Computer Task Group - IT Services - Category Directory

(716-882-8000)

800 Delaware Ave

Buffalo, NY 14209
www.ctq.com
 

Sales

$252 million

Business Description 
Computer Task Group, Incorporated (the Company, CTG, or the Registrant) was
incorporated in Buffalo, New York on March 11, 1966, and its corporate
headquarters are located at 800 Delaware Avenue, Buffalo, New York 14209
(716-882-8000). CTG is an international information technology (IT) solutions
and staffing company. CTG employs approximately 2,700 people worldwide and
serves customers through an international network of offices in North America
and Europe. During 2003, the Company had seven operating subsidiaries: CTG
Services, Inc., CTG HealthCare Solutions (Kansas), Inc., and Computer Task Group
of Canada, Inc., primarily providing services in North America; and Computer
Task Group Belgium N.V., Computer Task Group Luxembourg S.A., Computer Task
Group Nederland B.V., and Computer Task Group (U.K.) Ltd. primarily providing
services in Europe.

Copies of the Company's Form 10-K Annual Report, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports, including the
Company's code of ethics, committee charters and governance policies, which are
filed with the Securities and Exchange Commission, may be obtained without
charge through the Company's website at www.ctg.com/investors.

BACKGROUND

The Company operates in one industry segment, providing IT services to its
clients. The services provided typically encompass the IT business solution life
cycle, including phases for planning, developing, implementing, managing, and
ultimately maintaining the IT solution. A typical customer is an organization
with large, complex information and data processing requirements. Approximately
84 percent of consolidated 2003 revenue of $252.3 million was generated in North
America and 16 percent in Europe. The Company promotes a portion of its services
through four vertical market focus areas: Technology Service Providers,
Financial Services, HealthCare, and Life Sciences. CTG provides three primary
services to all of the markets that it serves. A brief discussion of these
services is as follows:

o IT STAFFING: CTG recruits, retains, and manages IT talent for its
clients. The Company services both large organizations with multiple
locations and high-volume IT requirements, and companies that need
to augment their own staff on a flexible basis. Our recruiting
organization works with customers to define their requirements and
develop the most competitive pricing to meet those requirements.

o APPLICATION MANAGEMENT OUTSOURCING (AMO): In an AMO project, a
client outsources the management of some or all of its applications
so that their internal management and staff can focus on projects
that will help them in creating and fostering initiatives that will
aid in delivering a competitive advantage to the company. CTG's
services in this area include support of single or multiple
applications, help desk, and facilities management through a full
suite of cost-effective maintenance, enhancement, and systems
development and integrated solutions.

o IT SOLUTIONS: CTG's services in this area range from helping clients
assess their business needs and identifying the right IT solutions
to meet them, to the delivery of services that include the selection
and implementation of packaged software and the design,
construction, testing, and integration of new systems.

International Business Machines Corporation (IBM) is CTG's largest customer. CTG
provides services to various IBM divisions in greater than 50 locations. In
November 2003, the Company signed a contract with International Business
Machines (IBM) for one year as one of IBM's national technical service providers
for the United States. IBM has the right to extend the contract for three
additional one-year periods. This contract, and its predecessor, accounted for
approximately 89 percent of all of the services provided to IBM in 2003. In
2003, IBM continued to be the Company's largest customer, accounting for $53.9
million or 21.4 percent of 2003 consolidated revenue, $51.9 million or 19.7
percent of 2002 consolidated revenue, and $78.3 or 24.5 percent of 2001
consolidated revenue. The Company expects to continue to derive a significant
portion of its revenue from IBM in 2004 and in future years. While a decline in
revenue from IBM would have a negative effect on the Company's revenues and
profits, the Company believes a simultaneous loss of all IBM business is
unlikely to occur due to the diversity of the projects performed for IBM and the
number of locations and divisions involved.

The Company has registered its symbol and logo with the U.S. Patent and
Trademark Office. It has entered into agreements with various software and
hardware vendors from time to time in the normal course of business, none of
which are material to the business.

No employees are covered by a collective bargaining agreement or are represented
by a labor union. CTG is an equal opportunity employer.

PRICING AND BACKLOG

The majority of CTG's services are performed on a time-and-materials basis.
Rates vary based on the type and level of skill required by the customer, as
well as geographic location. Agreements for work performed on a
time-and-materials basis generally do not specify any dollar amount as services
are rendered on an "as required" basis.

The Company performs a portion of its business on a monthly fee basis, as well
as a small portion of its project business on a fixed-price basis. These
contracts generally have different terms and conditions regarding cancellation
and warranties, and are usually negotiated based on the unique aspects of the
project. Contract value for fixed-price contracts is generally a function of the
type and level of skills required to complete the related project and the risk
associated with the project. Risk is a function of the project deliverable,
completion date and CTG's management and staff performance. Fixed-price
contracts accounted for under the percentage of completion method represented
approximately three percent of 2003, two percent of 2002, and one percent of
2001 total consolidated revenues, respectively. Revenue from all fixed-price
contracts, including those accounted for under the percentage of completion
method and on a monthly fee basis, represented 13 percent, 14 percent, and 12
percent of consolidated revenue in 2003, 2002, and 2001, respectively. As of
December 31, 2003 and 2002, the backlog for fixed-price and all managed-support
contracts was approximately $75.5 million and $49.6 million, respectively.
Approximately 44 percent of the December 31, 2003 backlog of $75.5 million, or
$33.1 million, is expected to be earned in 2004. Of the $49.6 million of backlog
at December 31, 2002, approximately 73 percent, or $36.4 million was earned in
2003. Revenue is subject to seasonal variations, with a minor downturn in months
of high vacation and legal holidays (July, August, and December). Backlog does
not tend to be seasonal, however, it does fluctuate based upon the timing of
long-term contracts.
 

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