UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 For the fiscal year
ended December 31, 2004 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _______ to _______
Commission File No. 1-9410
COMPUTER TASK GROUP, INCORPORATED
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(Exact name of Registrant as specified in its charter)
State of New York 16-0912632
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(State of incorporation) (I.R.S. Employer Identification No.)
800 Delaware Avenue, Buffalo, New York 14209
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(Address of principal executive offices) (Zip Code)
(716) 882-8000
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Registrant's telephone number,
including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 par value New York Stock Exchange
Rights to Purchase Series A
Participating Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. [X]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) YES X NO___
The aggregate market value of the Registrant's voting and non-voting common
equity, computed by reference to the price at which the common equity was last
sold on the last business day of the Registrant's most recently completed second
quarter was $64.8 million. Solely for the purposes of this calculation, all
persons who are or may be executive officers or directors of the Registrant and
all persons who have filed a Schedule 13D or Schedule 13G with respect to the
Registrant's stock have been deemed to be affiliates.
The total number of shares of Common Stock of the Registrant outstanding at
April 11, 2005 was 20,868,834.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Parts and Items Amended
The registrant hereby amends Part II, Item 9A. "Controls and Procedures," and
Part IV, Item 15. "Exhibits" of the Form 10-K for Computer Task Group,
Incorporated (the Company) for the fiscal year ended December 31, 2004 filed
with the Securities and Exchange Commission on March 16, 2005. Pursuant to a
Securities and Exchange Commission exemptive order, management's report on its
assessment of the Company's internal control over financial reporting, and the
attestation report of the Company's independent registered public accounting
firm on management's assessment were not included in that report. This Form
10-K/A includes management's report and the independent registered public
accounting firm's attestation report and other information, as required.
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PART II
ITEM 9A. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company's management has evaluated, under the supervision and with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, the effectiveness of the design and operations of the Company's
disclosure controls and procedures (as defined in Securities Exchange Act Rule
13a-15(e)), as of the end of the period covered by this annual report. Based on
that evaluation, and due to the material weaknesses in the Company's internal
control over financial reporting (as described below in Management's Annual
Report on Internal Control Over Financial Reporting), the Company's Chief
Executive Officer and Chief Financial Officer have concluded that the Company's
disclosure controls and procedures were not effective as of the end of the
period covered by this annual report.
(b) MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company's management is responsible for establishing and maintaining an
adequate system of internal control over financial reporting. Internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, a system of internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Further, because of changes in conditions,
effectiveness of internal control over financial reporting may deteriorate.
A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the company's ability to initiate,
authorize, record, process, or report external financial data reliably in
accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected. An internal control material weakness is a significant deficiency, or
combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected.
Management of the Company conducted an evaluation of the effectiveness of the
Company's internal control over financial reporting based on the Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on that evaluation, the Company's management
identified two control deficiencies it considered to be material weaknesses
under the rules specified by the Public Company Accounting Oversight Board's
Auditing Standard No. 2, and therefore concluded that its internal control over
financial reporting was not effective as of December 31, 2004. The material
weaknesses identified relate to internal control over financial reporting
associated with the Company's accounting for income taxes and its accounting for
medical self-insurance reserves, as described below.
3
As of December 31, 2004, management identified a material weakness in internal
control over financial reporting associated with the Company's accounting for
income taxes. Specifically, the Company did not have effective management
oversight and review controls to ensure that the Company's income tax accounting
was consistent with generally accepted accounting principles. This control
deficiency resulted in errors in the Company's accounting for both current and
deferred income tax amounts and related disclosures, which were corrected prior
to issuance of the Company's 2004 financial statements.
Additionally, as of December 31, 2004, management identified a deficiency in
internal control over financial reporting associated with the Company's
calculation of its incurred but not reported claims related to its self-insured
medical insurance programs. Specifically, the Company's policies and procedures
associated with the calculation of these incurred but not reported claims did
not include an evaluation of the underlying assumptions used to estimate future
claims liabilities to reflect recent claims development experience. This
deficiency resulted in a material understatement of the Company's recorded
medical self-insurance reserves. This error in accounting was corrected prior to
issuance of the Company's 2004 financial statements.
KPMG LLP, an independent registered public accounting firm, has issued a report
on management's assessment of the Company's internal control over financial
reporting, which is included herein.
(c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
We continue to review, revise and improve the effectiveness of the Company's
internal controls including the additional controls implemented relating to the
Company's medical costs including the estimation of medical self-insurance
reserves, and strengthening the Company's income tax review control procedures
noted above. We have made no other significant changes in the Company's internal
controls over financial reporting in connection with the Company's fourth
quarter evaluation that would materially affect, or are reasonably likely to
materially affect the Company's internal controls over financial reporting.
4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Computer Task Group, Incorporated:
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting (Item 9A(b)),
that Computer Task Group, Incorporated (the Company) did not maintain effective
internal control over financial reporting as of December 31, 2004, because of
the effect of material weaknesses identified in management's assessment, based
on criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe our
audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness of future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weaknesses have been identified and included
in management's assessment.
As of December 31, 2004, management identified a material weakness in internal
control over financial reporting associated with the Company's accounting for
income taxes. Specifically, the Company, did not have effective management
oversight and review controls to ensure that the Company's income tax accounting
was consistent with generally accepted accounting principles. This control
deficiency resulted in errors in the Company's accounting for both current and
deferred income tax amounts and related disclosures, which were corrected prior
to issuance of the Company's 2004 financial statements.
5
Additionally, as of December 31, 2004, management identified a deficiency in
internal control over financial reporting associated with the Company's
calculation of its incurred but not reported claims related to its self-insured
medical insurance programs. Specifically, the Company's policies and procedures
associated with the calculation of these incurred but not reported claims did
not include an evaluation of the underlying assumptions used to estimate future
claims liabilities to reflect recent claims development experience. This
deficiency resulted in a material understatement of the Company's recorded
medical self-insurance reserves. This error in accounting was corrected prior to
issuance of the Company's 2004 financial statements.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements of the Company and subsidiaries as of December 31, 2004. These
material weaknesses have been considered in determining the nature, timing, and
extent of audit tests applied in our audit of the 2004 consolidated financial
statements, and this report does not affect our report dated March 14, 2005,
which expressed an unqualified opinion on those consolidated financial
statements.
In our opinion, management's assessment that the Company did not maintain
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on criteria established in
Internal Control--Integrated Framework issued by COSO. Also, in our opinion,
because of the effect of the material weaknesses described above on the
achievement of the objectives of the control criteria, the Company has not
maintained effective internal control over financial reporting as of December
31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by COSO.
/s/ KPMG LLP
Buffalo, New York
April 14, 2005
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(B) Exhibits
23. (a) Consent of Independent Registered Public Accounting Firm 9
31. (a) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 10
31. (b) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11
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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 TASK GROUP, INCORPORATED
By /s/ James R. Boldt
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James R. Boldt,
Chairman and Chief Executive Officer
Dated: April 15, 2005
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.
Signature Title Date
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(i) Principal Executive Officer: Chairman and
Chief Executive Officer April 15, 2005
/s/ James R. Boldt
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James R. Boldt
(ii) Principal Accounting and Senior Vice President and April 15, 2005
Financial Officer Chief Financial Officer
/s/ Gregory M. Dearlove
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Gregory M. Dearlove
(iii) Directors
/s/ Thomas E Baker Director April 15, 2005
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Thomas E. Baker
/s/ George B. Beitzel Director April 15, 2005
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George B. Beitzel
/s/ James R. Boldt Director April 15, 2005
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James R. Boldt
/s/ Randall L. Clark Director April 15, 2005
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Randall L. Clark
/s/ Randolph A. Marks Director April 15, 2005
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Randolph A. Marks
/s/ John M. Palms Director April 15, 2005
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John M. Palms
/s/ Daniel J. Sullivan Director April 15, 2005
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Daniel J. Sullivan
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