CDI 8-K CDI Corp. Reports Second Quarter 2007 Net Earnings Increase by over 50% and Announces Dividend

News Release

CDI Corp. Reports Second Quarter 2007 Net Earnings Increase by over 50% and Announces Dividend

Philadelphia (July 26, 2007) - CDI Corp. (NYSE:CDI) today reported earnings for the second quarter ended June 30, 2007 and announced a quarterly cash dividend.

For the quarter ended June 30, 2007, the company reported net earnings of $8.3 million, or $0.41 per diluted share, on revenue of $338.1 million. Second quarter revenue increased by 7.5% compared to $314.5 million for the second quarter of 2006, and net earnings increased 52.7% compared to the year ago quarter. Contributing to 2007 net earnings was an approximate $0.4 million reduction of income tax expense due to the recognition of foreign research and development credits partially offset by certain charges against deferred tax assets.

The company also announced a dividend of $0.11 per share to be paid on August 23, 2007 to all shareholders of record as of August 9, 2007.

“Increased demand for engineering project outsourcing from our customer base in capital-intensive industries such as oil and gas, alternative energy, life sciences and in the defense sector was a key driver of our solid performance,” said President and Chief Executive Officer, Roger H. Ballou. “Continued capital spending in the U.K. and Australia construction marketplace also contributed to our revenue and profit growth. In addition, generally solid demand for both contract and permanent hiring provided a favorable environment for most of our U.S.-based staffing businesses.

“Our strategic focus on providing higher-margin services in the engineering and construction marketplace, our continued emphasis on generating professional services revenue from permanent placement and franchise-related activity, and our ability to control operating expenses are all contributing to continued improvement in operating profit margin which increased to 3.6% this quarter versus 2.6% in the second quarter of 2006.”

Business Segment Discussion

The Engineering Solutions segment reported an 11.2% increase in second quarter revenue compared to the prior-year quarter reflecting continued strength in engineering project demand in the Process & Industrial, Government Services and Life Sciences verticals. Operating profit on a year-over-year basis increased significantly due to growth in higher-margin engineering project business.

IT Solutions revenue decreased by 13.2% versus the prior-year quarter resulting from declines in staffing services provided to smaller accounts and staffing cutbacks by a large IT client. Operating profit declined significantly due to the reduction in revenue and margin pressures within staffing services, partially offset by effective cost control initiatives.

Demand continued to be robust at U.K.-based AndersElite as revenue increased by 22.4% versus the prior year (or 11.7% on a local currency basis). Operating profit increased significantly on a local currency basis compared to the prior-year quarter driven by increases in higher-margin permanent placement business and continued improvement in recruiter productivity.

Todays Staffing second quarter revenue increased 6.6% versus the second quarter of 2006 reflecting increased placement of higher-skilled workers at higher pay rates and increased permanent placement activity. Operating profit declined due to continued margin pressure.

Management Recruiters International, Inc. (MRI) second quarter revenue increased 18.9% on a year-over-year basis driven by solid increases in contract staffing revenue and new franchise sales as well as by a moderate increase in royalty revenue. Operating profit increased versus the prior-year quarter due to the aforementioned revenue growth and effective cost control initiatives.

Corporate Summary

Corporate overhead costs increased by 10.3% versus the prior year quarter due to increases in variable and stock-based compensation costs partially offset by decreases in compliance spending.

“CDI ended the quarter with $53.2 million in cash and cash equivalents compared to $36.6 million at the end of quarter one,” said Ballou. “Our current cash balance is more than sufficient to support revenue growth, capital spending and ongoing dividends. Additionally, our significant debt capacity could support potential acquisitions. “

Business Outlook

“Long-term strength in engineering project demand, reflected in a solid new business pipeline, and a potential strengthening in staffing demand should support year-over-year revenue growth of 4% to 6% for the third quarter and 6% to 8% for the full year - even with potential continued softness in the IT Solutions segment and anticipated moderation in the rate of revenue growth in the Process & Industrial vertical. Variable contribution margin from this incremental revenue in the third quarter could be in the 12% to 14% range as we continue to move our portfolio of services up the value continuum.”

Financial Tables Follow

Conference Call/Webcast

CDI Corp. will conduct a conference call at 11 a.m. (ET) today to discuss this announcement.  The conference call will be broadcast live over the Internet and can be accessed by any interested party at www.cdicorp.com.  An online replay will be available at www.cdicorp.com for 14 days after the call. 

Company Information

Headquartered in Philadelphia, CDI Corp. (NYSE:CDI) is a leading provider of engineering & information technology outsourcing solutions and professional staffing. Its operating units include CDI Engineering Solutions, CDI IT Solutions, CDI AndersElite Limited, Todays Staffing, Inc. and Management Recruiters International, Inc. Visit CDI at www.cdicorp.com.

Caution Concerning Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address expectations or projections about the future, including statements about our strategy for growth, expected expenditures and future financial results, are forward-looking statements. Some of the forward-looking statements can be identified by words like "anticipates," "believes," "expects," "may," "will," "could," “intends," "plans," "estimates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to: changes in general economic conditions and levels of capital spending by customers in the industries that we serve; the impact of a potential reduction in demand in our IT Solutions segment; possible inaccurate assumptions or forecasts regarding the bill rate, profit margin and duration of assignment applicable to billable personnel (and regarding the utilization rate of billable personnel in our project business); competitive market pressures; the availability and cost of qualified labor; changes in customers' attitudes towards outsourcing; our level of success in attracting, training, and retaining qualified management personnel and other staff employees; the ability to pass on to customers increases in costs (such as those relating to workers’ compensation, unemployment insurance, medical insurance coverage or other costs which may arise from regulatory requirements); our performance on customer contracts; the possibility of incurring liability for our activities, including the activities of our temporary employees; adverse consequences arising out of the U.K. Office of Fair Trading investigation; and government policies or judicial decisions adverse to the staffing industry. More detailed information about some of these risks and uncertainties may be found in our filings with the SEC, particularly in the "Risk Factors" section of our Form 10-K's and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Form 10-K's and Form 10-Q's. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise.

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Contacts:

Vincent Webb

Vice President, Corporate Communications & Marketing

215-636-1240

Vince.Webb@cdicorp.com

Mark Kerschner

Chief Financial Officer

215-636-1105

Mark.Kerschner@cdicorp.com

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Consolidated Statements of Earnings
Unaudited
(in thousands, except per share data)
	For the three months ended							For the six months ended
	June 30,					March 31,		June 30,
	2007		2006			2007		2007		2006
Revenues	$	338,138	$	314,478		$	331,941	$	670,079	$	621,809
Cost of services		256,738		242,170			255,147		511,885		478,930
Gross profit		81,400		72,308			76,794		158,194		142,879
Operating and administrative expenses		69,129		64,049			63,723		132,852		126,786
Operating profit		12,271		8,259			13,071		25,342		16,093
Other income (expense), net		264		(697	)		435		699		(534	)
Earnings before income taxes		12,535		7,562			13,506		26,041		15,559
Income tax expense		4,206		2,108			5,038		9,244		5,199
Net earnings	$	8,329	$	5,454		$	8,468	$	16,797	$	10,360
Diluted earnings per share	$	0.41	$	0.27		$	0.42	$	0.83	$	0.52
Diluted number of shares		20,406		20,127			20,194		20,300		20,066

	June 30,		March 31,		December 31,		June 30,
	2007		2007		2006		2006
Selected Balance Sheet Data:
Cash and cash equivalents	$	53,219	$	36,566	$	33,551	$	14,447
Accounts receivable, net	$	260,941	$	268,437	$	243,586	$	257,453
Current assets	$	325,599	$	318,337	$	290,684	$	287,883
Total assets	$	450,020	$	440,688	$	413,119	$	408,324
Current liabilities	$	115,592	$	120,787	$	104,746	$	113,483
Shareholders' equity	$	322,152	$	308,771	$	299,332	$	285,673

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		For the three months ended							For the six months ended
		June 30,					March 31,		June 30,
		2007			2006		2007		2007		2006
Selected Cash Flow Data:
Depreciation expense	$	2,789		$	2,543	$	2,747	$	5,536	$	5,053
Capital expenditures	$	2,554		$	2,728	$	2,219	$	4,773	$	5,799
Dividends paid	$	2,220		$	2,196	$	2,212	$	4,432	$	4,380
Free cash flow for the quarter ended June 30, 2007 is shown below:
Net cash provided by operating activities	$	13,497
Less: capital expenditures		(2,554	)
Less: dividends paid		(2,220	)
	$	8,723

		For the three months ended									For the six months ended
		June 30,						March 31,			June 30,
		2007			2006			2007			2007			2006
Selected Earnings and Other Financial Data:
Revenues	$	338,138		$	314,478		$	331,941		$	670,079		$	621,809
Gross profit	$	81,400		$	72,308		$	76,794		$	158,194		$	142,879
Gross profit margin		24.1	%		23.0	%		23.1	%		23.6	%		23.0	%
Operating and administrative expenses as a percentage of revenue		20.4	%		20.4	%		19.2	%		19.8	%		20.4	%
Corporate expenses	$	5,108		$	4,629		$	4,741		$	9,849		$	9,653
Corporate expenses as a percentage of revenue		1.5	%		1.5	%		1.4	%		1.5	%		1.6	%
Operating profit margin		3.6	%		2.6	%		3.9	%		3.8	%		2.6	%
Effective income tax rate		33.6	%		27.9	%		37.3	%		35.5	%		33.4	%
After-tax return on shareholders’ equity (a)		9.8	%		6.4	%		9.2	%
Pre-tax return on net assets (b)		17.1	%		10.8	%		15.9	%
Variable contribution margin (c)		17.0	%		10.4	%		21.3	%		19.2	%		9.0	%

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		For the three months ended									For the six months ended
		June 30,						March 31,			June 30,
		2007			2006			2007			2007			2006
Selected Segment Data :
Engineering Solutions (d)
Revenues	$	153,166		$	137,724		$	150,969		$	304,135		$	277,112
Gross profit		31,572			25,625			29,992			61,564			53,013
Gross profit margin		20.6	%		18.6	%		19.9	%		20.2	%		19.1	%
Operating profit		7,999			4,519			9,628			17,627			12,141
Operating profit margin		5.2	%		3.3	%		6.4	%		5.8	%		4.4	%
IT Solutions (d)
Revenues	$	59,862		$	68,938		$	65,177		$	125,039		$	133,097
Gross profit		11,035			13,207			12,045			23,080			25,387
Gross profit margin		18.4	%		19.2	%		18.5	%		18.5	%		19.1	%
Operating profit		483			1,581			1,501			1,984			1,697
Operating profit margin		0.8	%		2.3	%		2.3	%		1.6	%		1.3	%
AndersElite
Revenues	$	63,193		$	51,623		$	61,595		$	124,788		$	100,209
Gross profit		17,456			13,488			16,175			33,631			25,415
Gross profit margin		27.6	%		26.1	%		26.3	%		27.0	%		25.4	%
Operating profit		3,520			1,901			2,693			6,213			3,018
Operating profit margin		5.6	%		3.7	%		4.4	%		5.0	%		3.0	%
Todays Staffing
Revenues	$	42,421		$	39,791		$	38,027		$	80,448		$	79,245
Gross profit		9,602			9,610			8,752			18,354			18,703
Gross profit margin		22.6	%		24.2	%		23.0	%		22.8	%		23.6	%
Operating profit		1,096			1,375			672			1,768			2,099
Operating profit margin		2.6	%		3.5	%		1.8	%		2.2	%		2.6	%
Management Recruiters International
Revenues	$	19,496		$	16,402		$	16,173		$	35,669		$	32,146
Gross profit		11,735			10,378			9,830			21,565			20,361
Gross profit margin		60.2	%		63.3	%		60.8	%		60.5	%		63.3	%
Operating profit		4,281			3,512			3,318			7,599			6,791
Operating profit margin		22.0	%		21.4	%		20.5	%		21.3	%		21.1	%

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		For the three months ended						For the six months ended
		June 30,				March 31,		June 30,
		2007		2006		2007		2007		2006
Engineering Solutions Revenue by Vertical (e):
CDI Process and Industrial	$	115,509	$	99,868	$	112,539	$	228,048	$	200,084
CDI Aerospace		17,282		20,828		18,129		35,411		43,634
CDI Government Services		17,193		14,438		16,552		33,745		28,586
CDI Life Sciences		3,182		2,590		3,749		6,931		4,808
Total Engineering Solutions Revenue	$	153,166	$	137,724	$	150,969	$	304,135	$	277,112

(a) Current quarter combined with the three preceding quarters' net earnings divided by the average shareholders’ equity.

(b) Current quarter combined with the three preceding quarters' pre-tax earnings divided by the average net assets.

Net assets include total assets minus total liabilities excluding cash and income tax accounts.

(c) Year-over-year change in operating profit divided by year-over-year change in revenue.

(d) As noted in the fourth quarter 2006 earnings press release, CDI began reporting on five business units reflecting the new operating structure in place January 1, 2007. Under the new structure, CDI now separately reports CDI Engineering Solutions and CDI IT Solutions. For comparative purposes, the Company has revised the reporting segments' 2006 data for these two segments .

(e) The Company has revised the reporting segments' prior year revenue for Engineering Solutions for comparative purposes.

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