CDI Corp. Reports First Quarter 2014 Results

PHILADELPHIA, May 7, 2014 /PRNewswire/ -- CDI Corp. (NYSE: CDI) (the "Company") today reported results for the first quarter ended March 31, 2014. 

First Quarter Highlights

  • Revenue of $276.3 million, an increase of 2.5% versus first quarter 2013  
  • Gross profit margin of 18.4% versus 18.6% for first quarter 2013
  • Operating profit of $4.7 million for first quarter 2014 including a pre-tax restructuring charge of $0.4 million and pre-tax charges associated with CEO separation of $0.7 million; first quarter 2013 operating profit was $4.9 million
  • Earnings per diluted share of $0.10 versus $0.13 for first quarter 2013; first quarter 2014 results include a restructuring charge of $0.01 per diluted share and charges associated with CEO separation of $0.04 per diluted share, as described below

For the first quarter of 2014, the Company reported revenue of $276.3 million, an increase of 2.5% versus the prior-year first quarter. The Company reported first quarter 2014 operating profit of $4.7 million compared to operating profit of $4.9 million in the prior-year first quarter. The Company reported first quarter 2014 net income of $2.0 million, or $0.10 per diluted share, versus net income of $2.5 million, or $0.13 per diluted share, in the prior-year first quarter.

In the first quarter of 2014, the Company recorded an aggregate $0.9 million charge to net income (or $0.04 per diluted share) related to the CEO separation that included (i) a $0.7 million pre-tax charge to operations associated with the CEO's separation arrangement ($0.4 million after-tax, or $0.02 per diluted share) and (ii) an additional $0.5 million charge for the write-off of certain deferred tax assets associated with the CEO's forfeiture of outstanding equity awards (or $0.02 per diluted share). Also included in first quarter 2014 results is a pre-tax restructuring charge of $0.4 million ($0.2 million after-tax, or $0.01 per diluted share) related to the Company's restructuring announced in December 2013.

"We are pleased with our first quarter year-over-year revenue growth, including double digit gains in the OGC and AIE verticals and in the UK staffing business.  We continue to face revenue challenges in our government-related businesses, as well as in MRI and non-program staffing.  Additionally, sales to our largest customer remain significantly below year-ago levels," said CDI Interim CEO and President, Robert Larney.  "We continue to focus on improving gross margins throughout our operations. Our overhead costs are under control as we execute our previously announced restructuring plan. Based on our current outlook, we anticipate higher revenues and profit for CDI throughout the remainder of 2014."

Business Segment Discussion

The Company's Global Engineering and Technology Solutions segment (GETS) reported a 5.4% increase in first quarter revenue to $82.3 million when compared to the prior-year quarter. Revenue rose in the Oil, Gas & Chemicals (OGC), Aerospace & Industrial Equipment (AIE), and Hi-Tech verticals although gains were partially offset by continued revenue challenges in the infrastructure and government services businesses, both reported in "Other." Operating profit was $1.6 million versus $1.9 million in the prior-year quarter. GETS operating profit in first quarter 2014 includes $0.3 million of restructuring charges.

The Company's Professional Staffing Services segment (PSS) reported a 1.7% revenue increase in the first quarter to $180.1 million when compared to the prior-year first quarter. Revenue increases in OGC, AIE and "Other" were partially offset by a decline in Hi-Tech. PSS operating profit was flat versus the prior-year first quarter.

Management Recruiters International, Inc. (MRI) first quarter revenue decreased 3.1% to $13.9 million compared to the prior-year first quarter, driven by declines in both contract staffing and royalty and franchise fee income. MRI's first quarter operating profit was $1.3 million compared to $1.6 million in the prior-year first quarter.

Business Outlook

The Company anticipates revenues for the second quarter of 2014 in the range of $268 million to $276 million, compared to $263.4 million in the prior-year second quarter.

Conference Call

At 11:00 a.m. Eastern Time today, Robert Larney, Interim President & CEO and CFO, will host a conference call to discuss the 2014 first quarter results and business outlook. The call can be accessed live, via the Internet, at www.cdicorp.com

About CDI

CDI Corp. (NYSE: CDI) is an integrated, market-leading engineering and technology services firm providing differentiated, client-focused solutions in select global industries. CDI provides global engineering and technology solutions and professional staffing services through its global business operations. The Company also provides staffing services through its franchised Management Recruiters International, Inc. (MRI) operating unit. Learn more 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 our future financial results, are forward-looking statements. 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 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 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: the inability to successfully execute on our CEO leadership transition, our strategic plan or the realignment announced in December 2014; weakness in general economic conditions and levels of capital spending by clients in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our clients' capital projects or the inability of our clients to pay our fees; the termination or non-renewal of a major client contract or project; delays or reductions in government spending, including the impact of sequestration on U.S. government defense spending; credit risks associated with our clients; competitive market pressures; the availability and cost of qualified personnel; our level of success in attracting, training and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations including the impact of healthcare reform laws and regulations; the possibility of incurring liability for our business activities, including the activities of our temporary employees; our performance on client contracts; negative outcome of pending and future claims and litigation; and government policies, legislation or judicial decisions adverse to our 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 and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Form 10-Ks and Form 10-Qs. 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. 

Financial Tables Follow

 

 CDI CORP. AND SUBSIDIARIES

(Amounts in thousands, except per share data)

(Unaudited)



Three Months Ended


March 31,

Consolidated Statements of Income:

2014


2013





Revenue

$

276,272



$

269,466


Cost of services

225,509



219,315


Gross profit

50,763



50,151


Operating and administrative expenses (1)

45,708



45,238


Restructuring and other related costs (2)

370




Operating profit

4,685



4,913


Other income (expense), net

(82)



(51)


Income before income taxes

4,603



4,862


Income tax expense (1)

2,562



2,309


Net income

2,041



2,553


Less: Income attributable to the noncontrolling interest

4



62


Net income attributable to CDI (1)

$

2,037



$

2,491






Earnings per common share:




Basic

$

0.10



$

0.13


Diluted

$

0.10



$

0.13


Weighted-average shares outstanding - Basic

19,507



19,378


Weighted-average shares outstanding - Diluted

19,803



19,723




Selected Balance Sheet Data:

March 31,
2014


December 31,
2013





Cash and cash equivalents

$

6,157



$

45,479


Accounts receivable, net

267,042



230,613


Total current assets

293,164



291,227


Total assets

406,673



405,807


Total current liabilities

105,788



103,236


Total CDI shareholders' equity

282,813



284,308





Three months ended


March 31,

Selected Cash Flow Data:

2014


2013





Net cash used in operating activities

$

40,753



$

21,620


Depreciation and amortization

2,690



2,561


Capital expenditures

2,296



1,093


Dividends paid to shareholders

2,536







Three Months Ended


March 31,

Selected Other Financial Data:

2014


2013







Gross profit margin

18.4

%


18.6

%

Operating and administrative expenses as a percentage of revenue

16.5

%


16.8

%

Operating profit margin

1.7

%


1.8

%

Effective income tax rate

55.7

%


47.5

%

Pre-tax return on net assets (3)

7.6

%


11.6

%




Three Months Ended


March 31,

Selected Segment Data:

2014


2013





Global Engineering and Technology Solutions (GETS)




Revenue:




Oil, Gas and Chemicals (OGC)

$

32,543



$

29,650


Aerospace and Industrial Equipment (AIE)

19,846



16,869


Hi-Tech

7,910



7,621


Other

21,955



23,897


Total revenue

$

82,254



$

78,037


Gross profit

$

22,400



$

21,524


Gross profit margin

27.2

%


27.6

%

Operating profit (2)

$

1,556



$

1,880


Operating profit margin

1.9

%


2.4

%





Professional Staffing Services (PSS)




Revenue:




Oil, Gas and Chemicals (OGC)

$

45,063



$

33,342


Aerospace and Industrial Equipment (AIE)

19,917



18,917


Hi-Tech

60,134



71,994


Other

55,025



52,855


Total revenue

$

180,139



$

177,108


Gross profit

$

21,946



$

22,270


Gross profit margin

12.2

%


12.6

%

Operating profit

$

6,145



$

6,165


Operating profit margin

3.4

%


3.5

%





Management Recruiters International (MRI)




Revenue:




Contract Staffing

$

11,072



$

11,236


Royalties and Franchise Fees

2,807



3,085


Total revenue

$

13,879



$

14,321


Gross profit

$

6,417



$

6,357


Gross profit margin

46.2

%


44.4

%

Operating profit

$

1,260



$

1,629


Operating profit margin

9.1

%


11.4

%



_________________________

(1)

In the first quarter of 2014, the Company recorded an aggregate $0.9 million charge to net income related to the separation of the CEO that was comprised of a $0.7 million pre-tax charge ($0.4 million after tax) to operations and an additional $0.5 million charge to income tax expense for the write-off of certain deferred tax assets related to the forfeiture of outstanding equity awards.



(2)

In the first quarter of 2014, the Company recorded an aggregate charge of $0.4 million (including $0.3 million to GETS) to "Restructuring and other related costs" in the consolidated statement of operations related to the 2013 restructuring plan initiated in December 2013.



(3)

Pre-tax return on net assets is calculated as earnings before income taxes for the prior 12 consecutive months divided by the average of the corresponding beginning and ending period net assets. Net assets include total assets minus total liabilities excluding cash and cash equivalents, income tax accounts and debt.

 

 

SOURCE CDI Corp.



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