UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| (X) |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2003
OR
| ( ) |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-5519
CDI CORP.
| Pennsylvania | 23-2394430 | |
|
|
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| (State or other jurisdic- | (I.R.S. Employer | |
| tion of incorporation or organization) |
Identification Number) |
1717 Arch Street, 35th Floor, Philadelphia, PA 19103-2768
Registrant’s telephone number, including area code: (215) 569-2200
Indicate whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate whether the Registrant is an accelerated filer (as defined in Section 12b-2 of the Exchange Act.)
Yes (X) No ( )
Outstanding shares of each of the Registrant’s classes of common stock as of July 30, 2003 were:
| Common stock, $.10 par value | 19,445,697 shares | |
| Class B common stock, $.10 par value | None |
CDI CORP.
Table of Contents
| Part I: | FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Consolidated Balance Sheets as of December 31, 2002 and June 30, 2003 (unaudited) |
3 | ||||||||
Consolidated Statements of Earnings for the three months ended June 30, 2002 and
2003 and for the six months ended June 30, 2002 and 2003 (unaudited) |
5 | ||||||||
Consolidated Statements of Shareholders’ Equity for the three months ended June
30, 2002 and 2003 and for the six months ended June 30, 2002 and 2003
(unaudited) |
6 | ||||||||
Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and
2003 (unaudited) |
7 | ||||||||
Notes to Consolidated Financial Statements |
8 | ||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 | ||||||||
Item 3. Quantitative and Qualitative Disclosures about Market Risks |
22 | ||||||||
Item 4. Controls and Procedures |
22 | ||||||||
| Part II: | OTHER INFORMATION |
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Item 2. Changes in Securities and Use of Proceeds |
23 | ||||||||
Item 4. Submission of Matters to a Vote of Security Holders |
23 | ||||||||
Item 6. Exhibits and Reports on Form 8-K |
24 | ||||||||
| SIGNATURES | 25 | ||||||||
| INDEX TO EXHIBITS | 26 | ||||||||
2
PART I. FINANCIAL INFORMATION
CDI CORP. AND SUBSIDIARIES
| June 30, | ||||||||||
| 2003 | December 31, | |||||||||
| (unaudited) | 2002 | |||||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 46,614 | 41,148 | |||||||
Accounts receivable, less allowance for
doubtful accounts of $4,987 - June 30,
2003; $7,683 - December 31, 2002 |
204,175 | 189,557 | ||||||||
Short-term investments |
58,764 | 58,477 | ||||||||
Prepaid expenses and other |
9,235 | 6,403 | ||||||||
Income taxes receivable |
1,972 | 6,101 | ||||||||
Deferred income taxes |
10,499 | 13,195 | ||||||||
Total current assets |
331,259 | 314,881 | ||||||||
Fixed assets, at cost: |
||||||||||
Computers and systems |
81,423 | 75,815 | ||||||||
Equipment and furniture |
26,214 | 27,213 | ||||||||
Leasehold improvements |
12,585 | 12,082 | ||||||||
| 120,222 | 115,110 | |||||||||
Accumulated depreciation |
(90,593 | ) | (85,976 | ) | ||||||
Fixed assets, net |
29,629 | 29,134 | ||||||||
Deferred income taxes |
9,339 | 11,750 | ||||||||
Goodwill, net |
68,134 | 68,334 | ||||||||
Other assets |
6,074 | 8,675 | ||||||||
Total assets |
$ | 444,435 | 432,774 | |||||||
See accompanying notes to consolidated financial statements.
3
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
| June 30, | ||||||||||
| 2003 | December 31, | |||||||||
| (unaudited) | 2002 | |||||||||
Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Obligations not liquidated because of
outstanding checks |
$ | 13,412 | 5,978 | |||||||
Accounts payable |
21,451 | 25,008 | ||||||||
Withheld payroll taxes |
4,412 | 2,773 | ||||||||
Accrued
compensation and related costs |
49,110 | 52,914 | ||||||||
Accrued expenses and other |
24,254 | 29,808 | ||||||||
Total current liabilities |
112,639 | 116,481 | ||||||||
Deferred compensation |
8,592 | 8,492 | ||||||||
Total liabilities |
121,231 | 124,973 | ||||||||
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
20,385,268 shares - June 30, 2003; 20,313,915
shares - December 31, 2002 |
2,039 | 2,031 | ||||||||
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none issued |
— | — | ||||||||
Additional paid-in capital |
24,519 | 22,975 | ||||||||
Retained earnings |
317,902 | 306,339 | ||||||||
Accumulated other comprehensive income (loss) |
1,546 | (610 | ) | |||||||
Unamortized value of restricted stock issued |
(668 | ) | (800 | ) | ||||||
Less common stock in treasury, at cost -
958,465 shares - June 30, 2003 and
December 31, 2002 |
(22,134 | ) | (22,134 | ) | ||||||
Total shareholders’ equity |
323,204 | 307,801 | ||||||||
Total liabilities and shareholders’ equity |
$ | 444,435 | 432,774 | |||||||
See accompanying notes to consolidated financial statements.
4
CDI CORP. AND SUBSIDIARIES
| Three months ended | Six months ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Revenues |
$ | 269,994 | 298,415 | 539,520 | 611,549 | ||||||||||||
Cost of services |
204,824 | 220,489 | 405,974 | 454,299 | |||||||||||||
Gross profit |
65,170 | 77,926 | 133,546 | 157,250 | |||||||||||||
Operating and administrative costs |
56,452 | 75,569 | 116,466 | 155,208 | |||||||||||||
Provision for restructure |
— | — | — | 4,053 | |||||||||||||
Operating profit (loss) |
8,718 | 2,357 | 17,080 | (2,011 | ) | ||||||||||||
Interest (income) expense, net |
(252 | ) | 43 | (626 | ) | 128 | |||||||||||
Earnings (loss) from continuing operations before
income taxes, minority interests, discontinued
operations and cumulative effect of accounting change |
8,970 | 2,314 | 17,706 | (2,139 | ) | ||||||||||||
Income tax expense (benefit) |
2,867 | 802 | 6,143 | (791 | ) | ||||||||||||
Earnings (loss) from continuing operations
before minority interests, discontinued operations,
and cumulative effect of accounting change |
6,103 | 1,512 | 11,563 | (1,348 | ) | ||||||||||||
Minority interests |
— | 69 | — | 135 | |||||||||||||
Earnings (loss) from continuing operations before
discontinued operations and cumulative effect of
accounting change |
6,103 | 1,443 | 11,563 | (1,483 | ) | ||||||||||||
Discontinued operations (loss) profit |
— | (70 | ) | — | 398 | ||||||||||||
Earnings (loss) from continuing operations
before cumulative effect of accounting change |
6,103 | 1,373 | 11,563 | (1,085 | ) | ||||||||||||
Cumulative effect of change in accounting for
goodwill, net of tax |
— | — | — | (13,968 | ) | ||||||||||||
Net earnings (loss) |
$ | 6,103 | 1,373 | 11,563 | (15,053 | ) | |||||||||||
Basic earning (loss) per share: |
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Earnings (loss) from continuing operations
before accounting change |
$ | 0.32 | 0.08 | 0.60 | (0.08 | ) | |||||||||||
Discontinued operations |
$ | — | — | — | 0.02 | ||||||||||||
Cumulative effect of accounting change, net of tax |
$ | — | — | — | (0.73 | ) | |||||||||||
Net earnings (loss) |
$ | 0.32 | 0.07 | 0.60 | (0.79 | ) | |||||||||||
Diluted earning (loss) per share: |
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Earnings (loss) from continuing operations
before accounting change |
$ | 0.31 | 0.07 | 0.59 | (0.08 | ) | |||||||||||
Discontinued operations |
$ | — | — | — | 0.02 | ||||||||||||
Cumulative effect of accounting change, net of tax |
$ | — | — | — | (0.73 | ) | |||||||||||
Net earnings (loss) |
$ | 0.31 | 0.07 | 0.59 | (0.79 | ) | |||||||||||
See accompanying notes to consolidated financial statements.
5
CDI CORP. AND SUBSIDIARIES
| Three months ended | Six months ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Common stock |
|||||||||||||||||
Beginning of period |
$ | 2,034 | 2,013 | 2,031 | 2,008 | ||||||||||||
Exercise of stock options |
3 | 9 | 4 | 12 | |||||||||||||
Stock purchase plans |
2 | 1 | 4 | 3 | |||||||||||||
End of period |
$ | 2,039 | 2,023 | 2,039 | 2,023 | ||||||||||||
Additional paid-in capital |
|||||||||||||||||
Beginning of period |
$ | 23,424 | 18,745 | 22,975 | 17,629 | ||||||||||||
Exercise of stock options |
579 | 1,882 | 703 | 2,554 | |||||||||||||
Restricted stock-vesting/forfeiture |
— | — | — | 4 | |||||||||||||
Restricted stock-change in value |
(1 | ) | 14 | (3 | ) | 22 | |||||||||||
Stock purchase plans |
517 | 247 | 844 | 679 | |||||||||||||
End of period |
$ | 24,519 | 20,888 | 24,519 | 20,888 | ||||||||||||
Retained earnings |
|||||||||||||||||
Beginning of period |
$ | 311,799 | 299,272 | 306,339 | 315,698 | ||||||||||||
Net earnings (loss) |
6,103 | 1,373 | 11,563 | (15,053 | ) | ||||||||||||
End of period |
$ | 317,902 | 300,645 | 317,902 | 300,645 | ||||||||||||
Accumulated other comprehensive loss |
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Beginning of period |
$ | (810 | ) | (2,445 | ) | (610 | ) | (2,038 | ) | ||||||||
Foreign currency translation adjustment |
2,356 | 1,189 | 2,156 | 782 | |||||||||||||
| $ | 1,546 | (1,256 | ) | 1,546 | (1,256 | ) | |||||||||||
Unamortized value of restricted stock issued |
|||||||||||||||||
Beginning of period |
$ | (737 | ) | (633 | ) | (800 | ) | (690 | ) | ||||||||
Restricted stock-vesting/forfeiture |
— | — | — | 10 | |||||||||||||
Restricted stock-change in value |
1 | (14 | ) | 3 | (22 | ) | |||||||||||
Restricted stock-amortization of value |
68 | 56 | 129 | 111 | |||||||||||||
End of period |
$ | (668 | ) | (591 | ) | (668 | ) | (591 | ) | ||||||||
Treasury stock |
|||||||||||||||||
Beginning of period |
$ | (22,134 | ) | (21,967 | ) | (22,134 | ) | (21,957 | ) | ||||||||
Restricted stock-vesting/forfeiture |
— | — | — | (10 | ) | ||||||||||||
End of period |
$ | (22,134 | ) | (21,967 | ) | (22,134 | ) | (21,967 | ) | ||||||||