CDI Corp. Reports Second Quarter 2010 Results
CDI Corp. Reports Second Quarter 2010 Results and Announces Dividend
CDI Corp. has reported its financial results for the second quarter ended June 30, 2010 and announced a quarterly cash dividend.
For the quarter ended June 30, 2010, the company reported net earnings of $2.6 million, or $0.13 per diluted share, on revenue of $219.0 million versus $0.1 million in net earnings, or $0.00 per diluted share, on revenue of $215.4 million in the year-ago second quarter.
Second quarter results include a benefit of $1.8 million related to lower estimated penalties and legal fees associated with a previously-disclosed claim made under the Federal False Claims Act that the company received from the Civil Division of the US Department of Justice (DOJ). This benefit was reduced in part by second quarter pre-tax charges of $0.4 million for severance and real estate exit costs and $0.3 million in costs associated with the previously-announced June 28, 2010 purchase of the business of L. Robert Kimball & Associates, Inc. (L.R. Kimball).
Excluding these items, pre-tax earnings for the quarter were $1.9 million. Second quarter 2009 pre-tax earnings, excluding severance charges totaling $0.7 million, were approximately $0.8 million.
Second quarter 2010 revenue increased 1.7% (0.9% in constant currency) to $219.0 million compared to revenue of $215.4 million in the prior-year second quarter. A quarterly cash dividend of $0.13 per share will be paid on August 26, 2010 to all shareholders of record as of August 12, 2010.
We continued to see signs of a modest recovery consistent with patterns observed since the fourth quarter of 2009, said President and Chief Executive Officer, Roger H. Ballou. We are particularly pleased by signs of above-market growth in our IT Solutions segment which achieved year-over-year revenue growth of over 31%. Additionally, we were pleased with continued improvement in our Management Recruiters International segment which achieved year-over-year revenue growth of over 14%. We continued to see softness in areas of our Engineering Solutions segment but we also see signs through awards and bid activity that could indicate a modest rebound in the second half of the year.
Business Segment Discussion
CDI Engineering Solutions (ES) revenue declined 7.0% (8.8% in constant currency) versus the year-ago second quarter driven by a decrease in spending by customers in the Aerospace, Government Services and Process & Industrial verticals. ES second quarter 2010 revenue includes $0.7 million from the new CDI-Infrastructure vertical which includes three days of results from the aforementioned L.R. Kimball purchase. Operating profit decreased 11.5% versus the prior-year quarter driven primarily by the decline in higher-margin project engineering and permanent placement revenue as well as by $0.3 million in severance and real estate exit costs, partially offset by the $1.8 million benefit related to the aforementioned DOJ matter. Second quarter 2009 operating profit also included $0.3 million in severance charges.
Management Recruiters International, Inc. (MRI) revenue increased 14.2% versus the prior-year quarter driven by increases in royalty revenue, contract staffing revenue and franchise sales revenue. Operatingprofit increased $1.3 million on a year-over-year basis driven primarily by the increase in higher-marginroyalty revenues and by ongoing expense controls. Second quarter 2009 MRI operating profit includedseverance charges of $0.1 million.
UK-based CDI AndersElite (Anders) revenue declined 33.7% (31.6% in constant currency) compared tothe prior-year second quarter reflecting continued weak conditions in the UK construction industry.
Anders operating loss was reduced by $1.0 million versus the prior-year quarter reflecting expensecontrol efforts and increases in higher-margin permanent placement revenue offset by a decline instaffing services revenue. Operating loss in the year-ago quarter included $0.2 million in severancecosts.
CDI IT Solutions (ITS) revenue increased 31.8% versus the prior-year quarter. These gains were drivenby successful business development efforts across both retail and national accounts and new accountwins. Operating profit increased 52.5% to $2.9 million driven by the aforementioned revenue growth andoperating leverage. Operating profit in both the current and year-ago quarter included $0.1 million inseverance charges.
Corporate overhead remained virtually flat versus the prior-year quarter reflecting continuing cost controlefforts.
CDI ended the quarter with $27.4 million in cash and cash equivalents, said Ballou. Primary uses ofcash during the quarter included the purchase of L.R. Kimball and funding of organic growth primarily inour ITS segment. With our existing cash and cash equivalents and borrowing capacity, we should havesufficient resources to support company growth and ongoing capital needs.
If the current business momentum continues in both our ITS segment and in permanent placementdemand, particularly in MRI, and if we see an anticipated rebound in capital spending by our EScustomers, we would expect significant improvements in operating leverage in the second half of 2010,said Ballou. We expect that overall third quarter 2010 organic revenue increases could range from 1% to
4% on a year-over-year basis and 8% to 11% when including revenue from the L.R. Kimball acquisition.