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Computer Task Group Inc. Reports Operating Results (10-K)

February 24, 2012 | About:
The Daily Reckoning

10qk

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Computer Task Group Inc. (CTGX) filed Annual Report for the period ended 2011-12-31.

Comp Task has a market cap of $275.8 million; its shares were traded at around $15 with a P/E ratio of 22 and P/S ratio of 0.8. Comp Task had an annual average earning growth of 35.6% over the past 10 years.
This is the annual revenues and earnings per share of CTGX over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of CTGX.


Highlight of Business Operations:

In 2011, the Company recorded revenue of $396.3 million, an increase of 19.6% as compared with revenue of $331.4 million recorded in 2010. Revenue from the Company’s North American operations totaled $329.3 million in 2011, an increase of 21.6% when compared with revenue of $270.7 million in 2010. Revenue from the Company’s European operations totaled $67.0 million in 2011, an increase of 10.3% when compared with 2010 revenue of $60.7 million. The European revenue represented 16.9% and 18.3% of 2011 and 2010 consolidated revenue, respectively. The Company’s revenue includes reimbursable expenses billed to customers. These expenses totaled $12.7 million and $9.1 million in 2011 and 2010, respectively.

IBM is CTG’s largest customer. CTG provides services to various IBM divisions in many locations. During the 2011 fourth quarter, the NTS Agreement was renewed for three years until December 31, 2014. As part of the NTS Agreement, the Company also provides its services as a predominant supplier to IBM’s Integrated Technology Services unit and as the sole provider to the Systems and Technology Group business unit. These agreements accounted for approximately 94% of all of the services provided to IBM by the Company in 2011. In 2011, 2010, and 2009, IBM accounted for $116.5 million or 29.4%, $102.3 million or 30.9%, and $71.2 million or 25.8% of the Company’s consolidated revenue, respectively. We expect to continue to derive a significant portion of our revenue from IBM in future years. However, a significant decline or the loss of the revenue from IBM would have a significant negative effect on our operating results. The Company’s accounts receivable from IBM at December 31, 2011 and 2010 amounted to $12.8 million and $13.1 million, respectively. No other customer accounted for more than 10% of the Company’s revenue in 2011, 2010 or 2009.

In 2010, the Company recorded revenue of $331.4 million, an increase of 20.3% as compared with revenue of $275.6 million recorded in 2009. Revenue from the Company’s North American operations totaled $270.7 million in 2010, an increase of 27.2% when compared with revenue of $212.8 million in 2009. Revenue from the Company’s European operations totaled $60.7 million in 2010, a decrease of 3.2% when compared with 2009 revenue of $62.8 million. The European revenue represented 18.3% and 22.8% of 2010 and 2009 consolidated revenue, respectively. The Company’s revenue includes reimbursable expenses billed to customers. These expenses totaled $9.1 million and $6.1 million in 2010 and 2009, respectively.

IBM was CTG’s largest customer in 2010 and 2009. During the second quarter of 2008, the Company and IBM agreed to extend the current NTS Agreement contract until July 1, 2011. During the 2011 fourth quarter, the NTS agreement was further renewed for an additional three years until December 31, 2014. As part of the NTS Agreement, the Company also provides its services as a predominant supplier to IBM’s Integrated Technology Services unit and as the sole provider to the Systems and Technology Group business unit. These agreements accounted for approximately 96% of all of the services provided to IBM by the Company in 2010. In 2010, 2009, and 2008, IBM accounted for $102.3 million or 30.9%, $71.2 million or 25.8%, and $108.3 million or 30.6% of the Company’s consolidated revenue, respectively. The Company continued to derive a significant portion of our revenue from IBM in 2011. However, a significant decline or the loss of the revenue from IBM in future years would have a significant negative effect on our operating results. The Company’s accounts receivable from IBM at December 31, 2010 and 2009 totaled $13.1 million and $9.7 million, respectively. No other customer accounted for more than 10% of the Company’s revenue in 2010, 2009 or 2008.

deferred compensation totaled $1.9 million. In 2010 and 2009, net income was $8.4 million and $5.9 million, respectively, while the corresponding non-cash adjustments netted to $2.6 million and $1.8 million, respectively. Accounts receivable balances increased $10.6 million in 2011 as compared with 2010, increased $13.2 million in 2010 as compared with 2009, and decreased $3.8 million in 2009 as compared with 2008. The increase in the accounts receivable balance in 2011 resulted from an increase in revenue in the 2011 fourth quarter of approximately 16% when compared with the 2010 fourth quarter. Additionally, days sales outstanding (DSO) at December 31, 2011 was 62 days, whereas the DSO at December 31, 2010 was 60 days. DSO is calculated by dividing accounts receivable obtained from the consolidated balance sheet by average daily revenue for the fourth quarter of the respective year. The increase in the accounts receivable balance in 2010 resulted from an increase in revenue in the 2010 fourth quarter of approximately 29% when compared with the 2009 fourth quarter. The DSO of 60 days at December 31, 2010 was consistent with the DSO at December 31, 2009. The decline in the accounts receivable balance in 2009 resulted from a decrease in revenue in the 2009 fourth quarter of approximately 19% when compared with the 2008 fourth quarter, offset by an increase in DSO of three days from 57 days at December 31, 2008.

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