investments.
Short-term investments are classified as held-for-sale and carried at
cost, which approximates fair value. At December 31, 1997, short-term
investments maturing within one year consist of:
Fair
Cost value
--------(in thousands)---------
Commercial paper $ 8,711 $ 8,711
Corporate bonds 2,452 2,450
Government bonds 2,002 2,000
-------- --------
$ 13,165 $ 13,161
======== ========
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 1 (continued)
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, regardless of the degree of such risk,
consist principally of cash and cash equivalents, short-term investments
and trade accounts receivable. The Company invests the majority of its
excess cash in money market funds, commercial paper and demand
obligations of high-credit, high-quality financial institutions or
companies, with certain limitations as to the amount that can be
invested in any one entity.
The Company maintains its cash balances principally in four financial
institutions located in New York, New Jersey, California and the United
Kingdom. The balances in the United States are insured by the Federal
Deposit Insurance Corporation up to $100,000 for each entity at each
institution. At December 31, 1997, uninsured amounts held at these
financial institutions total approximately $10,766,000.
The Company's customers are generally very large, Fortune 500 companies
in many industries and with wide geographic dispersion. The Company's
largest customer accounts for approximately 4% of billed accounts
receivable at December 31, 1997. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends, and other information.
The Company's largest client accounted for 11.2%, 8.8% and 6.9%,
respectively, of the Company's consolidated revenues in 1997, 1996 and
1995. No other client accounted for more than 8% in those years.
Fair Value of Financial Instruments
The carrying value of financial instruments (principally consisting of
cash and cash equivalents, short-term investments, accounts receivable
and payable and long-term debt) approximates fair value because of the
short maturities or, as to long-term debt, the rates currently offered
to the Company.
Property and Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 1 (continued)
Goodwill
Goodwill, the cost in excess of the net assets of acquired businesses,
is being amortized by the straight-line method, primarily over thirty
years. Accumulated amortization is $4,523,000 and $3,921,000 at December
31, 1997 and 1996, respectively. On an ongoing basis, management reviews
the valuation and amortization of goodwill. As part of this review, the
Company estimates the value and future benefits of income generated, to
determine that no impairment has occurred.
Income Taxes
The Company and its domestic subsidiaries file a consolidated Federal
income tax return. The foreign subsidiaries file in each of their local
jurisdictions.
Deferred income taxes result from temporary differences between income
reported for financial and income tax purposes. These temporary
differences result primarily from the allowance for doubtful accounts
provision and certain accrued expenses which are deductible, for tax
purposes, only when paid.
Tax benefits from early disposition of the stock by optionees under
incentive stock options and from exercise of non-qualified options are
credited to additional paid-in capital.
The Company intends to permanently reinvest the earnings, the unremitted
earnings at December 31, 1997, from its foreign corporate joint venture
and, accordingly, is not providing deferred taxes on its share of
undistributed earnings. The Company has no other unremitted earnings at
December 31, 1997.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 1 (continued)
Earnings Per Share
In 1997, the Company has adopted SFAS No. 128, "Earnings Per Share,"
which requires public companies to present basic earnings per share and,
if applicable, diluted earnings per share. In accordance with SFAS No.
128, all comparative periods have been restated as of December 31, 1997.
Basic EPS is based on the weighted average number of common shares
outstanding without consideration of common stock equivalents. Diluted
earnings per share is based on the weighted average number of common and
common equivalent shares outstanding. The calculation takes into account
the shares that may be issued upon exercise of stock options, reduced by
the shares that may be repurchased with the funds received from the
exercise, based on the average price during the year.
Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive
Income," governing the reporting and display of comprehensive income and
its components, and Statement of Financial Accounting Standards No. 131
("SFAS No. 131"), "Disclosures About Segments of an Enterprise and
Related Information," requiring that all public businesses report
financial and descriptive information about their reportable operating
segments. Both statements are applicable to fiscal years beginning after
December 15, 1997. The impact of adopting SFAS No. 130 is not expected
to be material to the consolidated financial statements or notes to
consolidated financial statements. Management is currently evaluating
the effect of SFAS No. 131 on consolidated financial statement
disclosures.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 2 - ACQUISITIONS
On December 31, 1997, the Company acquired, for approximately $5 million
cash, certain assets from Millennium Computer Technology, Inc.
("Millennium"), a Chattanooga-based IT services provider. The
acquisition was recorded under the purchase method of accounting. Had
the acquisition of Millennium occurred on January 1, 1997, the effect on
revenues and net income would have been immaterial.
On December 19, 1997, the Company acquired all the common stock of CG
Computer Services ("CG") in exchange for 566,666 shares of Computer
Horizons stock. CG provides IT provisioning and staffing solutions with
offices in San Francisco, Los Angeles, Chicago, and Parsippany, New
Jersey. This transaction was accounted for as a pooling of interests
and, accordingly, the consolidated financial statements for the periods
presented have been restated to include the accounts of CG.
The reconciliation below details the effect of the pooling noted above
on the previously reported revenues, net income and earnings per share
of the separate companies for the periods preceding the acquisition:
<TABLE>
<CAPTION>
Nine months
ended
September 27, Year ended Year ended
1997 1996 1995
-------- -------- --------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Revenue
Computer Horizons Corp. $226,846 $233,858 $200,050
CG 12,820 15,294 13,115
-------- -------- --------
Combined $239,666 $249,152 $213,165
======== ======== ========
Net income
Computer Horizons Corp. $ 14,903 $ 11,232 $ 9,907
CG 468 632 518
-------- -------- --------
Combined $ 15,371 $ 11,864 $ 10,425
======== ======== ========
</TABLE>
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 2 (continued)
<TABLE>
<CAPTION>
Nine months
ended
September 27, Year ended Year ended
1997 1996 1995
------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Earnings per share
Basic
Computer Horizons Corp. $ .61 $ .47 $ .45
CG .00 .01 .01
------- ------- -------
Combined $ .61 $ .48 $ .46
======= ======= =======
Diluted
Computer Horizons Corp. $ .58 $ .44 $ .42
CG .00 .02 .02
------- ------- -------
Combined $ .58 $ .46 $ .44
======= ======= =======
</TABLE>
In June 1994, the Company acquired the net assets of Strategic
Outsourcing Services, Inc. ("SOS"), a New Jersey-based provider of data
processing services, for approximately $250,000. The acquisition
agreement also provides for contingent consideration based on the future
performance of SOS, through 1998. The acquisition was accounted for as a
purchase. In 1997, 1996 and 1995, the Company recorded contingent
consideration, totalling approximately $119,000, $137,000 and $202,000,
respectively, as additional goodwill, with certain additional amounts
payable subject to future performance. These contingent consideration
payments are not dependent upon the continued employment of the former
shareholder.
In January 1993, the Company acquired Unified Systems Solutions, Inc.
("USS"), a New Jersey-based provider of systems and network integration
services, for approximately $750,000. The acquisition agreement also
provides for contingent consideration based on the future performance of
USS through 1996. The acquisition was accounted for as a purchase. The
excess of cash over the fair value of assets acquired, totalling
approximately $509,000, was recorded as goodwill in 1994. In 1995 and
1994, the Company recorded contingent consideration, totalling
approximately $390,000 and $245,000, as additional goodwill. These
contingent consideration payments are not dependent upon the continued
employment of the former shareholders. Also in 1995, the Company
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 2 (continued)
entered into an agreement with the former shareholders of USS to pay
approximately $2,396,000, plus interest, in lieu of any amounts that may
have been due for the remaining contingent period ending March 31, 1996.
The $2,396,000 was also recorded as goodwill in 1995.
Subsequent Events
On September 25, 1998, the Company acquired the assets of Enterprise
Solutions Group, LLC ("ESG"), a Cincinnati, Ohio-based technology
organization that provides training and educational services as well as
consulting services for Fortune 500 companies. The acquisition will be
accounted for as a purchase. The total purchase price was approximately
$7,333,000 in cash and common stock. The purchase price may be adjusted
based on the actual earnings of the company for the twelve months ended
December 31, 1998, up to a maximum purchase price of $11,000,000. The
remaining purchase price is to be paid out in three payments starting
December 1998 and ending December 2000. Had the acquisition of ESG
occurred on January 1, 1997, the effect on revenues and net income would
have been immaterial.
On August 4, 1998, the Company acquired the assets of RPM Consulting
("RPM"), a leading provider of electronic commerce solutions and
enterprise management development based in Maryland, for a combination
of cash and common stock totaling approximately $27,700,000, and two
earnout payments based on pretax profit margins. The acquisition will be
accounted for as a purchase. Had the acquisition of RPM occurred on
January 1, 1997, the effect on revenues and net income would have been
immaterial.
On July 2, 1998, the Company acquired the net assets of Infomatics
Search Group ("ISG), a Toronto, Canada based information technology
service firm, offering both professional staffing and career placement
services. The acquisition will be accounted for as a purchase. The total
purchase price was approximately $21,600,000 in cash. The purchase
agreement includes an earnout clause equal to two times increases in
prior period adjusted earnings (as defined in the purchase agreement) to
be earned in 1998, 1999, and 2000. Had the acquisition of ISG occurred
on January 1, 1997, the effect on revenues and net income would have
been immaterial.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
On June 24, 1998, the Company acquired all of the common stock of Spargo
Consulting PLC ("Spargo"), an information technology consultancy service
provider, organized under the laws of the United Kingdom for 1,887,000
shares of Computer Horizon stock. This transaction was accounted for as
a pooling of interests and, accordingly, the consolidated financial
statements for the periods presented have been restated to include the
accounts of Spargo. The combination with Spargo was treated as a
Qualified Stock Purchase for US Federal Income Tax purposes
The reconciliation below details the effect of the pooling noted above
on the previously reported revenues, net income and earnings per share
of the separate companies for the periods preceding the acquisition:
<TABLE>
<CAPTION>
Three Months
Ended Year Ended Year Ended Year Ended
March 31, 1998 1997 1996 1995
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
Computer Horizons Corp. $ 107,101 $ 334,729 $ 249,152 $ 213,165
Spargo 4,410 15,581 12,259 11,644
---------- ---------- ---------- ----------
Combined $ 111,511 $ 350,310 $ 261,411 $ 224,809
========== ========== ========== ==========
Net Income
Computer Horizons Corp. $ 8,174 $ 22,644 $ 11,864 $ 10,425
Spargo 530 1,890 1,211 890
---------- ---------- ---------- ----------
Combined $ 8,704 $ 24,534 $ 13,075 $ 11,315
========== ========== ========== ==========
Earnings Per Share
Basic
Computer Horizons Corp. $ 0.28 $ 0.88 $ 0.48 $ 0.46
Spargo 0.00 0.01 0.02 0.01
---------- ---------- ---------- ----------
Combined $ 0.28 $ 0.89 $ 0.50 $ 0.47
========== ========== ========== ==========
Diluted
Computer Horizons Corp. $ 0.27 $ 0.84 $ 0.46 $ 0.44
Spargo 0.00 0.01 0.01 0.00
---------- ---------- ---------- ----------
Combined $ 0.27 $ 0.85 $ 0.47 $ 0.44
========== ========== ========== ==========
Shares Outstanding
Basic 30,714,000 27,567,000 26,380,000 24,312,000
Diluted 32,270,000 28,999,000 27,932,000 25,823,000
</TABLE>
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
On February 27, 1998, the Company acquired all of the common stock of
Princeton Softech, Inc. ("Princeton") in exchange for 954,213 shares of
Computer Horizons stock.
Princeton specializes in relational databases, data synchronization,
intelligent data migration and data management tools, and is based in
Princeton, New Jersey. This transaction will be accounted for as an
inmaterial pooling of interests. The results of Princeton will be
included as of January 1, 1998.
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31:
1997 1996
------(in thousands)----
Billed $60,274 $41,180
Unbilled 23,015 18,485
------- -------
83,289 59,665
Less allowance for doubtful accounts 1,742 1,203
------- -------
$81,547 $58,462
======= =======
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 4 - INVESTMENT IN JOINT VENTURE
In 1995, the Company entered into a software development and services
joint venture with the Birla Group, a large multinational conglomerate
located in India. The foreign joint venture, known as Birla Horizons
International ("BHI"), is headquartered in New Delhi, India and
currently has operations in India, the United States, the United Kingdom
and Canada.
The Company and the Birla Group each made cash contributions of $500,000
and each received a 50% interest in the joint venture. The Birla Group
has also contributed the net assets of its then existing information
technology company to the joint venture and the Company is providing
technological and management support.
The Company's total investment in BHI is $1,672,000 and $1,746,000 at
December 31, 1997 and 1996, respectively, representing the initial cost
plus equity in the undistributed net earnings since formation, and is
included in other noncurrent assets. BHI provided consultants to the
Company at a total cost of $5,017,000, $4,216,000 and $2,686,000 in
1997, 1996 and 1995, respectively. Approximately $374,000 was included
in accounts payable at December 31, 1997.
NOTE 5 - LONG-TERM DEBT AND LINES OF CREDIT
Long-term debt consists of the following at December 31:
1997 1996
--------(in thousands)--------
9.55% senior notes $1,432 $2,860
Other 41 111
Notes payable at prime 439
------ ------
1,473 3,410
Less current maturities 1,473 1,968
------ ------
$ $1,442
====== ======
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 5 (continued)
In 1988, the Company issued two senior notes aggregating $10,000,000
bearing interest at 9.55%, payable semiannually. The notes are payable
in annual installments of $1,428,000 from April 15, 1992 through 1997
with a final payment of $1,432,000 due April 15, 1998, and are subject
to the provisions of the loan agreement, including, among other things,
restrictions on additional borrowings, prepayments, dividends and stock
purchases (which were waived in connection with certain purchases of
treasury stock), and maintenance of a minimum net worth of $13,500,000.
The notes payable consist of notes to the four former shareholders of
USS. In 1995, an agreement was signed (Note 2) resulting in $957,000
being due in April 1996 and $439,000 in April 1997, with 8.75% imputed
interest.
At December 31, 1997, the Company has two unused bank lines of credit
totalling $25,000,000 at rates below the banks' prime lending rates.
During 1997, the Company had no borrowings against either line.
NOTE 6 - SHAREHOLDERS' EQUITY
Authorized Shares
On May 7, 1997, the Company approved an amendment to the Company's
Certificate of Incorporation increasing the authorized number of shares
of the Company's common stock from 30,000,000 to 60,000,000.
Stock Splits
The Board of Directors of the Company has declared three-for-two common
stock splits in the form of 50% stock distributions as follows:
Shareholder of
Date declared record date Date payable
------------- ----------- ------------
May 7, 1997 May 22, 1997 June 9, 1997
December 12, 1995 December 22, 1995 January 9, 1996
April 24, 1995 May 9, 1995 May 30, 1995
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 6 (continued)
Amounts equal to the $.10 par value of the common shares distributed
have been retroactively transferred from additional paid-in capital to
common stock. All references in the financial statements with regard to
number of shares of common stock, common stock prices and per share
amounts have been restated to reflect the above-mentioned stock splits.
Stock Options and SFAS No. 123 Pro Forma Disclosure
In 1994, the Company adopted a stock option plan which provides for the
granting, to officers and key employees, of options for the purchase of
a maximum of 7,594,000 shares of common stock and stock appreciation
rights (SARs). Options and SARs generally expire five years from the
date of grant and become exercisable in specified amounts during the
life of the respective options. No SARs have been granted as of December
31, 1997. This plan, which replaces the Company's 1985 Plan, will
terminate on June 15, 2004. There were 5,555,000 shares available for
option at December 31, 1997.
In 1994, the Company amended the non-qualified Directors' Stock Option
Plan increasing the maximum number of shares of common stock that may be
acquired pursuant to the exercise of options granted under the plan from
379,000 to 844,000, and providing that each new director of the Company
who is not an employee of the Company (i) shall immediately receive
options to purchase 75,938 shares of its common stock and (ii) shall
receive up to five annual grants to purchase 10,125 shares of its common
stock. The plan expires on March 4, 2001. There were 504,000 shares
available for option at December 31, 1997.
The exercise price per share on all options and/or SARs granted may not
be less than the fair value at the date of the option grant.
Accordingly, no compensation cost has been recognized for the plans. Had
compensation cost for the plans been determined based on the fair value
of the options at the grant dates consistent with the method of SFAS No.
123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 6 (continued)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C> <C>
Net income As reported $24,534,000 $13,075,000 $11,315,000
Pro forma 21,623,000 10,746,000 10,492,000
Earnings per share
Basic As reported $.89 $.50 $.47
Pro forma .78 .41 .43
Diluted As reported $.85 $.47 $.44
Pro forma .75 .38 .41
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options-pricing model with the following
weighted-average assumptions used for grants in 1997, 1996 and 1995,
respectively: expected volatility of 61%, 97% and 70%; risk-free
interest rates of 5.47%, 6.28% and 6.27%; and expected lives of 5.0, 4.9
and 4.5 years.
A summary of the status of the Company's stock option plans as of
December 31, 1997, 1996 and 1995, and changes during the years ending on
those dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------- ----------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
------ ----- ------ ----- ------ -----
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Outstanding - January 1 2,200 $ 7.03 2,260 $ 3.80 2,199 $ 2.10
Granted 333 23.39 885 14.65 812 6.09
Exercised (462) 5.37 (678) 2.50 (749) 1.29
Canceled/forfeited (36) 13.36 (267) 17.47 (2) 6.78
------ ------ -----
Outstanding - December 31 2,035 9.97 2,200 7.03 2,260 3.80
====== ====== =====
Options exercisable - December 31 833 7.10 764 4.94 999 2.42
====== ====== =====
Weighted-average fair value of
options granted during the year 23.30 11.65 3.82
</TABLE>
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 6 (continued)
The following information applies to options outstanding at December 31,
1997:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
-------------------------------------------------- -------------------------------
Weighted
Outstanding average Weighted Exercisable Weighted
as of remaining average as of average
December 31, contractual exercise December 31, exercise
Range of exercise prices 1997 life price 1997 price
------------------------ ---- ---- ----- ---- -----
(000's) (000's)
<S> <C> <C> <C> <C> <C>
$ 0.00 - $ 14.99 1,554 5.1 $ 6.23 708 $ 4.55
15.00 - 29.99 480 6.3 21.53 125 21.47
30.00 and over 1 4.7 35.38 -- --
----- ----- --------- ----- ---------
2,035 5.3 $ 9.86 833 $ 7.10
===== ===== ========= ===== =========
</TABLE>
Certain officers have the right to borrow from the Company against the
exercise price of options exercised.
The Company has issued warrants to purchase shares of its common stock
to two outside business/ legal consulting firms. Warrants for 8,625,
30,000 and 10,125 shares were granted, respectively, in 1997, 1996 and
1995. The exercise price is the fair value at the date of grant.
Shareholder Rights Plan
In July 1989, the Board of Directors declared a dividend distribution of
.131 preferred stock purchase right on each outstanding share of common
stock of the Company. The rights were amended on February 13, 1990. Each
right will, under certain circumstances, entitle the holder to buy one
one-hundredth (1/100) of a share of Series A preferred stock at an
exercise price of $30.00 per one one-hundredth (1/100) share, subject to
adjustment. Each one one-hundredth (1/100) of a share of Series A
preferred stock has voting, dividend and liquidation rights and
preferences substantively equivalent to one share of common stock.
The rights will be exercisable and transferable separately from the
common stock only if a person or group acquires 20% or more, subject to
certain exceptions, of the Company's outstanding common stock or
announces a tender offer that would result in the ownership of 20% or
more of the common
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 6 (continued)
stock. If a person becomes the owner of at least 20% of the Company's
common shares (an "Acquiring Person"), each holder of a right other than
the Acquiring Person is entitled, upon payment of the then current
exercise price per right (the "Exercise Price"), to receive shares of
common stock (or common stock equivalents) having a market value equal
to twice the Exercise Price.
Additionally, if the Company subsequently engages in a merger or other
business combination with the Acquiring Person in which the Company is
not the surviving corporation, or in which the outstanding shares of the
Company's common stock are changed or exchanged, or if more than 50% of
the Company's assets or earning power is sold or transferred, a right
would entitle a Computer Horizon Corp. shareholder, other than the
Acquiring Person and its affiliates, to purchase upon payment of the
Exercise Price, shares of the Acquiring Person having a market value of
twice the Exercise Price. Prior to a person becoming an Acquiring
Person, the rights may be redeemed at a redemption price of one cent per
right, subject to adjustment. The rights are subject to amendment by the
Board. No shareholder rights have become exercisable. The rights will
expire on July 16, 1999.
NOTE 7 - INCOME TAXES
The following is a geographical breakdown of the Company's income before
taxes:
1997 1996 1995
---- ---- ----
Domestic 40,169 19,342 18,103
Foreign 2,863 2,764 1,784
------ ------ ------
43,032 22,106 19,887
====== ====== ======
The provision for income taxes consists of the following for the years
ended December 31:
1997 1996 1995
--------------(in thousands)----------------
Current
Federal $ 13,927 $ 6,629 $ 6,180
State 4,558 2,108 2,353
Foreign 963 676 549
Deferred
Federal (703) (341) (358)
State (244) (33) (136)
Foreign (3) (8) (16)
-------- -------- --------
$ 18,498 $ 9,031 $ 8,572
======== ======== ========
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 7 (continued)
Deferred tax assets and liabilities consist of the following at December
31:
<TABLE>
<CAPTION>
1997 1996
-----(in thousands)----
<S> <C> <C>
Deferred tax assets
Accrued insurance $ 588 $ 291
Accrued payroll and benefits 1,413 1,011
Deferred lease obligations 48 72
Allowance for doubtful accounts 469 249
Other 275 129
------ ------
2,793 1,752
Deferred tax liabilities
Depreciation 123 31
------ ------
Deferred tax assets, net $2,670 $1,721
====== ======
</TABLE>
A reconciliation of income taxes, as reflected in the accompanying
statements, with the statutory Federal income tax rate of 35% for the years
ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------(in thousands)---------------
<S> <C> <C> <C>
Statutory Federal income taxes $ 15,061 $ 7,737 $ 6,960
State and local income taxes, net of
Federal tax benefit 2,804 1,349 1,441
Foreign taxes, provided at rates
other than the US statutory rate (37) 10 35
Amortization of goodwill 203 201 180
Equity in net earnings of joint venture (310) (126)
Other, net 467 44 82
-------- -------- --------
$ 18,498 $ 9,031 $ 8,572
======== ======== ========
</TABLE>
Deferred income taxes of approximately $413,000 have not been provided
on undistributed earnings of a foreign joint venture in the amount of
$1,181,000 as the earnings are considered to be permanently reinvested
at December 31, 1997.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 8 - EARNINGS PER SHARE DISCLOSURES
<TABLE>
<CAPTION>
For the year ended
----------------------------------------
Per
Income Shares share
(numerator) (denominator) amount
-----(in 000's, except per share data)--
<S> <C> <C> <C>
December 31, 1997
Net income $ 24,534
==========
Basic earnings per share
Income available to common stockholders $ 24,534 27,567,000 $ 0.89
========
Effect of diluted securities
Options 1,432,000
---------- -----------
Diluted earnings per share
Income available to common stock-
holders plus assumed conversions $ 24,534 28,999,000 $ 0.85
========== ========== ========
December 31, 1996
Net income $ 13,075
==========
Basic earnings per share
Income available to common stockholders $ 13,075 26,380,000 $ 0.50
========
Effect of diluted securities
Options 1,552,000
---------- -----------
Diluted earnings per share
Income available to common stock-
holders plus assumed conversions $ 13,075 27,932,000 $ 0.47
========== ========== ========
December 31, 1995
Net income $ 11,315
==========
Basic earnings per share
Income available to common stockholders $ 11,315 24,312,000 $ 0.47
========
Effect of diluted securities
Options
1,511,000
---------- -----------
Diluted earnings per share
Income available to common stock-
holders plus assumed conversions $ 11,315 25,823,000 $ 0.44
========== ========== ========
</TABLE>
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 8 (continued)
Options to purchase 8,713 and 27,375 shares of common stock in 1997 and
1996, respectively, ranging from $25.67 to $35.58, and $18.00 to $33.33
per share were outstanding during 1997 and 1996, respectively, but were
not included in the computation of diluted earnings per share because
the option's exercise price was greater than the average market price of
common shares. The options which expire between December 31, 2001 and
January 1, 2007 were still outstanding at December 31, 1997. All options
to purchase shares of common stock were included in the computation of
diluted earnings per share in 1995.
NOTE 9 - SAVINGS PLAN AND OTHER RETIREMENT PLANS
The Company maintains a defined contribution savings plan covering
eligible employees. The Company makes contributions up to a specific
percentage of participants' contributions. The Company contributed
approximately $469,000, $345,000, and $246,000 in 1997, 1996 and 1995,
respectively.
In 1995, the Company instituted a Supplemental Executive Retirement Plan
whereby key executives are entitled to receive lump-sum payments (or, if
they elect, a ten-year payout) upon reaching the age of 65 and being in
the employ of the Company. The maximum commitment if all plan members
remain in the employ of the Company until age 65 is approximately $9.7
million. Benefits accrue and vest based on a formula which includes
total years with the Company and total years possible until age 65. The
plan is nonqualified and not formally funded. Life insurance policies on
the members are purchased to assist in funding the cost. The deferred
compensation expense is charged to operations during the remaining
service lives of the members and amounted to approximately $183,000,
$97,000 and $82,000 in 1997, 1996 and 1995, respectively.
In addition, the Company adopted a Deferred Compensation Plan for Key
Executives that permits the individuals to defer a portion of their
annual salary or bonus for a period of at least five years. There is no
effect on the Company's operating results since any amounts deferred
would have previously been expensed. Amounts deferred as of December 31,
1997 have been included in other noncurrent liabilities.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 10 - COMMITMENTS
Leases
The Company leases office space under long-term operating leases
expiring through 2006. As of December 31, 1997, approximate minimum rental
commitments were as follows:
Year ending (in thousands)
1998 $ 3,957
1999 3,233
2000 1,294
2001 976
2002 700
Thereafter 729
--------
$ 10,889
========
Office rentals are subject to escalations based on increases in real
estate taxes and operating expenses. Aggregate rent expense for
operating leases approximated $3,721,000, $2,899,000, and $2,267,000 in
the years ended December 31, 1997, 1996 and 1995, respectively.
Other
In 1994, the Vice Chairman and Executive Vice President of the Company
announced his resignation effective February 15, 1995. The Company
recorded approximately $400,000 of deferred compensation in 1994 which
is to be paid beginning February 1998 through 2005. The Company also
agreed to retain this former officer as a consultant for a three-year
period for approximately $75,000 each year and entered into a
noncompetition agreement for that period.
<PAGE>
Computer Horizons Corp. and Subsidiaries
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1997, 1996 and 1995
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
For the years ended December 31, 1997 and 1996, selected quarterly
financial data is as follows:
<TABLE>
<CAPTION>
Quarters
-----------------------------------------------------
First Second Third Fourth
----------(in thousands, except per share data)------
<S> <C> <C> <C> <C>
1997
Revenues $ 77,205 $ 83,645 $ 89,861 $ 99,599
Direct costs 52,485 56,102 59,698 65,289
Selling, general and administrative 17,106 18,320 18,687 20,052
Merger-related costs 976
Income from operations 7,614 9,223 11,476 13,282
Interest expense - net 57 31 114 1,222
Equity in net earnings of joint
venture 150 63 (75) (125)
Income before income taxes 7,821 9,317 11,515 14,379
Income taxes 3,371 3,927 4,898 6,303
Net income 4,450 5,390 6,617 8,076
Earnings per share:
Basic $ 0.17 $ 0.20 $ 0.25 $ 0.27
Diluted 0.16 0.19 0.23 0.26
1996
Revenues $ 63,994 $ 62,781 $ 63,892 $ 70,744
Direct costs 43,713 44,143 43,928 48,626
Selling, general and administrative 14,058 14,517 14,897 16,205
Income from operations 6,223 4,121 5,067 5,913
Interest expense - net (31) (68) 4 (8)
Equity in net earnings of joint
venture 213 230 200 242
Income before income taxes 6,405 4,283 5,271 6,147
Income taxes 2,672 1,799 2,187 2,373
Net income 3,733 2,484 3,084 3,774
Earnings per share:
Basic $ 0.14 $ 0.09 $ 0.12 $ 0.15
Diluted 0.13 0.09 0.11 0.14
</TABLE>
<PAGE>
Computer Horizons Corp. and Subsidiaries
MARKET AND DIVIDEND INFORMATION
Years ended December 31, 1997 and 1996
The Company's common stock is quoted on the Nasdaq National Market, under the
symbol CHRZ. The range of high and low closing stock prices, as reported by the
Nasdaq National Market, for each of the quarters for the years ended December
31, 1997 and 1996, retroactively adjusted to reflect the three-for-two common
stock split declared by the Board of Directors in June 1997, is as follows:
1997 1996
--------------------- ------------------
High Low High Low
---- --- ---- ---
Quarter
First $25.42 $16.83 $25.67 $12.67
Second 38.88 19.67 36.00 22.00
Third 44.13 32.13 28.17 10.00
Fourth 45.50 27.00 25.83 16.17
The Company plans to reinvest its earnings in future growth opportunities and,
therefore, does not anticipate paying cash dividends in the near future and has
not paid any to date. As of December 31, 1997, there were approximately 1,100
holders of record of common stock.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors and Shareholders
Computer Horizons Corp.
In connection with our audit of the restated consolidated financial statements
of Computer Horizons Corp. and Subsidiaries referred to in our report dated
February 15, 1999, which is included in this Form 8-K, we have also audited
Schedule II which has been restated to reflect a merger with Spargo Consultants
PLC for each of the years ended December 31, 1997, 1996 and 1995. In our
opinion, this schedule presents fairly in all material respects, the information
required to be set forth therein.
/s/GRANT THORNTON LLP
- ---------------------
GRANT THORNTON LLP
Parsippany, New Jersey
February 15, 1999
<PAGE>
Computer Horizons Corp. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Charged to Balance at
beginning costs and Deductions - end of
Description of period expenses describe (1) period
----------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts $1,203,000 $575,000 $ 36,000 $1,742,000
========== ======== ======== ===========
Year ended December 31, 1996
Allowance for doubtful accounts $ 840,000 $487,000 $124,000 $1,203,000
========== ======== ======== ===========
Year ended December 31, 1995
Allowance for doubtful accounts $ 566,000 $465,000 $191,000 $ 840,000
========== ======== ======== ===========
</TABLE>
Notes
(1) Uncollectible accounts written off, net of recoveries.
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
SELECTED FINANCIAL DATA
Year ended December 31,
1997 1996 1995 1994 1993*
------------ ------------ ------------ ------------ ------------
------------------(dollar amounts in thousands, except per share data)-----------
<S> <C> <C> <C> <C> <C>
Revenues $ 350,310 $ 261,411 $ 224,809 $ 173,204 $ 139,249
Costs and expenses:
Direct costs 233,574 180,410 156,125 121,402 99,248
Selling, general and administrative 74,165 59,677 48,837 38,534 31,516
Merger-related costs 976
Income from operations 41,595 21,324 19,847 13,268 8,305
Other income (expense):
Interest income 1,700 404 346 83 245
Interest expense (276) (507) (667) (725) (847)
Equity in net earnings of
joint venture 13 885 361
Income before income
taxes 43,032 22,106 19,887 12,626 7,703
Income taxes 18,498 9,031 8,572 5,495 3,469
------------ ------------ ------------ ------------ ------------
Net income $ 24,534 $ 13,075 $ 11,315 $ 7,131 $ 4,234
============ ============ ============ ============ ============
Earnings per share:
Basic $ .89 $ .50 $ .47 $ .32 $ .18
============ ============ ============ ============ ============
Diluted $ .85 $ .47 $ .44 $ .30 $ .17
============ ============ ============ ============ ============
Weighted average number of shares outstanding:
Basic 27,567,000 26,380,000 24,312,000 22,446,000 24,047,000
============ ============ ============ ============ ============
Diluted 28,999,000 27,932,000 25,823,000 23,952,000 24,961,000
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Computer Horizons Corp. and Subsidiaries
SELECTED FINANCIAL DATA (continued)
Year ended December 31,
1997 1996 1995 1994 1993
----------------------(in thousands, except per share data)----------------
<S> <C> <C> <C> <C> <C>
Analysis (%)
Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin 33.3 31.0 30.5 29.9 28.6
Selling, general and administrative
21.1 22.8 21.7 22.2 22.6
Merger-related costs .3
Income from operations 11.9 8.2 8.8 7.7 6.0
Interest expense - net .4 (.0) (.1) (.4) (.5)
Equity in net earnings of joint
venture .3 .1
Income before income taxes 12.3 8.5 8.8 7.3 5.5
Income taxes 5.3 3.5 3.8 3.2 2.5
Net income 7.0 5.0 5.0 4.1 3.0
Revenue growth YOY 34.0 16.3 29.8 31.3 17.1
Net income growth YOY 87.6 15.6 58.7 90.2 52.5
Return on equity, average 18.9 19.9 25.0 24.5 15.4
Effective tax rate 43.0 40.9 43.1 43.5 45.0
At year-end
Total assets $ 217,625 $ 96,610 $ 63,096 $ 54,521 $ 44,208
Working capital 160,370 55,052 42,553 22,968 19,105
Long-term debt 1,442 3,324 4,346 6,160
Shareholders' equity 185,974 73,747 57,931 32,679 27,264
Stock price $ 45.50 $ 25.67 $ 16.89 $ 4.00 $ 2.32
P/E multiple 51 51 36 13 13
Employees* 3,794 3,228 2,830 2,419 1,869
Clients (during year)* 549 556 538 545 535
Offices (worldwide) 49 49 45 39 36
</TABLE>
*Does not include Birla Horizons International.
<PAGE>
ITEM 7(c). Exhibits
Exhibit 23.1 Consent of Grant Thornton
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Computer Horizons Corp.
We have audited the accompanying restated consolidated balance sheets of
Computer Horizons Corp. and Subsidiaries as of December 31, 1997 and 1996, and
the related restated consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
The accompanying consolidated financial statements have been restated to reflect
a restatement of the Company's previously reported amounts for the merger with
Spargo Consultants PLC (see Note 2). These restated consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the restated consolidated financial position of Computer
Horizons Corp. and Subsidiaries as of December 31, 1997 and 1996 and the
restated consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/GRANT THORNTON LLP
- ---------------------
GRANT THORNTON LLP
Parsippany, New Jersey
February 15, 1999
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Computer Horizons Corp.
We have issued our reports dated February 15, 1999, accompanying the restated
consolidated financial statements and schedules included in the Current Report
of Computer Horizons Corp. on Form 8-K filed March 16, 1999 for the year ended
December 31, 1997. We hereby consent to the incorporation by reference of said
reports in the Registration Statements of Computer Horizons Corp. on Forms S-3
(File 333-33665, effective September 24, 1997, File No. 333-44417, effective
February 27, 1998, and File No. 333-48877, effective March 30, 1998) and on
Forms S-8 (File No. 033-41726, effective January 16, 1991, File No. 033-59437,
effective May 18, 1995, File No. 033-64763, effective December 5, 1995, and File
No. 333-60751, effective August 5, 1998).
/s/GRANT THORNTON LLP
- ---------------------
GRANT THORNTON LLP
Parsippany, New Jersey
March 16, 1999
<PAGE>
As filed with the Securities and Exchange Commission on March 16, 1999
Registration No. 333_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMPUTER HORIZONS CORP.
(Exact name of registrant as specified in its charter)
New York 132638902
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046-1495
(Address of principal (Zip Code)
executive offices)
COMPUTER HORIZONS CORP. EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plan)
- - - - - - - - - - - - -
MR. JOHN J. CASSESE
Computer Horizons Corp.
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046-1495
(973) 299-4000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Robert A. Cantone, ESQ.
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
(212) 969-3000
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Amount Proposed Proposed
of Shares Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Registration
to be Registered Registered(l) Per Share (2) Offering Price Fee
- ---------------- ------------- ------------- -------------- ---
<S> <C> <C> <C> <C>
Common Stock, $0.10 par 500,000 $12.25 $6,125,000 $1,806.88
</TABLE>
<PAGE>
(1) Represents the maximum number of shares that may be issued pursuant to the
Computer Horizons Corp. Employee Stock Purchase Plan.
(2) Estimated for purposes of calculating the registration fee only and computed
in accordance with Rule 457(c) under the Securities Act, using the average of
the high and low prices of the Common Stock as reported on the Nasdaq Stock
Market on March 15, 1999.
<PAGE>
PART I
ITEM 1. Plan Information
Not required to be filed with this Registration Statement.
ITEM 2. Registration Information and Employee Plan Annual information
Not required to be filed with this Registration Statement.
PART II
ITEM 3. Incorporation of Documents by Reference
The following documents are incorporated herein by reference:
A. The Company's annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 10-K").
B. The Company's quarterly Reports on Form 10-Q for the quarters
ended September 28, 1998, June 29, 1998 and March 31, 1998.
C. The Company Reports on Form 8-K dated June 30, 1998, July 3,
1998, August 4, 1998 and March 16, 1999; and Form 8-K/A dated
August 4, 1998.
D. Description of the Registrant's Common Stock, par value $.10
contained in the Registrant's Registration Statement on Form 8-A.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
ITEM 4. Description of Securities
Not applicable.
ITEM 5. Interests of Named Experts and Counsel
None.
<PAGE>
ITEM 6. Indemnification of Directors and Officers
The Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation") provides, as permitted by Section 402(b) of the
New York Business Corporation Law (the "BCL") that no director shall be
personally liable to the Company or any shareholder for damages for any breach
of duty as a director, provided that the Certificate of Incorporation does not
eliminate or limit the liability of any director if a judgment or other final
adjudication adverse to him establishes that (i) his acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law, (ii)
he personally gained in fact a financial profit or other advantage to which he
was not legally entitled or (iii) his acts violated Section 719 of the BCL.
The Certificate of Incorporation also provides, in accordance with
Section 722 of the BCL, that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, (1) is or was a director or officer of the
Company or (2) is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans (whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent), shall be
indemnified and held harmless by the Company to the fullest extent authorized or
permitted by applicable law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) actually and
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his heirs,
executors and administrators, provided, however, that, except for actions
brought to enforce such indemnification rights, the Company shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Company. The right to
indemnification conferred in the Certificate of Incorporation is a contract
right and includes the rights to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition, provided,
however, that, if the BCL requires, the payment of such expenses incurred by a
director or officer in his capacity as such (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service with respect to an employee benefit plan)
in advance of the final disposition of a proceeding, shall be made only upon
delivery to the Company of an undertaking by or on behalf of such director or
officer to repay all amounts so advanced as to which it shall ultimately be
determined that such director or officer is not entitled to be indemnified.
<PAGE>
The Certificate of Incorporation further provides, in accordance with
the BCL, that the indemnification rights provided therein are not exclusive of
any other rights that any person may have, and that the Company may, subject to
certain restrictions imposed by the BCL, maintain insurance to protect itself
and its officers and directors against expenses, liabilities and losses, whether
or not the Company would be permitted to indemnify such person against such
expenses, liabilities and losses under the BCL.
The Company currently has a $15,000,000 directors' and officers'
liability insurance policy.
ITEM 7. Exemption from Registration Claimed
Not applicable.
ITEM 8. Exhibits
Note: As the Plan provides that the shares offered and sold
thereunder are to be treasury shares, no opinion of counsel as
to the legalities of the securities being registered is
provided.
23.1 Consent of Grant Thornton LLP.
99.1 The Computer Horizons Corp. Employee Stock Purchase Plan.
ITEM 9. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective Registration Statement; and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to
such information in the Registration Statement.
<PAGE>
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3 and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Borough of Mountain Lakes, State of New Jersey, on March 16,
1999.
COMPUTER HORIZONS CORP.
By: /s/John J. Cassese
-------------------------
John J. Cassese
Chairman of the Board and President
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint John J. Cassese, William J.
Murphy, and Michael J. Shea or any of them, with full power of substitution and
full power to act without the other, his true and lawful attorney-in-fact and
agent to act for him in his name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) or supplements
to this Registration Statement and to file the same with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or appropriate to be done with respect to this Registration Statement
or any amendments or supplements hereto in and about the premises, as fully to
all intents and purposes as they might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act Of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date Signed
- --------- ----- -----------
/s/John J. Cassese Chairman of the Board and President March 16, 1999
- ------------------ (Principal Executive Officer) and
John J. Cassese Director
Executive Vice President, Chief March 16, 1999
/s/William J. Murphy Financial Officer and Secretary
- -------------------- (Principal Financial Officer)
William J. Murphy
Vice President and Controller March 16, 1999
/s/Michael J. Shea (Principal Accounting Officer)
- ------------------
Michael J. Shea
Exhibit 5.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated __________, 1999, accompanying the
consolidated financial statements incorporated by reference in the Annual Report
of Computer Horizons Corp. on Form 10-K for the year ended December 31, 1997,
and our report dated __________, 1999, accompanying the financial statement
schedule included in that Form 10-K, which are incorporated by reference in this
Registration Statement. We consent to the incorporation by reference in the
Registration Statement of the aforementioned.
/s/GRANT THORNTON LLP
- ----------------------
GRANT THORNTON LLP
Parsippany, New Jersey __________, 1999
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Computer Horizons Corp.
We have issued our report dated February 15, 1999 included in Computer Horizons
Corp.'s current report on Form 8-K dated March 16, 1999 on the consolidated
restated financial statements and schedule as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997, which are
incorporated by reference in this Registration Statement. It should be noted
that the independent public accountant's reports on financial statements and
schedule previously incorporated by reference in the Annual Report of Computer
Horizons Corp. on Form 10-K and incorporated by reference in this registration
statement are no longer appropriate since restated financial statements have
been presented giving effect to a business combination accounted for as a
pooling of interests. We hereby consent to the incorporation by reference of
said report in this Registration Statement on Form S-8, covering shares of
common stock, par value $.10 per share, to be offered pursuant to the Company's
1999 Employee Stock Purchase Plan.
/s/GRANT THORNTON LLP
- ---------------------
GRANT THORNTON LLP
Parsippany, New Jersey
March 16, 1999