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Form 10-Q COMPUTER TASK GROUP INC For: Jul 01

August 8, 2022 3:58 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended July 1, 2022

OR

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

For the Transition period from                 to                

Commission File No. 1-9410

 

COMPUTER TASK GROUP, INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

New York

 

16-0912632

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

300 Corporate Parkway, Suite 214N, Amherst, New York

 

14226

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (716882-8000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

CTG

 

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      NO  

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

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

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

 

 

 

 

Shares outstanding at

Title of each class

 

August 3, 2022

Common stock, par value $.01 per share

 

15,519,191

 


 

 

SEC Form 10-Q Index

 

 

 

 


 

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(Unaudited)

 

 

For the Quarter Ended

 

 

For the Two Quarters Ended

 

 

July 1, 2022

 

 

July 2, 2021

 

 

July 1, 2022

 

 

July 2, 2021

 

Revenue

$

82,759

 

 

$

92,164

 

 

$

172,176

 

 

$

189,293

 

Cost of services

 

63,009

 

 

 

71,785

 

 

 

131,831

 

 

 

148,147

 

Gross profit

 

19,750

 

 

 

20,379

 

 

 

40,345

 

 

 

41,146

 

Selling, general and administrative expenses

 

16,577

 

 

 

17,578

 

 

 

33,973

 

 

 

36,247

 

Operating income

 

3,173

 

 

 

2,801

 

 

 

6,372

 

 

 

4,899

 

Interest and other income

 

99

 

 

 

110

 

 

 

190

 

 

 

194

 

Interest and other expense

 

484

 

 

 

366

 

 

 

832

 

 

 

600

 

Income before income taxes

 

2,788

 

 

 

2,545

 

 

 

5,730

 

 

 

4,493

 

Provision for income taxes

 

748

 

 

 

712

 

 

 

1,450

 

 

 

1,152

 

Net income

$

2,040

 

 

$

1,833

 

 

$

4,280

 

 

$

3,341

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.14

 

 

$

0.13

 

 

$

0.30

 

 

$

0.24

 

Diluted

$

0.13

 

 

$

0.12

 

 

$

0.28

 

 

$

0.22

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

14,419

 

 

 

13,845

 

 

 

14,309

 

 

 

13,770

 

Diluted

 

15,122

 

 

 

14,972

 

 

 

15,050

 

 

 

14,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

1


 

COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

(Unaudited)

 

 

For the Quarter Ended

 

 

For the Two Quarters Ended

 

 

July 1, 2022

 

 

July 2, 2021

 

 

July 1, 2022

 

 

July 2, 2021

 

Net income

$

2,040

 

 

$

1,833

 

 

$

4,280

 

 

$

3,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(3,238

)

 

 

254

 

 

 

(4,567

)

 

 

(1,991

)

Change in pension, net of taxes of $45 and $1 in the 2022 and 2021 second quarters, respectively, and $78 and $39 in the first two quarters of 2022 and 2021, respectively

 

580

 

 

 

56

 

 

 

911

 

 

 

606

 

Other comprehensive income (loss)

 

(2,658

)

 

 

310

 

 

 

(3,656

)

 

 

(1,385

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

$

(618

)

 

$

2,143

 

 

$

624

 

 

$

1,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

2


 

COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share balances)

(Unaudited)

 

 

July 1,

 

 

December 31,

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

35,479

 

 

$

35,584

 

Accounts receivable, net of allowances of $367 and $581 in 2022 and 2021,

   respectively

 

76,622

 

 

 

84,252

 

Prepaid and other current assets

 

3,146

 

 

 

2,849

 

Income taxes receivable

 

 

 

 

80

 

Total current assets

 

115,247

 

 

 

122,765

 

Property, equipment and capitalized software, net

 

4,376

 

 

 

5,242

 

Operating lease right-of-use assets

 

19,005

 

 

 

22,132

 

Deferred income taxes

 

4,725

 

 

 

4,946

 

Acquired intangibles, net

 

6,219

 

 

 

7,280

 

Goodwill

 

18,104

 

 

 

19,676

 

Cash surrender value of life insurance, net

 

4,039

 

 

 

4,018

 

Other assets

 

2,226

 

 

 

2,228

 

Investments

 

80

 

 

 

47

 

Total assets

$

174,021

 

 

$

188,334

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

$

13,544

 

 

$

21,150

 

Accrued compensation

 

18,071

 

 

 

22,534

 

Advance billings on contracts

 

4,964

 

 

 

4,762

 

Short-term operating lease liabilities

 

5,838

 

 

 

6,444

 

Short-term deferred payroll taxes

 

3,508

 

 

 

3,508

 

Other current liabilities

 

7,169

 

 

 

6,585

 

Income taxes payable

 

351

 

 

 

 

Total current liabilities

 

53,445

 

 

 

64,983

 

Deferred compensation benefits

 

10,650

 

 

 

11,437

 

Long-term operating lease liabilities

 

13,030

 

 

 

15,612

 

Deferred income taxes

 

1,512

 

 

 

1,792

 

Other long-term liabilities

 

77

 

 

 

73

 

Total liabilities

 

78,714

 

 

 

93,897

 

Shareholders’ Equity:

 

 

 

 

 

 

 

Common stock, par value $0.01 per share, 150,000,000 shares authorized;

   27,017,824 shares issued in 2022 and 2021

 

270

 

 

 

270

 

Capital in excess of par value

 

108,890

 

 

 

110,330

 

Retained earnings

 

112,322

 

 

 

108,042

 

Less: Treasury stock of 11,498,633 and 11,667,719 shares at cost, in

   2022 and 2021, respectively

 

(105,579

)

 

 

(107,265

)

Accumulated other comprehensive loss

 

(20,596

)

 

 

(16,940

)

Total shareholders’ equity

 

95,307

 

 

 

94,437

 

Total liabilities and shareholders’ equity

$

174,021

 

 

$

188,334

 

 

 

 

 

 

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

3


 

COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

 

 

For the Two Quarters Ended

 

 

July 1, 2022

 

 

July 2, 2021

 

Cash flow from operating activities:

 

 

 

 

 

 

 

Net income

$

4,280

 

 

$

3,341

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

Depreciation and amortization expense

 

1,400

 

 

 

1,685

 

Equity-based compensation expense

 

1,176

 

 

 

1,272

 

Deferred income taxes

 

155

 

 

 

(199

)

Deferred compensation benefits

 

(97

)

 

 

134

 

Loss on the sale of property and equipment

 

 

 

 

62

 

Changes in assets and liabilities that provide (use) cash, excluding the effects of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

 

4,256

 

 

 

(6,259

)

Prepaid and other current assets

 

(423

)

 

 

(436

)

Other long-term assets

 

(22

)

 

 

(329

)

Cash surrender value of life insurance

 

429

 

 

 

133

 

Accounts payable

 

(7,203

)

 

 

(3,166

)

Accrued compensation

 

(3,023

)

 

 

1,929

 

Income taxes payable / receivable

 

442

 

 

 

138

 

Advance billings on contracts

 

455

 

 

 

1,272

 

Other current liabilities

 

1,005

 

 

 

379

 

Other long-term liabilities

 

4

 

 

 

(7

)

Net cash provided by (used in) operating activities

 

2,834

 

 

 

(51

)

Cash flow from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

(280

)

 

 

(1,189

)

Proceeds from sale of property & equipment

 

9

 

 

 

 

Premiums paid for life insurance

 

(450

)

 

 

(429

)

Net cash used in investing activities

 

(721

)

 

 

(1,618

)

Cash flow from financing activities:

 

 

 

 

 

 

 

Deferred debt financing costs

 

 

 

 

(1,342

)

Proceeds from stock option plan exercises

 

215

 

 

 

366

 

Taxes remitted for shares withheld from equity-based compensation

   transactions

 

(1,229

)

 

 

(389

)

Proceeds from Employee Stock Purchase Plan

 

84

 

 

 

84

 

Change in cash overdraft, net

 

223

 

 

 

 

Net cash used in financing activities

 

(707

)

 

 

(1,281

)

Effect of exchange rates on cash and cash equivalents

 

(1,511

)

 

 

(706

)

Net decrease in cash and cash equivalents

 

(105

)

 

 

(3,656

)

Cash and cash equivalents at beginning of year

 

35,584

 

 

 

32,865

 

Cash and cash equivalents at end of quarter

$

35,479

 

 

$

29,209

 

 

 

 

 

 

 

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

4


 

COMPUTER TASK GROUP, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Equity

 

Balances as of April 1, 2022

 

 

27,018

 

 

$

270

 

 

$

109,422

 

 

$

110,282

 

 

 

11,599

 

 

$

(106,628

)

 

$

(17,938

)

 

$

95,408

 

Employee Stock Purchase Plan share

   issuance

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(5

)

 

 

48

 

 

 

 

 

 

47

 

Stock Option Plan share issuance, net

 

 

 

 

 

 

 

 

(139

)

 

 

 

 

 

(29

)

 

 

264

 

 

 

 

 

 

125

 

Restricted Stock Plan share

   issuance/forfeiture

 

 

 

 

 

 

 

 

(995

)

 

 

 

 

 

(66

)

 

 

737

 

 

 

 

 

 

(258

)

Equity-based compensation

 

 

 

 

 

 

 

 

603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

603

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,040

 

 

 

 

 

 

 

 

 

 

 

 

2,040

 

Foreign currency adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,238

)

 

 

(3,238

)

Pension loss adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

580

 

 

 

580

 

Balances as of July 1, 2022

 

 

27,018

 

 

$

270

 

 

$

108,890

 

 

$

112,322

 

 

 

11,499

 

 

$

(105,579

)

 

$

(20,596

)

 

$

95,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Equity

 

Balances as of April 2, 2021

 

 

27,018

 

 

$

270

 

 

$

108,385

 

 

$

95,820

 

 

 

11,636

 

 

$

(107,339

)

 

$

(17,062

)

 

$

80,074

 

Employee Stock Purchase Plan share

   issuance

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

(5

)

 

 

43

 

 

 

 

 

 

48

 

Stock Option Plan share issuance, net

 

 

 

 

 

 

 

 

(40

)

 

 

 

 

 

 

 

 

183

 

 

 

 

 

 

143

 

Restricted Stock Plan share

   issuance/forfeiture

 

 

 

 

 

 

 

 

101

 

 

 

 

 

 

59

 

 

 

(394

)

 

 

 

 

 

(293

)

Equity-based compensation

 

 

 

 

 

 

 

 

682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

682

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,833

 

 

 

 

 

 

 

 

 

 

 

 

1,833

 

Foreign currency adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

254

 

 

 

254

 

Pension loss adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56