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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 2000
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
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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
- --------------------------------------------- -------------------
(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
- ---------------------------- ------------------------------------
(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 28, 2001 of voting stock of the
Registrant held by shareholders other than executive officers, directors or
known beneficial owners of 10% or more of such stock of the Registrant was:
Common stock, $.10 par value $167,554,000
Class B common stock, $.10 par value Not applicable
The outstanding shares of each of the Registrant's classes of common stock as
of February 28, 2001 were:
Common stock, $.10 par value 19,070,426 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 1, 2001 Part III
1
PART I
Item 1. BUSINESS.
THE COMPANY
OVERVIEW
CDI Corp. (the "Registrant" or the "Company") is in the business of providing
staffing, project and permanent placement services. The Company's principal
executive offices are located in Philadelphia, Pennsylvania. The predecessor of
the Company was formed in 1950. The Company's revenues are derived primarily
from Fortune 1000 companies serviced primarily in the United States.
The Company's foreign operations are primarily located in the United Kingdom
and Canada.
The Company conducts its operating activities through four segments as listed
below:
Clerical/
Technical Project Administrative Permanent
Segment Staffing Services Staffing Placement
Information Technology Services X X
Technical Services X X
Management Recruiters X X
Todays Staffing X
Personnel are recruited by the Company and assigned to work for customers in
each segment of the Company's operations. Such recruited personnel are employees
of the Company. The Company assumes risk with respect to the performances of its
services and the acceptability of its employees to its customers.
In certain cases, particularly in the Information Technology Services and
Technical Services segments, the services of personnel ("supplier associates
employees") supplied by other staffing companies or contractors ("supplier
associates") are used to fulfill customer expectations or customer contract
requirements. In these cases, the Company receives an administrative fee for
arranging for, billing for and collecting the billings related to the supplier
associates. Typically, the customer is responsible for assessing the work of
supplier associates who have the responsibility for the performance
acceptability of their personnel to the customer.
Management Recruiters ("MRI") is in the business of providing permanent
placement services with over 1,000 franchise locations throughout the world. MRI
also operates company store locations that provide permanent placement and
clerical/administrative staffing services. This operating segment derives its
revenue from placement fees, initial franchise fees, continuing franchise
royalties and clerical/administrative staffing services.
2
OPERATING SEGMENTS
The following table sets forth (in thousands) the revenues and earnings from
continuing operations before income taxes and minority interests attributable to
the continuing operations of the operating segments of the Registrant and its
consolidated subsidiaries during the years indicated and the assets attributable
to each segment as of the end of each year.
Years ended December 31,
2000 1999 1998
----------- ---------- ----------
Revenues
- --------
Information Technology Services $ 355,693 331,521 320,599
Technical Services 985,891 929,118 898,736
Management Recruiters 136,752 113,343 112,217
Todays Staffing 238,908 227,895 208,993
----------- ---------- ----------
$ 1,717,244 1,601,877 1,540,545
=========== ========== ==========
Earnings from continuing
operations before income
taxes and minority interests
- ----------------------------
Operating profit
Information Technology Services $ 17,369 22,581 21,278
Technical Services 21,827 44,435 33,059
Management Recruiters 30,716 22,450 22,813
Todays Staffing 15,153 15,166 13,946
Corporate expenses (25,260) (18,656) (14,986)
----------- ---------- ----------
59,805 85,976 76,110
Interest expense 5,189 2,114 1,384
------------ ---------- ----------
$ 54,616 83,862 74,726
============ ========== ==========
Assets
- ------
Information Technology Services $ 133,413 131,303 92,223
Technical Services 314,897 276,691 243,188
Management Recruiters 52,029 54,821 36,355
Todays Staffing 62,199 58,555 52,730
Corporate 9,491 9,454 5,966
Net assets of discontinued operations - 856 5,352
------------ ----------- ----------
$ 572,029 531,680 435,814
============ ========== ==========
3
INFORMATION TECHNOLOGY SERVICES
The Registrant's Information Technology Services operating segment provides
staffing, managed staffing, project outsourcing and functional outsourcing
services in the information technology markets. In providing its staffing
services, the segment recruits and hires employees or secures supplier
associates employees and provides these personnel to customers. Customers use
the segment's employees or supplier associates to develop, design and maintain
information systems.
In managed information technology staffing, the segment not only provides
employees but may also manage the customer's entire information technology
contract staffing needs. When providing managed staffing services, the segment
frequently establishes a branch office at one or more of the customer's local
facilities, staffs it with employees from the segment, and ties that branch into
the segment's business systems. In some instances, managed information
technology staffing services also include the coordination of supplier
associates employees assigned to the customer from other staffing companies.
In information technology outsourcing, the segment assumes certain
responsibilities for a service or a deliverable. Outsourcing services are
focused on distributed systems management, application development and
maintenance support, help desk services and PC support. In most instances, these
outsourcing services are located on site at the customer's premises.
During the year ended December 31, 2000, Information Technology Services
provided services to several hundred customers. Historically, much of its
business has been performed for large industrial corporations, but the segment
has begun to penetrate non-industrial fields such as banking and financial
services. Customers are geographically dispersed. Managed staffing and
outsourcing services are concentrated among a small number of these customers,
which tend to be among the largest U.S. corporations. In 2000, one large
industrial corporation comprised approximately 25% of Information Technology
Services' total revenues.
Since much of the business of Information Technology Services and Technical
Services is performed for large multi-national manufacturing companies, a
material portion of the revenues for each of these segments is derived from many
of the same customers. Loss of one or more of these customers in one segment
could adversely impact revenues of the other segment.
In providing staffing services the segment's employees are hired by the
segment and assigned to work for a customer. The period of assignment depends
upon the duration of the need for the skills of an individual employee. At the
end of an assignment, an employee is either reassigned within the current
customer, is assigned to perform services with another customer, or employment
is terminated.
Supplier associates employees are engaged through another staffing company or
contractor to work on an assignment for a customer. At the end of an assignment
the services of supplier associates are typically terminated.
Information Technology Services' personnel are attracted to this type of
employment by the opportunity to work on "state-of-the-art" projects and by the
geographic and industry diversity of projects. In addition, they may be
compensated at higher hourly rates than the hourly rate equivalent paid to
personnel with similar backgrounds and experience employed by the segment's
customers.
4
Information Technology Services' employees are on Information Technology
Services' payroll and are subject to its administrative control. When staffing
services are provided at a customer's location, the customer retains technical
and supervisory control. When the segment provides managed staffing services,
the segment may provide additional administrative supervision for its personnel.
The ability of Information Technology Services to find and hire personnel
with the capabilities required by customers is critical to its operations.
During periods of high demand for specific skills, it is not uncommon for
Information Technology Services to experience pressure to pay higher wage rates
or lose employees to competitors who will pay higher 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 are filled quickly.
Information Technology Services' personnel of virtually every skill level are
currently in high demand. This level of demand is expected to remain high. The
segment's greatest challenge is finding and retaining qualified information
technology professionals. Consequently, the segment is employing aggressive
recruiting methods and is continuing to enhance its benefits for these
professionals. In order to enhance employee retention, the segment has initiated
career tracking to place employees on a continuum of assignments requiring
increasing technical skills. This provides employees with both career
progression and skills that translate into higher billings to customers over
time.
Pricing under most contracts between Information Technology Services and its
customers is based on prevailing hourly rates of pay. Contracts generally do not
obligate the customer to pay for any fixed number of hours. Both the customer
and the segment have the right to terminate the contract, usually on short
notice. Similarly, Information Technology Services maintains the right to
terminate employees at will. Some 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.
Information Technology Services operates through a network of approximately
41 sales and recruiting offices located in major markets throughout the United
States and 5 international offices.
Customers typically invite several companies to bid for contracts, which are
awarded primarily on the basis of price, value-added services and prior
performance. Many times customers grant multi-vendor contracts.
Industry analysts estimate the market for the Information Technology sector
of the staffing industry to be approximately $23 billion a year. No single
company or small group of companies is dominant. Competition in the industry is
intense from national, regional and local companies, some of which serve only
selected markets.
TECHNICAL SERVICES
The Registrant's Technical Services operating segment provides staffing,
managed staffing, outsourcing and consulting services in engineering and other
technical fields.
5
In providing its staffing services, the segment recruits and hires employees
or secures supplier associates employees and provides these personnel to
customers. Customers use the segment's employees or supplier associates
employees for expansion programs, to staff special projects and to meet peak
period manpower needs.
In managed technical staffing, the segment not only provides the employees
but may also manage the customer's entire contract staffing requirements. When
providing managed staffing services, the segment frequently establishes a branch
office at one or more of the customer's facilities, staffs it with employees
from the segment, and connects that branch into the segment's business systems.
In some instances, managed staffing services also include the coordination of
supplier associates employees assigned to the customer from other staffing
companies.
In technical outsourcing, the segment usually takes over a customer's entire
technical department, staffing the department with employees and managing the
production of the department's output. In most instances, the managed department
is located on site at the customer's premises, but in some cases the customer
may prefer an off-site location, and in this case the segment might be called
upon to furnish the site as well as to furnish the computer systems needed to
support the operations. The segment sometimes maintains stand-alone operations,
which provide off-site services to multiple customers.
Technical Services also performs engineering consulting, providing services
such as project planning and feasibility studies, conceptual engineering, detail
engineering and design, procurement and project management. These activities
typically take place at the segment's own facilities where the segment furnishes
the computer systems support.
During the year ended December 31, 2000, Technical Services provided services
to approximately 3,000 customers. Much of its business is performed for large
multi-national manufacturing companies. Historically, the segment's largest
markets have been aircraft/aerospace, automotive, hydrocarbon/petrochemical,
construction, electronics, industrial equipment, marine and telecommunications.
The segment is broadening its markets to include pharmaceuticals, specialty
chemicals, biotechnology, medical devices and food and beverage. Customers are
geographically dispersed. Managed staffing, outsourcing and consulting services
are concentrated among a small number of these customers, which tend to be among
the largest U.S. industrial corporations.
Since much of the business of Information Technology Services and Technical
Services is performed for large multi-national manufacturing companies, a
material portion of the revenues for each of these segments is derived from many
of the same customers. Loss of one or more of these customers in one segment
could adversely impact revenues of the other segment.
Services are performed 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,
2000, approximately 80% of the segment's revenues were generated through
in-customer work with the remaining 20% generated in-house.
In-customer staffing employees are hired by the segment and assigned to work
for a customer. The period of assignment depends upon the duration of the need
for the skills of an individual employee. At the end of an assignment, an
employee is either reassigned within a current customer, is assigned to perform
services with another customer, or employment is terminated.
6
Supplier associates employees are engaged through another staffing company or
contractor to work on an assignment for a customer. At the end of an assignment
the services of supplier associates are typically terminated.
Technical Services' personnel are attracted to this type of employment by the
opportunity to work on "state-of-the-art" projects and by the geographic and
industry diversity of projects. In addition, they may be compensated at higher
hourly rates than the hourly rate equivalent paid to personnel with similar
backgrounds and experience employed by the segment's customers.
When performing services on an in-customer basis, Technical Services'
employees are on Technical Services' payroll and are subject to its
administrative control. The customer retains technical and supervisory control.
When the segment provides managed staffing services, the segment may provide
additional administrative supervision for its personnel.
When services are performed in-house, Technical Services generally provides
supervision for employees, and may have increased responsibility for the
performance of work that is generally monitored in conjunction with customer
personnel.
The demand for in-house services is generally more constant than for
in-customer staffing services. Consequently, the duration of employment of
employees working on in-house services is usually longer than for employees
working in in-customer staffing. Supervisory personnel at managed programs and
at in-house facilities are generally long-term employees and are important to
the continuing relationship with customers.
The ability of Technical Services to find and hire employees with the
capabilities required by customers is critical to its operations. Such personnel
usually 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 customer
requirements may be filled quickly.
Pricing under most contracts between Technical Services and its customers is
based on prevailing hourly rates of pay. Contracts generally do not obligate the
customer to pay for any fixed number of hours. Both the customer and the segment
have the right to terminate the contract, usually on short notice. Similarly,
Technical Services maintains the right to terminate employees at will. Some
customer contracts contain limitations on the maximum cost expressed either in a
dollar amount or a maximum number of worker hours to be provided.
Technical Services operates through a network of approximately 139 sales and
recruiting offices and in-house facilities located in major markets throughout
the United States and 27 international offices.
Marketing activities are conducted by divisional and regional management to
ascertain opportunities for Technical Services in specific geographic areas.
Each office assists in identifying the potential markets for services in its
geographic area, and develops that market through personal contact with
prospective and existing customers. Additionally, Technical Services' operating
management stays
7
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, value-added services and prior
performance. Many times customers grant multi-vendor contracts.
Industry analysts estimate the market for the Technical Engineering sector of
the staffing industry to be approximately $5 billion a year. The Registrant
believes that it is one of the largest companies providing technical services in
this sector of the market, but that neither it nor any small group of companies
is dominant. Competition in the industry is intense from national, regional and
local companies, some of which serve only selected markets.
MANAGEMENT RECRUITERS
The Registrant's Management Recruiters operating segment recruits executive,
management, professional, technical, sales and clerical personnel for permanent
employment positions. Candidates are recruited for many different capacities
including accounting, finance, administrative, information technology,
engineering, managerial, personnel, production, research and development, sales,
supervision and technical.
Fees for placement services paid by the employers are generally a percentage
of the annual compensation to be paid to the new employee. Fees are paid on a
retainer basis or on a contingent basis after a qualified candidate has been
hired and remains employed for a trial period, generally 30 days. On large,
multiple placement projects, Management Recruiters can be engaged on a retainer
basis for up to a year in duration.
Management Recruiters also provides professional, executive, middle
management and clerical personnel on a temporary basis, at times with the
objective of permanently placing such personnel with the customer-employer.
Management Recruiters employs these temporary personnel.
As of December 31, 2000, Management Recruiters had approximately 1,041
franchised offices and 47 company-owned offices providing services to both large
and small employers in virtually all industries. Of the franchised offices, 886
are located throughout the United States with 155 offices located
internationally. All company-owned offices are located in the United States. The
broad geographic scope of operations enables franchisees and company-owned
offices to provide nationwide recruiting and matching of employers with job
candidates in the United States. The network utilizes an inter-office referral
system on both national and regional levels which enables offices to cooperate
in fulfilling a customer's requirements. Management Recruiters established a
direct international presence in 1999 when it acquired a business headquartered
in the United Kingdom.
Franchisees pay an initial fee approximating $72,500 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'
8
expertise in the business, and from its Internet presence, national marketing,
public relations support and advertising campaigns. Further, they receive
extensive pre-opening training and start-up assistance on site. Franchisees also
have the right to use Management Recruiters' trade names, trademarks, the
inter-office referral system, operating techniques, advertising materials, sales
programs, video and live interactive training programs, computer programs,
Internet and intranet systems, manuals and forms.
A large number of companies are engaged in the recruitment business and
Management Recruiters encounters significant competition. 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.
TODAYS STAFFING
The Registrant's Todays Staffing operating segment provides clerical,
secretarial, office support, legal, and a small number of semi-skilled light
industrial personnel to customers on a temporary basis. The segment recruits and
hires employees and provides these personnel to the customer on a contract or
project basis. In managed staffing, the segment not only provides the employees
but also manages the customer's entire contract staffing needs. In the
professional segment of legal, Todays Staffing also places personnel on a
permanent basis. This segment is not reliant on supplier associates.
Customers retain Todays Staffing to meet peak period manpower needs, to
temporarily replace personnel on vacation and to staff special projects. During
the year ended December 31, 2000, these services were provided to approximately
9,000 customers.
Services are performed in customers' facilities by Todays Staffing 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 either reassigned within
the current customer, is assigned to perform services with another customer, or
employment is terminated. Todays Staffing personnel are on Todays Staffing
payroll and are subject to its administrative control. The customer retains
supervisory control and responsibility for the performance of the employee's
services. The ability of Todays Staffing to locate and hire personnel with
capabilities required by customers is critical to its operations.
Pricing is based on prevailing hourly rates of pay, and arrangements with the
customer generally do not obligate the customer to pay for any fixed number of
hours. Both the customer and the segment have the right to terminate services,
usually on short notice. Similarly, Todays Staffing maintains the right to
terminate employees at will.
Todays Staffing operates through a network of approximately 119 sales and
recruiting offices, 9 of which are franchised, situated in the United States and
12 offices in 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.
9
Revenues from both company and franchised offices are reflected in the
segment's revenues. Todays Staffing employs all of 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 for administrative costs. Franchisees are paid by Todays
Staffing a portion of the gross profit on their accounts.
The segment competes with large national companies and many smaller companies
in regional and local markets. The market for the office/clerical sector of the
staffing industry is estimated by industry analysts to be approximately $21
billion a year.
EMPLOYEES
At December 31, 2000 the Registrant had approximately 32,360 employees. The
Registrant believes that its relations with its employees are generally good.
Item 2. PROPERTIES.
The Information Technology Services operating segment has approximately 41
facilities throughout the United States and 5 facilities internationally,
occupying a total of approximately 125,000 square feet of space. Most of the
space is devoted to sales, marketing and administrative functions, and a small
portion is used for in-house operations. The facilities are leased under terms
generally extending up to five years.
The Technical Services operating segment has approximately 139 facilities
throughout the United States and 27 facilities internationally, occupying a
total of approximately 750,000 square feet of space. Approximately 350,000
square feet is devoted to in-house technical services and the balance to sales,
marketing and administrative functions. The facilities are leased under terms
generally extending up to five years.
The Management Recruiters operating segment occupies approximately 150,000
square feet of office space at 47 locations, primarily for its company-owned
permanent placement offices. These facilities are leased for varying terms, the
majority of which extend up to five years. Management Recruiters also had 1,041
franchised offices. Franchisees enter into their own leases for which the
segment assumes no obligation.
The Todays Staffing operating segment occupies approximately 200,000 square
feet of office space at approximately 122 locations for its company-owned
temporary services offices. These facilities are leased for varying terms
generally extending up to five years. Todays Staffing also has 9 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 50,000 square feet is leased.
10
Item 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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, 2000 and 1999. The Registrant's common stock is
traded on the New York Stock Exchange.
2000 1999
----------------- ------------------
High Low High Low
----- ------- ------ ------
First quarter 25.69 18.25 27.00 19.50
Second quarter 25.88 18.44 34.88 22.69
Third quarter 23.00 14.94 36.00 25.75
Fourth quarter 17.44 11.00 30.00 22.13
No cash dividends were declared during the years ended December 31, 2000 and
1999. The Company has no present intention of paying cash dividends during the
year ending December 31, 2001.
Shareholders of record on February 28, 2001 numbered 517. This number counts
each street name account as only 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.
11
Item 6. SELECTED FINANCIAL DATA.
Following is Selected Financial Data for the years ended December 31, 2000,
1999, 1998, 1997 and 1996. The data presented is in thousands, except for per
share data.
2000 1999 1998 1997 1996
Earnings Data
Revenues ............................. $1,717,244 1,601,877 1,540,545 1,496,758 1,374,881
Earnings from continuing operations .. $ 33,003 49,679 44,239 46,934 42,470
Discontinued operations .............. -- 2,768 1,338 (9,322) (11,072)
---------- ---------- ---------- ----------- ----------
Net earnings ......................... $ 33,003 52,447 45,577 37,612 31,398
Basic earnings per share:
Earnings from continuing
operations ....................... $ 1.73 2.61 2.25 2.36 2.14
Discontinued operations ........... $ -- .15 .07 (.47) (.56)
Net earnings ...................... $ 1.73 2.76 2.32 1.89 1.58
Diluted earnings per share:
Earnings from continuing
operations ....................... $ 1.73 2.60 2.25 2.36 2.14
Discontinued operations ........... $ -- .14 .07 (.47) (.56)
Net earnings ...................... $ 1.73 2.74 2.32 1.89 1.58
Cash dividends ....................... $ -- -- -- -- --
Balance Sheet Data
Total assets ......................... $ 572,029 531,680 435,814 348,837 340,174
Long-term debt ....................... $ 49,623 65,651 35,059 -- 48,866
Shareholders' equity ................. $ 325,795 293,844 240,369 215,585 176,986
12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (In thousands, except per share data and ratios)
Results of operations, year ended December 31, 2000 vs. year ended December 31,
1999
- --------------------------------------------------------------------------------
Consolidated Results
- --------------------
The Company achieved record consolidated revenues of $1,717,244 during 2000,
reflecting a 7.2% increase over the 1999 level of $1,601,877. All operating
segments achieved year-over-year growth in revenues.
Gross profit increased by 9.9% during 2000, reflecting improvements in both
volume and gross profit margins. The gross profit margin improved to 27.2% in
2000 from 26.5% in 1999. This improvement in the margin reflects the Company's
increased emphasis on contract pricing and improved operating results from the
Management Recruiters segment.
Operating and administrative costs increased 20.2% during 2000. As a percent
of consolidated revenues, these costs were 23.7% in 2000 and 21.1% in 1999.
During 2000, the Company invested in additional recruiters, management and
infrastructure as well as new business initiatives. In addition, recruiter
compensation and bonus structures were changed to promote retention and increase
productivity in light of very challenging labor supply and competitive
pressures. The Company also incurred additional system costs to support its
front and back-office systems. Prospectively, management anticipates that there
will continue to be a tight labor supply, particularly for high-end technical
talent. Additionally, retention of productive recruiting personnel may continue
to impact operations as competitive pressures continue.
Operating profit decreased 30.4% during 2000. As a percentage of consolidated
revenues, operating profit declined to 3.5% in 2000 from 5.4% in 1999. As noted
above, the Company was faced with very challenging recruiting and market
conditions in 2000, which resulted in increased costs. Additionally, the
Company's 2000 operating results were adversely affected by a number of charges
summarized below:
Description Pre-Tax Amounts
- ----------- -----------------
-- Resolution of dispute with health insurance provider .. $ 4,368
-- Billing adjustments ................................... 4,476
-- Executive separation costs ............................ 1,106
-- Other charges ......................................... 1,735
--------
$11,685
--------
During 2000, the Company reached a settlement with its health insurance
provider related to rates and claim payments. As a result, the Company recorded
a charge against pre-tax earnings of $4,368, or $.14 per share on an after-tax
basis. Under the terms of the agreement, the Company will fund its obligation
over a two-year period.
13
During 2000, the Company completed an extensive review of its customer
accounts and related costs. Following that review and reflecting management's
assessment of the Company's ultimate ability to recover these amounts, pre-tax
adjustments totaling $4,476, or $.15 per share on an after-tax basis, were
charged to operations.
The Company recorded pre-tax separation charges of $1,106, or $.04 per share
on an after-tax basis, associated with changes in management personnel including
the resignation of the Company's former President and Chief Executive Officer.
In addition, the Company recorded various other pre-tax charges to operations
totaling $1,735, or $.06 per share on an after-tax basis. These charges reflect
decisions made subsequent to the resignation of the Company's former Chief
Executive Officer including the cancellation of consulting contracts, costs
associated with acquisitions the Company is no longer pursuing, the write-off of
a start-up investment, and costs associated with the decision to close two
company offices.
Interest expense increased $3,075 during 2000 primarily due to higher
borrowing levels throughout much of the year.
The Company provided for income taxes at a rate of 38.0% in 2000 compared to
39.3% in 1999. The decrease in the Company's effective income tax rate primarily
reflects the implementation of state tax minimization strategies.
Earnings from continuing operations were $1.73 per share diluted compared to
$2.60 per share in 1999. The decrease is attributable to lower operating results
in 2000 as described above. Diluted shares used to compute earnings per share
for 2000 and 1999 were comparable. Net earnings per share in 1999 were $2.74 on
a diluted basis and included income from discontinued operations of $.14 per
share.
Acquisition activity in 2000 was not significant and, as such, did not have
a significant effect on reported earnings.
The Company expects costs to escalate in 2001 by approximately $4,700 due to
increased depreciation of its enterprise-wide information system and other
technology investments. Additionally, as part of the aforementioned settlement
with the Company's health insurance provider, the Company agreed to convert to a
participating contract for 2001 and future years. Under this form of contract,
the Company assumes greater risk for health care costs. The Company expects that
its share of costs associated with health care benefits for employees will
increase by approximately $4,000 for 2001.
In mid-2000, the Company discontinued any further field implementation of
its enterprise-wide information system in order to focus on alternatives. The
project was conceived several years ago. Over that period of time there have
been significant changes in technology. The Company is continuing to evaluate
alternatives to more effectively provide for the information systems'
requirements of its various businesses.
14
Segment Discussion
- ------------------
Information Technology Services
- -------------------------------
Information Technology Services segment revenues increased 7.3% during 2000.
The segment experienced soft demand for its services during the first half of
2000. Management attributes this softness to hesitancy by major customers to
launch new spending programs on the heels of spending required to maintain Year
2000 compliance. During the second half of 2000, Information Technology Services
experienced increased demand as customers initiated new systems projects,
particularly to connect their new systems to the Internet, and developed formal
outsourcing strategies in such areas as console operations and help-desk
support. In both 2000 and 1999, one customer accounted for approximately 25% and
30%, respectively, of the segment's total revenues.
Operating profit margins declined to 4.9% in 2000 from 6.8% in 1999.
Approximately $1,457 (40 basis point decline in the margin) is due to the
applicable portion of the charges referred to in Consolidated Results above. The
segment invested in approximately 27 additional recruiters and enhanced
compensation programs to strengthen the unit's ability to attract and retain
productive recruiters and compete in a very tight market for qualified technical
talent. The unit also incurred additional costs to implement a national staffing
business model. This effort included standardized practices, procedures and
metrics. Management also launched its Innovantage brand signaling its focus on
both professional services and functional outsourcing. While these initiatives
negatively impacted operating profit margins in 2000, management believes the
investments are integral to the segment's longer-term growth strategies.
The unit's focus is to leverage its Innovantage service offering throughout
its client base and to pursue new business opportunities in non-manufacturing
sectors where significant growth opportunities may exist.
Technical Services
- ------------------
Technical Services segment revenues increased 6.1% during 2000. This segment
experienced solid increases in revenue, particularly during the first half of
2000. However, growth slowed during the second half of 2000. During the third
quarter, revenues declined from the second quarter due largely to the
termination of a high-margin multi-year telecommunications contract. There was a
significant reduction in requirements following the client's merger, which
occurred on June 30, 2000. The contract was ultimately terminated in September
2000. Additionally, during the fourth quarter, the Technical Services segment
experienced a sharp and broad-based reduction in demand for services in its
aerospace, electronics/computer, chemical, telecommunications, automotive and
marine service lines.
Operating profit margins declined to 2.2% from 4.8% in 1999. Approximately
$8,275 (80 basis point decline in the margin) is due to the applicable portion
of the charges referred to in Consolidated Results above. This segment has also
made significant investments in its management infrastructure and operations
support, particularly for its telecommunications group. Results were also
negatively impacted by the third quarter termination of a high-margin
telecommunications contract referred to above. The segment was unable to
immediately adjust its cost structure to compensate for the loss of the
contract.
15
Technical Services' management is selectively pruning certain lower-margin
staffing business and is focusing its attention on its higher-margin engineering
services and telecommunications services product lines.
Information Technology Services' and Technical Services' contracts are
individually price negotiated, and as a result, the price-to-direct cost mix is
constantly changing. The cost structure of both segments is generally variable.
In periods of substantial increases in revenues, operating profits can widen
because the segments can take advantage of certain economies of scale in the
support cost structure. Conversely, in periods of declining demand, operating
results can deteriorate quickly because realization of cost savings typically
lags implementation of downsizing and cost reduction programs.
Management Recruiters
- ---------------------
Management Recruiters segment revenues increased 20.7% during 2000. This
unit has experienced strong demand in all geographic regions and growth in all
key sales channels including company-owned offices, franchised offices and their
client services group, which services large-block permanent placement
assignments. Concerns over Internet disintermediation, which arose in 1999, have
diminished as employers continue to require recruiter input in the permanent
placement hiring process.
Operating profit margins increased to 22.5% from 19.8% in 1999. The
improvement in operating profit margin is attributable, in part, to a favorable
recovery of a disputed contract payment totaling $623. This recovery improved
the operating profit margin in 2000 by 50 basis points. The segment's margin
also improved due to continuing strong cost controls and strong performance by
its franchisee organization.
This segment will continue to invest in technology to enhance the
effectiveness of its recruiter network and improve its ability to match
qualified applicants with open positions.
Todays Staffing
- ---------------
Todays Staffing segment revenues increased 4.8% during 2000. Revenue growth
began to decelerate after the first quarter of 2000. This slowdown was
broad-based and not geographic or industry specific. The unit's slower revenue
growth reflects the impact of an increasingly tighter labor market, making
candidate recruiting more difficult and increasing turnover among the unit's
recruiting and sales professionals, as a result of increased industry
competition.
Operating profit margins declined to 6.3% in 2000 from 6.7% in 1999. The
slight decline in the operating profit margin is due, in part, to a decision to
close two offices during 2001, which resulted in a pre-tax charge to earnings of
approximately $304 (10 basis point decline in the margin). In addition, during
the year, the unit experienced higher than normal turnover among its staff,
including recruiting professionals, and implemented a series of recruiting and
retention measures resulting in higher costs.
Todays Staffing's strategy is to penetrate middle-market opportunities to
maintain strong margins, leverage Internet-based tools to enhance recruiter
productivity and continue to expand its legal staffing business.
16
Results of operations, year ended December 31, 1999 vs. year ended December 31,
1998
- -------------------------------------------------------------------------------
Consolidated Results
- --------------------
The Company recorded consolidated revenues of $1,601,877 in 1999, a 4.0%
increase over the 1998 level of $1,540,545. All operating segments achieved
year-over-year growth in revenues.
Gross profit increased by 8.7% during 1999, reflecting both improvements in
volume and gross profit margins. The gross profit margin improved to 26.5% in
1999 from 25.4% in 1998. This improvement in the margin is due to increasing
selectivity in new contracts and the Company's strategy to invest and grow its
high-margin businesses.
Operating and administrative costs increased 7.6% during 1999. As a percent
of revenues, these costs were 21.1% in 1999 and 20.4% in 1998. The overall
increase noted is due, in part, to recurring wage and salary increases within
the Company as well as increased costs for the Company's enterprise-wide
information system.
Operating profit increased 13.0% during 1999. As a percentage of revenues,
operating profit increased to 5.4% in 1999 from 4.9% in 1998. During the second
quarter of 1998, the Company recorded a pre-tax charge of $2,300 to reorganize
the Technical Services segment. Excluding these charges, the Company's 1998
operating profit margin would have been 5.1%.
Interest expense increased $730 during 1999 reflecting higher average levels
of debt outstanding.
Earnings from continuing operations were $2.60 per share diluted compared to
$2.25 per share in 1998. Excluding the reorganization charge referred to above,
1998 earnings from continuing operations would have been increased by $.07 per
share resulting in per share earnings of $2.32. Net earnings for 1999, including
the impact of earnings from discontinued operations, was $2.74 per share diluted
vs. $2.32 per share in 1998. During the second and fourth quarters of 1999, the
Company recorded gains from discontinued operations of $2,015 and $753,
respectively, net of applicable income taxes. These gains primarily reflected
settlement of a disputed receivable that was fully reserved and adjustments of
certain estimates. In the fourth quarter of 1998, a gain of $1,338, net of
applicable income taxes, was recorded reflecting lower than anticipated costs
related to the wind-down of the discontinued operations and greater realization
on disposal of assets than expected. The liquidation of the discontinued
operations was completed in 1999.
During the year ended December 31, 1999, each of the Company's business
segments made acquisitions for which the Company invested collectively $50,012.
The acquisitions were accounted for using the purchase method. Goodwill acquired
amounted to $44,736 and is being amortized on the straight-line method over
periods of 15 and 20 years. These acquisitions did not have a significant effect
upon reported earnings for 1999.
17
Segment Discussion
- ------------------
Information Technology Services
- -------------------------------
Information Technology Services segment revenues increased 3.4% during 1999.
Operationally, the segment completed its first full year as a stand-alone
business unit. Prior to mid-1998, the Company's Information Technology Services
business was integrated with the Company's Technical Services segment.
Information Technology Services' customer base consists principally of large,
multi-national companies, much like the customer base of the Company's Technical
Services segment. In both 1999 and 1998, one large industrial customer comprised
approximately 30% of the segment's total revenues. As a stand-alone business
unit, the segment has begun to broaden its customer and industry base and has
already achieved a measure of success in the financial services industry.
Demand began to moderate in the second half of 1998 within the segment's
manufacturing-oriented customer base as those customers faced global challenges
in their markets. During 1999, many customers concerned with achieving Year 2000
(Y2K) compliance responded by delaying discretionary information technology
projects. This softness was particularly evident during the fourth quarter of
1999. Additionally, a tight labor supply, particularly for highly skilled
information technology specialists, became even more acute in 1999 and this
condition is not expected to subside substantially.
Operating profit margins were 6.8% in 1999 compared to 6.6% in 1998. During
1998, the company anticipated strong revenue growth, and therefore invested in
management and support structure. The anticipated growth did not materialize.
Throughout 1999, management carefully monitored its costs and transitioned from
a regional management to a unified management structure and began implementation
of standardized recruiting and career progression practices in all offices. This
effective emphasis on cost control, particularly during the second half of 1999
produced stronger profit margins than in 1998.
Technical Services
- ------------------
Technical Services segment revenues increased 3.4% in 1999. The segment's
customer base consists principally of large, multi-national manufacturing
companies. Historically, its largest markets have been aerospace, automotive,
construction, electronics, industrial equipment, petrochemicals, marine, and
telecommunications. The segment has begun to penetrate the pharmaceuticals
market, expand its level of business within telecommunications and is focusing
on other new markets such as biotechnology, medical devices and food and
beverage.
Technical Services' revenue growth moderated during 1999, in part, by
continuing cyclical softness in the aerospace industry, reduced spending by
certain key customers in the process of merger and increased contract
selectivity and screening by Technical Services' management.
Operating profit margins for Technical Services increased to 4.8% during
1999 from 3.7% during 1998. The operating profit margins for 1999 are considered
more reflective of this segment's overall historical performance. In the second
quarter of 1998, Technical Services' operating profit margins were impacted by
reorganization costs and other non-recurring charges of $2,300. Excluding these
18
charges in 1998, the segment's operating profit margins would have been 3.9%.
Additionally, throughout 1998, many Technical Services' customers experienced a
difficult business environment due to turbulent international market conditions,
delayed new product introductions and investment imbalances. This was
particularly pronounced in the electronics and hydrocarbon and petrochemical
customer base. The improved results in 1999 reflect the higher margins
associated with strengths in managed engineering services, targeted new market
and product growth, increased contract selectivity and ongoing cost containment
efforts.
Information Technology Services' and Technical Services' many contracts are
individually price negotiated, and as a result, the price-to-direct cost mix is
constantly changing. The cost structure of both segments is generally variable.
In periods of substantial increases in revenues, operating profits can widen
because the segments can take advantage of certain economies of scale in the
support cost structure. Conversely, in periods of declining demand, operating
results can deteriorate quickly because realization of cost savings typically
lags implementation of downsizing and cost reduction programs.
Management Recruiters
- ---------------------
Management Recruiters segment revenues increased 1.0% during 1999 and was
below the segment's rate of growth over the past few years. The most significant
cause of this slowing of growth is the severe shortage of middle management and
professional personnel candidates for permanent employment positions. Those
shortages are expected to continue into 2000. Additionally, a certain amount of
disintermediation is taking place as candidates and employers bypass recruiting
organizations in favor of direct contact via the Internet. This latter effect
cannot be quantified with certainty.
Operating profit margins declined to 19.8% in 1999 from 20.3% in 1998. The
decline in the margin reflects a shift in fulfillment mix from large client
project placement work to more labor-intensive single transaction searches.
Further, 1999 margins also declined as a result of start-up costs for four new
staffing offices.
Todays Staffing
- ---------------
Todays Staffing segment revenues increased 9.0% in 1999. Today Staffing's
customer base consists of a large number of "retail" accounts and a small number
of large "wholesale" accounts. These large, multi-location accounts have become
more price sensitive, and in 1999 the segment elected not to continue to pursue
certain of these accounts when pricing began to erode. Conversely, the segment
identified and won new, large contracts with a category of emerging
middle-market customers. Demand for office/clerical and professional temporary
services in 1999 remained strong. Legal staffing is a small but growing
component of the segment's services.
Todays Staffing's operating profit margins were 6.7% in both 1999 and 1998.
Operating profit in 1999 was adversely impacted by integration costs associated
with Today's acquisition of Staffing Consultants, Inc. and increased recruiting
costs.
19
Inflation
- ---------
The Technical Services, Information Technology Services and Todays Staffing
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
- -------------------------------
The Company's main sources of liquidity are from operations and from
borrowings, including unsecured committed revolving credit agreements with banks
that provide for borrowings up to $125 million. In addition, the Company has two
uncommitted short-term lines of credits with banks that total $23 million.
Borrowings are priced at floating rates of interest or are related to the banks'
costs of funds and, therefore, the Company is subject to market risks as
interest rates change (see Item 7A. below). These sources have been adequate to
support growth opportunities in the Company's businesses.
Expansions and contractions in the levels at which the Company's business
operates can 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 decreased in 2000
because the Company was able to reduce the collection cycle for accounts
receivable and better manage its cash outflows. Cash flows from operating
activities was $58,457 in 2000 and $38,793 in 1999. The ratio of current assets
to current liabilities was 2.2 to 1 and 2.4 to 1 at December 31, 2000 and
December 31, 1999, respectively. The ratio of long-term debt to capital
(long-term debt plus shareholders' equity) at December 31, 2000 and 1999 was
13.2% and 18.3%, respectively.
During 2000, investing activities resulted in cash outflows of $43,719, a
$27,077 reduction from 1999 levels. The primary reason for the decline in
investing activities is attributable to lower acquisition activity.
Cash outflows in 2000 associated with financing activities totaled $14,735,
and primarily relate to repayments of long-term debt. In 1999, the Company had
cash inflows of $29,206, principally related to incremental borrowings of
long-term debt used to fund increased levels of working capital, purchases of
fixed assets and investments in acquisitions.
New Accounting Standards
- ------------------------
In September, 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
This Statement supercedes and replaces SFAS No. 125 of the same name and
provides guidance on securitization, sale and servicing of financial assets.
This standard will become effective for transactions entered into after March
31, 2001; however, companies that hold beneficial interests from previous
securitizations are required to make additional disclosures in their December
31, 2000 financial statements. The standard does not have any effect on the
Company as of December 31, 2000. Impact in the future will depend on the
Company's future transactions.
20
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's only financial instruments are debt instruments, which
primarily consist of its lines of credit. The Company does not actively manage
its interest rate risk because the impact of a 10% (approximately 70 basis
points) increase in interest rates on its variable rate debt (using the year-end
debt balance and effective interest rates) would have a relatively nominal
after-tax impact on the Company's results of operations.
The Company has no derivative or off-balance sheet instruments.
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 Company's performance on
contracts, changes in customers' attitudes toward outsourcing, government
policies or judicial decisions adverse to the staffing industry, changes in
economic conditions and delays or unexpected costs associated with
implementation of computer systems. 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.
21
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 2000, 1999 and 1998
(In thousands, except per share data)
2000 1999 1998
---------- ---------- ----------
Revenues ............................. $1,717,244 1,601,877 1,540,545
Cost of services ..................... 1,250,485 1,177,250 1,149,849
---------- ---------- ----------
Gross profit ......................... 466,759 424,627 390,696
Operating and administrative costs ... 406,954 338,651 314,586
---------- ---------- ----------
Operating profit ..................... 59,805 85,976 76,110
Interest expense ..................... 5,189 2,114 1,384
---------- ---------- ----------
Earnings from continuing operations
before income taxes and minority
interests ......................... 54,616 83,862 74,726
Income taxes ......................... 20,741 32,960 29,470
---------- ---------- ----------
Earnings from continuing operations
before minority interests ......... 33,875 50,902 45,256
Minority interests ................... 872 1,223 1,017
---------- ---------- ----------
Earnings from continuing operations .. 33,003 49,679 44,239
Discontinued operations .............. -- 2,768 1,338
---------- ---------- ----------
Net earnings ......................... $ 33,003 52,447 45,577
========== ========== ==========
Basic earnings per share:
Earnings from continuing
operations ....................... $ 1.73 2.61 2.25
Discontinued operations ........... -- .15 .07
Net earnings ...................... $ 1.73 2.76 2.32
Diluted earnings per share:
Earnings from continuing
operations ....................... $ 1.73 2.60 2.25
Discontinued operations ........... -- .14 .07
Net earnings ...................... $ 1.73 2.74 2.32
See accompanying notes to consolidated financial statements.
22
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2000 and 1999
(In thousands, except share data)
Assets 2000 1999
--------- ---------
Current assets:
Cash ............................................. $ 11,432 11,429
Accounts receivable, less allowance for
doubtful accounts of $3,694-2000; $4,203-1999 .. 371,088 352,458
Prepaid expenses and other ....................... 8,267 5,322
Deferred income taxes ............................ 11,969 4,448
--------- ---------
Total current assets ............... 402,756 373,657
Fixed assets, net .................................... 66,110 53,256
Deferred income taxes ................................ -- 86
Goodwill and other intangible assets, net ............ 90,281 89,328
Other assets ......................................... 12,882 15,353
--------- ---------
$ 572,029 531,680
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Obligations not liquidated because of
outstanding checks .............................. $ 22,568 21,446
Accounts payable ................................. 44,266 32,575
Withheld payroll taxes ........................... 3,343 3,211
Accrued compensation and related costs ........... 63,500 57,458
Other accrued expenses ........................... 32,628 31,517
Income taxes payable ............................. 12,746 8,774
--------- ---------
Total current liabilities .......... 179,051 154,981
Long-term debt ....................................... 49,623 65,651
Deferred income taxes ................................ 1,272 --
Deferred compensation ................................ 13,144 13,916
Minority interests ................................... 3,144 3,288
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 20,015,561
shares-2000; 19,999,463 shares-1999 ............ 2,002 2,000
Class B common stock, $.10 par value
authorized 3,174,891 shares; none issued ....... -- --
Additional paid-in capital ....................... 16,677 16,539
Retained earnings ................................ 331,308 298,305
Accumulated other comprehensive loss ............. (1,999) (611)
Unamortized value of restricted stock issued ..... (230) (945)
Less common stock in treasury, at cost -
950,135 shares-2000; 927,651 shares-1999 ....... (21,963) (21,444)
--------- ---------
Total shareholders' equity ......... 325,795 293,844
--------- ---------
$ 572,029 531,680
========= =========
See accompanying notes to consolidated financial statements.
23
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
-------- -------- --------
Continuing Operations
Operating activities:
Earnings from continuing
operations ........................ $ 3,003 49,679 44,239
Minority interests ................. 872 1,223 1,017
Depreciation ....................... 17,719 14,040 12,242
Amortization of intangible assets... 5,931 4,304 2,237
Income tax provision greater (less)
than tax payments ................ (1,836) 8,521 1,617
Change in assets and liabilities
net of effects from acquisitions:
(Increase) in accounts receivable.. (17,471) (35,129) (40,874)
Increase (decrease) in payables
and accrued expenses ........... 21,341 (5,966) 12,731
Other ............................. (1,102) 2,121 (1,838)
-------- -------- --------
58,457 38,793 31,371
-------- -------- --------
Investing activities:
Purchases of fixed assets .......... (30,615) (27,585) (23,099)
Acquisitions net of cash acquired... (11,677) (42,622) (39,138)
Other .............................. (1,427) (589) 389
-------- -------- --------
(43,719) (70,796) (61,848)
-------- -------- --------
Financing activities:
Borrowings long-term debt .......... 37,661 34,704 46,006
Payments long-term debt ............ (53,689) (6,096) (11,580)
Obligations not liquidated
because of outstanding checks .... 1,122 18 8,289
Share repurchase program ........... -- -- (20,478)
Other .............................. 171 580 16
-------- -------- --------
(14,735) 29,206 22,253
-------- -------- --------
Net cash flows from continuing
operations ........................... 3 (2,797) (8,224)
Net cash flows from discontinued
operations ........................... -- 7,264 8,188
-------- -------- --------
Increase (decrease) in cash ............. 3 4,467 (36)
Cash at beginning of year ............... 11,429 6,962 6,998
-------- -------- --------
Cash at end of year ..................... $ 11,432 11,429 6,962
======== ======== ========
See accompanying notes to consolidated financial statements.
24
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
--------- --------- ---------
Common stock
Beginning of year ................... $ 2,000 1,995 1,995
Exercise of stock options ........... 2 4 --
Restricted stock issued ............. -- 1 --
--------- --------- ---------
End of year ......................... $ 2,002 2,000 1,995
========= ========= =========
Additional paid-in capital
Beginning of year ................... $ 16,539 15,534 16,014
Exercise of stock options ........... 250 672 14
Restricted stock-issued ............. -- 278 --
Restricted stock-vesting/forfeiture.. (35) (25) 2
Restricted stock-change in value .... (147) 76 (495)
Treasury stock issued ............... -- -- (1)
Stock Purchase Plan ................. 70 4 --
--------- --------- ---------
End of year ......................... $ 16,677 16,539 15,534
========= ========= =========
Retained earnings
Beginning of year ................... $ 298,305 245,858 200,281
Net earnings ........................ 33,003 52,447 45,577
--------- --------- ---------
End of year ......................... $ 331,308 298,305 245,858
========= ========= =========
Accumulated other comprehensive loss
Beginning of year ................... $ (611) (720) (207)
Translation adjustment .............. (845) 109 (513)
Unrealized loss on investment ....... (543) -- --
--------- --------- ---------
End of year ......................... $ (1,999) (611) (720)
========= ========= =========
Unamortized value of restricted stock
issued
Beginning of year ................... $ (945) (1,117) (1,819)
Restricted stock-issued ............. -- (279) --
Restricted stock-vesting/forfeiture.. 479 188 25
Restricted stock-change in value .... 147 (76) 495
Restricted stock-amortization
of value ........................... 89 339 182
--------- --------- ---------
End of year ......................... $ (230) (945) (1,117)
========= ========= =========
Treasury stock
Beginning of year ................... $ (21,444) (21,181) (679)
Issued .............................. -- -- 1
Purchased ........................... -- -- (20,478)
Exercise of stock options ........... (40) (75) --
Restricted stock-forfeiture ......... (479) (188) (25)
--------- --------- ---------
End of year ......................... $ (21,963) (21,444) (21,181)
========= ========= =========
Comprehensive income
Net earnings ........................ $ 33,003 52,447 45,577
Translation adjustment .............. (845) 109 (513)
Unrealized loss on investment ....... (543) -- --
--------- --------- ---------
$ 31,615 52,556 45,064
========= ========= =========
See accompanying notes to consolidated financial statements.
25
CDI CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except shares, per share data and ratios)
Significant Accounting Policies
- -------------------------------
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and all companies in which the Company has a controlling
financial interest which are comprised of all majority-owned subsidiaries after
elimination of intercompany balances and transactions.
Use of Estimates and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company operates in a dynamic industry, and accordingly, can be affected
by a variety of factors including future regulatory changes, uncertainty
relating to the performance of the U.S. economy, competition, demand for the
Company's services, adverse litigation and claims and the hiring, training
and retention of key employees.
Allowance for Doubtful Accounts - An allowance against accounts receivables
exists for receivables that are not expected to be realized. The allowance is
established based on historical experience and for any receivables that are
known or estimated to be uncollectible.
Fixed Assets - Fixed assets are stated at cost and are depreciated 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 are 14% to
25% for computer hardware, 14% to 33% for computer software and 10% to 25% for
equipment and furniture. Leasehold improvements are amortized over the shorter
of the estimated life of the asset or the lease term.
Goodwill and Other Intangible Assets, Net - Goodwill of $89,726 as of December
31, 2000 and $88,644 as of December 31, 1999 representing the cost in excess of
the fair value of net assets acquired related to acquisitions is being amortized
on a straight-line basis generally over 15 and 20 years. For the years ended
December 31, 2000, 1999 and 1998 amortization expense was $5,763, $3,748 and
$1,669, respectively. Accumulated amortization was $15,588 as of December 31,
2000 and $10,311 as of December 31, 1999.
Other intangible assets 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, net of amortization, of $555 and $684
at December 31, 2000 and 1999, respectively, are being amortized on the
straight-line method over five to twelve years. Amortization of other
intangible assets in 2000, 1999 and 1998 was $168, $556 and $568,
respectively. Accumulated amortization was $4,831 as of December 31, 2000 and
$4,910 as of December 31, 1999.
26
The Company reviews long-lived assets, goodwill and other identifiable
intangibles to be held, used or disposed of for impairment based on the
undiscounted cash flows from the related assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
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 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.
Revenue Recognition - The Company derives its revenues from numerous sources.
All of the Company's segments perform staffing services. The Company's Technical
Services and Information Technology Services segments also typically perform
project services. The Management Recruiters segment derives the majority of its
revenue and profits from permanent placement fees, initial franchise fees and
continuing franchise royalties.
Staffing Services - Revenues derived from staffing services are recorded on a
gross basis as services are performed and associated costs have been incurred
using employees of the Company. In these circumstances, the Company assumes
the risk of acceptability of its employees to its customers. In certain
cases, the Company may utilize other companies and their employees to fulfill
customer requirements. In these cases the Company receives an administrative
fee for arranging for, billing for and collecting the billings related to
these companies. The customer is typically responsible for assessing the work
of these companies who have responsibility for the acceptability of their
personnel to the customer. Under these circumstances, the Company's reported
revenues are net of associated costs (effectively the administrative fee).
Project Services - Project services are generally provided on a
cost-plus-fixed- fee or time-and-material basis. Typically, a customer will
outsource a discrete project or activity and the Company assumes
responsibility for performance of the function or project. The Company
recognizes revenues and associated costs on a gross basis as services are
performed and costs are incurred using its employees.
Permanent Placement Fees - The Company earns permanent placement fees from
its company-owned operations and royalties from its franchisees. Fees for
contingent searches are recognized at the time the candidate commences
employment. For retained searches, where the Company or the franchisee
receives a fee for specific services rendered, such revenues are recognized
as the related services are rendered. Revenues associated with Company-owned
operations are recorded on a gross basis and royalties from franchisees are
recorded on a net basis as a component of revenue.
Initial franchise Fees - Fees related to sales of new franchises are deferred
until the franchise commences operations, at which time the Company has
substantially fulfilled its requirements under the franchise agreement.
Stock-Based Compensation - The Company uses the intrinsic value based method of
accounting for stock options and similar instruments granted to employees and
directors in accordance with Accounting Principles Board Opinion No. 25,
Accounting
27
for Stock Issued to Employees. No compensation expense has been recognized in
the financial statements for grants of stock options because option exercise
prices are not less than the fair market value of the underlying common stock at
dates of grants.
Income Taxes - The Company accounts for income taxes in accordance with
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
require an asset and liability approach of accounting for income taxes. The
Company and its wholly-owned U.S. subsidiaries file a consolidated federal
income tax return.
Fair Value of Financial Instruments - The carrying value of significant
financial instruments approximates fair value because of the nature and
characteristics of its financial instruments. The Company's financial
instruments are accounts receivable, accounts payable, accrued expenses and
long-term debt. The Company does not have any off-balance sheet financial
instruments or derivatives.
Per Share Data - Earnings used to calculate both basic and diluted earnings per
share for all periods 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 assumed adjustments are
necessary.
The number of common shares used to calculate basic and diluted earnings
per share for 2000, 1999 and 1998 was determined as follows:
2000 1999 1998
---- ---- ----
Basic
Average shares outstanding .............. 19,073,267 19,052,110 19,689,349
Restricted shares issued not vested ..... (29,795) (38,605) (45,937)
----------- ----------- -----------
19,043,472 19,013,505 19,643,412
Diluted
Shares used for basic .................. 19,043,472 19,013,505 19,643,412
Dilutive effect of stock options ....... 7,757 63,661 38,601
Dilutive effect of units under the Stock
Purchase Plan ........................ 52,183 34,738 --
Dilutive effect of restricted shares
issued not vested .................... 1,020 4,073 1,400
---------- ---------- ----------
19,104,432 19,115,977 19,683,413
Foreign Currency Translation - Foreign subsidiaries of the Company use a local
currency as the functional currency. Net assets are translated at year-end rates
while revenues and expenses are translated at average exchange rates.
Adjustments resulting from these translations are reflected in accumulated other
comprehensive loss in shareholders' equity. Gains and losses arising from
foreign currency transactions are reflected in the consolidated statements of
earnings.
Comprehensive Income - Comprehensive income consists of net earnings, foreign
currency translation adjustments and adjustments related to an equity investment
classified as an available for sale security.
28
Acquisitions
- ------------
Investments in businesses acquired totaled $9,265, $50,012 and $39,138 for
the years ended December 31, 2000, 1999 and 1998, respectively. All acquisitions
were accounted for using the purchase method. For 2000, assets of $8,297 were
acquired (including goodwill of $6,825) along with liabilities of $46. A portion
of the investment in 2000 reduced minority interests by $1,014. For 1999, assets
of $55,603 were acquired (including goodwill of $44,736) along with liabilities
of $6,330. A portion of the investment in 1999 reduced minority interests by
$739. For 1998, assets of $45,011 were acquired (including goodwill of $36,322)
together with liabilities of $5,696 and minority interests of $177.
Investments in businesses acquired in 2000 amounting to $675 were not paid
during the year and are not included in investing activities in the Consolidated
Statement of Cash Flows for the year ended December 31, 2000. This amount is
expected to be paid in 2001.
Investments in businesses acquired in 1999 amounting to $7,390 were not
paid during the year and are not included in investing activities in the
Consolidated Statement of Cash Flows for the year ended December 31, 1999. Of
that amount, $3,087 was paid in 2000 and is included in investing activities in
the Consolidated Statement of Cash Flows for the year ended December 31, 2000.
The remaining unpaid amount is expected to be paid in 2001.
Financial results of the acquired operations are reflected in the
accompanying Consolidated Statements of Earnings from dates of acquisition. The
acquisitions did not have a significant effect on reported earnings for the
years ended December 31, 2000, 1999 and 1998, and earnings would not have been
significantly different from reported earnings had the acquisitions occurred at
the beginning of the years.
In connection with certain acquisitions, the Company is obligated to pay
contingent consideration if the acquired businesses achieve certain earnings and
operating performance targets over periods ranging from one to five years. In
general, amounts are due based on pre-determined performance levels at the time
of the acquisition. If such pre-determined performance levels are attained in
the future in their entirety, contingent consideration due after December 31,
2000 would be paid in the following years:
2001 $ 800
2002 13,900
2003 900
2004 1,500
------------
$ 17,100
============
Contingent consideration, when earned, is recorded as additional purchase
consideration and would increase goodwill. Any such amounts are uncertain until
required performance levels are actually attained.
Accounts Receivable
- -------------------
The Company's principal asset is accounts receivable. Receivables arise
from services provided pursuant to contracts or agreements with customers for
such
29
services. The primary users of the Company's services are large U.S. based
industrial and commercial concerns, many of which are Fortune 500 companies. It
is not Company or industry practice to require collateral or other security for
receivables because of the nature of the customer base involved. Historically,
losses due to customers' inability to comply with the payment terms of their
contracts or agreements with the Company have not been significant.
Significant portions of the Company's revenue base and resultant
receivables are concentrated in certain industries. As of each of December 31,
2000 and 1999, receivables from customers in the electronics/information
processing industries comprised approximately 25% of consolidated receivables,
receivables from customers in the aircraft/aerospace industries comprised
approximately 15% of consolidated receivables and customers in the
telecommunications industry comprised approximately 15% of consolidated
receivables.
Fixed Assets
- ------------
Fixed assets at December 31, 2000 and 1999 were comprised of the following:
2000 1999
--------- ---------
Computers and systems ................................ $ 95,999 76,197
Equipment and furniture .............................. 37,537 32,275
Leasehold improvements ............................... 11,640 9,387
--------- ---------
145,176 117,859
Accumulated depreciation ............................. (79,066) (64,603)
--------- ---------
$ 66,110 53,256
========= =========
Long-term Debt
- --------------
Long-term debt at December 31, 2000 and 1999 was as follows:
2000 1999
--------- ---------
Notes payable to banks under revolving credit
agreement with interest at 7.20%...................... $ 25,000 40,000
Note payable to bank under committed line of
credit with interest at 6.59% ........................ 12,854 --
Notes payable to banks under uncommitted
lines of credit with interest at 7.39%................ 8,800 22,200
Other .................................................. 2,969 3,451
--------- --------
$ 49,623 65,651
========= =========
The Company has an unsecured revolving credit agreement with a syndicate of
banks that provides for borrowings up to $100 million through March 31, 2002.
There is an annual facility fee equal to .3% of the banks' commitments. During
2000 and 1999, interest on borrowings under this agreement were at variable
rates based on London Interbank offered rates ("LIBOR") (adjusted for reserve
requirements) plus a LIBOR margin of .5%. The LIBOR margin can range from .5% to
1.5% depending upon the
30
ratio of all of the Company's borrowings to its cash flow. 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.
The Company entered into an unsecured revolving committed line of credit
with a bank during 2000 that provides for borrowings up to $25 million through
May 18, 2001. There is a commitment fee of .075% per annum of the unused portion
of the commitment. Interest on borrowings under this agreement was at variable
rates based on LIBOR (adjusted for reserve requirements) plus a fixed LIBOR
margin of .75%.
Uncommitted short-term lines of credit with two banks that total $23
million are also available at interest rates quoted on a transactional basis
that are related to the banks' costs of funds.
The weighted average interest rate incurred on borrowings during the years
ended December 31, 2000, 1999 and 1998 was 6.75%, 5.68% and 5.73%, respectively.
All borrowings at December 31, 2000 are classified as long-term because the
Company intends to finance maturities as they become due with borrowings under
the revolving credit agreement. As of December 31, 2000, all long-term debt will
mature in 2002.
The revolving credit agreement and the committed line of credit require
that a consolidated current ratio of at least 1.5 be maintained. In addition,
the ratio of consolidated indebtedness to EBITDA may not exceed 2.5 and the
ratio of EBIT to interest expense may not be less than 2.5. EBIT is earnings
from continuing operations before minority interests, income taxes and interest
expense. EBITDA is EBIT plus depreciation and amortization. The Company was in
compliance with the terms of its credit agreements through December 31, 2000.
Capital Stock
- -------------
Stock Classification - 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. Class B shares so converted are then cancelled. At December 31, 2000, and
1999 no Class B common shares were issued.
Restricted Common Stock - During the years ended December 31, 1999 and 1997, the
Company issued shares of restricted common stock which vest either with the
passage of time (ranging from three to ten years) or based on the percentage
achievement of pre-determined goals (covering periods ranging from three to five
years). Shares that do not vest are forfeited.
Restricted common shares that vest over time have a fixed value when
issued. The value of restricted shares that vest based on performance will
fluctuate with changes in the fair market value of the common stock until there
is a determination as to performance vesting. Over the period of time that these
shares may become vested, there will be charges to earnings for the fair value
based on the aggregate number of these shares. As such charges occur,
unamortized value of restricted stock will be reduced. To the extent that shares
are forfeited, the unamortized value of such restricted stock will be reduced
and the forfeited shares will be placed in treasury stock.
31
Treasury Stock - 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.
During 1998, 889,700 shares were purchased under the program for $20,478. There
were no repurchases in 1999.
In December, 2000, the Company announced that its Board of Directors had
approved the repurchase of up to $20 million of the Company's outstanding shares
of common stock over a six-month period ending in June, 2001. No shares have
been repurchased under this program.
Changes in common shares outstanding for the years ended December 31, 2000,
1999 and 1998 follow:
2000 1999 1998
----------- ----------- -----------
Shares issued
Beginning of year ......... 19,999,463 19,951,300 19,950,800
Exercise of stock options.. 12,622 37,000 500
Restricted stock issued.... -- 11,000 --
Stock Purchase Plan ....... 3,476 163 --
---------- ---------- ----------
End of year ............... 20,015,561 19,999,463 19,951,300
=========== =========== ===========
Treasury shares
Beginning of year ......... 927,651 917,458 27,265
Issued .................... -- -- (38)
Purchased ................. -- -- 889,700
Exercise of stock options.. 2,517 3,150 --
Restricted stock
forfeiture .............. 19,967 7,043 531
----------- ----------- -----------
End of year ............... 950,135 927,651 917,458
=========== =========== ===========
Stock Based Plans
- -----------------
As of December 31, 2000, the Company maintains two stock-based incentive
compensation plans under which the Company has granted stock options to certain
employees, directors and consultants. The Company adopted the CDI Corp. 1998
Non-Qualified Stock Option Plan (the "1998 Plan") as a replacement for the
Non-Qualified Stock Option and Stock Appreciation Rights Plan (the "Old Plan").
Coincident with the adoption of the 1998 Plan, no additional stock options or
stock appreciation rights may be granted under the Old Plan. The Company has
applied the same accounting practice to both the 1998 Plan and the Old Plan.
Non-qualified stock options under the 1998 Plan may be granted to
employees, directors and consultants. Stock options granted to individuals other
than employees and directors are not significant. Grants under the 1998 Plan,
except for grants to certain non-employee directors whose retainer fees may be
paid in whole or in part via stock options, are determined by the Compensation
Committee appointed by the Board of Directors. The price at which options are to
be exercised may not be less than 100% of the fair market value per share of the
Company's common stock on the date of grant and, unless otherwise determined by
the Committee, options granted under the 1998 Plan will expire in ten years from
the date of grant.
32
Under the terms of the Old Plan, non-qualified stock options and stock
appreciation rights could be granted separately or in tandem to salaried
employees, directors and consultants. Grants under the plan, except for grants
to certain non-employee directors whose retainer fees were in part paid via
stock options, were determined by the Compensation Committee appointed by the
Board of Directors. The price at which options or stock appreciation rights may
be exercised were not to 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 were not to be exercised
after five years from date of grant.
As of December 31, 2000, 1,378,711 shares of common stock are reserved for
future issuance under these plans. There are and have been no stock appreciation
rights outstanding under the Old Plan.
Activity under both stock option plans is as follows:
Shares subject Weighted average
to options exercise price
-------------- -----------------
December 31, 1997 535,400 $ 32.10
Granted ......... 284,314 $ 32.51
Exercised ....... (500) $ 16.88
Cancelled ....... (9,253) $ 36.66
----------
December 31, 1998 809,961 $ 32.18
Granted ......... 553,747 $ 24.38
Exercised ....... (37,000) $ 14.78
Cancelled ....... (189,674) $ 28.48
----------
December 31, 1999 1,137,034 $ 27.56
Granted ......... 742,141 $ 20.94
Exercised ....... (12,622) $ 18.32
Cancelled ....... (593,912) $ 27.46
----------
December 31, 2000 1,272,641 $ 25.72
==========
Additional information regarding options outstanding as of December 31,
2000, 1999 and 1998, is as follows:
2000 1999 1998
----------- ---------- ----------
Range of exercise prices
Lowest ........................ $ 15.31 15.00 13.00
Highest ....................... $ 46.50 46.50 46.50
Weighted average remaining life ... 7.0 years 7.3 years 6.7 years
Options exercisable
Number of shares .............. 334,597 250,609 139,020
Weighted average exercise
price ........................ $ 30.46 31.24 27.16
33
The Company accounts for stock options granted to employees and directors
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," under which no
compensation cost for stock options is recognized for awards granted at exercise
prices that are at or above fair market value.
SFAS No. 123, "Accounting for Stock-Based Compensation," uses a fair value
based method of accounting for stock options. Had SFAS No. 123 been adopted,
additional compensation expense would have been recorded. Compensation expense
has been determined for the Company's stock option plans based on the fair
values of awards at dates of grant. If SFAS No. 123 had been adopted, earnings
from continuing operations and related earnings per share would have been the
pro forma amounts indicated below for the years ended December 31, 2000, 1999
and 1998:
2000 1999 1998
---------- --------- ---------
Earnings from continuing operations
As reported ................ $ 33,003 49,679 44,239
Pro forma .................. $ 30,017 47,621 42,921
Basic earnings per share
Earnings from continuing operations
As reported .................. $ 1.73 2.61 2.25
Pro forma .................... $ 1.58 2.50 2.19
Diluted earnings per share
Earnings from continuing operations
As reported .................. $ 1.73 2.60 2.25
Pro forma .................... $ 1.57 2.49 2.18
The pro forma results may not be representative of the effects on
reported earnings for future years. These results consider the impact of stock
options granted since January 1, 1995 only. The weighted average fair value of
options granted in 2000, 1999 and 1998 has been estimated on the dates of grant
using the Black-Scholes Option Pricing Model using the following
weighted-average assumptions:
2000 1999 1998
---- ------ ------
Risk-free interest rate... 6.43% 5.41% 4.65%
Expected life of option... 10 years 10 years 9 years
Expected stock price
volatility.............. 46% 42% 40%
Expected dividend yield... -- -- --
Under the terms of the Stock Purchase Plan for Management Employees and
Non-Employee Directors ("SPP"), designated employees and non-employee directors
have the opportunity to purchase the Company's common stock on a pre-tax basis.
Employee participants use a portion of their annual bonus awards to purchase SPP
units. Certain senior management personnel are required to participate and have
25% of their annual bonus awards used to purchase SPP units. Employees who
participate voluntarily may have up to 25% of their annual bonus awards used to
purchase SPP units. Senior management personnel required to participate may also
voluntarily have up to an additional 25% of their annual bonus awards used to
purchase SPP units. Non-employee directors may participate by using some or all
of their retainer fees to purchase SPP units.
34
The number of SPP units credited to a participant is determined by dividing the
amount of the annual bonus or director retainer fees used to purchase SPP units
by the fair market value of a share of the Company's common stock on the date
that the participant's account is credited with the SPP units. The Company also
makes a matching contribution of one SPP unit for every three SPP units
purchased by a participant on a voluntary basis.
Each SPP unit represents the participant's right to receive one share of the
Company's common stock upon the satisfaction of the vesting period applicable to
the SPP unit. Vesting takes place over a period of three to ten years as chosen
by the participant.
If a participant's employment terminates or service on the Company's Board of
Directors ceases for any reason after three years from the start of a vesting
period (regardless of the vesting period chosen), the participant will receive
shares of the Company's common stock for all the SPP units credited to his
account pertaining to the vesting period. If employment for an employee
participant terminates within the first three years of a vesting period, the
employee participant, under certain circumstances, may receive cash in lieu of
shares of the Company's common stock in an amount that does not take into
account any appreciation in the value of such shares or the Company's matching
contribution of units. If a non-employee director does not stand for re-election
to the Board, he will receive shares of the Company's common stock for all the
SPP units credited to his account regardless of the vesting period chosen.
There are 110,830 SPP units outstanding (including Company matching units) as of
December 31, 2000. These SPP units were determined using a weighted average
market price of $19.27 per share. Costs charged to earnings during 2000, 1999
and 1998 related to this plan were $657, $1,133 and $375, respectively. Costs
charged to earnings related to employee participants include the amount of the
deferred bonus for the year used to purchase SPP units plus a portion of the
value of the Company match SPP units credited to participant's accounts. Company
match SPP units have a fixed value determined at the time participants' accounts
are credited, which value is charged to earnings over a three-year period, the
minimum period over which employee participants vest in these units. Costs
charged to earnings related to non-employee directors include the amount of the
deferred retainers fees used to purchase SPP units plus the value of the Company
match SPP units credited to a director's account. These Company match units have
a fixed value that is charged to earnings over a one-year period.
Under the terms of the Performance Shares Plan ("PSP"), members of the
Company's senior management designated by the Compensation Committee of the
Board of Directors are eligible to receive shares of the Company's common stock
at the expiration of a performance period if specified performance goals have
been achieved during the period. The Committee will determine the performance
goals, length of performance periods and the frequency of awards. Participation
in this plan was initiated in 1998 with a performance period extending through
December 31, 2000. No shares were earned under the plan related to this
performance period. A second performance period was established starting in 2000
and extending through 2002. There are 174,000 shares allocated to participants
for issuance if performance levels are attained. The performance goals
applicable to the second performance period are related to year over year growth
in the Company's earnings per share and revenues using 1999 as the base year.
The minimum year over year growth for any shares to be earned is 14%. The
established minimum goal for 2000 was not achieved. No cost was reflected for
this plan in 2000, 1999 or 1998.
35
Income Taxes
- ------------
The provision for income taxes relating to continuing operations for the
years ended December 31, 2000, 1999 and 1998 was comprised of the following:
Total Federal State Foreign
-------- -------- -------- --------
2000
Current ...........................$ 26,199 18,788 3,069 4,342
Deferred .......................... (5,458) (4,157) (1,322) 21
-------- ------- ------- ------
$ 20,741 14,631 1,747 4,363
======== ====== ===== ======
1999
Current ...........................$ 27,311 21,080 3,012 3,219
Deferred .......................... 5,649 4,664 1,025 (40)
-------- ------- ------ ------
$ 32,960 25,744 4,037 3,179
======== ======= ====== ======
1998
Current ...........................$ 26,542 20,957 3,591 1,994
Deferred .......................... 2,928 2,507 486 (65)
-------- ------ ----- ------
$ 29,470 23,464 4,077 1,929
======== ====== ===== =======
The tax effects of the principal components creating net deferred income
tax assets as of December 31, 2000 and 1999 were as follows:
2000 1999
------ ------
Components creating deferred tax assets
Expenses not currently deductible (principally
compensation and payroll-related) $ 22,085 19,058
Intangible assets amortization 664 1,287
Other 698 129
Operating loss carryforwards 628 293
------ ------
24,075 20,767
Components creating deferred tax liabilities
Deferral of revenues and accounts receivable (2,735) (8,897)
Basis differences for fixed assets (8,924) (6,415)
Other (1,719) (921)
------ ------
(13,378) (16,233)
------ ------
$ 10,697 4,534
====== ======
In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that some portion or all of the
benefits of the deferred tax assets will not be achieved. The ultimate
realization of deferred tax assets is dependent upon a number of things,
including past and future taxable
36
income. Based upon the assessment of the prospects for achieving the benefits of
the deferred tax assets, the Company believes it is more likely than not that
such benefits will be realized.
The effective income tax rates relating to continuing operations for the
years ended December 31, 2000, 1999 and 1998 differed from the applicable
federal rate as follows:
2000 1999 1998
---- ---- ----
Federal rate 35% 35% 35%
State income taxes 2% 3% 4%
Expenses permanently nondeductible for
tax purposes 1% 1% 1%
Other - - (1%)
--- --- ---
Effective income tax rate 38% 39% 39%
=== === ===
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
the Company. Costs of the plans that are qualified for income tax purposes are
funded. Costs of plans that are not qualified are not funded. Charges to
earnings for these retirement plans for the years ended December 31, 2000, 1999
and 1998 were $5,771, $5,304, and $5,003, respectively.
The Company does not provide other post-retirement benefits. Further, the
Company does not provide post-employment benefits.
Leases
- ------
Offices used for sales, recruiting and administrative functions and
facilities used for in-house engineering, design and drafting are occupied under
numerous leases that expire through 2009. In addition, there are leases for
computers and office equipment. Rental expense under all leases for the years
ended December 31, 2000, 1999 and 1998 was $26,679, $23,918 and $20,703,
respectively.
For periods after December 31, 2000, approximate minimum annual rental
expense under non-cancelable leases aggregate $60,568 with rentals of $17,354
due in 2001, $14,117 due in 2002, $10,045 due in 2003, $8,283 due in 2004 and
$4,319 due in 2005.
Operating Segments
- ------------------
The Company's internal reporting structure is based upon type of services
provided and, in the case of certain services having similar characteristics,
upon management responsibility. Internal operating units that have similar
characteristics have been aggregated and are reported as the Technical Services
segment.
37
Information Technology Services provides a full range of staffing services
and professional services on an outsourced basis utilizing personnel with
expertise in distributed systems management, applications development and
maintenance support, help desk services and personal computer support.
Technical Services provides staffing and outsourcing services engaging
personnel who provide engineering, engineering support, technical and
telecommunications services through its specialized divisions.
Management Recruiters provides a search and recruiting service for the
permanent employment of management personnel. It also provides temporary
administrative, clerical and management staffing services through several
specialized divisions.
Todays Staffing provides temporary administrative, clerical and legal
staffing services.
38
Operating segment data for the years ended December 31, 2000, 1999 and 1998
follows. Certain amounts in depreciation and amortization, assets and purchases
of fixed assets for prior years have been reclassified to conform to
classifications in 2000.
2000 1999 1998
--------- --------- ---------
Revenues
- --------
Information Technology Services $ 355,693 331,521 320,599
Technical Services 985,891 929,118 898,736
Management Recruiters 136,752 113,343 112,217
Todays Staffing 238,908 227,895 208,993
--------- --------- ---------
$ 1,717,244 1,601,877 1,540,545
========= ========= =========
Earnings from continuing operations
before income taxes and minority
interests
- -----------------------------------
Operating profit
Information Technology Services $ 17,369 22,581 21,278
Technical Services 21,827 44,435 33,059
Management Recruiters 30,716 22,450 22,813
Todays Staffing 15,153 15,166 13,946
Corporate expenses (25,260) (18,656) (14,986)
--------- --------- ---------
59,805 85,976 76,110
Interest expense 5,189 2,114 1,384
--------- --------- ---------
$ 54,616 83,862 74,726
========= ========= =========
Depreciation and amortization
- -----------------------------
Information Technology Services $ 3,697 1,787 1,432
Technical Services 11,763 9,129 7,829
Management Recruiters 3,568 2,873 1,699
Todays Staffing 3,674 3,755 3,132
Corporate 948 800 387
--------- --------- ---------
$ 23,650 18,344 14,479
========= ========= =========
Assets
- ------
Information Technology Services $ 133,413 131,303 92,223
Technical Services 314,897 276,691 243,188
Management Recruiters 52,029 54,821 36,355
Todays Staffing 62,199 58,555 52,730
Corporate 9,491 9,454 5,966
Net assets of discontinued operations - 856 5,352
--------- --------- ---------
$ 572,029 531,680 435,814
========= ========= =========
39
2000 1999 1998
--------- --------- ---------
Purchases of fixed assets
- -------------------------
Information Technology Services $ 5,003 4,277 4,411
Technical Services 20,180 18,394 13,954
Management Recruiters 2,604 2,128 2,809
Todays Staffing 1,781 1,178 1,308
Corporate 1,047 1,608 617
--------- --------- ---------
$ 30,615 27,585 23,099
========= ========= =========
Intersegment activity is not significant. Therefore, revenues reported for
each operating segment are substantially all from external customers.
The Company is domiciled in the United States and its segments operate
primarily in the United States. Revenues and fixed assets by geographic area for
the years ended December 31, 2000, 1999 and 1998 are as follows:
2000 1999 1998
--------- --------- ---------
Revenues
- --------
United States $ 1,545,243 1,466,973 1,446,295
Canada, Europe and other 172,001 134,904 94,250
--------- --------- ---------
$ 1,717,244 1,601,877 1,540,545
========= ========= =========
Fixed assets
- ------------
United States $ 61,369 50,139 37,819
Canada, Europe and other 4,741 3,117 1,634
--------- --------- ---------
$ 66,110 53,256 39,453
========= ========= =========
There was no single customer from whom the Company derived 10% or more of
its consolidated revenues during 2000, 1999 or 1998.
In 2000, operating profit included pre-tax charges totaling $11.7 million
that included the resolution of a dispute with a health insurance provider,
billing adjustments, executive separation costs and other charges. Operating
profit for Information Technology Services, Technical Services and Todays
Staffing and corporate expenses were impacted by these charges.
In 1998, operating profit for Technical Services included reorganization
costs and other non-recurring charges of $2.3 million associated with realigning
and downsizing the Technical Services support structure.
Discontinued Operations
- -----------------------
In prior years the Company adopted plans to dispose of two separate lines
of business within Technical Services that provided certain specialized services
to the automotive industry. These businesses have been classified as
discontinued
40
operations in the Company's reported results of operations. The disposal or
liquidation of these businesses was completed in prior years.
Adjustments were made in 1999 to prior year provisions for loss from
discontinued operations resulting in a gain after taxes of $2,768 primarily from
the recovery on a disputed contract receivable and adjustment of certain
estimates. Adjustments were made in 1998 to prior year provisions for loss from
discontinued operations resulting in a gain after tax of $1,338 primarily due to
lower than anticipated costs related to the wind-down of discontinued operations
and greater than anticipated realization on the disposal of assets.
Legal Proceedings and Claims
- ----------------------------
The Company has litigation and other claims pending which have arisen in
the ordinary course of business. There are substantive defenses and/or insurance
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.
41
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, 2000 and 1999 and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 2000. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule listed under the heading "Financial statement
schedules" on page 44. 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 consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2000 and 1999 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. 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.
Philadelphia, PA /s/ KPMG LLP
February 20, 2001 -----------------------------
KPMG LLP
42
CDI CORP. AND SUBSIDIARIES
Quarterly Results
Years ended December 31, 2000 and 1999
(In thousands, except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----------
2000
- ----
Revenues $ 421,400 437,447 441,571 416,826 1,717,244
Gross profit 114,022 122,685 120,916 109,136 466,759
Operating profit (loss) 20,914 22,798 18,978 (2,885) 59,805
Interest expense 1,048 1,393 1,392 1,356 5,189
Earnings (loss) from
continuing operations 11,804 12,828 11,220 (2,849) 33,003
Discontinued operations - - - - -
Net earnings (loss) $ 11,804 12,828 11,220 (2,849) 33,003
Basic earnings per share:
Earnings (loss) from
continuing operations $ .62 .67 .59 (.15) 1.73
Discontinued operations $ - - - - -
Net earnings (loss) $ .62 .67 .59 (.15) 1.73
Diluted earnings per share:
Earnings (loss) from
continuing operations $ .62 .67 .59 (.15) 1.73
Discontinued operations $ - - - - -
Net earnings (loss) $ .62 .67 .59 (.15) 1.73
1999
- ----
Revenues $ 389,121 407,576 409,274 395,906 1,601,877
Gross profit 100,683 105,960 111,686 106,298 424,627
Operating profit 20,300 21,465 23,136 21,075 85,976
Interest expense 427 440 499 748 2,114
Earnings from continuing
operations 11,733 12,397 13,332 12,217 49,679
Discontinued operations - 2,015 - 753 2,768
Net earnings $ 11,733 14,412 13,332 12,970 52,447
Basic earnings per share:
Earnings from continuing
operations $ .62 .65 .70 .64 2.61
Discontinued operations $ - .11 - .04 .15
Net earnings $ .62 .76 .70 .68 2.76
Diluted earnings per share:
Earnings from continuing
operations $ .62 .65 .70 .64 2.60
Discontinued operations $ - .11 - .04 .14
Net earnings $ .62 .75 .70 .68 2.74
There were $11.7 million of pre-tax charges in the fourth quarter of 2000 that
include resolution of a dispute with a health insurance provider, billing
adjustments, executive separation costs and other charges.
43
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,
2000 and 1999, the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the years ended
December 31, 2000, 1999 and 1998, the footnotes thereto and the
report of KPMG LLP, independent auditors, are filed herewith.
Financial statement schedules
Schedule submitted for the years ended December 31, 2000, 1999 and
1998.
II - Valuation and Qualifying Accounts
(b) Registrant filed a Form 8-K during the quarter ended December 31, 2000
dated October 20, 2000 reporting under Item 5. Other Events, the
resignation of the Registrant's President and Chief Executive Officer,
Mitch Wienick, on October 17, 2000 and the appointment of Allen M.
Levantin as acting President and Chief Executive Officer.
44
(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
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. Amended and Restated CDI Corp. 1998 Non-Qualified Stock
Option Plan, incorporated herein by reference to the
Registrant's report on Form 10-Q for the quarter ended June
30, 2000 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
c. CDI Corp. Performance Shares 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)
d. Amended and Restated CDI Corp. Stock Purchase Plan for
Management Employees and Non-Employee Directors,
incorporated herein by reference to the Registrant's report
on Form 10-Q for the quarter ended June 30, 2000 (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)
f. 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)
g. Amendment dated as of April 12, 2000 to Consulting
Agreement dated as of April 7, 1997 by and between
Registrant and Walter R. Garrison, incorporated herein by
reference to the Registrant's report on Form 10-Q for the
quarter ended June 30, 2000 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or arrangement)
45
h. 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)
i. 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)
j. 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)
k. Restricted Stock Agreement dated as of October 25, 1999
between Registrant and Gregory L. Cowan, incorporated
herein by reference to Registrant's report on Form 10-K for
the year ended December 31, 1999 (File No. 1-5519).
(Constitutes a management contract or compensatory plan or
arrangement)
l. Employment Agreement dated as of April 8, 2000 by and
between Registrant and Mitchell Wienick, incorporated
herein by reference to Registrant's report on Form 10-Q for
the quarter ended June 30, 2000 (File No. 1-5519).
(Constitutes a management contract or compensatory plan or
arrangement)
m. 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)
n. Release and Waiver of Claims and Non-Competition Agreement
dated October 26, 2000 by and between Registrant and
Mitchell Wienick. (Constitutes a management contract or
compensatory arrangement)
21. Subsidiaries of the Registrant.
23. Consents of experts and counsel.
46
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/ Allen M. Levantin
- -------------------------------------
Allen M. Levantin, Acting
President and Chief Executive
Officer
Date: March 14, 2001
- -------------------------------------
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/ Allen M. Levantin
- -------------------------------------
Allen M. Levantin
Acting President, Chief
Executive Officer and Director
(Principal Executive Officer)
Date: March 14, 2001
- -------------------------------------
By: /s/ Gregory L. Cowan
- -------------------------------------
Gregory L. Cowan
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 14, 2001
- -------------------------------------
By: /s/ Walter E. Blankley
- -------------------------------------
Walter E. Blankley
Director
Date: March 15, 2001
- -------------------------------------
47
By: /s/ John M. Coleman
- -------------------------------------
John M. Coleman
Director
Date: March 21, 2001
- -------------------------------------
By: /s/ Michael J. Emmi
- -------------------------------------
Michael J. Emmi
Director
Date: March 15, 2001
- -------------------------------------
By: /s/ Walter R. Garrison
- ------------------------------------
Walter R. Garrison
Director
Date: March 19, 2001
- -------------------------------------
By: /s/ Kay Hahn Harrell
- -------------------------------------
Kay Hahn Harrell
Director
Date: March 15, 2001
- -------------------------------------
By: /s/ Lawrence C. Karlson
- -------------------------------------
Lawrence C. Karlson
Director
Date: March 15, 2001
- -------------------------------------
By: /s/ Alan B. Miller
- -------------------------------------
Alan B. Miller
Director
Date: March 15, 2001
- -------------------------------------
48
By: /s/ Barton J. Winokur
- -------------------------------------
Barton J. Winokur
Director
Date: March 21, 2001
- -------------------------------------
49
Schedule II
-----------
CDI CORP. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Allowance for Uncollectible Receivables)
Years ended December 31, 2000, 1999 and 1998
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, 2000 $ 4,203,000 3,863,000 4,372,000 - 3,694,000
December 31, 1999 $ 6,000,000 915,000 2,807,000 95,000(a) 4,203,000
December 31, 1998 $ 4,995,000 2,200,000 1,295,000 100,000(a) 6,000,000
(a) Allowance of acquired businesses at dates of acquisition.
50
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
CDI CORP.
------------------
EXHIBITS
to
Annual Report
FORM 10-K
Year ended December 31, 2000
Under
SECURITIES EXCHANGE ACT OF 1934
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. Amended and Restated CDI Corp. 1998 Non-Qualified Stock
Option Plan, incorporated herein by reference to the
Registrant's report on Form 10-Q for the quarter ended
June 30, 2000 (File No. 1-5519). (Constitutes a management
arrangement)
c. CDI Corp. Performance Shares 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)
d. Amended and Restated CDI Corp. Stock Purchase Plan for
Management Employees and Non-Employee Directors,
incorporated herein by reference to the Registrant's
report on Form 10-Q for the quarter ended June 30, 2000
(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)
f. 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)
g. Amendment dated as of April 12, 2000 to Consulting
Agreement dated as of April 7, 1997 by and between
Registrant and Walter R. Garrison, incorporated herein
by reference to the Registrant's report on Form 10-Q for
the quarter ended June 30, 2000 (File No. 1-5519).
(Constitutes a management contract or compensatory plan or
arrangement)
51
INDEX TO EXHIBITS
Number Exhibit Page
- ------- ------------------------------------------------------------- ----
h. 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
by and between 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)
i. 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)
j. 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)
k. Restricted Stock Agreement dated as of October 25, 1999
between Registrant and Gregory L. Cowan, incorporated
herein by reference to the Registrant's report on Form
10-K for the year ended December 31, 1999 (File No. 1-5519).
(Constitutes a management contract or compensatory plan
or arrangement)
l. Employment Agreement dated as of April 8, 2000 by and
between Registrant and Mitchell Wienick, incorporated herein
by reference to Registrant's report on Form 10-Q for the
quarter ended June 30, 2000 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or arrangement)
m. 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)
n. Release and Waiver of Claims and Non-Competition Agreement 53
dated October 26, 2000 by and between Registrant and
Mitchell Wienick. (Constitutes a management contract or
compensatory arrangement)
21. Subsidiaries of the Registrant. 57
23. Consents of experts and counsel. 59
52