PHILADELPHIA, Feb 27, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- CDI Corp. (NYSE: CDI) today reported earnings for the fourth quarter and for the full year ended December 31, 2006 and announced a quarterly cash dividend.
For the quarter ended December 31, 2006, the company recorded net earnings of $6.8 million, or $0.34 per diluted share, on revenue of $321.0 million. Fourth quarter revenue grew 10.4% compared to $290.7 million for the fourth quarter of 2005 and net earnings increased by 104.9% compared to the year-ago quarter.
The current year quarter includes a reversal of a previous charge to earnings of $0.8 million due to a decision, based on increased business, to utilize leased space vacated in 2004. In the fourth quarter of 2005 the company also identified and corrected certain errors totaling $1.5 million ($1.2 million related to the Business Solutions operating unit and $0.3 million related to the AndersElite operating unit). When adjusted for these aforementioned items, the net earnings increase on a year-over-year basis would have been approximately 43% (see attached tables for a reconciliation).
The company also announced a dividend of $0.11 per share to be paid on March 27, 2007 to all shareholders of record as of March 13, 2007.
For the full year ended December 31, 2006, the company reported net earnings of $23.3 million, or $1.16 per diluted share, on revenue of $1.27 billion.
"CDI performed well in the fourth quarter and for the full year," said President and Chief Executive Officer Roger H. Ballou. "We are pleased that our strategic focus on providing longer-cycle, solutions-based services to our engineering, IT and professional staffing clients is producing solid results.
"Fourth quarter revenue growth, on a year-over-year basis, was primarily driven by continued strong capital spending by a broad base of clients in the process, life sciences, and U.S. Government segments, as well as in the United Kingdom infrastructure marketplace and by growth in a previously-reported contract with a major IT services company. We were also very pleased with the improvement in our gross profit margin driven by solid growth in permanent placement and a shift in mix to higher-margin, longer-duration project business."
Business Segment Discussion
The Business Solutions segment reported an 11.9% gain in fourth quarter revenue compared to the prior year quarter driven by the aforementioned strength in capital spending by new and existing clients in most vertical markets and from the major IT win announced in 2005. Operating profit increased significantly due to the aforementioned revenue growth and an increase in mix of higher-margin solutions business.
U.K.-based AndersElite reported year-over-year fourth quarter revenue growth of 24.2% (or 14.5% on a constant currency basis) driven by a continued robust construction marketplace in the U.K. and Australia. Operating profit increased significantly compared to the prior year quarter primarily driven by increases in higher-margin permanent placement revenue.
Todays Staffing revenue for the fourth quarter declined by 9.2% versus the fourth quarter of 2005 due to a slowdown in temporary staffing demand, particularly in Todays' national accounts. Operating profits declined by $0.2 million compared to the year-ago quarter due to the decline in revenue, largely offset by expense reductions.
Management Recruiters International, Inc.'s (MRI) fourth quarter revenue increased by 2.4% versus the prior year with growth in staffing revenues somewhat offset by a decline in royalty revenues. Year-over-year operating profit was down 21.4% for the quarter due to the previously-noted decline in higher-margin royalties and slightly higher expenses.
Corporate overhead costs for the fourth quarter decreased by 12.0% versus the prior year period due primarily to the previously-mentioned reversal of a lease reserve of $0.8 million.
"CDI ended the year with approximately $33.6 million in cash and cash equivalents," said Ballou. "We were pleased that our cash generative business model enabled CDI, during the fourth quarter, to source free cash flow of $18.6 million. With our cash on hand and untapped borrowing capacity, we are confident in our ability to support revenue growth initiatives.
"Beginning with the first quarter of 2007, CDI will report on five business segments reflecting the new operating structure in place effective January 1, 2007. AndersElite, Todays Staffing and MRI will continue to report as in the past. However, reflecting our new operating organization, we will separately report CDI Engineering Solutions and CDI IT Solutions to provide a more detailed view of CDI's mix of engineering versus IT outsourcing revenue and operating profit. This will also allow investors to more clearly compare our performance by segment to that of appropriate publicly-traded peer firms."
"We are pleased with our overall operating performance this quarter as our operating profit margin improved to 3.3% of total revenue," said Ballou. "Additionally, we are encouraged by continued strength in capital spending trends by clients in our key verticals. A healthy capital spending environment, plus our current pipeline of new business wins, could produce organic revenue growth in the range of 7% to 9% for 2007. We also expect first quarter 2007 growth of 7% to 9% compared to the first quarter of 2006.
"Our business model remains sound and we should be able to generate 11% to 13% variable contribution margin on this revenue growth in 2007."
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, 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. 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; possible inaccurate assumptions or forecasts regarding the bill rate, profit margin and duration of assignment applicable to billable personnel (and regarding the utilization rate of billable personnel in our project business); competitive market pressures; the availability and cost 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; the ability to pass on to customers increases in costs (such as those relating to workers' compensation, unemployment insurance, medical insurance coverage or other costs which may arise from regulatory requirements); our performance on customer contracts; the possibility of 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; and government policies or judicial decisions adverse to the staffing industry. 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.
CDI CORP. AND SUBSIDIARIES Consolidated Statements of Earnings Unaudited (in thousands, except per share data) For the three months ended For the year ended December 31, September 30, December 31, 2006 2005 2006 2006 2005 Revenues $321,026 $290,724 $322,451 $1,265,286 $1,133,584 Cost of services 244,267 223,322 247,597 970,794 871,016 Gross profit 76,759 67,402 74,854 294,492 262,568 Operating and administrative expenses 66,232 62,580 64,447 257,465 241,432 Restructuring - (126) - - (126) Gain on sale of asset - - - - (420) Operating profit 10,527 4,948 10,407 37,027 21,682 Other (expense) income, net 4 16 (42) (572) 307 Earnings before income taxes 10,531 4,964 10,365 36,455 21,989 Income tax expense 3,730 1,492 4,263 13,192 8,032 Net earnings before cumulative effect of accounting change 6,801 3,472 6,102 23,263 13,957 Cumulative effect of accounting change, net of tax - 152 - - 152 Net earnings $6,801 $3,320 $6,102 $23,263 $13,805 Diluted earnings per share $0.34 $0.16 $0.30 $1.16 $0.69 Diluted number of shares (000) 20,121 20,038 20,102 20,090 19,940 December December September 31, 31, 30, 2006 2005 2006 Selected Balance Sheet Data: Cash and cash equivalents $33,551 $13,407 $18,882 Accounts receivable, net $243,586 $232,365 $265,506 Current assets $290,684 $259,755 $301,316 Total assets $413,119 $379,494 $420,308 Current liabilities $104,746 $97,766 $118,787 Shareholders' equity $299,332 $271,478 $293,366 For the three months ended For the year ended December 31, September 30, December 31, 2006 2005 2006 2006 2005 Selected Cash Flow Data: Depreciation expense $2,788 $2,690 $2,687 $10,528 $10,300 Capital expenditures $4,720 $3,503 $2,991 $13,510 $15,698 Dividends paid $2,200 $2,181 $2,202 $8,782 $8,696 Free cash flow for the quarter ended December 31, 2006 is shown below: Net cash provided by operating activities $25,533 Less: capital expenditures (4,720) Less: dividends paid (2,200) Free cash flow for the quarter ended December 31, 2006 $18,613 For the three months ended For the year ended December 31, September 30, December 31, 2006 2005 2006 2006 2005 Selected Earnings and Other Financial Data: Revenues $321,026 $290,724 $322,451 $1,265,286 $1,133,584 Gross profit $76,759 $67,402 $74,854 $294,492 $262,568 Gross profit margin 23.9% 23.2% 23.2% 23.3% 23.2% Operating and administrative expenses as a percentage of revenue 20.6% 21.5% 20.0% 20.3% 21.3% Corporate expenses $4,030 $4,579 $4,458 $18,141 $17,270 Corporate expenses as a percentage of revenue 1.3% 1.6% 1.4% 1.4% 1.5% Operating profit margin 3.3% 1.7% 3.2% 2.9% 1.9% Effective income tax rate 35.4% 30.1% 41.1% 36.2% 36.5% After-tax return on shareholders' equity (a) 8.2% 5.1% 7.0% Pre-tax return on net assets (b) 14.1% 9.3% 11.7% Variable contribution margin(c) 18.4% 41.2% 10.9% 11.7% 13.9% Reconciliation to adjusted earnings:(1) 2006 2005 Increase Net earnings, as reported $6,801 $3,320 Add: 2005 fourth quarter adjustment $1,056 Deduct: 2006 fourth quarter adjustment (529) Net earnings, as adjusted $6,272 $4,376 43.3% (1) The table above puts CDI's fourth quarter results of operations on a more comparable basis by eliminating the after-tax effect of the lease reserve reversal of $0.8 million in 2006 and the error correction of $1.5 million in 2005. For the three months ended For the year ended December 31, September 30, December 31, 2006 2005 2006 2006 2005 Selected Segment Data (d): Business Solutions Revenues $208,903 $186,730 $209,643 $828,755 $737,755 Gross profit 41,240 35,463 40,301 159,941 138,681 Gross profit margin 19.7% 19.0% 19.2% 19.3% 18.8% Operating profit 7,641 2,857 7,439 28,918 15,723 Operating profit margin 3.7% 1.5% 3.5% 3.5% 2.1% AndersElite Revenues $58,340 $46,981 $58,639 $217,188 $184,419 Gross profit 15,324 10,446 14,938 55,677 44,968 Gross profit margin 26.3% 22.2% 25.5% 25.6% 24.4% Operating profit 1,948 523 2,706 7,672 5,473 Operating profit margin 3.3% 1.1% 4.6% 3.5% 3.0% Todays Staffing Revenues $36,078 $39,728 $36,546 $151,869 $149,147 Gross profit 9,105 9,657 8,625 36,433 36,779 Gross profit margin 25.2% 24.3% 23.6% 24.0% 24.7% Operating profit 1,218 1,374 651 3,968 2,406 Operating profit margin 3.4% 3.5% 1.8% 2.6% 1.6% Management Recruiters International Revenues $17,705 $17,285 $17,623 $67,474 $62,263 Gross profit 11,090 11,836 10,990 42,441 42,140 Gross profit margin 62.6% 68.5% 62.4% 62.9% 67.7% Operating profit 3,750 4,773 4,069 14,610 14,931 Operating profit margin 21.2% 27.6% 23.1% 21.7% 24.0% For the three months ended For the year ended December 31, September 30, December 31, 2006 2005(e) 2006(e) 2006 2005(e) Business Solutions Revenue by Vertical: CDI Process and Industrial $94,287 $83,662 $93,290 $370,429 $339,317 CDI Information Technology Services 76,819 67,311 78,364 305,512 260,982 CDI Aerospace 18,980 20,584 20,616 83,230 80,370 CDI Government Services 15,289 13,837 14,188 58,063 51,493 CDI Life Sciences 3,528 1,336 3,185 11,521 5,593 Total Business Solutions Revenue $208,903 $186,730 $209,643 $828,755 $737,755 (a) Current quarter combined with the three preceding quarters' net earnings divided by the average shareholders' equity. (b) Current quarter combined with the three preceding quarters' pre-tax earnings divided by the average net assets. Net assets include total assets minus total liabilities excluding cash and income tax accounts (c) Year-over-year change in operating profit divided by year-over-year change in revenue (d) Commencing January 1, 2006, the company refined its method of allocating shared services costs to more accurately reflect management and staff time devoted to, and central costs attributable to, the reporting segments. The operating profit for the year and three-month period ended December 31, 2005 has been revised for comparative purposes. (e) Reclassified to conform to the current presentation.
SOURCE CDI Corp.
Vincent Webb, Vice President, Corporate Communications & Marketing, +1-215-636-1240, or Vince.Webb@cdicorp.com, or Mark Kerschner, Chief Financial Officer, +1-215-636-1105, or Mark.Kerschner@cdicorp.com, both of CDI Corp.
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