Computer Task Group Inc (CTG) 2003 Q4 法說會逐字稿

At this time, I would like to welcome everyone to the Computer Test Group fourth-quarter 2003 earnings release conference call. (OPERATOR INSTRUCTIONS). I would now like to turn the conference over to James Boldt, Chairman and CEO. Please go ahead, sir.

Good morning, everyone. This is Jim Boldt. I want to thank you for joining us this morning for our fourth quarter 2003 earnings conference call. Joining me is our CFO, Greg Dearlove. As for the format of the call this morning, Greg is going to begin with a review of our financial results. After his review, I will talk about the trends we saw in the fourth quarter and what we anticipate for the first quarter of 2004. Then we will open the call for questions. Greg, if you would start us out, please.

Before I begin, I want to mention that statements made in the course of this conference call that state the Company's or management's intentions, hopes, beliefs, expectations or predictions in the future are forward-looking statements. It's important to note that the Company's actual results could differ materially from those projected. Additional information concerning factors that could cause actual results to differ from those in the forward-looking statements is contained in our press releases and from time to time in the Company's SEC filings.

For the fourth quarter of 2003, CTG's revenues were $63.3 million. Net income was 1.8 million, and net income per diluted share was 11 cents. The fourth-quarter sequential increase in revenue was in line with our expectations and reflected three more billing days, offset somewhat by the impact of holiday time. Our net income and diluted earnings per share reflected the favorable impact of a tax ruling in Europe that resulted in a tax refund from prior years, and which impacted net income by $1.2 million, and diluted earnings per share by 7 cents. Excluding the favorable impact of this ruling, CTG would have had net income and diluted earnings per share of approximately $600,000 and 4 cents in the fourth quarter. Net income and diluted earnings per share, excluding the favorable tax ruling, came in at the high end of our guidance due to our continued attention to petroleum costs in all aspects of our business.

Our direct profit percentage, at 27.1 percent in the fourth quarter, was approximately the same as last year's fourth quarter. However, our operating profits increased to 1.3 percent during the current quarter, up from 0.6 percent in the comparable period last year. Excluding the impact of our accounting change in 2002, this is the tenth consecutive quarter that the Company has reported profitability.

SG&A decreased over $465,000 in the fourth quarter versus the same quarter last year and approximated 25.8 percent of revenue, an improvement of almost 1 percentage point from last year. Revenues from IBM were $13.7 million in the fourth quarter of 2003, up from or 13 million in the fourth quarter of 2002. Quarterly revenues from our operations in Europe were $11 million in 2003 as compared to $9.1 million in last year's fourth quarter.

On the balance sheet, our days sales outstanding in the receivables decreased to 63 days from 66 days in the third quarter of 2003 and from 65 days in the fourth quarter of 2002. Our long-term debt was completely paid off at year-end, dropping from $6.9 million as of September 26, 2003 and $8.5 million from a year ago. This is the first time that CTG has been out of debt since the first quarter of 1999, when we acquired Elumen Solutions. Our cash flows reflect a decrease in cash during the quarter of $395,000, after making $180,000 of capital acquisitions and recording depreciation expense of $764,000. Also, total employment in the fourth quarter continued at 2700, of which approximately 85 percent were billable employees. Jim, that concludes the summary of the Company's financial results for the fourth quarter of 2003.

In general, our fourth quarter of the year was pretty much in line with what we had expected. We experienced the normal seasonal softness in revenue that we would expect at the end of any year due to the holidays. In the fourth quarter, we again saw strong demand from our strategic staffing business, and continued to add recruiters to this group. We'd added about 70 percent to the number of strategic staffing recruiters since we started to see an increase from staffing demands in the third quarter of 2002. We believe that we now have enough recruiters in that organization to meet current demand.

As to our Solutions business, as we mentioned on last quarter's call, we think that we're seeing the very first signs of a recovery in that business. It's not, as of yet, widespread. But more customers are talking about starting projects than have in sometime. We are encouraged that others in the industry have reported the same trend in their business. We said on the last call we think that the increase in the Solutions business will happen like the increase that we saw in the staffing business, slowly over time versus a dramatic resurgence.

Our Health-care group had another good quarter, and we continue to see a lot of demand for development and integration projects going forward. We recently have added recruiters in our health-care vertical, as well.

Our Life Sciences vertical is performing extremely well. Revenues from our Life Sciences group grew by double digits in the second half of 2003 versus the first half of the year. As we mentioned in our press release, we are working on 21 CFR Part 11 compliance work at several major pharmaceutical companies. Revenues from our retail and financial services verticals were stable in the last quarter.

As for the business in Europe, business in Belgium continues to pick up. Luxembourg and the UK remain stable. And the Netherlands is the only remaining country in Europe where we have an excess bench issue. As we reported in the third quarter call, our plan was to lay off some additional staff there in the fourth quarter. The severance associated with the additional layoffs in the Netherlands in the fourth quarter of the year reduced earnings per share by approximately 1 cent. As Greg mentioned, we are out of debt at the end of 2003, representing the first time in nearly five years that we have been debt free. Like any company that's going from a debt to cash position, we expect that we will be in and out of debt over the next year depending on our cash flows and the timing of our biweekly payrolls.

As to the first quarter of 2004, we are forecasting revenues in the 62.5 to 65.5 million range. Given the revenue forecast, we expect earnings to be in the 2 to 4 cent per share range in the first quarter of the year. As to the future, we continue to remain guardedly optimistic. Staffing demand has been increasing for six quarters now. We are seeing an increased interest in AMOs, and the very first signs of a recovery in development and integration work.

With that, I would like to open the call to questions if there are any. Operator, would you please manage our question-and-answer period?

(OPERATOR INSTRUCTIONS). At this time, there no questions.

Well, with no questions this morning, you certainly made by job easy. I would like to thank you though for your continued support and for joining us this morning. Have a great day.

This concludes today's conference call. You may now disconnect.