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 six 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 1993, accounted for approximately 44% of its consolidated revenues in 1998. The Company believes that the range of services and solutions that it offers, combined with its worldwide network of 55 offices and subsidiary organizations, provides it with significant competitive advantages in the information technology marketplace.
The Company's clients primarily are Fortune 500 companies with significant information technology budgets and recurring staffing or software development needs. In 1998, the Company provided information technology services to 768 clients. During 1998, the Company's largest client, AT&T, accounted for 8.8% of the Company's consolidated revenues. The Company's next largest client, Prudential, accounted for 8.3% 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) e-business development services, (4) enterprise network management, (5) outsourcing, and (6) 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 4,000 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, and century date windowing, while simultaneously performing other systems upgrades such as language conversions and platform migrations. In addition, CHC's Signature 2000(TM) provides the Company a fully integrated testing solution across all phases of the testing life cycle, including Testing Processes, Software Products and experienced management and technical resources. The Company also provides a workstation solution for the Year 2000, including Asset Management, assessment and correction of spreadsheets and databases, correction to the workstation clocks, and third-party vendor compliancy assessment.
To manage an organization's Year 2000 program, the Company provides a fully integrated "Program Management Office" (PMO) approach. The PMO provides a complete set of processes, templates and recommended software products to support the reporting, risk management, contingency planning and program management across the enterprise.
(3) E-business Development Services: The Company has the capability to develop and implement open computer e-business strategy, architecture, and engineering, design, implementation and operational services. Such services include project management, selection of viable systems platforms, creation of migration plans, development of customized software applications, and systems and database integration.
(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) Outsourcing: Spurred by global competition and rapid technological change, large 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.
(6) Knowledge Transfer: The Company's Education Division offers custom-designed and/or existing courseware to enhance the competencies of client staff in specific technologies, languages, methodologies and applications. The prevailing focus of the Company is to assist clients through instructor-led, on-site training and consulting and multimedia curricula in the transitioning IT organization of Fortune 1000 corporations. To support these changing technologies, the Company has developed extensive curriculum offerings in Operating Systems, Mainframe Technology, Client/Server and Open Systems, Object Orientation, Application Development, Information Engineering, Internet/Intranet, and ERP packages.
Personnel
As of December 3l, 1998, the Company had a staff of 4,834, of whom more than 4,000 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 Five" 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.
Item 2. Properties
The Company's Corporate and Financial Headquarters, its IT Services Division, its Education Division, as well as its Eastern Regional Office, comprising approximately 63,000 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 $1,101,000. As of December 3l, l998, the Company also maintained facilities in Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Washington, Washington D.C. and Wisconsin, as well as international operations located in London and Toronto, with an aggregate of approximately 211,600 square feet. The leases for these facilities are at a current annual aggregate rental of approximately $4,035,000. These leases expire at various times with no lease commitment longer than September 30, 2006.
Item 3.
Item 3. Legal Proceedings There are no material pending legal proceedings.
Item 4.
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.
PART II
Item 5.
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, 1998, which material is incorporated by reference in this Form 10-K Annual Report.
Item 6.
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, 1998, which material is incorporated by reference in this Form 10-K Annual Report.
Item 7.
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, 1998, which material is incorporated by reference in this Form 10-K Annual Report.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
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, 1998, which material is incorporated by reference in this Form 10-K Annual Report.
Item 8.
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, 1998, are incorporated herein by reference. Such information is listed in Item 14(a)1 of this Form 10-K Annual Report.
Item 9.
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.
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 1999 Annual Meeting of Shareholders which is expected to be filed with the Securities and Exchange Commission on or before April 12, 1999 (the "1999 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.
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 1999 Proxy Statement.
Item 12.
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 1999 Proxy Statement.
Item 13.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. The following consolidated financial statements, appearing in the Company's 1998 Annual Report to Shareholders, are incorporated herein by reference.
- - - Consolidated balance sheets as of December 3l, 1998 and 1997
- - - Consolidated statements of income for each of the three years in the period ended December 31, 1998
- - - Consolidated statement of shareholders' equity for each of the three years in the period ended December 31, 1998
- - - Consolidated statements of cash flows for each of the three years in the period ended December 31, 1998
- - - 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, 1998, 1997 and 1996.
- - - 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 have been filed during the quarter for which this report is filed.
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 31, 1999 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 31, 1999 By: /s/ John J. Cassese ------------------- John J. Cassese, Chairman of the Board and President (Principal Executive Officer) and Director
Date: March 31, 1999 By: /s/ William J. Murphy ---------------------- William J. Murphy, Executive Vice President and CFO (Principal Financial Officer)
Date: March 31, 1999 By: /s/ Michael J. Shea ---------------------- Michael J. Shea Vice President and Controller (Principal Accounting Officer)
Date: March 31, 1999 By: /s/ Thomas J. Berry -------------------- Thomas J. Berry, Director
Date: March 31, 1999 By: /s/ William M. Duncan -------------------- William M. Duncan, Director
Date: March 31, 1999 By: /s/ Rocco J. Marano ------------------- Rocco J. Marano, Director
EXHIBIT INDEX
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors and Shareholders Computer Horizons Corporation
In connection with our audit of the consolidated financial statements of Computer Horizons Corp. and Subsidiaries referred to in our report dated February 15, 1999, which is inlcuded in the 1998 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, 1998, 1997 and 1996. In our opinion, this schedule presents fairly in all material respects, the information required to be set forth herein.
GRANT THORNTON LLP
Parsippany, New Jersey February 15, 1999
Computer Horizons Corp. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1998, 1997 and 1996
Notes - - -----
(1) Uncollectible accounts written off, net of recoveries.
Computer Horizons Corp. and Subsidiaries
SELECTED FINANCIAL DATA
Year ended December 31,
Computer Horizons Corp. and Subsidiaries
SELECTED FINANCIAL DATA (continued)
Year ended December 31,
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors and Shareholders Computer Horizons Corp.
In connection with our audit of the consolidated financial statements of Computer Horizons Corp. and Subidiaries referred to in our report dated February 15, 1999, which is included in the 1998 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, 1998, 1997 and 1996. In our opinion, this schedule presents fairly in all material respects, the information required to be set forth therin.
/s/GRANT THORNTON LLP - - --------------------- GRANT THORNTON LLP
Parsippany, New Jersey February 15, 1999