Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The consolidated financial
statements include the accounts of Computer Task Group, Incorporated, and its subsidiaries (the Company or CTG), located primarily in North America and Europe. There are no unconsolidated entities, or off balance sheet arrangements. All
inter-company accounts and transactions have been eliminated. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to
prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles. Such estimates primarily relate to the valuation of goodwill, valuation allowances for deferred tax assets, actuarial assumptions
including discount rates and expected rates of return, as applicable, for the Companys defined benefit and postretirement benefit plans, the allowance for doubtful accounts receivable, assumptions underlying stock option valuation, investment
valuation, legal matters, and estimates of progress toward completion and direct profit or loss on contracts. Actual results could differ from those estimates.
The Company operates in one industry segment, providing IT services to its clients. These services include IT Staffing and IT Solutions. CTG provides these primary services to all of the markets that it serves. The services provided
typically encompass the IT business solution life cycle, including phases for planning, developing, implementing, managing, and ultimately maintaining the IT solution. A typical customer is an organization with large, complex information and data
processing requirements. The Company promotes a significant portion of its services through three vertical market focus areas: Technology Service Providers, Healthcare (which includes services provided to health care providers, health insurers, and
life sciences companies) and Financial Services. The Company focuses on these three vertical areas as it believes that these areas are either higher growth markets than the general IT services market and the general economy, or are areas that
provide greater potential for the Companys growth due to the size of the vertical market. The vertical areas of Technology Service Providers, Healthcare, and Financial Services totaled 38%, 25%, and 11% of total consolidated revenue in 2007,
41%, 24%, and 10% of total consolidated revenue in 2006 and 41%, 24%, and 8% of total consolidated revenue in 2005, respectively. Outside of these three vertical market focus areas, the Company provides its services to customers in general
industries, which totaled 26% of total consolidated revenue in 2007, 25% in 2006, and 27% in 2005, respectively.
Revenue and Cost Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, when the services have been rendered, when the price is
determinable, and when collectibility of the amounts due is reasonably assured. For time-and-material contracts revenue is recognized as hours are incurred and costs are expended. Revenue from time-and-material projects totaled approximately 88%,
90% and 92% of 2007, 2006, and 2005 consolidated revenue, respectively.
For contracts with periodic billing schedules, primarily monthly, revenue is
recognized as services are rendered to the customer. Revenue from such projects totaled approximately 8%, 6%, and 5% of 2007, 2006, and 2005 consolidated revenue, respectively.
Revenue for fixed price contracts is recognized as per the proportional method of accounting using an input-based approach whereby salary and indirect labor costs incurred are measured and compared to the total
estimate of costs at completion for a project. Revenue is recognized based upon the percent complete calculation of total incurred costs to total estimated costs. The Company infrequently works on fixed price projects that include significant
amounts of material or other non-labor related costs which could distort the percent complete within a percentage complete calculation. The Companys estimate of the total labor costs it expects to incur over the term of the contract is based
on the nature of the project and our past experience on similar projects, and includes management judgments and estimates which affect the amount of revenue recognized on fixed price contracts in any accounting period. Revenue from fixed-price
contracts accounted for under the percentage-of-completion method totaled approximately 4%, 4%, and 3% of 2007, 2006 and 2005 consolidated revenue, respectively.
As required, the Company includes billable expenses in its accounts as both revenue and direct costs. These billable expenses totaled $7.9 million, $9.4 million, and $9.2 million in 2007, 2006 and 2005, respectively.
32
Selling, general, and administrative costs are charged to expense as incurred.
Bad debt expense (benefit), net was approximately $0.2 million, $0, and $(0.1) million in 2007, 2006 and 2005, respectively.
Restricted Cash
At December 31, 2007, the Company has
restricted use to approximately $0.4 million of its cash and cash equivalents as the funds are held as a guarantee by a financial institution for leased office space.
Fair Value of Financial Instruments
The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties. At December 31, 2007 and 2006, the carrying amounts of the Companys financial instruments, which include cash and cash equivalents ($4.3 million and $4.8
million, respectively), accounts receivable, net ($52.3 million and $52.5 million, respectively), and accounts payable ($10.1 million and $9.6 million, respectively), approximate fair value. The Companys investments ($0.6 million and $1.3
million, respectively) are recorded at fair value (see note 2, Investments).
Investments
The Companys investments at December 31, 2007 consist of mutual funds which are allocated to the Computer Task Group, Incorporated Non-qualified Key Employee
Deferred Compensation Plan. The mutual funds are classified as trading securities and are recorded in the Companys consolidated balance sheets at fair value based upon market quotes. Unrealized gains and losses on these securities are recorded
in earnings, and were nominal in 2007, 2006 and 2005. All other investments consisting of equity securities were sold during 2007.
Property and
Equipment
Property and equipment are generally stated at historical cost less accumulated depreciation. Depreciation is computed using the
straight-line method based on estimated useful lives of one year to 30 years, and begins after an asset has been put into service. The cost of property or equipment sold or otherwise disposed of, along with related accumulated depreciation, is
eliminated from the accounts, and the resulting gain or loss, if any, is reflected in current earnings. Maintenance and repairs are charged to expense when incurred, while significant betterments to existing assets are capitalized.
The Company accounts for capitalized software costs under either Statement of Position (SOP) 98-1 Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, or FAS 86 Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, according to the intended use of the software. At December 31, 2007, the Company has capitalized a
total of approximately $0.2 million for two projects under SOP 98-1 and $0.1 million for one project under FAS 86, and has not yet begun to amortize these projects as they are not yet complete.
Leases
The Company is obligated under a number of long-term
operating leases primarily for the rental of office space, office equipment and automobiles based in Europe. In instances where the Company has negotiated leases that contain rent holidays or escalation clauses, the expense for those leases is
recognized monthly on a straight line basis over the term of the lease.
33
Goodwill
The
Company tests its goodwill for impairment at least annually. During 2006, the Company changed its annual impairment test date from January 1 (effective valuation date of December 31) to the end of its October fiscal month-end. The Company
believes its October fiscal month-end is preferable as it provides additional time prior to the Companys year-end of December 31 to complete the impairment testing and report the results of those tests in its annual report on Form 10-K.
At the respective measurement dates for 2007, 2006, and 2005, with the assistance of an independent appraisal company, the Company completed its annual
valuation of the business to which the Companys goodwill relates. These valuations, as applicable, are based on estimates and assumptions that may analyze the appraised value of similar transactions from which the goodwill arose, the appraised
value of similar companies, or estimates of future discounted cash flows. The valuations indicated that the estimated fair value of the business exceeded the carrying value of the business in each period. Additionally, there are no facts or
circumstances that arose during 2007, 2006 or 2005 that led management to believe the goodwill was impaired. Accordingly, the Company believes no goodwill impairment is required to be recorded in its consolidated financial results.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds
the fair value of the assets. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell. The Company does not have any long-lived assets that are impaired or that it intends to dispose of at
December 31, 2007.
Income Taxes
The Company
provides for deferred income taxes for the temporary differences between the financial reporting basis and the tax basis of the Companys assets and liabilities. In assessing the realizability of deferred tax assets, management considers within
each tax jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment.
34
Equity-Based Compensation
On January 1, 2006, the Company adopted the provisions of FAS 123R, Share-Based Payment (FAS 123R) and related interpretations 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. With the adoption of the standard, the calculated fair value cost of its equity-based
compensation awards are recognized in the Companys income statement over the period in which an employee or director is required to provide the services for the award. Compensation cost is not recognized for employees or directors that do not
render the requisite services. The Company recognized the expense for equity-based compensation in its 2007 and 2006 statements of income on a straight-line basis based upon awards that are ultimately expected to vest. See note 10,
Equity-Based Compensation.
On November 16, 2005, the Board of Directors of the Company approved the acceleration of the vesting of all
unvested out-of-the money stock options previously awarded to its employees, including its executive officers and its directors under the Companys equity compensation plans having an exercise price greater than $3.48, which was the closing
price of the Companys common stock on that date. Options to purchase approximately 1.1 million shares of the Companys common stock became exercisable immediately. The weighted-average exercise price of the options subject to the
acceleration was $4.69.
The purpose of the acceleration was to enable the Company to eliminate future compensation expense the Company would otherwise
recognize in its statements of income with respect to these accelerated options upon the adoption of FAS 123R. The Board of Directors took the action in the belief that it is in the best interest of the shareholders to minimize future compensation
expense associated with stock options upon adoption of FAS 123R. The estimate of the maximum future compensation expense that would have been recorded in the Companys statements of income had the vesting of these options not been accelerated
was approximately $1.4 million.
The following table details the effect on net income (loss) and basic and diluted net income (loss) per share for the
years ended December 31, 2007, 2006, and 2005 as if the Company had adopted the fair value recognition provisions of FAS 123R as they apply to stock-based employee compensation for all periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands, except per-share data)
|
|
2007
|
|
|
2006
|
|
|
2005 (a)
|
|
Net income, as reported for the prior periods
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
2,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based employee compensation expense
|
|
$
|
863
|
|
|
$
|
856
|
|
|
$
|
3,288
|
|
Tax benefit
|
|
|
(294
|
)
|
|
|
(260
|
)
|
|
|
(786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation, net of tax
|
|
$
|
569
|
|
|
$
|
596
|
|
|
$
|
2,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), including stock-based compensation
|
|
$
|
4,246
|
|
|
$
|
3,495
|
|
|
$
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share, as reported for the prior periods
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share, including the effect of stock-based compensation expense
|
|
$
|
0.26
|
|
|
$
|
0.21
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share, as reported for the prior periods
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share, including the effect of stock-based compensation expense
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Net income, net loss including stock-based compensation, and basic and diluted net income (loss) per share prior to January 1, 2006 did not include stock-based compensation
expense as the Company continued to apply the recognition and expensing provisions of APB No. 25.
|
35
Net Income Per Share
Basic and diluted earnings per share (EPS) for the years ended December 31, 2007, 2006, and 2005 are as follows:
|
|
|
|
|
|
|
|
|
For the year ended
(amounts in thousands,
except per-share data)
|
|
Net
Income
|
|
Weighted
Average
Shares
|
|
Earnings
per
Share
|
December 31, 2007
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
4,246
|
|
16,181
|
|
$
|
0.26
|
Dilutive effect of outstanding equity instruments
|
|
|
|
|
473
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
4,246
|
|
16,654
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
3,495
|
|
16,417
|
|
$
|
0.21
|
Dilutive effect of outstanding equity instruments
|
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
3,495
|
|
16,745
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
2,423
|
|
16,735
|
|
$
|
0.14
|
Dilutive effect of outstanding equity instruments
|
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
2,423
|
|
17,066
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
Weighted-average shares represent the average number of issued shares less treasury shares and shares held in the
Stock Trusts, and for the basic EPS calculations, unvested restricted stock.
Certain options representing 1.7 million, 1.8 million, and
2.3 million shares of common stock were outstanding at December 31, 2007, 2006, and 2005, respectively, but were not included in the computation of diluted earnings per share as their effect on the computation would have been
anti-dilutive.
Foreign Currency
The functional
currency of the Companys foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for assets and liabilities using current exchange rates in effect at the
balance sheet date, for equity accounts using historical exchange rates, and for revenue and expense activity using the applicable months average exchange rates. The Company recorded gains (losses) totaling approximately $0 in 2007 and 2006,
and $(0.1) million in 2005 from foreign currency transactions for the settlement of intercompany balances.
Cash and Cash Equivalents, and Cash
Overdrafts
For purposes of the statement of cash flows, cash and cash equivalents are defined as cash on hand; demand deposits; and short-term, highly
liquid investments with a maturity of three months or less. Total cash equivalents at December 31, 2007 and 2006 totaled $0.6 million and $0, respectively and consisted of overnight interest bearing deposits. Additionally, as the Company does
not fund its bank accounts for the checks it has written until the checks are presented to the bank for payment, the change in cash overdraft, net represents the increase or decrease in outstanding checks year-over-year.
Taxes Collected from Customers
In instances where the Company
collects taxes from its customers for remittance to governmental authorities, primarily in its European operations, such taxes are recorded and presented on a net basis.
36
Accumulated Other Comprehensive Loss
The components that make up accumulated other comprehensive loss on the consolidated balance sheets at December 31, 2007, 2006, and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Foreign currency adjustment
|
|
$
|
(1,780
|
)
|
|
$
|
(3,038
|
)
|
|
$
|
(4,221
|
)
|
Pension loss adjustment, net of tax of $458
in 2007 and $950 in 2006
|
|
|
(404
|
)
|
|
|
(1,476
|
)
|
|
|
|
|
Unrealized gain on investments, net of tax
of $239 in 2006 and $243 in 2005
|
|
|
|
|
|
|
376
|
|
|
|
382
|
|
Minimum pension liability adjustment, net
of tax of $949 in 2005
|
|
|
|
|
|
|
|
|
|
|
(1,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,184
|
)
|
|
$
|
(4,138
|
)
|
|
$
|
(5,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2007 and 2006, the net tax expense associated with the pension loss
adjustment, net was $0.5 million and $0.1 million, respectively. For the year ended December 31, 2005, the tax expense associated with the minimum pension liability adjustment was $0.1 million.
Recent Accounting Pronouncements
In 2006, the Emerging Issues Task
Force issued EITF 06-04, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This EITF requires an entity to account for both assets and liabilities associated
with the purchase of endorsement split-dollar life insurance arrangements for employees where the policy continues to be in place after the employees retirement. This EITF will be effective for the Company for the fiscal year beginning
January 1, 2008. Although the Company is currently evaluating the effect that the adoption this EITF will have on its financial condition or results of operations, it does not believe the impact will be material.
37
2. Investments
At
December 31, 2007 and 2006, the carrying value of the Companys investments is as follows:
|
|
|
|
|
|
|
December 31,
(amounts in
thousands)
|
|
2007
|
|
2006
|
Trading
|
|
$
|
604
|
|
$
|
448
|
Available-for-sale
|
|
|
|
|
|
813
|
|
|
$
|
604
|
|
$
|
1,261
|
|
|
|
|
|
|
|
The Companys investments at December 31, 2007 consist of mutual funds which are allocated to the
Computer Task Group, Incorporated Non-qualified Key Employee Deferred Compensation Plan.
At December 31, 2006, the Companys available-for-sale
investments are summarized as follows:
|
|
|
|
December 31,
(amounts in
thousands)
|
|
2006
|
Equity securities - cost
|
|
$
|
198
|
Unrealized gains
|
|
|
615
|
Equity securities fair value
|
|
$
|
813
|
|
|
|
|
There were no available-for-sale investments owned by the Company at December 31, 2006 that had an unrealized
loss. The available-for-sale securities were classified as current assets at December 31, 2006 as the Company sold these assets in the first quarter of 2007. The Company did not sell any available-for-sale assets during 2006. At
December 31, 2006, unrealized gains on available-for-sale investments, net of tax, was $0.4 million and were included in accumulated other comprehensive loss.
3. Property and Equipment
Property and equipment at December 31, 2007 and 2006 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Useful Life
|
|
2007
|
|
|
2006
|
|
|
|
(years)
|
|
(amounts in thousands)
|
|
Land
|
|
|
|
$
|
378
|
|
|
$
|
378
|
|
Buildings
|
|
30
|
|
|
4,423
|
|
|
|
4,448
|
|
Equipment
|
|
2-5
|
|
|
12,221
|
|
|
|
10,825
|
|
Furniture
|
|
5-10
|
|
|
4,926
|
|
|
|
4,738
|
|
Software
|
|
1-5
|
|
|
8,751
|
|
|
|
8,974
|
|
Leasehold improvements
|
|
3-10
|
|
|
3,941
|
|
|
|
3,240
|
|
|
|
|
|
|
34,640
|
|
|
|
32,603
|
|
Less accumulated depreciation
|
|
|
|
|
(28,899
|
)
|
|
|
(26,685
|
)
|
|
|
|
|
$
|
5,741
|
|
|
$
|
5,918
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2007, the Company received approximately $0.2 million in insurance proceeds related to damage to its
corporate headquarters.
38
4. Debt
During
February 2008, the Company entered into an amendment of its existing revolving credit agreement (Agreement) which extended the term by three years. The Agreement allows the Company to borrow up to $35 million, has a term of three years, and expires
in April 2011. The Agreement has interest rates ranging from 0 to 75 basis points over the prime rate and 150 to 225 basis points over LIBOR, and provides certain of the Companys assets as security for outstanding borrowings. The Company is
required to meet certain financial covenants in order to maintain borrowings under the Agreement, pay dividends, and make acquisitions. At December 31, 2007 and 2006, the Company was in compliance with these covenants. There were no amounts
outstanding, and there was $0.4 million assigned to letters of credit under this Agreement at both December 31, 2007 and 2006.
The maximum amounts
outstanding under the Agreement during 2007, 2006, and 2005 were $13.7 million, $23.9 million, and $29.4 million, respectively. Average bank borrowings outstanding for the years 2007, 2006, and 2005 were $5.0 million, $6.6 million, and $17.3
million, respectively, and carried weighted-average interest rates of 7.0%, 7.8%, and 6.0%, respectively. The Company incurred commitment fees totaling approximately $0.1 million in each of 2007, 2006 and 2005 relative to the Agreement.
Interest paid during 2007, 2006, and 2005 totaled $0.4 million, $0.6 million, and $1.1 million, respectively.
39
5. Income Taxes
The
provision for income taxes for 2007, 2006, and 2005 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Domestic and foreign components of income
before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
6,438
|
|
|
$
|
4,769
|
|
|
$
|
2,835
|
|
Foreign
|
|
|
371
|
|
|
|
1,380
|
|
|
|
719
|
|
|
|
$
|
6,809
|
|
|
$
|
6,149
|
|
|
$
|
3,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision (benefit) for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
1,753
|
|
|
$
|
1,208
|
|
|
$
|
924
|
|
Foreign
|
|
|
792
|
|
|
|
922
|
|
|
|
532
|
|
U.S. state and local
|
|
|
279
|
|
|
|
208
|
|
|
|
196
|
|
|
|
|
2,824
|
|
|
|
2,338
|
|
|
|
1,652
|
|
Deferred tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(132
|
)
|
|
|
(179
|
)
|
|
|
(613
|
)
|
Foreign
|
|
|
(8
|
)
|
|
|
353
|
|
|
|
172
|
|
U.S. state and local
|
|
|
(121
|
)
|
|
|
142
|
|
|
|
(80
|
)
|
|
|
|
(261
|
)
|
|
|
316
|
|
|
|
(521
|
)
|
|
|
$
|
2,563
|
|
|
$
|
2,654
|
|
|
$
|
1,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective and statutory income tax rate can be
reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax at statutory rate of 34%
|
|
$
|
2,315
|
|
|
$
|
2,091
|
|
|
$
|
1,208
|
|
State tax, net of federal benefits
|
|
|
289
|
|
|
|
180
|
|
|
|
99
|
|
Benefit of state net operating losses previously
offset by valuation allowances
|
|
|
(185
|
)
|
|
|
3
|
|
|
|
(29
|
)
|
Non-taxable income
|
|
|
(783
|
)
|
|
|
(687
|
)
|
|
|
(557
|
)
|
Non-deductible expenses
|
|
|
982
|
|
|
|
934
|
|
|
|
712
|
|
Change in beginning of year temporary differences
|
|
|
(12
|
)
|
|
|
(15
|
)
|
|
|
|
|
Change in estimate primarily related to foreign taxes
|
|
|
|
|
|
|
135
|
|
|
|
(161
|
)
|
Change in estimate primarily related to state taxes
and tax reserves
|
|
|
65
|
|
|
|
91
|
|
|
|
(88
|
)
|
Benefit of foreign net operating losses previously
offset by valuation allowances
|
|
|
(60
|
)
|
|
|
(17
|
)
|
|
|
(66
|
)
|
Other, net
|
|
|
(48
|
)
|
|
|
(61
|
)
|
|
|
13
|
|
|
|
$
|
2,563
|
|
|
$
|
2,654
|
|
|
$
|
1,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
37.6
|
%
|
|
|
43.2
|
%
|
|
|
31.8
|
%
|
40
The Companys effective tax rate (ETR) is calculated quarterly based upon current assumptions relating to the full
years estimated operating results, and various tax related items. The Companys normal ETR is approximately 37-41%. The 2007 ETR was 37.6%. The 2007 ETR was at the low end of the range primarily due to several items that decreased tax
expense by approximately $0.1 million, net. The Company decreased the valuation allowance for the net operating loss for U.S. state jurisdictions by approximately $0.2 million, which was offset by adding approximately $0.1 million to its tax
reserves due to changes in estimates of recoverability. Without these items the 2007 ETR would have been approximately 39.1%. The 2006 ETR was 43.2%. The 2006 ETR was higher than normal primarily due to several items that increased tax expense by
approximately $0.2 million, including adding approximately $0.1 million to its tax reserves due to a change in estimate of recoverability, and an increase to the valuation allowance for net operating losses for Canada by approximately $0.1 million
in the 2006 fourth quarter. Without these items, the 2006 ETR would have been approximately 39.5%.
The Companys deferred tax assets and liabilities
at December 31, 2007 and 2006 consist of the following:
|
|
|
|
|
|
|
|
|
December 31,
(amounts in
thousands)
|
|
2007
|
|
|
2006
|
|
Assets
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
$
|
3,709
|
|
|
$
|
3,653
|
|
Loss carryforwards
|
|
|
2,954
|
|
|
|
3,106
|
|
Accruals deductible for tax purposes when paid
|
|
|
512
|
|
|
|
601
|
|
Depreciation
|
|
|
300
|
|
|
|
246
|
|
Allowance for doubtful accounts
|
|
|
329
|
|
|
|
248
|
|
Amortization
|
|
|
560
|
|
|
|
679
|
|
State taxes
|
|
|
669
|
|
|
|
705
|
|
Gross deferred tax assets
|
|
|
9,033
|
|
|
|
9,238
|
|
|
|
|
Deferred tax asset valuation allowance
|
|
|
(2,492
|
)
|
|
|
(2,768
|
)
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
(272
|
)
|
Accrued income not recognized for tax
|
|
|
(336
|
)
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
(23
|
)
|
Gross deferred tax liabilities
|
|
|
(336
|
)
|
|
|
(295
|
)
|
Net deferred tax assets
|
|
$
|
6,205
|
|
|
$
|
6,175
|
|
|
|
|
|
|
|
|
|
|
Net deferred assets and liabilities
are recorded as follows:
|
|
|
|
|
|
|
|
|
Net current assets
|
|
|
1,350
|
|
|
|
1,185
|
|
Net non-current assets
|
|
|
5,108
|
|
|
|
4,990
|
|
Net non-current liabilities
|
|
|
(253
|
)
|
|
|
|
|
Net deferred tax assets
|
|
$
|
6,205
|
|
|
$
|
6,175
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, the net non-current liability is recorded on the consolidated balance sheet in other
long-term liabilities. In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Factors that may affect the Companys ability to achieve sufficient forecasted
taxable income in future periods may include, but are not limited to, the following: increased competition, a decline in sales or margins, a loss of market share, the availability of qualified professional staff, and a decrease in demand for IT
services. Based upon the levels of historical taxable income and projections for future taxable income over the years in which the deferred tax assets are deductible, at December 31, 2007 management believes that it is more likely than not that
the Company will realize the benefits, net of the established valuation allowance, of these deferred tax assets in the future.
41
The Company has various state net operating loss carryforwards totaling approximately $8.2 million. These state net
operating losses have a carryforward period of 5 to 20 years and begin to expire in 2008. The Company also has a Canadian net operating loss carryforward of $0.5 million which begins to expire in 2008. The Netherlands net operating loss carryforward
of $9.2 million begins to expire in 2009, while in the United Kingdom the net operating loss carryforward is approximately $0.2 million, and has no expiration date.
At December 31, 2007, the Company has a deferred tax asset before the valuation allowance resulting from net operating losses in various states of approximately $0.4 million, in The Netherlands of approximately
$2.3 million, and approximately $0.2 million in various other countries where it does business. Management of the Company has analyzed each jurisdictions tax position, including forecasting potential taxable income in future years, and the
expiration of the net operating loss carryforwards as applicable, and determined that it is unclear whether all of the deferred tax asset totaling $2.9 million will be realized at any point in the future. Accordingly, at December 31, 2007, the
Company has offset a portion of the asset with a valuation allowance totaling $2.5 million, resulting in a net deferred tax asset from net operating loss carryforwards of approximately $0.4 million. During 2007, the valuation allowance decreased by
approximately $0.3 million net, due to a variety of factors including foreign currency changes in The Netherlands of $0.1 million (which offset the reduction in the deferred tax asset), and $0.2 million related to the adjustment of the U.S. state
net operating loss valuation allowance due to a change in estimate of recoverability.
The Company adopted the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes (Interpretation 48) on January 1, 2007. Upon implementation of Interpretation 48, the Company was not required to recognize any increase in its liability for unrecognized tax
benefits.
The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the
Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2003.
A
reconciliation of unrecognized tax benefits from January 1, 2007 to December 31, 2007 is as follows:
|
|
|
|
|
(amounts in thousands)
|
|
|
|
Balance at January 1, 2007
|
|
$
|
247
|
|
Additions based on tax positions related to the current year
|
|
|
96
|
|
Additions for tax positions of prior years
|
|
|
|
|
Reductions for tax positions of prior years
|
|
|
|
|
Reductions for lapse of statute of limitations
|
|
|
(29
|
)
|
Settlements
|
|
|
(25
|
)
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
289
|
|
|
|
|
|
|
Included in the balance at December 31, 2007 is approximately $280,000 of gross unrecognized tax benefits
that if recognized would impact the Companys effective tax rate. No significant increase or decrease in the total amount of unrecognized tax benefits is expected within the next twelve months.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. As of the date of adoption, the Company had accrued
approximately $15,000 in interest and penalties, as applicable. At December 31, 2007, the Company had approximately $35,000 (less the associated tax benefit) accrued for the payment of interest and penalties, as applicable.
The Company has established reserves for tax contingencies based upon the probable outcome of tax positions taken for financial statement purposes compared to positions
taken on the Companys tax returns. The Company reviews its tax-contingency reserves on a quarterly basis to ensure they are appropriately stated. Such reviews include consideration of factors such as the cause of the action, the degree of
probability of an unfavorable outcome, the Companys ability to estimate the liability, and the timing of the liability and how it will impact the Companys other tax attributes. At December 31, 2007, the Company believes it has
adequately provided for its tax-related liabilities.
42
Undistributed earnings of the Companys foreign subsidiaries were minimal at December 31, 2007, and are
considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to both
U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. In the event that the foreign entities earnings were distributed, it is estimated that U.S. federal and state
income taxes, net of foreign credits, would be immaterial.
In 2007, 2006, and 2005, 131,000, 185,000, and 74,000 shares of common stock, respectively,
were issued through the exercise of non-qualified stock options or through the disqualifying disposition of incentive stock options. The tax benefit to the Company from these transactions, which is credited to capital in excess of par value rather
than recognized as a reduction of income tax expense, was $45,000, $113,000, and $31,000 in 2007, 2006, and 2005, respectively. These tax benefits have also been recognized in the consolidated balance sheets as a reduction of income taxes payable.
Net income tax payments during 2007, 2006, and 2005 totaled $1.7 million, $1.8 million, and $0.7 million, respectively.
6. Lease Commitments
At December 31, 2007, the Company was
obligated under a number of long-term operating leases. Minimum future obligations under such leases are summarized as follows:
|
|
|
|
Year ending December 31,
(amounts in
thousands)
|
|
|
2008
|
|
$
|
6,719
|
2009
|
|
|
4,936
|
2010
|
|
|
3,020
|
2011
|
|
|
1,412
|
2012
|
|
|
761
|
Later years
|
|
|
3,654
|
Minimum future obligations
|
|
$
|
20,502
|
|
|
|
|
The operating lease obligations relate to the rental of office space, office equipment, and automobiles leased in
Europe. Total rental expense under such operating leases for 2007, 2006, and 2005 was approximately $7.4 million, $6.3 million, and $6.3 million, respectively.
7. Deferred Compensation Benefits
The Company maintains a non-qualified defined-benefit Executive Supplemental Benefit Plan (ESBP) that
provides certain former key executives with deferred compensation benefits, based on years of service and base compensation, payable during retirement. The plan was amended as of November 30, 1994, to freeze benefits for participants at that
time.
Net periodic pension cost for the years ended December 31, 2007, 2006, and 2005 for the ESBP is as follows:
|
|
|
|
|
|
|
|
|
|
Net Periodic Pension Cost ESBP
(amounts in thousands)
|
|
2007
|
|
2006
|
|
2005
|
Interest cost
|
|
$
|
488
|
|
$
|
493
|
|
$
|
513
|
Amortization of actuarial loss
|
|
|
99
|
|
|
118
|
|
|
108
|
Net periodic pension cost
|
|
$
|
587
|
|
$
|
611
|
|
$
|
621
|
|
|
|
|
|
|
|
|
|
|
The Company also retained a contributory defined-benefit plan for its previous employees located in The
Netherlands (NDBP) when the Company disposed of its subsidiary, CTG Nederland, B.V. Benefits paid are a function of a percentage of career average pay. The Plan was curtailed for additional contributions in January 2003.
43
Net periodic pension benefit for the twelve month periods ended September 28, 2007, September 29, 2006,
and September 30, 2005 for the NDBP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Pension Cost (Benefit) NDBP
(amounts in thousands)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Interest cost
|
|
$
|
265
|
|
|
$
|
241
|
|
|
$
|
252
|
|
Expected return on plan assets
|
|
|
(338
|
)
|
|
|
(301
|
)
|
|
|
(281
|
)
|
Amortization of actuarial loss
|
|
|
(18
|
)
|
|
|
2
|
|
|
|
1
|
|
Net periodic pension benefit
|
|
$
|
(91
|
)
|
|
$
|
(58
|
)
|
|
$
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in benefit obligation and reconciliation of fair value of plan assets for the year ended
December 31, 2007 and 2006 for the ESBP, and for the twelve month period ended September 28, 2007 and September 29, 2006 for the NDBP are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Benefit Obligation
(amounts in thousands)
|
|
ESBP
|
|
|
NDBP
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Benefit obligation at beginning of period
|
|
$
|
8,783
|
|
|
$
|
9,159
|
|
|
$
|
5,532
|
|
|
$
|
5,774
|
|
Interest cost
|
|
|
488
|
|
|
|
493
|
|
|
|
265
|
|
|
|
241
|
|
Benefits paid
|
|
|
(703
|
)
|
|
|
(703
|
)
|
|
|
(67
|
)
|
|
|
(62
|
)
|
Actuarial gain
|
|
|
(421
|
)
|
|
|
(166
|
)
|
|
|
(850
|
)
|
|
|
(711
|
)
|
Effect of exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
594
|
|
|
|
290
|
|
Benefit obligation at end of period
|
|
|
8,147
|
|
|
|
8,783
|
|
|
|
5,474
|
|
|
|
5,532
|
|
|
|
|
|
|
Reconciliation of Fair Value of Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
|
|
|
|
|
|
|
|
|
6,478
|
|
|
|
5,734
|
|
Actual return on plan assets
|
|
|
|
|
|
|
|
|
|
|
376
|
|
|
|
290
|
|
Employer contributions
|
|
|
703
|
|
|
|
703
|
|
|
|
|
|
|
|
197
|
|
Benefits paid
|
|
|
(703
|
)
|
|
|
(703
|
)
|
|
|
(67
|
)
|
|
|
(62
|
)
|
Effect of exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
763
|
|
|
|
319
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
|
|
|
|
|
|
|
|
7,550
|
|
|
|
6,478
|
|
Accrued benefit cost (asset)
|
|
$
|
8,147
|
|
|
$
|
8,783
|
|
|
$
|
(2,076
|
)
|
|
$
|
(946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit cost (asset) is included in the consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
$
|
(2,076
|
)
|
|
$
|
(946
|
)
|
Current liabilities
|
|
$
|
774
|
|
|
$
|
734
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
$
|
7,373
|
|
|
$
|
8,049
|
|
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation
|
|
|
6.57
|
%
|
|
|
5.80
|
%
|
|
|
5.30
|
%
|
|
|
4.60
|
%
|
Net periodic pension cost
|
|
|
5.80
|
%
|
|
|
5.60
|
%
|
|
|
5.30
|
%
|
|
|
4.60
|
%
|
Salary increase rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
For the ESBP, the accumulated benefit obligation at December 31, 2007 and 2006 was $8.1 million and $8.8
million, respectively. The amounts included in other comprehensive loss relating to the pension loss adjustment in 2007 and 2006, net of tax, were approximately $0.3 million and $0.2 million, respectively. Benefits paid to participants are funded by
the Company as needed. The plan is deemed unfunded as the Company has not specifically identified Company assets to be used to discharge the deferred compensation benefit liabilities. The Company has purchased insurance on the lives of certain plan
participants in amounts considered sufficient to reimburse the Company for the costs associated with the plan for those participants. The Company does not anticipate making contributions to the plan in 2008 and future years to fund the plan.
44
For the NDBP, the accumulated benefit obligation at both September 28, 2007 and September 29, 2006 was $5.5
million. The assets in the NDBP are 20% invested in the Aegon World Equity Fund. This fund invests in global equities, with a small portion of the fund in new or emerging economies. The remaining 80% of the assets are invested as determined by Aegon
with no direction from the Company, with a guaranteed minimum return to the Company of 4%. The historical return to the Company on these investments has been approximately 4.5%. The Companys investments were allocated as indicated above in
both 2006 and 2007, and the Company does not anticipate changing these allocation percentages in 2008. The expected return on plan assets for 2006 and 2007 was a function of the average historical return of 4.5% on the 80% of the funds invested by
Aegon, and a historical return of 9% on the 20% of the funds invested in the Aegon Equity Fund. The Company does not anticipate making additional contributions to the plan in 2008 and future years, as the plan is currently fully funded.
Anticipated benefit payments for the ESBP and the NDBP expected to be paid in future years are as follows:
|
|
|
|
|
|
|
Year ending December 31,
(amounts in
thousands)
|
|
ESBP
|
|
NDBP
|
2008
|
|
$
|
774
|
|
$
|
63
|
2009
|
|
|
759
|
|
|
70
|
2010
|
|
|
771
|
|
|
88
|
2011
|
|
|
749
|
|
|
93
|
2012
|
|
|
730
|
|
|
105
|
2013-2017
|
|
|
3,533
|
|
|
878
|
|
|
$
|
7,316
|
|
$
|
1,297
|
|
|
|
|
|
|
|
For December 31, 2006, the Company adopted the provisions of FAS 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans (FAS 158). FAS 158 required the Company to recognize the funded status of its plans, measured as the difference between the fair value of the plan assets and the benefit obligation, in its
consolidated balance sheet. Additionally, FAS 158 required the Company to recognize as a component of other accumulated comprehensive loss, net of tax, the gains or losses and prior service costs or credits that arose during the period but were not
recognized as components of net periodic pension cost. The disclosures below include the ESBP, the NDBP, and the postretirement benefit plan discussed in note 8, Employee Benefits, under the caption Other Postretirement
Benefits.
The incremental effect of applying FAS 158 on individual line items in the Companys consolidated balance sheet for December 31,
2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
Prior to
FAS 158
|
|
Adjustment
|
|
|
After
FAS 158
|
Deferred income taxes
|
|
$
|
5,102
|
|
$
|
(112
|
)
|
|
$
|
4,990
|
Other assets
|
|
$
|
2,653
|
|
$
|
26
|
|
|
$
|
2,679
|
Total assets
|
|
$
|
111,803
|
|
$
|
(86
|
)
|
|
$
|
111,717
|
Deferred compensation benefits
|
|
$
|
8,503
|
|
$
|
289
|
|
|
$
|
8,792
|
Total liabilities
|
|
$
|
49,797
|
|
$
|
289
|
|
|
$
|
50,086
|
Accumulated other comprehensive loss
|
|
$
|
3,987
|
|
$
|
151
|
|
|
$
|
4,138
|
Total shareholders equity
|
|
$
|
61,782
|
|
$
|
(151
|
)
|
|
$
|
61,631
|
The amounts included in accumulated other comprehensive loss, net of tax, that have not yet been recognized as
components of net periodic benefit cost as of December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
ESBP
|
|
NDBP
|
|
|
Post-
Retirement
Plan
|
|
|
Total
|
|
Unrecognized actuarial (gain) loss
|
|
$
|
1,013
|
|
$
|
(739
|
)
|
|
$
|
41
|
|
|
$
|
315
|
|
Unrecognized transition obligation
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
90
|
|
Unrecognized prior service cost
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
$
|
1,013
|
|
$
|
(739
|
)
|
|
$
|
130
|
|
|
$
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
The amounts included in accumulated other comprehensive loss, net of tax, that have not yet been recognized as components
of net periodic benefit cost as of December 31, 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
ESBP
|
|
NDBP
|
|
|
Post-
Retirement
Plan
|
|
|
Total
|
|
Unrecognized actuarial (gain) loss
|
|
$
|
1,325
|
|
$
|
(26
|
)
|
|
$
|
71
|
|
|
$
|
1,370
|
|
Unrecognized transition obligation
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
107
|
|
Unrecognized prior service cost
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
$
|
1,325
|
|
$
|
(26
|
)
|
|
$
|
177
|
|
|
$
|
1,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts recognized in other comprehensive loss, net of tax, for 2007, 2006, and 2005 primarily consists of an
actuarial (gain) loss and a transition obligation totaled $1,072,000, $(174,000), and $110,000, respectively. Net periodic pension cost (benefit) for the ESBP and the NDBP, net periodic postretirement benefit cost, and the amounts recognized in
other comprehensive loss, net of tax, for 2007, 2006, and 2005 totaled $1,640,000, $458,000, and $769,000, respectively.
The amounts in accumulated other
comprehensive loss expected to be recognized as components of net periodic benefit cost during 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
ESBP
|
|
NDBP
|
|
|
Post-
Retirement
Plan
|
|
Total
|
Unrecognized actuarial (gain) loss
|
|
$
|
66
|
|
$
|
(47
|
)
|
|
$
|
0
|
|
$
|
19
|
Unrecognized transition obligation
|
|
|
|
|
|
|
|
|
|
29
|
|
|
29
|
Unrecognized prior service cost
|
|
|
|
|
|
|
|
|
|
0
|
|
|
0
|
|
|
$
|
66
|
|
$
|
(47
|
)
|
|
$
|
29
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company also maintains a non-qualified defined-contribution deferred compensation plan for certain key
executives. Company contributions to this plan, if any, are based on annually defined financial performance objectives. There were $0.4 million in contributions to the plan in 2007 for amounts earned in 2006, and $0.2 million in contributions to the
plan in 2006 for amounts earned in 2005. There were no contributions to the plan in 2005. The Company anticipates making contributions in 2008 totaling approximately $0.4 million to this plan for amounts earned in 2007. The investments in the plan
are included in the total assets of the Company, and are discussed in Note 2, Investments. During 2007, several participants in the plan exchanged a portion of their investments for stock units which represent shares of the
Companys common stock. In exchange for the funds received, the Company issued shares out of treasury stock equivalent to the number of share units received by the participants. These shares of common stock are not entitled to any voting rights
and the holders will not receive dividends, if any are paid. The shares are being held by the Company, and will be released to the participants as prescribed by their payment elections under the plan.
8. Employee Benefits
401(k) Profit-Sharing Retirement Plan
The Company maintains a contributory 401(k) profit-sharing retirement plan covering substantially all U.S. employees. The Company matches up to 50% of the
first 6% of eligible wages contributed by the participants. Company contributions consist of cash, and may include the Companys stock, were funded and charged to operations in the amounts of $2.3 million, $2.4 million, and $2.1 million for
2007, 2006, and 2005, respectively.
Other Retirement Plans
The Company maintains various other defined contribution retirement plans covering substantially all of the remaining European employees. Company contributions charged to operations were $0.2 million in each of 2007, 2006, and 2005,
respectively.
46
Other Postretirement Benefits
The Company provides limited healthcare and life insurance benefits to ten retired employees and their spouses, totaling 14 participants, pursuant to contractual agreements.
Net periodic postretirement benefit cost for the years ended December 31, 2007, 2006, and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
Net Periodic Postretirement Benefit Cost
|
|
2007
|
|
2006
|
|
2005
|
(amounts in thousands)
|
|
|
|
|
|
|
Interest cost
|
|
$
|
39
|
|
$
|
41
|
|
$
|
37
|
Amortization of transition amount
|
|
|
29
|
|
|
29
|
|
|
29
|
Amortization of actuarial loss
|
|
|
4
|
|
|
9
|
|
|
|
Net periodic postretirement benefit cost
|
|
$
|
72
|
|
$
|
79
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
No adjustments were made to the 2005, 2006 and 2007 net periodic postretirement benefit cost due to Medicare
reform as the amounts were deemed to be insignificant.
The change in postretirement benefit obligation at December 31, 2007 and 2006 is as follows:
|
|
|
|
|
|
|
|
|
Changes in Postretirement Benefit Obligation
|
|
2007
|
|
|
2006
|
|
(amounts in thousands)
|
|
|
|
|
|
|
Postretirement benefit obligation at beginning of year
|
|
$
|
706
|
|
|
$
|
773
|
|
Interest cost
|
|
|
39
|
|
|
|
41
|
|
Benefits paid
|
|
|
(43
|
)
|
|
|
(54
|
)
|
Actuarial gain
|
|
|
(47
|
)
|
|
|
(54
|
)
|
Postretirement benefit obligation at end of year
|
|
|
655
|
|
|
|
706
|
|
Fair value of plan assets at end of year
|
|
|
|
|
|
|
|
|
Accrued postretirement benefit obligation
|
|
$
|
655
|
|
|
$
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued postretirement benefit obligation is included in the consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
67
|
|
|
$
|
59
|
|
Non-current liabilities
|
|
$
|
588
|
|
|
$
|
647
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
Benefit obligation
|
|
|
6.51
|
%
|
|
|
5.80
|
%
|
Net periodic postretirement benefit cost
|
|
|
5.80
|
%
|
|
|
5.60
|
%
|
Salary increase rate
|
|
|
|
|
|
|
|
|
The discount rate used in 2007 to calculate the benefit obligation was 6.51%, which is reflective of a series of
bonds that are included in the Moodys Aa long-term corporate bond yield whose cash flow approximates the payments to participants for the remainder of the plan. Benefits paid to participants are funded by the Company as needed. Anticipated
benefit payments for the postretirement medical plan are expected to be paid in future years as follows:
|
|
|
|
Year ending December 31,
|
|
|
(amounts in thousands)
|
|
|
2008
|
|
$
|
67
|
2009
|
|
|
68
|
2010
|
|
|
68
|
2011
|
|
|
61
|
2012
|
|
|
52
|
2013-2017
|
|
|
273
|
|
|
$
|
589
|
|
|
|
|
47
The rate of increase in healthcare costs is assumed to be 10% for medical, 6% for dental, and 8% for Medicare Part B in
2007, gradually declining to 5% by the year 2013 and remaining at that level thereafter. Increasing the assumed healthcare cost trend rate by one percentage point would increase the accrued postretirement benefit obligation by $44,800 at
December 31, 2007, and the net periodic postretirement benefit cost by $2,700 for the year. A one-percentage-point decrease in the healthcare cost trend would decrease the accrued postretirement benefit obligation by $40,000 at
December 31, 2007, and the net periodic postretirement benefit cost by $2,400 for the year.
Employee Health Insurance
The Company provides various health insurance plans for its employees, including a self-insured plan for its employees in the U.S.
9. Shareholders Equity
Employee Stock Purchase Plan
Under the Companys First Employee Stock Purchase Plan (Plan), employees may apply up to 10% of their compensation to purchase the Companys
common stock. Shares are purchased at the closing market price on the business day preceding the date of purchase. As of December 31, 2007, approximately 121,000 shares remain unissued under the Plan, of the total of 11.5 million shares
that had been authorized under the Plan. During 2007, 2006, and 2005, approximately 28,000, 35,000, and 39,000 shares, respectively, were purchased under the plan at an average price of $4.63, $4.20, and $3.66 per share, respectively.
Shareholder Rights Plan
The Board of Directors adopted a
Shareholder Rights Plan in January 1989. Under the plan, one right was distributed for each share of common stock outstanding on January 27, 1989, and on each additional share of common stock issued after that date and prior to the date the
rights become exercisable if they do so. The rights become exercisable if and when 20% or more of the Companys outstanding common stock is acquired by a person or group, other than Company-provided employee benefit plans, and when an offer to
acquire the Company is made. Each right entitles the holder to purchase Series A preferred stock (which is essentially equivalent to common stock) at a 50% discount from the then-market price of the common stock or, in the event of a merger,
consolidation, or sale of a major part of the Companys assets, to purchase common stock of the acquiring company at a 50% discount from its then-market price. The Shareholder Rights Plan was amended in 1999 to provide that the rights expire in
November 2008. The rights may be redeemed by the Company at a price of $.01 per right.
Stock Trusts
The Company maintains a Stock Employee Compensation Trust (SECT) to provide funding for existing employee stock plans and benefit programs. Shares of the Companys
common stock are purchased by and released from the SECT by the trustee of the SECT at the request of the compensation committee of the Board of Directors. As of December 31, 2007, all shares remaining in the SECT were unallocated and,
therefore, are not considered outstanding for purposes of calculating earnings per share.
48
SECT activity for the years ended December 31, 2007, 2006, and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Share balance at beginning of year
|
|
3,564
|
|
|
3,881
|
|
|
3,999
|
|
Shares released:
|
|
|
|
|
|
|
|
|
|
Stock option plans
|
|
(131
|
)
|
|
(185
|
)
|
|
(79
|
)
|
Employee Stock Purchase Plan
|
|
(28
|
)
|
|
(35
|
)
|
|
(39
|
)
|
Restricted stock issuance
|
|
(87
|
)
|
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share balance at end of year
|
|
3,318
|
|
|
3,564
|
|
|
3,881
|
|
|
|
|
|
|
|
|
|
|
|
During 1999, the Company created an Omnibus Stock Trust (OST) to provide funding for various employee benefit
programs. During 1999, the OST purchased 59,000 shares for $1.0 million. Shares of the Companys common stock are released from the OST by the trustee at the request of the compensation committee of the Board of Directors. During 2007, 2006,
and 2005, no shares were purchased or released by the OST.
Preferred Stock
At December 31, 2007 and 2006, the Company has 2,500,000 shares of par value $0.01 preferred stock authorized for issuance, but none outstanding.
10. Equity-Based Compensation
On January 1, 2006, the Company adopted the provisions of FAS 123R,
Share-Based Payment and related interpretations 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. The FAS established standards for the accounting for transactions in which the Company exchanges its equity instruments for goods or services. The standard requires the Company to
measure the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of the award. Currently, the Company issues stock options and restricted stock in exchange for employee and director
services. With the adoption of the standard, the calculated cost of its equity-based compensation awards is recognized in the Companys consolidated statements of income over the period in which an employee or director is required to provide
the services for the award. Compensation cost will not be recognized for employees or directors that do not render the requisite services. The Company recognizes the expense for equity-based compensation in its consolidated income statements on a
straight-line basis based upon awards that are ultimately expected to vest. As part of the adoption of the standard, the Company is required to estimate forfeitures. These estimates will be revised, as applicable, in subsequent periods if actual
forfeitures differ from those estimates. In the Companys pro forma financial information related to stock-based compensation for periods prior to January 1, 2006 (see note 1, Summary of Significant Accounting Policies for
Equity-Based Compensation), the Company accounted for forfeitures as they occurred.
For the years ended December 31, 2007 and 2006, the
Company recognized compensation expense of $863,000 and $856,000, respectively, in its consolidated statements of income as selling, general and administrative expenses. The tax benefit recorded for this compensation expense was $294,000 and
$260,000, respectively, resulting in a net after tax cost to the Company of $569,000 in 2007 and $596,000 in 2006. No compensation cost was recognized in the consolidated statements of income for 2005 as the Company continued to apply the
recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25) and related interpretations, as all options granted by the Company had an exercise
price that was equal to or greater than the underlying common stock at the date of grant.
49
On April 26, 2000, the shareholders approved the Companys Equity Award Plan (Equity Plan). Under the
provisions of the plan, stock options, restricted stock, stock appreciation rights, and other awards may be granted or awarded to employees and directors of the Company. The compensation committee of the Board of Directors determines the nature,
amount, pricing, and vesting of the grant or award. All options and awards remain in effect until the earlier of the expiration, exercise, or surrender date. For the most part, options generally become exercisable in three or four equal annual
installments, beginning one year from the date of grant. In certain limited instances, options granted with market price conditions are expected to vest nine and one-half years from the date of grant. As of December 31, 2007, a total of
3,500,000 shares may be awarded under this plan, and 370,375 shares are available for grant as of that date.
On April 24, 1991, the shareholders
approved the Companys 1991 Employee Stock Option Plan (1991 Plan). Under the provisions of the plan, options may be granted to employees and directors of the Company. The option price for options granted under this plan is equal to or greater
than the fair market value of the Companys common stock on the date the option is granted. Incentive stock options generally become exercisable in four annual installments of 25% of the shares covered by the grant, beginning one year from the
date of grant, and expire six years after becoming exercisable. Nonqualified stock options generally become exercisable in either four or five annual installments of 20 or 25% of the shares covered by the grant, beginning one year from the date of
grant, and expire up to 15 years from the date of grant. All options remain in effect until the earlier of the expiration, exercise, or surrender date. There are no options available for grant under this plan as of December 31, 2007.
Under the Companys 1991 Restricted Stock Plan, 800,000 shares of restricted stock may be granted to certain key employees.
The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock options granted on the date of grant. The per-option weighted-average
fair value on the date of grant of stock options granted in 2007, 2006, and 2005 was $1.72, $2.17, and $2.12, respectively. The fair value of the options at the date of grant was estimated using the following weighted-average assumptions for the
years ended December 31, 2007, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Expected life (years)
|
|
3.4
|
|
|
4.0
|
|
|
3.4
|
|
Dividend yield
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Risk-free interest rate
|
|
4.7
|
%
|
|
5.0
|
%
|
|
3.7
|
%
|
Expected volatility
|
|
47.4
|
%
|
|
55.2
|
%
|
|
68.0
|
%
|
The Company used historical volatility calculated using daily closing prices for its common stock over periods
that match the expected term of the option granted to estimate the expected volatility for the grants made in 2005, 2006 and 2007. The risk-free interest rate assumption was based upon U.S. Treasury yields appropriate for the expected term of the
Companys stock options based upon the date of grant. The expected term of the stock options granted was based upon the options expected vesting schedule and historical exercise patterns. The expected dividend yield was based upon the
Companys recent history of paying dividends, and the expectation of paying dividends in the foreseeable future.
During 2007, the Company issued
restricted stock to certain employees and its independent directors. For the employees, the stock vests over a period of four years, with 25% of the stock issued vesting one year from the date of grant, and another 25% vesting each year thereafter
until the stock is fully vested to the employee. The Company is recognizing compensation expense for these shares ratably over the expected term of the restricted stock, or four years. For the independent directors, the issued stock vests at
retirement. As the directors are eligible for retirement from the Companys Board of Directors at any point, the Company recognized the expense associated with these shares on the date of grant. The shares of restricted stock issued are
considered outstanding, and are eligible to receive dividends, if any are paid, and can be voted. However, only vested shares of outstanding restricted stock are included in the calculation of basic earnings per share.
50
As of December 31, 2007, total remaining stock-based compensation expense for non-vested equity-based compensation
is approximately $1.5 million, which is expected to be recognized on a weighted-average basis over the next 18 months. Historically, the Company has issued shares out of its Stock Employee Compensation Trust to fulfill the share requirements from
stock option exercises and restricted stock grants.
A summary of stock option activity under these plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Plan
Options
|
|
|
Weighted-
Average
Exercise Price
|
|
1991
Plan
Options
|
|
|
Weighted-
Average
Exercise Price
|
Outstanding at December 31, 2004
|
|
2,734,000
|
|
|
$
|
3.62
|
|
950,038
|
|
|
$
|
13.74
|
Granted
|
|
733,500
|
|
|
$
|
4.18
|
|
|
|
|
|
|
Exercised
|
|
(69,500
|
)
|
|
$
|
2.89
|
|
(9,375
|
)
|
|
$
|
2.87
|
Canceled and forfeited
|
|
(173,250
|
)
|
|
$
|
3.71
|
|
(18,625
|
)
|
|
$
|
12.92
|
Expired
|
|
|
|
|
|
|
|
(53,074
|
)
|
|
$
|
20.94
|
Outstanding at December 31, 2005
|
|
3,224,750
|
|
|
$
|
3.76
|
|
868,964
|
|
|
$
|
13.43
|
Granted
|
|
473,000
|
|
|
$
|
4.54
|
|
|
|
|
|
|
Exercised
|
|
(172,750
|
)
|
|
$
|
2.78
|
|
(12,000
|
)
|
|
$
|
2.88
|
Canceled and forfeited
|
|
(176,125
|
)
|
|
$
|
3.94
|
|
(27,000
|
)
|
|
$
|
17.87
|
Expired
|
|
|
|
|
|
|
|
(177,138
|
)
|
|
$
|
16.75
|
Outstanding at December 31, 2006
|
|
3,348,875
|
|
|
$
|
3.91
|
|
652,826
|
|
|
$
|
12.55
|
Granted
|
|
475,500
|
|
|
$
|
4.52
|
|
|
|
|
|
|
Exercised
|
|
(87,750
|
)
|
|
$
|
3.83
|
|
(42,750
|
)
|
|
$
|
2.87
|
Canceled and forfeited
|
|
(122,750
|
)
|
|
$
|
4.58
|
|
(60,875
|
)
|
|
$
|
21.74
|
Expired
|
|
|
|
|
|
|
|
(65,654
|
)
|
|
$
|
20.18
|
Outstanding at December 31, 2007
|
|
3,613,875
|
|
|
$
|
3.97
|
|
483,547
|
|
|
$
|
11.21
|
Options exercisable at December 31, 2007
|
|
2,739,500
|
|
|
$
|
3.92
|
|
483,547
|
|
|
$
|
11.21
|
For 2007, 2006 and 2005, the intrinsic value of the options
exercised under the Equity Plan was approximately $101,300, $279,000 and $72,900, respectively, while the intrinsic value of the options exercised under the 1991 Plan for the same years was $72,100, $19,800 and $8,900, respectively.
A summary of restricted stock activity for the year-to-date period ended December 31, 2007
under the Equity Plan and the 1991 Restricted Stock Plan is as follows:
|
|
|
Equity Plan
Restricted Stock
|
|
|
Weighted-
Average
Fair Value
|
|
1991
Restricted
Stock Plan
|
|
|
Weighted-
Average
Fair Value
|
Outstanding at December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
97,500
|
|
|
$
|
4.40
|
|
|
|
|
|
|
Canceled and forfeited
|
|
(2,000
|
)
|
|
$
|
4.65
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
95,500
|
|
|
$
|
4.39
|
|
|
|
|
|
|
Granted
|
|
45,000
|
|
|
$
|
4.70
|
|
41,500
|
|
|
$
|
4.52
|
Canceled and forfeited
|
|
(1,500
|
)
|
|
$
|
4.65
|
|
(4,500
|
)
|
|
$
|
4.52
|
Outstanding at December 31, 2007
|
|
139,000
|
|
|
$
|
4.49
|
|
37,000
|
|
|
$
|
4.52
|
At December 31, 2007, there are 763,000 shares available for grant under the 1991 Restricted Stock Plan. At
December 31, 2007, 112,875 and 0 shares of outstanding restricted stock are vested under the Equity Plan and the 1991 Restricted Stock Plan, respectively.
51
A summary of options outstanding as of December 31, 2007 for the Equity and 1991 Plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
Equity Plan
|
|
|
|
|
|
|
|
|
|
|
$1.40
|
|
180,000
|
|
$
|
1.40
|
|
10.0
|
|
$
|
743,400
|
$2.24 - $3.26
|
|
1,198,500
|
|
$
|
3.09
|
|
8.1
|
|
$
|
2,928,125
|
$3.48 - $4.90
|
|
1,776,375
|
|
$
|
4.41
|
|
7.8
|
|
$
|
1,987,045
|
$5.30 - $5.94
|
|
459,000
|
|
$
|
5.56
|
|
9.8
|
|
$
|
61,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,613,875
|
|
|
|
|
|
|
$
|
5,719,970
|
|
|
|
|
|
|
|
|
|
|
|
1991 Plan
|
|
|
|
|
|
|
|
|
|
|
$2.88
|
|
49,875
|
|
$
|
2.88
|
|
1.9
|
|
$
|
132,418
|
$5.13 - $6.13
|
|
245,500
|
|
$
|
5.94
|
|
5.3
|
|
$
|
3,038
|
$16.19 - $21.94
|
|
167,172
|
|
$
|
19.27
|
|
1.7
|
|
$
|
|
$26.06 - $30.31
|
|
21,000
|
|
$
|
28.29
|
|
4.7
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
483,547
|
|
|
|
|
|
|
$
|
135,456
|
|
|
|
|
|
|
|
|
|
|
|
A summary of options exercisable at December 31, 2007 for the Equity Plan and the 1991 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
Equity Plan
|
|
|
|
|
|
|
|
|
|
|
$1.40
|
|
180,000
|
|
$
|
1.40
|
|
10.0
|
|
$
|
743,400
|
$2.24 - $3.26
|
|
968,500
|
|
$
|
3.11
|
|
8.2
|
|
$
|
2,342,725
|
$3.48 - $4.90
|
|
1,132,000
|
|
$
|
4.35
|
|
6.8
|
|
$
|
1,335,170
|
$5.30 - $5.94
|
|
459,000
|
|
$
|
5.56
|
|
7.0
|
|
$
|
61,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,739,500
|
|
|
|
|
|
|
$
|
4,482,695
|
|
|
|
|
|
|
|
|
|
|
|
1991 Plan
|
|
|
|
|
|
|
|
|
|
|
$2.88
|
|
49,875
|
|
$
|
2.88
|
|
1.9
|
|
$
|
132,418
|
$5.13 - $6.13
|
|
245,500
|
|
$
|
5.94
|
|
5.3
|
|
$
|
3,038
|
$16.19 - $21.94
|
|
167,172
|
|
$
|
19.27
|
|
1.7
|
|
$
|
|
$26.06 - $30.31
|
|
21,000
|
|
$
|
28.29
|
|
4.7
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
483,547
|
|
|
|
|
|
|
$
|
135,456
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic values as calculated in the above charts are based upon the Companys closing stock
price on December 31, 2007 of $5.53 per share.
52
11. Significant Customer
International Business Machines (IBM) is the Companys largest customer. IBM accounted for $104.6 million or 32.2%, $115.4 million or 35.3%, and $105.5 million or 35.8% of consolidated 2007, 2006, and 2005 revenue, respectively. The
Companys accounts receivable from IBM at December 31, 2007 and 2006 amounted to $10.3 million and $10.9 million, respectively. The Company expects to continue to derive a significant portion of its revenue from IBM in 2008 and in future
years. However, a significant decline in revenue from IBM would have a significant negative effect on the Companys revenue and profits. No other customer accounted for more than 10% of revenue in 2007, 2006, or 2005.
12. Litigation
The Company and its subsidiaries are involved from
time to time in various legal proceedings arising in the ordinary course of business. Although the outcome of lawsuits or other proceedings involving the Company and its subsidiaries cannot be predicted with certainty and the amount of any liability
that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, management does not expect these matters, if any, to have a material adverse effect on the financial position, results of operations, or cash flows
of the Company.
13. Enterprise -Wide Disclosures
The
Company operates in one industry segment, providing information technology (IT) professional services to its clients. The services provided include flexible and strategic staffing and the planning, design, implementation, and maintenance of
comprehensive IT solutions. All of the Companys revenue is generated from these services. CTGs reportable information is based on geographical areas. The accounting policies of the individual geographical areas are the same as those
described in note 1, Summary of Significant Accounting Policies.
|
|
|
|
|
|
|
|
|
|
Financial Information About Geographic Areas
|
|
|
|
|
|
|
(amounts in thousands)
|
|
2007
|
|
2006
|
|
2005
|
Revenue from External Customers
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
250,097
|
|
$
|
265,386
|
|
$
|
243,223
|
Belgium
|
|
|
50,786
|
|
|
41,500
|
|
|
32,940
|
Other European countries
|
|
|
21,311
|
|
|
17,447
|
|
|
15,384
|
Other countries
|
|
|
3,091
|
|
|
2,920
|
|
|
2,918
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
325,285
|
|
$
|
327,253
|
|
$
|
294,465
|
|
|
|
|
|
|
|
|
|
|
Long-lived Assets
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
4,513
|
|
$
|
5,102
|
|
$
|
5,950
|
Belgium
|
|
|
921
|
|
|
519
|
|
|
452
|
Other European countries
|
|
|
307
|
|
|
297
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
5,741
|
|
$
|
5,918
|
|
$
|
6,616
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Assets, Net of Valuation Allowance
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
6,297
|
|
$
|
6,260
|
|
$
|
6,274
|
Europe
|
|
|
146
|
|
|
189
|
|
|
325
|
Other countries
|
|
|
98
|
|
|
21
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets, net
|
|
$
|
6,541
|
|
$
|
6,470
|
|
$
|
6,760
|
|
|
|
|
|
|
|
|
|
|
53
14. Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
|
(amounts in thousands, except per-share data)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
80,016
|
|
|
$
|
80,140
|
|
|
$
|
80,625
|
|
|
$
|
84,504
|
|
|
$
|
325,285
|
|
Direct costs
|
|
|
62,586
|
|
|
|
62,173
|
|
|
|
62,347
|
|
|
|
65,783
|
|
|
|
252,889
|
|
Gross profit
|
|
|
17,430
|
|
|
|
17,967
|
|
|
|
18,278
|
|
|
|
18,721
|
|
|
|
72,396
|
|
Selling, general, and administrative expenses
|
|
|
16,150
|
|
|
|
16,206
|
|
|
|
16,644
|
|
|
|
16,872
|
|
|
|
65,872
|
|
Operating income
|
|
|
1,280
|
|
|
|
1,761
|
|
|
|
1,634
|
|
|
|
1,849
|
|
|
|
6,524
|
|
Interest and other expense, net
|
|
|
514
|
|
|
|
(127
|
)
|
|
|
(161
|
)
|
|
|
59
|
|
|
|
285
|
|
Income before income taxes
|
|
|
1,794
|
|
|
|
1,634
|
|
|
|
1,473
|
|
|
|
1,908
|
|
|
|
6,809
|
|
Provision for income taxes
|
|
|
672
|
|
|
|
635
|
|
|
|
559
|
|
|
|
697
|
|
|
|
2,563
|
|
Net income
|
|
$
|
1,122
|
|
|
$
|
999
|
|
|
$
|
914
|
|
|
$
|
1,211
|
|
|
$
|
4,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.07
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.08
|
|
|
$
|
0.26
|
|
Diluted net income per share
|
|
$
|
0.07
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.07
|
|
|
$
|
0.25
|
|
|
|
|
|
|
Quarters
|
|
|
|
|
(amounts in thousands, except per-share data)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
83,643
|
|
|
$
|
85,765
|
|
|
$
|
79,830
|
|
|
$
|
78,015
|
|
|
$
|
327,253
|
|
Direct costs
|
|
|
65,525
|
|
|
|
67,058
|
|
|
|
61,595
|
|
|
|
58,923
|
|
|
|
253,101
|
|
Gross profit
|
|
|
18,118
|
|
|
|
18,707
|
|
|
|
18,235
|
|
|
|
19,092
|
|
|
|
74,152
|
|
Selling, general, and administrative expenses
|
|
|
16,557
|
|
|
|
17,164
|
|
|
|
16,493
|
|
|
|
17,084
|
|
|
|
67,298
|
|
Operating income
|
|
|
1,561
|
|
|
|
1,543
|
|
|
|
1,742
|
|
|
|
2,008
|
|
|
|
6,854
|
|
Interest and other expense, net
|
|
|
(322
|
)
|
|
|
(149
|
)
|
|
|
(143
|
)
|
|
|
(91
|
)
|
|
|
(705
|
)
|
Income before income taxes
|
|
|
1,239
|
|
|
|
1,394
|
|
|
|
1,599
|
|
|
|
1,917
|
|
|
|
6,149
|
|
Provision for income taxes
|
|
|
452
|
|
|
|
586
|
|
|
|
767
|
|
|
|
849
|
|
|
|
2,654
|
|
Net income
|
|
$
|
787
|
|
|
$
|
808
|
|
|
$
|
832
|
|
|
$
|
1,068
|
|
|
$
|
3,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.07
|
|
|
$
|
0.21
|
|
Diluted net income per share
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.06
|
|
|
$
|
0.21
|
|
54