1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5519
------
CDI CORP.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2394430
- - - ------------------------- -----------------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification Number)
organization)
1717 Arch Street, 35th Floor, Philadelphia, PA 19103-2768
----------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (215) 569-2200
--------------
Indicate 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
----- -----
Outstanding shares of each of the Registrant's classes of common
stock as of October 28, 1994 were:
Common stock, $.10 par value 19,714,928 shares
Class B common stock, $.10 par value None
Exhibit Index is on page 11
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2
PART 1. FINANCIAL INFORMATION
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
September 30, December 31,
Assets 1994 1993
- - - ------ ------------- ------------
Current assets:
Cash $ 5,261 20,361
Accounts receivable, less allowance
for doubtful accounts of $2,607 -
September 30, 1994; $1,785 -
December 31, 1993 218,319 168,051
Prepaid expenses 4,481 4,581
------- -------
Total current assets 228,061 192,993
Fixed assets, at cost:
Land 2,951 3,377
Buildings 9,829 11,179
Computer-aided design systems 24,723 24,554
Equipment and furniture 76,002 70,965
Leasehold improvements 12,188 11,053
------- -------
125,693 121,128
Accumulated depreciation 83,790 78,442
------- -------
Net fixed assets 41,903 42,686
Deferred income taxes 2,400 1,724
Goodwill and other intangible assets 22,432 23,791
Other assets 5,488 5,516
------- -------
$ 300,284 266,710
======= =======
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3
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
September 30, December 31,
Liabilities and Shareholders' Equity 1994 1993
- - - ------------------------------------ ------------- ------------
Current liabilities:
Current portion of long-term debt $ - 16,000
Obligations not liquidated because
of outstanding checks 8,738 4,038
Accounts payable 12,186 6,836
Withheld payroll taxes 1,318 1,425
Accrued expenses 57,603 46,731
Currently payable income taxes 10,877 7,516
Deferred income taxes 6,300 2,525
------ ------
Total current liabilities 97,022 85,071
Long-term debt 68,338 62,021
Deferred compensation 3,048 2,649
Minority interests 334 466
Shareholders' equity:
Preferred stock, $.10 par value -
authorized 1,000,000 shares; none
issued - -
Common stock, $.10 par value -
authorized 100,000,000 shares;
issued 19,739,983 shares 1,974 1,974
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none
issued - -
Additional paid-in capital 11,361 11,361
Retained earnings 118,798 103,761
Less common stock in treasury, at cost -
25,055 shares - September 30, 1994;
25,155 shares - December 31, 1993 (591) (593)
------- -------
Total shareholders' equity 131,542 116,503
------- -------
$ 300,284 266,710
======= =======
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4
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
Quarter ended Nine months ended
September 30, September 30,
--------------- -----------------
1994 1993 1994 1993
------- ------- ------- -------
Revenues $ 288,700 232,735 802,832 683,736
Cost of operations 263,343 216,383 736,990 636,487
------- ------- ------- -------
Gross profit 25,357 16,352 65,842 47,249
General and administrative
expenses 13,091 10,553 37,525 35,257
------- ------- ------- -------
Operating profit 12,266 5,799 28,317 11,992
Interest expense 1,068 961 2,936 2,871
------- ------- ------- -------
Earnings before income taxes
and minority interests 11,198 4,838 25,381 9,121
Income taxes 4,606 1,849 10,279 3,648
------- ------- ------- -------
Earnings before minority
interests 6,592 2,989 15,102 5,473
Minority interests (40) 47 65 62
------- ------- ------- -------
Net earnings $ 6,632 2,942 15,037 5,411
======= ======= ======= =======
Per share $ .34 .15 .76 .27
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5
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Nine months ended
September 30,
-----------------
1994 1993
------ ------
Operating activities:
Net earnings $ 15,037 5,411
Minority interests 65 62
Depreciation 8,836 9,204
Amortization of intangible assets 1,775 2,243
Imaging business reserve - (224)
Income tax provision greater than
tax payments and refunds 6,460 556
Change in assets and liabilities
net of effects from acquisitions:
(Increase) in accounts receivable (50,475) (1,757)
Increase in payables and accrued
expenses 16,115 3,463
Other 298 64
------ ------
(1,889) 19,022
------ ------
Investing activities:
Purchases of fixed assets (9,607) (9,444)
Acquisitions net of cash acquired (175) (4,040)
Other 1,554 189
------ ------
(8,228) (13,295)
------ ------
Financing activities:
Payments long-term debt (9,683) (13,217)
Obligations not liquidated because
of outstanding checks 4,700 3,369
------ ------
(4,983) (9,848)
------ ------
Decrease in cash (15,100) (4,121)
Cash at beginning of period 20,361 6,245
------ ------
Cash at end of period $ 5,261 2,124
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6
CDI CORP. AND SUBSIDIARIES
Comments to Financial Statements
Earnings per share of common stock are based on the weighted
average number of shares of common stock and dilutive common share
equivalents, which arise from stock options, outstanding during the
periods. No further dilution resulted from a computation of fully
diluted earnings per share. The number of shares used to compute
earnings per share for the third quarter and nine months of 1994 was
19,757,631 and 19,767,407 shares, respectively. For the third quarter
and nine months of 1993, 19,727,088 and 19,724,683 shares,
respectively, were used.
Revenues and operating profit attributable to the business
segments of the Company for the third quarter and nine months ended
September 30, 1994 and 1993 follows ($000s):
Third quarter Nine months
1994 1993 1994 1993
------- ------- ------- -------
Revenues:
Technical Services $ 243,016 195,583 675,357 576,417
Temporary Services 31,153 28,377 89,663 82,728
Management Recruiters 14,531 8,775 37,812 24,591
------- ------- ------- -------
$ 288,700 232,735 802,832 683,736
======= ======= ======= =======
Operating profit:
Technical Services $ 10,450 5,383 24,604 12,014
Temporary Services 1,316 690 3,155 1,315
Management Recruiters 2,367 1,309 5,526 3,046
Corporate expenses (1,867) (1,583) (4,968) (4,383)
------- ------- ------- -------
$ 12,266 5,799 28,317 11,992
======= ======= ======= =======
During 1994, 100 shares of common stock held in treasury were
reissued. These shares had a cost of $2,000.
Certain prior year's amounts have been reclassified to conform to
current year presentation.
These comments contain only the information which is required by
Form 10-Q. Further reference should be made to the comprehensive
disclosures contained in the Company's annual report on Form 10-K for
the year ended December 31, 1993.
The financial statements included in this report reflect all
adjustments which, in the opinion of management, are necessary for a
fair statement of the results for the periods presented.
<PAGE>
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Consolidated revenues for the nine months and quarter ended
September 30, 1994 were 17% and 24% higher, respectively, compared to
the same period a year ago. Operating profit for the nine months and
third quarter in 1994 was 3.5% and 4.2% of revenues, respectively,
compared to 1.8% and 2.5% for the nine months and third quarter in
1993.
Technical Services' revenues for the nine months and third
quarter of 1994 grew 17% and 24%, respectively, from last year's
comparable periods. Operating profit margins for the nine months and
third quarter of 1994 were 3.6% and 4.3%, respectively, vs. 2.1% and
2.8% for last year's comparable periods.
CDI's Technical Services, which accounts for approximately 85% of
consolidated revenues, is benefitting from the improvement in economic
conditions. The continued growth in the use of outsourcing is also
helping current business. The ability of CDI's customers to convert
fixed costs to variable costs and thus manage costs more effectively
continues to provide a long-term stimulus for business. Although
business is good in many of the industrial sectors in which CDI
operates, performance in the automotive, computers, electronics and
telecommunications fields is especially strong compared with a year
ago. Chemicals/petrochemicals, however, remain somewhat flat.
CDI and its Technical Services' customers have begun to work more
closely together in a partnering mode, whereby CDI provides a broad
range of personnel requirements over a longer time horizon.
Temporary Services' revenues for the nine months and third
quarter of 1994 were 8% and 10% higher, respectively, compared to the
same period a year ago. Operating profit margins for the nine months
and third quarter of 1994 were 3.5% and 4.2%, respectively, vs. 1.6%
and 2.4% for last year's comparable periods. The growing economy is
having a favorable impact in the Todays Temporary office and clerical
personnel business.
Management Recruiters' revenues were up 54% for the nine months
of this year and up 66% compared to last year's third quarter.
Operating profit margins for the nine months and third quarter of 1994
were 14.6% and 16.3%, respectively, compared to 12.4% and 14.9%,
respectively, for the same periods in 1993.
<PAGE>
8
The growing strength of the economy is also evident in CDI's
Management Recruiters. For the first time in several years, companies
are actively expanding management to better accommodate both current
and anticipated business conditions. In addition, new product
offerings, including recently introduced InterExec, a temporary middle
manager service, have produced increased revenues over and above
improvements in Management Recruiters' traditional middle management
search business.
Financial Condition
-------------------
The ratio of current assets to current liabilities was 2.4 to 1
as of September 30, 1994 and 2.3 to 1 as of December 31, 1993. The
ratio of long-term debt to total capital (long-term debt plus
shareholders' equity) was 34% as of September 30, 1994, compared to
35% at December 31, 1993. The abnormally high cash balance on
December 31, 1993 was reduced early in 1994 coincident with the
repayment of $16 million of current debt that was outstanding on
December 31, 1993. Working capital has increased in 1994 primarily as
a result of the higher levels of business at which the Company has
been operating. The Company believes that capital resources available
from operations and financing arrangements are adequate to support the
Company's businesses.
<PAGE>
9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.a. CDI Corp. Non-Qualified Stock Option and Stock
Appreciation Rights Plan, incorporated herein by
reference to the EDGAR filing made by the
Registrant on March 21, 1994 in connection with
the Registrant's definitive Proxy Statement for
its annual meeting of shareholders held on May 3,
1994 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
b. Employment Agreement dated May 1, 1973 by and
between Comprehensive Designers, Inc. and Walter
R. Garrison, incorporated herein by reference to
Exhibit 10.e. to Registrant's registration state-
ment on Form 8-B (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
c. Employment Agreement dated April 1, 1963, as
amended and restated effective May 1, 1986, by
and between Registrant and Christian M. Hoechst,
incorporated herein by reference to Registrant's
report on Form 10-K for the year ended April 30,
1987 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
d. Employment Agreement dated April 30, 1973 by and
between Comprehensive Designers, Inc. and Edgar D.
Landis, incorporated herein by reference to
Exhibit 10.g. to Registrant's registration state-
ment on Form 8-B (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
e. Supplemental Pension Agreement dated April 11,
1978 between CDI Corporation and Walter R.
Garrison, incorporated herein by reference to the
Registrant's report on Form 10-K for the year
ended December 31, 1989 (File No. 1-5519).
(Constitute a management contract or compensatory
plan or arrangement)
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
(b) The Registrant was not required to file a Form 8-K during
the quarter ended September 30, 1994.
<PAGE>
10
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 thereunto duly authorized.
CDI CORP.
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November 4, 1994 By: /s/ Edgar D. Landis
-----------------------------------
EDGAR D. LANDIS
Executive Vice President, Finance
(Duly authorized officer and
principal financial officer of
Registrant)
<PAGE>
11
INDEX TO EXHIBITS
Number Exhibits Page
- - - ------ -------------------------------------------------- ----
10.a. CDI Corp. Non-Qualified Stock Option and Stock
Appreciation Rights Plan, incorporated herein by
reference to the EDGAR filing made by the
Registrant on March 21, 1994 in connection with
the Registrant's definitive Proxy Statement for
its annual meeting of shareholders held on May 3,
1994 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
b. Employment Agreement dated May 1, 1973 by and
between Comprehensive Designers, Inc. and Walter
R. Garrison, incorporated herein by reference to
Exhibit 10.e. to Registrant's registration state-
ment on Form 8-B (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
c. Employment Agreement dated April 1, 1963, as
amended and restated effective May 1, 1986, by
and between Registrant and Christian M. Hoechst,
incorporated herein by reference to Registrant's
report on Form 10-K for the year ended April 30,
1987 (File No. 1-5519). (Constitutes a manage-
ment contract or compensatory plan or arrangement)
d. Employment Agreement dated April 30, 1973 by and
between Comprehensive Designers, Inc. and Edgar D.
Landis, incorporated herein by reference to
Exhibit 10.g. to Registrant's registration state-
ment on Form 8-B (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
e. Supplemental Pension Agreement dated April 11,
1978 between CDI Corporation and Walter R.
Garrison, incorporated herein by reference to the
Registrant's report on Form 10-K for the year
ended December 31, 1989 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
11. Statement re computation of per share earnings. 12
27. Financial Data Schedule. 13
<PAGE>
12
EXHIBIT 11
Statement Re Computation of Per Share Earnings
Quarter ended Nine months ended
September 30, September 30,
--------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
Primary
- - - -------
Net earnings $ 6,632,000 2,942,000 15,037,000 5,411,000
========== ========== ========== ==========
Common and common
equivalent shares
outstanding:
Weighted average
common shares
outstanding
during the period 19,714,903 19,714,828 19,714,858 19,714,738
Assumed exercise of
stock options 42,728 12,260 52,549 9,945
---------- ---------- ---------- ----------
19,757,631 19,727,088 19,767,407 19,724,683
========== ========== ========== ==========
Earnings per share of
common stock $ .34 .15 .76 .27
Fully diluted
- - - -------------
Net earnings $ 6,632,000 2,942,000 15,037,000 5,411,000
========== ========== ========== ==========
Common and common
equivalent shares
outstanding:
Weighted average
common shares
outstanding
during the period 19,714,903 19,714,828 19,714,858 19,714,738
Assumed exercise of
stock options 42,728 14,351 52,549 14,351
---------- ---------- ---------- ----------
19,757,631 19,729,179 19,767,407 19,729,089
========== ========== ========== ==========
Earnings per share of
common stock $ .34 .15 .76 .27
<PAGE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 5,261
<SECURITIES> 0
<RECEIVABLES> 220,926
<ALLOWANCES> 2,607
<INVENTORY> 0
<CURRENT-ASSETS> 228,061
<PP&E> 125,693
<DEPRECIATION> 83,790
<TOTAL-ASSETS> 300,284
<CURRENT-LIABILITIES> 97,022
<BONDS> 68,338
<COMMON> 1,974
0
0
<OTHER-SE> 129,568
<TOTAL-LIABILITY-AND-EQUITY> 300,284
<SALES> 0
<TOTAL-REVENUES> 802,832
<CGS> 0
<TOTAL-COSTS> 736,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,936
<INCOME-PRETAX> 25,381
<INCOME-TAX> 10,279
<INCOME-CONTINUING> 15,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,037
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
