CDI Corp
Feb 27, 2007

CDI Corp. Reports Fourth Quarter 2006 Net Earnings More Than Double, Reports Full Year 2006 Financial Results and Announces Dividend

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 Summary

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."

Business Outlook

"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

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 An online replay will be available at 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, Todays Staffing, Inc. and Management Recruiters International, Inc. Visit CDI at

                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
                    (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
     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
    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
     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
     equity (a)              8.2%      5.1%      7.0%

    Pre-tax return on
     net assets (b)         14.1%      9.3%     11.7%

     margin(c)              18.4%     41.2%     10.9%       11.7%       13.9%

    Reconciliation to
                            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%

    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%

    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.


Vincent Webb, Vice President, Corporate Communications & Marketing,
+1-215-636-1240, or, or Mark Kerschner, Chief Financial
Officer, +1-215-636-1105, or, both of CDI Corp.

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