1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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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
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CDI CORP.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2394430
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1717 Arch Street, 35th Floor, Philadelphia, PA 19103-2768
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 569-2200
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common stock, $.10 par value New York Stock Exchange
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(Title of each class) (Name of exchange on which registered)
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
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Indicate 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 or any amendment to this Form 10-K. [ X ]
The aggregate market value as of February 15, 1995 of voting stock
of the Registrant held by shareholders other than officers, directors
or known beneficial owners of 10% or more of such stock of the
Registrant was:
Common stock, $.10 par value $213,292,000
Class B common stock, $.10 par value Not applicable<PAGE>
The outstanding shares of each of the Registrant's classes of
common stock as of February 15, 1995 were:
Common stock, $.10 par value 19,714,928 shares
Class B common stock, $.10 par value None
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into
Documents which incorporated
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Proxy Statement for Annual Meeting
of Shareholders to be Held May 2, 1995 Part III
<PAGE>
2
PART I
Item 1. BUSINESS.
BUSINESS SEGMENTS
The following table sets forth (in thousands) the revenues and
operating profit attributable to the business segments of the
Registrant and its consolidated subsidiaries during the years indicated
and the identifiable assets attributable to each segment as of the end
of each such year.
Years ended
December 31,
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1994 1993 1992
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Revenues:
Technical Services $ 924,069 776,446 672,723
Temporary Services 121,180 111,739 151,084
Management Recruiters 52,350 33,107 31,279
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$ 1,097,599 921,292 855,086
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Operating profit (loss):
Technical Services $ 35,433 16,202 12,349
Temporary Services 5,002 2,015 (641)
Management Recruiters 7,240 3,856 3,332
Corporate expenses (6,749) (5,719) (5,076)
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$ 40,926 16,354 9,964
========= ======= =======
Identifiable assets:
Technical Services $ 260,596 215,640 213,544
Temporary Services 23,013 23,648 25,392
Management Recruiters 8,310 5,486 4,877
Corporate 5,756 21,936 4,022
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$ 297,675 266,710 247,835
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TECHNICAL SERVICES
The Registrant's Technical Services segment, which management
believes is the nation's largest organization of its kind, locates,
recruits and hires a wide variety of technical personnel and provides
their services to customers on a temporary or project basis. Customers
retain Technical Services for expansion and development programs, to
staff special projects, to meet peak period manpower needs, to provide
skills which the customers' employees may not possess or which are not
available locally and to staff non-core, peripheral functions. During
the year ended December 31, 1994, Technical Services provided these
services to approximately 3,000 customers.
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Technical Services has capabilities in a broad range of skills and
disciplines and supplies services to fulfill a wide variety of customer
requirements. Much of its business, including engineering, drafting
and designing services, is performed for large industrial corporations
in the aircraft/aerospace, automotive, chemicals, electronics,
industrial equipment, information processing, marine, petroleum/
petrochemicals, power/energy, telecommunications and other fields.
Technical Services' customers are widely dispersed geographically.
During the year ended December 31, 1994, approximately 12% of
the segment's revenues were derived from various divisions of General
Motors Corporation and its subsidiaries, compared with 12% in 1993,
15% in 1992, 21% in 1991 and 31% in 1990. The significant decline in
business with General Motors in the early 1990s, and particularly in
1991, had a material adverse effect on the operations of the
Registrant. During the year ended December 31, 1994, approximately 3%
of the segment's revenues were derived directly from prime contracts
with the United States Government and an additional approximately 10%
of the segment's revenues were derived from subcontracts for the United
States Government. Most of the Government business is defense related.
The outlook for defense is uncertain in the years ahead. Further
significant losses of business with General Motors Corporation and
subsidiaries or a significant loss of business with the United States
Government and its prime contractors would have a material adverse
effect on the operations of the Registrant.
Services rendered by Technical Services generally are not of a
concept-originating nature, but, rather, are directed toward the
implementation of a customer's previously conceived concepts and
programs. Services are performed both in customers' facilities
("in-customer") and in Technical Services' own facilities ("in-house")
depending upon industry practice and the needs and preferences of
customers. During the year ended December 31, 1994, approximately
70% of Technical Services' revenues were generated through in-customer
work with the remaining 30% generated in-house. As of December 31,
1994 Technical Services had approximately 14,600 employees providing
services in-customer and 3,600 employees providing services in-house.
In-customer services are rendered by employees who are hired by
Technical Services and assigned to work on a specific project of a
customer. The period of assignment depends upon the duration of the
need for the skills possessed by an individual employee. At the end of
an assignment, an employee is either assigned to perform services with
another customer, or employment is terminated.
Technical personnel are attracted to this type of employment by
the opportunity to frequently work on "state-of-the-art" projects and
by the geographic and industry diversity of the projects. In addition,
technical personnel may be compensated at higher rates than the hourly
rate equivalent paid to personnel with similar backgrounds and
experience who are employed by industry or government. In many
instances Technical Services' employees work substantial overtime.
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4
When performing services on an in-customer basis, Technical
Services personnel so assigned are on Technical Services' payroll
and are subject to its administrative control. The customer retains
technical and supervisory control over the performance of in-customer
services. When services are provided to staff and manage non-core
peripheral functions of customers, Technical Services provides
supervision for employees and may have greater responsibilities for
performance.
When services are performed in-house, Technical Services generally
provides supervision for employees, and may have increased
responsibility for the performance of work which is monitored in
conjunction with customer personnel. Typically, in-house facilities
are established only at locations where there is a reasonably
concentrated customer base that uses Technical Services continuously.
In-house operations offer services from one location to customers
in the vicinity of such operations. The demand for in-house services
is generally more constant than at a customer's facility.
Consequently, the duration of employment of employees working in-house
is usually greater than for employees working in-customer. Supervisory
personnel at in-house facilities are generally long-term employees and
are important in the continuing relationship with customers. Technical
Services' largest in-house operations provide services in the automo-
tive, chemicals/petrochemicals and marine fields.
At its locations serving the automotive industry, Technical
Services operates a prototype-build facility and assembly-line-tool
fabrication facilities. During the year ended December 31, 1994,
these operations on a combined basis provided approximately 10% of
the segment's revenues. During 1994, the prototype-build facility
operated at its approximate capacity while the assembly-line-tool
fabrication facilities operated below capacity.
Industry continues to expand its use of computerized systems
to do engineering and design work. In order to continue to provide
state-of-the-art services to its customers, Technical Services has
made substantial investments in computer-aided design/computer-aided
manufacturing ("CAD/CAM") systems supporting a wide range of
disciplines at its in-house engineering facilities. The computer
technology surrounding these systems continues to change rapidly.
It is expected that additional fixed capital investments in CAD/CAM
equipment and software will continue to be made.
The ability of Technical Services to locate and hire personnel
with the capabilities required by customers is critical to its
operations. Such personnel have prior experience in their area of
expertise. During periods of high demand for specific skills, it is
not uncommon for Technical Services to experience pressure to pay
higher wage rates or lose employees to competitors who will pay such
rates in an attempt to attract personnel with the required skills.
To assist in fulfilling its personnel needs, a computerized retrieval
system facilitates the rapid selection of resumes on file so that
customers' requirements around the country may be filled quickly.
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5
Pricing under most contracts between Technical Services and its
customers is based on prevailing hourly rates of pay, and contracts
generally (i) do not obligate the customer to pay for any fixed number
of hours, (ii) give the customer the right to vary the number of
technical personnel assigned and (iii) give both the customer and the
segment the right to terminate the contract, usually on short notice.
Similarly, Technical Services has the right to terminate the employment
of its technical employees without notice. Some of these customer
contracts contain limitations on the maximum cost to the customer
expressed either in a dollar amount or a maximum number of worker hours
to be provided.
Technical Services operated through a network of approximately
130 sales/recruiting offices and in-house engineering/drafting
facilities which are situated in major markets throughout the United
States, with two offices in Canada and seven offices located overseas.
Each office is responsible for determining the potential market for
services in its geographic and industrial area, and developing that
market through personal contact with prospective and existing
customers. Additionally, Technical Services' operating management
stays abreast of emerging demand for services so that efforts can be
expanded or redirected to take advantage of potential business either
in established or new marketing areas.
Customers typically invite several companies to bid for contracts,
which are awarded primarily on the basis of price, prior performance
and previous experience in successful project completion. Many times
customers on in-customer work grant contracts to more than one company
to perform work on the same project. Because prices charged to
customers are primarily based upon prevailing wage rates in the market-
place, customers are aware of these rates and are readily able to judge
the reasonableness of competing bids. Consequently, Technical Services
competes for contracts based upon price and performance capability and
also for the available personnel with the requisite capabilities.
Reliable statistical information on the technical services
industry is not available. It is estimated that approximately 600
companies are engaged in this business generating combined annual
revenues of approximately $6.5 billion. No single company or small
group of companies is dominant. Competition in the industry is intense
both from national as well as smaller local or regional companies, some
of which serve only selected industries.
TEMPORARY SERVICES
The Registrant's Temporary Services segment provides clerical,
secretarial, office support, new product demonstration and survey and
some semi-skilled light industrial personnel to customers on a
temporary basis. The Registrant has de-emphasized light industrial
during recent years.
Customers retain Temporary Services to meet peak period manpower
needs, to temporarily replace employees on vacation and to staff
special projects. During the year ended December 31, 1994, these
services were provided to approximately 11,000 customers.
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6
Services are performed in customers' facilities by Temporary
Services' employees who are hired to work on customers' projects.
The period of assignment depends upon the duration of the need for
the skills possessed by an individual employee. At the end of an
assignment, an employee is assigned to perform services with another
customer, or employment is terminated. Temporary Services personnel
so assigned are on Temporary Services' payroll and are subject to its
administrative control. The customer retains supervisory control and
responsibility for the performance of the employee's services. As of
December 31, 1994 Temporary Services had approximately 7,000 employees
providing services to customers.
The ability of Temporary Services to locate and hire personnel
with capabilities required by customers is critical to its operations.
Pricing under contracts between Temporary Services and its
customers is based on prevailing hourly rates of pay, and contracts (i)
do not obligate the customer to pay for any fixed number of hours, (ii)
give the customer the right to vary the number of temporary personnel
assigned and (iii) give both the customer and the segment the right to
terminate the contract on short notice. Similarly, Temporary Services
has the right to terminate the employment of its temporary employees
without notice.
Competition for contracts is based upon price, successful
recruiting of personnel with requisite capabilities and, in numerous
instances, prior experience with customers.
Temporary Services operates through a network of approximately 90
sales and recruiting offices, 29 of which are franchised, situated in
the United States and Canada. Each office is responsible for
determining the potential market for services in its geographic area
and developing that market through personal contact with prospective
and existing customers.
Revenues from both company and franchised offices are reflected in
the segment's revenues. Temporary Services employs all the temporary
personnel, including those recruited by the franchised offices, and
also bears the responsibility for billing services to customers and for
collection of billings. Franchisees are responsible for selling
services to customers, recruiting temporary personnel and their
administrative costs. Franchisees are paid a portion of the gross
profit on their accounts by Temporary Services.
Industry leaders Kelly Services, Inc. and Manpower Inc., each has
U.S. annual revenues exceeding $2 billion. Temporary Services competes
with these leaders as well as with a second tier of approximately a
dozen companies in the $100 million to $1 billion revenues range and
additionally with hundreds of companies in regional and local markets.
The Registrant estimates that companies in those categories of the
temporary services industry that it addresses generate annual revenues
of approximately $11.5 billion.
<PAGE>
7
MANAGEMENT RECRUITERS
The Registrant's Management Recruiters segment is believed by
management to be the nation's largest professional contingency search
and recruiting organization. This segment primarily recruits manage-
ment, technical, sales and clerical personnel for permanent employment
positions. Candidates are recruited for many different capacities
including accounting, administrative, data processing, managerial,
personnel, production, research and development, sales, supervision
and technical. Fees are paid by the customer-employer only when a
candidate is hired.
Services are performed solely for employers. The fees paid by
the employers are generally a percentage of the annual compensation to
be paid to the new employee. A fee is earned only after a qualified
candidate has been hired and remains employed for a trial period,
generally 30 days. There is no additional cost for Management
Recruiters' services. Management Recruiters markets its services to
employers through personal and telephone contact, direct mail and
national advertising in newspapers and periodicals.
Management Recruiters has recently launched several new product
lines complimentary to its search and recruiting activities. They
include placing professional, executive, middle management and clerical
personnel on a temporary basis, video conferencing services and
outplacement services.
Management Recruiters has developed its temporary placement
services with an objective of permanently placing the personnel with
the customer-employer. Fee schedules are developed to provide for
reduced rates on permanent placement fees in recognition of the
temporary services fees paid prior to permanent employment. This
arrangement provides both the employee and employer the opportunity
to work with one another prior to making a decision on permanent
employment. Management Recruiters does, however, provide these
services to customers in situations where eventual permanent employment
is not contemplated. During 1994, the latter category constituted the
majority of the revenues generated. Revenues derived from company-
operated and franchised offices for these temporary services are
reflected in the segment's revenues. Management Recruiters employs
all the personnel and has the responsibility for billing of services to
customers. Franchisees are paid a portion of the gross profit on their
accounts by Management Recruiters.
As of December 31, 1994 Management Recruiters had 555 franchised
offices and 45 company-owned offices throughout the United States,
providing services to both large and small employers in virtually all
industries, including nearly all of the Fortune 1,000 companies. The
broad geographic scope of operations enables franchisees and company-
owned offices to provide nationwide recruiting and matching of
employers with job candidates. The network utilizes an inter-office
referral system on both national and regional levels which enables all
offices to cooperate in fulfilling a customer's requirements.
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8
Franchisees pay an initial fee generally approximating $45,000 to
acquire a franchise. The fee is designed to cover the cost of
establishing and bringing a new franchise into the system. Franchisees
also pay ongoing royalties based on a percentage of the franchisee's
placement fees. Franchisees benefit from Management Recruiters'
expertise in the business, and from its national marketing, public
relations and advertising campaigns. Further, they receive extensive
pre-opening training and start-up assistance on site, such as help in
office location and lease negotiation. Franchisees also have the
rights to use Management Recruiters' trade names, trademarks, the
inter-office referral system, operating techniques, advertising
materials, sales programs, video and live interactive video training
programs, computer programs, manuals and forms.
A large number of companies are engaged in the recruitment
business and Management Recruiters encounters competition from many
of these. Employers commonly offer to more than one company the
opportunity to find qualified candidates for a position making
competition for qualified individuals intense. Management Recruiters'
ability to obtain placements with employers is determined more on its
ability to find qualified candidates than on its fee structure.
EMPLOYEES
At December 31, 1994, the Registrant had approximately 1,500 sales
and administrative staff employees. The Registrant believes that its
relations with its employees are generally good.
Item 2. PROPERTIES.
The Technical Services segment had approximately 130 facilities
throughout the United States, two facilities in Canada and seven
facilities in Europe, occupying a total of approximately 1.6 million
square feet of space. Approximately 1.2 million square feet was
devoted to in-house technical services, prototype-build and assembly-
line-tool fabrication and the balance to sales, marketing and
administrative functions. Facilities containing 220,000 square feet
were owned. The remaining facilities were leased under terms generally
extending up to five years.
The Temporary Services business segment occupied 110,000 square
feet of office space at approximately 60 locations for its company-
owned temporary services offices. These facilities are leased for
varying terms generally extending up to eight years. Temporary
Services also has 29 franchised offices. Franchisees enter into their
own leases for which the segment assumes no obligation.
The Management Recruiters business segment occupied 120,000 square
feet of office space at 45 locations, primarily for its company-owned
personnel placement offices. These facilities were leased for varying
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9
terms, the majority of which extend up to five years. Management
Recruiters also had 555 franchised offices. Franchisees enter into
their own leases for which the segment assumes no obligation.
The Registrant's corporate headquarters are located in
Philadelphia, Pennsylvania where office space of approximately 30,000
square feet is leased.
Facilities are considered suitable and adequate for present levels
of operation.
Item 3. LEGAL PROCEEDINGS.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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10
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Stock price and other information regarding the Registrant's
common stock is for the years ended December 31, 1994 and 1993. The
Registrant's common stock is traded on the New York Stock Exchange.
1994 1993
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High Low High Low
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First quarter 14-1/2 10-1/4 10-3/8 8-1/4
Second quarter 15 10-3/8 8-3/4 6-7/8
Third quarter 14-1/8 12-1/4 11-1/4 7-3/8
Fourth quarter 19-7/8 12-7/8 13-1/8 8-5/8
No cash dividends were declared during the years ended December
31, 1994 and 1993. The Company has no present intention of paying
cash dividends during the year ending December 31, 1995.
Shareholders of record on February 15, 1995 numbered 714. The
714 counts each street name account as one shareholder, when, in fact,
such an account may represent multiple owners. Taking into account
such multiple owners, the total number of shareholders approximated
4,500.
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Item 6. SELECTED FINANCIAL DATA.
Following is Selected Financial Data for the years ended December
31, 1994, 1993, 1992, 1991 and 1990. The data presented is in
thousands, except per share data.
1994 1993 1992 1991 1990
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Earnings Data
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Revenues $ 1,097,599 921,292 855,086 768,089 921,220
Earnings (loss) from
continuing operations $ 22,371 7,830 3,447 (7,617) 12,046
Loss from discontinued
operations - - - - (1,677)
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Net earnings (loss) $ 22,371 7,830 3,447 (7,617) 10,369
========= ======= ======= ======= =======
Per share:
Earnings (loss) from
continuing operations $ 1.13 .40 .17 (.39) .61
Loss from discontinued
operations $ - - - - (.09)
Net earnings (loss) $ 1.13 .40 .17 (.39) .53
Cash dividends $ - - - - -
Balance Sheet Data
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Total assets $ 297,675 266,710 247,835 229,029 257,656
Long-term debt $ 58,798 62,021 72,190 67,117 61,203
Shareholders' equity $ 138,877 116,503 108,668 105,132 112,747
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations, year ended December 31, 1994 vs. year ended
December 31, 1993
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Consolidated revenues advanced 19% over the prior year, and
operating profit margins on revenues improved to 3.7% from 1.8% in
1993.
Technical Services segment revenues, which in 1994 represented 84%
of the Company's consolidated revenues, grew 19% over the prior year.
Operating profit margins for Technical Services were 3.8% in 1994
compared with 2.1% in 1993. The growth of revenues was due to strong
demand in most of the industrial markets served by the segment.
Revenues in the automotive and telecommunications markets were well
ahead of a year ago, as were aircraft/aerospace, electronics and
power/energy. Demand in the chemical/petrochemicals markets, however,
fell somewhat short of a year ago. The customer base in automotive is
more diversified than it was just a few years back, and the customer
roster is expanding across all sectors served by the Company. An
important impetus for growth in Technical Services was a continued rise
in and acceptance of the concept of outsourcing. The growth in the
U.S. economy also favorably impacted the segment. Each of the
Technical Services segment's many contracts is individually price
negotiated, and as a result the price-to-direct cost mix is constantly
changing. Its cost structure is generally variable. In periods of
substantial increases in revenues, such as in 1994, operating profit
margins can widen because the segment can take advantage of certain
economies of scale in its support cost structure. Conversely, in
periods of decline in demand, such as in 1991, operating results can
deteriorate quickly because realization of cost savings typically lags
implementation of downsizing and cost reduction programs. The segment
has made investments in fixed capital equipment. It is expected that
investments will continue for assets such as CAD/CAM hardware and
software.
The Company's Temporary Services segment operates under the name
of Todays Temporary. The Company acquired Todays Temporary in late
1991. The segment's revenues, which in 1994 represented 11% of the
Company's consolidated revenues, grew 8% over the prior year.
Operating profit margins for Temporary Services were 4.1% in 1994
compared with 1.8% in 1993. The growth in the U.S. economy favorably
impacted the segment. Additionally, the segment continued to improve
its performance via better margins and cost containment following the
integration of the old CDI Temporary Services branches into the Todays
operations network. The Temporary Services segment is not capital
intensive.
Management Recruiters' revenues, which in 1994 represented 5% of
consolidated revenues, grew 58% over the prior year. Operating profit
margins for Management Recruiters were 13.8% in 1994 compared with
11.6% in 1993. Management Recruiters' new product offerings, including
a temporary middle manager service and a temporary office/clerical
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13
service, gave this segment a significant boost in revenues over and
above improvements in its traditional middle management search
business. The growth in the U.S. economy also favorably impacted
the segment. The segment's new temporary services are structured to
compliment its search business and are uniquely designed to offer a
customer the services of personnel on a temporary basis who are
oftentimes candidates for permanent positions with that customer.
The segment is generally not price sensitive and it is not capital
intensive.
Results of Operations, year ended December 31, 1993 vs. year ended
December 31, 1992
- ------------------------------------------------------------------
Consolidated revenues advanced 8% over the prior year, and
operating profit margins on revenues improved to 1.8% from 1.2% in
1992.
Technical Services segment revenues, which in 1993 represented 84%
of the Company's consolidated revenues, grew 15% over the prior year.
Operating profit margins for Technical Services were 2.1% in 1993
compared with 1.8% in 1992. Revenue levels in all of CDI's important
Technical Services markets improved in 1993 over 1992. In the
automotive field, revenues were ahead of 1992 by 13%. However, the
segment's automotive business with its largest customer, General
Motors, declined moderately. Revenues in the chemicals/petrochemicals
field were up 13% for the year, but demand softened in certain spots
in the second half.
Todays Temporary, the Company's Temporary Services segment, made
progress in 1993 integrating the old CDI Temporary Services branches
into the Todays operations network. The Company had acquired Todays
in late 1991. The segment's revenues in 1993 declined 26% from 1992
because of the closure or sale in 1992 of certain underperforming CDI
Temporary branches and because the segment chose to purge much of CDI
Temporary's marginally profitable light industrial temporary services
business. These changes in business focus favorably affected profit
margins and resulted in a profitable year in 1993, reversing CDI
Temporary's loss pattern of the past several years.
Management Recruiters' revenues grew 6% in 1993 over the prior
year. Operating profit margins for Management Recruiters were 11.6%
in 1993 compared with 10.7% in 1992. Although the segment's middle-
management search and recruiting markets improved in 1993, they did
so off of a smaller base than existed before the early 1990s recession.
Results of Operations, year ended December 31, 1992 vs. year ended
December 31, 1991
- ------------------------------------------------------------------
Consolidated revenues advanced 11% over the prior year, and
operating profit margins on revenues improved to 1.2% compared with
a negative 0.6% in 1991.
Technical Services segment revenues, which in 1992 represented
79% of the Company's consolidated revenues, grew 12% over the prior
year. Operating profit margins for Technical Services were 1.8% in
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14
1992 compared with a negative 0.1% in 1991. Apart from the automotive
market, most Technical Services markets showed moderate but steady
improvement throughout the year, reflecting growing strength in the
U.S. economy. The segment's automotive operations, however, continued
to feel the effects of the pressures on that industry, and particularly
on General Motors, the segment's largest customer. The segment's
volume of business with General Motors in 1992 declined to 12% of
consolidated revenues, a drop of $125 million below the peak in 1990
when General Motors accounted for 25% of consolidated revenues.
Continued improvements in the segment's levels of business with
Chrysler, Ford and first tier automotive suppliers were not sufficient
to offset this decline. Additionally, fixed costs related to the
segment's pre-recession expansion of its automotive capacity continued
to be a drag on Technical Services' profits.
During 1992, the Company's Temporary Services segment undertook a
reorganization to convert many of its existing CDI Temporary branches
to the Todays Temporary network. Todays was acquired late in 1991.
In the reorganization, certain underperforming CDI Temporary branches
were closed or sold, and low-margin light industrial temporary services
business was phased down. Todays was the principal contributor to the
increase in revenues in 1992 over 1991, and Todays' profits offset part
of CDI Temporary's losses for the year.
Management Recruiters segment revenues declined 6% in 1992, but
operating profit margins improved to 10.7% from 8.5% a year ago. The
substantial thinning of middle-management ranks created fewer middle
management position openings. Despite the lower volume in 1992, cost
control measures and downsizing in 1990 and 1991 enabled the segment to
improve its profitability.
Inflation
- ---------
The Technical Services and Temporary Services business segments'
services are priced generally in close relationship with direct labor
costs. Management Recruiters' middle management search services are
priced as a function of salary levels of job candidates. In recent
years inflation has not been a meaningful factor.
Liquidity and Capital Resources
- -------------------------------
Expansions and contractions in the levels at which the Company's
businesses operate directly affect consolidated working capital, which
in turn has a direct relationship to total capital employed because of
the high concentration of total assets represented by current assets.
Working capital increased in 1994 primarily because of the higher
levels of business at which the Company was operating. The ratio of
current assets to current liabilities was 2.3 to 1 as of December 31,
1994 and 1993, compared with 2.9 to 1 as of December 31, 1992.
The Company's main sources of liquidity have been from operations
and from borrowings, including a revolving credit agreement and
short-term lines of credit with banks. The revolving credit agreement
provides for borrowings of up to $100 million. Long-term borrowings
outstanding under all agreements at December 31, 1994 were $59
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15
million. Considering the most restrictive of the limitations placed
on bank borrowings by the agreements, the available borrowing capacity
to the Company under the revolving credit agreement (using borrowings
outstanding as of December 31, 1994) was $52 million. These sources
have been adequate to support growth opportunities in the Company's
businesses. The consolidated ratio of long-term debt to total capital
(long-term debt plus shareholders' equity) was 30% as of December 31,
1994 compared with 35% as of December 31, 1993 and 40% as of December
31, 1992.
Current assets represent a high portion of consolidated total
assets. An important source of liquidity is the Company's large
current asset position with its concentration of highly liquid
receivables. This source could be tapped voluntarily by reducing
the volume of business accepted, thereby turning a portion of working
capital into cash. Similarly, when the Company's business levels
contract, such as during periods of economic decline, a portion of
working capital is turned into cash. The Company believes that the
public and private debt and equity markets would be currently available
as sources of additional capital.
On December 31, 1993, the Company had abnormally high cash
balances and current debt amounting to $16 million. Both cash and
current debt were reduced by $16 million in early 1994.
<PAGE>
16
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1994, 1993 and 1992
(In thousands, except per share data)
1994 1993 1992
--------- ------- -------
Revenues $ 1,097,599 921,292 855,086
Cost of operations 1,006,483 857,828 798,272
--------- ------- -------
Gross profit 91,116 63,464 56,814
General and administrative expenses 50,190 47,110 46,850
--------- ------- -------
Operating profit 40,926 16,354 9,964
Interest expense 4,111 3,727 4,103
--------- ------- -------
Earnings before income taxes and
minority interests 36,815 12,627 5,861
Income taxes 14,413 4,790 2,493
--------- ------- -------
Earnings before minority interests 22,402 7,837 3,368
Minority interests 31 7 (79)
--------- ------- -------
Net earnings $ 22,371 7,830 3,447
========= ======= =======
Net earnings per share $ 1.13 .40 .17
See accompanying notes to financial statements.
<PAGE>
17
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
------- ------- -------
Balance at beginning of year $ 103,761 95,931 92,484
Net earnings 22,371 7,830 3,447
------- ------- -------
Balance at end of year $ 126,132 103,761 95,931
======= ======= =======
See accompanying notes to financial statements.
<PAGE>
18
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(In thousands, except share data)
Assets 1994 1993
- ------ ------- -------
Current assets:
Cash $ 5,160 20,361
Accounts receivable, less allowance for
doubtful accounts of $3,184-1994;
$1,785-1993 214,867 168,051
Prepaid expenses 4,389 4,581
------- -------
Total current assets 224,416 192,993
Fixed assets, at cost:
Land 3,013 3,377
Buildings 9,884 11,179
Computer-aided design systems 26,328 24,554
Equipment and furniture 76,412 70,965
Leasehold improvements 11,976 11,053
------- -------
127,613 121,128
Accumulated depreciation 84,560 78,442
------- -------
Net fixed assets 43,053 42,686
Deferred income taxes 2,124 1,724
Goodwill and other intangible assets 22,048 23,791
Other assets 6,034 5,516
------- -------
$ 297,675 266,710
======= =======
<PAGE>
19
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(In thousands, except share data)
Liabilities and Shareholders' Equity 1994 1993
- ------------------------------------ ------- -------
Current liabilities:
Current portion of long-term debt $ - 16,000
Obligations not liquidated because of
outstanding checks 6,733 4,038
Accounts payable 10,766 6,836
Withheld payroll taxes 5,635 1,425
Accrued compensation and related costs 45,223 37,615
Other accrued expenses 13,915 9,116
Currently payable income taxes 10,016 7,516
Deferred income taxes 3,879 2,525
------- -------
Total current liabilities 96,167 85,071
Long-term debt 58,798 62,021
Deferred compensation 3,528 2,649
Minority interests 305 466
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 126,132 103,761
Less common stock in treasury, at cost -
25,055 shares-1994; 25,155 shares-1993 (590) (593)
------- -------
Total shareholders' equity 138,877 116,503
------- -------
$ 297,675 266,710
======= =======
See accompanying notes to financial statements.
<PAGE>
20
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
------ ------ ------
Operating activities:
Net earnings $ 22,371 7,830 3,447
Minority interests 31 7 (79)
Depreciation 11,926 12,416 11,813
Amortization of intangible assets 2,251 2,917 3,409
Imaging business reserve - (224) (1,120)
Income tax provision greater than
tax payments 3,459 1,851 3,087
Change in assets and liabilities
net of effects from acquisitions:
(Increase) in accounts receivable (47,008) (199) (10,707)
Increase in payables and accrued
expenses 20,547 394 3,634
Other 238 1,522 (1,360)
------ ------ ------
13,815 26,514 12,124
------ ------ ------
Investing activities:
Purchases of fixed assets (13,974) (11,214) (8,787)
Acquisitions net of cash acquired (198) (4,070) (8,920)
Other 1,684 (2,161) 1,600
------ ------ ------
(12,488) (17,445) (16,107)
------ ------ ------
Financing activities:
Borrowings long-term debt - 16,128 6,158
Payments long-term debt (19,223) (11,324) (3,066)
Obligations not liquidated
because of outstanding checks 2,695 243 2,522
Other - - 77
------ ------ ------
(16,528) 5,047 5,691
------ ------ ------
Increase (decrease) in cash (15,201) 14,116 1,708
Cash at beginning of year 20,361 6,245 4,537
------ ------ ------
Cash at end of year $ 5,160 20,361 6,245
====== ====== ======
See accompanying notes to financial statements.
<PAGE>
21
CDI CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Significant Accounting Policies
- -------------------------------
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries
after elimination of intercompany balances and transactions.
Fixed Assets - Depreciation of fixed assets is provided generally on
the straight-line method at rates calculated to provide for retirement
of assets at the end of their estimated useful lives. The annual rates
generally used are 3-1/3% for buildings, 25% for computer-aided design
systems, 10% to 25% for equipment and furniture and the lesser of the
life of the lease or asset for leasehold improvements.
Goodwill and Other Intangible Assets - The net assets of subsidiaries
acquired, which were accounted for as purchases, have been reflected at
their fair values at dates of acquisition. The excess of acquisition
costs over such net assets is reflected in the consolidated balance
sheets as goodwill - $18,033,000 at December 31, 1994 and $18,804,000
at December 31, 1993. Goodwill of $13,985,000 at December 31, 1994 and
$14,756,000 at December 31, 1993 is being amortized on the straight-
line method over ten to forty years. Amortization for goodwill in 1994
and 1993 was $957,000 and $1,231,000, respectively, resulting in
accumulated amortization of $5,010,000 as of December 31, 1994 and
$4,053,000 as of December 31, 1993.
Other intangible assets, primarily arising in conjunction with
acquisitions, include agreements with individuals not to enter into
competing businesses with the Company, the value for an established
customer base and the value for acquired temporary services franchise
arrangements. Other intangible assets of $4,015,000 and $4,987,000
were recorded at December 31, 1994 and 1993, respectively, and are
being amortized on the straight-line method over two to twelve years.
Amortization for other intangible assets in 1994 and 1993 was
$1,294,000 and $1,686,000, respectively, resulting in accumulated
amortization of $3,308,000 as of December 31, 1994 and $4,101,000 as
of December 31, 1993.
The Company periodically evaluates its goodwill and other intangible
assets to determine whether or not the carrying value of any of these
assets has been impaired.
Obligations Not Liquidated Because of Outstanding Checks - The Company
manages its levels of cash in banks to minimize its cash balances.
Cash balances as reflected by banks are always higher than the
Company's book balances because of checks in float throughout the
banking system. Cash is generally not provided to accounts until
checks are presented for payment. The differences in balances created
by this float result in negative cash balances in the Company's
records. These negative balances are reflected in current liabilities
as Obligations Not Liquidated Because of Outstanding Checks.
<PAGE>
22
Income Taxes - The Company and its wholly-owned U.S. subsidiaries file
a consolidated federal income tax return. Other U.S. subsidiaries file
separate federal income tax returns. Deferred income taxes are
recorded for taxes estimated to be payable in future years based upon
differences between the financial reporting and tax bases of assets and
liabilities and for operating loss carryforwards. Deferred tax assets
and liabilities are determined using enacted tax rates expected to
apply to taxable income in the years the temporary differences are
expected to be recovered or settled.
Fair Value of Financial Instruments - The carrying value of financial
instruments approximate fair value. The Company's financial
instruments are accounts receivable, accounts payable and long-term
debt.
Per Share Data - For the years ended December 31, 1994, 1993 and 1992,
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 years. No
further dilution resulted from a computation of fully diluted earnings
per share. The number of shares used to compute earnings per share was
19,778,980, 19,728,401 and 19,718,254 for the years ended December 31,
1994, 1993 and 1992, respectively.
Acquisitions
- ------------
During the year ended December 31, 1994 there were investments
totalling $198,000 that relate to an acquisition in a prior year and
to the acquisition of the minority interests in a subsidiary. Goodwill
relating to these subsidiaries increased by $198,000.
During the year ended December 31, 1993 the Company made an
acquisition in Technical Services. Cash aggregating $4,070,000 was
invested. The acquisition was accounted for using the purchase method.
Assets (including goodwill of $1,182,000) of $7,133,000 were acquired
along with liabilities of $3,063,000. Goodwill is being amortized on
the straight-line method over twenty years. The consolidated state-
ments of earnings include the results of operations for the acquired
company from date of acquisition. The acquisition did not have a
significant effect upon reported earnings for the year ended December
31, 1993 and earnings for 1993 would not have been significantly
different than reported had the acquisition occurred January 1, 1993.
During the year ended December 31, 1992 the Company made several
acquisitions, none of which was individually material, in Technical
Services and Temporary Services. Cash aggregating $8,399,000, net of
cash acquired, was invested. The acquisitions were accounted for using
the purchase method. Assets (including goodwill of $3,597,000) of
$15,294,000 were acquired along with liabilities of $5,129,000.
Goodwill is being amortized on the straight-line method over twenty
years. In addition, there were investments of $521,000 relating to
acquisitions in prior years all of which increased goodwill. The
consolidated statements of earnings include the results of operations
for the acquired companies from their respective dates of acquisition.
<PAGE>
23
The acquisitions did not have a significant effect upon reported
earnings for the year ended December 31, 1992 and earnings for 1992
would not have been significantly different than reported had the
acquisitions occurred January 1, 1992.
Accounts Receivable
- -------------------
The Company's principal asset is accounts receivable. Receivables
arise from services provided pursuant to contracts or agreements with
customers for such services. Historically, losses due to customers'
inability to comply with the payment terms of their contracts or
agreements with the Company have not been significant. The primary
users of the Company's services are large U.S. based industrial and
commercial concerns, many of which are Fortune 500 companies, and the
U.S. Government.
Accounts receivable as of December 31, 1994 for Technical
Services, Temporary Services and Management Recruiters were
$197,144,000, $13,283,000 and $4,440,000, respectively, and as of
December 31, 1993 were $152,405,000, $12,831,000 and $2,815,000,
respectively. Receivables from the automotive industry comprised
approximately 40% of consolidated receivables as of December 31, 1994
and 35% as of December 31, 1993. Additionally, receivables in
chemicals/petrochemicals industry represented approximately 10% of
receivables as of December 31, 1994 and 15% as of December 31, 1993.
The aircraft/aerospace and electronics industries each represented
approximately 10% of receivables as of December 31, 1994 and 1993.
It is not Company or industry practice to require collateral or other
security because of the nature of the customer base involved.
Accounts receivable include both billed and unbilled receivables.
Unbilled receivables include $38,000,000 as of December 31, 1994 and
$23,000,000 as of December 31, 1993 for the recognized revenue value on
fixed price contracts in progress in excess of amounts already billed.
Billings on fixed price contracts generally can be rendered upon
completion of specified portions of work. All such billings can be
rendered and should be collected within the ensuing year.
<PAGE>
24
Long-term Debt
- --------------
Long-term debt at December 31, 1994 and 1993 was as follows
($000s):
1994 1993
------ ------
Notes payable to banks under revolving
credit agreement with interest at
6-3/8% at December 31, 1994 $ 48,000 48,000
Notes payable to banks under short-term
lines of credit with interest at 6-5/8%
at December 31, 1994 10,000 28,150
Other 798 1,871
------ ------
58,798 78,021
Current portion of long-term debt - 16,000
------ ------
$ 58,798 62,021
====== ======
A revolving credit agreement with a syndicate of banks provides
for borrowings up to $100 million. Borrowings outstanding at March 31,
1997 may be converted into term debt which would mature in quarterly
installments payable over four years. There was an initial one-time
fee paid equal to 1/8% of the banks' commitments and there is an annual
facility fee equal to 3/10% of the banks' commitments. Interest rate
alternatives are available whereby the Company can elect to have
interest be at either (i) rates quoted competitively by the syndicate
banks on a transactional basis with borrowings awarded to the lowest
bidder(s), (ii) rates quoted on the Interbank Eurodollar Market
("LIBOR") (adjusted for reserve requirements) plus a LIBOR margin that
can range from 1/2% to 1-1/2% depending upon the ratio of all of the
Company's borrowings to its cash flow or (iii) rates determined by the
greater of either (a) the prime rate or (b) the overnight Federal funds
rate plus 1/2%. The ratio for the LIBOR margin is determined each
quarter using borrowings outstanding at the end of the quarter and cash
flow for the four quarters then ended. The resulting ratio is used to
determine the applicable LIBOR Margin for the ensuing quarter.
Uncommitted short-term lines of credit with five banks are also
available under which interest rates are quoted on a transactional
basis and are related to the banks' costs of funds.
All borrowings at December 31, 1994 are classified long-term
because the Company intends to finance maturities as they become due
with borrowings under the revolving credit agreement. As of December
31, 1994 borrowings scheduled to mature in 1995 were $10,716,000, with
$44,000 due in 1996, $9,016,000 due in 1997 and $12,012,000 due in each
of 1998 and 1999.
The revolving credit agreement places limitations on certain
transactions that include acquisition by the Company of its securities,
payment of cash dividends and investments in other businesses. In
addition, the credit agreement includes certain other requirements. A
consolidated current ratio of at least 1.5 is to be maintained.
<PAGE>
25
Consolidated tangible net worth (total shareholders' equity less
goodwill and other intangible assets) shall be at least $70 million
plus 35% of consolidated net earnings after December 31, 1992
($80,570,000 as of December 31, 1994). If interest coverage (ratio of
operating profit to interest expense using the most recent four
quarters) is less than 1 to 1, the tangible net worth requirement is
increased by $5 million. The ratio of consolidated indebtedness for
borrowings to total capital (sum of consolidated current and long-term
debt, non-current deferred income taxes, minority interests and
tangible net worth) shall not exceed .60. The Company was in
compliance with the terms of the credit agreement through December 31,
1994.
Capital Stock
- -------------
Common stock and Class B common stock have equal rights except
that dividends, other than stock dividends, may be declared and paid on
common stock in excess of amounts declared and paid on Class B common
stock. The Class B common stock is convertible on a share-for-share
basis into common stock and Class B shares so converted shall be
cancelled.
At December 31, 1994, 788,750 shares of common stock were reserved
for issuance under the non-qualified stock option and stock
appreciation rights plan.
During the years ended December 31, 1994, 1993 and 1992, 100
shares, 200 shares and 500 shares, respectively, of common stock held
in treasury were reissued. These shares had a cost of $3,000, $5,000,
and $12,000, respectively.
During the year ended December 31, 1992, 11,250 shares of common
stock were issued pursuant to the exercise of stock options under the
Company's non-qualified stock option and stock appreciation rights
plan. The issuance of these shares increased common stock by $1,000
and additional paid-in capital by $76,000.
Stock Plan
- ----------
Under the terms of a non-qualified stock option and stock
appreciation rights plan, options and stock appreciation rights to
purchase an aggregate of 788,750 shares of common stock may be granted
separately or in tandem to salaried employees, consultants and
directors. Stock appreciation rights may also be granted with respect
to outstanding options. Grants under the plan are determined by a
stock option committee appointed by the board of directors. The price
at which options or stock appreciation rights may be exercised shall
not be less than 50% of the market value per share of the Company's
common stock on the date of grant and, unless otherwise determined by
the committee, options or rights granted under the plan shall not be
exercised after five years from date of grant.
The plan permits optionees to purchase stock via cash payment, the
delivery of shares of the Company's common stock in lieu of cash, or a
combination of both. Upon the exercise of stock appreciation rights,
<PAGE>
26
the recipient of such rights will receive an amount equal to the excess
of the then market price of the shares subject to the rights over the
exercise price of the rights. The amount of such excess is payable
one-half in cash and one-half in shares of the common stock of the
Company, valued at the then market price. The exercise of one
alternative by a holder of a tandem grant also reduces the number of
shares then exercisable with respect to the other alternative.
During the years ended December 31, 1994, 1993 and 1992 options
were granted to purchase 107,000 shares, 200,000 shares and 60,000
shares, respectively, at average option prices per share of $15.06,
$10.38 and $6.58, respectively. No stock appreciation rights were
granted during any of these years. The only exercise of stock options
or stock appreciation rights during the years ended December 31, 1994,
1993 and 1992 were 11,250 option shares in 1992 at a price of $6.86 per
share.
At December 31, 1994, 1993 and 1992 options were outstanding to
purchase 351,000, 252,000 and 60,000 shares of common stock,
respectively, at average prices of $11.32, $9.59 and $6.58 per share,
respectively. Options to purchase 113,333 shares and 106,667 shares
were exercisable at December 31, 1994 and 1993, respectively, at
average prices of $9.12 and $9.30, respectively. At December 31, 1992,
there were no options exercisable. No stock appreciation rights were
outstanding as of December 31, 1994, 1993 or 1992.
Income Taxes
- ------------
The provision for income taxes for the years ended December 31,
1994, 1993 and 1992 was comprised of the following ($000s):
Total Federal State Foreign
------- ------- ------ -------
1994
- ----
Current $ 13,473 11,515 1,475 483
Deferred 940 1,366 (422) (4)
------ ------ ----- -----
$ 14,413 12,881 1,053 479
====== ====== ===== =====
1993
- ----
Current $ 7,535 6,489 980 66
Deferred (2,745) (2,210) (515) (20)
------ ------ ----- -----
$ 4,790 4,279 465 46
====== ====== ===== =====
1992
- ----
Current $ 1,975 1,012 928 35
Deferred 253 745 (439) (53)
Benefits reducing goodwill 265 265 - -
------ ------ ----- -----
$ 2,493 2,022 489 (18)
====== ====== ===== =====
<PAGE>
27
The tax effects of the principal components creating net deferred
income tax liabilities as of December 31, 1994 and 1993 were as follows
($000s):
1994 1993
------ ------
Components creating deferred tax liabilities
Deferral of revenues and accounts receivable $ 15,830 11,392
Basis differences for fixed assets 351 218
Other 1,323 1,222
------ ------
17,504 12,832
Components creating deferred tax assets
Expenses accrued not currently deductible (13,612) (10,045)
Intangible assets amortization (1,299) (1,017)
Other (316) (919)
Carryforwards, primarily operating losses (1,041) (989)
------ ------
(16,268) (12,970)
Valuation allowances 519 939
------ ------
$ 1,755 801
====== ======
The net change in the valuation allowances for the years ended
December 31, 1994 and 1993 was a decrease of $420,000 and $35,000,
respectively.
The effective income tax rates for the years ended December 31,
1994, 1993 and 1992 differed from the federal rate as follows:
1994 1993 1992
---- ---- ----
Federal rate 35% 34% 34%
State income taxes 2% 2% 10%
Foreign income taxes - - 4%
Expenses permanently nondeductible
for tax purposes 2% 2% 10%
Effect of adopting Statement No. 109 - - (12%)
Capital loss carryforward - - (3%)
--- --- ---
Effective income tax rate 39% 38% 43%
=== === ===
Certain subsidiaries have operating loss carryforwards for tax
purposes the realization of which is dependent upon the respective
subsidiaries having sufficient taxable income in future years to use
the carryforwards. At December 31, 1994 for federal income tax
purposes, these carryforwards aggregated approximately $1,300,000 and
expire in varying amounts from 2002 through 2008. The tax benefits of
approximately $100,000 of these carryforwards reduce goodwill and have
been recognized for financial reporting purposes. Of the remaining
$1,200,000, benefits relating to $800,000 have been recognized for
<PAGE>
28
financial reporting purposes. Benefits for the remaining $400,000 have
not been recognized and are included in the valuation allowance as of
December 31, 1994.
At December 31, 1994 for state income tax purposes, there were
operating loss carryforwards aggregating approximately $6,800,000
expiring in varying amounts from 1995 through 2009. Benefits relating
to approximately $2,600,000 have been recognized for financial
reporting purposes. Benefits for the remaining $4,200,000 have not
been recognized and are included in the valuation allowance as of
December 31, 1994.
Retirement Plans
- ----------------
Trusteed contributory and non-contributory defined contribution
retirement plans have been established for the benefit of eligible
employees. Costs of the plans are charged to earnings and are based
on either a formula using a percentage of compensation or an amount
determined by the board of directors of a company limited to the amount
allowable for Federal income tax purposes. Costs are funded as
accrued. Charges to earnings for contributions to these retirement
plans for the years ended December 31, 1994, 1993 and 1992 were
$1,813,000, $1,638,000 and $2,050,000, respectively.
Except for retirement plans, the Company provides no other
postretirement benefits. Further, the Company does not provide
postemployment benefits. Therefore, the Financial Accounting Standards
Board Statement No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, and the Financial Accounting Standards
Board Statement No. 112, Employers' Accounting for Postemployment
Benefits, do not apply to the Company.
Leases
- ------
Offices used for sales, recruiting and administrative functions
and facilities used for in-house engineering, design and drafting are
occupied under numerous leases which expire through 2010. In addition,
there are leases for computers and office equipment. Rentals under all
leases for the years ended December 31, 1994, 1993 and 1992 were
$18,348,000, $17,969,000 and $23,898,000, respectively.
For periods after December 31, 1994, approximate minimum annual
rentals under non-cancellable leases aggregate $38,560,000 with rentals
of $12,346,000 due in 1995, $9,630,000 due in 1996, $6,827,000 due in
1997, $4,458,000 due in 1998 and $2,963,000 due in 1999.
<PAGE>
29
Business Segments
- -----------------
Business segment data for the years ended December 31, 1994, 1993
and 1992 follows ($000s):
Technical Services - This segment provides principally technical
services and temporary engineering, drafting, designing and other
technical personnel to a broad range of customers in industry and to
the United States Government.
Temporary Services - This segment provides temporary clerical,
secretarial and office support personnel services to a broad range of
commercial customers.
Management Recruiters - This segment provides principally a
contingency search and recruiting service for permanent employment of
management, technical, sales and clerical personnel.
1994 1993 1992
------- ------- -------
Revenues
- --------
Technical Services $ 924,069 776,446 672,723
Temporary Services 121,180 111,739 151,084
Management Recruiters 52,350 33,107 31,279
--------- ------- -------
$ 1,097,599 921,292 855,086
========= ======= =======
Operating profit (loss)
- -----------------------
Technical Services $ 35,433 16,202 12,349
Temporary Services 5,002 2,015 (641)
Management Recruiters 7,240 3,856 3,332
Corporate expenses (6,749) (5,719) (5,076)
--------- ------- -------
$ 40,926 16,354 9,964
========= ======= =======
Identifiable assets
- -------------------
Technical Services $ 260,596 215,640 213,544
Temporary Services 23,013 23,648 25,392
Management Recruiters 8,310 5,486 4,877
Corporate 5,756 21,936 4,022
--------- ------- -------
$ 297,675 266,710 247,835
========= ======= =======
Capital additions
- -----------------
Technical Services $ 12,610 10,105 7,746
Temporary Services 557 457 795
Management Recruiters 733 434 208
Corporate 74 218 38
--------- ------- -------
$ 13,974 11,214 8,787
========= ======= =======
<PAGE>
30
1994 1993 1992
--------- ------- -------
Depreciation expense
- --------------------
Technical Services $ 10,738 11,290 10,375
Temporary Services 582 548 797
Management Recruiters 483 505 580
Corporate 123 73 61
--------- ------- -------
$ 11,926 12,416 11,813
========= ======= =======
For the years ended December 31, 1994, 1993 and 1992 Technical
Services had a customer that provided revenues equal to 10%, 11% and
12%, respectively, of consolidated revenues.
Legal Proceedings and Claims
- ----------------------------
Litigation and other claims, which arise in the ordinary course
of business, are pending. Substantive defenses and/or insurance are
available such that the outcome of these items should not have a
material adverse effect on the financial condition or results of
operations of the Company.
<PAGE>
31
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of CDI Corp.:
We have audited the accompanying consolidated balance sheets of
CDI Corp. and subsidiaries as of December 31, 1994 and 1993 and the
related consolidated statements of earnings, retained earnings and cash
flows for each of the years in the three-year period ended December 31,
1994. In connection with our audits of the consolidated financial
statements, we also have audited the related financial statement
schedule listed under the heading "Financial statement schedules" on
page 33. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of CDI Corp. and subsidiaries as of December 31, 1994 and 1993 and the
results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
February 27, 1995 /s/ KPMG PEAT MARWICK LLP
1600 Market Street ---------------------------------
Philadelphia, PA 19103 KPMG Peat Marwick LLP
<PAGE>
32
CDI CORP. AND SUBSIDIARIES
Quarterly Earnings
Years Ended December 31, 1994 and 1993
(In thousands, except per share data)
First Second Third Fourth
quarter quarter quarter quarter Year
1994 ------- ------- ------- ------- ---------
- ----
Revenues $ 249,231 264,901 288,700 294,767 1,097,599
Gross profit 19,348 21,137 25,357 25,274 91,116
Operating profit 7,589 8,462 12,266 12,609 40,926
Interest expense 976 892 1,068 1,175 4,111
Net earnings 3,944 4,461 6,632 7,334 22,371
Per share .20 .23 .34 .37 1.13
1993
- ----
Revenues $ 217,467 233,534 232,735 237,556 921,292
Gross profit 14,006 16,891 16,352 16,215 63,464
Operating profit 2,382 3,811 5,799 4,362 16,354
Interest expense 832 1,078 961 856 3,727
Net earnings 897 1,572 2,942 2,419 7,830
Per share .05 .08 .15 .12 .40
<PAGE>
33
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Part III of this form is omitted by the Registrant since it will
file with the Commission a definitive proxy statement pursuant to
Regulation 14A involving the election of directors not later than 120
days after the close of the fiscal year.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Documents filed as part of this report
Financial statements
The consolidated balance sheets of the Registrant as of
December 31, 1994 and 1993, the related consolidated
statements of earnings, retained earnings and cash flows
for each of the years ended December 31, 1994, 1993 and
1992, the footnotes thereto and the report of KPMG Peat
Marwick LLP, independent auditors, are filed herein.
Financial statement schedules
Schedule submitted for the years ended December 31, 1994,
1993 and 1992.
II - Valuation and Qualifying Accounts
(b) Registrant was not required to file a Form 8-K during the
quarter ended December 31, 1994.
<PAGE>
34
(c) Exhibits
3.(i) Articles of incorporation of the Registrant,
incorporated herein by reference to the
Registrant's report on Form 10-Q for the quarter
ended June 30, 1990 (File No. 1-5519).
(ii) Bylaws of the Registrant, incorporated herein by
reference to the Registrant's report on Form 10-Q
for the quarter ended June 30, 1990 (File No.
1-5519).
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 manage-
ment 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)
<PAGE>
35
11. Statement re computation of per share earnings.
21. Subsidiaries of the Registrant.
23. Consents of experts and counsel.
27. Financial Data Schedule.
<PAGE>
36
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.
CDI Corp.
- -------------------------------------
By: /s/ Walter R. Garrison
- -------------------------------------
Walter R. Garrison, President
Date: February 27, 1995
- -------------------------------------
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.
By: /s/ Walter R. Garrison
- -------------------------------------
Walter R. Garrison
President and Director
(Principal Executive Officer)
Date: February 27, 1995
- -------------------------------------
By: /s/ Edgar D. Landis
- -------------------------------------
Edgar D. Landis
Executive Vice President,
Finance and Director
(Principal Financial and
Accounting Officer)
Date: February 27, 1995
- -------------------------------------
By: /s/ Walter E. Blankley
- -------------------------------------
Walter E. Blankley
Director
Date: February 27, 1995
- -------------------------------------
<PAGE>
37
By: /s/ Christian M. Hoechst
- -------------------------------------
Christian M. Hoechst
Director
Date: February 27, 1995
- -------------------------------------
By: /s/ Lawrence C. Karlson
- -------------------------------------
Lawrence C. Karlson
Director
Date: February 27, 1995
- -------------------------------------
By: /s/ Allen M. Levantin
- -------------------------------------
Allen M. Levantin
Director
Date: February 27, 1995
- -------------------------------------
By: /s/ Alan B. Miller
- -------------------------------------
Alan B. Miller
Director
Date: February 27, 1995
- -------------------------------------
By: /s/ John W. Pope
- -------------------------------------
John W. Pope
Director
Date: February 27, 1995
- -------------------------------------
By: /s/ Allen I. Rosenberg
- -------------------------------------
Allen I. Rosenberg
Director
Date: February 27, 1995
- -------------------------------------
<PAGE>
38
By: /s/ Barton J. Winokur
- -------------------------------------
Barton J. Winokur
Director
Date: February 27, 1995
- -------------------------------------
<PAGE>
39
Schedule II
-----------
CDI CORP. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Allowance for Uncollectible Receivables)
Years ended December 31, 1994, 1993 and 1992
Uncollectible
Additions receivables
Balance at charged written off, Balance
beginning to net of Other at end
of year earnings recoveries changes of year
---------- --------- ------------- ---------- ---------
December 31, 1994 $ 1,785,000 2,196,000 797,000 - 3,184,000
December 31, 1993 $ 1,644,000 655,000 585,000 71,000(a) 1,785,000
December 31, 1992 $ 1,979,000 1,000,000 1,478,000 143,000(a) 1,644,000
(a) Allowance for uncollectible receivables at dates of acquisition of
subsidiaries purchased during the year.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CDI CORP.
EXHIBITS
to
Annual Report
FORM 10-K
Year ended December 31, 1994
Under
SECURITIES EXCHANGE ACT OF 1934
<PAGE>
INDEX TO EXHIBITS 40
Number Exhibit Page
- ------- ------------------------------------------------------- ----
3.(i) Articles of incorporation of the Registrant,
incorporated herein by reference to the Registrant's
report on Form 10-Q for the quarter ended June 30,
1990 (File No. 1-5519).
(ii) Bylaws of the Registrant, incorporated herein by
reference to the Registrant's report on Form 10-Q for
the quarter ended June 30, 1990 (File No. 1-5519).
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 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 statement 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 statement 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. 41
21. Subsidiaries of the Registrant. 42
23. Consents of experts and counsel. 45
27. Financial Data Schedule. 46
<PAGE>
41
EXHIBIT 11
Statement Re Computation of Per Share Earnings
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992
---------- ---------- ----------
Primary
- -------
Net earnings $ 22,371,000 7,830,000 3,447,000
========== ========== ==========
Common and common equivalent
shares outstanding:
Weighted average common
shares outstanding during
the period 19,714,874 19,714,759 19,710,086
Assumed exercise of stock
options 64,106 13,642 8,168
---------- ---------- ----------
19,778,980 19,728,401 19,718,254
========== ========== ==========
Net earnings per share $ 1.13 .40 .17
Fully diluted
- -------------
Net earnings $ 22,371,000 7,830,000 3,447,000
========== ========== ==========
Common and common equivalent
shares outstanding:
Weighted average common
shares outstanding during
the period 19,714,874 19,714,759 19,710,086
Assumed exercise of stock
options 131,006 43,338 11,161
---------- ---------- ----------
19,845,880 19,758,097 19,721,247
========== ========== ==========
Net earnings per share $ 1.13 .40 .17
<PAGE>
42
EXHIBIT 21
Subsidiaries of the Registrant
The following are the subsidiaries of the Registrant that were
actively engaged in the conduct of business as of December 31, 1994 and
the jurisdiction in which each is organized. The voting securities of
each are all owned directly or indirectly by the Registrant, except for
CDI International Limited and Career Pathways, the ownership of which is
set forth below. Each of the subsidiaries conducts its business using
the names indicated except as separately set forth herein.
State or
Country of
Subsidiary Organization
- ---------- ------------
Subsidiary of the Registrant:
CDI Corporation (a) Pennsylvania
Subsidiaries of CDI Corporation:
Aware Engineering, Inc. Texas
CDI Aircraft Maintenance Personnel, Inc. Delaware
CDI Computer Services, Inc.(b) Pennsylvania
CDI International Limited (c)(d) United Kingdom
CDI Marine Company Florida
CDI Telecommunications, Inc. Pennsylvania
CompData Services Corporation (e) Delaware
Greenhill Corporation Delaware
Innovative Information Systems, Inc. Massachusetts
The M&T Company (f) Pennsylvania
Management Recruiters International, Inc. (g) Delaware
Midwest Technical, Inc. Ohio
Modern Engineering, Inc. Michigan
Spectrum Acquisition Company (h) Delaware
Stubbs Overbeck & Associates, Inc. (i) Delaware
Todays Temporary, Inc. Pennsylvania
Underground Electrical Company Delaware
United Enterprises, Inc. Massachusetts
Western Investments Corp. Delaware
Pinpoint Systems, Inc. Delaware
10553440 Ontario Limited Canada
Subsidiary of Aware Engineering, Inc.:
Aware Operating Services, Inc. Texas
Subsidiary of CDI Aircraft Maintenance Personnel, Inc.:
STS Services, Inc. (j) Nevada
Subsidiaries of Modern Engineering, Inc.:
Modern Engineering Technical Services Co. Michigan
Modern Engineering Tool Construction Inc. (k) Delaware
Modern Prototype Company (k) Delaware
Modern Engineering Interamericana S.A. Argentina
Modern Engineering Europe S.A. France
<PAGE>
43
Subsidiary of CDI Marine Company:
CDI Power Systems Group, Inc. Delaware
Subsidiary of Midwest Technical, Inc.:
MTI Corporation (l) West Virginia
Subsidiaries of Management Recruiters International, Inc.:
Brownshill Corporation Delaware
InterExec, Inc. (m) Ohio
MRCP, Inc. Ohio
Management Recruiters of Cuernevaca, Inc. Ohio
Sales Consultants, Inc. Ohio
Subsidiary of MRCP, Inc.:
Career Pathways (n) Ohio
Subsidiary of CDI Telecommunications, Inc.:
CDI Personnel Services, Inc. (o) Pennsylvania
Subsidiary of Todays Temporary, Inc.:
Todays Temporary, Ltd. Canada
Subsidiary of Todays Temporary, Ltd.:
142760 Canada Inc. (p) Canada
Subsidiary of United Enterprises, Inc.:
United Engineers, Inc. (q) Massachusetts
Subsidiary of United Engineers, Inc.:
U.E. of Massachusetts, Inc. Massachusetts
Subsidiaries of Western Investments Corp.:
AAAA Temporary Services, Inc. Oregon
Lang Corporation Nevada
Timesavers, Inc. California
Subsidiary of 10553440 Ontario Limited:
CDI Engineering Services, Ltd. Canada
Subsidiary of CDI Engineering Services, Ltd.:
CDI Technical Services, Ltd. Canada
(a) CDI Corporation also conducts its business using the trade names
CDI Corporation-Central, Division of CDI Corporation; CDI Corpora-
tion-Midwest, Division of CDI Corporation; CDI Corporation-North
Central, Division of CDI Corporation; CDI Corporation-Northeast,
Division of CDI Corporation; CDI Corporation-Southeast, Division of
CDI Corporation; CDI Corporation-West, Division of CDI Corporation;
CDI Tek Skills, Division of CDI Corporation; Innovative Information
Systems; CDI Temporary Services; and CDI Information Services.
<PAGE>
44
(b) CDI Computer Services, Inc. also conducts its business using the
trade name of Innovative Information Systems.
(c) CDI Corporation holds a 60% ownership interest in CDI
International Limited.
(d) CDI International Limited also conducts its business using the
trade names of Anders Glaser Wills, AGW Trade and CDI Technical
Services.
(e) CompData Services Corporation also conducts its business using the
trade name of Innovative Information Systems.
(f) The M&T Company also conducts its business using the trade name of
The M&T Company Technical Services Company.
(g) Management Recruiters International, Inc. also conducts its
business using the trade names of Management Recruiters, Sales
Consultants, Office Mates 5, CompuSearch and ConferView.
(h) Spectrum Acquisition Company conducts its business using the trade
name Spectrum Engineering Corporation.
(i) Stubbs Overbeck & Associates, Inc. also conducts its business
using the trade name of CDI-Stubbs Overbeck.
(j) STS Services, Inc. also conducts its business using the trade name
of STS Services Aviation Labor, Inc.
(k) Modern Engineering Tool Construction Inc. and Modern Prototype
Company also conduct their business using the trade name Modern
Engineering.
(l) MTI Corporation also conducts its business using the trade name of
MTI Corporation of Kentucky.
(m) InterExec, Inc. also conducts its business using the trade names
of DayStar and Sales Staffers.
(n) Career Pathways is a general partnership in which MRCP, Inc holds
a 51% ownership interest.
(o) CDI Personnel Services, Inc. conducts its business using the trade
name of CDI Temporary Services.
(p) 142760 Canada Inc. conducts its business using the trade names
Personnel Temporaire Todays and Todays Temporary.
(q) United Engineers, Inc. also conducts its business using the trade
name of U.E., Inc.
<PAGE>
45
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CDI Corp.:
We consent to incorporation by reference in Registration Statement
No. 33-7263 on Form S-8 of CDI Corp., in Registration Statement No.
33-30357 on Form S-8 of CDI Corp. and in Registration Statement No.
33-25801 on Form S-3 of CDI Corp. of our report dated February 27,
1995, relating to the consolidated balance sheets of CDI Corp. and
subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of earnings, retained earnings and cash flows
and the related financial statement schedule for each of the years in
the three-year period ended December 31, 1994, which report appears in
the December 31, 1994 annual report on Form 10-K of CDI Corp.
Philadelphia, PA /s/ KPMG Peat Marwick LLP
February 27, 1995 KPMG PEAT MARWICK LLP
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