CDI Corp. Reports Fourth Quarter and Full Year 2009 Results
CDI Corp. has reported its financial results for the fourth quarter and year ended December 31, 2009, and announced a quarterly cash dividend.
For the quarter ended December 31, 2009, the company reported a net loss of $6.9 million, or $0.36 per diluted share, versus a net loss of $3.6 million, or $0.19 per diluted share, in the prior-year fourth quarter.
For the fourth quarter 2009, the operating loss was $6.4 million compared to $3.2 million in the fourth quarter 2008.
The fourth quarter 2009 operating loss of $6.4 million includes a $4.3 million charge associated with a previously-disclosed claim under the federal False Claims Act that the company received from the Civil Division of the U.S. Department of Justice (DOJ) in August 2009. Also included are $0.4 million in legal expenses associated with the DOJ claim, $0.6 million in charges for severance and real estate exit costs, $0.6 million in non-income based tax items, and an increase in bad debt reserves of $0.3 million for potential credit losses associated with a previously-disclosed bankruptcy of a large customer in the Engineering Solutions segment.
Excluding these charges, the companys operating loss for the fourth quarter 2009 was $0.3 million while the net loss was $1.6 million or $0.09 per diluted share. Fourth quarter 2008 operating profit, when excluding charges totaling $5.3 million disclosed in that prior-year period, was $2.1 million, while the net loss was $0.1 million or $0.01 per diluted share.
Fourth quarter 2009 revenue declined 14.4% (16.7% in constant currency) to $217.2 million compared to revenue of $253.6 million in the prior-year fourth quarter.
For the year ended December 31, 2009, the company reported a net loss of $19.9 million, or $1.05 per diluted share, on revenue of $885.0 million. In addition to the aforementioned fourth quarter 2009 charges, the major factor contributing to the full year 2009 loss is a $12.3 million charge which the company recorded in the third quarter of 2009 related to the previously-disclosed fine imposed by the United Kingdoms Office of Fair Trading. For the full year 2008, the company reported net earnings of $19.4 million, or $0.97 per diluted share, on revenue of $1.12 billion.
The company also announced a quarterly cash dividend of $0.13 per share to be paid on March 23, 2010 to all shareholders of record as of March 9, 2010.
Although CDIs markets remained challenging in the fourth quarter, we saw some signs that a modest recovery is underway in sectors of our business, said President and Chief Executive Officer, Roger H. Ballou. Our IT Solutions business experienced year-over-year revenue growth of 13.0% due to successful business development efforts and increased spending across most industry segments, while our Management Recruiters International division saw a moderation in royalty revenue decline versus the prior year which resulted in sequential royalty growth. However, we saw continued softness in some areas of our Engineering Solutions business as customer capital projects primarily in the chemical, petrochemical and commercial aerospace markets continued to be delayed. Additionally, we continued to see softness at AndersElite driven by the weak UK construction industry.
Business Segment Discussion
CDI Engineering Solutions (ES) revenue declined 19.2% (21.1% in constant currency) versus the year-ago fourth quarter primarily driven by continued weakness in the Process & Industrial vertical (particularly in the
petrochemical and chemical areas) as well as by weakness in commercial aviation in the Aerospace vertical.
ES reported an operating loss of $4.6 million versus an operating profit of $0.9 million in the year-ago fourth quarter. ES performance was driven by the revenue decline, the aforementioned DOJ charge of $4.3 million and associated legal expense of $0.4 million. Fourth quarter operating results also include $0.5 million in losses from the companys ownership in joint ventures, $0.4 million in real estate exit and severance costs, and $0.3 million in increased bad debt reserves. Fourth quarter 2008 results included bad debt charges of $2.5 million due to the bankruptcy of a large customer, reorganization charges of $0.6 million, $0.5 million in costs associated with unsuccessful acquisition negotiations, and a $0.5 million goodwill adjustment.
Additionally, the prior-year fourth quarter included $0.4 million of operating losses associated with the companys ownership in joint ventures.
Management Recruiters International, Inc. (MRI) revenue declined by 21.9% versus the prior-year fourth quarter reflecting a moderation in royalty revenue declines as well as declines in staffing and franchise sales.
MRI reported operating profit of $1.0 million, versus a $1.1 million operating profit in the year-ago fourth quarter, primarily due to declines in higher-margin royalties mostly offset by cost reduction efforts.
UK-based CDI AndersElite (Anders) revenue declined 35.6% (41.5% in constant currency) versus the prior year fourth quarter reflecting moderating, but still weak, market conditions in the UK construction industry.
Anders reported an operating loss of $1.3 million versus an operating loss of $1.7 million in the year-ago fourth quarter reflecting the revenue decline offset by cost reduction efforts.
CDI IT Solutions fourth quarter revenue accelerated to a growth rate of 13.0% when compared to the year ago fourth quarter reflecting ramp-up of previous new business wins and continued business development efforts. Operating profit of $1.7 million was more than double the prior-year fourth quarter reflecting the revenue increase, operating leverage and effective cost controls during the quarter.
Corporate overhead costs decreased by 16.5% compared to the prior-year fourth quarter primarily related to cost control efforts which included lower professional services fees somewhat offset by severance costs of $0.1 million.
CDI ended the quarter with $73.5 million in cash and cash equivalents, said Ballou. With our existing cash and cash equivalents, and untapped borrowing capacity, we should have sufficient resources to support organic revenue growth, capital spending, shareholder dividends and potential strategic acquisitions.
While some areas of our business have shown resilience particularly in IT Solutions, MRI and Government Services the nascent economic recovery has not yet affected all areas of CDIs current business mix, said Ballou. We anticipate that our customers will increase their capital spending in CDIs Engineering Solutions verticals later in the business cycle and that permanent placement hiring in technical, professional and managerial areas will ramp-up during the year. The prudent expense reductions we have taken during the previous six quarters have enabled us to reduce total CDI operating and administrative expenses by over $10 million during the fourth quarter versus the prior year and by over $49 million for the full year versus the prior year when excluding the DOJ and OFT charges and other previously-disclosed out-of-pattern charges.
This has created an efficient operating structure which could provide upside operating leverage. We anticipate that overall first quarter 2010 revenue declines could narrow to 5% to 8% on a year-over-year basis. As a result of the relative weakness of the US dollar compared to the year-ago first quarter, we anticipate that in constant currency our revenue decline could likely be in the range of 8% to 11%.