Company Also Announces New 1.0 Million Share Repurchase
Authorization BUFFALO, N.Y., Feb. 20 /PRNewswire-FirstCall/ -- CTG
(NASDAQ:CTGX), an international information technology (IT)
solutions and staffing company, today announced its financial
results for the 2007 fourth quarter and full year which ended on
December 31, 2007. For the 2007 fourth quarter, CTG reported
revenue growth of 8.3 percent, or $6.5 million, to $84.5 million
compared with 2006 fourth quarter revenue of $78.0 million. CTG's
net income for the 2007 fourth quarter was $1.2 million, including
the effects of merger evaluation costs, 13.4 percent higher than
2006 fourth quarter net income of $1.1 million. On a per diluted
share basis, 2007 fourth quarter net income was $0.07, a 16.7
percent increase from $0.06 in the 2006 fourth quarter. Earnings
growth reflected the power of operating leverage combined with an
improved sales mix and disciplined cost management. For 2007, CTG
reported revenue of $325.3 million, 0.6 percent less than 2006
revenue of $327.3 million. CTG's 2007 net income was $4.2 million,
a 21.5 percent increase from 2006 net income of $3.5 million. On a
per diluted share basis, 2007 net income was $0.25, 19.0 percent
higher than $0.21 in 2006. CTG also announced today that its Board
of Directors approved a new repurchase authorization for 1.0
million shares. "We had strong fourth quarter results as revenues
from both our solutions and staffing business and the profits from
our higher margin solutions helped to offset an unusual bad debt
expense. Excluding the effects of merger evaluation costs,
operating income (1) for the quarter was up 9.5 percent," said CTG
Chairman and Chief Executive Officer James R. Boldt. "Importantly,
when you exclude the effect of merger evaluation costs, CTG's
quarterly net income per share was at its highest level since the
fourth quarter of 1999." Mr. Boldt added, "In 2007 we had a 21.5
percent increase in net income and achieved CTG's third consecutive
year of double-digit earnings growth due to higher profits
resulting primarily from the 7.2 percent increase in revenues from
our solutions business. We accomplished these results despite the
effect of approximately $0.7 million in merger evaluation costs."
2007 Fourth Quarter Review Solutions revenue for the quarter, which
represented 33 percent of total revenue, helped to drive improved
net income. Operating income, excluding merger evaluation costs
(1), increased by 9.5 percent in the 2007 fourth quarter compared
with the 2006 fourth quarter. Operating income was impacted by $0.3
million in merger evaluation costs for advisory fees incurred in
connection with consideration of two unsolicited merger proposals
received from RCM Technologies, Inc. in 2007. As previously
announced, CTG's Board unanimously rejected both proposals as
inadequate. Reduced selling, general and administrative expenses in
the quarter, which was primarily the result of cost containment
efforts, more than offset a $0.2 million write-off for bad debts.
The bad debt expense was related to a staffing customer that
declared a Chapter 7 liquidation bankruptcy in January 2008. CTG's
net income before merger evaluation costs (1) was $1.4 million, a
34.2 percent increase from 2006 fourth quarter net income of $1.1
million. On a per diluted share basis, 2007 fourth quarter net
income before merger evaluation costs (1) was $0.09, a 50.0 percent
increase from $0.06 in the 2006 fourth quarter. Net income before
merger evaluation costs and equity-based compensation expense (1)
for the 2007 fourth quarter was $1.6 million, a 25.7 percent
increase from $1.3 million in the 2006 fourth quarter. Net income
per diluted share before merger evaluation costs and equity-based
compensation expense (1) for the 2007 fourth quarter was $0.10,
25.0 percent higher than $0.08 in the 2006 fourth quarter. 2007
Profits Reflect Effect of Strategy to Shift Towards an IT Solutions
Company In 2007, CTG's staffing business contributed $220.0
million, or 68 percent, to consolidated revenue, a decline of 3.9
percent from 2006. As was previously disclosed, a significant
staffing customer reduced its demand in the third quarter of 2006.
Offsetting the decline in staffing revenue, the Company's solutions
business grew 7.2 percent to $105.3 million when compared with
2006. Although still a smaller base relative to staffing business
revenue, continued growth in our higher margin solutions business
is expected to drive higher net income going forward. European
sales, net of favorable currency effects, increased 12.1 percent in
2007 and represented 22.2 percent of consolidated revenue. Selling,
general, and administrative expenses, excluding merger evaluation
costs, declined 3.1 percent in 2007 representing 20.0 percent of
revenue compared with 20.6 percent in 2006. Lower expenses in 2007
reflect cost control initiatives partially offset by the $0.2
million in bad debt expense in the 2007 fourth quarter described
above. In 2007, CTG recorded $2.4 million in depreciation expense
and $2.1 million for capital expenditures. CTG had no debt at the
end of the 2007 fourth quarter, the 2007 third quarter and the 2006
fourth quarter. Strong Pipeline of Opportunities to Continue to
Reposition CTG as an IT Solutions Company CTG issued guidance for
the 2008 first quarter with revenue expected to range from $83
million to $85 million, 3.7 to 6.2 percent increase above the 2007
first quarter. In the 2008 first quarter, the Company will record
approximately $0.2 million, or $.01 per diluted share, in merger
evaluation costs for advisory fees related to the merger proposals
received from RCM Technologies, Inc. in 2007. After the first
quarter charge, CTG does not expect to record any additional merger
evaluation costs for these proposals. The Company projects 2008
first quarter net income per diluted share before merger evaluation
costs(1) will range from $0.07 to $0.09, an increase of 40 to 80
percent over the 2007 first quarter, excluding the 2007 gain on the
sale of marketable securities. Net income per diluted share before
merger evaluation costs and equity-based compensation expense(1) is
expected to range from $0.08 to $0.10 for the quarter. There are 63
billing days in the 2008 first quarter compared with 64 days in the
2007 first quarter. Based on current business and market conditions
and the strength of its solutions business pipeline, CTG expects
that its 2008 revenue will range from $340 million to $350 million,
an increase of five to eight percent over 2007 revenue. The Company
currently projects 2008 net income to grow in the range of 32 to 72
percent and be in the range of $0.33 to $0.43 per diluted share,
reflecting its growth in higher margin solutions business. Mr.
Boldt noted, "We expect a significant increase in earnings as
operating margins expand based on the strong pipeline and robust
level of proposal activity in our solutions business. While overall
market demand for staffing is lower due to the recent slowdown in
the economy, we expect stability or modest growth in CTG's staffing
revenue this year based on recent staffing wins." He concluded, "We
believe our strategy to focus on the healthcare market,
particularly addressing the increasing demand for electronic
medical solutions for providers and payers, is manifesting itself
through our pipeline and proposal activity. Our objective for 2008
is to continue the growth in our solutions business which will
drive margin expansion. We will continue to be opportunistic in our
staffing business as we refine our sales efforts toward a diverse,
but select, group of high volume customers." Stock Repurchase
Program CTG repurchased 499,000 of its shares in the 2007 fourth
quarter and a total of 925,000 shares in 2007. On February 20,
2008, the Company was authorized to acquire approximately 0.2
million shares under its prior repurchase program. Combined with
the new 1.0 million repurchase authorization, approximately 1.2
million shares are currently available for repurchase by the
Company. In December 2007, the Company extended its 10b5-1 stock
repurchase plan to facilitate in 2008 the repurchase of its common
stock during its self-imposed blackout periods prior to the
announcement of quarterly results. Mr. Boldt commented, "Our
Board's new 1.0 million share repurchase authorization reflects our
continued confidence in CTG's future prospects and our belief that
our shares are undervalued. We intend to continue the active
repurchase of CTG shares in 2008." About CTG Backed by 41 years'
experience, CTG is transforming its business to a higher
profitability model of IT solutions. The Company provides IT
application management, consulting, software development and
integration, in addition to staffing solutions to help Global 2000
clients focus on their core businesses and use IT as a competitive
advantage to excel in their markets. CTG combines in-depth
understanding of our clients' businesses with a full range of
integrated services and proprietary ISO 9001:2000-certified service
methodologies. Our 3,400 IT professionals based in an international
network of offices in North America and Europe have a proven track
record of delivering solutions that work. More information about
CTG is available on the Web at http://www.ctg.com/. 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, 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 2006 Form 10-K and
Management's Discussion and Analysis section of the Company's 2006
annual report, which are incorporated by reference. The Company
assumes no obligation to update the forward-looking information
contained in this release. (1) On January 1, 2006, the Company
adopted the provisions of FAS 123R, "Share-Based Payment" on a
modified prospective basis, which required the Company to record
equity-based compensation expense for all awards granted after the
date of adoption and for the unvested portion of previously granted
awards outstanding as of the date of adoption. Additionally, during
the second and third quarter of 2007, the Company received two
unsolicited merger proposals from RCM Technologies, Inc. and
incurred costs to evaluate those proposals. For the purposes of
these calculations, Operating Income before Merger Evaluation Costs
excludes merger evaluation costs and Net Income and Net Income per
Diluted Share before Merger Evaluation Costs and Equity-Based
Compensation Expense excludes all merger evaluation costs and
equity-based compensation expense, net of income tax. Operating
Income before Merger Evaluation Costs and Net Income and Net Income
per Diluted Share before Merger Evaluation Costs and Equity-Based
Compensation Expense are not measurements calculated in accordance
with U.S. Generally Accepted Accounting Principles (GAAP), and are
not intended to be a replacement for, or considered to be more
important than, operating income, net income or net income per
diluted share calculated in accordance with GAAP. As the
calculations of Operating Income before Merger Evaluation Costs and
Net Income and Net Income per Diluted Share before Merger
Evaluation Costs and Equity-Based Compensation are not in
accordance with GAAP, the Company believes that the use of the
calculations is significantly limited, and should only be used to
compare operating income excluding merger evaluation costs, and net
income and net income per diluted share excluding merger evaluation
costs and equity-based compensation expense, net of income tax, on
a year-over-year basis. To mitigate this limitation, the Company
has provided operating income, net income and net income per
diluted share calculated in accordance with GAAP, which should be
the measurements utilized to analyze the Company's financial
results. Other than to measure operating income excluding merger
evaluation costs, and net income and net income per share
year-over-year on a consistent basis excluding merger evaluation
costs and equity-based compensation expense, net of tax, the
Company does not utilize Operating Income Before Merger Evaluation
Costs and Net Income and Net Income per Diluted Share before Merger
Evaluation Costs and Equity Based Compensation Expense for any
other purpose. Conference Call and Webcast CTG will hold a
conference call on Thursday February 21, 2008 at 10:00 AM Eastern
Time to discuss its financial results and business strategy. CTG
Chairman and Chief Executive Officer James R. Boldt will lead the
call. Interested parties can dial in to 1-888-276-0010 between 9:45
AM and 9:50 AM and ask for the CTG conference call and identify
James Boldt as the conference chairperson. A replay of the call
will be available between 12:00 p.m. Eastern Time February 21, 2008
and 11:00 p.m. Eastern Time February 24, 2008 by dialing
1-800-475-6701 and entering the conference ID number 899687. A
webcast of the call will also be available on CTG's web site:
http://www.ctg.com/. It will also be broadcast by Shareholder.com
at: http://investor.ctg.com/eventdetail.cfm?EventID=29711. You must
have Windows Media Player or RealPlayer's audio software on your
computer to listen to the webcast. Both are available for
downloading at no charge when accessing the webcast. 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. 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 Year Ended Dec. 31, Dec. 31, Dec. 31,
Dec. 31, 2007 2006 2007 2006 Revenue $84,504 $78,015 $ 325,285
$327,253 Direct costs 65,783 58,923 252,889 253,101 Selling,
general and administrative expenses 16,523 17,084 65,195 67,298
Merger evaluation costs 349 - 677 - Operating income 1,849 2,008
6,524 6,854 Other income (expense), net 59 (91) 285 (705) Income
before income taxes 1,908 1,917 6,809 6,149 Provision for income
taxes 697 849 2,563 2,654 Net income $1,211 $1,068 $4,246 $3,495
Net income per share: Basic $0.08 $0.07 $0.26 $0.21 Diluted $0.07
$0.06 $0.25 $0.21 Weighted average shares outstanding: Basic 15,887
16,328 16,181 16,417 Diluted 16,434 16,656 16,654 16,745
Calculations of Operating Income Before Merger Evaluation Costs and
Net Income and Net Income per Diluted Share Before Merger
Evaluation Costs and Equity-Based Compensation Expense (1) For the
Quarter Ended For the Year Ended Dec. 31, Dec. 31, Dec. 31, Dec.
31, 2007 2006 2007 2006 Operating income $1,849 $2,008 $6,524
$6,854 Merger evaluation costs 349 - 677 - Operating income before
merger evaluation costs $2,198 $2,008 $7,201 $6,854 Net income
$1,211 $1,068 $4,246 $3,495 Merger evaluation costs, net of income
tax 222 - 426 - Net income before merger evaluation costs 1,433
1,068 4,672 3,495 Equity-based compensation expense, net of income
tax 155 195 569 596 Net income before merger evaluation costs and
equity-based compensation expense $1,588 $1,263 $5,241 $4,091 Net
income per diluted share before merger evaluation costs $0.09 $0.06
$0.28 $0.21 Net income per diluted share before merger evaluation
costs and equity-based compensation expense $0.10 $0.08 $0.31 $0.24
COMPUTER TASK GROUP, INCORPORATED (CTG) Condensed Consolidated
Balance Sheets (Unaudited) (amounts in thousands) Dec. 31, Dec. 31,
Dec. 31, Dec. 31, 2007 2006 2007 2006 Current Assets: Current
Liabilities: Cash and cash equivalents $4,290 $4,758 Accounts
payable $10,109 $9,561 Accounts Accrued receivable, net 52,314
52,544 compensation 21,299 23,162 Other current Other current
assets 4,628 4,702 liabilities 6,613 7,627 Total Current Total
Current Assets 61,232 62,004 Liabilities 38,021 40,350 Property and
equipment, net 5,741 5,918 Long-term debt - - Goodwill 35,678
35,678 Other liabilities 9,361 9,736 Shareholders' Other assets
9,810 8,117 equity 65,079 61,631 Total Liabilities and
Shareholders' Total Assets $112,461 $111,717 Equity $112,461
$111,717 Today's news release, along with CTG news releases for the
past year, is available on the Web at http://www.ctg.com/. CONTACT:
James R. Boldt, Chairman & Chief Executive Officer (716)
887-7244 Investor Relations: Brendan Harrington, Chief Financial
Officer (716) 888-3634 DATASOURCE: CTG CONTACT: James R. Boldt,
Chairman & Chief Executive Officer, +1-716-887-7244, or
Investor Relations, Brendan Harrington, Chief Financial Officer,
+1-716-888-3634 Web site: http://www.ctg.com/ Company News On-Call:
http://www.prnewswire.com/comp/198025.html
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