UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 16, 2007
COMPUTER HORIZONS CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 0-7282 13-2638902
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
49 Old Bloomfield Avenue, Mountain Lakes, NJ 07046-1495
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 299-4000
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported, on October 18, 2006, Computer Horizons Corp. (the
"Company") entered into an asset purchase agreement (the "Chimes Asset Purchase
Agreement") by and among Axium International, Inc., a Delaware corporation,
Diversity MSP, Inc., a California corporation ("Diversity MSP"), Chimes, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company (now known as
Chimes, LLC; a Delaware limited liability company) and the Company. Pursuant to
the Chimes Asset Purchase Agreement, on February 16, 2007, the Company sold to
Diversity MSP substantially all of the assets of Chimes, LLC, excluding cash and
marketable securities, for a purchase price of $80,000,000 in cash (the "Chimes
Asset Sale").
As previously reported, on November 7, 2006, the Company entered into an
asset purchase agreement (the "Commercial Services Asset Purchase Agreement") by
and among TEKsystems, Inc., a Maryland corporation ("TEKsystems"), TEKsystems
EF&I Solutions, LLC, a Maryland limited liability company, Allegis Group Canada
Corporation, a Nova Scotia unlimited liability corporation, the Company, GBS
Holdings Private Limited, a corporation organized under the laws of Mauritius,
CHC Healthcare Solutions, LLC, a Delaware limited liability company, and Allegis
Group, Inc., a Maryland corporation. Pursuant to the Commercial Services Asset
Purchase Agreement, on February 16, 2007, the Company sold to TEKsystems
substantially all of the assets of its Commercial Services Business (as defined
in the Commercial Services Asset Purchase Agreement), for a purchase price of
$57,000,000 in cash subject to a potential post-closing working capital
adjustment (the "Commercial Services Asset Sale").
The Commercial Services Asset Sale, together with the Chimes Asset Sale
(collectively, the "Asset Sales"), constitute a sale of substantially all the
assets of the Company.
A copy of our February 16, 2007 press release announcing the Asset Sales
is attached hereto as Exhibit 99.1.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
FORWARD-LOOKING STATEMENTS
This current report on Form 8-K contains forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. In some cases, forward-looking statements can be identified
by words such as "believe," "expect," "anticipate," "plan," "potential,"
"continue" or similar expressions. Forward-looking statements also include the
assumptions underlying or relating to any of the foregoing statements. Such
forward-looking statements are based upon current expectations and beliefs and
are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements including, but not limited to, risks associated with unforeseen
technical difficulties, the ability to meet customer requirements, market
acceptance of service offerings, changes in technology and standards, the
ability to complete cost reduction initiatives, dependencies on certain
technologies, delays, market acceptance and competition, as well as other risks
described from time to time in the Company's filings with the Securities and
Exchange Commission, press releases and other communications. All
forward-looking statements included in this current report on Form 8-K are based
on information available to the Company on the date hereof. The Company
2
undertakes no obligation (and expressly disclaims any such obligation) to update
forward-looking statements made in this current report on Form 8-K to reflect
events or circumstances after the date of this current report on Form 8-K or to
update reasons why actual results would differ from those anticipated in such
forward-looking statements.
(b) PRO FORMA FINANCIAL INFORMATION:
The unaudited pro forma consolidated financial information of the Company
and Chimes that follows gives effect to the consummation of the proposed Asset
Sales. The historical information was derived from our unaudited consolidated
balance sheet as of September 30, 2006 and 2005 and December 31, 2005, 2004 and
2003, our unaudited consolidated statement of operations for the nine months
ended September 30, 2006 and 2005 and for the three years ended December 31,
2005, 2004 and 2003.
The unaudited pro forma consolidated financial statements include specific
assumptions and adjustments related to the Asset Sales. The pro forma
adjustments have been made to illustrate the anticipated financial effect of the
Asset Sales. The pro forma adjustments are described in the notes accompanying
the pro forma consolidated financial statements and should be read in
conjunction with our quarterly report on Form 10Q for the period ended September
30, 2006 and our annual report on Form 10K for the year ended December 31, 2005.
The unaudited pro forma condensed combined financial information is for
informational purposes only. The pro forma information is not necessarily
indicative of what the Company's financial position or results of operations
actually would have been had the Asset Sales been completed as of the date
presented. In addition, the unaudited pro forma condensed combined financial
information does not purport to project the Company's future financial position
or future results of operations.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable in the circumstances. The
pro forma condensed consolidated balance sheet of the Company should be read in
conjunction with the notes thereto.
3
CHIMES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2006
-------------------------------------------------------------------------
Chimes Pro Company
Company Sale of Forma Pro Forma
(dollars in thousands) Historical(1) Chimes(2) Adjustments Note Consolidated
- -------------------------------------------------------- ------------- ----------- ------------ ------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 48,185 $ (16,445) $ 81,433 {a}{b} $ 113,173
Cash in escrow ......................................... 1,000 -- -- 1,000
Accounts receivable, net ............................... 42,560 (5,957) -- 36,603
Refundable tax credit .................................. 7,714 (41) -- 7,673
Other Receivables ...................................... 429 -- -- 429
Prepaid expenses and other ............................. 2,982 (594) -- 2,388
--------- --------- --------- ---------
TOTAL CURRENT ASSETS ................................... 102,870 (23,037) 81,433 161,266
--------- --------- --------- ---------
PROPERTY AND EQUIPMENT ................................. 44,275 (7,498) -- 36,777
Less accumulated depreciation .......................... (41,178) 6,598 -- (34,580)
--------- --------- --------- ---------
TOTAL PROPERTY AND EQUIPMENT, NET ...................... 3,097 (900) -- 2,197
--------- --------- --------- ---------
OTHER ASSETS--NET:
Deferred income taxes .................................. 1,637 85 (85) {c} 1,637
Other .................................................. 2,685 (105) -- 2,580
--------- --------- --------- ---------
TOTAL OTHER ASSETS ..................................... 4,322 (20) (85) 4,217
--------- --------- --------- ---------
TOTAL ASSETS ........................................... $ 110,289 $ (23,957) $ 81,348 $ 167,680
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................... $ 18,002 $ (11,980) $ -- 6,022
Accrued payroll, payroll taxes and benefits ............ 9,145 (1,788) -- 7,357
Income taxes payable ................................... 1,150 -- 2,300 {d} 3,450
Restructuring reserve .................................. 146 (67) -- 79
Deferred income taxes .................................. 1,636 -- -- 1,636
Other accrued expenses ................................. 4,569 (1,094) -- 3,475
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES .............................. 34,648 (14,929) 2,300 22,019
--------- --------- --------- ---------
OTHER LIABILITIES:
Deferred compensation .................................. 1,734 -- -- 1,734
Change of control payable .............................. 2,330 -- -- 2,330
Other .................................................. -- (14) -- (14)
--------- --------- --------- ---------
TOTAL LIABILITIES ...................................... 38,712 (14,943) 2,300 26,069
--------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par; authorized and
unissued 200,000 shares, including
50,000 Series A ..................................... --
4
September 30, 2006
-------------------------------------------------------------------------
Chimes Pro Company
Company Sale of Forma Pro Forma
(dollars in thousands) Historical(1) Chimes(2) Adjustments Note Consolidated
- -------------------------------------------------------- ------------- ----------- ------------ ------ ------------
Common stock, $.10 par; authorized
100,000,000 shares; issued
33,158,105 shares at September 30, 2006
and September 30, 2005, December 31,
2005, 33,153,805 December 31, 2004 and
33,153,107 December 31, 2003 ........................ 3,315 (23) -- 3,292
Additional paid in capital ............................. 146,506 (18,023) -- 128,483
Accumulated other comprehensive loss ................... (179) 21 -- (158)
Retained earnings ...................................... (77,134) 9,011 79,048 {d} 10,925
--------- --------- --------- ---------
72,508 (9,014) 79,048 142,542
Less shares held in treasury, at cost;
134,948 and 1,118,014 shares at
September 30, 2006 .................................. (931) -- -- (931)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY ............................. 71,577 (9,014) 79,048 141,611
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $ 110,289 $ (23,957) $ 81,348 $ 167,680
========= ========= ========= =========
- -------------------
(1) As reported in Computer Horizons Corp. unaudited Quarterly Report on Form 10-Q for the nine months ended September 30, 2006.
(2) Derived from Computer Horizons unaudited financial information as of September 30, 2006.
5
CHIMES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30, 2006
------------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- -------------------------------------------------------- ------------- ------------- ------------- --------------
REVENUES:
Commercial ............................................. $ 136,124 $ -- $ -- $ 136,124
Chimes ................................................. 23,474 (23,474) -- --
------------ ------------ ------------ ------------
TOTAL REVENUES ......................................... 159,598 (23,474) -- 136,125
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ........................................... 107,689 (568) -- 107,122
Selling, general & administrative ...................... 51,758 (20,952) 2,116 32,922
Special charges/(credits) .............................. 334 -- -- 334
Gain on Sale ........................................... (394) -- -- (394)
------------ ------------ ------------ ------------
TOTAL COSTS ............................................ 159,387 (21,520) 2,116 139,984
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS .......................... 211 (1,954) (2,116) (3,859)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Interest income ........................................ 1,308 (1,047) -- 261
Interest expense ....................................... (1) -- -- (1)
Other .................................................. -- (2) -- (2)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ........................... 1,307 (1,049) -- 258
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES ...................... 1,518 (3,003) (2,116) (3,601)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ................................................ (150) (1,270) 1,345 (75)
Deferred ............................................... -- 85 (85) --
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ........................... (150) (1,185) 1,260 (75)
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS ........... 1,368 (4,188) (856) (3,676)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS ............. (13,232) -- -- (13,232)
LOSS ON SALE FROM DISCONTINUED OPERATIONS .............. (4,779) -- -- (4,779)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS NET
OF TAX .............................................. (18,011) -- -- (18,011)
------------ ------------ ------------ ------------
NET LOSS ............................................... $ (16,643) $ (4,188) $ (856) $ (21,687)
============ ============ ============ ============
EARNINGS/(LOSS) PER SHARE FROM CONTINUING
OPERATIONS--BASIC ................................... $ 0.04 $ (0.11)
========== ==========
EARNINGS/(LOSS) PER SHARE FROM DISCONTINUED
OPERATIONS--BASIC ................................... $ (0.56) $ (0.56)
========== ==========
LOSS PER SHARE--BASIC .................................. $ (0.51) $ (0.67)
========== ==========
6
Nine Months Ended
September 30, 2006
------------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- -------------------------------------------------------- ------------- ------------- ------------- --------------
EARNINGS/(LOSS) PER SHARE FROM CONTINUING
OPERATIONS--DILUTED ................................. $ 0.04 $ (0.11)
========== ==========
EARNINGS/(LOSS) PER SHARE FROM DISCONTINUED
OPERATIONS--DILUTED ................................. $ (0.55) $ (0.55)
========== ==========
LOSS PER SHARE--DILUTED ................................ $ (0.51) $ (0.66)
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC .................................. 32,411,474 32,411,474
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--DILUTED ................................ 32,619,000 32,619,000
========== ==========
- -------------------
(1) As reported in Computer Horizons unaudited quarterly report on Form 10-Q for the nine months ended September 30, 2006 with
Federal segment in Discontinued Operations.
(2) Derived from Computer Horizons unaudited financial information for the nine months ended September 30, 2006.
7
CHIMES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30, 2005
-----------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- -------------------------------------------------------- ------------- ------------- ------------- --------------
REVENUES:
Commercial ............................................. $ 148,504 $ -- $ -- $ 148,504
Chimes ................................................. 20,747 (20,747) -- --
------------ ------------ ------------ ------------
TOTAL REVENUES ......................................... 169,251 (20,747) -- 148,504
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ........................................... 120,908 (697) -- 120,211
Selling, general & administrative ...................... 52,797 (17,795) 1,960{e} 36,962
Amortization of intangibles ............................ 78 -- -- 78
Special charges/(credits) .............................. 716 (1) -- 715
Gain on Sale ........................................... 4,482 -- -- 4,482
------------ ------------ ------------ ------------
TOTAL COSTS ............................................ 178,981 (18,493) 1,960 162,448
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS .......................... (9,730) (2,254) (1,960) (13,944)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Interest income ........................................ 541 (424) -- 117
Interest expense ....................................... (5) -- -- (5)
Other .................................................. -- 2 -- 2
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ........................... 536 (422) -- 114
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ................................. (9,194) (2,676) (1,960) (13,830)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ................................................ 259 13 -- 272
Deferred ............................................... (100) -- -- (100)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ........................... 159 13 -- 172
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS ........... $ (9,035) $ (2,663) $ (1,960) $ (13,658)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS
NET OF TAX .......................................... 2,071 -- -- 2,071
------------ ------------ ------------ ------------
NET LOSS ............................................... $ (6,964) $ (2,663) $ (1,960) $ (11,587)
============ ============ ============ ============
LOSS PER SHARE FROM CONTINUING
OPERATIONS--BASIC AND DILUTED ....................... $ (0.29) (0.42)
------------ ------------
EARNINGS PER SHARE FROM DISCONTINUED
OPERATIONS--BASIC AND DILUTED ....................... 0.07 0.06
------------ ------------
LOSS PER SHARE BASIC AND DILUTED ....................... (0.22) (0.36)
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC AND DILUTED ...................... 31,280,000 31,280,000
------------ ------------
- -------------------
(1) As reported in Computer Horizons unaudited quarterly report on Form 10-Q for the nine months ended September 30, 2005 with
Federal segment in Discontinued Operations.
(2) Derived from Computer Horizons unaudited financial information for the nine months ended September 30, 2005.
8
CHIMES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 31, 2005
--------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- ------------------------------------------------------------ ------------- ------------- ------------- --------------
REVENUES:
Commercial ................................................. $ 195,435 $ -- $ -- $ 195,435
Chimes ..................................................... 28,421 (28,421) -- --
------------ ------------ ------------ ------------
TOTAL REVENUES ............................................. 223,856 (28,421) -- 195,435
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ............................................... 159,587 (938) -- 158,649
Selling, general & administrative .......................... 71,902 (24,530) 2,791{e} 50,163
Amortization of intangibles ................................ 79 -- -- 79
Special charges/(credits) .................................. 20,532 75 -- 20,607
------------ ------------ ------------ ------------
TOTAL COSTS ................................................ 252,100 (25,393) 2,791 229,498
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS .............................. (28,244) (3,028) (2,791) (34,063)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Net (loss)/gain on investments ............................. (1,180) -- -- (1,180)
Interest income ............................................ 811 (658) -- 153
Interest expense ........................................... (6) 1 -- (5)
Other ...................................................... -- (22) -- (22)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ............................... (375) (679) -- (1,054)
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES .......................... (28,619) (3,707) (2,791) (35,117)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current .................................................... (432) 39 -- (393)
Deferred ................................................... (16,698) -- -- (16,698)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ............................... (17,130) 39 -- (17,091)
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS ............... (45,749) (3,668) (2,791) (52,208)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS
NET OF TAX ................................................. (671) -- -- (671)
------------ ------------ ------------ ------------
NET LOSS ................................................... $ (46,420) $ (3,668) $ (2,791) $ (52,879)
============ ============ ============ ============
LOSS PER SHARE FROM CONTINUING
OPERATIONS--BASIC AND DILUTED ........................... $ (1.46) $ (1.66)
---------- ----------
EARNINGS PER SHARE FROM DISCONTINUED
OPERATIONS--BASIC AND DILUTED ........................... $ (0.02) $ (0.02)
---------- ----------
LOSS PER SHARE BASIC AND DILUTED ........................... $ (1.48) $ (1.68)
---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC AND DILUTED .......................... 31,399,000 31,399,000
---------- ----------
- -------------------
(1) As reported in Computer Horizons annual report on Form 10-K for the year ended December 31, 2005 with Federal segment in
Discontinued Operations.
(2) Derived from Computer Horizons audited financial information for the year ended December 31, 2005.
9
CHIMES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 31, 2004
------------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- ---------------------------------------------------- ----------------- ------------- ------------- --------------
REVENUES:
Commercial ......................................... $ 191,096 $ -- $ -- $ 191,096
Chimes ............................................. 23,092 (23,092) -- --
------------ ------------ ------------ ------------
TOTAL REVENUES ..................................... 214,188 (23,092) -- 191,096
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ....................................... 154,488 (1,396) -- 153,092
Selling, general & administrative .................. 69,077 (22,341) 2,035{e} 48,770
Amortization of intangibles ........................ 189 -- -- 189
Restructuring Charges .............................. 2,859 (502) -- 2,357
Special charges/(credits) .......................... (939) -- -- (939)
Goodwill impairment ................................ 20,306 -- -- 20,306
Write-off of assets ................................ 910 -- -- 910
------------ ------------ ------------ ------------
TOTAL COSTS ........................................ 246,890 (24,239) 2,035 224,685
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS ...................... (32,702) 1,147 (2,035) (33,589)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Interest income .................................... 321 (144) -- 177
Interest expense ................................... (82) (1) -- (83)
Other .............................................. -- (41) -- (41)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ....................... 239 (186) -- 53
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES .................. (32,463) 961 (2,035) (33,536)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ............................................ (1,493) -- -- (1,493)
Deferred ........................................... (1,985) -- -- (1,985)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ....................... (3,478) -- -- (3,478)
------------ ------------ ------------ ------------
Loss before cumulative effect of minority
interest ........................................ (28,985) 961 (2,035) (30,058)
------------ ------------ ------------ ------------
Minority Interest .................................. (45) -- -- (45)
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING
OPERATIONS ...................................... (29,030) 961 (2,035) (30,103)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED
OPERATIONS NET OF TAX ........................... 3,858 -- -- 3,858
------------ ------------ ------------ ------------
NET LOSS ........................................... $ (25,172) $ 961 $ (2,035) $ (26,246)
============ ============ ============ ============
EARNINGS/(LOSS) PER SHARE FROM CONTINUING
OPERATIONS--BASIC ............................... $ (0.94) $ (0.98)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
10
Year Ended
December 31, 2004
------------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- ---------------------------------------------------- ----------------- ------------- ------------- --------------
DISCONTINUED OPERATIONS--BASIC .................. $ 0.12 $ 0.12
============ ============
LOSS PER SHARE--BASIC .............................. $ (0.82) $ (0.85)
============ ============
EARNINGS/(LOSS) PER SHARE FROM CONTINUING
OPERATIONS--DILUTED ............................. $ (0.93) $ (0.96)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--DILUTED ................ $ 0.12 $ 0.12
============ ============
LOSS PER SHARE--DILUTED ............................ $ (0.80) $ (0.84)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC .............................. 30,870,000 30,870,000
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--DILUTED ............................ 31,295,000 31,295,000
============ ============
- -------------------
(1) As reported in Computer Horizons annual report on Form 10-K for the year ended December 31, 2004 with Federal segment in
Discontinued Operations.
(2) Derived from Computer Horizons audited financial information for the year ended December 31, 2004.
11
CHIMES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 31, 2003
--------------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- ------------- ------------- --------------
REVENUES:
Commercial ......................................... $ 206,972 $ -- $ -- $ 206,972
Chimes ............................................. 20,018 (20,018) -- --
------------ ------------ ------------ ------------
TOTAL REVENUES ..................................... 226,990 (20,018) -- 206,972
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ....................................... 162,880 (1,392) -- 161,488
Selling, general & administrative .................. 74,434 (22,644) 1,841{e} 53,631
Amortization of intangibles ........................ 63 -- -- 63
Special charges/(credits) .......................... 10,113 -- -- 10,113
Restructuring Charges .............................. 3,278 (709) -- 2,569
------------ ------------ ------------ ------------
TOTAL COSTS ........................................ 250,768 (24,745) 1,841 227,864
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS ...................... (23,778) 4,727 (1,841) (20,892)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Gain/(loss) on sale of assets ...................... (424) -- -- (424)
Net (loss)/gain on investments ..................... (432) -- -- (432)
Interest income .................................... 517 (118) -- 399
Interest expense ................................... (40) -- -- (40)
Other .............................................. -- (16) -- (16)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ....................... (379) (134) -- (513)
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES .................. (24,157) 4,593 (1,841) (21,405)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ............................................ 264 -- -- 264
Deferred ........................................... (6,966) -- -- (6,966)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ....................... (6,702) -- -- (6,702)
------------ ------------ ------------ ------------
Loss before cumulative effect of minority interest.. (17,455) 4,593 (1,841) (14,703)
Minority Interest .................................. (89) -- -- (89)
NET INCOME/(LOSS) FROM CONTINUING
OPERATIONS ...................................... (17,544) 4,593 (1,841) (14,792)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED
OPERATIONS NET OF TAX ........................... 389 -- -- 389
------------ ------------ ------------ ------------
NET LOSS ........................................... $ (17,155) $ 4,593 $ (1,841) $ (14,403)
============ ============ ============ ============
EARNINGS/(LOSS) PER SHARE FROM
CONTINUING OPERATIONS--BASIC .................... $ (0.58) $ (0.49)
============ ============
12
Year Ended
December 31, 2003
--------------------------------------------------------------------------
Chimes Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands, except per share data) Historical(1) Chimes(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- ------------- ------------- --------------
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--BASIC .................. $ 0.01 $ 0.01
============ ============
LOSS PER SHARE--BASIC .............................. $ (0.56) $ (0.47)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
CONTINUING OPERATIONS--DILUTED .................. $ (0.57) $ (0.48)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--DILUTED ................ $ 0.01 $ 0.01
============ ============
LOSS PER SHARE--DILUTED ............................ $ (0.56) $ (0.47)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC .............................. 30,455,000 30,455,000
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--DILUTED ............................ 30,570,000 30,570,000
============ ============
- -------------------
(1) As reported in Computer Horizons annual report on Form 10-K for the year ended December 31, 2003 with Federal segment in
Discontinued Operations.
(2) Derived from Computer Horizons audited financial information for the year ended December 31, 2003.
13
NOTES TO CHIMES, INC. UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Pro forma adjustments reflect only those adjustments which are supportable
and directly attributable to the transaction and do not include the impact of
contingencies. Pro forma adjustments include the following ($ in thousands):
SALE OF CHIMES:
(a) To record cash proceeds consisting of $80 million consideration, net
of transaction costs of $3 million.
(b) To record operating cash of $4,433,000 not included in the sale of
Chimes.
(c) Adjustments represent the impact to the consolidated provision
for the sale of the assets for Chimes, Inc. The consolidated
provision was recalculated based upon the proforma income before
income taxes as presented above. The proforma income was
determined as if Chimes, Inc. was no longer part of the
consolidated group. When preparing the proforma provision
calculation, the Company assumed that all categories of permanent
and temporary tax differences, as originally stated in the tax
provision from December 31, 2003 to September 30, 2006, would
have remained with the Company.
Other assumptions made with respect to the calculation of the
provision:
1. As of September 2006, the stand alone operations of Chimes,
Inc. would not have been required to report a valuation
allowance as the operations had cumulative income for the
past three years, as outlined within Financial Accounting
Standard 109, Accounting for Income Taxes. This is a
different result with respect to the remaining operations
of Computer Horizons as the Company maintained a full
valuation allowance at this time.
2. Note that as of September 30, 2006, the Company is
presenting the proforma balance sheet as if the Company
would have been required to accrue and pay Federal, State
and Foreign income taxes and record the applicable deferred
taxes associated with its normal operations. As the stand
alone Chimes, Inc. would have been profitable during the
2005 and 2006, there would not have been a net operating
loss available to the operations to offset current taxable
income. This is a different result with respect to the
remaining operations of Computer Horizons as the Company
has certain net operating losses available to offset
taxable income.
(d) Adjustment to Equity of $81,348,000 consists of net assets
Computer Horizons sold to Axium International of $4,666,000, plus
retained cash of $4,433,000, less the tax adjustment of $85,000
and the pro-forma estimated pre-tax gain as of September 30, 2006
on sale of Chimes of $72,334,000. The sale of the Company's
14
affiliate's assets pursuant to the Chimes Asset Purchase
Agreement will be a taxable transaction with respect to the
Company to the extent that any gain or loss is realized. The
Company will realize gain or loss measured by the difference
between the proceeds received by it and its affiliates on such
sale and the Company's (or an affiliate's) tax basis in the
assets. For purposes of calculating gain or loss, the proceeds
received by the Company and its affiliates will include the cash
received by them, the amount of their indebtedness that is
cancelled or assumed, and any other consideration received by
them for their assets. It is anticipated that the Company will
have sufficient current losses to offset most of the gain
expected to be realized from the Chimes Asset Sale for regular
Federal income tax purposes and otherwise incur approximately
$1.3 million in alternative minimum taxes. The Company and/or its
affiliates may be subject to state income taxes to the extent
that gains exceed losses for state tax law purposes, but does not
anticipate that such taxes, if any, will be significant. Based
upon current projections, such state taxes are estimated to be
approximately $1 million after taking into account the
availability of state losses to offset the gain.
(e) To adjust previously allocated corporate general expenses. The
adjustment was made following the sale of the Company's Federal
Division, RGII, to NetStar, Inc. on September 29, 2006, to remove
RGII specific legal expense originally incurred at corporate on
behalf of RGII, and then reallocate the revised corporate expense to
the Chimes. Adjustments to the corporate allocation to RGII are as
follows:
Corporate RGII Total
Allocation Legal Expense Adjustment
---------- ------------- ----------
YEARS ENDED:
12/31/2005 ..................... $1,809 $ 443 $1,366
12/31/2004 ..................... 1,767 285 1,482
12/31/2003 ..................... 747 -- 747
NINE MONTHS ENDED:
9/30/2006 ...................... -- -- --
9/30/2005 ...................... 1,314 195 1,119
Adjustments to the Chimes corporate allocation are as follows:
Original Corporate Adjusted Corporate
Allocation Allocation
------------------ ------------------
YEARS ENDED:
12/31/2005 ..................... $2,848 $2,791
12/31/2004 ..................... 2,065 2,035
12/31/2003 ..................... 1,841 1,841
NINE MONTHS ENDED
9/30/2006 ...................... $2,116 $2,116
9/30/2005 ...................... 1,984 1,960
15
COMPUTER HORIZONS CORP.--COMMERCIAL SERVICES BUSINESS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2006
----------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands) Historical(1) Commercial(2) Adjustments Consolidated
- --------------------------------------------------------- ------------- --------------- ------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 48,185 $ -- $54,399{a} $ 102,584
Cash in escrow .......................................... 1,000 -- -- 1,000
Accounts receivable, net ................................ 42,560 (36,603) -- 5,957
Refundable tax credit ................................... 7,714 (7,672) 7,672{b} 7,714
Other Receivables ....................................... 429 -- -- 429
Prepaid expenses and other .............................. 2,982 (1,586) -- 1,396
--------- --------- --------- ---------
TOTAL CURRENT ASSETS .................................... 102,870 (45,860) 62,071 119,081
--------- --------- --------- ---------
PROPERTY AND EQUIPMENT .................................. 44,275 (19,970) -- 24,305
Less accumulated depreciation ........................... (41,178) 17,957 -- (23,221)
--------- --------- --------- ---------
TOTAL PROPERTY AND EQUIPMENT, NET ....................... 3,097 (2,013) -- 1,084
--------- --------- --------- ---------
OTHER ASSETS--NET:
Deferred income taxes ................................... 1,637 -- -- 1,637
Other ................................................... 2,685 (18,799) -- (16,114)
--------- --------- --------- ---------
TOTAL OTHER ASSETS ...................................... 4,322 (18,799) -- (14,477)
--------- --------- --------- ---------
TOTAL ASSETS ............................................ $ 110,289 $ (66,672) $ 62,071 $ 105,688
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................ $ 18,002 $ (4,537) $ -- $ 13,465
Accrued payroll, payroll taxes and benefits ............. 9,145 (6,356) -- 2,789
Income taxes payable .................................... 1,150 -- 134{h} 1,284
Restructuring reserve ................................... 146 (52) -- 94
Deferred income taxes ................................... 1,636 -- -- 1,636
Other accrued expenses .................................. 4,569 (2,194) -- 2,375
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES ............................... 34,648 (13,139) 134 21,643
--------- --------- --------- ---------
OTHER LIABILITIES:
Deferred compensation ................................... 1,734 -- -- 1,734
Intercompany cash transfers not on GL ................... -- 3,639 -- 3,639
Intercompany ............................................ -- (36,206) -- (36,206)
Change of control payable ............................... 2,330 -- -- 2,330
--------- --------- --------- ---------
TOTAL LIABILITIES ....................................... 38,712 (45,705) 134 (6,859)
--------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock, $.10 par; authorized
100,000,000 shares; issued 33,158,105
shares at September30, 2006 .......................... 3,315 (6,325) -- (3,010)
Additional paid in capital .............................. 146,506 (7,628) -- 138,878
Accumulated other comprehensive loss .................... (179) 158 -- (21)
16
Retained earnings ....................................... (77,134) (7,172) 61,937{c} (22,369)
--------- --------- --------- ---------
72,508 (20,967) 61,937 113,478
Less shares held in treasury, at cost;
134,948 and 1,118,014 shares at
September30, 2006 .................................... (931) -- -- (931)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY .............................. 71,577 (20,967) 61,937 112,547
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ............................................... $ 110,289 $ (66,672) $ 62,071 $ 105,688
========= ========= ========= =========
- -------------------
(1) As reported in Computer Horizons Corp. unaudited Quarterly Report on Form 10-Q for the nine months ended September 30, 2006.
(2) Derived from Computer Horizons unaudited financial information as of September 30, 2006.
17
COMPUTER HORIZONS CORP.--COMMERCIAL SERVICES BUSINESS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30, 2006
--------------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands) Historical(1) Commercial(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- --------------- ------------- ---------------
REVENUES:
Commercial ......................................... $ 136,124 $ (136,124) $ -- $ --
Chimes ............................................. 23,474 -- -- 23,474
------------ ------------ ------------ ------------
TOTAL REVENUES ..................................... 159,598 (136,124) -- 23,474
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ....................................... 107,689 (107,121) -- 568
Selling, general & administrative .................. 51,758 (29,586) 12,268{d) 34,440
Special charges / (credits) ........................ 334 (261) -- 73
Gain on Sale ....................................... (394) -- -- (394)
------------ ------------ ------------ ------------
TOTAL COSTS ........................................ 159,387 (136,968) 12,268 34,687
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS ...................... 211 844 (12,268) (11,213)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Interest income .................................... 1,308 (55) -- 1,253
Interest expense ................................... (1) (0) -- (1)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ....................... 1,307 (55) -- 1,252
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES .................. 1,518 789 (12,268) (9,961)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ............................................ (150) -- -- {e} (150)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ....................... (150) -- -- (150)
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING
OPERATIONS ..................................... 1,368 789 (12,268) (10,111)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED
OPERATIONS ..................................... (13,232) -- -- (13,232)
LOSS ON SALE FROM DISCONTINUED
OPERATIONS ..................................... (4,779) -- -- (4,779)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED
OPERATIONS NET OF TAX .......................... (18,011) -- -- (18,011)
------------ ------------ ------------ ------------
NET LOSS ........................................... $ (16,643) $ 789 $ (12,268) $ (28,122)
============ ============ ============ ============
EARNINGS/(LOSS) PER SHARE FROM
CONTINUING OPERATIONS--BASIC ................... $ 0.04 $ (0.31)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--BASIC ................. $ (0.56) $ (0.56)
============ ============
LOSS PER SHARE--BASIC .............................. $ (0.51) $ (0.87)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
CONTINUING OPERATIONS--DILUTED ................. $ 0.04 $ (0.31)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--DILUTED ............... $ (0.55) $ (0.55)
============ ============
18
Nine Months Ended
September 30, 2006
--------------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands) Historical(1) Commercial(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- --------------- ------------- ---------------
LOSS PER SHARE--DILUTED ............................ $ (0.51) $ (0.86)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC ............................. 32,411,474 32,411,474
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--DILUTED ........................... 32,619,000 32,619,000
============ ============
- -------------------
(1) As reported in Computer Horizons unaudited quarterly report on Form 10-Q for the nine months ended September 30, 2006 with
Federal segment in Discontinued Operations.
(2) Derived from Computer Horizons unaudited financial information for the nine months ended September 30, 2006.
19
COMPUTER HORIZONS CORP.--COMMERCIAL SERVICES BUSINESS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30, 2005
-------------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands) Historical(1) Commercial(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- --------------- ------------- --------------
REVENUES:
Commercial ......................................... $ 148,504 $ (148,504) $ -- $ --
Chimes ............................................. 20,747 -- -- 20,747
------------ ------------ ------------ ------------
TOTAL REVENUES ..................................... 169,251 (148,504) -- 20,747
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ....................................... 120,908 (120,189) -- 719
Selling, general & administrative .................. 52,797 (33,672) 12,538{d} 31,663
Amortization of intangibles ........................ 78 -- -- 78
Special charges / (credits) ........................ 716 (1,010) -- (294)
Gain on Sale ....................................... 4,482 -- -- 4,482
------------ ------------ ------------ ------------
TOTAL COSTS ........................................ 178,981 (154,871) 12,538 36,648
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS ...................... (9,730) 6,367 (12,538) (15,901)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Interest income .................................... 541 (10) -- 531
Interest expense ................................... (5) -- -- (5)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ....................... 536 (10) -- 526
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ............................ (9,194) 6,357 (12,538) (15,375)
INCOME (TAXES)/BENEFIT:
Current ............................................ 259 -- -- {e} 259
Deferred ........................................... (100) -- -- {e} (100)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ....................... 159 -- -- 159
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING
OPERATIONS ..................................... (9,035) 6,357 (12,538) (15,216)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED
OPERATIONS NET OF TAX .......................... 2,071 -- -- 2,071
------------ ------------ ------------ ------------
NET LOSS ........................................... $ (6,964) 6,357 (12,538) $ (13,145)
============ ============ ============ ============
LOSS PER SHARE FROM CONTINUING
OPERATIONS--BASIC AND DILUTED .................. $ (0.29) $ (0.47)
------------ ------------
EARNINGS PER SHARE FROM DISCONTINUED
OPERATIONS--BASIC AND DILUTED .................. $ 0.07 $ 0.06
------------ ------------
LOSS PER SHARE BASIC AND DILUTED ................... $ (0.22) $ (0.41)
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC AND DILUTED ................. 31,280,000 31,280,000
------------ ------------
- -------------------
(1) As reported in Computer Horizons unaudited quarterly report on Form 10-Q for the nine months ended September 30, 2005 with
Federal segment in Discontinued Operations.
(2) Derived from Computer Horizons unaudited financial information for the nine months ended September 30, 2005.
20
COMPUTER HORIZONS CORP.--COMMERCIAL SERVICES BUSINESS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2005
-------------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands except per share data) Historical(1) Commercial(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- --------------- ------------- -------------
REVENUES:
Commercial ......................................... $ 195,435 $ (195,435) $ -- $ --
Chimes ............................................. 28,421 -- -- 28,421
------------ ------------ ------------ ------------
TOTAL REVENUES ..................................... 223,856 (195,435) -- 28,421
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ....................................... 159,587 (158,649) -- 938
Selling, general & administrative .................. 71,902 (46,006) 17,026{d} 42,922
Amortization of intangibles ........................ 79 -- -- 79
Special charges / (credits) ........................ 20,532 (2,594) -- 17,938
------------ ------------ ------------ ------------
TOTAL COSTS ........................................ 252,100 (207,249) 17,026 61,877
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS ...................... (28,244) 11,814 (17,026) (33,456)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Net (loss)/gain on investments ..................... (1,180) -- -- (1,180)
Interest income .................................... 811 (10) -- 801
Interest expense ................................... (6) -- -- (6)
Other .............................................. -- 23 -- 23
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ....................... (375) 14 -- (361)
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES .................. (28,619) 11,828 (17,026) (33,818)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ............................................ (432) (7) -- {e} (439)
Deferred ........................................... (16,698) -- -- {e} (16,698)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ....................... (17,130) (7) -- (17,137)
------------ ------------ ------------ ------------
NET INCOME/(LOSS) FROM CONTINUING
OPERATIONS ..................................... (45,749) 11,820 (17,026) (50,955)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS
NET OF TAX ..................................... (671) -- -- (671)
------------ ------------ ------------ ------------
NET LOSS ........................................... $ (46,420) 11,820 (17,026) $ (51,626)
============ ============ ============ ============
LOSS PER SHARE FROM CONTINUING
OPERATIONS--BASIC AND DILUTED .................. $ (1.46) $ (1.62)
------------ ------------
EARNINGS PER SHARE FROM DISCONTINUED
OPERATIONS--BASIC AND DILUTED .................. $ (0.02) $ (0.02)
------------ ------------
LOSS PER SHARE BASIC AND DILUTED ................... $ (1.48) $ (1.64)
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC AND DILUTED ................. 31,399,000 31,399,000
------------ ------------
- -------------------
(1) As reported in Computer Horizons annual report on Form 10-K for the year ended December 31, 2005 with Federal segment in
Discontinued Operations
(2) Derived from Computer Horizons audited financial information for the year ended December 31, 2005.
21
COMPUTER HORIZONS CORP.--COMMERCIAL SERVICES BUSINESS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2004
--------------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands except per share data) Historical(1) Commercial(2) Adjustments Consolidated
- ---------------------------------------------------- ------------- --------------- ------------- --------------
REVENUES:
Commercial ......................................... $ 191,096 $ (191,096) $ -- $ --
Chimes ............................................. 23,092 -- -- 23,092
------------ ------------ ------------ ------------
TOTAL REVENUES ..................................... 214,188 (191,096) -- 23,092
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ....................................... 154,488 (153,092) -- 1,396
Selling, general & administrative .................. 69,077 (45,254) 15,371{d} 39,194
Amortization of intangibles ........................ 189 -- -- 189
Restructuring Charges .............................. 2,859 (1,508) -- 1,351
Special charges/(credits) .......................... (939) (346) -- (1,285)
Goodwill impairment ................................ 20,306 (20,306) -- 0
Write-off of assets ................................ 910 -- -- 910
TOTAL COSTS ........................................ 246,890 (220,506) 15,371 41,755
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS ...................... (32,702) 29,410 (15,371) (18,663)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Interest income .................................... 321 (1) -- 320
Interest expense ................................... (82) -- -- (82)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ....................... 239 (1) -- 238
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES .................. (32,463) 29,409 (15,371) (18,425)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ............................................ (1,493) (1) --(e) (1,494)
Deferred ........................................... (1,985) -- --(e) (1,985)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ....................... (3,478) (1) -- (3,479)
------------ ------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF
MINORITY INTEREST .............................. (28,985) 29,411 (15,371) (14,946)
------------ ------------ ------------ ------------
MINORITY INTEREST .................................. (45) 45 -- (0)
NET INCOME/(LOSS) FROM CONTINUING
OPERATIONS ..................................... (29,030) 29,456 (15,371) (14,946)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED
OPERATIONS NET OF TAX .......................... 3,858 -- -- 3,858
------------ ------------ ------------ ------------
NET LOSS ........................................... $ (25,172) 29,456 (15,371) $ (11,088)
============ ============ ============ ============
EARNINGS/(LOSS) PER SHARE FROM
CONTINUING OPERATIONS--BASIC ................... $ (0.94) $ (0.48)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--BASIC ................. $ 0.12 $ 0.12
============ ============
LOSS PER SHARE--BASIC .............................. $ (0.82) $ (0.36)
============ ============
22
EARNINGS/(LOSS) PER SHARE FROM
CONTINUING OPERATIONS--DILUTED ................. $ (0.93) $ (0.48)
============ ============
EARNINGS/(LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS--DILUTED ............... $ 0.12 $ 0.12
============ ============
LOSS PER SHARE--DILUTED ............................ $ (0.80) $ (0.35)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC ............................. 30,870,000 30,870,000
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--DILUTED ........................... 31,295,000 31,295,000
============ ============
- -------------------
(1) As reported in Computer Horizons annual report on Form 10-K for the year ended December 31, 2004 with Federal segment in
Discontinued Operations.
(2) Derived from Computer Horizons audited financial information for the year ended December 31, 2004.
23
COMPUTER HORIZONS CORP.--COMMERCIAL SERVICES BUSINESS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2003
-----------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands except per share data) Historical(1) Commercial(2) Adjustments Consolidated
- ------------------------------------------------------- ------------- --------------- ------------- --------------
REVENUES:
Commercial ............................................. $ 206,972 $ (206,972) $ -- $ --
Chimes ................................................. 20,018 -- -- 20,018
------------ ------------ ------------ ------------
Total Revenues ......................................... 226,990 (206,972) -- 20,018
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs ........................................... 162,880 (161,488) -- 1,392
Selling, general & administrative ...................... 74,434 (47,979) 18,104{d} 44,559
Amortization of intangibles ............................ 63 (0) -- 63
Special charges/(credits) .............................. 10,113 (3,808) -- 6,305
Restructuring Charges .................................. 3,278 (1,574) -- 1,704
------------ ------------ ------------ ------------
TOTAL COSTS ............................................ 250,768 (214,849) 18,104 54,023
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS .......................... (23,778) 7,877 (18,104) (34,005)
------------ ------------ ------------ ------------
OTHER INCOME/(EXPENSE):
Gain/(loss) on sale of assets .......................... (424) -- -- (424)
Net (loss)/gain on investments ......................... (432) -- -- (432)
Interest income ........................................ 517 (2) -- 515
Interest expense ....................................... (40) 6 -- (34)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME/(EXPENSE) ........................... (379) 4 -- (375)
------------ ------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES ...................... (24,157) 7,881 (18,104) (34,380)
------------ ------------ ------------ ------------
INCOME (TAXES)/BENEFIT:
Current ................................................ 264 (1,756) -- (e) (1,492)
Deferred ............................................... (6,966) -- -- (e) (6,966)
------------ ------------ ------------ ------------
TOTAL INCOME (TAXES)/BENEFIT ........................... (6,702) (1,756) -- (8,458)
------------ ------------ ------------ ------------
Loss before cumulative effect of minority
interest ........................................... (17,455) 9,637 (18,104) (25,922)
------------ ------------ ------------ ------------
Minority Interest ...................................... (89) (89) -- (178)
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS ........... (17,544) 9,547 (18,104) (26,101)
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS
NET OF TAX ......................................... 389 -- -- 389
NET LOSS ............................................... $ (17,155) 9,547 (18,104) $ (25,712)
============ ============ ============ ============
EARNINGS/(LOSS) PER SHARE FROM CONTINUING
OPERATIONS--BASIC .................................. $ (0.58) $ (0.86)
============ ============
EARNINGS/(LOSS) PER SHARE FROM DISCONTINUED
OPERATIONS--BASIC .................................. $ 0.01 $ 0.01
============ ============
LOSS PER SHARE--BASIC .................................. $ (0.56) $ (0.84)
============ ============
EARNINGS/(LOSS) PER SHARE FROM CONTINUING
OPERATIONS--DILUTED ................................ $ (0.57) $ (0.85)
============ ============
EARNINGS/(LOSS) PER SHARE FROM DISCONTINUED
OPERATIONS--DILUTED ................................ $ 0.01 $ 0.01
============ ============
24
Year Ended December 31, 2003
-----------------------------------------------------------------------
Commercial Company
Company Sale of Pro Forma Pro Forma
(dollars in thousands except per share data) Historical(1) Commercial(2) Adjustments Consolidated
- -------------------------------------------------------- ------------- --------------- ------------- --------------
LOSS PER SHARE--DILUTED ................................ $ (0.56) $ (0.84)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--BASIC ................................. 30,455,000 30,455,000
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING--DILUTED ............................... 30,570,000 30,570,000
============ ============
- -------------------
(1) As reported in Computer Horizons annual report on Form 10-K for the year ended December 31, 2004 with Federal segment in
Discontinued Operations
(2) Derived from Computer Horizons audited financial information for the year ended December 31, 2004.
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NOTES TO COMMERCIAL SERVICES BUSINESS
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro forma adjustments reflect only those adjustments which are supportable and
directly attributable to the transaction and do not include the impact of
contingencies. Pro forma adjustments include the following:
SALE OF COMMERCIAL SERVICES BUSINESS:
1. To record cash proceeds consisting of $57 million consideration less
an estimated Working Capital adjustment (using September 30, 2006
balances) of $600,642, net of transaction costs of $2 million.
2. To record assets not included in the sale of the Commercial Services
Business, consisting of a refundable tax credit of $7,672,000. The Quebec
Government ("Revenu Quebec") through Invest Quebec has granted the
Montreal Outsourcing Centre a refundable tax credit on certain qualifying
job positions in Information Technology. This Program has been available
to the MOC since 2002. To date tax refunds have been collected for 2002,
2003 and 2004. The refund is received in cash net of any taxes owing. The
main categories qualified for the Program are salary and vacation pay.
3. Adjustment to Equity of $62,071,000 consists of net assets Computer
Horizons sold to Allegis Group, Inc. of $25,688,000, plus net assets
retained of $7,672,000, and the pro-forma estimated pre-tax gain as of
September 30, 2006 on sale of the Commercial Services Business of
$28,711,000. The sale of the Commercial Services Business assets pursuant
to the Commercial Services Asset Purchase Agreement will be a taxable
transaction with respect to the Company to the extent that any gain or
loss is realized. The Company will realize gain or loss measured by the
difference between the proceeds received by it and its affiliates on such
sale and the Company's (or an affiliate's) tax basis in the assets. For
purposes of calculating gain or loss, the proceeds received by the Company
and its affiliates will include the cash received by them, the amount of
their indebtedness that is cancelled or assumed, and any other
consideration received by them for their assets. It is anticipated that
the Company will have sufficient current losses to offset most of the gain
expected to be realized from the Commercial Services Asset Sale for
regular Federal income tax purposes and otherwise incur approximately
$134,000 in alternative minimum taxes. The Company and/or its affiliates
may be subject to state income taxes to the extent that gains exceed
losses for state tax law purposes, but does not anticipate that such
taxes, if any, will be significant.
4. To adjust previously allocated corporate general expenses. The
adjustment was made following the sale of the Company's Federal Division,
RGII, to NetStar, Inc. on September 29, 2006, to remove RGII specific
legal expense originally incurred at corporate on behalf of RGII, and then
reallocate the revised corporate expense to the Commercial Services
Business. Adjustments to the corporate allocation to RGII are as follows:
Corporate RGII Total
Allocation Legal Expense Adjustment
---------- ------------- ----------
YEARS ENDED:
12/31/2005 .................... $1,809 $ 443 $1,366
12/31/2004 .................... 1,767 285 1,482
12/31/2003 .................... 747 -- 747
NINE MONTHS ENDED:
9/30/2006 ..................... -- -- --
9/30/2005 ..................... 1,314 195 1,119
26
Adjustments to the Commercial Services Business corporate allocation are as
follows:
Original Corporate Adjusted Corporate
Allocation Allocation
------------------ ------------------
YEARS ENDED:
12/31/2005 .................... $17,375 $17,026
12/31/2004 .................... 15,600 15,371
12/31/2003 .................... 18,104 18,104
NINE MONTHS ENDED
9/30/2006 ..................... $12,268 $12,268
9/30/2005 ..................... 12,693 12,538
Tax Provision Disclosure--Pro Forma Assumptions
5. Adjustments represent the impact to the consolidated provision for
the sale of the assets for Commercial. The consolidated provision was
recalculated based upon the Pro Forma income before income taxes as
presented above. The Pro Forma income was determined as if Commercial was
no longer part of the consolidated group.
Other assumptions made with respect to the calculation of the provision:
As of December 31, 2002 the stand alone operations of Commercial would
have been required to report a valuation allowance as the operations had
cumulative losses for the past three years, as outlined within Financial
Accounting Standard 109, Accounting for Income Taxes. This is a similar result
with respect to the remaining operations of Computer Horizons Corp. as the
Company maintained a full valuation allowance at this time.
27
(d) Exhibits:
EXHIBIT NO. DOCUMENT
99.1 Press Release dated February 16, 2007.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPUTER HORIZONS CORP.
(Registrant)
Date: February 21, 2007
By: /s/ Barbara Moss
-----------------------------
Barbara Moss
Chief Financial Officer
29
