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, 1998
------------------
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 28, 1998 were:
Common stock, $.10 par value 19,267,842 shares
Class B common stock, $.10 par value None
<PAGE>
2
PART 1. FINANCIAL INFORMATION
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
September 30,
1998 December 31,
Assets (unaudited) 1997
- ------ ------------- ------------
Current assets:
Cash $ 8,055 6,998
Accounts receivable, less allowance
for doubtful accounts of $4,972 -
September 30, 1998; $4,995 -
December 31, 1997 319,702 259,415
Prepaid expenses 4,697 3,980
Deferred income taxes 7,537 6,990
Net assets of discontinued operations 5,655 12,202
------- -------
Total current assets 345,646 289,585
Fixed assets, at cost:
Computers 58,577 41,963
Equipment and furniture 26,968 26,127
Leasehold improvements 8,021 8,015
------- -------
93,566 76,105
Accumulated depreciation 58,325 49,718
------- -------
Net fixed assets 35,241 26,387
Deferred income taxes 5,789 5,759
Goodwill and other intangible assets, net 35,909 16,220
Other assets 9,583 10,886
------- -------
$ 432,168 348,837
======= =======
<PAGE>
3
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
September 30,
1998 December 31,
Liabilities and Shareholders' Equity (unaudited) 1997
- ------------------------------------ ------------- ------------
Current liabilities:
Obligations not liquidated because
of outstanding checks $ 13,888 13,139
Accounts payable 33,080 25,127
Withheld payroll taxes 4,804 5,256
Accrued expenses 101,208 71,583
Currently payable income taxes 10,425 6,203
------- -------
Total current liabilities 163,405 121,308
Long-term debt 23,620 -
Deferred compensation 10,113 10,127
Minority interests 2,449 1,610
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 19,951,300 shares - September 30,
1998; 19,950,800 shares - December 31,
1997 1,995 1,995
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none
issued - -
Additional paid-in capital 15,592 16,014
Retained earnings 232,693 200,281
Unamortized value of restricted stock
issued (1,224) (1,819)
Less common stock in treasury, at cost -
683,458 shares - September 30, 1998;
27,265 shares - December 31, 1997 (16,475) (679)
------- -------
Total shareholders' equity 232,581 215,792
------- -------
$ 432,168 348,837
======= =======
<PAGE>
4
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data; unaudited)
Quarter ended Nine months ended
September 30, September 30,
---------------- --------------------
1998 1997 1998 1997
------- ------- --------- ---------
Revenues $ 389,535 383,073 1,157,148 1,121,678
Cost of services 288,421 293,582 867,308 861,223
------- ------- --------- ---------
Gross profit 101,114 89,491 289,840 260,455
Operating and administrative
expenses 79,453 67,412 234,321 198,575
------- ------- --------- ---------
Operating profit 21,661 22,079 55,519 61,880
Interest expense 421 694 852 2,186
------- ------- --------- ---------
Earnings from continuing
operations before income
taxes and minority
interests 21,240 21,385 54,667 59,694
Income taxes 8,556 6,833 21,593 22,195
------- ------- --------- ---------
Earnings from continuing
operations before
minority interests 12,684 14,552 33,074 37,499
Minority interests 350 777 662 1,068
------- ------- --------- ---------
Earnings from continuing
operations 12,334 13,775 32,412 36,431
Discontinued operations - - - -
------- ------- --------- ---------
Net earnings $ 12,334 13,775 32,412 36,431
======= ======= ========= =========
Basic earnings per share:
Earnings from continuing
operations $ .63 .69 1.64 1.84
Discontinued operations $ - - - -
Net earnings $ .63 .69 1.64 1.84
Diluted earnings per share:
Earnings from continuing
operations $ .63 .69 1.63 1.83
Discontinued operations $ - - - -
Net earnings $ .63 .69 1.63 1.83
<PAGE>
5
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands; unaudited)
Nine months ended
September 30,
-----------------
1998 1997
------ ------
Continuing Operations
Operating activities:
Earnings from continuing operations $ 32,412 36,431
Minority interests 662 1,068
Depreciation and amortization 10,575 9,322
Income tax provision greater (less)
than tax payments 3,645 (284)
Change in assets and liabilities
net of effects from acquisitions:
Increase in accounts receivable (57,194) (38,396)
Increase in payables and accrued
expenses 35,367 20,185
Other 735 (2,433)
------ ------
26,202 25,893
------ ------
Investing activities:
Purchases of fixed assets (16,833) (8,340)
Acquisitions net of cash acquired (23,806) (3,245)
Other 412 228
------ ------
(40,227) (11,357)
------ ------
Financing activities:
Borrowings long-term debt 34,633 10,724
Payments long-term debt (11,099) (36,790)
Obligations not liquidated because
of outstanding checks 749 2,196
Share repurchase program (15,772) -
Other 24 894
------ ------
8,535 (22,976)
------ ------
Net cash flows from continuing operations (5,490) (8,440)
Net cash flows from discontinued operations 6,547 12,961
------ ------
Increase in cash 1,057 4,521
Cash at beginning of period 6,998 6,066
------ ------
Cash at end of period $ 8,055 10,587
====== ======
<PAGE>
6
CDI CORP. AND SUBSIDIARIES
Comments to Financial Statements
Earnings used to calculate both basic and diluted earnings per
share are the reported earnings in the Company's consolidated statement
of earnings. Because of the Company's capital structure, all reported
earnings pertain to common shareholders and no other assumed adjustments
are necessary. The number of shares used to calculate basic and diluted
earnings per share for the third quarter and nine months ended September
30, 1998 and 1997 was determined as follows:
Third quarter Nine months
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Basic
- -----
Average shares
outstanding 19,736,248 19,907,535 19,861,135 19,873,414
Restricted shares
issued not vested (44,900) (38,625) (46,400) (25,375)
---------- ---------- ---------- ----------
19,691,348 19,868,910 19,814,735 19,848,039
========== ========== ========== ==========
Diluted
- -------
Shares used for basic 19,691,348 19,868,910 19,814,735 19,848,039
Dilutive effect of
stock options 16,984 47,049 46,305 65,268
Dilutive effect of
restricted shares
issued not vested - 3,304 1,662 2,003
---------- ---------- ---------- ----------
19,708,332 19,919,263 19,862,702 19,915,310
========== ========== ========== ==========
Revenues and operating profit attributable to the business segments
of the Company for the third quarter and nine months ended September 30,
1998 and 1997 follow ($000s):
Third quarter Nine months
--------------- -------------------
1998 1997 1998 1997
------- ------- --------- ---------
Revenues:
Technical Services $ 226,235 237,392 681,468 702,857
Information Technology Services 81,663 72,422 236,170 209,888
Temporary Services 51,936 49,295 155,416 140,265
Management Recruiters 29,701 23,964 84,094 68,668
------- ------- --------- ---------
$ 389,535 383,073 1,157,148 1,121,678
======= ======= ========= =========
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7
Third quarter Nine months
--------------- -------------------
1998 1997 1998 1997
------- ------- --------- ---------
Operating profit:
Technical Services $ 10,251 12,660 24,883 33,839
Information Technology Services 5,355 5,071 15,029 15,394
Temporary Services 4,027 3,264 9,890 8,269
Management Recruiters 5,778 4,561 16,833 12,357
Corporate expenses (3,750) (3,477) (11,116) (7,979)
------- ------- --------- ---------
$ 21,661 22,079 55,519 61,880
======= ======= ========= =========
During the nine months ended September 30, 1998, the Company made a
number of acquisitions in which it invested $23,806,000. These
acquisitions were accounted for using the purchase method. Assets
acquired totaled approximately $26 million including $22 million of
goodwill. These acquisitions did not have a significant effect on the
results of operations for the nine months and quarter ended September
30, 1998.
During the nine months ended September 30, 1998, there were 500
shares of common stock issued upon the exercise of a stock option
granted under the Company s non-qualified stock option and stock
appreciation rights plan. As a result of the option exercise,
additional paid-in capital was increased by $13,000.
During 1997 shares of restricted common stock were issued to
certain officers of the Company under their employment agreements.
A portion of these shares will vest over time and the remainder will
vest depending upon the percentage achievement of predetermined goals.
The shares that will vest over time have a fixed value based upon the
market value of the shares when they were issued. The value for the
shares that vest based upon performance will fluctuate with changes in
their market value until there is a determination as to their vesting.
During the nine months ended September 30, 1998, 5,469 of these
restricted shares vested and 531 shares related to performance-based
vesting did not vest and were forfeited. The vesting of the shares
resulted in additional paid-in capital increasing by $11,000 because of
income tax benefits related to the vesting. The forfeited shares were
put in treasury increasing treasury stock by $25,000 and decreasing
unamortized value of restricted stock issued by the same amount. Also
during the nine months ended September 30, 1998, additional paid-in
capital and unamortized value of restricted stock issued were each
decreased by $445,000 for market price changes related to the shares
that will vest based upon performance. In addition, unamortized value
of restricted stock issued was decreased by $125,000 for charges to
earnings associated with the amortization of the value of the restricted
shares.
<PAGE>
8
In August, 1998 the Company initiated a program to repurchase up to
5% of its outstanding shares of common stock over a one-year period.
Through September 30, 1998, 655,700 shares were purchased under the
program. These shares were placed in treasury and increased treasury
stock by $15,772,000.
In addition, 38 shares of common stock held in treasury were
reissued. These shares had a cost of $1,000 and their reissuance
reduced additional paid-in capital and treasury stock by that amount.
Through December 31, 1997 a reserve was established for estimated
costs and losses associated with the disposition of certain divisions of
a subsidiary serving the automotive industry that have been classi- fied
as discontinued operations in the Company's financial statements.
Charges against the reserve during the nine months ended September 30,
1998 totaled $3.8 million and were for items that corresponded to those
considered in establishing the reserve. The net assets of discontinued
operations as of September 30, 1998 were comprised of working capital,
fixed assets and deferred income taxes. The remaining wind-down and
liquidation of the discontinued operations is expected to be completed
in 1998.
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.
Results for interim periods are not necessarily indicative of results to
be expected for the full year.
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, 1997.
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, 1998 were 3% and 2% higher, respectively, compared to the
same periods a year ago. Operating profits for the nine months of 1998
were down from last year's nine months and essentially flat for the
third quarter. Operations in 1998 reflect mixed market conditions with
Temporary Services and Management Recruiters performing well and
Technical Services and Information Technology Services being adversely
affected by unsettled market conditions. Operating profit for the nine
months and third quarter in 1998 was 4.8% and 5.6%, respectively, of
revenues compared to 5.5% and 5.8%, respectively, for the nine months
and third quarter of 1997.
<PAGE>
9
Technical Services' revenues for the nine months and third quarter
of 1998 declined 3% and 5%, respectively, from last year's comparable
periods. Results for 1997 included the operations of non-strategic
businesses divested in the third quarter of 1997. Excluding the
revenues of the divested businesses in 1997, nine months revenues in
1998 increased 2% and third quarter revenues were flat. Operating
profit for the nine months and third quarter in 1998 was 3.7% and 4.5%,
respectively, of revenues compared to 4.8% and 5.3%, respectively, for
the nine months and third quarter in 1997. (The non-strategic
businesses operating results did not have a material impact on margins
in 1997.) Technical Services in 1998 was impacted by lower revenues and
operating profit in its engineering business which is primarily focused
on the petrochemical sector. This weakness had started to become
evident early in 1997 and became more pronounced as the year progressed.
The support cost structure related to technical staffing was higher in
1998 reflecting additional capacity put in place starting in 1997 to
service existing and expected demand from customers. In the second
quarter of 1998, Technical Services operating profit included
restructuring costs and other non-recurring charges of $2.3 million. Of
the total $2.3 million in non-recurring charges, restructuring costs
were $1.4 million and were associated with realigning Technical
Services' operations. The restructuring costs included separation costs
of $500,000 for personnel in order to reduce future overhead support
costs and $900,000 for the disposition of leasehold obligations for real
estate no longer needed in the engineering business. The remaining
$900,000 for non-recurring charges relate to healthcare costs associated
with a self-insured program which has been replaced with an indemnity
program and vacation pay costs resulting from the institution of a new
compensation program. Approximately one-third of these costs remain
unpaid as of September 30, 1998 and the Company expects that
substantially all will be paid by the end of 1998. Technical Services
operating profit for the nine months and third quarter of 1997 included
a net gain of $2.1 million from the divestiture of the non-strategic
businesses.
Information Technology Services' revenues were up 13% for each of
the nine months and third quarter of this year compared to last year.
Operating profit margins for the nine months and third quarter of 1998
were 6.4% and 6.6%, respectively, compared to 7.3% and 7.0%,
respectively, for the same periods in 1997. This segment also increased
its support cost structure during 1997 to service existing and expected
demand from customers. Revenue growth in 1998 did not keep pace with
the additional support cost structure put into place starting in 1997.
Temporary Services' revenues for the nine months and third quarter
of 1998 were 11% and 5% higher, respectively, compared to the same
periods a year ago. Operating profit margins for the nine months and
third quarter of 1998 were 6.4% and 7.8%, respectively, vs. 5.9% and
6.6%, respectively, for the same periods in 1997. Demand for
office/clerical services continued to be strong and Temporary Services
has benefitted from its targeted expansion of services for legal and
financial temporary staffing.
<PAGE>
10
Management Recruiters' revenues were up 22% for the nine months of
this year and up 24% compared to last year's third quarter. Operating
profit margins for the nine months and third quarter of 1998 were 20.0%
and 19.5%, respectively, compared to 18.0% and 19.0%, respectively, for
the same periods in 1997. The market for Management Recruiters' middle
management search and recruiting services has remained strong and demand
has been sustained.
The third quarters of 1998 and 1997 include favorable pre-tax
adjustments of $1.5 million and $400,000, respectively, resulting from
annual actuarial studies of the Company's workers compensation
liabilities.
Interest expense in 1998 was lower than in 1997 because of lower
levels of debt outstanding.
The after-tax impact of the $2.1 million net gain recorded in 1997
by Technical Services was approximately $200,000 and includes a charge
of approximately $600,000 for the minority interests participation in
the gain.
The nine months and third quarter of 1997 include a credit of $2
million from the reduction of income tax reserves that were no longer
required. The effective income tax rates for the nine months of 1998
and 1997 (excluding the $2 million credit) were 40% and 41%,
respectively.
The wind-down and liquidation of the discontinued operations is
continuing and is expected to be completed in 1998. Costs and losses
incurred during the nine months ended September 30, 1998 of $3.8 million
were charged against a reserve for discontinued operations established
through December 31, 1997 for such costs and losses.
Year 2000
---------
Many existing computer systems use two digits to identify a year
with the assumption that the first two digits of a year are "19." With
the year 2000 approaching, computer systems that are not Year 2000
compliant will read the year 2000 as 1900 and malfunction. The
Company's program to assess the extent of issues related to Year 2000
compliance and to develop and implement solutions for those issues is
being directed by senior management with the Company's Chief Information
Officer having primary responsibility for the coordination, remediation
and implementation efforts. Designated personnel at the Company's
headquarters and at each of the Company's operating locations have been
assigned Year 2000 compliance responsibilities.
The program is focused on internal information technology systems,
computer-aided design systems, non-IT systems (purchased systems with
embedded logic chips), facilities and the status of compliance by larger
customers, suppliers and other key third parties. The program involves
the following phases:
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11
Inventory
Assessment and planning
Remediation or replacement and testing
Implementation
The internal IT systems compliance issues are most critical and
relate to the Company's financial systems, computer networks and
communications systems and personnel recruiting and human resource
systems. Corporate level personnel have responsibility to insure that
these systems will be Year 2000 compliant as well as determining the
status of compliance by larger customers, suppliers and other key third
parties.
Year 2000 compliance related to internal financial systems is
being addressed in two ways. The Company has decided to replace its
primary financial system with a state-of-the-art integrated enterprise-
wide system. This decision was driven by the need for enhanced
processing, control and reporting capabilities using current
technologies. The new system will be Year 2000 compliant and is
expected to be operational by third quarter, 1999. In addition, the
existing primary system and other satellite systems are being evaluated
for Year 2000 compliance and required remediation, testing and
implementation are underway. These efforts are scheduled to be
concluded by mid-1999.
A Company-wide expansion and upgrade of its computer networks and
communications systems has been underway since mid-1997. The roll out
and implementation of the new platform, which is Year 2000 compliant, is
scheduled to be completed by the end of first quarter, 1999.
Personnel recruiting and human resource systems are being replaced
by new systems developed through the end of 1997. These new systems are
Year 2000 compliant and are in the process of being installed in the
operating locations. The roll-out is scheduled to be completed during
the second quarter, 1999.
With respect to larger customers, suppliers and other key third
parties, questionnaire surveys have been distributed for use in
assessing their state of compliance in order to develop plans in case of
non-compliance. Customers with whom there is electronic interchange of
data are of primary focus to insure that both the Company and those
customers are Year 2000 compliant with the standards established for
such interchange.
The approximate status for each of these areas follows:
Remediation Implementation
Assessment or and
and replacement projected
Inventory planning and testing completion
------------- ------------- ------------- --------------
Financial Substantially Substantially Approximately
systems complete complete 30% complete Q3, 1999
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12
Remediation Implementation
Assessment or and
and replacement projected
Inventory planning and testing completion
------------- ------------- ------------- --------------
Computer
networks
and
communi-
cations Substantially Substantially Approximately
systems complete complete 90% complete Q1, 1999
Personnel
recruit-
ing and
human
resource Substantially Substantially Substantially
systems complete complete complete Q2, 1999
Larger Approximately Approximately Not
customers 80% complete 50% complete applicable Q2, 1999
Larger
suppliers
and Approximately Approximately Not
others 40% complete 0% complete applicable Q2, 1999
The responsibility for identifying, assessing compliance issues and
then implementing solutions for computer-aided design systems,
non-IT systems, facilities and the status of compliance by local
suppliers and third parties rests primarily with each operating office.
Solutions for Year 2000 issues related to computer-aided design systems,
non-IT systems and facilities will, of necessity, come from vendors and
others providing the related services. The Company, however, needs to
identify compliance issues and insure that remediation or replacement is
accomplished. With respect to local suppliers and third parties, the
Company has also distributed questionnaire surveys in order to assess
their state of compliance in order to develop plans in case of non-
compliance. The identification and assessment process is well underway
with the expectation that solutions will be in place by second quarter,
1999.
The cost of the Company's Year 2000 program is expected to be
approximately $2 million all of which will be charged against
operations. This amount does not include costs associated with the new
financial system or the new personnel recruiting and human resource
systems described above. These systems already were scheduled for
implementation and their implementation was not accelerated because of
Year 2000 issues. To date approximately $1 million has been spent on
the Year 2000 program most of which relates to the remediation effort
associated with the existing financial systems.
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13
The Company believes that its program to address Year 2000
compliance is on schedule for completion before the end of 1999.
However, there can be no assurance that there will be no material impact
as a result of Year 2000 issues, particularly considering the dependence
and interdependence that exists with third parties and that resources
for remediation and replacement may not be available in the time frame
required. Since the Company has a greater level of control over
implementing solutions to Year 2000 issues relating to its internal
systems, it is more likely that adverse impacts on the Company could
originate with third parties than the Company's inability to have its
internal systems Year 2000 compliant. If issues related to internal
systems or those related to third parties are not resolved before the
end of 1999, the consequences to the Company would be material.
The Company is waiting to develop a most reasonably likely worst
case Year 2000 scenario until additional information and insight is
obtained primarily from third parties. At the appropriate time but not
later than mid-1999, the Company will determine the extent to which
contingency plans are required.
Financial Condition
-------------------
The ratio of current assets to current liabilities was 2.1 to 1
as of September 30, 1998 and 2.4 to 1 as of December 31, 1997. The
ratio of long-term debt to total capital (long-term debt plus
shareholders' equity) was 9% as of September 30, 1998. No long-term
debt was outstanding as of December 31, 1997.
During the nine months ended September 30, 1998, the Company made a
number of acquisitions in which it invested $23,806,000. These
acquisitions were accounted for using the purchase method. Assets
acquired totaled approximately $26 million including $22 million of
goodwill. These acquisitions did not have a significant effect on the
results of operations for the nine months and quarter ended September
30, 1998.
In August, 1998 the Company initiated a program to repurchase up to
5% of its outstanding shares of common stock over a one-year period.
Through September 30, 1998, 655,700 shares costing $15,772,000 were
purchased under the program.
The Company believes that capital resources available from
operations and financing arrangements are adequate to support the
Company's businesses.
New Accounting Standards
------------------------
The Company has adopted Statement of Position 98-1, Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use.
The amount of cost capitalized is approximately $8 million through
September 30, 1998.
<PAGE>
14
In June, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information. Statement No. 131
supersedes Statement of Financial Accounting Standards No. 14,
Financial Reporting for Segments of a Business Enterprise, and
establishes new standards for reporting information about operating
segments in annual financial statements and requires selected
information about operating segments in interim financial reports.
Statement 131 also establishes standards for related disclosures about
products and services, geographic areas and major customers. Statement
131 is effective for periods beginning after December 15, 1997 with
initial implementation required in financial statements for the annual
period ending after December 15, 1997. This Statement affects
reporting in financial statements only and will not have impact upon
results of operations, financial condition or liquidity. The Company
will adopt the standards established by this Statement as required.
In February, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits.
Statement No. 132 supersedes several previously issued Statements and
establishes revised standards for disclosures surrounding pensions and
other postretirement benefits. Statement No. 132 is effective for years
beginning after December 15, 1997. This Statement affects reporting in
financial statements only and will not have impact upon results of
operations, financial condition or liquidity. The Company will adopt
the standards established by this Statement as required.
In June, 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. Statement No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities and is
effective for years beginning after June 15, 1999. The Company will
determine the extent to which Statement No. 133 applies and adopt the
standards established as required.
Forward-looking Information
---------------------------
Certain information in this report, including Management's
Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements as such term is defined
in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Certain forward-looking statements can
be identified by the use of forward-looking terminology such as,
"believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "estimates," or "anticipates" or
the negative thereof or other comparable terminology, or by discussions
of strategy, plans or intentions. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. These include
risks and uncertainties such as competitive market pressures, material
changes in demand from larger customers, availability of labor, the
<PAGE>
15
Company's performance on contracts, changes in customers' attitudes
toward outsourcing, government policies adverse to the staffing
industry, changes in economic conditions, unforeseen events associated
with divestiture of discontinued operations, delays or unexpected costs
in making modifications to existing software and converting to new
software to resolve issues related to Year 2000 and failure of third
parties to provide Year 2000 compliant products and services. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company assumes
no obligation to update such information.
<PAGE>
16
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, 1997 (File
No. 1-5519). (Constitutes a management contract
or compensatory plan or arrangement)
b. 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)
c. Employment Agreement dated March 11, 1997,
including Restricted Stock Agreement and Non-
Qualified Stock Option Agreement, by and between
Registrant and Mitchell Wienick, incorporated
herein by reference to the EDGAR filing made by
the Registrant on April 1, 1997 in connection
with the Registrant's definitive Proxy Statement
for its annual meeting of shareholders held on
April 28, 1997 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
d. Consulting Agreement dated as of April 7, 1997
by and between Registrant and Walter R. Garrison,
incorporated herein by reference to Registrant's
report on Form 10-Q for the quarter ended June
30, 1997 (File No. 1-5519). (Constitutes a
management contract or compensatory plan or
arrangement)
<PAGE>
17
e. Employment Agreement, Restricted Stock Agreement
and Non-Qualified Stock Option Agreement all
dated August 4, 1997, by and between Registrant
and Robert J. Mannarino, incorporated herein by
reference to the Registrant's report on Form 10-Q
for the quarter ended September 30, 1997. (File
No. 1-5519). (Constitutes a management contract
or compensatory plan or arrangement)
f. Supplemental Retirement Agreement dated as of
April 7, 1997 by and between Registrant and
Mitchell Wienick, incorporated herein by
reference to the Registrant's report on Form
10-K for the year ended December 31, 1997
(File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
g. Employment Agreement dated October 29, 1997,
Restricted Stock Agreement dated November 10,
1997 and Non-Qualified Stock Option Agreement
dated November 10, 1997 each by and between
Registrant and John D. Sanford, incorporated by
reference to the Registrant's report on Form
10-K for the year ended December 31, 1997
(File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
h. Supplemental Retirement Agreement dated as of
November 18, 1997 by and between Registrant and
Robert J. Mannarino, incorporated herein by
reference to the Registrant's report on Form
10-K for the year ended December 31, 1997
(File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
i. Supplemental Retirement Agreement dated as of
November 20, 1997 by and between Registrant and
John D. Sanford, incorporated herein by reference
to the Registrant's report on Form 10-K for the
year ended December 31, 1997 (File No. 1-5519).
(Constitutes a management contract or
compensatory plan or arrangement)
j. Employment Agreement dated July 8, 1997,
including Restricted Stock Agreement and Non-
Qualified Stock Option Agreement, by and between
Registrant and Brian J. Bohling, incorporated
herein by reference to the Registrant's report
on Form 10-Q for the quarter ended March 31, 1998
(File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
<PAGE>
18
k. Supplemental Retirement Agreement dated November
18, 1997 by and between Registrant and Brian J.
Bohling, incorporated herein by reference to the
Registrant's report on Form 10-Q for the quarter
ended March 31, 1998 (File No. 1-5519).
(Constitutes a management contract or
compensatory plan or arrangement)
l. Employment Agreement effective January 1, 1998
by and between Registrant and Joseph R. Seiders,
incorporated herein by reference to the Regis-
trant's report on Form 10-Q for the quarter ended
March 31, 1998 (File No. 1-5519). (Constitutes a
management contract or compensatory plan or
arrangement)
m. CDI Corp. 1998 Non-Qualified Stock Option Plan,
incorporated herein by reference to the EDGAR
filing made by the Registrant on April 3, 1998
in connection with the Registrant's definitive
Proxy Statement for its annual meeting of
shareholders held on May 5, 1998 (File No.
1-5519). (Constitutes a management contract
or compensatory plan or arrangement)
n. CDI Corp. Performance Share Plan, incorporated
herein by reference to the Registrant's report
on Form 10-Q for the quarter ended March 31, 1998
(File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
o. CDI Corp. Management Stock Purchase Plan, incor-
porated herein by reference to the Registrant's
report on Form 10-Q for the quarter ended March
31, 1998 (File No. 1-5519). (Constitutes a
management contract or compensatory plan or
arrangement)
27. Financial Data Schedule.
(b) During the quarter ended September 30, 1998 the Registrant
filed a Form 8-K to report that its Board of Directors, on
on August 3, 1998, had approved a program to repurchase up
to 5% of the Registrant's outstanding common stock over a
one-year period.
<PAGE>
19
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 12, 1998 By: /s/ John D. Sanford
--------------------------------------
JOHN D. SANFORD
Executive Vice President and Chief
Financial Officer
(Duly authorized officer and
principal financial officer of
Registrant)
<PAGE>
20
INDEX TO EXHIBITS
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 Registrant's report on Form 10-Q
for the quarter ended June 30, 1997 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
b. 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)
c. Employment Agreement dated March 11, 1997, including
Restricted Stock Agreement and Non-Qualified Stock
Option Agreement, by and between Registrant and
Mitchell Wienick, incorporated herein by reference to
the EDGAR filing made by the Registrant on April 1,
1997 in connection with the Registrant s definitive
Proxy Statement for its annual meeting of share-
holders held on April 28, 1997 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
d. Consulting Agreement dated as of April 7, 1997 by
and between Registrant and Walter R. Garrison,
incorporated herein by reference to Registrant's
report on Form 10-Q for the quarter ended June 30,
1997 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
e. Employment Agreement, Restricted Stock Agreement and
Non-Qualified Stock Option Agreement all dated August
4, 1997, by and between Registrant and Robert J.
Mannarino, incorporated herein by reference to the
Registrant's report on Form 10-Q for the quarter
ended September 30, 1997 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
<PAGE>
21
INDEX TO EXHIBITS
Number Exhibit Page
- ------- ------------------------------------------------------ ----
f. Supplemental Retirement Agreement dated as of April 7,
1997 by and between Registrant and Mitchell Wienick,
incorporated herein by reference to the Registrant's
report on Form 10-K for the year ended December 31,
1997 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
g. Employment Agreement dated October 29, 1997,
Restricted Stock Agreement dated November 10, 1997
and Non-Qualified Stock Option Agreement dated
November 10, 1997 each by and between Registrant and
John D. Sanford, incorporated by reference to the
Registrant's report on Form 10-K for the year ended
December 31, 1997 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
h. Supplemental Retirement Agreement dated as of
November 18, 1997 by and between Registrant and Robert
J. Mannarino, incorporated herein by reference to the
Registrant's report on Form 10-K for the year ended
December 31, 1997 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
i. Supplemental Retirement Agreement dated as of
November 20, 1997 by and between Registrant and John
D. Sanford, incorporated herein by reference to the
Registrant's report on Form 10-K for the year ended
December 31, 1997 (File No. 1-5519). (Constitutes a
management contract or compensatory plan or
arrangement)
j. Employment Agreement dated July 8, 1997, including
Restricted Stock Agreement and Non-Qualified Stock
Option Agreement, by and between Registrant and
Brian J. Bohling, incorporated herein by reference
to the Registrant's report on Form 10-Q for the
quarter ended March 31, 1998 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
k. Supplemental Retirement Agreement dated November 18,
1997 by and between Registrant and Brian J. Bohling,
incorporated herein by reference to the Registrant's
report on Form 10-Q for the quarter ended March 31,
1998 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
<PAGE>
22
INDEX TO EXHIBITS
Number Exhibit Page
- ------- ------------------------------------------------------ ----
l. Employment Agreement effective January 1, 1998 by and
between Registrant and Joseph R. Seiders, incorporated
herein by reference to the Registrant's report on Form
10-Q for the quarter ended March 31, 1998 (File No.
1-5519). (Constitutes a management contract or
compensatory plan or arrangement)
m. CDI Corp. 1998 Non-Qualified Stock Option Plan,
incorporated herein by reference to the EDGAR filing
made by the Registrant on April 3, 1998 in connection
with the Registrant's definitive Proxy Statement for
its annual meeting of shareholders held on May 5,
1998 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
n. CDI Corp. Performance Share Plan, incorporated herein
by reference to the Registrant's report on Form 10-Q
for the quarter ended March 31, 1998 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
o. CDI Corp. Management Stock Purchase Plan, incorporated
herein by reference to the Registrant's report on
Form 10-Q for the quarter ended March 31, 1998 (File
No. 1-5519). (Constitutes a management contract or
compensatory plan or arrangement)
27. Financial Data Schedule. 23
<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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 8,055
<SECURITIES> 0
<RECEIVABLES> 324,674
<ALLOWANCES> 4,972
<INVENTORY> 0
<CURRENT-ASSETS> 345,646
<PP&E> 93,566
<DEPRECIATION> 58,325
<TOTAL-ASSETS> 432,168
<CURRENT-LIABILITIES> 163,405
<BONDS> 23,620
0
0
<COMMON> 1,995
<OTHER-SE> 230,586
<TOTAL-LIABILITY-AND-EQUITY> 432,168
<SALES> 0
<TOTAL-REVENUES> 1,157,148
<CGS> 0
<TOTAL-COSTS> 867,308
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 852
<INCOME-PRETAX> 54,667
<INCOME-TAX> 21,593
<INCOME-CONTINUING> 32,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,412
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.63
</TABLE>
