Back to GetFilings.com
1
UNITED STATES
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 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Transition period from _______ to _______
Commission File No. 1-9410
COMPUTER TASK GROUP, INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of New York 16-0912632
-------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
800 Delaware Avenue, Buffalo, New York 14209
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 882-8000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
-------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
Rights to Purchase Series A
Participating Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
----
(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 at March 13, 1996 was $158,407,919. Solely for the purposes of
this calculation, all persons who are or may be executive officers or directors
of the Registrant and all persons who have filed a Schedule 13D with respect to
the Registrant's stock have deemed to be affiliates.
The total number of shares of Common Stock of the Registrant outstanding at
March 13, 1996 was 10,316,830.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in the
following parts of this report: Parts I, II and IV--the Registrant's 1995
Annual Report to Shareholders; Part III--the Registrant's definitive Proxy
Statement as filed with the Securities and Exchange Commission and as used in
connection with the solicitation of proxies for the Registrant's annual meeting
of shareholders to be held on April 24, 1996.
2
PART I
------
ITEM 1. BUSINESS
---------
Computer Task Group, Incorporated (Company or CTG or Registrant) was
incorporated in Buffalo, New York on March 11, 1966, and its corporate
headquarters are located at 800 Delaware Avenue, Buffalo, New York 14209
(716-882-8000). CTG is an information technology services company. CTG employs
approximately 5,000 people and serves customers through an international
network of offices in North America and Europe. The Company has four operating
subsidiaries: Computer Task Group of Canada, Inc.; Computer Task Group (U.K.)
Ltd.; Computer Task Group Nederland B.V.; and Computer Task Group Belgium N.V.
As of July 1, 1994, the Company sold its petroleum industry subsidiaries,
Profimatics, Inc. and Profimatics & Co., GmbH.
BACKGROUND
- ----------
The Company operates in one area of the computer industry -- providing
information technology services. A typical customer is a Fortune 500-size
organization with large, complex information and data processing requirements.
CTG's customer base is large and diverse, consisting of approximately 900
customers. The Company serves approximately 35 percent of the Fortune 100.
CTG works with customers to develop effective business solutions
through information systems and technology. The Company's professional staff
may support a customer's software development team on a specific application or
project or may manage the project entirely for the customer. The Company's
range of services extends from flexible staffing provided on a per diem basis
to managing multi-million dollar technology projects. Approximately 51 percent
of the Company's services are provided to customers in the service sector,
followed by 23 percent in the manufacturing industry, 9 percent in the banking
and finance sector and 17 percent in other industries. Most of CTG's services
are provided on-site at the customer's facilities. CTG's network of offices
provides wide geographical coverage with the capability of servicing large
companies with multiple locations.
In 1993, the Company completed an extensive reengineering of its
operations, resulting in a new business strategy and a complementary
organization. CTG's business strategy is based upon the concept of a strategic
variable workplace, being cost competitive while being responsive in supplying
qualified staff to work on client engagements. CTG's services are sold and
delivered on a local level through its network of geographically dispersed
delivery teams made up of sales managers, resource managers and business
consultants. The Company has a staff of over 90 recruiting specialists located
in five regional locations who utilize an electronic recruiting database to
screen and qualify individuals who are available to work on CTG's clients'
information technology needs. The Company maintains a qualified database of
over 160,000 candidates available for assignments.
In the 1980's, CTG's growth strategy included expansion via geographic
acquisitions primarily in North America. The Company also completed two
acquisitions in Europe, one in 1986 and the other in 1990. In total, between
1979 and 1990, CTG acquired 21 firms ranging in size from $1 million to
approximately $30 million in revenue. CTG has not made an acquisition in the
last five years, but instead has focused on internal growth and divesting small
non-strategic businesses. Future growth will come from internal growth and
strategic investments.
International Business Machines Corporation (IBM) is CTG's largest
customer. CTG provides services to various IBM divisions in approximately 50
locations. In 1995, CTG was awarded a two year contract to be one of IBM's nine
national technical service providers. IBM accounted for $80 million or 23.7
percent of CTG's 1995 revenue, $68 million or 22.7 percent of CTG's 1994
revenue, and $80 million or 27.1 percent of CTG's 1993 revenue. The Company
expects to continue to derive a significant portion of its business from IBM in
1996 and to actively pursue new business with IBM. A significant decline in
revenues from IBM could have a material adverse impact on the Company's
revenues and profits. Because of the diversity of the projects performed for
IBM and the number of locations and divisions involved, the Company
2
3
believes the simultaneous loss of all IBM business is unlikely to occur. IBM
accounted for approximately 24.2 percent of North American revenue and 7.3
percent of European revenue during 1995. In addition, the Company continues to
expand its non-IBM business, which grew 11 percent or $25.8 million in 1995
compared to 1994.
In 1989, CTG entered into an agreement with IBM where IBM purchased
1,448,276 shares of CTG Series B Preferred Stock. On February 25, 1994, IBM
converted all of its CTG Series B Preferred Stock into common stock and CTG
repurchased 500,000 of its common shares from IBM for $3,515,000. This
repurchase reduced IBM's ownership of the Company to approximately 9.2 percent.
IBM subsequently sold 550,000 CTG common shares on the open market. The Company
and its Stock Employee Compensation Trust repurchased IBM's remaining 398,276
shares in December 1994 for $2,950,000.
The Company holds no patents, trademarks, or service marks other than
its registered name and logo. It has entered into agreements with various
software and hardware vendors from time to time in the normal course of
business, none of which are material to the business.
SERVICES
- --------
CTG operates in one area of the Information Technology (IT) industry,
the services area. Segment information is included in CTG's 1995 Annual Report
to Shareholders on page 24 and is incorporated herein by reference.
Most companies follow a continuous process to create business
solutions. The business solution life cycle begins with planning, as companies
design strategies to meet overall business objectives using IT. Planning is
followed by development, in which companies develop and implement IT solutions
using their newly devised plans. Finally, managing and maintaining ensure
systems and technologies are supported to preserve their effectiveness. CTG
provides services in each of these three areas as follows:
Business Consulting. Business Consulting focuses on the planning phase
of the IT life cycle. CTG's consultants help a customer develop the plan to
reengineer its business processes, assess its technology needs, and choose the
appropriate technology.
Development & Integration. Development & Integration supports the
implementation phase of the IT life cycle, including software package
implementation, application development, and client/server development.
Managed Support. Managed Support addresses the maintenance segment of
the IT life cycle. It encompasses service offerings such as operations and
network support (running or maintaining a customer's systems), application
support (maintaining a company's programs and documentation) and setting-up and
maintaining a Help Desk.
SALES AND MARKETING
- --------------------
CTG's marketing efforts span all strata of the organization, involving
virtually all of the Company's professionals.
On the corporate and regional level, management performs strategic,
tactical and operational sales planning to assess industry and customer needs
and target markets.
Customers are served by local teams, comprised of Sales Managers,
Business Consultants and Resource Managers who work together -- the first two
focused on identifying an engagement and the latter focused on finding
appropriate, high quality professionals for an engagement. Supporting these
local teams are sourcing specialists backed by a national electronic database
of professional computer consultants and programmers -- to improve
effectiveness at locating qualified IT candidates. In addition, Project
Managers are responsible for profitability, client satisfaction and risk
management in the project delivery of consulting offerings.
3
4
Sales Managers are full-time employees who receive a base salary and
are paid commissions based on objectives such as the amount and profitability
of the business they sell. Each Sales Manager is assigned a sales quota and is
paid in relationship to this quota. Sales Managers, and the professionals
serving our customers, continually seek to identify new opportunities with
existing and prospective customers. CTG publishes brochures that explain its
services, produces informative customer newsletters, advertises in trade
publications, participates in trade shows, and encourages employees to author
articles, which keeps the CTG name in front of clients.
The Internet and the World Wide Web (Web) are also key components of
the Company's communications infrastructure, called CTGNet. The Web is the
foundation of an ongoing knowledge exchange effort and the Company is currently
refining and building new Web functionality to continuously provide current
information to its customers, suppliers, investors and potential employees. The
Internet and the Web present important opportunities for new business and CTG
is currently developing Internet tools to support its clients. Internally, the
Company is at the leading edge of using the Internet to exchange knowledge. CTG
has been using the Internet and the Web for two years as a communications tool,
to connect wide-spread employees, and as a resource tool for recruiting,
marketing and service delivery.
PRICING AND BACKLOG
- -------------------
CTG provides the majority of its business on a time and materials
basis. Rates vary based on the type and level of skill required by the
customer. Consulting services are more specialized; therefore, they generally
command higher rates. Agreements for work performed on a per diem basis
generally do not specify any dollar amount because services are rendered on an
"as required" basis, and are subject to cancellation without penalty on thirty
days' notice.
The Company performs project business on either a fixed-price or time
and materials basis. These contracts generally have different terms and
conditions regarding cancellation and warranties, and are usually negotiated
based on the unique aspects of the project. Approximately 4 percent of the
Company's 1995 revenue is from fixed-price contracts accounted for under the
percentage of completion method, compared to 5 percent in 1994. Revenue from
all fixed price contracts, including those accounted for under the percentage
of completion method and managed support contracts, totaled 13 percent in 1995,
compared to 8 percent in 1994. As of December 31, 1995 and 1994, the backlog
for fixed-price and managed support contracts was approximately $51 million and
$55 million, respectively. Approximately 42 percent of the December 31, 1995
backlog is expected to be earned in 1996. Revenue is subject to seasonal
variations, with a minor downturn in months of high vacation and legal holidays
(July, August and December). The backlog is not seasonal.
COMPETITION
- -----------
The IT services market is highly competitive. The market is also
highly fragmented among many providers with no single competitor maintaining
clear market leadership. The Company's competition varies from city to city and
by the type of service provided. Competition comes from four primary channels:
a customer's internal data processing staff; small local firms or individuals
specializing in specific programming services or applications; hardware vendors
and suppliers of packaged software systems; and large national or international
vendors, including major accounting and consulting firms, which offer a variety
of development services to a broad spectrum of commercial customers. CTG
competes against all four of these for its share of the market.
Management believes the Company's customers have different buying
values. In order to compete for their business, the Company believes that it
must quickly respond to customers with high quality skills at a low cost,
utilizing CTG's strategic variable workforce. Customers demand the ability to
solve business problems, backed by a defined approach and experience. CTG's
organization is designed to allow it to compete in the IT services industry.
4
5
CTG has implemented a Total Quality Management Program, with a goal to
achieve continuous, measured improvements in services and deliverables. As part
of this program, CTG has developed specific methodologies for providing value
added services which result in unique solutions and specified deliverables for
its clients. The Company believes these methodologies will enhance its ability
to compete.
MANAGEMENT AND PROFESSIONAL STAFF
- ---------------------------------
As of December 31, 1995, CTG employed 5,014 people, of which 4,402
were professional technical staff.
CTG's long-term profitability and growth depend on its ability to
attract qualified information systems professionals with the skills to fulfill
customer requirements. Qualified systems engineers and professionals with
computer-related skills are in great demand and the Company faces considerable
competition in attracting such individuals. Competing employers include not
only computer-related professional services companies, but also businesses with
internal data processing staffs.
The Company offers several employment options to enable it to attract
professional staff. The Company pays its employees on either a salaried or
hourly basis. Management has developed a professional staff resources database.
This database provides a pipeline of quality professional resources to assist
management in providing customers with responsive, dependable and
cost-effective service to fulfill the needs required.
CTG's service agreements with its customers generally state that
neither party may hire the other's personnel for the term of the project and a
stated period thereafter. The Company's employees are required to sign
non-solicitation and non-disclosure agreements which state they will not accept
employment directly or indirectly with a customer or solicit or hire another
employee, for a specified period after termination of employment. The
agreements also provide that the employee will not use or disclose Company or
client confidential information. In addition, entry level staff who attend the
Company's systems training course and more experienced staff who complete new
technology training sign agreements to reimburse the Company for the cost of
the training if they voluntarily terminate their employment within a defined
period from the date the training program starts.
No employees are covered by a collective bargaining agreement or are
represented by a labor union. CTG is an equal opportunity employer.
TECHNICAL AND MANAGEMENT TRAINING
- ---------------------------------
For a services company, amounts spent on education and training for
staff to keep abreast of technology are similar to research and development
expense. CTG recognizes that its ability to remain competitive depends on its
ability to offer customers services that make the highest and best use of
emerging new technologies. The Company provides ongoing educational programs so
that its technical staff has the skills needed to respond to today's new
demands. Classroom and distributed training, using videos and computer-based
training courses, are utilized.
CTG also offers its employees management and sales training. These
courses offer the latest marketing and management practices and serve both as
refresher courses and as training vehicles to ensure that the technical staff
has the skills necessary for promotion. They also provide a forum for imparting
Company policies to ensure consistency in the quality of services throughout
the Company's organization.
CTG believes its training and continuing education programs keep its
technical staff current and provide the Company with the necessary management
and marketing personnel to support future growth. CTG invested approximately
$4.0 million, $4.4 million and $4.5 million, on education in 1995, 1994, and
1993, respectively, including compensation paid to technical staff while in
training.
5
6
FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS
- -----------------------------------------------------------------
(amounts in thousands)
1995 1994 1993
----- ---- ----
Revenue from Unaffiliated Customers
North America $ 306,156 $ 274,115 $ 266,150
European Community 33,251 27,444 29,315
----------- ----------- -----------
$ 339,407 $ 301,559 $ 295,465
=========== =========== ===========
Operating Income (Loss)
North America $ 12,300 $ (2,348) $ (14,529)
European Community 450 128 (14,838)
----------- ----------- ------------
$ 12,750 $ (2,220) $ (29,367)
=========== =========== ===========
Identifiable Assets
North America $ 61,771 $ 62,406 $ 67,088
European Community 13,280 10,510 13,202
Corporate and Other 29,715 22,574 28,281
----------- ----------- -----------
$ 104,766 $ 95,490 $ 108,571
=========== =========== ===========
6
7
Executive Officers of the Company
---------------------------------
Term Of Period During Other Positions
Office Which Served as And Offices with
Name and Age Office Expires Executive Officer(1) Registrant
- ------------ ------- ------- -------------------- ------------------
Gale S. Fitzgerald Chairman of 4-24-96 5-6-91 to date Director
45 the Board and
Chief Executive Officer
Richard A. Ballou Vice President 4-24-96 11-2-93 to date None
44
Charles A. Barbour Vice President 4-24-96 11-2-93 to date None
44
James R. Boldt Vice President 4-24-96 2-12-96 to date Treasurer
44 and Chief
Financial Officer
Louis J.F. Boyle Vice President 4-24-96 7-1-94 to date None
44
Janice M. Cole Vice President 4-24-96 11-2-93 to date None
50
Beatrice DeRocco Vice President 4-24-96 4-26-95 to date None
51
Michael E. Grich Vice President 4-24-96 2-9-95 to date None
47
Stephen A. Hoffman Vice President 4-24-96 11-16-90 to date None
43
Joseph G. Makowski Vice President 4-24-96 9-30-89 to date Secretary
42 and General
Counsel
Nico Molenaar Vice President 4-24-96 1-2-96 to date None
40
Mark V. Megregian Vice President 4-24-96 1-21-94 to date None
53
- ---------------
[FN]
(1) Business Experience
-------------------
Ms. Fitzgerald was appointed Chairman of the Board and chief executive
officer as of October 3, 1994 and President and chief operating officer as of
July 1, 1993. She joined the Company in May 1991 as Senior Vice President
responsible for the Company's Northeastern U.S. and Canadian operations. She
was previously Vice President, Professional Services at International Business
Machines Corporation (IBM), where she had worked for 18 years in various
management positions.
Mr. Ballou was promoted to Vice President in November 1993 and has
been employed by the Company for 12 years. He has held a variety of technical
and management positions and is presently responsible for the operations of the
Company's Mid-Atlantic and South regions.
7
8
Mr. Barbour was promoted to Vice President in November 1993 and has
been employed by the Company for 16 years. He has held a variety of
management positions and is presently responsible for the operations of the
Company's Mid-West region.
Mr. Boldt joined the Company as a Vice President in February 1996. He
was previously Vice President of Finance, Secretary and Chief Financial Officer
of Pratt and Lambert United, Inc., where he worked for 20 years in a variety of
management positions. He is currently responsible for the Company's Finance,
Accounting and Internal Audit functions.
Mr. Boyle joined the Company as an officer in July 1994, and currently
serves as Vice President and Chief Information Officer. He was Manager,
Northern New England Consulting Practice with Coopers & Lybrand from 1992 to
June 1994 and held a variety of technical consulting and management positions
prior to that.
Ms. Cole was promoted to Vice President in November 1993 and has been
employed by the Company since 1980. She has held a variety of technical and
management positions and is presently responsible for the operations of the
Company's Northeast region.
Ms. DeRocco joined the Company as a Vice President in April 1995.
She previously held a variety of management positions at IBM and is
presently responsible for the operations of the Company's West region.
Mr. Grich was promoted to Vice President in February 1995 and has been
employed by the Company since 1991. He has held a variety of sales and
management positions and is presently responsible for the operations of the
Company's Central region. Prior to joining the Company, he was employed by Cap
Gemini as Northeastern Director for Sales and Marketing. He also spent 20 years
with IBM where his last position was Branch Manager for IBM's Hartford
Professional Services office.
Mr. Hoffman was promoted to Vice President in November 1990 and is
currently responsible for the operations of the Company's National Delivery
Team, which focuses primarily on IBM. Prior to joining the Company in March
1990, he worked 13 years at IBM where his last position was IBM's Buffalo
branch manager.
Mr. Makowski was promoted to Vice President in September 1993. He
has served as Secretary and General Counsel since September 1989. He has
served as the Company's Corporate Counsel since 1985.
Mr. Molenaar was promoted to Vice President in January 1996 and has
been employed by the Company since 1988. He has held a variety of management
positions and is presently responsible for the Company's European operations.
Mr. Megregian joined the Company as an officer in January, 1994 and
currently serves as Vice President, Offerings and Performance. Most recently,
Mr. Megregian was an independent business consultant with KWR Information
Systems for two years. Prior to that, he was with IBM for 27 years where he had
held various management and technical positions.
ITEM 2. PROPERTIES
----------
The Company occupies a headquarters building (approximately 40,000
square feet) at 800 Delaware Avenue, Buffalo, New York, under a Lease Agreement
with the Erie County Industrial Development Agency (Agency), dated as of
September 1, 1978. At the end of the term of the Lease Agreement in 1996, the
Company has the right to purchase its headquarters building and the real
property on which it is situated for $1.00. Until such time, the building and
real property are encumbered by a mortgage held by the trustee for the
purchaser of the industrial revenue bond issued by the Agency to finance its
purchase of the building and real property.
8
9
The Company also occupies an office building at 700 Delaware Avenue,
Buffalo, New York under a Lease Agreement with the Agency, dated April 1, 1990.
The building consists of approximately 39,000 square feet and is occupied by
the Company's Buffalo sales office and corporate administrative operations. At
the end of the Lease Agreement in 2001, the Company has the right to purchase
the building and the real property on which it is situated for $10.00. There is
no mortgage on this building.
The Company also owns a 37,000 square foot building in Melbourne,
Florida and a 24,000 square foot office and operations facility in Pittsburgh,
Pennsylvania, which was financed by an industrial revenue bond.
Three of the four properties are currently on the market as the
Company looks for more efficient space. The buildings are still in use while
they are on the market, and the Company does not expect to incur a loss on the
sale of these buildings. The Melbourne, Florida building, with a net book value
of $1.8 million, is leased to a third party under a five year lease.
The remainder of the Company's locations are leased facilities. Most
of these facilities serve as sales and support offices and their size varies,
generally in the range of 1,000 to 12,000 square feet, with the number of
people employed at each office. The Company's lease terms generally vary from
periods of less than a year to five years and generally have flexible renewal
options. The Company believes that its present owned and leased facilities are
adequate to support its current and future needs.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
9
10
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
--------------------------------------------------------------------
Information relating to the market and market prices of the Company's
Common Stock, the approximate number of Company shareholders and the Company's
dividend history for the past two years is included under the caption "Stock
Market Information" in the Company's Annual Report to Shareholders for the year
ended December 31, 1995, submitted herewith as an exhibit, and incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
A ten-year summary of certain financial information relating to the
financial condition and results of operations of the Company is included under
the caption "Consolidated Summary - Ten-Year Selected Financial Information" in
the Company's Annual Report to Shareholders for the year ended December 31,
1995, submitted herewith as an exhibit, and incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Management's discussion and analysis of financial condition and
results of operations is included in the Company's Annual Report to
Shareholders for the year ended December 31, 1995, submitted herewith as an
exhibit, and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The consolidated financial statements of the Company and the
supplementary data information are included in the Company's Annual Report to
Shareholders for the year ended December 31, 1995, submitted herewith as an
exhibit, and incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
On October 16, 1995, the Company engaged KPMG Peat Marwick LLP (KPMG)
as the principal accountants to audit the Company's financial statements for
the fiscal year ending December 31, 1995, and dismissed Price Waterhouse LLP
(Price Waterhouse). The Company did not consult with KPMG regarding accounting
advice prior to its engagement.
Price Waterhouse had been engaged since 1977 as the principal
accountants to audit the Company's financial statements. Price Waterhouse's
report on the financial statements of the Company as of December 31, 1994 and
1993 and for the years then ended contained no adverse opinion or disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope, or
accounting principles. Also, during the aforementioned period, there occurred
no "reportable event" within the meaning of Item 304(a)(1)(v) of Regulation S-K
of the Commission.
The decision to change accountants was approved by the Board of
Directors of the Company. During the Company's two most recent fiscal years and
any subsequent interim period preceding the dismissal, there were no
disagreements between the Company and Price Waterhouse on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which if not resolved to the satisfaction of Price
Waterhouse would have caused Price Waterhouse to make reference to the subject
matter of the disagreement in connection with its report.
II-1 10
11
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
---------------------------------------------------
The information in response to this item is incorporated herein by
reference to the information set forth on pages 2 and 5 in the Company's
definitive Proxy Statement filed pursuant to Regulation 14A and used in
connection with the Company's 1996 annual meeting of shareholders to be held on
April 24, 1996, except insofar as information with respect to executive
officers is presented in Part I, Item 1 hereof pursuant to General Instruction
G(3) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information in response to this item is incorporated herein by
reference to the information under the caption "Information about Management"
presented in the Company's definitive Proxy Statement filed pursuant to
Regulation 14A and used in connection with the Company's 1996 annual meeting of
shareholders to be held on April 24, 1996, excluding the Compensation Committee
Report on Executive Compensation and the Company's Performance Graph as set
forth in the Company's definitive Proxy Statement dated March 27, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information in response to this item is incorporated herein by
reference to the information under the caption "Security Ownership of the
Company's Common Shares by Certain Beneficial Owners and by Management"
presented in the Company's definitive Proxy Statement filed pursuant to
Regulation 14A and used in connection with the Company's 1996 annual meeting of
shareholders to be held on April 24, 1996, as set forth in the Company's
definitive Proxy Statement dated March 27, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information in response to this item is incorporated herein by
reference to the information under the captions "Indebtedness of Management"
and "Compensation Committee Interlocks and Insider Participation" presented in
the Company's definitive Proxy Statement filed pursuant to Regulation 14A and
used in connection with the Company's 1996 annual meeting of shareholders to be
held on April 24, 1996, excluding the Compensation Committee Report on
Executive Compensation and the Company's Performance Graph as set forth in the
Company's definitive Proxy Statement dated March 27, 1996.
III-1 11
12
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(A) Index to Financial Statements and Financial Statement Schedules
---------------------------------------------------------------
The 1995, 1994 and 1993 consolidated financial statements, and the
report of KPMG Peat Marwick LLP dated February 9, 1996, on the consolidated
balance sheet as of December 31, 1995 and the related consolidated statements
of income, shareholder's equity and cash flows for the year then ended,
appearing in the accompanying 1995 Annual Report to Shareholders, are
incorporated by reference in this Form 10-K Annual Report. With the exception
of the aforementioned information and the information incorporated in Parts I
and II, the 1995 Annual Report to Shareholders is not to be deemed filed as
part of this report. The following financial statement schedule should be read
in conjunction with the financial statements in such 1995 Annual Report to
Shareholders. All other financial statement schedules have been omitted because
they are not material or the required information is shown in the financial
statements or the notes thereto.
Reference
---------
Report of Independent Accountants IV-2
Report of Independent Accountants on IV-3
Financial Statement Schedule
Report of Independent Accountants on
Financial Statement Schedule IV-4
Financial statement schedule:
Valuation and Qualifying Accounts IV-5
(Schedule VIII)
(B) Form 8-K
--------
Filing on Form 8-K was made October 16, 1995 in regard to the change
in certifying accountants from Price Waterhouse LLP to KPMG Peat Marwick LLP.
(C) Exhibits
--------
The Exhibits to this Form 10-K Annual Report are listed on the
attached Exhibit Index appearing on pages E-1 to E-4.
IV-1 12
13
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Computer Task Group, Incorporated
In our opinion, the consolidated balance sheet and the related consolidated
statements of income, of cash flows and of changes in stockholders' equity as
of and for each of the two years in the period ended December 31, 1994
(appearing on pages 11 though 25 of the Computer Task Group, Incorporated
Annual Report to Shareholders which has been included in this Form 10-K Annual
Report) present fairly, in all material respects, the financial position,
results of operations and cash flows of Computer Task Group, Incorporated and
its subsidiaries as of and for each of the two years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of Computer Task Group, Incorporated for any period subsequent to
December 31, 1994.
PRICE WATERHOUSE LLP
Buffalo, New York
February 10, 1995
IV-2 13
14
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULE
----------------------------
To the Board of Directors and Stockholders of
Computer Task Group, Incorporated
Under date of February 9, 1996, we reported on the consolidated balance sheet
of Computer Task Group, Incorporated and subsidiaries as of December 31, 1995,
and the related consolidated statements of income, shareholders' equity, and
cash flows for the year then ended, as contained in the 1995 Annual Report to
Shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in the Annual Report on Form 10-K for the year
1995. In connection with our audit of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule, insofar as it relates to the year ended December 31, 1995,
as listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, insofar as it relates to the
year ended December 31, 1995, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Buffalo, New York
February 9, 1996
IV-3 14
15
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULE
----------------------------
To the Board of Directors of
Computer Task Group, Incorporated
Our audits of the consolidated financial statements referred to in our report
dated February 10, 1995 appearing on page IV-2 included in this Annual Report
on Form 10-K also included an audit of the Financial Statement Schedule for
1994 and 1993 listed in Item 14. (A) of this Form 10-K. In our opinion, this
Financial Statement Schedule for 1994 and 1993 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
Buffalo, New York
February 10, 1995
IV-4 15
16
COMPUTER TASK GROUP, INCORPORATED
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
Balance at Net Balance at
Description January 1 Change December 31
- ----------- ---------- ------ -----------
1995
Account deducted from assets
Allowance for Doubtful
Accounts $ 1,045 $ (183) (A) $ 862
Net Deferred Tax Assets
Valuation Allowance $ 1,087 $ (125) (B) $ 962
1994
Account deducted from assets
Allowance for Doubtful
Accounts $ 967 $ 78 (A) $ 1,045
Net Deferred Tax Assets
Valuation Allowance $ 1,471 $ (384) (C) $ 1,087
1993
Account deducted from assets
Allowance for Doubtful
Accounts $ 642 $ 325 (A) $ 967
Net Deferred Tax Assets
Valuation Allowance $ 737 $ 734 (D) $ 1,471
- ---------------
[FN]
(A) Includes additions charged to costs and expenses less accounts written off
and translation adjustments.
(B) Utilization of foreign net operating losses that were previously offset
completely by the valuation allowance.
(C) Includes benefit of unrealized capital loss carryforward that was realized
during the year.
(D) Includes additions charged to costs and expenses for net operating loss
carryforwards that are not expected to be realized.
IV-5 16
17
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 TASK GROUP, INCORPORATED
By /s/ Gale S. Fitzgerald
----------------------------
Gale S. Fitzgerald, Chairman of the
Board and chief executive officer
Dated: March 22, 1996
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.
Signature Title Date
- --------- ----- ----
(i) Principal Executive Officer: Chairman of the March 22, 1996
Board and chief
/s/ Gale S. Fitzgerald executive officer
-------------------------------
(Gale S. Fitzgerald)
(ii) Principal Accounting and Vice President, March 22, 1996
Financial Officer chief financial
officer
/s/ James R. Boldt
------------------------------
(James R. Boldt)
(iii) Directors
/s/ G. David Baer Director March 22, 1996
-------------------------------
(G. David Baer)
/s/ George B. Beitzel Director March 22, 1996
------------------------------
(George B. Beitzel)
/s/ Richard L. Crandall Director March 22, 1996
------------------------------
(Richard L. Crandall)
/s/ Gale S. Fitzgerald Director March 22, 1996
------------------------------
(Gale S. Fitzgerald)
/s/ Paul W. Joy Director March 22, 1996
------------------------------
(Paul W. Joy)
/s/ Randolph A. Marks Director March 22, 1996
------------------------------
(Randolph A. Marks)
/s/ Barbara Z. Shattuck Director March 22, 1996
------------------------------
(Barbara Z. Shattuck)
IV-6 17
18
EXHIBIT INDEX
--------------
Page or
Exhibit Description Reference
- ------- ----------- ---------
2. Plan of acquisition, reorganization, arrangement, *
liquidation or succession.
3. (a) Restated Certificate of Incorporation of Registrant. (1)
(b) Form of Certificate of Amendment of the Restated (2)
Certificate of Incorporation of Registrant, under
Section 805 of the New York Business Corporation Law.
(c) Certificate of Amendment of the Certificate of (1)
Incorporation of Registrant.
(d) Restated By-laws of Registrant. (1)
(e) Certificate of Amendment of Certificate of Incorporation (2)
of Registrant.
4. (a) Specimen Common Stock Certificate. (2)
(b) Rights Agreement dated as of January 15, 1989, and (2)
amendment dated June 28, 1989, between Registrant
and The First National Bank of Boston, as Rights Agent.
(c) Form of Rights Certificate. (2)
9. Voting Trust Agreement. *
10. (a) 1981 Stock Bonus Plan. (3)
(b) Stock Purchase Agreements, dated as of February 25, (4)
1981, between Registrant and each of Randolph A. Marks,
G. David Baer and David N. Campbell.
(c) Lease Agreement, dated as of September 1, 1978, between (2)
Registrant and Erie County Industrial Development Agency.
(d) Lease Agreement Amendment, dated as of February 1, 1980, (2)
between Registrant and Erie County Industrial Development
Agency.
- ----------------------------
* None or requirement not applicable.
(1) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992
and incorporated herein by reference.
(2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994
and incorporated herein by reference.
(3) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991,
and incorporated herein by reference.
E-1 18
19
EXHIBIT INDEX (Continued)
-------------
Page or
Exhibit Description Reference
- ------- ----------- ---------
10. (e) First Employee Stock Purchase Plan (Seventh Amendment (5)
and Restatement).
(f) Description of Disability Insurance and Health (6)
Arrangements for Executive Officers.
(g) Non-Compete Agreements, dated as of March 1, 1984, (2)
between Registrant and each of Randolph A. Marks,
David N. Campbell and John P. Courtney.
(h) Description of Executive Supplemental Benefit Plan dated (2)
March 3, 1984, as restated, as of November 30, 1994.
(i) Line of Credit Agreement, dated December 21, 1987, (1)
between Registrant and Manufacturers and Traders
Trust Company.
(j) Letter of Marine Midland Bank, N.A. dated May 25, 1988, (7)
amending Line of Credit Agreement, dated December 12,
1984, between Registrant and Marine Midland Bank, N.A.
(k) Non-Compete Agreement, dated as of June 6, 1988, (7)
between Registrant and G. David Baer.
(l) Line of Credit Agreement, dated March 3, 1988, between (7)
Registrant and Chemical Bank, as amended by letter of
Chemical Bank dated September 15, 1988.
(m) Promissory Note, dated July 10, 1991, between Registrant (3)
and Manufacturers and Traders Trust Company.
(n) 1991 Employee Stock Option Plan, as Amended. (8)
(o) 1991 Restricted Stock Plan. (5)
(p) 1995 Key Employee Compensation Plans. (9)
- --------------------------
(4) Filed as an Exhibit to the Registrant's Registration Statement No. 2- 71086 on Form S-7 filed on
February 27, 1981, and incorporated herein by reference.
(5) Filed as an Appendix to the Registrant's definitive Proxy Statement dated March 20, 1991, and incorporated
herein by reference.
(6) Filed as an Exhibit to Amendment No. 1 to Registration Statement No. 2-71086 on Form S-7 filed on
March 24, 1981, and incorporated herein by reference.
(7) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993,
and incorporated herein by reference.
E-2 19
20
EXHIBIT INDEX (Continued)
-------------
Page or
Exhibit Description Reference
- ------- ----------- ----------
10. (q) Management Stock Purchase Plan. (10)
(r) Executive Compensation Plans and Arrangements.
(s) Amendment and Restatement, dated September 30, 1993, (7)
of Promissory Note, dated July 10, 1991, between
Registrant and Manufacturers and Traders Trust Company.
(t) Promissory Note, dated September 30, 1993, between (7)
Registrant and Manufacturers and Traders Trust Company.
(u) Agreement, dated February 25, 1994, of Stock Conversion (7)
and Repurchase between Registrant and International
Business Machines Corporation.
(v) Nondisclosure and Nonsolicitation Agreement, dated (7)
July 1, 1993, between Registrant and Gale S. Fitzgerald.
(w) Stock Purchase Agreement between Registrant and (11)
Honeywell, Inc. dated June 13, 1994.
(x) Terms of Separation Package dated September 23, 1994, (2)
between Registrant and David N. Campbell.
(y) Stock Employee Compensation Trust Agreement, dated (2)
May 3, 1994, between Registrant and Thomas R. Beecher,
Jr., as trustee.
(z) Promissory Notes, dated May 3, 1994, and December 7, 1994, (2)
between Registrant and Thomas R. Beecher, Jr., as Trustee of
the Computer Task Group, Incorporated Stock Employee
Compensation Trust.
- --------------------------
(8) Filed as an Appendix to the Registrant's definitive Proxy Statement dated March 27, 1995, and incorporated
herein by reference.
(9) Included in the Registrant's definitive Proxy Statement dated March 27, 1996 on page 7 under the caption
entitled "Annual Cash Incentive Compensation," and incorporated herein by reference.
(10) Filed as an Appendix to the Registrant's definitive Proxy Statement dated March 27, 1992, and incorporated
herein by reference.
(11) Filed as Exhibit 2 to the Registrant's Form 8-K Report dated July 29, 1994, and incorporated herein by
reference.
E-3 20
21
EXHIBIT INDEX (Continued)
-------------
Page or
Exhibit Description Reference
- ------- ----------- ---------
10. (aa) Stock Purchase Agreement, dated December 7, 1994, between (2)
Registrant and Thomas R. Beecher, Jr., as Trustee of the Computer
Task Group, Incorporated Stock Employee Compensation Trust, and
International Business Machines Corporation.
(bb) Severance Compensation Agreements dated October 31, 1994, between (2)
Registrant and Gale S. Fitzgerald and G. David Baer.
(cc) CTG Non-Qualified Key Employee Deferred Compensation Plan
11. Statement re: computation of per share earnings.
12. Statement re: computation of ratios. *
13. Annual Report to Shareholders.
18. Letter re: change in accounting principles. *
21. Subsidiaries of the Registrant.
22. Published report regarding matters submitted to a vote *
of security holders.
23. Consents of experts and counsel.
24. Power of Attorney. *
27. Financial Data Schedule. *
- --------------------------
E-4 21