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

October 26, 2012 | About:

10qk

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Computer Task Group Inc. (CTGX) filed Quarterly Report for the period ended 2012-09-28.

Computer Task Group, Inc. has a market cap of $312.4 million; its shares were traded at around $18.29 with a P/E ratio of 21.2 and P/S ratio of 0.8. Computer Task Group, Inc. had an annual average earning growth of 12.4% over the past 10 years.

Highlight of Business Operations:

There were 63 billable days in both the 2012 and 2011 third quarters. Reimbursable expenses billed to customers and included in revenue totaled $3.3 million and $3.1 million in the 2012 and 2011 third quarters, respectively.

The revenue increase in North America in the 2012 third quarter and first three quarters as compared with the corresponding 2011 period was due to significant demand for the Companys IT solutions services. IT solutions revenue increased 13.1% and 20.6% in the 2012 third quarter and year-to-date period, respectively, as compared with the corresponding 2011 periods. The IT solutions revenue increase was primarily driven by an increase in electronic medical records work for providers in the Companys healthcare vertical market. IT staffing revenue in the 2012 third quarter and year-to-date period was consistent with the revenue recorded in the corresponding 2011 period. The Companys headcount was approximately 3,800 employees at September 28, 2012, which was a 3% increase from approximately 3,700 employees at both December 31, 2011 and September 30, 2011.

In the 2012 third quarter, IBM was the Companys largest customer, accounting for $28.3 million or 26.6% of consolidated revenue as compared with $30.8 million or 30.4% of revenue in the comparable 2011 period. In the first three quarters of 2012, IBM accounted for $85.6 million or 27.1% of consolidated revenue, compared with $89.0 million or 30.2% in the comparable 2011 period. During the 2011 fourth quarter, the National Technical Services Agreement (NTS Agreement) with IBM was renewed for three years to December 31, 2014. As part of the NTS Agreement, the Company provides its services as a predominant supplier to IBMs Integrated Technology Services unit and as sole provider to the Systems and Technology Group business unit. The Companys accounts receivable from IBM at September 28, 2012 and September 30, 2011 totaled $11.6 million and $15.4 million, respectively. No other customer accounted for more than 10% of the Companys revenue in the third quarter or first three quarters of 2012 or 2011.

Operating income was 5.9% of revenue in the 2012 third quarter as compared with 4.5% in the 2011 third quarter, and 5.7% of revenue in the first three quarters of 2012 as compared with 4.7% in the corresponding 2011 period. The increase in operating income as a percentage of revenue in the 2012 third quarter and year-to-date period as compared with the corresponding 2011 periods is primarily due the favorable change in business mix from the prior periods. Operating income from North American operations was $16.1 million and $12.0 million in the first three quarters of 2012 and 2011, respectively. European operations recorded operating income of $2.0 million and $1.9 million, respectively, in the corresponding 2012 and 2011 periods.

Net income for the 2012 third quarter was 3.6% of revenue or $0.23 per diluted share, compared with net income of 3.0% of revenue or $0.18 per diluted share in the 2011 third quarter. Net income for the first three quarters of 2012 was 3.6% of revenue or $0.67 per diluted share, compared with net income of 2.9% of revenue or $0.52 per diluted share in the corresponding 2011 period. Net income in the 2012 year-to-date period included approximately $0.025 per share from the life insurance proceeds mentioned above. Diluted earnings per share was calculated using 16.8 million and 16.7 million weighted-average equivalent shares outstanding for the quarters and year-to-date periods ended September 28, 2012 and September 30, 2011, respectively.

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