Exhibit 99
NEWS RELEASE
CDI CORP. REPORTS SECOND QUARTER 2006 EPS UP 35% AND ANNOUNCES DIVIDEND
Philadelphia (July 27, 2006) - CDI Corp. (NYSE:CDI) today reported earnings for
the second quarter ended June 30, 2006 and announced a quarterly cash dividend.
For the quarter ended June 30, 2006, the company reported net earnings of $5.5
million, or $0.27 per diluted share, on revenues of $314.5 million. Total second
quarter revenue increased 9.8% compared to $286.4 million for the second quarter
of 2005 and net earnings increased 36.4% compared to the year-ago quarter. The
company also announced a quarterly dividend of $0.11 per share to be paid on
August 24, 2006 to all shareholders of record as of August 10, 2006.
"We were pleased with our continued revenue momentum in many of our business
sectors which was driven by both contingent staffing demand and continued
strength in capital spending by clients in key vertical industries," said
President and Chief Executive Officer Roger H. Ballou. "However, we were
disappointed that there were a number of specific items that adversely affected
our second quarter results.
"We incurred pre-tax charges of approximately $0.5 million during the quarter
for resolution of a previously-disclosed arbitration proceeding with a customer.
Our earnings also reflect $0.7 million of pre-tax marked-to-market charges and
realized losses on previously-disclosed forward exchange contracts.
"In spite of these expenses, we were able to increase pre-tax earnings by 18.8%
compared to the year-ago quarter. Contributing to the net earnings increase of
36.4% was an effective tax rate for the second quarter of 27.9%. The tax rate
was favorably impacted by the recognition of foreign research and development
credits which were fully recognized in the second quarter."
In June, 2006, the United Kingdom's Office of Fair Trading (OFT) opened an
investigation into alleged anti-competitive behavior by the company's U.K.-based
AndersElite segment (Anders) and a number of its competitors in the U.K.
construction recruitment industry. The allegations being investigated include,
among others, the competitors agreeing to minimum fees in their contracts with
U.K. intermediary recruitment companies and declining to work with one
particular U.K. intermediary recruitment company. Anders is cooperating with the
OFT in the investigation under the OFT's corporate leniency program. It is
likely that the OFT will ultimately impose a fine on Anders, however it is too
early in the process to determine with any reliability the amount or materiality
of that fine.
Effective January 1, 2006, the company adopted the accounting required under
SFAS No. 123(R) for its stock-based compensation plan. The change in accounting,
plus the effect of additional awards which were granted in 2006, resulted in an
increase of $0.5 million in stock-based compensation expenses in the second
quarter versus the prior year.
BUSINESS SEGMENT DISCUSSION
The Business Solutions segment recorded a solid year-over-year revenue increase
of 10.8% as every vertical reported revenue gains. New project wins and ramp up
of previously-announced account wins in the IT Services vertical were key
drivers. Operating profits increased 50.9% on a year-over-year basis while
absorbing the aforementioned arbitration resolution costs.
Anders revenue increased 10.6% versus the prior-year quarter due to solid growth
in both permanent placement and in contingent demand. Year-over-year operating
profits increased by 6.9% and were held down primarily due to investment in new
offices and office development.
Todays Staffing revenue growth slowed during the quarter but increased by 5.3%
compared to the prior year. This growth was driven by increases in bill rates
and growth in national accounts somewhat offset by a slowing in the mortgage
processing business. Operating profits more than doubled driven primarily by
effective cost control initiatives.
Management Recruiters International, Inc. (MRI) revenue increased by 6.4% versus
the second quarter of 2005 while operating profit decreased by 11.5% compared to
the year-ago quarter. MRI results reflect continued weakness in its U.S.-based
royalties due to softness in permanent placement and the non-renewal of several
domestic franchise operations whose territories will be re-sold. In addition,
royalty revenue was affected by the previously-announced sale of an
international master franchise resulting in lower royalty revenues which were
more than offset by lower operating costs. Operating profit margins were further
affected by a change in mix with increases in lower-margin staffing revenue and
franchise sales revenue compared to the year-ago quarter.
Year-over-year and sequential data for the business segments can be found in the
attached tables.
CORPORATE SUMMARY
Corporate overhead costs increased 14.4% versus the year-ago period driven
primarily by increases in expenses related to compliance, tax consulting and
severance costs.
"CDI ended the quarter with approximately $14.4 million in cash and cash
equivalents and approximately $3.8 million in short-term debt as we continued to
fund working capital requirements," said Ballou. "We continue to have
significant debt capacity, if necessary, to fund potential higher working
capital requirements driven by our revenue growth, capital spending and
potential acquisitions."
BUSINESS OUTLOOK
"Capital spending decisions by clients in our key verticals drive a significant
portion of our revenue base," said Ballou. "We see continued demand in these
sectors as our clients invest in plant, equipment and infrastructure
improvements. This spending, as well as continued demand for staffing services,
could produce year-over-year revenue growth of 9 to 11% in the third quarter and
full year growth of 10 to 12%.
"We should be able to generate low to mid teen variable contribution margins on
these incremental sales as our management team continues to effectively execute
our business plan."
FINANCIAL TABLES FOLLOW
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Conference Call/Webcast
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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
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Headquartered in Philadelphia, CDI Corp. (NYSE:CDI) is a leading provider of
engineering and information technology outsourcing solutions and professional
staffing. Its operating units include CDI Business Solutions, CDI AndersElite
Limited, Todays Staffing, Inc. and Management Recruiters International, Inc.
Visit CDI at www.cdicorp.com.
Caution Concerning Forward-Looking Statements
---------------------------------------------
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements that address
expectations or projections about the future, including statements about our
strategy for growth, expected expenditures and future financial results are
forward-looking statements. Some of the forward-looking statements can be
identified by words like "anticipates," "believes," "expects," "may," "will,"
"could," "intends," "plans," "estimates," and similar expressions. These
statements are not guarantees of future performance and involve a number of
risks, uncertainties and assumptions that are difficult to predict. Actual
outcomes and results may differ materially from what is expressed or forecasted
in these forward-looking statements depending on a variety of factors, including
the following: changes in general economic conditions and levels of capital
spending by customers in the industries we serve; possible inaccurate
assumptions or forecasts regarding the bill rate, profit margin, duration of
assignment and utilization rate applicable to our billable personnel;
competitive market pressures; the availability of qualified labor; changes in
customers' attitudes towards outsourcing; our level of success in attracting,
training, and retaining qualified management personnel and other staff
employees; our ability to pass on to customers increases in our costs (such as
those relating to workers' compensation insurance or which may arise from
regulatory requirements); our performance on our customer contracts; the
possibility of our incurring liability for our activities, including the
activities of our temporary employees; adverse consequences arising out of the
U.K. Office of Fair Trading investigation described in this news release; and
government policies or judicial decisions adverse to the staffing industry.
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 STATEMENTS OF EARNINGS
UNAUDITED
(in thousands, except per share data)
For the three months ended For the six months ended
---------------------------------------- -------------------------
June 30, June 30,
------------------------- March 31, -------------------------
2006 2005 2006 2006 2005
----------- ----------- ----------- ----------- -----------
Revenues $ 314,478 $ 286,411 $ 307,331 $ 621,809 $ 552,330
Cost of services 242,170 220,165 236,760 478,930 425,299
----------- ----------- ----------- ----------- -----------
Gross profit 72,308 66,246 70,571 142,879 127,031
Operating and administrative expenses 64,049 59,980 62,737 126,786 117,645
Gain on sale of asset - - - - (420)
----------- ----------- ----------- ----------- -----------
Operating profit 8,259 6,266 7,834 16,093 9,806
Other expense (income), net 697 (99) (163) 534 (246)
----------- ----------- ----------- ----------- -----------
Earnings before income taxes 7,562 6,365 7,997 15,559 10,052
Income tax expense 2,108 2,367 3,091 5,199 3,740
----------- ----------- ----------- ----------- -----------
Net earnings $ 5,454 $ 3,998 $ 4,906 $ 10,360 $ 6,312
=========== =========== =========== =========== ===========
Diluted earnings per share $ 0.27 $ 0.20 $ 0.25 $ 0.52 $ 0.32
=========== =========== =========== =========== ===========
Diluted number of shares (000) 20,133 19,871 20,009 20,071 19,875
=========== =========== =========== =========== ===========
June 30, March 31, December 31, June 30,
2006 2006 2005 2005
----------- ----------- ------------ -----------
SELECTED BALANCE SHEET DATA:
- ----------------------------
Cash, cash equivalents and short-term
investments $ 14,447 $ 20,684 $ 13,407 $ 22,455
Accounts receivable, net $ 257,453 $ 246,545 $ 232,365 $ 213,477
Current assets $ 286,981 $ 282,108 $ 259,755 $ 249,626
Total assets $ 407,422 $ 401,703 $ 379,494 $ 363,312
Current liabilities $ 112,868 $ 116,442 $ 97,766 $ 88,192
Shareholders' equity $ 285,386 $ 276,097 $ 271,478 $ 268,394
For the three months ended For the six months ended
---------------------------------------- -------------------------
June 30, June 30,
------------------------- March 31, -------------------------
2006 2005 2006 2006 2005
----------- ----------- ----------- ----------- -----------
SELECTED CASH FLOW DATA:
- ------------------------
Depreciation expense $ 2,543 $ 2,526 $ 2,510 $ 5,053 $ 5,063
Capital expenditures $ 2,728 $ 4,000 $ 3,071 $ 5,799 $ 6,513
Dividends paid $ 2,196 $ 2,172 $ 2,184 $ 4,380 $ 4,340
Free cash flow for the quarter ended
June 30, 2006 is shown below:
Net cash used in operating activities $ (10,927)
Less: capital expenditures (2,728)
Less: dividends paid (2,196)
-----------
Free cash flow for the quarter ended
June 30, 2006 $ (15,851)
===========
For the three months ended For the six months ended
---------------------------------------- -------------------------
June 30, June 30,
------------------------- March 31, -------------------------
2006 2005 2006 2006 2005
----------- ----------- ----------- ----------- -----------
SELECTED EARNINGS AND OTHER FINANCIAL DATA:
- -------------------------------------------
Revenues $ 314,478 $ 286,411 $ 307,331 $ 621,809 $ 552,330
Gross profit $ 72,308 $ 66,246 $ 70,571 $ 142,879 $ 127,031
Gross profit margin 23.0% 23.1% 23.0% 23.0% 23.0%
Operating and administrative expenses as a
percentage of revenue 20.4% 20.9% 20.4% 20.4% 21.3%
Corporate expenses $ 4,629 $ 4,043 $ 5,024 $ 9,653 $ 8,233
Corporate expenses as a percentage of revenue 1.5% 1.4% 1.6% 1.6% 1.5%
Operating profit margin 2.6% 2.2% 2.5% 2.6% 1.8%
Effective income tax rate 27.9% 37.2% 38.7% 33.4% 37.2%
After-tax return on shareholders'
equity - last twelve months (a) 6.4% 1.5% 6.1%
For the three months ended For the six months ended
---------------------------------------- ------------------------
June 30, June 30,
------------------------- March 31, -------------------------
2006 2005 2006 2006 2005
----------- ----------- ----------- ----------- -----------
SELECTED SEGMENT DATA (B):
- --------------------------
BUSINESS SOLUTIONS
Revenues $ 206,662 $ 186,508 $ 203,547 $ 410,209 $ 363,505
Gross profit 38,832 34,636 39,568 78,400 67,081
Gross profit margin 18.8% 18.6% 19.4% 19.1% 18.5%
Operating profit 6,100 4,042 7,738 13,838 7,623
Operating profit margin 3.0% 2.2% 3.8% 3.4% 2.1%
ANDERSELITE
Revenues $ 51,623 $ 46,695 $ 48,586 $ 100,209 $ 88,505
Gross profit 13,488 11,687 11,927 25,415 22,229
Gross profit margin 26.2% 25.1% 24.5% 25.4% 25.1%
Operating profit 1,901 1,779 1,117 3,018 2,517
Operating profit margin 3.7% 3.8% 2.3% 3.0% 2.8%
TODAYS STAFFING
Revenues $ 39,791 $ 37,795 $ 39,454 $ 79,245 $ 71,002
Gross profit 9,610 9,421 9,093 18,703 17,766
Gross profit margin 24.2% 24.9% 23.0% 23.6% 25.1%
Operating profit 1,375 518 724 2,099 62
Operating profit margin 3.5% 1.4% 1.8% 2.6% 0.1%
MANAGEMENT RECRUITERS INTERNATIONAL
Revenues $ 16,402 $ 15,413 $ 15,744 $ 32,146 $ 29,318
Gross profit 10,378 10,502 9,983 20,361 19,955
Gross profit margin 63.3% 68.2% 63.4% 63.3% 67.9%
Operating profit 3,512 3,970 3,279 6,791 7,417
Operating profit margin 21.4% 25.8% 20.8% 21.1% 25.3%
For the three months ended For the six months ended
---------------------------------------- ------------------------
June 30, June 30,
------------------------- March 31, -------------------------
2006 2005 2006 2006 2005
----------- ----------- ----------- ----------- -----------
BUSINESS SOLUTIONS REVENUE BY VERTICAL:
- ---------------------------------------
CDI Process and Industrial $ 90,775 $ 87,055 $ 90,666 $ 181,441 $ 166,730
CDI Information Technology Services 77,744 65,536 73,454 151,198 129,319
CDI Aerospace 20,828 20,666 22,806 43,634 40,784
CDI Government Services 14,438 11,228 14,148 28,586 22,549
CDI Life Sciences 2,877 2,023 2,473 5,350 4,123
----------- ----------- ----------- ----------- -----------
Total Business Solutions Revenue $ 206,662 $ 186,508 $ 203,547 $ 410,209 $ 363,505
=========== =========== =========== =========== ===========
(a) Current quarter combined with the three preceding quarters' earnings or
(loss) divided by the average shareholders' equity.
(b) Commencing January 1, 2006, the company changed its method of allocating
certain support services expenses to the business segments. The operating profit
for the quarters ended March 31, 2005, June 30, 2005 and December 31, 2005 have
been revised for comparative purposes.