PHILADELPHIA, April 26, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- CDI Corp. (NYSE: CDI) today reported earnings for the first quarter ended March 31, 2007 and announced a quarterly cash dividend.
For the quarter ended March 31, 2007, the company reported net earnings of $8.5 million, or $0.42 per diluted share, on revenue of $331.9 million. Total first quarter revenue increased by 8.0% compared to $307.3 million for the first quarter of 2006, and net earnings increased 72.6% compared to $4.9 million in the year-ago quarter. First quarter results were favorably affected by a $1.6 million pre-tax reversal of a legal accrual due to the company's successful appeal of a 2004 lawsuit judgment against the company. When adjusted for this reversal, the net earnings increase on a year-over-year basis would have been approximately 52% (see attached table for reconciliation).
The company also announced a quarterly dividend of $0.11 per share to be paid on May 24, 2007 to all shareholders of record as of May 10, 2007.
"Continuing strong spending by clients in most of our key vertical industries and in the U.K. infrastructure marketplace produced solid revenue and profit gains," said President and Chief Executive Officer Roger H. Ballou. "We also saw generally positive trends within the contract and permanent placement hiring environment as clients continue to add technical, professional and managerial talent to support growth in their firms.
"We are pleased that our strategic focus on providing higher-margin, longer-cycle services is producing solid results. Both our professional services revenue, consisting of permanent placement and franchise-related revenue, and our project outsourcing revenue, consisting of knowledge- intensive engineering and IT outsourcing, is contributing to continued improvement in gross profit margin on a year-over-year basis."
Business Segment Discussion
As noted in the fourth quarter 2006 earnings press release, CDI will now report on five business segments reflecting the new operating structure in place effective January 1, 2007. Under the new structure, CDI will now report two new business segments: "CDI Engineering Solutions" and "CDI IT Solutions". CDI Engineering Solutions is comprised of the Process & Industrial, Aerospace, Government Services and Life Sciences verticals while CDI IT Solutions is comprised primarily of the former IT Services vertical.
The Engineering Solutions segment reported an 8.3% gain in first quarter revenue compared to the prior year quarter. Continued strong demand driven by capital spending drove new account and new project wins. Additionally, some pricing leverage was realized in high labor demand sectors. Operating profit, on a year-over-year basis, increased significantly due to the growth in revenue and to the aforementioned successful legal appeal. Operating profits were partially offset by approximately $0.6 million in start-up costs associated with two previously-announced major account wins.
Revenue in the IT Solutions segment increased moderately by 1.6% compared to the year-ago quarter as our previously-announced account win reflected a higher run rate in 2007 versus its lower run rate in the first quarter 2006. This was partially offset by the closing of certain lower-performing offices. When compared to the first quarter of 2006, operating profit increased primarily due to effective cost controls.
U.K.-based AndersElite first quarter revenue increased 26.8% versus the prior year (or 13.0% on a constant currency basis) driven by continued strength in the U.K. and Australia construction and infrastructure marketplaces. On a constant currency basis, operating profit doubled compared to the first quarter of 2006, driven by gains in recruiter productivity, growth in higher-margin permanent placement revenue, and expansion in Australian offices.
Todays Staffing revenue for the first quarter declined by 3.6% compared to the year-ago quarter reflecting continued softness in temporary staffing demand. There was, however, better-than-anticipated sequential revenue growth in the first quarter. Despite the decline in revenue, operating profit, on a year-over-year basis, was relatively flat reflecting continued effective cost control activities.
Management Recruiters International, Inc.'s (MRI) first quarter revenue increased by 2.7% versus the prior-year quarter with growth in contract revenue, somewhat offset by a decline in royalties due to the previously- announced sale of an international master license in April 2006. Operating profit was essentially flat compared to the year-ago quarter.
Corporate overhead costs were down slightly when compared to the first quarter of 2006. This reflects decreases in legal and compliance spending somewhat offset by higher spending to recruit talent in the financial area and higher stock compensation costs.
"CDI ended the quarter with approximately $36.6 million in cash and cash equivalents compared to a year-end total of $33.6 million," said Ballou. "We remain confident that our cash generative business model and our current cash balance are sufficient to support revenue growth, capital spending and dividends. Additionally, we continue to have significant debt capacity to support potential acquisitions."
"We continue to see strength in capital spending plans by many of our clients and we are beginning to see significant opportunities develop in new markets such as alternative fuels. We have, however, also seen a recent downtick in demand in the IT Solutions segment. Based on all of these factors, we could produce year-over-year revenue growth of 7% to 9% for both the second quarter and the full year. Additionally, we should be able to generate low to mid-teen variable contribution margins on this incremental revenue for the second quarter and the full year."
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 http://www.cdicorp.com. An online replay will be available at http://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 http://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; the impact of a potential reduction in demand in our IT Solutions segment; 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.
Consolidated Statements of Earnings Unaudited (in thousands, except per share data) For the three months ended March 31, December 31, 2007 2006 2006 Revenues $331,941 $307,331 $321,026 Cost of services 255,147 236,760 244,267 Gross profit 76,794 70,571 76,759 Operating and administrative expenses 63,723 62,737 66,232 Operating profit 13,071 7,834 10,527 Other income, net 435 163 4 Earnings before income taxes 13,506 7,997 10,531 Income tax expense 5,038 3,091 3,730 Net earnings $8,468 $4,906 $6,801 Diluted earnings per share $0.42 $0.25 $0.34 Diluted number of shares (000) 20,162 20,009 20,121 March 31, December 31, 2007 2006 2006 Selected Balance Sheet Data: Cash and cash equivalents $36,566 $20,684 $33,551 Accounts receivable, net $268,437 $246,545 $243,586 Current assets $318,337 $282,108 $290,684 Total assets $440,195 $401,703 $413,119 Current liabilities $121,738 $116,442 $104,746 Shareholders' equity $308,771 $276,097 $299,332 For the three months ended March 31, December 31, 2007 2006 2006 Selected Cash Flow Data: Depreciation expense $2,747 $2,510 $2,788 Capital expenditures $2,219 $3,071 $4,720 Dividends paid $2,212 $2,184 $2,200 Free cash flow for the quarter ended March 31, 2007 is shown below: Net cash provided by operating activities $2,612 Less: capital expenditures (2,219) Less: dividends paid (2,212) Free cash flow for the quarter ended March 31, 2007 $(1,819) For the three months ended March 31, December 31, 2007 2006 2006 Selected Earnings and Other Financial Data: Revenues $331,941 $307,331 $321,026 Gross profit $76,794 $70,571 $76,759 Gross profit margin 23.1% 23.0% 23.9% Operating and administrative expenses as a percentage of revenue 19.2% 20.4% 20.6% Corporate expenses $4,741 $5,024 $4,030 Corporate expenses as a percentage of revenue 1.4% 1.6% 1.3% Operating profit margin 3.9% 2.5% 3.3% Effective income tax rate 37.3% 38.7% 35.4% After-tax return on shareholders' equity (a) 9.2% 6.0% 8.2% Pre-tax return on net assets (b) 15.9% 10.9% 14.1% Variable contribution margin (c) 21.3% 10.4% 18.4% For the three months ended March 31, 2007 2006 Increase Reconciliation to adjusted earnings:(1) Net earnings, as reported $8,468 $4,906 72.6% Deduct: 2007 first quarter adjustment - net of tax (1,003) Net earnings, as adjusted $7,465 $4,906 52.2% (1) The table above puts CDI's first quarter results of operations on a more comparable basis by eliminating the after-tax effect of the lawsuit reversal of $1.6 million in 2007. For the three months ended March 31, December 31, 2007 2006 2006 Selected Segment Data: Engineering Solutions (d) Revenues $150,969 $139,388 $140,624 Gross profit 29,992 27,388 28,618 Gross profit margin 19.9% 19.6% 20.4% Operating profit 9,628 7,622 6,164 Operating profit margin 6.4% 5.5% 4.4% IT Solutions (d) Revenues $65,177 $64,159 $68,279 Gross profit 12,045 12,180 12,622 Gross profit margin 18.5% 19.0% 18.5% Operating profit 1,501 116 1,477 Operating profit margin 2.3% 0.2% 2.2% AndersElite Revenues $61,595 $48,586 $58,340 Gross profit 16,175 11,927 15,324 Gross profit margin 26.3% 24.5% 26.3% Operating profit 2,693 1,117 1,948 Operating profit margin 4.4% 2.3% 3.3% Todays Staffing Revenues $38,027 $39,454 $36,078 Gross profit 8,752 9,093 9,105 Gross profit margin 23.0% 23.0% 25.2% Operating profit 672 724 1,218 Operating profit margin 1.8% 1.8% 3.4% Management Recruiters International Revenues $16,173 $15,744 $17,705 Gross profit 9,830 9,983 11,090 Gross profit margin 60.8% 63.4% 62.6% Operating profit 3,318 3,279 3,750 Operating profit margin 20.5% 20.8% 21.2% For the three months ended March 31, December 31, 2007 2006 2006 Engineering Solutions Revenue by Vertical (e): CDI Process and Industrial $112,539 $100,216 $102,828 CDI Aerospace 18,129 22,806 18,980 CDI Government Services 16,552 14,148 15,289 CDI Life Sciences 3,749 2,218 3,527 Total Engineering Solutions Revenue $150,969 $139,388 $140,624 (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) As noted in the fourth quarter 2006 earnings press release, CDI will now report on five business units reflecting the new operating structure in place January 1, 2007. Under the new structure, CDI will now report CDI Engineering Solutions and CDI IT Solutions. For comparative purposes, the Company has revised the reporting segments' 2006 data for these two segments. (e) The Company has revised the reporting segments' prior year revenue for Engineering Solutions for comparative purposes.
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, both of CDI Corp.
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