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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-7282
COMPUTER HORIZONS CORP.
(Exact name of registrant as specified in its charter)
New York 13-2638902
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046-1495
(Address of principal executive offices) (Zip Code)
- --------------------------------------------------------------------------------
Registrant's telephone number,
including area code: (201) 402-7400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (Par value $.10 per share)
(Title of class)
Series A Preferred Stock Purchase Rights
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant as of March 20, l997, was approximately
$408,313,000.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of March 20, l997: 16,233,702 shares.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated herein by reference the registrant's (i) Annual
Report to Shareholders for the year ended December 3l, l996, in Part II of this
Report and (ii) Proxy Statement for the 1997 Annual Meeting of Shareholders,
expected to be filed with the Securities and Exchange Commission on or before
April 7, 1997, in Part III hereof.
PART I
Item 1. Business
General
The Company provides a wide range of information technology services
and solutions to major corporations. Historically a professional services
staffing firm, the Company has, over the past five years, developed the
technological and managerial infrastructure to offer its clients value added
services including CHC's Signature 2000(TM) solution for the millennium change,
client/server systems development and migration, enterprise network management,
document imaging practices, outsourcing and offshore software development and
maintenance ("solutions"). The Company markets solutions to both existing and
potential clients with the objective of becoming a preferred provider of
comprehensive information technology services and solutions for such clients.
Solutions engagements, which represented less than five percent of the Company's
consolidated revenues in 1992, accounted for approximately 30% of its
consolidated revenues in 1996. The Company believes that the range of services
and solutions that it offers, combined with its worldwide network of 43 offices
and subsidiary organizations, provides it with significant competitive
advantages in the information technology marketplace.
In 1996, the Company expanded operations by opening offices in Toronto,
Canada and London, England. Together with the offices operated by the Company's
joint venture, Birla Horizons International, the Company has established itself
as an international enterprise, with global capabilities.
The Company's clients primarily are Fortune 1,000 companies with
significant information technology budgets and recurring staffing or software
development needs. In 1996, the Company provided information technology services
to 453 clients. During 1996, the Company's largest client, AT&T accounted for
9.8% of the Company's consolidated revenues, with no other client accounting for
more than 5% of such revenues.
With the trend in the commercial market moving towards fully integrated
information systems solutions, the Company offers its clients a broad range of
business and technical services as a service outsourcer and systems integrator
capable of providing complex total solutions. This total solutions approach
comprises proprietary software and tools, proven processes and methodologies,
tested project management practices and resource management and procurement
programs.
The Company offers a range of information technology services and
solutions, which include (1) professional services staffing, (2) the solution
for the millennium change, (3) client/ server systems development and migration,
(4) enterprise network management, (5) document imaging practices, (6)
outsourcing, (7) offshore software development and maintenance, and (8)
knowledge transfer.
(1) Professional Services Staffing: Providing highly skilled software
professionals to augment the internal information management staffs of major
corporations remains the Company's primary business. The Company offers its
clients centralized vendor management, supplying their staffing needs from among
the Company's over 2,500 software professionals. The Company is committed to
expanding its professional services staffing operations in conjunction with its
solutions business.
(2) Solution for the Millennium Change: CHC's Signature 2000(TM)
offering combines an internally developed proprietary software toolkit, skilled
resources, proven methodologies, experienced project management, as well as
significant millennium project experience. It analyzes, locates, reports on, and
then restructures all programs and database definitions affected by the absence
of a century date field to permit processing of dates after December 31, 1999.
The solution is customized for each particular enterprise and deals with all
collateral issues. In effect, CHC's Signature 2000(TM) provides the Company with
an opportunity to facilitate field expansion, while simultaneously performing
other systems upgrades such as language conversions and platform migrations.
(3) Client/Server Systems Development and Migration: The Company has
the capability to develop and implement open computer systems using
client/server architecture and integrating servers, mini and mainframe systems,
workstations, terminals and communication gateways into complete, flexible
networks. Such services include project management, selection of viable systems
platforms, creation of migration plans, development of customized software
applications, and systems and database integration. The Company specializes in
integrating local area network ("LAN") environments into single heterogeneous
networks and unifying enterprise networks into wide area network ("WAN")
environments.
(4) Enterprise Network Management: As application development migrates
to distributed systems platforms, so too must the disciplines of systems
management. The Company's enterprise network management offering is comprised of
experienced technical professionals whose only business focus is the development
and integration of centralized management platforms for mission-critical
distributed systems environments. The Company's staff handles large-scale
integration projects, including those requiring vendor product integration and
custom software development associated with LAN/WAN monitoring and control,
network asset management, software distribution and help desk support.
(5) Document Imaging Practices: The Company offers an
open-architectured document management solution that enables its clients to
seamlessly image-enable existing applications that can reside on mainframes,
mid-range or PC environments. The client is able to obtain a total solution that
utilizes the Company's proprietary toolset, UNIDOC(TM), to provide customized
design, development and deployment for their document management needs.
(6) Outsourcing: Spurred by global competition and rapid technological
change, big companies, in particular, are downsizing and outsourcing for reasons
ranging from cost reduction to capital asset improvement and from improved
technology introduction to better strategic focus. In response to this trend,
the Company has created a group of regional outsourcing centers with 24 hour/7
day a week support, which are fully equipped with the latest technology and
communications, as well as a complete staff that includes experienced project
managers, technicians and operators. These professionals facilitate essential
data functions including: applications development, systems maintenance, data
network management, voice network administration and help desk operations.
(7) Offshore Software Development and Maintenance: For major U.S.
corporations under the constraints of downsizing and cost-cutting, offshore
software development and maintenance provides a high quality, low-cost
alternative to having these services performed domestically. Through Birla
Horizons International, a joint venture established in India, the Company is
able to provide offshore development, legacy systems maintenance and conversion
services, which can be ported to client computers at satellite speed. Quality
control and project management remain localized through one of the Company's
domestic offices.
8) Knowledge Transfer: The Company offers both standard curricula and
custom-tailored courses for a client's particular environment and needs.
Comprehensive courses cover languages, hardware, software, tools, methodologies
and management and productivity skills. The Company's offerings include
application downsizing, graphical interfaces, open systems, computer-aided
software engineering ("CASE") and information engineering technologies,
relational technology and personal computer software and hardware. The Company
also has reseller and training rights in selected markets to certain development
tools used as an aid in building client/server applications.
Personnel
As of December 3l, 1996, the Company had a staff of 2,916, of whom
2,510 were computer professionals. The Company devotes significant resources to
recruitment of qualified professionals and provides continuing in-house training
and education, and a career path management development program within the
Company.
Competition
The Company competes in the commercial information technology services
market which is highly competitive and served by numerous firms, many of which
serve only their respective local markets. The market includes participants in a
variety of market segments, including systems consulting and integration firms,
professional services companies, application software firms, temporary
employment agencies, the professional service groups of computer equipment
companies such as Hewlett-Packard Company, Unisys Corporation and Digital
Equipment Corporation, facilities management and management information systems
("MIS") outsourcing companies, certain "Big Six" accounting firms, and general
management consulting firms. The Company's competitors also include companies
such as Andersen Consulting, Technology Solutions Corporation, Cambridge
Technology Partners, Inc., Cap Gemini America, Business System Group, the
consulting division of Computer Sciences Corporation, Analysts International
Corp., CIBER, Inc., Computer Task Group Inc., and Keane Inc.
Many participants in the information technology consulting and software
solutions market have significantly greater financial, technical and marketing
resources and generate greater revenues than the Company. The Company believes
that the principal competitive factors in the commercial information technology
services industry include responsiveness to client needs, speed of application
software development, quality of service, price, project management capability
and technical expertise. Pricing has its greatest importance as a competitive
factor in the area of professional service staffing. The Company believes that
its ability to compete also depends in part on a number of competitive factors
outside its control, including the ability of its competitors to hire, retain
and motivate skilled technical and management personnel, the ownership by
competitors of software used by potential clients, the price at which others
offer comparable services and the extent of its competitors' responsiveness to
customer needs.
Item 2. Properties
The Company's Corporate and Financial Headquarters, its Unified Systems
Solutions, Inc. subsidiary, its ComputerKnowledge division, as well as its
Eastern Regional Office, comprising approximately 43,500 square feet, are
located at 49 Old Bloomfield Avenue, Mountain Lakes, New Jersey. The Mountain
Lakes leases are for terms expiring December 31, 1999, at a current annual
rental of approximately $734,000. As of December 3l, l996, the Company also
maintained facilities in Arizona, California, Colorado, Connecticut, Florida,
Georgia, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Minnesota,
Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee,
Texas, Toronto and Washington D.C. with an aggregate of approximately 136,400
square feet. The leases for these facilities are at a current annual aggregate
rental of approximately $1,854,000. These leases expire at various times with no
lease commitment longer than December 31, 2001. In addition, through Birla
Horizons International, the Company has offices in New Delhi, India; London,
England; California; New Jersey, and Toronto, Canada.
Item 3. Legal Proceedings
There are no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Company
The following table sets forth certain information with respect to the
executive officers of the Company, who are elected to serve until the next
annual meeting of the Board of Directors and until their successors are elected
and qualify. All the positions listed are or were held by such officers with the
Company.
PERIOD
NAME AGE TITLE POSITION HELD
- ---- --- ----- -------------
John J. Cassese 52 Chairman of the Board 1982-Present
and President
Director 1969-Present
William J. Murphy 52 Executive Vice President 1997 - Present
and CFO
Bernhard Hubert 52 Senior Vice President 1982-1995
and CFO
Executive Vice President 1995-1996
and CFO*
Director* 1995-1996
Michael J. Shea 36 Controller 1995-Present
Vice President 1996-Present
*Resigned effective December 31, 1996.
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The information required by this item is contained under the caption
"Market and Dividend Information" in the Company's Annual Report to Shareholders
for the year ended December 3l, 1996, which material is incorporated by
reference in this Form 10-K Annual Report.
Item 6. Selected Financial Data
The information required by this item is contained under the caption
"Selected Financial Data" in the Company's Annual Report to Shareholders for the
year ended December 3l, 1996, which material is incorporated by reference in
this Form 10-K Annual Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The information required by this item is contained under the caption
"Management's Discussion and Analysis" in the Company's Annual Report to
Shareholders for the year ended December 3l, 1996, which material is
incorporated by reference in this Form 10-K Annual Report.
Item 8. Financial Statements and Supplementary Data
The financial statements together with the report thereon by Grant
Thornton LLP, Independent Certified Public Accountants, appearing in the
Company's Annual Report to Shareholders for the year ended December 31, 1996,
are incorporated herein by reference. Such information is listed in Item 14(a)1
of this Form 10-K Annual Report.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
There have been no disagreements with the Company's independent
accountants involving accounting and financial disclosure matters.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The information called for by Item 10 with respect to
identification of directors of the Company is incorporated herein by reference
to the material under the caption "Election of Directors" in the Company's Proxy
Statement for its 1997 Annual Meeting of Shareholders which is expected to be
filed with the Securities and Exchange Commission on or before April 7, 1997
(the "1997 Proxy Statement").
(b) The information called for by Item 10 with respect to executive
officers of the Company is included in Part I herein under the caption
"Executive Officers of the Company".
Item 11. Executive Compensation
The information called for by Item 11 with respect to management
remuneration and transactions is incorporated herein by reference to the
material under the caption "Executive Compensation" in the 1997 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 with respect to security
ownership of certain beneficial owners and management is incorporated herein by
reference to the material under the caption "Certain Holders of Voting
Securities" in the 1997 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
(a) 1. The following consolidated financial statements for 1996 and
1995, appearing in the Company's Annual Report to Shareholders, are incorporated
herein by reference.
- Consolidated balance sheets as of December 3l, 1996 and 1995
- Consolidated statements of income for each of the
three years in the period ended December 31, 1996
- Consolidated statement of shareholders' equity for each of the
three years in the period ended December 31, 1996
- Consolidated statements of cash flows for each of the
three years in the period ended December 31, 1996
- Notes to consolidated financial statements
- Report of independent certified public accountants on
the consolidated financial statements
2. Schedule II - Valuation and qualifying accounts for the years
ended December 31, 1996, 1995 and 1994.
-Report of independent certified public accountants on
the financial statements schedule.
All other schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial statements or
notes thereto.
3. The exhibit index
4. Consent of Grant Thornton LLP
(b) No reports on Form 8K were filed during the quarter ended
December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMPUTER HORIZONS CORP.
Date: March 21, 1997 By: /s/ John J. Cassese
------------------------
John J. Cassese, Chairman
of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
COMPUTER HORIZONS CORP.
Date: March 21, 1997 By: /s/ John J. Cassese
-------------------
John J. Cassese, Chairman
of the Board and President
(Principal Executive Officer)
and Director
Date: March 21, 1997 By: /s/ William J. Murphy
----------------------
William J. Murphy,
Executive Vice President and CFO
(Principal Financial Officer)
Date: March 21, 1997 By: /s/ Michael J. Shea
----------------------
Michael J. Shea
Vice President and Controller
(Principal Accounting Officer)
Date: March 21, 1997 By: /s/ Thomas J. Berry
--------------------
Thomas J. Berry, Director
Date: March 21, 1997 By: /s/ Rocco J. Marano
-------------------
Rocco J. Marano
Date: March 21, 1997 By: /s/ Wilfred R. Plugge
---------------------
Wilfred R. Plugge, Director
EXHIBIT INDEX
Exhibit Description Incorporated by Reference to
- ------- ----------- -------------------------------------
3(a-1) Certificate of Incorporation as amended Exhibit 3(a) to Registration
through 1971. Statement on Form S-1 (File No.
2-42259).
3(a-2) Certificate of Amendment dated May 16, Exhibit 3(a-2) to Form 10K for the
1983 to Certificate of Incorporation. fiscal year ended February 28, 1983.
3(a-3) Certificate of Amendment dated June 15, Exhibit 3(a-3) to Form 10K for the
1988 to Certificate of Incorporation. fiscal year ended December 31, 1988.
3(a-4) Certificate of Amendment dated July 6, Exhibit 3(a-4) to Form 10K
1989 to Certificate of Incorporation. for the fiscal year ended
December 31, 1994.
3(a-5) Certificate of Amendment dated February Exhibit 3(a-4) to Form 10K for the
14, 1990 to Certificate of year ended December 31, 1989.
Incorporation.
3(a-6) Certificate of Amendment dated May 1, Exhibit 3(a-6) to Form 10K
1991 to Certificate of Incorporation. for the fiscal year ended
December 31, 1994.
3(a-7) Certificate of Amendment dated July 12, Exhibit 3(a-7) to Form 10K
1994 to Certificate of Incorporation. for the fiscal year ended
December 31, 1994.
3(b) Bylaws, as amended and presently in Exhibit 3(b) to Form 10K for the
effect. year ended December 31, 1988.
4(a) Rights Agreement dated as of July 6, Exhibit 1 to Registration Statement
1989 between the Company and Chemical on Form 8-A dated July 7, 1989.
Bank, as Rights Agent ("Rights
Agreement") which includes the form of
Rights Certificate as Exhibit B.
4(b) Amendment No. 1 dated as of February Exhibit 1 to Amendment No. 1 on
13, 1990 to Rights Agreement. Form 8 dated February 13, 1990 to
Registration Statement on Form 8-A
4(c) Amendment No. 2 dated as of August 10, Exhibit 4(c) to Form 10K
1994 to Rights Agreement. for the fiscal year ended
December 31, 1994.
4(d) Employee's Savings Plan and Amendment Exhibit 4.4 to Registration
Number One. Statement on Form S-8 dated
December 5, 1995.
4(e) Employee's Savings Plan Trust Agreement Exhibit 4.5 to Registration
as Amended and Restated Effective Statement on Form S-8 dated
January 1, 1996. December 5, 1995.
10(a) Employment Agreement dated as of Exhibit 10(a) to Form 10K for the
February 16, 1990 between the Company year ended December 31, 1989.
and John J. Cassese
10(b) Employment Agreement dated as of Exhibit 10(c) to Form 10K for the
February 16, 1990 between the Company year ended December 31, 1989.
and Bernhard Hubert.
10(c) Employment Agreement dated as of March
6, 1997 between the Company and Michael
J. Shea.
10(d) Note Agreement dated as of March 15, Exhibit 10(i) to Form 10K for the
1988 between the Company and year ended December 31, 1988.
Massachusetts Mutual Life Insurance
Company.
10(e) 1991 Directors' Stock Option Plan, as Exhibit 10(g) to Form 10K
amended. for the fiscal year ended
December 31, 1994.
10(f) 1994 Incentive Stock Option and Exhibit 10(h) to Form 10K
Appreciation Plan. for the fiscal year ended
December 31, 1994.
10(g) $15,000,000 Promissory Note payable to
Chemical Bank
10(h) $10,000,000 Discretionary Line of
Credit from PNC Bank.
11 Statement regarding Computation of Per
Share Earnings.
13 Annual Report to Security Holders.
21 List of Subsidiaries.
Computer Horizons Corp. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1996, 1995 and 1994
Column A Column B Column C Column D Column E
Balance at Charged to Balance at
beginning costs and Deductions - end of
Description of period expenses describe(l) period
----------- --------- -------- ----------- ------
Year ended December 31, 1996
Allowance for doubtful accounts $840,000 $487,000 $124,000 $1,203,000
-------- -------- -------- ----------
Year ended December 31, 1995
Allowance for doubtful accounts $566,000 $465,000 $191,000 $ 840,000
-------- -------- -------- ----------
Year ended December 31, 1994
Allowance for doubtful accounts $462,000 $244,000 $140,000 $ 566,000
-------- -------- -------- ----------
Notes
(1) Uncollectible accounts written off, net of recoveries.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Shareholders
Computer Horizons Corp.
In connection with our audit of the consolidated financial statements of
Computer Horizons Corp. and Subsidiaries referred to in our report dated January
27, 1997, which is included in the 1996 Annual Report to Shareholders and
incorporated by reference in this Form 10-K, we have also audited Schedule II
for each of the years ended December 31, 1996, 1995 and ]994. In our opinion,
this schedule presents fairly, in all material respects, the information
required to be set forth therein.
GRANT THORNTON LLP
Parsippany, New Jersey
January 27, 1997
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Computer Horizons Corp.
We have issued our report dated January 27, 1997, accompanying the consolidated
financial statements incorporated by reference in the Annual Report to
Shareholders of Computer Horizons Corp. (the "Company") on Form 10-K for the
year ended December 31, 1996. We hereby consent to the incorporation by
reference of said report in the Registration Statements on Forms S-8, covering
shares of common stock, par value $.10 per share, to be offered pursuant to the
Computer Horizons Corp. Employee Savings Plan and the Company's 1994 Incentive
Stock Option and Appreciation Plan, 1985 Incentive Stock Option and Appreciation
Plan, as amended, 1976 Stock Option Plan, as amended, and 1991 Directors' Stock
Option Plan, as amended.
GRANT THORNTON LLP
Parsippany, New Jersey
March 18, 1997