CDI Corp. Reports Second Quarter 2008 Results and Announces Dividend

PHILADELPHIA, July 31 /PRNewswire-FirstCall/ -- 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.

Consolidated Earnings Release Tables
(Unaudited)
(in thousands, except per share data)

For the six months
For the three months ended ended
June 30, March 31, June 30,
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

For the six
For the three months ended months ended

Selected Cash Flow Data from June 30, March 31, June 30,
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

Selected Earnings and Other Financial
Data from continuing operations:

For the three months ended For the six months ended
June 30, March 31, June 30,
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%

Reconciliation from reported to
adjusted earnings from continuing
operations: For the three months ended
June 30,

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%

For the six
For the three months ended months ended
Selected Segment Data
from continuing June 30, March 31, June 30,
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 six
For the three months ended months ended
Engineering Solutions
Revenue by June 30, March 31, June 30,
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

For the three months For the six
ended months ended

Selected Earnings Data from June 30, March 31, June 30,
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.

SOURCE CDI Corp.

Vincent Webb, Vice President, Corporate Communications & Marketing,
+1-215-636-1240, Vince.Webb@cdicorp.com, or Mark Kerschner, Chief Financial
Officer, +1-215-636-1105, Mark.Kerschner@cdicorp.com