PHILADELPHIA, Feb 26, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- CDI Corp. (NYSE: CDI) today reported financial results for the fourth quarter and full year ended December 31, 2008 and announced a quarterly cash dividend.
For the quarter ended December 31, 2008, the company reported a net loss from continuing operations of $3.2 million, or $0.17 per diluted share, compared to net earnings from continuing operations of $8.2 million, or $0.40 per diluted share, in the prior-year quarter. Included in the results are $4.8 million in previously-announced, event-driven pre-tax charges as well as a $0.5 million goodwill adjustment.
The previously-announced event-driven charges recorded in the fourth quarter are as follows:
-- Approximately $1.8 million in reorganization charges associated with severance payments, real estate exit costs, accelerated software charges, and expenses related to the recovery of the majority of the Management Recruiters International, Inc. (MRI) segment's international franchise network through the termination of its largest master franchise agreement.
-- An increase in bad debt reserves for potential credit losses of $2.5 million as a result of the recent bankruptcy of a large customer in the Engineering Solutions segment.
-- $0.5 million in costs incurred during unsuccessful negotiations to complete an acquisition.
Excluding the event-driven charges and the goodwill adjustment, net earnings from continuing operations for the fourth quarter were $0.3 million, or $0.02 per diluted share. Fourth quarter revenue from continuing operations decreased 15.2% (8.8% in constant currency) to $253.6 million compared to revenue of $299.0 million in the prior-year quarter.
A quarterly cash dividend of $0.13 per share will be paid on March 26, 2009 to all shareholders of record as of March 12, 2009.
For the full year ended December 31, 2008, the company reported net earnings from continuing operations of $19.8 million, or $0.99 per diluted share, on revenue of $1.12 billion. Full year net earnings from continuing operations decreased 37.8% and full year revenue from continuing operations decreased 5.8% compared to 2007 full year results.
"As previously announced, the decline in the company's net earnings from continuing operations for the fourth quarter -- when adjusted for the event-driven charges and the goodwill adjustment -- was driven by two primary factors," said President & Chief Executive Officer, Roger H. Ballou. "First, we experienced a rapid deceleration in permanent placement revenue in our AndersElite segment and in our recruitment process outsourcing business within the Engineering Solutions segment. We also saw accelerated weakness in permanent placement demand in industries served by our MRI segment, resulting in reduced royalty payments. Second, we saw significant staffing reductions, as well as project delays and cancellations, at various chemical and industrial Engineering Solutions customers which were announced by our customers in late 2008.
"We remain committed to our long-term strategy to focus on delivering global engineering solutions while also providing professional staffing solutions and IT consulting and staffing services. However, given the unprecedented challenges created by the current recession and credit crisis, we have taken prompt and prudent steps to right-size the organization while preserving our ability to respond quickly to our customers' needs when capital spending and hiring rebound.
"We feel that our diversified business portfolio has provided some balance in this economic climate as customer spending in sectors such as U.S. government and defense, Canadian energy, and certain U.K. transportation infrastructure areas have added some stability to our revenue base."
The company also reported that it repurchased 536,397 shares of common stock during the fourth quarter under the previously-announced stock repurchase program.
Business Segment Discussion
The CDI Engineering Solutions (ES) segment reported a 9.7% decrease in fourth quarter revenue driven by the aforementioned decline by chemical and industrial customers, somewhat offset by solid growth in the Government Services vertical. Operating profit declined to $0.9 million, a decrease of 91.5% versus the prior-year quarter, driven by the aforementioned bad debt charge of $2.5 million due to the bankruptcy of a large customer, reorganization charges of $0.6 million, $0.5 million in costs associated with the previously-mentioned unsuccessful acquisition negotiations, and a $0.5 million goodwill adjustment. Additionally, operating profit during the quarter includes $0.4 million of operating losses associated with the company's ownership in joint ventures. ES also experienced a slowdown in high-margin alternative energy projects and recruitment process outsourcing.
MRI's fourth quarter revenue declined 18.5% versus the year-ago quarter reflecting a decline in royalty revenue, contract staffing and franchise sales. Operating profit declined 71.6% versus the prior-year quarter primarily due to the aforementioned decline in higher-margin royalties and reorganization charges of $0.8 million, partially offset by operating expense savings.
U.K.-based AndersElite (Anders) revenue declined 42.7% (21.1% on a constant currency basis) versus the prior-year quarter driven by weakness in contract staffing and by a steep decline in permanent placement revenue in the U.K. construction marketplace. Anders reported an operating loss of $1.7 million, a reduction of $4.0 million compared to the year-ago quarter. This primarily reflected a decline in high-margin permanent placement revenue and reorganization charges of $0.2 million.
CDI IT Solutions fourth quarter revenue increased 1.4% versus the prior-year quarter driven by a ramp-up in a previously-announced large client account win, somewhat offset by weakness in automotive and local accounts. Operating profit increased 56.2% on a year-over-year basis, reflecting reduced operating expenses somewhat offset by $0.2 million in reorganization costs.
Corporate overhead costs decreased by 12.8% versus the prior-year quarter due to a decrease in variable compensation costs.
"CDI ended the year with $61.8 million in cash and cash equivalents," said Ballou. "With our cash on hand and untapped borrowing capacity, we should have sufficient resources to support organic revenue growth when the economy begins to recover and capital spending resumes. Additionally, we believe these resources are sufficient to support our stock repurchase program, capital expenditures, shareholder dividends and potential strategic acquisitions."
"We anticipate continued weakness in hiring demand in many non-governmental sectors in both the U.S. and U.K. well into 2009. Additionally, we anticipate continued weakness in capital spending by customers, particularly in the Process & Industrial vertical," said Ballou. "Due to these factors, we anticipate that overall first quarter 2009 revenue could decline by 18% to 25% (or 12% to 18% on a constant currency basis) when compared to the year-ago quarter.
"Given the current economic weakness, it is particularly difficult to forecast these trends beyond the short-term and we will therefore limit guidance to the first quarter. However, we believe that the prudent expense reductions we have taken, and anticipate taking in the first quarter, will create an operating structure that will enable us to be profitable at the current revenue run rate."
Financial Tables Follow
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.
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: continued deterioration in general economic conditions and levels of capital spending by customers in the industries that we serve; further weakness 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; competitive market pressures; our ability to maintain and grow our revenue base; the availability and cost of qualified labor; adverse consequences arising out of the U.K. Office of Fair Trading investigation; 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; 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.
CDI Corp. and Subsidiaries Consolidated Earnings Release Tables (Unaudited) (in thousands, except per share data) For the three months ended For the year ended December 31, September 30, December 31, 2008 2007 2008 2008 2007 Revenue $253,641 $298,960 $281,865 $1,118,597 $1,187,299 Cost of service 199,617 224,253 219,279 863,150 900,359 Gross profit 54,024 74,707 62,586 255,447 286,940 Operating and administrative expenses 57,205 63,013 55,766 230,089 240,104 Operating profit (loss) (3,181) 11,694 6,820 25,358 46,836 Other income and expense, net 844 1,096 1,065 3,770 2,303 Equity in losses from affiliated companies (406) - - (406) - Earnings (loss) from continuing operations before income taxes (2,743) 12,790 7,885 28,722 49,139 Income tax expense (benefit) 476 4,619 (241) 8,912 17,311 Earnings (loss) from continuing operations (3,219) 8,171 8,126 19,810 31,828 Earnings (loss) from discontinued operations - (355) - - 2,374 Net earnings (loss) $(3,219) $7,816 $8,126 $19,810 $34,202 Diluted earnings (loss) per share Earnings (loss) from continuing operations $(0.17) $0.40 $0.41 $0.99 $1.56 Earnings (loss) from discontinued operations - (0.02) - - 0.12 Net earnings (loss) $(0.17) $0.38 $0.41 $0.99 $1.68 Average diluted number of shares 18,975 20,452 20,023 20,009 20,351 Selected Balance Sheet Data from continuing December 31, September 30, December 31, operations: 2008 2008 2007 Cash and cash equivalents $61,761 $77,484 $127,059 Accounts receivable, net $193,338 $213,970 $210,629 Current assets $273,535 $316,051 $348,754 Total assets $384,247 $430,976 $450,058 Current liabilities $79,993 $95,714 $102,741 Shareholders' equity $291,780 $322,339 $334,978 Selected Cash Flow Data from continuing For the three months ended For the year ended operations: December 31, September 30, December 31, 2008 2007 2008 2008 2007 Depreciation expense $3,104 $2,816 $3,101 $11,903 $10,913 Capital expenditures $682 $1,997 $3,496 $10,136 $7,841 Dividends paid $2,461 $2,649 $2,598 $10,342 $9,309 Free cash flow for the quarter ended December 31, 2008 is shown below: Net cash provided by operating activities $3,132 Less: capital expenditures (682) Less: dividends paid (2,461) Cash flow used $(11) Selected Earnings and Other Financial Data from continuing For the three months ended For the year ended operations: December 31, September 30, December 31, 2008 2007 2008 2008 2007 Revenue $253,641 $298,960 $281,865 $1,118,597 $1,187,299 Gross profit $54,024 $74,707 $62,586 $255,447 $286,940 Gross profit margin 21.3% 25.0% 22.2% 22.8% 24.2% Operating and administrative expenses as a percentage of revenue 22.6% 21.1% 19.8% 20.6% 20.2% Corporate expenses $4,500 $5,163 $4,372 $18,277 $19,938 Corporate expenses as a percentage of revenue 1.8% 1.7% 1.6% 1.6% 1.7% Operating profit margin -1.3% 3.9% 2.4% 2.3% 3.9% Effective income tax rate -17.4% 36.1% -3.1% 31.0% 35.2% After-tax return on shareholders' equity (a) 6.3% 10.0% 9.6% 6.3% 10.0% Pre-tax return on net assets (b) 14.0% 23.4% 20.1% 14.0% 23.4% Variable contribution margin (c) NM 17.0% NM NM 18.6% Selected Segment Data from continuing For the three months ended For the year ended operations: December 31, September 30, December 31, 2008 2007 2008 2008 2007 Engineering Solutions (d) Revenue $142,217 $157,570 $151,754 $603,223 $614,522 Gross profit 28,290 36,364 30,152 125,742 129,487 Gross profit margin 19.9% 23.1% 19.9% 20.8% 21.1% Operating profit (e) 865 10,187 6,430 27,069 35,508 Operating profit margin 0.6% 6.5% 4.2% 4.5% 5.8% Management Recruiters International Revenue $17,487 $21,451 $18,184 $74,703 $77,950 Gross profit 9,231 12,248 10,326 40,784 45,764 Gross profit margin 52.8% 57.1% 56.8% 54.6% 58.7% Operating profit 1,117 3,936 3,063 9,923 15,775 Operating profit margin 6.4% 18.3% 16.8% 13.3% 20.2% AndersElite Revenue $35,992 $62,777 $55,558 $213,535 $253,922 Gross profit 5,967 15,424 11,876 47,036 67,079 Gross profit margin 16.6% 24.6% 21.4% 22.0% 26.4% Operating profit (loss) (1,736) 2,307 1,389 3,917 12,378 Operating profit margin -4.8% 3.7% 2.5% 1.8% 4.9% IT Solutions (d) Revenue $57,945 $57,162 $56,369 $227,136 $240,905 Gross profit 10,536 10,671 10,232 41,885 44,610 Gross profit margin 18.2% 18.7% 18.2% 18.4% 18.5% Operating profit 667 427 310 2,320 3,113 Operating profit margin 1.2% 0.7% 0.6% 1.0% 1.3% Engineering Solutions For the three months ended For the year ended Revenue by Vertical (f): December 31, September 30, December 31, 2008 2007 2008 2008 2007 CDI Process and Industrial $103,912 $122,170 $112,528 $453,544 $474,982 CDI Government Services 20,963 18,647 20,844 82,909 70,035 CDI Aerospace 17,342 16,753 18,382 66,770 69,505 Total Engineering Solutions Revenue $142,217 $157,570 $151,754 $603,223 $614,522
Selected Earnings Data from discontinued For the three months ended For the year ended operations (g): December 31, September 30, December 31, 2008 2007 2008 2008 2007 Net Revenue $- $- $- $- $117,168 Earnings (loss) from discontinued operations before taxes - (569) - - 1,642 Income tax expense (benefit) - (214) - - 613 Earnings (loss) from discontinued operations, net of taxes - (355) - - 1,029 Gain from disposal of discontinued operations, net of taxes - - - - 1,345 Earnings (loss) from discontinued operations, net of taxes $- $(355) $- $- $2,374 (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 September 30, 2008 and the three months and year ended December 31, 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) Includes $406 of equity in losses associated with the Company's joint ventures for the three months and year ended December 31, 2008. (f) Effective with the second quarter of 2008, Engineering Solutions began reporting 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. (g) 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.
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