CDI Lowers Expectations
CDI Lowers Expectations
CDI Corp. has announced that it expects revenue and pre-tax operating profit from continuing operations to be lower than the company's previous guidance due to deteriorating market conditions and several event-driven charges.
The company anticipates reporting a fourth quarter 2008 revenue decline of 15% to 16% (or approximately 9% on a constant currency basis) when compared to the prior-year quarter and expects to report pre-tax operating losses from continuing operations of between $2.6 million and $2.8 million for the same period. Pre-tax operating profit from continuing operations, exclusive of the charges described below, would likely have been in the range of $2.0 million to $2.2 million.
Included in the anticipated results for the fourth quarter are the following event-driven charges:
- Approximately $1.8 million associated with severance payments, real estate exit costs, accelerated software charges, and expenses related to the recovery of the majority of the MRI segment's international franchise network through the termination of its largest master franchise agreement. As a result of these charges, the company expects to reduce full year 2009 operating expenses in the range of $11 million to $13 million. The company also expects to take additional steps in the first quarter of 2009 to further reduce operating expenses which could result in charges in the range of $0.8 million to $1.4 million.
- An increase in reserves for potential credit losses of $2.5 million as a result of the recently-declared bankruptcy of a large account in the Engineering Solutions segment.
- Expenses of $0.5 million associated with costs incurred during unsuccessful negotiations to complete an acquisition.
Additionally, the company is performing an impairment analysis of its goodwill assets in accordance with Financial Accounting Standards Board Statement No. 142. At this time, the company has not yet completed its analysis to determine whether there is any asset impairment.
"The decline in the company's anticipated pre-tax operating profit from continuing operations, when adjusted for the aforementioned items, was driven by two primary factors," said Roger H. Ballou, President and CEO of CDI. "First, we experienced a rapid deceleration in permanent placement revenue in our AndersElite segment and in our recruitment process outsourcing business within the Engineering Solutions segment. We also saw weakness in permanent placement demand in certain industries served by our Management Recruiters International segment resulting in reduced royalty payments. Second, we saw significant staffing reductions at specific chemical and industrial clients of our Engineering Solutions segment which were announced by our customers late in 2008.
"We remain cautious in our outlook for 2009. However, we are confident that the cost reduction steps we have taken during the fourth quarter of 2008 - and anticipate taking in the first quarter of 2009 - will result in a lower breakeven level and a lean business platform that should allow us to generate profits in 2009 should the current economic climate stabilize."