[CDI Logo]
News Release
CDI Corp. Reports Second Quarter 2008 Results and Announces Dividend
Philadelphia (July 31, 2008) - CDI Corp. (NYSE:CDI) today reported net earnings
for the second quarter ended June 30, 2008 and announced a quarterly cash
dividend.
For the quarter ended June 30, 2008, the company reported net earnings from
continuing operations of $7.0 million, or $0.34 per diluted share, on revenue of
$289.2 million. Second quarter revenue declined 2.2% compared to the prior-year
quarter and net earnings from continuing operations declined 8.7% compared to
the year-ago quarter. Second quarter 2008 net earnings included a pre-tax charge
of approximately $0.3 million in real estate exit costs in the Engineering
Solutions segment. Second quarter 2007 net earnings included an approximate $0.4
million reduction in income tax expenses due to the recognition of foreign
research and development credits, partially offset by certain charges against
deferred tax assets. When adjusting for these items, year-over-year earnings
from continuing operations for the second quarter 2008 were essentially flat
compared to the prior-year quarter (see attached table for reconciliation).
The company also announced a quarterly cash dividend of $0.13 per share to be
paid on August 28, 2008 to all shareholders of record as of August 14, 2008.
"In spite of a difficult economic environment, we were able to deliver solid
bottom line performance while absorbing market-driven slowdowns in certain
business units, particularly in permanent placement," said President and Chief
Executive Officer, Roger H. Ballou. "We are pleased, however, that we were able
to accomplish a number of strategic goals which should augur well for later
profitable revenue growth. Specific accomplishments include the creation of two
joint ventures to broaden our engineering reach into the Middle East and Latin
America, new business wins in the alternative energy and defense markets, and,
after the close of the second quarter, the acquisition of an aerospace
engineering firm. We were also pleased to announce an expanded business
relationship with a large IT client."
Business Segment Discussion
The CDI Engineering Solutions segment reported a slight increase in second
quarter revenue compared to the prior-year quarter driven by growth in the
Government Services vertical. Operating profit increased 14.3% due to an
increased mix of higher-margin engineering project business. When adjusted for
the aforementioned real estate charge, operating profit would have increased
over 18%.
Management Recruiters International, Inc.'s (MRI) second quarter revenue was
essentially flat compared to the second quarter of 2007, reflecting weakness in
royalty revenue offset by a moderating rate of growth in contract staffing.
Operating profit declined 18.4% versus the prior-year quarter due to the
aforementioned decline in higher-margin royalty revenue driven by weaknesses in
the industrial and consumer product segments.
At U.K.-based AndersElite, revenue declined approximately 4.7% (both in dollars
and on a constant currency basis) versus the prior-year quarter driven by
significant weakness in permanent placement in both property development and
residential housing construction in the U.K. Operating profit declined by 57.7%
due to the decline in high-margin permanent placement revenue, somewhat offset
by cost control measures.
CDI IT Solutions second quarter revenue declined by 6.6% versus the year-ago
quarter reflecting decreased contract staffing in the automotive sector. This
was partially offset by staffing growth at a large IT client. Operating profit
during the quarter increased over 75% driven primarily by cost controls and
growth of higher-margin business.
Corporate Summary
Corporate overhead costs decreased by 15.4% on a year-over-year basis reflecting
lower compliance spending, consulting services spending and variable
compensation costs.
"We ended the quarter with $121.4 million in cash and cash equivalents after
generating $9.5 million in free cash flow during the quarter," said Ballou.
"With our cash on hand and untapped borrowing capacity, we should have
sufficient resources to support organic revenue growth, capital spending, our
stock repurchase program, shareholder dividends and strategic acquisitions."
Business Outlook
"Despite a challenging economic environment, particularly in the demand for
permanent placement hiring in the U.K. and certain U.S. segments, we remain
confident that our strategic plan to shift more of our business to higher-margin
solutions services and the previously-mentioned account wins and joint ventures
will, over time, produce solid organic growth and significant increases in
operating profits," said Ballou. "We anticipate that third quarter revenue could
be flat to slightly down versus the prior-year quarter. For the full year, we
anticipate relatively flat revenue compared to the previous year.
"We expect that our pre-tax profit from continuing operations could be down
slightly in the third quarter, and relatively flat for the full year, compared
to the prior-year periods even while absorbing significant start-up costs
associated with the previously-mentioned joint ventures and contract wins."
Following the close of the second quarter, the company received preliminary
indication that its application for certain foreign research and development tax
credits for the years 2005 and 2006 will be approved by the foreign tax
authority. Upon receipt of final approval, the company will recognize a
reduction in income tax expenses expected to be $2.3 million.
Financial Tables Follow
Conference Call/Webcast
CDI Corp. will conduct a conference call at 11 a.m. (ET) today to discuss this
announcement. The conference call will be broadcast live over the Internet and
can be accessed by any interested party at www.cdicorp.com. An online replay
will be available at www.cdicorp.com for 14 days after the call.
Company Information
Headquartered in Philadelphia, CDI Corp. (NYSE:CDI) is a leading provider of
engineering & information technology outsourcing solutions and professional
staffing. Its operating units include CDI Engineering Solutions, CDI IT
Solutions, CDI AndersElite Limited, and Management Recruiters International,
Inc. Visit CDI at www.cdicorp.com.
Caution Concerning Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements that address
expectations or projections about the future, including statements about our
strategies for growth and future financial results (such as revenues, pre-tax
profit and tax rates), 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 expressions. These statements are not guarantees of
future performance and involve a number of risks, uncertainties and assumptions
that are difficult to predict. Because these forward-looking statements are
based on estimates and assumptions that are subject to significant business,
economic and competitive uncertainties, many of which are beyond our control or
are subject to change, actual outcomes and results may differ materially from
what is expressed or forecasted in these forward-looking statements. Important
factors that could cause actual results to differ materially from the
forward-looking statements include, but are not limited to: changes in general
economic conditions and levels of capital spending by customers in the
industries that we serve; competitive market pressures; our ability to maintain
and grow our revenue base; 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 customers' attitudes towards
outsourcing; credit risks associated with our customers; changes in tax laws and
other government regulations; the possibility of incurring liability for our
activities, including the activities of our temporary employees; our performance
on customer contracts; adverse consequences arising out of the U.K. Office of
Fair Trading investigation; and government policies or judicial decisions
adverse to our businesses. More detailed information about some of these risks
and uncertainties may be found in our filings with the SEC, particularly in the
"Risk Factors" section of our Form 10-K's and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of our Form
10-K's and Form 10-Q's. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. We
assume no obligation to update such statements, whether as a result of new
information, future events or otherwise, except as required by law.
Contacts:
Vincent Webb
Vice President, Corporate Communications & Marketing
215-636-1240
Vince.Webb@cdicorp.com
Mark Kerschner
Chief Financial Officer
215-636-1105
Mark.Kerschner@cdicorp.com
###
CDI Corp. and Subsidiaries
Consolidated Earnings Release Tables
(Unaudited)
(in thousands, except per share data)
For the three months ended For the six months ended
--------------------------------------------------- ---------------------------------
June 30, June 30,
--------------------------------- March 31, ---------------------------------
2008 2007 2008 2008 2007
--------------- -------------- -------------- -------------- ---------------
Revenues $ 289,211 $ 295,717 $ 293,880 $ 583,091 $ 589,631
Cost of services 221,629 223,919 222,625 444,254 449,791
--------------- --------------- --------------- --------------- ---------------
Gross profit 67,582 71,798 71,255 138,837 139,840
Operating and administrative expenses 56,826 60,623 60,292 117,118 116,266
--------------- --------------- --------------- --------------- ---------------
Operating profit 10,756 11,175 10,963 21,719 23,574
Other income, net 613 264 1,248 1,861 699
--------------- --------------- --------------- --------------- ---------------
Earnings from continuing operations
before income taxes 11,369 11,439 12,211 23,580 24,273
Income tax expense 4,390 3,796 4,287 8,677 8,583
--------------- --------------- --------------- --------------- ---------------
Earnings from continuing operations 6,979 7,643 7,924 14,903 15,690
Earnings from discontinued operations -- 686 -- -- 1,107
--------------- --------------- --------------- --------------- ---------------
Net earnings $ 6,979 $ 8,329 $ 7,924 $ 14,903 $ 16,797
=============== =============== =============== =============== ===============
Diluted earnings per share
Earnings from continuing operations $ 0.34 $ 0.37 $ 0.39 $ 0.73 $ 0.77
Earnings from discontinued operations -- 0.04 -- -- 0.06
--------------- --------------- --------------- --------------- ---------------
Net earnings $ 0.34 $ 0.41 $ 0.39 $ 0.73 $ 0.83
=============== =============== =============== =============== ===============
Average diluted number of shares 20,409 20,406 20,405 20,407 20,300
=============== =============== =============== =============== ===============
Selected Balance Sheet Data from
- -------------------------------- June 30, March 31, December 31, June 30,
continuing operations: 2008 2008 2007 2007
- ---------------------- --------------- --------------- --------------- ---------------
Cash and cash equivalents $ 121,423 $ 110,043 $ 127,059 $ 53,219
Accounts receivable, net $ 214,073 $ 223,401 $ 210,629 $ 241,389
Current assets $ 347,864 $ 343,628 $ 348,754 $ 305,441
Total assets $ 449,536 $ 447,317 $ 450,058 $ 403,484
Current liabilities $ 92,289 $ 95,124 $ 102,741 $ 108,122
Shareholders' equity $ 344,319 $ 338,901 $ 334,978 $ 322,153
CDI Corp. and Subsidiaries
Consolidated Earnings Release Tables
(Unaudited)
(in thousands, except per share data)
For the three months ended For the six months ended
--------------------------------------------------- ---------------------------------
Selected Cash Flow Data from June 30, June 30,
- ---------------------------- --------------------------------- March 31, ---------------------------------
continuing operations: 2008 2007 2008 2008 2007
- ---------------------- --------------- --------------- --------------- --------------- ---------------
Depreciation expense $ 2,848 $ 2,634 $ 2,850 $ 5,698 $ 5,227
Capital expenditures $ 1,514 $ 2,487 $ 4,444 $ 5,958 $ 4,646
Dividends paid $ 2,637 $ 2,220 $ 2,646 $ 5,283 $ 4,432
Free cash flow for the quarter ended June
30, 2008 is shown below:
Net cash provided by operating
activities $ 13,694
Less: capital expenditures (1,514)
Less: dividends paid (2,637)
---------------
Free cash flow $ 9,543
===============
For the three months ended For the six months ended
--------------------------------------------------- -------------------------------
Selected Earnings and Other Financial June 30, June 30,
- ------------------------------------- --------------------------------- March 31, -------------------------------
Data from continuing operations: 2008 2007 2008 2008 2007
- -------------------------------- --------------- -------------- -------------- -------------- --------------
Revenues $ 289,211 $ 295,717 $ 293,880 $ 583,091 $ 589,631
Gross profit $ 67,582 $ 71,798 $ 71,255 $ 138,837 $ 139,840
Gross profit margin 23.4% 24.3% 24.3% 23.8% 23.7%
Operating and administrative expenses as a
percentage of revenue 19.6% 20.5% 20.5% 20.1% 19.7%
Corporate expenses $ 4,319 $ 5,108 $ 5,086 $ 9,405 $ 9,849
Corporate expenses as a percentage of revenue 1.5% 1.7% 1.7% 1.6% 1.7%
Operating profit margin 3.7% 3.8% 3.7% 3.7% 4.0%
Effective income tax rate 38.6% 33.2% 35.1% 36.8% 35.4%
After-tax return on shareholders' equity (a) 9.3% 9.0% 9.8%
Pre-tax return on net assets (b) 22.1% 19.2% 21.4%
Variable contribution margin (c) NM (c) 20.4% NM (c) NM (c) 20.4%
For the three months ended
---------------------------------
Reconciliation from reported to adjusted June 30,
- ---------------------------------------- ---------------------------------
earnings from continuing operations: 2008 2007 (Decrease)
- ------------------------------------ --------------- -------------- --------------
Earnings from continuing operations, as reported $ 6,979 $ 7,643 -8.7%
Real estate exit costs, net of tax 196 --
Prior year tax adjustments -- (405)
--------------- --------------
Earnings from continuing operations, as adjusted $ 7,175 $ 7,238 -0.9%
=============== ==============
CDI Corp. and Subsidiaries
Consolidated Earnings Release Tables
(Unaudited)
(in thousands, except per share data)
For the three months ended For the six months ended
--------------------------------------------------- ---------------------------------
Selected Segment Data from June 30, June 30,
- -------------------------- --------------------------------- March 31, ---------------------------------
continuing operations: 2008 2007 2008 2008 2007
- ---------------------- --------------- --------------- --------------- --------------- ---------------
Engineering Solutions (d)
Revenues $ 153,100 $ 152,542 $ 156,152 $ 309,252 $ 303,064
Gross profit 32,600 31,455 34,700 67,300 61,366
Gross profit margin 21.3% 20.6% 22.2% 21.8% 20.2%
Operating profit 8,953 7,834 10,821 19,774 17,381
Operating profit margin 5.9% 5.1% 6.9% 6.4% 5.7%
Management Recruiters International
Revenues $ 19,401 $ 19,496 $ 19,631 $ 39,032 $ 35,669
Gross profit 10,533 11,734 10,694 21,227 21,564
Gross profit margin 54.3% 60.2% 54.5% 54.4% 60.5%
Operating profit 3,493 4,281 2,250 5,743 7,598
Operating profit margin 18.0% 22.0% 11.5% 14.7% 21.3%
AndersElite
Revenues $ 60,245 $ 63,193 $ 61,740 $ 121,985 $ 124,788
Gross profit 13,529 17,457 15,664 29,193 33,632
Gross profit margin 22.5% 27.6% 25.4% 23.9% 27.0%
Operating profit 1,489 3,520 2,775 4,264 6,213
Operating profit margin 2.5% 5.6% 4.5% 3.5% 5.0%
IT Solutions (d)
Revenues $ 56,465 $ 60,486 $ 56,357 $ 112,822 $ 126,110
Gross profit 10,920 11,152 10,197 21,117 23,278
Gross profit margin 19.3% 18.4% 18.1% 18.7% 18.5%
Operating profit 1,140 648 203 1,343 2,230
Operating profit margin 2.0% 1.1% 0.4% 1.2% 1.8%
For the three months ended For the six months ended
------------------------------------------------ --------------------------------
Engineering Solutions Revenue June 30, June 30,
- ----------------------------- -------------------------------- March 31, --------------------------------
by Vertical (e): 2008 2007 2008 2008 2007
- ---------------- --------------- --------------- --------------- --------------- ---------------
CDI Process and Industrial $ 116,672 $ 117,810 $ 120,432 $ 237,104 $ 233,633
CDI Government Services 21,257 17,195 19,845 41,102 33,747
CDI Aerospace 15,171 17,537 15,875 31,046 35,684
--------------- --------------- --------------- --------------- ---------------
Total Engineering Solutions Revenue $ 153,100 $ 152,542 $ 156,152 $ 309,252 $ 303,064
=============== =============== =============== =============== ===============
CDI Corp. and Subsidiaries
Consolidated Earnings Release Tables
(Unaudited)
(in thousands, except per share data)
For the three months ended For the six months ended
--------------------------------------------------- ---------------------------------
Selected Earnings Data from June 30, June 30,
- --------------------------- --------------------------------- March 31, ---------------------------------
discontinued operations (f): (2008) (2007) (2008) (2008) (2007)
- ------------------------ --------------- --------------- --------------- --------------- ---------------
Net Revenues $ -- $ 42,421 $ -- $ -- $ 80,448
Earnings from discontinued operations,
before taxes -- 1,096 -- -- 1,768
Income tax expense -- 410 -- -- 661
--------------- --------------- --------------- --------------- ---------------
Earnings from discontinued operations,
net of taxes $ -- $ 686 $ -- $ -- $ 1,107
=============== =============== =============== =============== ===============
(a) Current quarter combined with the three preceding quarters' net earnings
from continuing operations divided by the average shareholders' equity.
(b) Current quarter combined with the three preceding quarters' pre-tax
earnings from continuing operations divided by the average net assets. Net
assets include total assets from continuing operations minus total
liabilities from continuing operations excluding cash, external debt and
income tax accounts.
(c) Year-over-year change in operating profit from continuing operations
divided by year-over-year change in revenue from continuing operations.
The calculations for the three months ended March 31, 2008 and the three
and six months ended June 30, 2008 are not meaningful (NM) because both
revenue and operating profit declined.
(d) The Company has revised the reporting segments' prior year data for
Engineering Solutions and IT Solutions for comparative purposes.
(e) Effective with the second quarter of 2008, Engineering Solutions will
report on three verticals reflecting the decision to re-align the
management and operations of Life Sciences into Process & Industrial.
Prior periods have been revised to reflect the new operating structure.
(f) In September 2007, the Company sold its Todays Staffing, Inc. subsidiary.
Please see the Company's consolidated financial statements and the notes
thereto for the year ended December 31, 2007 included in Form 10-K, filed
with the Securities and Exchange Commission on March 7, 2008.