CDI Corp. Reports Third Quarter 2010 Results and Announces Dividend
PHILADELPHIA, Oct. 28 /PRNewswire-FirstCall/ — CDI Corp. (NYSE: CDI) today reported results for the third quarter ended September 30, 2010 and announced a quarterly cash dividend.
For the quarter ended September 30, 2010, the company reported revenue of $249.4 million — an increase of 11.5% (11.7% in constant currency) compared to $223.7 million for the third quarter 2009. Third quarter 2010 net earnings were $1.7 million, or $0.09 per diluted share, versus a loss of $12.2 million, or $(0.64) per diluted share, in the third quarter 2009.
Third quarter 2010 revenue includes $14.9 million from the operations of L.R. Kimball which was acquired on June 28, 2010 and is included in the new CDI-Infrastructure vertical. Excluding Infrastructure, revenue for the third quarter 2010 increased 4.8% (5.0% in constant currency) versus the prior year. Third quarter 2009 earnings included a $12.3 million pre-tax charge associated with the previously-disclosed United Kingdom’s Office of Fair Trading (OFT) matter. Additionally, third quarter 2009 results included $0.8 million in pre-tax severance charges. Excluding these items, net earnings for the third quarter 2009 were approximately $0.6 million, or $0.03 per diluted share.
A quarterly cash dividend of $0.13 per share will be paid on November 24, 2010 to all shareholders of record on November 11, 2010.
“We were pleased with the solid year-over-year revenue growth in the third quarter,” said President and Chief Executive Officer, Roger H. Ballou. “Continued robust growth in our IT Solutions segment — and in both royalty and contract staffing revenue in our Management Recruiters International segment — reflected ongoing strength in demand for skilled permanent placement and contingent professionals.
“Additionally, we saw a year-over-year uptick in capital spending by oil and gas and specialty chemical customers in our Engineering Solutions segment’s Process & Industrial vertical which could indicate a positive turn in that important sector. We were also pleased with the performances of our new vertical as third quarter 2010 Infrastructure revenue, contribution margin and integration benchmarks met our expectations. Increases in our high-margin businesses, including Infrastructure, and continued cost-control vigilance contributed to a strong variable contribution margin of over 13% in the third quarter when taking into account the aforementioned 2009 items.”
Business Segment Discussion
CDI Engineering Solutions (ES) reported a 10.2% (9.2% in constant currency) increase in third quarter revenue versus the year-ago third quarter including results from Infrastructure. Excluding Infrastructure, ES revenue declined 2.0% driven by reduced spending by customers in the Aerospace and Government Services verticals somewhat offset by the previously-mentioned uptick in the Process & Industrial vertical. Operating profit increased by 33.2% to $4.0 million versus the prior-year third quarter, driven by increases in the higher-margin Infrastructure and Process & Industrial verticals. Third quarter 2009 operating profit also included $0.3 million in severance charges.
Management Recruiters International, Inc. (MRI) revenue increased 28.8% versus the prior-year third quarter driven by increases in royalty and contract sales revenue somewhat offset by a decline in franchise sales. Operating profit more than doubled to $1.9 million versus the prior-year third quarter driven primarily by the increase in higher-margin royalty revenue.
UK-based CDI AndersElite (Anders) revenue declined 47.6% (44.6% in constant currency) versus the prior-year third quarter reflecting continued weak market conditions in the UK construction industry. Anders reported an operating loss of $1.6 million versus an operating loss of $1.1 million in the year-ago third quarter (after adjusting the 2009 operating loss to exclude the aforementioned $12.3 million OFT matter) driven primarily by the revenue decline.
CDI IT Solutions (ITS) third quarter revenue increased 35.6% versus the prior-year third quarter reflecting successful business development efforts and broad-based growth across most offices and across most national and retail accounts. Operating profit more than doubled to $3.9 million reflecting the revenue increase, operating leverage and effective cost controls during the quarter.
Corporate Summary
Corporate overhead costs decreased 11% compared to the prior-year third quarter primarily due to lower severance and compensation costs. Prior-year third quarter corporate overhead costs included severance costs of $0.3 million.
“CDI ended the quarter with $21.1 million in net cash comprised of $29.1 million in cash and cash equivalents and $8.0 million in short-term debt,” said Ballou. “With our existing cash and cash equivalents and our borrowing capacity, we should have sufficient resources to support revenue growth and ongoing capital needs.”
Business Outlook
“Continued strong performance in both our IT Solutions and MRl segments, anticipated revenue sourced in our Infrastructure vertical, and improving project and staffing demand in our Process & Industrial vertical could produce fourth quarter 2010 revenue growth of 13% to 17% versus the prior-year fourth quarter even with continued weak performance at Anders,” said Ballou. “Variable contribution margin for the quarter on this incremental fourth quarter revenue, after adjusting for items identified in the fourth quarter 2009 press release, could be in the mid-to-upper teens due to prudent cost controls and growth in higher-margin permanent placement and ES outsourcing revenue.
“If current economic trends continue, we could achieve year-over-year revenue growth of 8% to 12% in 2011. We also believe that we could deliver mid-teen variable contribution margin for the year on that revenue growth.”
Financial Tables Follow
Conference Call/Webcast
CDI Corp. will conduct a conference call at 10:30 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, but not limited to, statements about the Company’s 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 the Company’s 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: weakness in general economic conditions and levels of capital spending by customers in the industries the Company serves; weakness in the financial and capital markets, which may result in the postponement or cancellation of CDI’s customers’ capital projects or the inability of CDI’s customers to pay the Company’s fees; loss of business and other adverse customer consequences as a result of the UK Office of Fair Trading decision or the Department of Justice investigation; difficulties in integrating the recently-acquired L.R. Kimball operations with the Company; credit risks associated with the Company’s customers; competitive market pressures; the availability and cost of qualified labor; the Company’s level of success in attracting, training, and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations; the possibility of incurring liability for the Company’s activities, including the activities of the Company’s temporary employees; the Company’s performance on customer contracts; negative outcome of pending and future claims and litigation; and government policies, legislation or judicial decisions adverse to the Company’s businesses. More detailed information about these and other 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. The Company assumes no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law.
Note on Constant Currency Calculations
Constant currency year-over-year changes should be considered in addition to, and not as a substitute for or superior to, changes in revenue prepared on a US dollar reported basis. Constant currency year-over-year changes in revenue are calculated by translating the prior period’s revenue in local currencies into US dollars using the average exchange rates of the current period.
CDI Corp. and Subsidiaries
Consolidated Earnings Release Tables
(Unaudited)
(in thousands, except per share data)
For the three months ended
--------------------------
September 30, June 30,
-------------
2010 2009 2010
---- ---- ----
Revenue $249,355 $223,673 $218,982
Cost of services 194,017 179,782 174,279
------- ------- -------
Gross profit 55,338 43,891 44,703
Operating and administrative
expenses 50,400 55,464 41,135
------ ------ ------
Operating profit (loss) 4,938 (11,573) 3,568
Other (expense) income, net (442) (51) (130)
Equity in losses from
affiliated companies (312) (278) (417)
---- ---- ----
Earnings (loss) before
income taxes 4,184 (11,902) 3,021
Income tax expense 2,473 280 423
----- --- ---
Net income (loss) 1,711 (12,182) 2,598
Less: gain (loss)
attributable to the
noncontrolling interest 32 (10) 8
--- --- ---
Net income (loss)
attributable to CDI $1,679 $(12,172) $2,590
====== ======== ======
Diluted net income (loss)
attributable to CDI per
share $0.09 $(0.64) $0.13
Average diluted number of
shares 19,244 18,944 19,241
September December
30, June 30, 31,
Selected Balance Sheet Data: 2010 2010 2009
---------------------------- ---- ---- ----
Cash and cash equivalents $29,140 $27,437 $73,528
Accounts receivable, net $216,947 $213,059 $176,677
Current assets $266,298 $254,718 $264,697
Total assets $401,447 $387,400 $375,034
Current liabilities $114,293 $102,500 $87,193
CDI shareholders' equity $273,649 $271,955 $274,755
Noncontrolling interest $342 $235 $141
For the nine months
ended
-------------------
September 30,
-------------
2010 2009
---- ----
Revenue $678,277 $667,751
Cost of services 536,729 532,154
------- -------
Gross profit 141,548 135,597
Operating and administrative expenses 132,427 147,293
------- -------
Operating profit (loss) 9,121 (11,696)
Other (expense) income, net (520) 65
Equity in losses from affiliated
companies (1,080) (859)
------ ----
Earnings (loss) before income taxes 7,521 (12,490)
Income tax expense 3,396 556
----- ---
Net income (loss) 4,125 (13,046)
Less: gain (loss) attributable to the
noncontrolling interest 47 (13)
--- ---
Net income (loss) attributable to CDI $4,078 $(13,033)
====== ========
Diluted net income (loss)
attributable to CDI per share $0.21 $(0.69)
Average diluted number of shares 19,211 18,927
September
30,
Selected Balance Sheet Data: 2009
---------------------------- ----
Cash and cash equivalents $70,531
Accounts receivable, net $187,727
Current assets $277,144
Total assets $385,802
Current liabilities $91,595
CDI shareholders' equity $281,942
Noncontrolling interest $138
For the three months ended
--------------------------
September 30, June 30,
-------------
Selected Cash Flow Data: 2010 2009 2010
------------------------ ---- ---- ----
Depreciation and amortization
expense $2,875 $2,791 $2,533
Capital expenditures $1,131 $740 $908
Dividends paid $2,474 $2,463 $2,471
Free cash flow for the quarter
ended September 30, 2010 is
shown below:
Net cash (used in) provided by
operating activities $(7,420)
Less: capital expenditures (1,131)
Less: dividends paid (2,474)
------
Free cash flow $(11,025)
========
For the three months ended
--------------------------
Selected Earnings and Other
Financial Data: September 30, June 30,
--------------------------- -------------
2010 2009 2010
---- ---- ----
Revenue $249,355 $223,673 $218,982
Gross profit $55,338 $43,891 $44,703
Gross profit margin 22.2% 19.6% 20.4%
Operating and administrative
expenses as a percentage of
revenue 20.2% 24.8% 18.8%
Corporate expenses $3,576 $4,018 $3,685
Corporate expenses as a
percentage of revenue 1.4% 1.8% 1.7%
Operating profit margin 2.0% (5.2)% 1.6%
Effective income tax rate 59.1% (2.4)% 14.0%
After-tax return on CDI
shareholders' equity (a) (1.0)% (5.5)% (5.9)%
Pre-tax return on net assets
(b) 0.3% (7.2)% (7.1)%
For the nine months
ended
-------------------
September 30,
-------------
Selected Cash Flow Data: 2010 2009
------------------------ ---- ----
Depreciation and amortization expense $7,962 $8,529
Capital expenditures $4,062 $4,686
Dividends paid $7,425 $7,391
Free cash flow for the quarter ended
September 30, 2010 is shown below:
Net cash (used in) provided by
operating activities
Less: capital expenditures
Less: dividends paid
Free cash flow
For the nine months
ended
--------------------
Selected Earnings and Other Financial
Data: September 30,
------------------------------------- -------------
2010 2009
---- ----
Revenue $678,277 $667,751
Gross profit $141,548 $135,597
Gross profit margin 20.9% 20.3%
Operating and administrative expenses
as a percentage of revenue 19.5% 22.1%
Corporate expenses $11,239 $12,120
Corporate expenses as a percentage of
revenue 1.7% 1.8%
Operating profit margin 1.3% (1.8)%
Effective income tax rate 45.2% (4.5)%
After-tax return on CDI
shareholders' equity (a)
Pre-tax return on net assets (b)
For the three months ended
--------------------------
September 30, June 30,
-------------
Selected Segment Data: 2010 2009 2010
---------------------- ---- ---- ----
Engineering Solutions
Revenue $134,250 $121,864 $110,197
Gross profit 29,090 22,623 20,375
Gross profit margin 21.7% 18.6% 18.5%
Operating profit (c) 3,954 2,969 3,094
Operating profit margin 2.9% 2.4% 2.8%
Management Recruiters International
Revenue $16,064 $12,468 $15,108
Gross profit 8,789 6,395 8,017
Gross profit margin 54.7% 51.3% 53.1%
Operating profit 1,925 823 1,755
Operating profit margin 12.0% 6.6% 11.6%
AndersElite
Revenue $13,904 $26,559 $16,930
Gross profit 2,801 4,215 3,142
Gross profit margin 20.1% 15.9% 18.6%
Operating loss (1,598) (13,380) (879)
Operating loss margin (11.5)% (50.4)% (5.2)%
IT Solutions
Revenue $85,137 $62,782 $76,747
Gross profit 14,658 10,658 13,169
Gross profit margin 17.2% 17.0% 17.2%
Operating profit 3,921 1,755 2,866
Operating profit margin 4.6% 2.8% 3.7%
For the three months ended
--------------------------
Engineering Solutions Revenue by
Vertical: September 30, June 30,
--------------------------------
2010 2009 2010
---- ---- ----
CDI Process and Industrial (d) $87,100 $85,880 $77,476
CDI Government Services 20,036 22,698 19,801
CDI Aerospace (d) 12,262 13,286 12,227
CDI Infrastructure (e) 14,852 - 693
------ --- ---
Total Engineering Solutions Revenue $134,250 $121,864 $110,197
======== ======== ========
For the nine months
ended
-------------------
September 30,
-------------
Selected Segment Data: 2010 2009
---------------------- ---- ----
Engineering Solutions
Revenue $354,151 $368,875
Gross profit 68,892 71,055
Gross profit margin 19.5% 19.3%
Operating profit (c) 8,518 9,915
Operating profit margin 2.4% 2.7%
Management Recruiters International
Revenue $45,534 $40,322
Gross profit 24,056 19,948
Gross profit margin 52.8% 49.5%
Operating profit 5,111 1,297
Operating profit margin 11.2% 3.2%
AndersElite
Revenue $52,386 $80,110
Gross profit 9,664 13,068
Gross profit margin 18.4% 16.3%
Operating loss (2,932) (16,509)
Operating loss margin (5.6)% (20.6)%
IT Solutions
Revenue $226,206 $178,444
Gross profit 38,936 31,526
Gross profit margin 17.2% 17.7%
Operating profit 8,583 4,862
Operating profit margin 3.8% 2.7%
For the nine months
ended
-------------------
Engineering Solutions Revenue by
Vertical: September 30,
--------------------------------
2010 2009
---- ----
CDI Process and Industrial (d) $242,198 $259,522
CDI Government Services 59,895 66,755
CDI Aerospace (d) 36,513 42,598
CDI Infrastructure (e) 15,545 -
------ ---
Total Engineering Solutions Revenue $354,151 $368,875
======== ========
(a) Net income attributable to CDI for the current quarter combined
with the income (loss) attributable to CDI from the three preceding
quarters, divided by the average CDI shareholders' equity at the
beginning and end of that four quarter period.
(b) Earnings before income taxes for the current quarter combined
with the earnings (loss) before income taxes from the three
preceding quarters, divided by the average net assets at the
beginning and end of that four quarter period. Net assets include
total assets minus total liabilities excluding cash and cash
equivalents and income tax accounts.
(c) Includes $312, $278, $417, $1,080 and $859 of equity in losses
associated with the Company's non-consolidated joint ventures for
the three months ended September 30, 2010 and 2009, the three months
ended June 30, 2010 and the nine months ended September 30, 2010 and
2009, respectively.
(d) Revenue for 2009 has been reclassified to conform to the 2010
presentation.
(e) During the second quarter of 2010, Engineering Solutions began
reporting a new vertical -CDI Infrastructure, which includes
results from the purchase of substantially all of the assets and
certain liabilities of L. Robert Kimball & Associates, Inc. on June
28, 2010.
SOURCE CDI Corp.