BUFFALO, N.Y., Oct. 21, 2014 /PRNewswire/ -- CTG (NASDAQ:
CTG), an information technology (IT) solutions and services
company, announced its financial results for the 2014 third quarter
which ended on September 26, 2014.
Third quarter results reflected lower revenue in CTG's
healthcare business offset in part by higher revenue from its
staffing and European businesses. When compared with the prior
year, the decline in earnings per share includes a $0.02 per diluted share impact realized from tax
credits and other tax reserve benefits in the 2013 third quarter.
Subsequent to the end of the third quarter, CTG Chairman and Chief
Executive Officer James R. Boldt
passed away on October 13, 2014. As
announced in the Company's October 14,
2014 news release, CTG's Board named its lead director
Daniel J. Sullivan as Non-executive
Chairman and CTG Chief Financial Officer Brendan M. Harrington as Interim Chief Executive
Officer.
Mr. Sullivan commented, "Everyone in the CTG family is
deeply saddened by the unexpected death earlier this month of our
CEO, Jim Boldt. A strong leader, Jim
was totally committed to CTG and its success throughout his nearly
20 years of service to the Company. Jim was a visionary who put CTG
on the path of becoming one of the largest U.S. providers of
healthcare IT services, while remaining mindful of the importance
of prudent expansion, conservative financial management, and a
balanced, diverse business mix. Because of his extraordinary
business acumen, dedication, and leadership, CTG is positioned well
for the future, a far more valuable, better performing, and
financially stronger company than when Jim became CTG's CEO in
2001."
2014 Third Quarter Review
Revenue, operating income, net income, and diluted net income
per share for the 2014 third quarter as compared with the 2013
third quarter were as follows (dollar amounts in thousands except
per-share data):
|
|
Sept. 26,
2014
|
|
|
Sept. 27,
2013
|
|
|
$
Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
96,760
|
|
$
|
100,689
|
|
$
|
(3,929)
|
|
(4)%
|
Operating
income
|
$
|
4,571
|
|
$
|
6,054
|
|
$
|
(1,483)
|
|
(24)%
|
Net income
|
$
|
2,726
|
|
$
|
3,863
|
|
$
|
(1,137)
|
|
(29)%
|
Diluted net income
per share
|
$
|
0.17
|
|
$
|
0.23
|
|
$
|
(0.06)
|
|
(26)%
|
|
|
|
|
|
|
|
|
|
|
|
The Company's operating margin decreased by 130 basis points to
4.7% from 6.0% in the 2013 third quarter, reflecting lower revenue
from electronic medical record implementations. Third quarter
results include approximately $1.9
million of revenue and $0.06
net income per diluted share from a data analytics project that
began in the second quarter 2014 and will run through the rest of
2014.
"CTG's third quarter financial results were consistent with the
guidance provided in our second quarter earnings release," said CTG
Interim Chief Executive Officer Brendan M.
Harrington, "The reduction in our operating margin reflects
the changing mix of our business due to current conditions in the
healthcare markets that we serve. We continue to be challenged in
our healthcare business by the continuing reduction in hospital
spending for electronic medical records (EMR) implementation
support. At the same time, demand from healthcare organizations for
application management outsourcing services is increasing. For
example, CTG won a large healthcare application management
engagement in the second quarter that began to ramp up in the third
quarter. Faced with lower reimbursement rates and the impact of
healthcare reform mandates, large hospitals are seeking more
business and IT consulting assistance in the areas of revenue cycle
and EMR optimization. We are adjusting to the changing environment
by continuing to expand our advisory services team and our
offerings to support the shift in healthcare client
needs."
Staffing revenue increased 1% to $61.5
million, or 64% of total revenue, compared with 60% of total
revenue in the 2013 third quarter. Solutions revenue decreased 11%
in the 2014 third quarter to $35.3
million, representing 36% of total revenue compared with 40%
of total revenue in the 2013 third quarter. European revenue
increased 1% to $18.3 million, or 19%
of total revenue, in the 2014 third quarter. Foreign currency
exchange fluctuations had a $0.1
million favorable effect on revenue in the quarter compared
with the 2013 third quarter. The modest increase in revenue
from CTG's European operations is attributable to growth in its
financial services and government business. There were 63 billing
days in both the third quarter of 2014 and 2013.
Mr. Harrington continued, "Growth in our staffing business
improved as reflected in the 100 person increase in headcount in
the quarter. We are also seeing a continuation of the modest growth
trend in our European operations as business from our government
and financial services clients there is solid. We remain
disciplined in managing costs as reflected in decreased operating
expenses in the quarter. These actions are helping to
partially reduce the impact on earnings from lower EMR
implementation revenue while we fine tune and expand our offerings
in response to changes in the U.S. healthcare market, including the
need for providers to consolidate EMR
information."
Selling, general, and administrative (SG&A) expenses in the
2014 third quarter were reduced by 4% to $14.5 million, or 15% of revenue, compared with
$15.1 million, or 15% of revenue, in
the 2013 third quarter. Medical costs related to the
Company's self-insured medical plan for the quarter were consistent
with the revised projection provided in its July 22, 2014 earnings release.
Cash used in operations was $2.4
million in the 2014 third quarter compared with cash
provided by operations of $3.0
million in the 2013 third quarter. At September 26, 2014, the Company had $28.3 million in cash compared with $31.5 million at the end of the 2013 third
quarter. The Company had no outstanding debt at the end of
the 2014 and 2013 third quarters. The effective tax rate for
the 2014 third quarter was 39.9% compared with 35.2% for the 2013
third quarter.
2014 Year-to-date Review
Revenue, operating income, net income, and diluted net income
per share for the first three quarters of 2014 as compared with the
first three quarters of 2013 are as follows (dollar amounts in
thousands except per share data):
|
|
Sept. 26,
2014
|
|
|
Sept.
27, 2013
|
|
|
$
Change
|
|
%
Change
|
Revenue
|
$
|
295,002
|
|
$
|
316,301
|
|
$
|
(21,299)
|
|
(7)%
|
Operating
income
|
$
|
15,516
|
|
$
|
18,635
|
|
$
|
(3,119)
|
|
(17)%
|
Net income
|
$
|
9,125
|
|
$
|
11,975
|
|
$
|
(2,850)
|
|
(24)%
|
Diluted net income
per share
|
$
|
0.56
|
|
$
|
0.70
|
|
$
|
(0.14)
|
|
(20)%
|
|
|
|
|
|
|
|
|
|
|
|
The Company's operating margin in the first three quarters of
2014 decreased by 60 basis points to 5.3% from 5.9% in the same
period of 2013. For the first three quarters of 2014, CTG's
solutions revenue was $114.9 million,
or 39% of total revenue, and its staffing revenue was $180.1 million, or 61% of total revenue.
European revenue in the first three quarters of 2014 increased 5%
to $58.9 million, or 20% of total
revenue.
Selling, general, and administrative expenses were reduced by 4%
to $45.7 million, or 15.5% of
revenue, compared with $47.8 million,
or 15.1% of revenue, in the first three quarters of 2013.
CTG did not repurchase any of its shares in the third quarter of
2014. Year to date, the Company has repurchased approximately
386,000 of its shares at an average price of $16.64 per share. On October 20, 2014, 751,000 shares were available
under its current repurchase authorizations.
2014 Fourth Quarter and Full Year Guidance
Based on year-to-date results and trends in its business, the
Company has set guidance in the table below for the 2014 fourth
quarter and updated its range of revenue and earnings guidance for
the 2014 full year from previous guidance to reflect current
results.
2014 Fourth
Quarter (66 billing days vs. 65 in Q4 2013)
|
|
|
Range
|
Range
midpoint
|
Change from 2013
fourth
quarter at range midpoint
|
|
|
|
|
Revenue
|
$100-102
million
|
$101
million
|
(2%)
|
Diluted net income
per share*
|
$0.20 -
$0.22
|
$0.21
|
(5%)
|
|
|
|
|
2014 Full Year
(Projected tax rate of 38% to 40%)
|
Range
|
Range
midpoint
|
Change from
2013
at range
midpoint
|
|
|
|
|
|
|
|
|
Revenue
|
$395-397
million
|
$396
million
|
(5)%
|
Diluted net income
per share *
|
$0.76 -
$0.78
|
$0.77
|
(16)%
|
|
|
|
|
|
*These ranges exclude
approximately $1.2 million, net of tax, or $0.07 of net income per
diluted share of costs associated with the death of the Company's
Chief Executive Officer, James R. Boldt, under his employment
agreement.
|
Mr. Harrington commented, "With the completion of a number of
our larger EMR engagements and our largest medical analytics
project in the third and fourth quarters, we expect the decline in
demand for EMR implementations, our most profitable health
solutions offerings, will continue into next year. Although
we believe we can effectively manage through this transition period
because of the diversity of our overall business, our financial
strength, and the expansion of our healthcare IT offerings, we
expect 2015 will be a challenge. We remain focused on securing
additional analytics work and the expansion of our healthcare
offerings tied to revenue cycle management and health reform
mandates. We expect to benefit from market demand for
healthcare application management support, an area where CTG has
significant experience. We also anticipate opportunity
related to ICD-10 based on the current government regulatory
deadline of October 1, 2015 for
implementation of the new coding standard. Demand in our IT
staffing business is on the rise, and we are well positioned to
further grow this business. In 2015, we must comply with the
requirements of the Patient Protection and Affordable Care Act. We
are in the process of offering compliant health coverage to our
hourly employees and intend to pass these additional costs on to
customers engaging our hourly employees who elect this
coverage."
Mr. Harrington added, "Long term, we remain confident that
healthcare is the most advantageous industry on which to focus our
growth strategy. Healthcare makes up almost 20% of the U.S.
GDP, and with the demographic of a large aging population, industry
spending is expected to grow. European healthcare providers are
expected to eventually install U.S. EMR systems, and with our EMR
implementation experience and European presence, CTG is in a good
place to benefit from this effort. With the transformational
changes in healthcare delivery and payment models being driven by
U.S. healthcare reform, there will be new opportunities for us to
support U.S. providers and payers in using technology to best adapt
to these changes."
Safe Harbor Statement
This document contains
certain forward-looking statements concerning the Company's current
expectations as to future growth. These statements are based upon a
review of industry reports, current business conditions in the
areas where the Company does business, the availability of
qualified professional staff, the demand for the Company's
services, current and proposed legislation and governmental
regulations that may affect the Company and/or its customers, and
other factors that involve risk and uncertainty. As such, actual
results may differ materially in response to a change in such
factors. Such forward-looking statements should be read in
conjunction with the Company's disclosures set forth in the
Company's 2013 Form 10-K, which is incorporated by reference and
other reports that may be filed from time to time with the
Securities and Exchange Commission. The Company assumes no
obligation to update the forward-looking information contained in
this release.
Conference Call and Webcast
CTG will hold a conference call to discuss its financial results
and business strategy on Tuesday, October
21, 2014 at 8:30 a.m. Eastern
Daylight Time. CTG Interim Chief Executive Officer
Brendan Harrington will lead the
call. Interested parties can dial in to 1-888-276-0010
between 8:10 a.m. and 8:20 a.m. and
ask for the CTG conference call. A replay of the call will be
available between 10:30 a.m. Eastern
Daylight Time October 21, 2014
and 11:00 p.m. Eastern Daylight Time
October 24, 2014 by dialing 1-
800-475-6701 and entering the conference ID number 306734.
A live webcast of the call will be available on CTG's web site:
http://www.ctg.com. The webcast will also be archived on CTG's
web site at http://investor.ctg.com/events.cfm for 90
days following completion of the conference call.
About CTG
CTG develops innovative IT solutions to address the business
needs and challenges of companies in several higher-growth
industries including healthcare, technology services, energy, and
financial services. As a leading provider of IT and business
consulting services to the healthcare market, CTG offers healthcare
institutions, physician practices, payers, and related
organizations a full range of offerings to help them achieve
clinical, operational, and financial goals. CTG has developed
for the healthcare provider and payer markets unique, proprietary
software solutions that support better and lower cost
healthcare. CTG also provides managed services IT staffing
for major technology companies and large corporations. Backed
by nearly 50 years' experience, proprietary methodologies, and an
ISO 9001-certified management system, CTG has a proven track record
of delivering high-value, industry-specific solutions. CTG
has approximately 3,900 employees and operates in North America and Western Europe. CTG posts news and other
important information on the Web at www.ctg.com.
Financial statements follow.
COMPUTER TASK
GROUP, INCORPORATED (CTG)
|
Condensed
Consolidated Statements of Income
|
(Unaudited)
|
(amounts in
thousands except per share data)
|
|
|
|
|
|
For the Quarter
Ended
|
|
For the Three
Quarters Ended
|
|
|
|
Sept.
26,
|
|
Sept.
27,
|
|
Sept.
26,
|
|
Sept.
27,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
96,760
|
|
$
|
100,689
|
|
$
|
295,002
|
|
$
|
316,301
|
Direct
costs
|
|
|
77,723
|
|
|
79,506
|
|
|
233,835
|
|
|
249,872
|
Selling, general and
administrative expenses
|
|
14,466
|
|
|
15,129
|
|
|
45,651
|
|
|
47,794
|
Operating
income
|
|
|
4,571
|
|
|
6,054
|
|
|
15,516
|
|
|
18,635
|
Other expense,
net
|
|
|
(33)
|
|
|
(91)
|
|
|
(185)
|
|
|
(306)
|
Income before income
taxes
|
|
|
4,538
|
|
|
5,963
|
|
|
15,331
|
|
|
18,329
|
Provision for income
taxes
|
|
|
1,812
|
|
|
2,100
|
|
|
6,206
|
|
|
6,354
|
Net income
|
|
$
|
2,726
|
|
$
|
3,863
|
|
$
|
9,125
|
|
$
|
11,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.18
|
|
$
|
0.25
|
|
$
|
0.61
|
|
$
|
0.78
|
|
Diluted
|
|
$
|
0.17
|
|
$
|
0.23
|
|
$
|
0.56
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,075
|
|
|
15,356
|
|
|
15,074
|
|
|
15,415
|
|
Diluted
|
|
|
16,160
|
|
|
16,923
|
|
|
16,336
|
|
|
17,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend
declared per share
|
|
|
$ 0.06
|
|
|
$ 0.05
|
|
|
$ 0.18
|
|
|
$ 0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTER TASK
GROUP, INCORPORATED (CTG)
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
(amounts in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
26,
|
|
December
31,
|
|
September
27,
|
|
|
|
2014
|
|
2013
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
28,256
|
|
$
|
46,227
|
|
$
|
31,532
|
|
Accounts receivable,
net
|
|
|
71,080
|
|
|
67,422
|
|
|
75,242
|
|
Other current
assets
|
|
|
5,096
|
|
|
2,770
|
|
|
3,304
|
Total current
assets
|
|
|
104,432
|
|
|
116,419
|
|
|
110,078
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
8,355
|
|
|
8,241
|
|
|
7,837
|
|
Goodwill
|
|
|
37,493
|
|
|
37,638
|
|
|
37,999
|
|
Other
assets
|
|
|
13,137
|
|
|
12,133
|
|
|
11,898
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
163,417
|
|
$
|
174,431
|
|
$
|
167,812
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
8,311
|
|
$
|
9,536
|
|
$
|
9,976
|
|
Accrued
compensation
|
|
|
23,095
|
|
|
31,460
|
|
|
28,222
|
|
Other current
liabilities
|
|
|
5,955
|
|
|
7,933
|
|
|
6,295
|
Total current
liabilities
|
|
|
37,361
|
|
|
48,929
|
|
|
44,493
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
liabilities
|
|
|
10,369
|
|
|
11,660
|
|
|
13,109
|
|
Shareholders'
equity
|
|
|
115,687
|
|
|
113,842
|
|
|
110,210
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
163,417
|
|
$
|
174,431
|
|
$
|
167,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTER TASK
GROUP, INCORPORATED (CTG)
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
(amounts in
thousands)
|
|
|
|
|
|
|
|
|
For the Three
Quarters Ended
|
|
|
|
September
26,
|
|
September
27,
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,125
|
|
$
|
11,975
|
|
Depreciation and
amortization expense
|
|
|
2,298
|
|
|
1,976
|
|
Equity-based
compensation expense
|
|
|
1,858
|
|
|
1,914
|
|
Other operating
items
|
|
|
(22,243)
|
|
|
(15,050)
|
Net cash provided by
(used in) operating activities
|
|
|
(8,962)
|
|
|
815
|
Net cash used in
investing activities
|
|
|
(2,304)
|
|
|
(5,607)
|
Net cash used in
financing activities
|
|
|
(5,898)
|
|
|
(4,433)
|
Effect of exchange
rates on cash and cash equivalents
|
|
|
(807)
|
|
|
143
|
Net decrease in cash
and cash equivalents
|
|
|
(17,971)
|
|
|
(9,082)
|
Cash and cash
equivalents at beginning of period
|
|
|
46,227
|
|
|
40,614
|
Cash and cash
equivalents at end of period
|
|
$
|
28,256
|
|
$
|
31,532
|
|
|
|
|
|
|
|
|
CTG news releases are available on the Web at
www.ctg.com.
ctg-e
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/ctg-reports-2014-third-quarter-results-797407235.html
SOURCE CTG