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 March 31, 1996
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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
------
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 April 30, 1996 were:
Common stock, $.10 par value 19,826,678 shares
Class B common stock, $.10 par value None
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PART 1. FINANCIAL INFORMATION
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
Assets 1996 1995
- ------ --------- ------------
Current assets:
Cash $ 3,602 4,490
Accounts receivable, less allowance
for doubtful accounts of $4,076 -
March 31, 1996; $4,059 - December 31,
1995 248,086 235,445
Prepaid expenses 5,149 4,587
Deferred income taxes 8,057 9,280
Net assets of discontinued operations 19,344 18,011
------- -------
Total current assets 284,238 271,813
Fixed assets, at cost:
Land 737 764
Buildings 3,853 3,846
Computers 54,543 53,016
Equipment and furniture 33,686 31,444
Leasehold improvements 13,318 12,211
------- -------
106,137 101,281
Accumulated depreciation 73,498 70,804
------- -------
Net fixed assets 32,639 30,477
Deferred income taxes 4,769 4,418
Goodwill and other intangible assets 18,656 16,605
Other assets 5,629 5,463
------- -------
$ 345,931 328,776
======= =======
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3
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
March 31, December 31,
Liabilities and Shareholders' Equity 1996 1995
- ------------------------------------ --------- ------------
Current liabilities:
Obligations not liquidated because
of outstanding checks $ 10,079 9,644
Accounts payable 7,481 8,179
Withheld payroll taxes 2,354 1,569
Accrued expenses 80,638 69,269
Currently payable income taxes 12,320 21,417
------- -------
Total current liabilities 112,872 110,078
Long-term debt 73,311 67,865
Deferred compensation 5,351 5,039
Minority interests 434 425
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 19,850,983 shares - March 31,
1996; 19,845,483 shares - December 31,
1995 1,985 1,985
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none
issued - -
Additional paid-in capital 12,801 12,703
Retained earnings 139,767 131,271
Less 25,055 shares of common stock
in treasury, at cost (590) (590)
------- -------
Total shareholders' equity 153,963 145,369
------- -------
$ 345,931 328,776
======= =======
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4
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
Three months ended March 31,
----------------------------
1996 1995
------- -------
Revenues $ 351,463 292,439
Cost of operations 320,418 269,333
------- -------
Gross profit 31,045 23,106
General and administrative expenses 15,741 11,418
------- -------
Operating profit 15,304 11,688
Interest expense 1,010 1,073
------- -------
Earnings from continuing operations
before income taxes and minority
interests 14,294 10,615
Income taxes 5,789 4,318
------- -------
Earnings from continuing operations
before minority interests 8,505 6,297
Minority interests 9 (32)
------- -------
Earnings from continuing operations 8,496 6,329
Discontinued operations - 811
------- -------
Net earnings $ 8,496 7,140
======= =======
Earnings per share:
Earnings from continuing operations $ .43 .32
Discontinued operations $ - .04
Net earnings $ .43 .36
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5
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Three months ended March 31,
----------------------------
1996 1995
------ ------
Continuing Operations
Operating activities:
Earnings from continuing operations $ 8,496 6,329
Minority interests 9 (32)
Depreciation 2,895 2,407
Amortization of intangible assets 467 443
Income tax provision greater (less)
than tax payments (8,225) 2,202
Change in assets and liabilities
net of effects from acquisitions:
Increase in accounts receivable (12,641) (33,751)
Increase in payables and accrued
expenses 11,456 7,971
Other (434) (823)
------ ------
2,023 (15,254)
------ ------
Investing activities:
Purchases of fixed assets (5,140) (4,049)
Acquisition net of cash acquired (2,500) -
Other 91 262
------ ------
(7,549) (3,787)
------ ------
Financing activities:
Borrowings long-term debt 5,466 22,032
Payments long-term debt (20) (18)
Obligations not liquidated because
of outstanding checks 435 3,298
Exercises of stock options 98 -
------ ------
5,979 25,312
------ ------
Net cash flows from continuing operations 453 6,271
Net cash flows from discontinued operations (1,341) (5,740)
------ ------
Increase (decrease) in cash (888) 531
Cash at beginning of period 4,490 5,155
------ ------
Cash at end of period $ 3,602 5,686
====== ======
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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 was 19,871,616 for the three months ended March 31,
1996 and 19,822,600 for the three months ended March 31, 1995.
Revenues and operating profit attributable to the business
segments of the Company for the three months ended March 31, 1996 and
1995 follow ($000s):
1996 1995
------- -------
Revenues:
Technical Services $ 295,244 243,462
Temporary Services 38,312 32,271
Management Recruiters 17,907 16,706
------- -------
$ 351,463 292,439
======= =======
Operating profit:
Technical Services $ 13,419 9,969
Temporary Services 1,678 1,289
Management Recruiters 2,534 2,491
Corporate expenses (2,327) (2,061)
------- -------
$ 15,304 11,688
======= =======
During the three months ended March 31, 1996, there were 5,500
shares of common stock issued upon the exercise of stock options
granted under the Company s non-qualified stock option and stock
appreciation rights plan. The issuance of these shares resulted in an
increase in additional paid-in capital of $98,000.
At the end of 1995 the Company adopted a plan to sell the
manufacturing technology division of a subsidiary which serves the
automotive market. That division is classified as a discontinued
operation in the Company s financial statements. The operations of a
small portion of the discontinued business were terminated by March 31,
1996. The remainder of the discontinued business continues to operate
and is expected to be sold prior to the end of 1996. Costs incurred
during the three months ended March 31, 1996 of $1.7 million, primarily
operating losses during the period, relating to the discontinued
business were charged against a reserve established at December 31,
1995 for estimated costs and losses to be incurred in 1996 through
termination and sale of the discontinued business. The charges to the
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reserve were for items and in amounts that corresponded to estimates
used in establishing the reserve. Only very minor amounts of assets
of the discontinued business were disposed of as of March 31, 1996.
The net assets for discontinued operations of $19 million as of March
31, 1996 were not significantly different from December 31, 1995 and
are comprised primarily of working capital and fixed assets.
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. All such adjustments are of a normal recurring nature.
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, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discontinued Operations
-----------------------
At the end of 1995 the Company adopted a plan to sell the
manufacturing technology division of a subsidiary which serves the
automotive market. That division is classified as a discontinued
operation in the Company's financial statements.
Results of Operations
---------------------
Consolidated revenues from continuing operations for the quarter
ended March 31, 1996 were 20% above the comparable quarter a year ago.
Operating profit margins from continuing operations were 4.4% of
revenues for the first quarter of this year compared to 4.0% for the
same period in 1995.
Technical Services' revenues from continuing operations increased
21% over the first quarter a year ago. Operating profit margins from
continuing operations for Technical Services were 4.5% in the first
quarter of 1996 compared to 4.1% for the 1995 first quarter. Technical
Services is benefitting from the broad-based trend in American business
and industry toward greater use of outsourced services. Telecommunica-
tions and information systems services markets remain particularly
strong, and petrochemicals continues to improve. In the automotive
sector, CDI Technical Services' continuing operations returned to above
breakeven after incurring losses in last year's third and fourth
quarters.
Temporary Services' revenues were up 19% over last year s first
quarter. Operating profit margins for Temporary Services were 4.4% for
the first quarter of 1996, compared with 4.0% for the 1995 first
quarter. Temporary Services markets remain firm.
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8
Management Recruiters' revenues for the first quarter of 1996 grew
7% over last year's first quarter. Operating profit margins were 14%
of revenues for the first quarter of this year and 15% for the first
quarter of last year. Management Recruiters' markets also remain firm
and performance continued at a steady pace.
The operations of a small portion of the discontinued business
were terminated by March 31, 1996. The remainder of the discontinued
business continues to operate and is expected to be sold prior to the
end of 1996. Costs incurred during the first quarter of 1996 of $1.7
million, primarily operating losses during the quarter, relating to the
discontinued business were charged against a reserve established as of
December 31, 1995 for such costs and losses. For the first quarter of
1995, the discontinued business had revenues of $26,563,000 and
earnings from operations of $811,000. These earnings were included in
reported earnings for that quarter.
Financial Condition
-------------------
The ratio of current assets to current liabilities was 2.5 to 1
for both March 31, 1996 and December 31, 1995. The ratio of long-term
debt to total capital (long-term debt plus shareholders' equity) was
32% for both March 31, 1996 and December 31, 1995. The Company
believes that capital resources available from operations and financing
arrangements are adequate to support the Company's businesses.
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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)
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10
f. Non-competition and Consulting Agreement by and
between Registrant and Christian M. Hoechst dated
October 17, 1995, incorporated herein by reference
to Registrant's report on Form 10-K for the year
ended December 31, 1995 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
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 March 31, 1996.
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.
--------------------------------------
May 8, 1996 By: /s/ Edgar D. Landis
--------------------------------------
EDGAR D. LANDIS
Executive Vice President, Finance
(Duly authorized officer and
principal financial officer of
Registrant)
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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)
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12
f. Non-competition and Consulting Agreement by and
between Registrant and Christian M. Hoechst dated
October 17, 1995, incorporated herein by reference
to Registrant's report on Form 10-K for the year
ended December 31, 1995 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
11. Statement re computation of per share earnings. 13
27. Financial Data Schedule. 14
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EXHIBIT 11
Statement Re Computation of Per Share Earnings
Three months ended March 31,
----------------------------
1996 1995
---------- ----------
Primary
- -------
Earnings from continuing operations $ 8,496,000 6,329,000
Discontinued operations - 811,000
---------- ----------
Net earnings $ 8,496,000 7,140,000
========== ==========
Common and common equivalent
shares outstanding:
Weighted average common
shares outstanding during
the period 19,821,991 19,714,928
Assumed exercise of stock
options 49,625 107,672
---------- ----------
19,871,616 19,822,600
========== ==========
Earnings per share:
Earnings from continuing operations $ .43 .32
Discontinued operations $ - .04
Net earnings $ .43 .36
Fully diluted
- -------------
Earnings from continuing operations $ 8,496,000 6,329,000
Discontinued operations - 811,000
---------- ----------
Net earnings $ 8,496,000 7,140,000
========== ==========
Common and common equivalent
shares outstanding:
Weighted average common
shares outstanding during
the period 19,821,991 19,714,928
Assumed exercise of stock
options 59,972 141,180
---------- ----------
19,881,963 19,856,108
========== ==========
Earnings per share:
Earnings from continuing operations $ .43 .32
Discontinued operations $ - .04
Net earnings $ .43 .36
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<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 ststements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,602
<SECURITIES> 0
<RECEIVABLES> 252,162
<ALLOWANCES> 4,076
<INVENTORY> 0
<CURRENT-ASSETS> 284,238
<PP&E> 106,137
<DEPRECIATION> 73,498
<TOTAL-ASSETS> 345,931
<CURRENT-LIABILITIES> 112,872
<BONDS> 73,311
0
0
<COMMON> 1,985
<OTHER-SE> 151,978
<TOTAL-LIABILITY-AND-EQUITY> 345,931
<SALES> 0
<TOTAL-REVENUES> 351,463
<CGS> 0
<TOTAL-COSTS> 320,418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,010
<INCOME-PRETAX> 14,294
<INCOME-TAX> 5,789
<INCOME-CONTINUING> 8,496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,496
<EPS-PRIMARY> .43
<EPS-DILUTED> 0
</TABLE>
