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CDI Corp. Reports Third Quarter 2010 Results and Announces Dividend

CDI Corp. Reports Third Quarter 2010 Results and Announces Dividend
CDI Corp. recently 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 $12.2million, 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 Kingdoms 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 segments 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.


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