CDI 10-Q 2011 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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, 2011

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 001-05519

CDI Corp.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2394430
(State of incorporation)	(I.R.S. Employer Identification Number)

1717 Arch Street, 35^th Floor, Philadelphia, PA 19103-2768

(Address of principal executive offices)

(215) 569-2200

(Registrant’s telephone number, including area code)

Indicate by check mark 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 by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  x	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

The number of shares outstanding of each of the registrant’s classes of common stock as of July 28, 2011 was as follows:

Common stock, $.10 par value per share	19,168,645 shares
Class B common stock, $.10 par value per share	None

CDI CORP.

TABLE OF CONTENTS

Part I:	FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	2
		Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010	3
		Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2011 and 2010	4
		Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 3.	Quantitative and Qualitative Disclosures about Market Risks	32
	Item 4.	Controls and Procedures	32
Part II:	OTHER INFORMATION
	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
	Item 3.	Defaults Upon Senior Securities	33
	Item 4.	Removed and Reserved	33
	Item 5.	Other Information	33
	Item 6.	Exhibits	34
SIGNATURE			35
INDEX TO EXHIBITS			36

1

PART 1. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS(Unaudited)

CDI CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

	June 30,         2011			December 31,        2010
Assets
Current assets:
Cash and cash equivalents	$	24,692		$	28,746
Accounts receivable, less allowance for doubtful accounts of $4,018 - June 30, 2011; $5,339 - December 31, 2010		236,797			222,999
Prepaid expenses and other current assets		7,993			8,773
Prepaid income taxes		2,179			2,407
Deferred income taxes		6,901			7,086
Total current assets		278,562			270,011
Property and equipment, net of depreciation of $73,788 - June 30, 2011; $74,423 - December 31, 2010		29,491			31,019
Deferred income taxes		6,854			8,531
Goodwill		61,839			61,054
Other intangible assets, net		18,386			19,020
Other non-current assets		9,194			8,876
Total assets	$	404,326		$	398,511
Liabilities and Shareholders’ Equity
Current liabilities:
Cash overdraft	$	2,483		$	2,970
Short-term debt		19,224			13,900
Accounts payable		33,755			32,910
Accrued compensation and related expenses		38,344			37,493
Other accrued expenses and other current liabilities		16,584			28,110
Accrued customer rebates		6,292			6,923
Income taxes payable		2,703			1,782
Total current liabilities		119,385			124,088
Deferred compensation		9,514			10,239
Other non-current liabilities		5,127			5,257
Total liabilities		134,026			139,584
Commitments and Contingencies (Note 8)
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 21,631,377 shares - June 30, 2011; 21,531,344 shares - December 31, 2010		2,163			2,153
Class B common stock, $.10 par value - authorized 3,174,891 shares; none issued		—			—
Additional paid-in-capital		62,629			60,338
Retained earnings		256,172			248,467
Accumulated other comprehensive income		1,383			111
Less common stock in treasury, at cost - 2,462,758 shares - June 30, 2011 and December 31, 2010		(52,487	)		(52,487	)
Total CDI shareholders’ equity		269,860			258,582
Noncontrolling interest		440			345
Total shareholders’ equity		270,300			258,927
Total liabilities and shareholders’ equity	$	404,326		$	398,511

See accompanying notes to consolidated financial statements.

2

CDI CORP. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenue	$	262,739		$	218,982		$	519,375		$	428,922
Cost of services		205,779			174,279			408,085			342,712
Gross profit		56,960			44,703			111,290			86,210
Operating and administrative expenses		43,256			41,135			94,833			82,027
Operating profit		13,704			3,568			16,457			4,183
Other expense, net		(116	)		(130	)		(159	)		(78	)
Equity in losses from affiliated companies		—			(417	)		—			(768	)
Earnings before income taxes		13,588			3,021			16,298			3,337
Income tax expense		1,572			423			3,542			923
Net income		12,016			2,598			12,756			2,414
Less: income attributable to the noncontrolling interest		34			8			80			15
Net income attributable to CDI	$	11,982		$	2,590		$	12,676		$	2,399
Basic net earnings attributable to CDI per share	$	0.62		$	0.14		$	0.66		$	0.13
Diluted net earnings attributable to CDI per share	$	0.62		$	0.13		$	0.66		$	0.12

See accompanying notes to consolidated financial statements.

3

CDI CORP. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

(Unaudited)

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Common stock
Beginning of period	$	2,159		$	2,146		$	2,153		$	2,143
Stock purchase plan		1			—			4			—
Time-vested deferred stock, stock appreciation rights and restricted stock		3			2			6			5
End of period	$	2,163		$	2,148		$	2,163		$	2,148
Additional paid-in-capital
Beginning of period	$	61,904		$	58,015		$	60,338		$	57,577
Stock-based compensation		725			822			2,291			1,260
End of period	$	62,629		$	58,837		$	62,629		$	58,837
Retained earnings
Beginning of period	$	246,677		$	266,554		$	248,467		$	269,225
Net income attributable to CDI		11,982			2,590			12,676			2,399
Dividends paid to shareholders		(2,487	)		(2,471	)		(4,971	)		(4,951	)
End of period	$	256,172		$	266,673		$	256,172		$	266,673
Accumulated other comprehensive income (loss)
Beginning of period	$	1,720		$	(3,314	)	$	111		$	(1,824	)
Translation adjustments		(337	)		(23	)		1,272			(1,513	)
End of period	$	1,383		$	(3,337	)	$	1,383		$	(3,337	)
Treasury stock
Beginning of period	$	(52,487	)	$	(52,366	)	$	(52,487	)	$	(52,366	)
End of period	$	(52,487	)	$	(52,366	)	$	(52,487	)	$	(52,366	)
Noncontrolling interest
Beginning of period	$	404		$	224		$	345		$	141
Contribution from the noncontrolling interest owners		—			—			—			72
Translation adjustments		2			3			15			7
Net income attributable to noncontrolling interest		34			8			80			15
Total	$	440		$	235		$	440		$	235
Comprehensive income
Net income attributable to CDI	$	11,982		$	2,590		$	12,676		$	2,399
Translation adjustments attributable to CDI		(339	)		(26	)		1,257			(1,520	)
Comprehensive income attributable to CDI		11,643			2,564			13,933			879
Net income attributable to noncontrolling interest		34			8			80			15
Translation adjustments attributable to noncontrolling interest		2			3			15			7
Comprehensive income attributable to noncontrolling interest		36			11			95			22
Total	$	11,679		$	2,575		$	14,028		$	901

See accompanying notes to consolidated financial statements.

4

CDI CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six Months Ended, June 30,
	2011			2010
Operating activities:
Net income	$	12,756		$	2,414
Adjustments to reconcile net income to cash used in operating activities:
Depreciation		4,874			4,795
Amortization		681			292
Deferred income taxes		1,862			447
Equity in losses of affiliated companies		—			768
Stock-based compensation		1,543			1,483
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net		(13,257	)		(20,244	)
Prepaid expenses and other current assets		788			149
Accounts payable		1,075			3,651
Accrued expenses and other current liabilities		(11,772	)		4,430
Income taxes receivable/payable		1,149			242
Other non-current assets		(318	)		24
Deferred compensation		47			(412	)
Other non-current liabilities		(130	)		(396	)
Net cash used in operating activities		(702	)		(2,357	)
Investing activities:
Additions to property and equipment		(3,528	)		(2,931	)
Reacquired franchise rights		(47	)		(285	)
Acquisitions		(290	)		(34,010	)
Other		148			126
Net cash used in investing activities		(3,717	)		(37,100	)
Financing activities:
Dividends paid to shareholders		(4,971	)		(4,951	)
Net proceeds from short-term debt		5,324			—
Cash overdraft		(487	)		(1,616	)
Contribution to joint venture by noncontrolling interest		—			72
Net cash used in financing activities		(134	)		(6,495	)
Effect of exchange rate changes on cash		499			(139	)
Net decrease in cash and cash equivalents		(4,054	)		(46,091	)
Cash and cash equivalents at beginning of period		28,746			73,528
Cash and cash equivalents at end of period	$	24,692		$	27,437
Supplemental disclosure of cash flow information:
Cash paid for interest	$	130		$	—
Cash paid for income taxes, net	$	461		$	351

See accompanying notes to consolidated financial statements.

5

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

1. Basis of Presentation

The accompanying consolidated interim financial statements of CDI Corp. (“CDI” or “the Company”) are unaudited. The balance sheet as of December 31, 2010 is from the audited balance sheet of the Company at that date. These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to reports on Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended December 31, 2010, as included in the Company’s Form 10-K filed on March 10, 2011. The consolidated financial statements for the unaudited interim periods include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for such interim periods. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Certain prior period information has been reclassified to conform to the current period presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and the related underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, goodwill, intangible assets, other long-lived assets, legal contingencies and assumptions used in the calculations of income taxes. These estimates and assumptions are based on management’s judgment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. As future events and their effects cannot be determined with precision, actual results will differ, and could differ significantly, from these estimates. Results for the three and six months ended June 30, 2011 are not necessarily indicative of results that may be expected for the full year.

2. Recent Accounting Pronouncements

Effective January 1, 2012, the Company is required to adopt the provisions of Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) which requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement would present total net income and its components followed consecutively by a second statement that would present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2011, the Company adopted the provisions of ASU No. 2010-29, Business Combinations (“ASU 2010-29”), which specifies that if a public entity presents comparative financial statements, the entity should disclose the pro forma revenue and earnings of the combined entity as though the business combinations that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU 2010-29 also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of ASU 2010-29 did not have any impact on the Company’s consolidated financial statements.

Effective January 1, 2011, the Company adopted the provisions of ASU No. 2010-28, Intangibles—Goodwill and Other (“ASU 2010-28”), which prohibits entities to assume that Step 1 of the goodwill impairment test is passed if they have reporting units with zero or negative carrying amounts, and the fair values of their reporting units are greater than zero. Instead, companies are required to consider whether there are any adverse qualitative factors indicating that impairment may exist in order to determine whether or not to perform Step 2 of the goodwill impairment test. The adoption of ASU 2010-28 did not have any impact on the Company’s consolidated financial statements.

Effective January 1, 2011, the Company adopted the provisions of ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), which changes the requirements for establishing separate units of accounting in a multiple-element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (“VSOE”), if it is available; third-party evidence if VSOE is not

6

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

available; or an estimated selling price if neither VSOE nor third-party evidence is available. The adoption of ASU 2009-13 did not have a material impact on the Company’s consolidated financial statements.

3. Fair Value Disclosures

The Company is exposed to risks associated with foreign currency fluctuations. The Company’s exposure to foreign currency fluctuations relates primarily to its operations denominated in British pounds sterling and Canadian dollars. Exchange rate fluctuations impact the US dollar value of reported earnings derived from these foreign operations, as well as the Company’s investment in the net assets related to these operations. The Company has at times engaged, and may in the future engage, in hedging activities with respect to certain of its foreign operations.

The Company maintains a nonqualified Deferred Compensation Plan for highly compensated employees. The assets of the plan are held in the name of CDI at a third party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in publicly traded mutual funds. The fair value of the plan assets is calculated using the market price of the mutual funds as of the end of the period.

The following tables outline, by major category, the assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010:

		Unobservable Inputs		Unobservable Inputs		Unobservable Inputs		Unobservable Inputs
			Fair Value Measurements At June 30, 2011
Description	Fair Value Measurements at June 30, 2011		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Prepaid expenses and other current assets
Mutual funds included in deferred compensation plan(1)		$     733		$     733		$  —		$  —
Other non-current assets
Mutual funds included in deferred compensation plan(2)		7,837		7,837		—		—
Total assets		$  8,570		$  8,570		$  —		$  —

(1) Included in “Other accrued expenses and other current liabilities” in the consolidated balance sheet is a corresponding liability of the same amount reflecting balances owed to plan participants.

(2) Included in “Deferred compensation” in the consolidated balance sheet is a corresponding liability of the same amount reflecting balances owed to plan participants.

7

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

		Unobservable Inputs		Unobservable Inputs		Unobservable Inputs		Unobservable Inputs
			Fair Value Measurements At December 31, 2010
Description	Fair Value Measurements at December 31, 2010		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Prepaid expenses and other current assets
Mutual funds included in deferred compensation plan(1)		$     191		$     191		$  —		$  —
Other non-current assets
Mutual funds included in deferred compensation plan(2)		7,461		7,461		$  —		$  —
Total assets		$  7,652		$  7,652		$  —		$  —

(1) Included in “Other accrued expenses and other current liabilities” in the consolidated balance sheet is a corresponding liability of the same amount reflecting balances owed to plan participants.

(2) Included in “Deferred compensation” in the consolidated balance sheet is a corresponding liability of the same amount reflecting balances owed to plan participants.

4. Acquisitions

DSPCon

On December 20, 2010, the Company acquired substantially all of the assets and certain liabilities of DSPCon, Inc. (“DSPCon”), headquartered in Bridgewater, New Jersey. DSPCon is a systems engineering and software development firm that develops, sells and services real-time data acquisition and analysis systems for use in applications such as aircraft engine vibration, satellite airframe structural integrity and turbo-machinery performance monitoring. Pro forma information related to this acquisition is not included because the impact on the Company’s consolidated results of operations is not material.

As of December 31, 2010, the Company’s preliminary goodwill allocation was $5.3 million pending receipt of the final valuation report for identifiable intangible assets. As of June 30, 2011, the Company has retrospectively adjusted the purchase price allocation and reduced goodwill and increased identifiable intangible assets by $2.2 million. The acquired intangible assets, all of which are being amortized, include primarily customer relationships and software technology.

The fair value of the contingent consideration arrangement of $2.1 million was estimated and recorded as of December 31, 2010. That measure is based on significant inputs that are not observable in the market which qualify as significant unobservable inputs (Level 3) on the fair value hierarchy. Key assumptions include a discount rate of 6.2% and probability adjusted level of earnings before interest and taxes (as defined in the acquisition agreement). As of June 30, 2011, the amount recognized for the contingent consideration arrangement has not changed from December 31, 2010.

L. R. Kimball

On June 28, 2010,the Company acquired substantially all of the assets and certain liabilities of L. Robert Kimball & Associates, Inc. and two affiliated companies (collectively, “L.R. Kimball”), a professional services firm headquartered in Ebensburg, Pennsylvania. L.R. Kimball provides architecture, civil and environmental engineering, communication technology and consulting services to governmental, educational and private industry customers, primarily in the mid-Atlantic region. The acquisition broadened both the Company’s service offering portfolio and engineering skill sets. A new vertical, CDI – Infrastructure was established within the ES reporting segment as a result of this acquisition.

Included in the consolidated statements of operations for the three and six months ended June 30, 2011 was revenue from L.R. Kimball of $13.4 million and $26.7 million, respectively. Included in the consolidated statements of operations for the three and six months ended June 30, 2011 was earnings before income taxes from L.R. Kimball of $0.5 million and $1.1 million, respectively.

8

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

The unaudited condensed pro forma consolidated statements of operations for the three and six months ended June 30, 2010 (assuming the acquisition of L.R. Kimball had occurred as of the beginning of the fiscal period presented) was as follows:

		Three Months Ended		Three Months Ended
	Three Months Ended		Six Months Ended
	June 30, 2010		June 30, 2010
Revenue		$  235,193		$  459,878
Net income attributable to CDI		1,694		643
Net earnings per share attributable to CDI
Basic		0.09		0.03
Diluted		0.09		0.03

5. Goodwill and Other Intangible Assets

The following table summarizes the changes in the Company’s carrying value of goodwill and other intangible assets by reporting segment from December 31, 2010 to June 30, 2011:

		December 31, 2010		December 31, 2010		December 31, 2010			December 31, 2010		December 31, 2010
	December 31, 2010 Net Balance		Additions		Amortization			Translation and Other      Adjustments		June 30, 2011     Net Balance
Goodwill
ES		$  40,832		$  290		$   —			$    58		$  41,180
Anders(1)		10,670		—		—			357		11,027
MRI		9,552		—		—			80		9,632
Total goodwill		61,054		290		—			495		61,839
Other intangible assets
Trademarks
MRI		2,165		—		—			—		2,165
ES(2)		100		—		(17	)		—		83
ES - indefinite life		5,100									5,100
Total trademarks		7,365		—		(17	)		—		7,348
Reacquired franchise rights - MRI(3)		489		47		(29	)		—		507
Customer relationships - ES(4)		10,571		—		(574	)		—		9,998
Developed Technology - ES(5)		460		—		(46	)		—		414
Non-compete agreements - ES(4)		135		—		(15	)		—		120
Total other intangible assets		19,020		47		(681	)		—		18,386
Total goodwill and other intangible assets		$  80,074		$  337		$  (681	)		$  495		$  80,225

(1) The Anders net goodwill balance at June 30, 2011 reflects an impairment charge of $8,312 which was taken in 2010.

(2) The ES trademark balance at June 30, 2011 includes accumulated amortization of $17.

(3) The MRI net reacquired franchise rights balance at June 30, 2011 includes accumulated amortization of $76.

(4) The ES net customer relationship and non-compete agreements balances at June 30, 2011 includes accumulated amortization of $1,962 and $30, respectively.

(5) The ES developed technology balance at June 30, 2011 includes accumulated amortization of $46.

Goodwill is reviewed at least annually for impairment by comparing the fair value of each reporting unit with its carrying value (including attributable goodwill). The estimated fair value for each reporting units is calculated based on the average of the projected discounted cash flows and the estimated market value of each reporting unit at the date the Company performs the impairment tests (implied fair value). Inherent in the development of the discounted cash flow projections are assumptions and estimates derived from a review of expected revenue growth rates, profit margins, business plans, cost of capital and tax rates. The Company also makes

9

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

certain assumptions about the future market conditions the reporting units operate in, market prices, interest rates and changes in business strategies.

During the fourth quarter of 2010, the Company’s Anders reporting unit experienced the impact of additional deterioration in the UK economic environment, specifically in the UK construction industry, which has historically been the concentration of services provided by Anders. As a result of this triggering event, the Company determined that it was necessary to perform an impairment test for Anders. The result of this test determined that the carrying value for the Anders reporting unit exceeded the fair value, which resulted in a goodwill impairment charge of $8.3 million for the fourth quarter of 2010. There were no triggering events subsequent to December 31, 2010 that required additional testing for the Anders reporting unit.

Effective July 1, 2010, the Company performed its annual impairment testing. Based on the results of the first step of the impairment test, the Company determined that there was no impairment of goodwill or other indefinite-lived intangible assets. The Company’s reporting units, with the exception of Infrastructure which was recorded at fair value on the acquisition date of June 28, 2010, had fair values substantially in excess of their carrying value after completion of the first step. The two reporting units with the lowest excess were Aerospace and P&I. The Aerospace reporting unit had a fair value in excess of its carrying value of approximately 18% and goodwill of $7.0 million. Aerospace’s fair value in excess was negatively affected by the slowdown in the commercial aviation industry. The P&I reporting unit had a fair value in excess of its carrying value of approximately 19% and goodwill of $12.7 million. P&I’s fair value in excess was negatively affected by the significant reduction in capital projects, due to the reduced demand in the chemical industry.

There were no triggering events subsequent to July 1, 2010 that required additional testing for reporting units other than Anders.

6. Short-term Borrowings

On October 29, 2010, the Company and its wholly-owned subsidiary, CDI Corporation, entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (the “Bank”). The Credit Agreement established a $35.0 million revolving line of credit facility. This is a short-term credit facility, the term of which ends on October 28, 2011. Borrowings under this line of credit may be used by the Company for general business purposes or for letters of credit.

The Company’s obligations under the Credit Agreement are guaranteed by two indirect subsidiaries of the Company: Management Recruiters International, Inc. and MRI Contract Staffing, Inc. The Bank was granted a security interest in nearly all of the assets of the two borrowing companies and the two guarantors (the “Loan Parties”), as collateral for borrowings under the facility. The Loan Parties also pledged the stock of various subsidiary companies to the Bank, as additional security for any borrowings.

Interest on borrowings under the facility is based on either a Eurodollar rate or an “Alternate Base Rate”, as chosen by the Company each time it wishes to borrow funds. The Eurodollar rate equals LIBOR (as set forth in the Credit Agreement) plus a number of basis points (ranging from 2.25% to 2.75%) depending on the Company’s leverage ratio (which is the ratio of consolidated indebtedness to Consolidated EBITDA, as defined in the Credit Agreement). The Alternate Base Rate equals the greater of (i) the Bank’s prime rate, (ii) the Federal Funds rate plus 0.5% or (iii) the one-month LIBOR plus 1%. Any Eurodollar-based borrowings must be in minimum principal amounts of $2.0 million and in increments of $0.1 million and any Alternate Base Rate borrowings must be in minimum principal amounts of $0.1 million and in increments of $0.1 million. Fees associated with the facility include a commitment fee of $30 thousand and a facility fee at the rate of 0.25% to 0.375% on the daily amount of the Bank’s commitment.

The Credit Agreement contains restrictive covenants which limit the Company with respect to, among other things, creating liens on its assets, subsidiary indebtedness, acquisitions and investments, mergers and consolidations, dividends, stock repurchases, disposition of assets other than in the ordinary course of business, and changing its line of business. The Credit Agreement also contains financial covenants which require the Company not to exceed a maximum leverage ratio (consolidated indebtedness to Consolidated EBITDA) of 2.5 to 1.0, to maintain a minimum fixed charge coverage ratio of 1.2 to 1.0, and to maintain a minimum liquidity balance (unrestricted cash and cash equivalents plus the amount of the unused credit line) of $20.0 million. The preceding financial covenant terms are as defined in the Credit Agreement. The Company was in compliance with all covenants under the Credit Agreement as of June 30, 2011.

At June 30, 2011, the Company had outstanding borrowings of $19.2 million under the Credit Agreement, with a weighted average interest rate of 3.25%, which were borrowed under the Alternate Base Rate option.

10

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

Additionally, the Company had a $10.2 million uncommitted, demand unsecured line of credit with Brown Brothers Harriman & Co., under which the lender issued, at its sole discretion, standby letters of credit. This line of credit expired as of March 31, 2011, and the outstanding standby letters of credit were replaced with letters of credit issued under the Credit Agreement. The total value of letters of credit as of June 30, 2011 was $4.2 million.

7. Earnings Per Share Attributable to CDI

Both basic and diluted earnings attributable to CDI per share for all periods are calculated based on the reported earnings attributable to CDI in the Company’s consolidated statements of operations.

The number of common shares used to calculate basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010 was determined as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Basic net earnings per share:
Net earnings available to common stockholders - basic	$	11,982	$	2,590	$	12,676	$	2,399
Basic weighted average shares		19,145,088		19,011,939		19,113,862		18,995,707
Basic net earnings per share	$	0.62	$	0.14	$	0.66	$	0.13
Diluted net earnings per share:
Net earnings available to common stockholders - diluted	$	11,982	$	2,590	$	12,676	$	2,399
Basic weighted average shares		19,145,088		19,011,939		19,113,862		18,995,707
Dilutive effect of stock based compensation awards		202,961		229,511		223,719		198,892
Diluted weighted average shares		19,348,049		19,241,450		19,337,581		19,194,599
Diluted net earnings per share	$	0.62	$	0.13	$	0.66	$	0.12

Outstanding awards granted under both the CDI Corp. 2004 Omnibus Stock Plan (the “Omnibus Plan”) and the CDI Corp. Stock Purchase Plan for Management Employees and Non-Employee Directors (the “Stock Purchase Plan”) of 706,600 and 813,292 shares were excluded from the computation of EPS for the three months ended June 30, 2011 and 2010, respectively, because their effect would have been anti-dilutive. Outstanding awards granted under both the Omnibus Plan and the Stock Purchase Plan of 1,450,656 and 890,900 shares were excluded from the computation of EPS for the six months ended June 30, 2011 and 2010, respectively, because their effect would have been anti-dilutive.

8. Commitments, Contingencies and Legal Proceedings

Commitments

The Company maintains a global master agreement with a large on-line job posting and search service for the benefit of its operating segments and MRI franchise network. At June 30, 2011, the aggregate minimum payments remaining for 2011 were $0.1 million, and commitments to pay $1.5 million in 2012 and $1.5 million in 2013.

Contingencies

On April 1, 2011 the Company received a favorable ruling from the Competition Appeal Tribunal (“CAT”) on the Company’s appeal of the previously disclosed imposed fine by the United Kingdom’s Office of Fair Trading (“OFT”), reducing the fine from $12.3 million (£7.6 million) to $2.5 million (£1.5 million). On May 24, 2011, the OFT indicated that it would not appeal the CAT’s ruling. As a result, the Company reduced the reserve by $9.7 million during the second quarter of 2011 and this reduction was reflected in “Operating and administrative expenses” in the consolidated statements of operations for the three and six months ended June 30, 2011. The Company paid the fine (including accumulated interest) of $2.5 million (£1.6 million) on July 7, 2011. The reserve of $2.5 million (£1.5 million) and $12.3 million (£7.6 million) was included in “Other accrued expenses and other current liabilities” in the consolidated balance sheets at June 30, 2011 and December 31, 2010, respectively.

11

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

Legal Proceedings

The Company has litigation and other claims pending which have arisen in the ordinary course of business. Management believes there are substantive defenses and/or insurance and specific accounting reserves established such that the outcome of these pending matters should not have a material adverse effect on the business, financial condition or results of operations of the Company.

9. Income Taxes

The Company calculates an effective income tax rate each quarter based upon forecasted annual income by jurisdiction, statutory tax rates and other tax-related items. The impact of discrete items is recognized in the interim period in which they occur.

The effective tax rates for the three months ended June 30, 2011 and 2010 were 11.6% and 14.0%, respectively, and for the six months ended June 30, 2011 and 2010 were 21.7% and 27.7%, respectively. The effective income tax rate for the 2011 periods was favorably impacted primarily by a reduction in the reserve for the United Kingdom’s Office of Fair Trading (“OFT”) matter (see Note 8 – Commitments, Contingencies and Legal Proceedings), which is not taxable, partially offset by adjustments to deferred tax assets and related tax expense for previously issued and unexercised stock options that expired during the respective periods. Additionally, the rate was unfavorably impacted for the 2011 periods by provisions for state and foreign taxes and projected losses in foreign jurisdictions on which no tax benefit had been recognized or on which the tax benefit was recognized at tax rates lower than the US rate. The income tax rate for the 2010 periods was favorably impacted primarily by a reduction in the reserve for a previously disclosed legal settlement in June 2010, which was largely not taxable.

10. Reporting Segments

The Company has four reporting segments: CDI Engineering Solutions (“ES”), CDI Information Technology Solutions (“ITS”), Management Recruiters International (“MRI”), and CDI AndersElite (“Anders”).

ES operates principally through the following four key verticals:

• CDI-Process and Industrial (“P & I”) – P & I provides a full range of engineering, design, project management, professional staffing, managed staffing and outsourcing solutions to firms in oil, gas, refining, alternative energy, power generation and energy transmission, nuclear, chemicals and heavy manufacturing industries. In addition, P & I offers facility design, project management, engineering, professional staffing and facility start-up services to customers in the pharmaceutical, bio-pharmaceutical and regulated medical services industries.

• CDI-Government Services (“Government Services”) – Government Services provides a full range of engineering, design and logistics services to the defense industry, particularly in marine design, systems development and military aviation support.

• CDI-Aerospace (“Aerospace”) – Aerospace provides a full range of engineering, design, project management, systems development, professional staffing and outsourcing solutions to both the commercial and military aerospace markets.

• CDI-Infrastructure (“Infrastructure”) – Infrastructure provides a full range of architecture, civil and environmental engineering, communication technology and consulting services to governmental, educational and private industry customers, primarily in the mid-Atlantic region.

ITS provides a variety of information technology (“IT”) related services to its customers, which are primarily large and mid-sized customers with significant IT requirements and/or the need to augment their own staff on a flexible basis. Services include staffing augmentation, permanent placement, outsourcing (both onsite, under the customer’s supervision, and offsite) and consulting.

MRI is a global franchisor operating as MRINetwork^® and provides the use of its trademarks, business systems and training and support services to its franchisees who engage in the search and recruitment of executive, technical, professional and managerial personnel for employment by their customers. The MRI franchisees provide permanent placement services primarily under the brand

12

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

names Management Recruiters^®, Sales Consultants^®, CompuSearch^® and OfficeMates 5^®. MRI also provides training, implementation services and back-office services to enable franchisees to pursue staffing opportunities.

Anders provides contract and permanent placement candidates to customers in the infrastructure environment seeking professionals in building, construction and related professional services through a network of Company offices. Anders maintains offices in the UK and Australia.

For purposes of performance measurement, the Company charges certain expenses directly attributable to the reporting segments and allocates certain expenses and support costs. Support costs consist principally of employee benefit administration, accounting support, IT services and shared service center costs. Operating and administrative expenses that are not directly attributable to the reporting segments are classified as corporate. Identifiable assets of the reporting segments exclude corporate assets, which principally consist of cash and certain prepaid expenses, non-trade accounts receivable, deferred tax assets attributable to the ES and ITS reporting segments, property and equipment and other assets.

Segment data is presented in the following table:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenue:
ES	$	140,112		$	110,197		$	277,898		$	219,901
ITS		90,747			76,747			180,171			141,069
MRI		17,400			15,108			33,099			29,470
Anders		14,480			16,930			28,207			38,482
	$	262,739		$	218,982		$	519,375		$	428,922
Operating profit (loss):
ES	$	4,140		$	3,094		$	7,559		$	4,564
ITS		3,521			2,866			6,981			4,662
MRI		2,240			1,755			3,801			3,186
Anders(1)		9,316			(879	)		8,419			(1,334	)
Corporate		(5,513	)		(3,685	)		(10,303	)		(7,663	)
		13,704			3,151			16,457			3,415
Less equity in losses from affiliated companies		—			417			—			768
Total operating profit		13,704			3,568			16,457			4,183
Other expense, net		(116	)		(130	)		(159	)		(78	)
Equity in losses from affiliated companies		—			(417	)		—			(768	)
Earnings before income taxes	$	13,588		$	3,021		$	16,298		$	3,337

(1) Includes reduction of OFT fine by $9.7 million (£6.0 million) during the second quarter of 2011 (originally recorded in the third quarter of 2009). See Note 8 - Commitments, Contingencies and Legal Proceedings.

Inter-segment activity is not significant; therefore, revenue reported for each operating segment is substantially all from external customers.

Revenue from one customer, International Business Machine Corporation (IBM), accounted for 20% of total CDI consolidated revenue for the fiscal year ended December 31, 2010. The Company’s current contract with IBM has been extended from its original term expiring on July 1, 2011 to a new expiration date of October 1, 2011.

13

CDI CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

Segment asset data is presented in the table below:

	June 30,		December 31,
	2011		2010
Assets:
ES	$	188,480	$	177,009
ITS		95,977		98,364
MRI		26,819		26,698
Anders		25,456		24,581
Corporate		67,594		71,859
	$	404,326	$	398,511

14

CDI CORP. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Amounts in thousands, except share and per share amounts, unless otherwise indicated)

(Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Concerning Forward-Looking Statements

This report (including Management’s Discussion and Analysis of Financial Condition and Results of Operations) 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, but not limited to, statements about our strategies for growth and future financial results (such as revenue, operating profit, cash flow and tax rate), are forward-looking statements. Some of the forward-looking statements can be identified by words like “anticipates,” “believes,” “expects,” “may,” “will,” “could,” “should,” “intends,” “plans,” “estimates” and similar references to future periods. 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 these forward-looking statements include, but are not limited to: weakness in general economic conditions and levels of capital spending by customers in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our customers’ capital projects or the inability of our customers to pay our fees; the termination of a major customer contract or project; credit risks associated with our customers; competitive market pressures; the availability and cost of qualified labor; our level of success in attracting, training, and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our temporary employees; our performance on customer contracts; negative outcome of pending and future claims and litigation; and government policies, legislation or judicial decisions adverse to our businesses. More detailed information about some of these and other risks and uncertainties may be found in our filings with the SEC, particularly in the “Risk Factors” section in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. 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, except as required by law.

Unless the context otherwise requires, all references herein to “CDI,” “the Registrant,” “the Company,” “we,” “us” or “our” are to CDI Corp. and its consolidated subsidiaries.

Executive Overview

Demand for the Company’s contract staffing services, permanent placement services and project engineering services is largely dependent on overall economic conditions as measured by unemployment rates, GDP growth and capital spending plans by clients in the Company’s vertical industries. Results for the quarter ended June 30, 2011 were generally positively impacted by moderately improving economic conditions, but these drivers are still characterized by higher unemployment and slower GDP growth than in previous post-recessionary periods.

On a year-over-year basis, the Company’s second quarter revenue increased 20.0%, including revenue of $13.4 million from the L.R. Kimball business acquired in June 2010. Excluding the L.R. Kimball business, overall CDI revenue in the second quarter increased 14.2% versus the prior-year quarter.

This increased revenue primarily reflects increases in demand for skilled contract workers in the Company’s Engineering Solutions (ES) verticals, larger accounts in the Company’s IT Solutions (ITS) segment and in the Company’s Management Recruiters International, Inc. (MRI) segment. Additionally, increases in engineering projects were driven by business from the recently acquired L.R. Kimball business and increased spending by customers in the Aerospace and Process and Industrial (P&I) verticals.

The Company’s ES segment’s second quarter revenue increased 27.1% versus the prior-year second quarter. Excluding revenue from the L.R. Kimball business (Infrastructure vertical), year-over-year revenue increased 15.7% due primarily to increased demand for skilled contract workers in the Process & Industrial (P&I) vertical as well as by increased project work in the Aerospace vertical and increases in permanent placement demand.

15

• P&I revenue increased 20.6% versus the prior-year second quarter driven primarily by staffing services increases in the power, energy and transportation sectors as well as by increases in project engineering services in the specialty chemical sector.

• Aerospace revenue increased 22.3% versus the prior-year second quarter, driven primarily by revenue associated with the Company’s acquisition of DSPCon and by increases in turbine engine design projects.

• Government Services revenue decreased 7.5% compared to the prior-year second quarter reflecting the lack of funding by the US Department of Defense for certain projects.

• Infrastructure revenue increased 1.5% in the second quarter 2011 compared to the first quarter 2011 due to normal increase in seasonality patterns, offset by decreases in state and local government spending for road, school and other civil infrastructure projects.

The Company’s ITS segment revenue increased 18.2% in the second quarter compared to the prior year second quarter primarily due to increased staffing demand in larger accounts, somewhat offset by decreases in IT project revenue.

Revenue in the Company’s MRI segment increased 15.2% in the second quarter when compared to the prior year second quarter driven primarily by increases in contract staffing revenues and also by increases in royalties.

Revenue in the Company’s AndersElite (Anders) segment decreased 14.5% in the second quarter versus the prior year second quarter reflecting the continued impact of a weak UK construction market and contraction in Anders’ transportation sector. Revenue has been affected by weak economic recovery in the UK and significant cuts in government spending.

The Company’s total consolidated gross profit for the second quarter increased by $12.3 million or 27.4% versus the prior year second quarter primarily due to higher revenue. Gross profit margins increased to 21.7% of revenue for the second quarter of 2011 versus 20.4% of revenue in the prior year second quarter, due to a change in services mix with higher margin projects becoming a larger portion of total revenue.

For the quarter ended June 30, 2011, the Company reported net income of $12.0 million or $0.62 per diluted share versus net income of $2.6 million, or $0.13 per diluted share in the prior year second quarter. Second quarter 2011 earnings include a non-taxable benefit of $9.7 million related to a previously disclosed successful appeal of the level of fine imposed by the United Kingdom’s Office of Fair Trading (OFT) in September 2009. The Company had previously recorded a charge to earnings in the full amount of the fine. This successful appeal had a positive impact of $0.50 per diluted share in the second quarter 2011. Second quarter 2011 pre-tax earnings also includes expenses of $0.7 million associated with severance payments for senior-level executives. These expenses had a negative impact of $0.02 per diluted share in the second quarter 2011. Second quarter 2010 pre-tax earnings included a benefit of $1.8 million, or $0.09 per diluted share, associated with a previously-disclosed legal settlement.

Revenue from one customer, International Business Machine Corporation (IBM), accounted for 20% of total CDI consolidated revenue for the fiscal year ended December 31, 2010. The Company’s current contract with IBM has been extended from its original term expiring on July 1, 2011 to a new expiration date of October 1, 2011.

Consolidated Discussion

Business Strategy

CDI’s strategic objective is to be a leading global provider of engineering and information technology (“IT”) outsourcing solutions and professional staffing. These services enable CDI’s customers to focus on their core competencies and drive profitable growth and return on capital investment.

The Company’s strategic plan includes: increasing revenues in higher-value, higher-margin services through both organic and acquisitive growth; increasing the share of revenue generated from global markets; creating a more balanced business portfolio and promoting a culture focused on meeting customers’ needs with disciplined execution to achieve profitable growth.

Key Performance Indicators

The Company assesses its performance by monitoring a number of key performance indicators, which include revenue, gross profit dollars, gross profit margin, operating profit, operating profit margin, pre-tax profit, return on net assets and earnings per share.

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Revenue is impacted by, among other things, levels of capital spending by customers, particularly in the ES and Anders business segments. Other external factors, such as the general business environment and employment levels, impact the Company’s staffing business. Economic growth or decline typically impacts the demand for labor.

Gross profit dollars and gross profit margin reflect CDI’s ability to realize pricing consistent with value provided, to address changes in market demand and to control and pass through direct costs. Gross profit margin will shift as a result of the mix of business. The Company is focused on improving margins through efforts to grow new higher-margin business and to cycle out of lower-margin business. Professional services revenue, consisting of royalties, permanent placement fees and franchise related fees, has a significant impact on gross profit margin. Since there are generally no direct costs associated with professional services revenue, increases or decreases in such revenue can have a disproportionate impact on gross profit margin.

Operating profit is gross profit less operating and administrative expenses. Operating profit margin reflects the Company’s ability to adjust overhead costs to changing business volumes.

Pre-tax profit is operating profit less other income/expenses, net of adjustments for equity in income/losses from affiliated companies.

Return on net assets (“RONA”) reflects CDI’s ability to generate earnings while optimizing assets deployed in the business. RONA is calculated as the pre-tax earnings for the current quarter and preceding three quarters, divided by the average net assets at the beginning and end of that four quarter period. Net assets include total assets minus total liabilities excluding cash and cash equivalents and income tax accounts. A key driver of RONA is the Company’s ability to manage its accounts receivable, its largest asset.

Consolidated Results of Operations for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010

The table that follows presents changes in revenue by service type along with selected financial information and some key metrics for the three months ended June 30, 2011 and 2010:

		57.50			57.50			57.50			57.50			57.50		57.50
	Three months ended
	June 30,												Increase (Decrease)
(in thousands)	2011			% of Total Revenue			2010			% of Total Revenue			$		%
Revenue
Staffing services	$	185,324			70.5	%	$	159,334			72.8	%	$	25,990		16.3	%
Project outsourcing services		70,986			27.0			54,346			24.8			16,640		30.6
Professional services		6,429			2.5			5,302			2.4			1,127		21.3
	$	262,739			100.0	%	$	218,982			100.0	%	$	43,757		20.0	%
Gross profit	$	56,960			21.7	%	$	44,703			20.4	%	$	12,257		27.4	%
Operating and administrative expenses		43,256			16.5			41,135			18.8			2,121		5.2
Operating profit		13,704			5.2			3,568			1.6			10,136		284.1
Net income attributable to CDI	$	11,982			4.6	%	$	2,590			1.2	%	$	9,392		362.6	%
Cash flow (used in) provided by operations	$	(2,246	)				$	(10,981	)				$	8,735		79.5	%
Effective income tax rate		11.6	%					14.0	%
After-tax return on shareholders’ equity(1)		(0.2	)%					(5.9	)%
Pre-tax return on net assets(2)		4.0	%					(7.1	)%

(1) Net income (loss) attributable to CDI for the current quarter combined with the income (loss) attributable to CDI from the three preceding quarters, divided by the average CDI shareholders’ equity at the beginning and end of that four quarter period.

(2) Earnings (loss) before income taxes for the current quarter combined with the earnings (loss) before income taxes from the three preceding quarters, divided by the average net assets at the beginning and end of that four quarter period. Net assets include total assets minus total liabilities excluding cash and cash equivalents and income tax accounts.

Revenue increased 20.0% for the second quarter of 2011 as compared to the second quarter of 2010. ES experienced increases in staffing services in the energy sector, oil and gas and transportation industries. ES outsourcing revenue increased primarily as a result

17

of the L.R. Kimball and DSPCon acquisitions. ITS experienced increased staffing services revenue, primarily due to larger accounts. MRI experienced growth in staffing revenue and increases in royalties. These increases in revenue were partially offset by decreases in Anders’ staffing services revenue primarily due to continued weak demand in the UK construction industry and deterioration in Anders’ transportation business.

During the second quarter of 2011 all four segments increased their professional services revenue compared to the second quarter of 2010 due to a moderate increase in permanent placement opportunities in sectors that the Company focuses on.

Gross profit increased by 27.4% for the second quarter of 2011 when compared to the second quarter of 2010 primarily due to the increase in revenue.Gross profit margin increased from 20.4% to 21.7% in the second quarter of 2011 when compared to the second quarter of 2010 primarily due to change in the mix of business with higher-margin projects in the Infrastructure (L.R. Kimball business), Aerospace and P&I verticals increasing as a percentage of total revenue.

Operating and administrative expenses were $43.3 million compared to $41.1 million in the prior year second quarter. Second quarter 2011 operating and administrative expenses include the OFT fine reduction of $9.7 million. Additionally second quarter 2010 operating and administrative costs include a previously disclosed $1.8 million credit related to a favorable legal settlement. Excluding those items, operating and administrative expenses are up $10 million or 23.3%, more than half of which is from the inclusion of Kimball’s results this quarter. Excluding operating and administrative expenses associated with the Kimball business, operating and administrative expenses as a percentage of revenue decreased to 18.7% from 19.6% in the prior-year, representing operating efficiencies at the higher level revenue run rates.

Operating profit increased by $10.1 million for the second quarter of 2011 when compared to the second quarter of 2010. Excluding the effect of the legal settlements in 2011 and 2010, operating profit increased by $2.2 million during the second quarter of 2011 as compared to the second quarter of 2010 due primarily to increases in revenues, partially offset by increases in personnel related costs required to support the higher volume of revenue, and severance payments to senior level executives totaling $0.7 million.

The Company’s effective income tax rate was 11.6% for the second quarter of 2011 as compared to 14.0% for the second quarter of 2010. The effective income tax rate for 2011 was favorably impacted primarily by the reduction in the reserve for the OFT matter, which is not taxable, partially offset by adjustments to deferred tax assets and related tax expense for previously issued and unexercised stock options that expired during the period. The income tax rate in 2010 was favorably impacted by the effect of the reduction in the reserve for the previously disclosed legal settlement in June 2010, which was largely non-taxable, partially offset by adjustments to deferred tax assets and related tax expense for previously issued and unexercised stock options that expired during the period, as well as other valuation differences for stock awards.

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Consolidated Results of Operations for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010

The table that follows presents changes in revenue by service type along with selected financial information and some key metrics for the six months ended June 30, 2011 and 2010:

		57.50			57.50			57.50			57.50			57.50		57.50
	Six months ended June 30,												Increase (Decrease)
(in thousands)	2011			% of Total Revenue			2010			% of Total Revenue			$		%
Revenue
Staffing services	$	366,722			70.6	%	$	310,154			72.3	%	$	56,568		18.2	%
Project outsourcing services		140,431			27.0			108,240			25.2			32,191		29.7
Professional services		12,222			2.4			10,528			2.5			1,694		16.1
	$	519,375			100.0	%	$	428,922			100.0	%	$	90,453		21.1	%
Gross profit	$	111,290			21.4	%	$	86,210			20.1	%	$	25,080		29.1	%
Operating and administrative expenses		94,833			18.3			82,027			19.1			12,806		15.6
Operating profit		16,457			3.2			4,183			1.0			12,274		293.4
Net income attributable to CDI	$	12,676			2.4	%	$	2,399			0.6	%	$	10,277		428.4	%
Cash flow (used in) provided by operations	$	(702	)				$	(2,357	)				$	1,655		70.2	%
Effective income tax rate		21.7	%					27.7	%

Revenue increased 21.1% for the first six months of 2011 as compared to the first six months of 2010. ES experienced increases in staffing services in the energy sector, Canadian oil and gas and industrial accounts. ES project engineering revenue increased primarily as a result of the acquired L.R. Kimball and DSPCon businesses. ITS experienced increased staffing services revenue, primarily due to account expansions with larger accounts. MRI also experienced growth in staffing revenue, due to franchisees continuing to grow their staffing services. These increases in revenue were partially offset by decreases in Anders’ staffing services revenue primarily due to continued weak demand in the UK construction industry and deterioration in Anders’ transportation business.

During the first six months of 2011 all four segments increased their professional services revenue compared to the first six months of 2010 due to a moderate increase in permanent placement opportunities in sectors focused on by the Company.

Gross profit increased by 29.1% for the first six months of 2011 when compared to the first six months of 2010 primarily due to the increase in revenue.Gross profit margin increased from 20.1% to 21.4% in the first six months of 2011 when compared to the first six months of 2010 primarily due to change in the mix of business with higher-margin projects in the Infrastructure, Aerospace and P&I verticals of ES increasing as a percentage of total revenue.

Operating and administrative expenses for the first six months of 2011 were $94.8 million compared to $82.0 million in the first six months of 2010. Operating and administrative expenses include the OFT fine reduction of $9.7 million for the first six months of 2011. Additionally the first six months of 2010 operating and administrative costs include a previously disclosed $1.8 million credit related to a favorable legal settlement. Excluding those items, operating and administrative expenses are up $20.7 million or 24.7%, more than one-third of which is from the inclusion of Kimball’s results for the six months of 2011. Excluding operating and administrative expenses associated with the Kimball business, operating and administrative expenses, as a percentage of revenue decreased to 18.5% for the first six months of 2011 from 19.5% in the prior-year period, representing operating efficiencies at the higher level revenue run rates.

Operating profit increased by $12.3 million for the first six months of 2011 when compared to the first six months of 2010. Excluding the effect of the legal settlements in 2011 and 2010, operating profit increased by $4.4 million during the first six months of 2011 as compared to the first six months of 2010 due primarily to increases in revenues, partially offset by increases in personnel related costs required to support the higher volume of revenue, and severance payments to senior level executives totaling $0.7 million.

The Company’s effective income tax rate was 21.7% for the first six months of 2011 as compared to 27.7% for the first six months of 2010. The effective income tax rate for 2011 was favorably impacted primarily by the reduction in the reserve for the OFT matter, which is not taxable, partially offset by adjustments to deferred tax assets and related tax expense for previously issued and unexercised stock options that expired during the period. The income tax rate in 2010 was favorably impacted by the effect of the reduction in the recorded reserve for the previously disclosed legal settlement in June 2010, which was non-taxable, partially offset by adjustments to deferred tax assets and related tax expense for previously issued and unexercised stock options that expired during the period, as well as other valuation differences for stock awards.

19

Segment Discussion

ES

Results of Operations

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating profit for ES for the three months ended June 30, 2011 and 2010:

		52.50		52.50			52.50		52.50			52.50		52.50
	Three months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$		%
Revenue
Staffing services	$	75,960		54.2	%	$	63,398		57.6	%	$	12,562		19.8	%
Project outsourcing services		63,475		45.3			46,542		42.2			16,933		36.4
Professional services		677		0.5			257		0.2			420		163.4
		140,112		100.0			110,197		100.0			29,915		27.1
Cost of services		109,391		78.1			89,822		81.5			19,569		21.8
Gross profit		30,721		21.9			20,375		18.5			10,346		50.8
Operating and administrative expenses		26,581		19.0			17,281		15.7			9,300		53.8
Operating profit	$	4,140		2.9	%	$	3,094		2.8	%	$	1,046		33.8	%

ES’s revenue increased during the second quarter of 2011 as compared to the second quarter of 2010 primarily due to:

• Increases in revenue related to the acquisitions in the Infrastructure and Aerospace verticals and project engineering increases in our U.S. Gulf Coast operations in the chemical industry, and

• Increases in staffing services in the energy sector, Canadian oil and gas and industrial accounts.

ES’s gross profit dollars increased for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to the increase in revenue. Gross profit margin increased primarily due to change in the mix of business with higher-margin projects in the Infrastructure, Aerospace and P&I verticals increasing as a percentage of total revenue.

ES’s operating and administrative expenses increased by $9.3 million for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to operating expenses associated with L.R. Kimball and DSPCon. Additionally, the operating and administrative expenses for the second quarter of 2010 also reflect the pre-tax gain of $1.8 million associated with a reduction in the reserve recorded for the previously disclosed legal settlement in June 2010. Excluding the effect of this gain, operating and administrative expenses increased by $7.5 million for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to expenses associated with L.R. Kimball and DSPCon, and increases in variable personnel costs required to support the increased business volume.

ES’s operating profit increased by $1.0 million for the second quarter of 2011 as compared to the second quarter of 2010. Excluding the effect of the gain described above, operating profit increased by $2.8 million primarily due to the increase in revenue and increase in higher-margin project work in the Infrastructure (L.R. Kimball), Aerospace and P&I verticals.

20

The following table presents changes in revenue for each of ES’s verticals for the three months ended June 30, 2011 and 2010:

		57.50		57.50			57.50		57.50			57.50			57.50
	Three months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
CDI-P & I	$	93,407		66.6	%	$	77,476		70.3	%	$	15,931			20.6	%
CDI-Government Services		18,308		13.1			19,801		18.0			(1,493	)		(7.5	)
CDI-Aerospace		14,954		10.7			12,227		11.1			2,727			22.3
CDI-Infrastructure		13,443		9.6			693		0.6			12,750			NM
	$	140,112		100.0	%	$	110,197		100.0	%	$	29,915			27.2	%

NM – not meaningful.

Revenue in the P & I vertical increased in the second quarter of 2011 as compared to the second quarter of 2010 due primarily to increases in staffing services in the energy sector, Canadian oil and gas and industrial accounts and project engineering increases in our U.S. Gulf Coast operations in the chemical industry.

Revenue in the Government Services vertical decreased in the second quarter of 2011 as compared to the second quarter of 2010 primarily due to the lack of funding by the U.S. Department of Defense for certain projects.

Revenue in the Aerospace vertical increased in the second quarter of 2011 as compared to the second quarter of 2010 primarily due to the addition of the DSPCon business in December of 2010.

The Infrastructure vertical was added to the ES business segment in the second quarter of 2010 with the June 28, 2010 purchase of substantially all of the assets and certain liabilities of L.R. Kimball. The revenues for the second quarter of 2011 reflect the revenues of L.R. Kimball for the full quarter while the revenues for the second quarter of 2010 only include revenues from June 28, 2010 to June 30, 2010.

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating profit for ES for the six months ended June 30, 2011 and 2010:

		57.50		57.50			57.50		57.50			57.50		57.50
	Six months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$		%
Revenue
Staffing services	$	151,273		54.4	%	$	126,228		57.4	%	$	25,045		19.8	%
Project outsourcing services		125,352		45.1			93,127		42.4			32,225		34.6
Professional services		1,273		0.5			546		0.2			727		133.2
		277,898		100.0			219,901		100.0			57,997		26.4
Cost of services		217,518		78.3			180,099		81.9			37,419		20.8
Gross profit		60,380		21.7			39,802		18.1			20,578		51.7
Operating and administrative expenses		52,821		19.0			35,238		16.0			17,583		49.9
Operating profit	$	7,559		2.7	%	$	4,564		2.1	%	$	2,995		65.6	%

ES’s revenue increased for the first six months of 2011 as compared to the first six months of 2010 primarily due to:

• Increases in revenue related to the acquisitions in the Infrastructure and Aerospace verticals and project engineering increases in our U.S. Gulf Coast operations in the chemical industry, and

21

• Increases in staffing services in the energy sector, Canadian oil and gas and industrial accounts.

ES’s gross profit dollars increased during the first six months of 2011 as compared to the first six months of 2010 primarily due to the increase in revenue. Gross profit margin increased primarily due to change in the mix of business with higher-margin projects in the Infrastructure, Aerospace and P&I verticals increasing as a percentage of total revenue.

ES’s operating and administrative expenses increased by $17.6 million for the first six months of 2011 as compared to the first six months of 2010. Additionally, the operating and administrative expenses for the first six months of 2010 also reflect the pre-tax gain of $1.8 million associated with a reduction in the reserve recorded for the previously disclosed legal settlement in June 2010. Excluding the effect of this gain, operating and administrative expenses increased by $15.8 million for the first six months of 2011 as compared to the first six month of 2010 primarily due to expenses associated with L.R. Kimball and DSPCon, and increases in variable personnel costs related to the increased business volume.

ES’s operating profit increased by $3.0 million for the first six months of 2011 as compared to the first six months of 2010. Excluding the effect of the gain described above operating profit increased by $4.8 million primarily due to the increase in revenue and increase in higher-margin project business in the P&I, Infrastructure (L.R. Kimball) and Aerospace verticals.

The following table presents changes in revenue for each of ES’s verticals for the six months ended June 30, 2011 and 2010:

		57.50		57.50			57.50		57.50			57.50			57.50
	Six months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
CDI-P & I	$	184,754		66.5	%	$	155,098		70.6	%	$	29,656			19.1	%
CDI-Government Services		37,375		13.4			39,859		18.1			(2,484	)		(6.2	)
CDI-Aerospace		29,079		10.5			24,251		11.0			4,828			19.9
CDI-Infrastructure		26,690		9.6			693		0.3			25,997			NM
	$	277,898		100.0	%	$	219,901		100.0	%	$	57,997			26.4	%

NM – not meaningful.

Revenue in the P & I vertical increased during the first six months of 2011 as compared to the first six months of 2010 due to increases in staffing services in the energy sector, Canadian oil and gas and industrial accounts and project engineering increases in our U.S. Gulf Coast operations in the chemical industry.

Revenue in the Government Services vertical decreased during the first six months of 2011 as compared to the first six months of 2010 primarily due to the lack of funding by the U.S. Department of Defense for certain projects.

Revenue in the Aerospace vertical increased during the first six months of 2011 as compared to the first six months of 2010 primarily due to the DSPCon business.

The Infrastructure vertical was added to the ES business segment in the second quarter of 2010 with the June 28, 2010 purchase of substantially all of the assets and certain liabilities of L.R. Kimball. The revenues for the first six months of 2011 reflect the revenues of L.R. Kimball for the full six months of 2011, while the revenues for the first six months of 2010 only include revenues from June 28, 2010 to June 30, 2010 of $0.7 million.

22

ITS

Results of Operations

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating profit for ITS for the three months ended June 30, 2011 and 2010:

		52.50		52.50			52.50		52.50			52.50			52.50
	Three months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
Staffing services	$	82,956		91.4	%	$	68,823		89.6	%	$	14,133			20.5	%
Project outsourcing services		7,511		8.3			7,804		10.2			(293	)		(3.8	)
Professional services		280		0.3			120		0.2			160			133.3
		90,747		100.0			76,747		100.0			14,000			18.2
Cost of services		76,199		84.0			63,578		82.8			12,621			19.9
Gross profit		14,548		16.0			13,169		17.2			1,379			10.5
Operating and administrative expenses		11,027		12.2			10,303		13.5			724			7.0
Operating profit	$	3,521		3.8	%	$	2,866		3.8	%	$	655			22.9	%

ITS’s revenue increased for the second quarter of 2011 as compared to the second quarter of 2010 due to increases in staffing services, primarily due to account expansions with larger accounts. ITS revenue decreased slightly for the second quarter of 2011 in project work as compared to the second quarter of 2010 due to the completion of a project with one customer, and the cancellation of a project commenced last year by another customer. Revenues from professional services more than doubled for the second quarter of 2011 as compared to the second quarter of 2010 reflecting higher permanent placement opportunities and ITS’s investment in sales and recruiting resources.

ITS’s gross profit dollars increased for the second quarter of 2011 as compared to the second quarter of 2010, primarily due to increases in revenue. ITS’s gross profit margin was lower due to change in the mix of business, with lower-margin staffing increasing as a percentage of total revenue.

ITS’s operating and administrative expenses increased slightly for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to increased personnel and recruiting costs related to expansions in business volumes.

ITS’s operating profit increased for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to increased business volumes, partially offset by increase in operating and administrative expenses.

23

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating profit for ITS for the six months ended June 30, 2011 and 2010:

		57.50		57.50			57.50		57.50			57.50			57.50
	Six months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
Staffing services	$	164,601		91.4	%	$	125,645		89.1	%	$	38,956			31.0	%
Project outsourcing services		15,079		8.4			15,113		10.7			(34	)		(0.2	)
Professional services		491		0.2			311		0.2			180			57.9
		180,171		100.0			141,069		100.0			39,102			27.7
Cost of services		151,679		84.2			116,791		82.8			34,888			29.9
Gross profit		28,492		15.8			24,278		17.2			4,214			17.4
Operating and administrative expenses		21,511		11.9			19,616		13.9			1,895			9.7
Operating profit	$	6,981		3.9	%	$	4,662		3.3	%	$	2,319			49.7	%

ITS’s revenue increased for the first six months of 2011 as compared to the first six months of 2010 primarily due to increases in staffing services, primarily due to account expansions with larger accounts. ITS revenue decreased slightly for the first six months of 2011 in project work compared to the first six months of 2010. Revenues from professional services increased for the first six months of 2011 as compared with the first six months of 2010, reflecting higher permanent placement opportunities and the ITS’s investment in sales and recruiting resources.

ITS’s gross profit dollars increased for the first six months of 2011 as compared to the first six months of 2010, primarily due to increases in revenue. ITS’s gross profit margin was lower due to change in the mix of business, with lower-margin staffing increasing as a percentage of total revenue.

ITS’s operating and administrative expenses increased for the first six months of 2011 as compared to the first six months of 2010 primarily due to increased personnel and recruiting costs related to expansions in business volumes.

ITS’s operating profit increased for the first six months of 2011 as compared to the first six months of 2010 primarily due to increased business volumes, partially offset by increase in operating and administrative expenses.

24

MRI

Results of Operations

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating profit for MRI for the three months ended June 30, 2011 and 2010:

		52.50		52.50			52.50		52.50			52.50			52.50
	Three months ended June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of Total Revenue			$		% of Total Revenue			$			%
Revenue
Staffing services	$	13,127		75.4	%	$	11,087		73.4	%	$	2,040			18.4	%
Professional services		4,273		24.6			4,021		26.6			252			6.3
		17,400		100.0			15,108		100.0			2,292			15.2
Cost of services		9,015		51.8			7,091		46.9			1,924			27.1
Gross profit		8,385		48.2			8,017		53.1			368			4.6
Operating and administrative expenses		6,145		35.3			6,262		41.5			(117	)		(1.9	)
Operating profit	$	2,240		12.9	%	$	1,755		11.6	%	$	485			27.6	%

MRI’s staffing revenue increased for the second quarter of 2011 as compared to the second quarter of 2010 due to franchisees continuing to grow their staffing services, reflecting ongoing demand for skilled contingent professionals. Professional services revenue increased due to increases in royalties in the US.

MRI’s gross profit dollars increased for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to increases in revenue. Gross profit margin decreased primarily due to change in the mix of business with lower margin contract staffing business growing at a faster rate than higher-margin professional services revenue and royalty accounts.

MRI’s operating and administrative expenses decreased for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to cost containment measures taken early in 2011.

MRI’s operating profit increased 27.6% to $2.2 million for the second quarter of 2011 as compared to the second quarter of 2010 driven primarily by the growth in royalty revenues.

25

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating profit for MRI for the six months ended June 30, 2011 and 2010:

		52.50		52.50			52.50		52.50			52.50		52.50
	Six months ended
	June 30,
	2011					2010					Increase (Decrease)
(in thousands)	$		% of  Total Revenue			$		% of Total Revenue			$		%
Revenue
Staffing services	$	24,949		75.4	%	$	21,598		73.3	%	$	3,351		15.5	%
Professional services		8,150		24.6			7,872		26.7			278		3.5
		33,099		100.0			29,470		100.0			3,629		12.3
Cost of services		17,064		51.6			14,203		48.2			2,861		20.1
Gross profit		16,035		48.4			15,267		51.8			768		5.0
Operating and administrative expenses		12,234		37.0			12,081		41.0			153		1.3
Operating profit	$	3,801		11.5	%	$	3,186		10.8	%	$	615		19.3	%

MRI’s staffing revenue increased for the first six months of 2011 as compared to the first six months of 2010 due to franchisees continuing to grow their staffing services, reflecting ongoing demand for skilled contingent professionals. Professional services revenue increased slightly due to increases in royalties offset by decreases in franchise sales.

MRI’s gross profit dollars increased for the first six months of 2011 as compared to the first six months of 2010 primarily due to increases in revenue. Gross profit margin decreased primarily due to change in the mix of business with lower margin contract staffing business growing at a faster rate than higher-margin professional services revenue and royalty accounts.

MRI’s operating and administrative expenses decreased for the first six months of 2011 as compared to the first six months of 2010 primarily due to cost containment measures taken early in 2011.

MRI’s operating profit increased 19.3% to $3.8 million for the first six months of 2011 as compared to the first six months of 2010 driven primarily by increases in revenues and growth in royalty revenues.

26

Anders

UK Office of Fair Trading Decision

On April 1, 2011 the Company received a favorable ruling from the Competition Appeal Tribunal (“CAT”) on the Company’s appeal of the previously disclosed imposed fine by the United Kingdom’s Office of Fair Trading (“OFT”), reducing the fine from $12.3 million (£7.6 million) to $2.5 million (£1.5 million). On May 24, 2011, the OFT indicated that it would not appeal the CAT’s ruling. As a result, the Company reduced the reserve by $9.7 million during the second quarter of 2011 and this reduction was reflected in “Operating and administrative expenses” in the consolidated statements of operations for the three and six months ended June 30, 2011. The Company paid the fine (including accumulated interest) of $2.5 million (£1.6 million) on July 7, 2011. The reserve of $2.5 million (£1.5 million) and $12.3 million (£7.6 million) was included in “Other accrued expenses and other current liabilities” in the consolidated balance sheets at June 30, 2011 and December 31, 2010, respectively.

Results of Operations

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating loss for Anders for the three months ended June 30, 2011 and 2010 in US dollars:

		52.50			52.50			52.50			52.50			52.50			52.50
	Three months ended June 30,
	2011						2010						Increase (Decrease)
(US dollars in thousands)	$			% of Total Revenue			$			% of Total Revenue			$			%
Revenue
Staffing services	$	13,281			91.7	%	$	16,026			94.7	%	$	(2,745	)		(17.1	)%
Professional services		1,199			8.3			904			5.3			295			32.6
		14,480			100.0			16,930			100.0			(2,450	)		(14.5	)
Cost of services		11,174			77.2			13,788			81.4			(2,614	)		(19.0	)
Gross profit		3,306			22.8			3,142			18.6			164			5.2
Operating and administrative expenses(1)		(6,010	)		(41.5	)		4,021			23.8			(10,031	)		(249.5	)
Operating profit (loss)	$	9,316			64.3	%	$	(879	)		(5.2	)%	$	10,195			NM

(1) Includes reduction of OFT fine by $9.7 million (£6.0 million) during the second quarter of 2011 (originally recorded in the third quarter of 2009). See Note 8 - Commitments, Contingencies and Legal Proceedings in Notes to Consolidated Financial Statements.

NM – Not meaningful.

27

The following table presents changes in revenue by service type, cost of services, gross profit, operating and administrative expenses and operating loss for Anders for the six months ended June 30, 2011 and 2010 in US dollars:

		55.			55.			55.			55.			55.			55.
	Six months ended June 30,
	2011						2010						Increase (Decrease)
(US dollars in thousands)	$			% of Total Revenue			$			% of Total Revenue			$			%
Revenue
Staffing services	$	25,899			91.8	%	$	36,683			95.3	%	$	(10,784	)		(29.4	)%
Professional services		2,308			8.2			1,799			4.7			509			28.3
		28,207			100.0			38,482			100.0			(10,275	)		(26.7	)
Cost of services		21,824			77.4			31,619			82.2			(9,795	)		(31.0	)
Gross profit		6,383			22.6			6,863			17.8			(480	)		(7.0	)
Operating and administrative expenses(1)		(2,036	)		(7.2	)		8,197			21.3			(10,233	)		(124.8	)
Operating profit (loss)	$	8,419			29.8	%	$	(1,334	)		(3.5	)%	$	9,753			NM

(1) Includes reduction of OFT fine by $9.7 million (£6.0 million) during the second quarter of 2011 (originally recorded in the third quarter of 2009). See Note 8 - Commitments, Contingencies and Legal Proceedings in Notes to Consolidated Financial Statements.

NM – Not meaningful.

The following table presents Anders’ results on a local currency basis (i.e. British pounds) for the three months ended June 30, 2011 and 2010:

		52.50			52.50			52.50			52.50			52.50			52.50
	Three months ended June 30,
	2011						2010						Increase (Decrease)
(British pounds in thousands)	£			% of Total Revenue			£			% of Total Revenue			£			%
Revenue
Staffing services	£	8,179			91.7	%	£	10,729			94.7	%	£	(2,550	)		(23.8	)%
Professional services		739			8.3			606			5.3			133			22.0
		8,918			100.0			11,335			100.0			(2,417	)		(21.3	)
Cost of services		6,882			77.2			9,231			81.4			(2,349	)		(25.5	)
Gross profit		2,036			22.8			2,104			18.6			(68	)		(3.2	)
Operating and administrative expenses(1)		(3,913	)		(43.9	)		2,688			23.8			(6,601	)		(245.6	)
Operating profit (loss)	£	5,949			66.7	%	£	(584	)		(5.2	)%	£	6,533			NM

(1) Includes reduction of OFT fine by £6.0 million during the second quarter of 2011 (originally recorded in the third quarter of 2009). See Note 8 - Commitments, Contingencies and Legal Proceedings in Notes to Consolidated Financial Statements.

NM – Not meaningful.

Anders’ staffing services revenue decreased for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to continued weak demand in the UK construction industry and deterioration in Anders’ transportation business. The increase in professional services revenue was primarily due to growth in permanent placement services in Australia.

Anders’ gross profit pounds decreased slightly for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to the decline in revenue. Gross profit margin increased for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to a change in mix as higher-margin professional services revenue was a larger portion of total revenue than in the prior year.

28

Anders’ decrease in operating and administrative expenses by £6.6 million for the second quarter of 2011 as compared to the second quarter of 2010 was primarily due to the reduction of £6.0 million ($9.7 million) of the reserve resulting from a previously announced successful appeal (in April 2011 ) of the level of fine imposed by the OFT. (See Note 8 – Commitments, Contingencies and Legal Proceedings in Notes to Consolidated Financial Statements). The Company had previously recorded a reserve for the fine of £7.6 million ($12.3 million) in the third quarter of 2009. Excluding the effect of the reduction of the OFT fine, operating and administrative expenses decreased by £0.6 million for the second quarter of 2011 as compared to the second quarter of 2010 primarily due to a favorable legal settlement of £0.2 million ($0.3 million) in the 2011 period.

Anders’ results reflect an operating profit of £5.9 million for the second quarter of 2011 as compared to an operating loss of £0.6 million for the second quarter of 2010 primarily due to the reduction of the reserve for the OFT fine described above. Excluding the effect of the reserve reduction, Anders’ operating loss decreased by £0.5 million for the second quarter of 2011 when compared to the second quarter of 2010 primarily due to a favorable legal settlement of 0.2 million ($0.3 million), and cost reduction measures in the 2011 period.

The following table presents Anders’ results on a local currency basis (i.e. British pounds) for the six months ended June 30, 2011 and 2010:

		52.50			52.50			52.50			52.50			52.50			52.50
	Six months ended June 30,
	2011						2010						Increase (Decrease)
(British pounds in thousands)	£			% of Total Revenue			£			% of Total Revenue			£			%
Revenue
Staffing services	£	16,052			91.8	%	£	23,951			95.3	%	£	(7,899	)		(33.0	)%
Professional services		1,432			8.2			1,179			4.7			253			21.5
		17,484			100.0			25,130			100.0			(7,646	)		(30.4	)
Cost of services		13,527			77.4			20,643			82.2			(7,116	)		(34.5	)
Gross profit		3,957			22.6			4,487			17.8			(530	)		(11.8	)
Operating and administrative expenses(1)		(1,429	)		(8.2	)		5,356			21.3			(6,785	)		(126.7	)
Operating profit (loss)	£	5,386			30.8	%	£	(869	)		(3.5	)%	£	6,255			NM

(1) Includes reduction of OFT fine by £6.0 million during the second quarter of 2011 (originally recorded in the third quarter of 2009). See Note 8 - Commitments, Contingencies and Legal Proceedings in Notes to Consolidated Financial Statements.

NM – Not meaningful.

Anders’ staffing services revenue decreased for the first six months of 2011 as compared to the first six months of 2010 primarily due to continued weak demand in the UK construction industry and deterioration in Anders’ transportation business. The increase in professional services revenue was primarily due to growth in permanent placement services in the UK, and a small increase in permanent placement services in Australia.

Anders’ gross profit pounds decreased for the first six months of 2011 as compared to the first six months of 2010 primarily due to the decline in revenue. Gross profit margin increased for the first six months of 2011 as compared to the first six months of 2010 primarily due to a change in mix as higher-margin professional services revenue was a larger portion of total revenue than in the prior year.

Anders’ decrease in operating and administrative expenses by £6.8 million for the first six months of 2011 as compared to the first six months of 2010 was primarily due to the reduction of £6.0 million ($9.7 million) of the reserve resulting from a previously announced successful appeal (in April 2011 ) of the level of fine imposed by the OFT. (See Note 8 – Commitments, Contingencies and Legal Proceedings in Notes to Consolidated Financial Statements). The Company had previously recorded a reserve for the fine of £7.6 million ($12.3 million) in the third quarter of 2009. Excluding the effect of the reduction of the OFT fine, operating and administrative expenses decreased by £0.8 million for the first six months of 2011 as compared to the first six months of 2010 primarily due to a favorable legal settlement of £0.2 million ($0.3 million) in the 2011 period.

Anders’ results reflect an operating profit for the first six months of 2011 as compared to a loss for the first six months of 2010 primarily due to the reduction of the reserve for the OFT fine described above. Excluding the effect of the reduction of the OFT fine,

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Anders’ operating loss decreased by £0.3 million for the first six months of 2011 when compared to the first six months of 2010 primarily due to a favorable legal settlement of £0.2 million ($0.3 million) and cost reduction measures in the 2011 period.

Liquidity and Capital Resources

The following table summarizes the net cash provided by (used in) for the major captions from the Company’s consolidated statements of cash flows:

		64.			64.			64.
	Six months ended June 30,
	2011			2010			Change
Operating Activities		$    (702	)		$    (2,357	)		$    1,655
Investing Activities		(3,717	)		(37,100	)		33,383
Financing Activities		(134	)		(6,495	)		6,361

Operating Activities

For the first six months of 2011, net cash used in operating activities was $0.7 million. Net cash used in operating activities during the first six months of 2011 was lower than the prior year by $1.7 million primarily due to lower working capital requirements. This was primarily caused by decreases in accounts receivable, partially offset by increases in accounts payable, accrued expenses and other current liabilities for the first six months of 2011 compared to the first six months of 2010.

Investing Activities

Net cash used in investing activities of $3.7 million decreased by $33.4 million during the first six months of 2011, as compared to the same period in 2010 primarily due to cash used for the Kimball acquisition in June of 2010. During the first six months of 2011, the Company used $3.5 million for capital expenditures, as compared to $2.9 million for the same period in 2010. During 2011, the Company’s capital expenditures consisted primarily of computer hardware and software.

Financing Activities

Net cash used in financing activities was $0.1 million during the first six months of 2011 compared to $6.5 million during the first six months of 2010. The decrease was primarily due to $5.3 million drawn from the short term debt facility during the first six months of 2011 compared to no short term debt borrowing during the first six months of 2010. In addition, cash from overdraft accounts decreased to $0.5 million for the first six months of 2011 compared with $1.6 million during the first six months of 2010. The Company paid shareholders dividends totaling $5.0 million during the first six months 2011 and 2010, respectively. The declaration and payment of future dividends will be at the discretion of the Company’s Board of Directors and will depend upon many factors including the Company’s earnings, financial condition and capital requirements. The Company did not repurchase any shares of its common stock under the repurchase program in 2011 or 2010.

The Company’s Credit Agreement with JP Morgan Chase Bank, N.A. provides for a $35.0 million revolving line of credit facility. This is a short-term facility, the term of which ends on October 28, 2011. Borrowings under this line of credit may be used by the Company for general business purposes or for the letters of credit. As of June 30, 2011, $19.2 million of short-term borrowing and $4.2 million of letters of credit were issued under the Credit Agreement. The Company is evaluating options to address the expiration of the Credit Facility on October 28, 2011, including refinancing with a new credit facility or other borrowings.

Summary

As of June 30, 2011, approximately 70% of the Company’s cash and cash equivalents are held by certain non-U.S. subsidiaries, principally a Canadian entity, as well as being denominated in foreign currencies, principally Canadian Dollars. The repatriation of cash and cash equivalent balances from non-U.S. subsidiaries could have adverse tax consequences; however, such cash and cash equivalent balances are generally available, without legal restrictions, to fund ordinary business operations at the local level. Deferred income taxes have not been provided on the unremitted earnings of such non-U.S. subsidiaries, because it is management’s intention to reinvest such earnings in non-U.S. subsidiaries for the foreseeable future.

The Company’s business model is expected to generate positive cash flow over the business cycle. However, changes in level of business activity, and to a lesser extent, seasonality, do impact working capital needs and cash flow. In addition, the uncertain global economy could continue to cause delays in customer payments which could lead to a slower collections process, causing a temporary decline in operating cash flow. While there is no assurance, management believes that the Company’s current cash balances, funds

30

generated from operations and unused borrowing capacity will be sufficient to support currently anticipated Company growth and ongoing capital needs.

Critical Accounting Policies and Estimates

The Company’s consolidated interim financial statements were prepared in accordance with generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting judgment increases, such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions identified in the Company’s 2010 Annual Report on Form 10-K filed on March 10, 2011 with the Securities and Exchange Commission have not materially changed.

31

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to risks associated with foreign currency fluctuations and changes in interest rates. The Company’s exposure to foreign currency fluctuations relates primarily to its operations denominated in British pounds sterling and Canadian dollars. Exchange rate fluctuations impact the US dollar value of reported earnings derived from these foreign operations, as well as the Company’s investment in the net assets related to these operations. The Company sometimes engages in hedging activities with respect to certain of its foreign operations. The Company did not enter into any foreign exchange contracts in the first six months of 2011. At June 30, 2011 there were no outstanding foreign exchange contracts or other hedging instruments.

The Company’s cash balances are primarily invested in money market investments at variable rates. Due to the Company’s cash balance, interest rate fluctuations will affect the Company’s return on its investments.

The Company’s short term borrowings are subject to interest at variable rates as specified in the Credit Agreement. Interest rate fluctuations will affect the Company’s interest expense on its borrowings.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

The management of the Company, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2010. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported as specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s second quarter ended June 30, 2011, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company has litigation and other claims pending which have arisen in the ordinary course of business. Except as described below, management believes there are substantive defenses and/or insurance and specific accounting reserves established such that the outcome of these pending matters should not have a material adverse effect on the business, financial condition or results of operations of the Company.

UK Office of Fair Trading Decision

On September 30, 2009 the United Kingdom’s Office of Fair Trading (“OFT”) issued a decision in its investigation into alleged anti-competitive behavior by Anders during the time period of late 2004 to early 2006. In its decision, the OFT found that Anders violated the UK Competition Act of 1998 and imposed a fine of approximately $12.3 million (£7.6 million) for the violations, which was not tax deductible. The Company reserved the full amount of the fine in the third quarter of 2009. The Company appealed the OFT decision in 2010. On April 1, 2011 the Company received a favorable ruling from the Competition Appeal Tribunal (“CAT”) on the Company’s appeal of the imposed fine, reducing the fine to $2.5 million (£1.5 million). On May 24, 2011, the OFT indicated that it would not appeal the CAT’s ruling. As a result the Company reduced the reserve by $9.7 million during the second quarter of 2011 and this reduction was reflected in “Operating and administrative expenses” in the consolidated statements of operations for the three and six months ended June 30, 2011. The Company paid the fine (including accumulated interest) of $2.5 million (£1.6 million) on July 7, 2011. The reserve of $2.5 million (£1.5 million) and $12.3 million (£7.6 million) was included in “Other accrued expenses and other current liabilities” in the consolidated balance sheets at June 30, 2011 and December 31, 2010, respectively.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the “Risk Factors” section (Part I, Item 1A) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Removed and Reserved

Item 5. Other Information

None.

33

Item 6. Exhibits

10.1*	Employment and Consulting Agreement dated as of February 15, 2009 between CDI Corporation and Robert J. Giorgio, and Amendment to Employment Agreement between CDI Corporation and Robert J. Giorgio effective as of December 16, 2010.
10.2*	Offer letter dated May 18, 2011 and Employment Agreement dated May 31, 2011 between CDI Corporation and Philip L. Clark.
10.3*	CDI Corp. Stock Purchase Plan for Management Employees and Non-Employee Directors, as amended and restated effective May 17, 2011.
10.4*	2011 CEO Cash Bonus Plan (incorporated by reference to the Registrant’s Definitive Proxy Statement, Appendix A, filed on April 19, 2011 (SEC File No. 001-05519)).
10.5	Amendment to Technical Services Agreement Statement of Work dated June 3, 2011 between CDI Corporation and International Business Machines Corporation (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on June 20, 2011 (SEC File No. 001-05519)).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**
(101.INS)	XBRL Instance Document
(101.SCH)	XBRL Taxonomy Extension Schema Document
(101.CAL)	XBRL Taxonomy Extension Calculation Linkbase Document
(101.DEF)	XBRL Taxonomy Extension Definition Linkbase Document
(101.LAB)	XBRL Taxonomy Extension Label Linkbase Document
(101.PRE)	XBRL Taxonomy Extension Presentation Linkbase Document

* Constitutes a management contract or compensatory plan or arrangement.

** Pursuant to Regulation S-T, these interactive data files are deemed not filed or incorporated in any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

34

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CDI Corp.
Date: August 5, 2011	By:	/s/ Mark A. Kerschner
		Mark A. Kerschner
		Executive Vice President and
		Chief Financial Officer

35

INDEX TO EXHIBITS

Number	Exhibit
10.1*	Employment and Consulting Agreement dated as of February 15, 2009 between CDI Corporation and Robert J. Giorgio, and Amendment to Employment Agreement between CDI Corporation and Robert J. Giorgio effective as of December 16, 2010.
10.2*	Offer letter dated May 18, 2011 and Employment Agreement dated May 31, 2011 between CDI Corporation and Philip L. Clark.
10.3*	CDI Corp. Stock Purchase Plan for Management Employees and Non-Employee Directors, as amended and restated effective May 17, 2011.
10.4*	2011 CEO Cash Bonus Plan (incorporated by reference to the Registrant’s Definitive Proxy Statement, Appendix A, filed on April 19, 2011 (SEC File No. 001-05519)).
10.5	Amendment to Technical Services Agreement Statement of Work dated June 3, 2011 between CDI Corporation and International Business Machines Corporation (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on June 20, 2011 (SEC File No. 001-05519)).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**
(101.INS)	XBRL Instance Document
(101.SCH)	XBRL Taxonomy Extension Schema Document
(101.CAL)	XBRL Taxonomy Extension Calculation Linkbase Document
(101.DEF)	XBRL Taxonomy Extension Definition Linkbase Document
(101.LAB)	XBRL Taxonomy Extension Label Linkbase Document
(101.PRE)	XBRL Taxonomy Extension Presentation Linkbase Document

* Constitutes a management contract or compensatory plan or arrangement.

** Pursuant to Regulation S-T, these interactive data files are deemed not filed or incorporated in any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.