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, 1995
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from TO
-------------- --------------
Commission file number 1-5519
------
CDI CORP.
------------------------------------------------------
(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 31, 1995 were:
Common stock, $.10 par value 19,814,928 shares
Class B common stock, $.10 par value None
<PAGE>
2
PART 1. FINANCIAL INFORMATION
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
(In thousands)
September 30, December 31,
Assets 1995 1994
- ------ ------------- ------------
Current assets:
Cash $ 3,835 5,160
Accounts receivable, less allowances
of $6,876 - September 30, 1995;
$4,280 - December 31, 1994 253,607 214,867
Prepaid expenses 4,582 4,389
------- -------
Total current assets 262,024 224,416
Fixed assets, at cost:
Land 2,647 3,013
Buildings 8,748 9,884
Computer-aided design systems 24,557 26,328
Equipment and furniture 85,390 76,412
Leasehold improvements 14,518 11,976
------- -------
135,860 127,613
Accumulated depreciation 88,271 84,560
------- -------
Net fixed assets 47,589 43,053
Deferred income taxes 2,771 2,124
Goodwill and other intangible assets 20,541 22,048
Other assets 6,924 6,034
------- -------
$ 339,849 297,675
======= =======
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3
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
(In thousands, except share data)
September 30, December 31,
Liabilities and Shareholders' Equity 1995 1994
- ------------------------------------ ------------- ------------
Current liabilities:
Obligations not liquidated because of
outstanding checks $ 11,105 6,733
Accounts payable 9,555 10,766
Withheld payroll taxes 1,337 5,635
Accrued expenses 76,959 59,138
Currently payable income taxes 5,440 10,016
Deferred income taxes 4,336 3,879
------- -------
Total current liabilities 108,732 96,167
Long-term debt 68,250 58,798
Deferred compensation 4,336 3,528
Minority interests 343 305
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 19,839,983 shares -
September 30, 1995; 19,739,983
shares - December 31, 1994 1,984 1,974
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none
issued - -
Additional paid-in capital 12,621 11,361
Retained earnings 144,173 126,132
Less 25,055 shares of common stock
in treasury, at cost (590) (590)
------- -------
Total shareholders' equity 158,188 138,877
------- -------
$ 339,849 297,675
======= =======
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4
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
Unaudited
(In thousands, except per share data)
Quarter ended Nine months ended
September 30, September 30,
---------------- -----------------
1995 1994 1995 1994
------- ------- ------- -------
Revenues $ 340,776 288,700 991,836 802,832
Cost of operations 317,543 263,343 911,894 736,990
------- ------- ------- -------
Gross profit 23,233 25,357 79,942 65,842
General and administrative
expenses 15,470 13,091 44,340 37,525
------- ------- ------- -------
Operating profit 7,763 12,266 35,602 28,317
Interest expense 1,294 1,068 4,161 2,936
------- ------- ------- -------
Earnings before income taxes
and minority interests 6,469 11,198 31,441 25,381
Income taxes 3,249 4,606 13,362 10,279
------- ------- ------- -------
Earnings before minority
interests 3,220 6,592 18,079 15,102
Minority interests 80 (40) 38 65
------- ------- ------- -------
Net earnings $ 3,140 6,632 18,041 15,037
======= ======= ======= =======
Per share $ .16 .34 .91 .76
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5
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Nine months ended
September 30,
-----------------
1995 1994
------ ------
Operating activities:
Net earnings $ 18,041 15,037
Minority interests 38 65
Depreciation 9,781 8,836
Amortization of intangible assets 1,583 1,775
Income tax provision greater (less)
than tax payments and refunds (4,766) 6,460
Change in assets and liabilities
net of effects from acquisitions:
Increase in accounts receivable (38,740) (50,475)
Increase in payables and accrued
expenses 12,312 16,115
Other (351) 298
------ ------
(2,102) (1,889)
------ ------
Investing activities:
Purchases of fixed assets (15,997) (9,607)
Acquisitions net of cash acquired - (175)
Other 1,680 1,554
------ ------
(14,317) (8,228)
------ ------
Financing activities:
Borrowings long-term debt 9,494 -
Payments long-term debt (42) (9,683)
Obligations not liquidated because
of outstanding checks 4,372 4,700
Exercise of stock option 1,270 -
------ ------
15,094 (4,983)
------ ------
Decrease in cash (1,325) (15,100)
Cash at beginning of period 5,160 20,361
------ ------
Cash at end of period $ 3,835 5,261
====== ======
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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 1995 was
19,838,623 and 19,829,130 shares, respectively. For the third quarter
and nine months of 1994, 19,757,631 and 19,767,407 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, 1995 and 1994 follows ($000s):
Third quarter Nine months
1995 1994 1995 1994
------- ------- ------- -------
Revenues:
Technical Services $ 287,090 243,016 839,083 675,357
Temporary Services 36,399 31,153 102,822 89,663
Management Recruiters 17,287 14,531 49,931 37,812
------- ------- ------- -------
$ 340,776 288,700 991,836 802,832
======= ======= ======= =======
Operating profit:
Technical Services $ 4,798 10,450 28,612 24,604
Temporary Services 2,239 1,316 4,965 3,155
Management Recruiters 2,553 2,367 7,492 5,526
Corporate expenses (1,827) (1,867) (5,467) (4,968)
------- ------- ------- -------
$ 7,763 12,266 35,602 28,317
======= ======= ======= =======
During 1995 100,000 shares of common stock were issued upon the
exercise of a stock option granted under the Company s non-qualified
stock option and stock appreciation rights plan. The issuance of
these shares resulted in an increase in common stock of $10,000 and
an increase in additional paid-in capital of $1,260,000.
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, 1994.
The financial statements included in this report are unaudited,
and reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of the results for the periods
presented, and all such adjustments are of a normal recurring nature.
<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, 1995 were 24% and 18% higher, respectively, compared to
the same period a year ago. Operating profit for the nine months and
third quarter in 1995 was 3.6% and 2.3% of revenues, respectively,
compared to 3.5% and 4.2% for the nine months and third quarter in
1994.
Technical Services' revenues for the nine months and third quarter
of 1995 grew 24% and 18%, respectively, from last year's comparable
periods. Operating profit margins for the nine months and third
quarter of 1995 were 3.4% and 1.7%, respectively, vs. 3.6% and 4.3% for
last year's comparable periods. During the third quarter of 1995,
revenues in CDI's non-automotive Technical Services business were $235
million, up 31% from a year ago and up 9% from this year's second
quarter. Operating profits in CDI's non-automotive Technical Services
business for the third quarter were $13.7 million, more than double
last year's $6.4 million and 54% better than this year's second
quarter. The third quarter improvement in revenues reflects broad
based increases in the telecommunications, aircraft/aerospace,
electronics, and chemicals/petrochemicals sectors.
Offsetting these gains, revenues in CDI's automotive Technical
Services business for the third quarter of 1995 were $51.8 million,
down 19% from last year's third quarter and down 22% from this year's
second quarter. Operating losses for the third quarter were $8.9
million, compared to operating profits of $4.0 million in last year's
third quarter and $3.5 million in this year's second quarter. The
operating losses in the current quarter were primarily attributable to
operations in CDI's manufacturing technology division, which builds
prototypes and assembly tools for the automotive industry. The easing
off of demand in the automotive sector, noted by CDI last quarter,
accelerated in the third quarter. This slowdown was particularly sharp
in the manufacturing technology division, and had a disproportionately
large impact on profitability. In addition, in light of the disruption
caused by a change in the management of this division in June, 1995 and
the division's subsequent experience during the third quarter, manage-
ment determined it would be appropriate to add approximately $3 million
to the subsidiary's receivables reserves. These reserves represent
reductions in anticipated values of certain unbilled receivables and do
not relate to customers inability to pay. Unbilled accounts
receivables, net of reserves pertaining to automotive were $33 million
at September 30, 1995. Improvements in demand are not expected in the
automotive sector in the fourth quarter.
CDI has recently engaged an investment banker to assist the
Company in exploring strategic alternatives for dealing with the
manufacturing technology division and the automotive business in
<PAGE>
8
general. Since the investment banker has only recently been engaged,
the Company has not attempted to determine the financial impact of any
strategic alternative.
In addition, the losses in the automotive sector in the third
quarter resulted in an increase in CDI s effective income tax rate for
all of 1995. This increase will result in a higher effective rate for
1995 compared to 1994. This increase had a particularly adverse impact
upon third quarter 1995 earnings because a lower effective rate for
1995 was anticipated in the first and second quarters of 1995.
Temporary Services' revenues for the nine months and third quarter
of 1995 were 15% and 17% higher, respectively, compared to the same
periods a year ago. Operating profit margins for the nine months and
third quarter of 1995 were 4.8% and 6.2%, respectively, vs. 3.5% and
4.2% for last year's comparable periods. Growth has been particularly
strong in Todays Temporary s broader based outsource programs that it
has with a growing number of customers.
Management Recruiters' revenues were up 32% for the nine months of
this year and up 19% compared to last year's third quarter. Operating
profit margins for the nine months and third quarter of 1995 were 15.0%
and 14.8%, respectively, compared to 14.6% and 16.3%, respectively, for
the same periods in 1994. The demand for services in Management
Recruiters traditional middle management search and recruiting business
as well as for its new product offerings initiated in recent years has
continued to be strong during 1995.
Financial Condition
-------------------
The ratio of current assets to current liabilities was 2.4 to 1
as of September 30, 1995 compared to 2.3 to 1 as of December 31, 1994.
The ratio of long-term debt to total capital (long-term debt plus
shareholders' equity) was 30% as of each of September 30, 1995 and
December 31, 1994. Working capital needs expanded during the nine
months ended September 30, 1995 primarily as a result of the increased
volume of business conducted. Funding for the increased investment in
working capital was provided, in part, by additional borrowings of
long-term debt. 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
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 Registrant s report on Form 10-Q
for the quarter ended June 30, 1995 (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 compensa-
tory plan or arrangement)
<PAGE>
10
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
(b) The Registrant has not filed a Form 8-K during the quarter
ended September 30, 1995.
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.
--------------------------------------
November 10, 1995 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
- ------ ------------------------------------------------------ ----
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 Registrant s report on Form 10-Q for
the quarter ended June 30, 1995 (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. 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,
--------------------- ---------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Primary
- -------
Net earnings $ 3,140,000 6,632,000 18,041,000 15,037,000
========== ========== ========== ==========
Common and common
equivalent shares
outstanding:
Weighted average
common shares
outstanding
during the period 19,764,928 19,714,903 19,734,928 19,714,858
Assumed exercise of
stock options 73,695 42,728 94,202 52,549
---------- ---------- ---------- ----------
19,838,623 19,757,631 19,829,130 19,767,407
========== ========== ========== ==========
Earnings per share of
common stock $ .16 .34 .91 .76
Fully diluted
- -------------
Net earnings $ 3,140,000 6,632,000 18,041,000 15,037,000
========== ========== ========== ==========
Common and common
equivalent shares
outstanding:
Weighted average
common shares
outstanding
during the period 19,764,928 19,714,903 19,734,928 19,714,858
Assumed exercise of
stock options 77,214 42,728 106,544 52,549
---------- ---------- ---------- ----------
19,842,142 19,757,631 19,841,472 19,767,407
========== ========== ========== ==========
Earnings per share of
common stock $ .16 .34 .91 .76
<PAGE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains financial information extracted from the consolidated
financial statements of CDI Corp. and Subsidiaries and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,835
<SECURITIES> 0
<RECEIVABLES> 260,483
<ALLOWANCES> 6,876
<INVENTORY> 0
<CURRENT-ASSETS> 262,024
<PP&E> 135,860
<DEPRECIATION> 88,271
<TOTAL-ASSETS> 339,849
<CURRENT-LIABILITIES> 108,732
<BONDS> 68,250
<COMMON> 1,984
0
0
<OTHER-SE> 156,204
<TOTAL-LIABILITY-AND-EQUITY> 339,849
<SALES> 0
<TOTAL-REVENUES> 991,836
<CGS> 0
<TOTAL-COSTS> 911,894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,161
<INCOME-PRETAX> 31,441
<INCOME-TAX> 13,362
<INCOME-CONTINUING> 18,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,041
<EPS-PRIMARY> .91
<EPS-DILUTED> 0
</TABLE>
