The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Form 10-K Report.

Executive Overview
Business Overview
CDI is an integrated engineering and technology services organization providing differentiated, client-focused solutions in select global industries. The Company provides engineering and information technology ("IT") solutions and staffing services to clients in the Oil, Gas and Chemical ("OGC"), Aerospace and Industrial Equipment ("AIE"), and Hi-Tech industry verticals as well as in "Other" industry verticals that primarily include the infrastructure, U.S. defense, transportation and financial services industries.
The Company operates through its three reporting segments: Global Engineering and Technology Solutions ("GETS"), Professional Services Staffing ("PSS"), and Management Recruiters International ("MRI"). GETS and PSS provide engineering and IT solutions and professional staffing services. MRI provides staffing services and generates franchising revenue through royalties and initial franchise fees.
The Company offers a full range of engineering and IT solutions. Engineering solutions include: feasibility studies, technology assessments, conceptual and front-end engineering design services and detailed design, procurement, construction management, validation, testing and operating and maintenance support. IT solutions include: assessments, business application services, web development, digital solutions, service management, IT security and risk management, and program management.
Professional staffing services include the sourcing and hiring of skilled technical, professional and managerial talent both on a contract staffing and direct hire basis. CDI also provides managed services, recruitment process outsourcing and staffing process consulting services to clients on a global basis.
The Company's strategic growth plan includes focusing on high-potential growth opportunities in a discrete number of priority industries and selective expansion of the Company's geographic footprint to meet the global needs of the Company's core clients. The priority industries of the Company's focus are OGC, AIE and Hi-Tech.
The Company's results of operations can be affected by economic conditions, including macroeconomic conditions, credit market conditions and levels of business confidence. There continues to be significant volatility in markets in the U.S. and around the world, as well as economic uncertainty in some of the markets where we operate, particularly in Europe. The Company will continue to monitor this volatility and uncertainty to position itself to respond to changing conditions.
Fiscal Year 2012 Overview
In December 2011, the Company announced a strategic growth initiative. As part of that initiative, the Company implemented a restructuring plan that was the primary driver of the reduction in operating and administrative expenses, which decreased as a percentage of total revenue to 16.9% in 2012 from 18.6% in 2011.

Revenue in 2012 increased by $45.2 million or 4.3% as compared to 2011, driven by growth in all three segments, particularly PSS. Gross profit decreased by $5.9 million as gross margin decreased to 19.9%, primarily reflecting a decrease in higher margin infrastructure engineering activities in GETS and higher growth in the lower margin PSS staffing business. Operating profit in 2012 was $32.3 million as compared to $20.4 million in 2011. Operating profit in 2011 included a benefit of $9.7 million related to the successful legal appeal of the UK Office of Fair Trading ("OFT") matter and an $8.1 million charge related to the restructuring plan announced in December 2011. Excluding the impact of the OFT matter and restructuring charge, operating profit improved primarily due to the ongoing cost savings from the 2011 restructuring plan implemented in the fourth quarter of 2011. Net income attributable to CDI was $19.1 million in 2012 as compared to $14.8 million in 2011. Income taxes increased to $12.6 million or an effective tax rate of 39.3% in 2012 compared to $5.1 million or an effective tax rate of 25.5% in 2011 due primarily to the increase in operating profit and the non-taxable benefit in 2011 related to the OFT matter.
During 2012, the Company generated $37.1 million in operating cash flow or $9.1 million more than 2011 and ended the year with cash and cash equivalents of $43.7 million at December 31, 2012. These positive cash flow results reflect the Company's improved net operating results and focus on improving working capital.

Results of Operations
Fiscal Year 2012 versus 2011

Consolidated Results of Operations

The table that follows presents changes in revenue by segment along with selected financial information and key metrics for 2012 and 2011:

                                       2012                          2011                   Increase (Decrease)
                                            % of Total                    % of Total
                                  $           Revenue           $           Revenue           $              %

Revenue:
GETS                        $   325,046        29.4 %     $   323,546        30.5 %     $     1,500          0.5  %
PSS                             710,268        64.3           667,662        63.0            42,606          6.4
MRI                              69,644         6.3            68,595         6.5             1,049          1.5
Total Revenue               $ 1,104,958       100.0       $ 1,059,803       100.0       $    45,155          4.3
Gross profit                $   219,409        19.9       $   225,301        21.3       $    (5,892 )       (2.6 )
Restructuring and other
related costs               $         -           -       $     8,100         0.8       $    (8,100 )         NM
Operating and
administrative expenses (1) $   187,143        16.9       $   196,826        18.6       $    (9,683 )       (4.9 )
Operating profit            $    32,266         2.9       $    20,375         1.9       $    11,891         58.4
Net income attributable to
CDI                         $    19,116         1.7       $    14,833         1.4       $     4,283         28.9
Cash flow provided by
operations                  $    37,137                   $    28,002                   $     9,135         32.6
Effective income tax rate          39.3 %                        25.5 %
Pre-tax return on net
assets (2)                         13.8 %                         8.7 %

(1) In 2011, the Company's PSS segment recorded a $9.7 million benefit related to the successful legal appeal of the OFT matter.

(2) Income before income taxes for the year, divided by the average net assets at the beginning and end of the year for the prior 12 consecutive months. Net assets include total assets minus total liabilities excluding cash and cash equivalents, income tax accounts and debt.

NM-Not meaningful.
Revenue increased in 2012 as compared to 2011 in all three segments, particularly PSS. GETS and PSS grew revenue in each of the three key industry verticals with OGC increasing the most in total dollars and percentage growth. These increases were partially offset by declining revenue in the "Other" industry verticals due primarily to reduced spending by state and local governments on infrastructure engineering activities in GETS and the completion of a long-term project in PSS.
Gross profit dollars and gross profit margin decreased in 2012 as compared to 2011 due primarily to the decrease in higher margin infrastructure engineering activities in GETS as a result of reduced state and local government spending, a shift in mix to lower margin business in PSS and lower permanent placement revenue in MRI.
Operating profit in 2011 included a benefit of $9.7 million related to the successful legal appeal of the OFT matter partially offset by an $8.1 million charge related to the restructuring plan announced in the fourth quarter of 2011. Excluding the 2011 impact of the OFT matter and restructuring charge, operating profit increased in 2012 primarily due to the ongoing cost savings from the 2011 restructuring plan and savings from additional cost reduction efforts.
The effective income tax rate for both periods was unfavorably impacted by losses in foreign jurisdictions for which no tax benefit had been recognized and reductions to deferred tax assets for stock-based compensation grants that expired with no corresponding tax benefit. The 2011 rate was favorably impacted by a reduction in the reserve for the OFT matter and Federal income tax credits under the Hiring Incentives to Restore Employment ("HIRE") Act. Corporate
Corporate expenses consist of operating and administrative expenses that are not allocated to the reporting units under segment reporting. Corporate expenses in 2011 included $0.6 million related to the restructuring plan announced in the fourth quarter of 2011. Corporate expenses decreased to $24.2 million for 2012 from $26.3 million for 2011. Excluding the 2011 impact of the 2011 restructuring plan, corporate expenses decreased primarily due to the ongoing cost savings from the restructuring plan implemented in the fourth quarter of 2011, savings from additional cost reduction efforts, and a reduction in consulting and personnel-related costs incurred during 2011 as the Company made investments to develop its new business strategy.

                           CDI CORP. AND SUBSIDIARIES
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
  (Amounts in thousands, except per share amounts, unless otherwise indicated)

Segment Results of Operations

Global Engineering and Technology Solutions ("GETS ")

The following table presents changes in revenue by industry vertical, cost of
services, gross profit, operating and administrative expenses and operating
profit for GETS in 2012 and 2011:
                                       2012                        2011                Increase (Decrease)
                                           % of Total                 % of Total
                                  $          Revenue         $          Revenue           $             %

Revenue:
Oil, Gas and Chemicals
("OGC")                      $ 110,931        34.1 %     $ 99,352        30.7 %     $    11,579        11.7  %
Aerospace and Industrial
Equipment ("AIE")               72,349        22.3         71,815        22.2               534         0.7
Hi-Tech                         32,829        10.1         29,639         9.2             3,190        10.8
Other                          108,937        33.5        122,740        37.9           (13,803 )     (11.2 )
Total revenue                  325,046       100.0        323,546       100.0             1,500         0.5
Cost of services               231,328        71.2        226,738        70.1             4,590         2.0
Gross profit                    93,718        28.8         96,808        29.9            (3,090 )      (3.2 )
Operating and administrative
expenses (1)                    67,993        20.9         81,829        25.3           (13,836 )     (16.9 )
Operating profit             $  25,725         7.9       $ 14,979         4.6       $    10,746        71.7

(1) The year ended December 31, 2011 included a $4.5 million restructuring charge.

GETS' revenue increased in 2012 as compared to 2011 primarily due to the growth in OGC and Hi-Tech industry verticals substantially offset by a decrease in "Other" industry verticals. The increase in OGC revenue was driven by increased demand from existing clients in the chemical industry. AIE revenue was relatively flat as revenue growth from the commercial aviation industry was significantly offset by reduced government agency and defense funding. Hi-Tech revenue increased in 2012 as compared to 2011 due primarily to increased demand from existing clients. Revenue in "Other" industry verticals decreased primarily due to reduced spending by state and local governments on infrastructure engineering activities partially offset by increased naval defense spending.

GETS' gross profit dollars and gross profit margin decreased in 2012 as compared to 2011 primarily due to the decline in higher margin infrastructure engineering activities.

GETS' operating and administrative expenses in 2011 included a $4.5 million restructuring charge. Excluding the 2011 impact of the restructuring charge, operating and administrative expenses decreased in 2012 primarily due to the ongoing cost savings from the restructuring plan announced in the fourth quarter of 2011 and savings from additional cost reduction efforts.

Excluding the impact of the 2011 restructuring charge, GETS' operating profit improved due to ongoing cost savings from the 2011 restructuring plan partially offset by the decline in higher margin infrastructure engineering activities.

                           CDI CORP. AND SUBSIDIARIES
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
  (Amounts in thousands, except per share amounts, unless otherwise indicated)

Professional Services Staffing ("PSS")
The following table presents changes in revenue by industry vertical, cost of
services, gross profit, operating and administrative expenses and operating
profit for PSS in 2012 and 2011
                                       2012                        2011                Increase (Decrease)
                                           % of Total                 % of Total
                                  $          Revenue         $          Revenue           $             %

Revenue:
Oil, Gas and Chemicals
("OGC")                      $ 117,240        16.5 %     $ 81,771        12.2 %     $    35,469        43.4  %
Aerospace and Industrial
Equipment ("AIE")               84,235        11.9         64,175         9.6            20,060        31.3
Hi-Tech                        291,839        41.1        280,433        42.0            11,406         4.1
Other                          216,954        30.5        241,283        36.1           (24,329 )     (10.1 )
Total revenue                  710,268       100.0        667,662       100.0            42,606         6.4
Cost of services               616,083        86.7        572,093        85.7            43,990         7.7
Gross profit                    94,185        13.3         95,569        14.3            (1,384 )      (1.4 )
Operating and administrative
expenses (1), (2)               73,657        10.4         73,382        11.0               275         0.4
Operating profit             $  20,528         2.9       $ 22,187         3.3       $    (1,659 )      (7.5 )

(1) The year ended December 31, 2011 included a $9.7 million benefit related to the successful legal appeal of the OFT matter.

(2) The year ended December 31, 2011 included a $2.6 million restructuring charge.

PSS' revenue increased in 2012 as compared to 2011 driven by growth in the OGC, AIE and Hi-Tech industry verticals, partially offset by the decrease in the "Other" industry verticals. OGC revenue growth was primarily due to increased demand for pipeline-related inspection activities. AIE revenue growth was primarily due to the impact of new clients. Hi-Tech revenue growth was primarily due to increased demand from existing clients and to a lesser extent the impact of new clients. Revenue in "Other" industry verticals decreased due primarily to the impact of the completion of a long-term project for a client in the financial services industry.

PSS' gross profit dollars and margin decreased in 2012 as compared to 2011 primarily due to a shift in mix to lower margin business and to a lesser extent reduced permanent placement fees. The shift in mix to lower margin business primarily relates to the growth in lower margin pipeline-related business and the impact of the completion of the higher margin project in the financial services industry.

PSS's operating and administrative expenses for 2011 included a benefit of $9.7 million related to the successful legal appeal of the OFT matter and a $2.6 million restructuring charge. Excluding the impact of the OFT matter and restructuring charge, operating and administrative expenses decreased primarily due to the ongoing cost savings from the restructuring plan implemented in the fourth quarter of 2011 and savings from additional cost reduction efforts.

Excluding the impact of the 2011 benefit related to the OFT matter and restructuring charge, PSS' operating profit improved primarily due to the ongoing cost savings from the restructuring plan implemented in the fourth quarter of 2011 and savings from additional cost reduction efforts partially offset by the decline in higher margin business.

                           CDI CORP. AND SUBSIDIARIES
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
  (Amounts in thousands, except per share amounts, unless otherwise indicated)

Management Recruiters International ("MRI")

The following table presents changes in revenue by service type, cost of
services, gross profit, operating and administrative expenses and operating
profit for MRI in 2012 and 2011:
                                       2012                       2011                 Increase (Decrease)
                                          % of Total                 % of Total
                                 $          Revenue         $          Revenue           $               %

Revenue:
Contract Staffing            $ 53,646        77.0 %     $ 51,612        75.2 %     $     2,034           3.9
Royalties and Franchise Fees   15,998        23.0         16,983        24.8              (985 )        (5.8 )
Total revenue                  69,644       100.0         68,595       100.0             1,049           1.5
Cost of services               38,138        54.8         35,671        52.0             2,467           6.9
Gross profit                   31,506        45.2         32,924        48.0            (1,418 )        (4.3 )
Operating and administrative
expenses                       21,305        30.6         23,456        34.2            (2,151 )        (9.2 )
Operating profit             $ 10,201        14.6       $  9,468        13.8       $       733           7.7

MRI's revenue increased in 2012 as compared to 2011 due primarily to growth in contract staffing revenue partially offset by a reduction in permanent placement royalty revenue.
MRI's gross profit dollars and margin decreased in 2012 as compared to 2011 due primarily to lower permanent placement royalty revenue.
MRI's operating and administrative expenses decreased in 2012 as compared to 2011 primarily due to the ongoing cost savings from the restructuring plan implemented in the fourth quarter of 2011.
MRI's operating profit increased in 2012 as compared to 2011 primarily due to the ongoing cost savings from the restructuring plan implemented in the fourth quarter of 2011 partially offset by lower permanent placement royalty revenue.

                           CDI CORP. AND SUBSIDIARIES
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
  (Amounts in thousands, except per share amounts, unless otherwise indicated)

Fiscal Year 2011 versus 2010

Consolidated Results of Operations

The table that follows presents changes in revenue by segment along with
selected financial information and key metrics for 2011 and 2010:
                                       2011                           2010                    Increase (Decrease)
                                            % of Total                     % of Total
                                  $           Revenue          $            Revenue              $              %

Revenue:
GETS                        $   323,546        30.5 %     $ 280,552         30.3  %       $     42,994         15.3 %
PSS                             667,662        63.0         584,421         63.1                83,241         14.2
MRI                              68,595         6.5          61,316          6.6                 7,279         11.9
Total Revenue               $ 1,059,803       100.0       $ 926,289        100.0          $    133,514         14.4
Gross profit                $   225,301        21.3       $ 193,963         20.9          $     31,338         16.2
Restructuring and other
related costs               $     8,100         0.8       $       -            -          $      8,100           NM
Goodwill impairment         $         -           -       $   8,312          0.9          $     (8,312 )         NM
Operating and
administrative expenses (1) $   196,826        18.6       $ 185,958         20.1          $     10,868          5.8
Operating profit (loss)     $    20,375         1.9       $    (307 )          -          $     20,682           NM
Net income (loss)
attributable to CDI         $    14,833         1.4       $ (10,858 )       (1.2 )        $     25,691           NM
Cash flow provided by (used
in) operations              $    28,002                   $  (4,339 )                     $     32,341           NM
Effective income tax rate          25.5 %                    (243.7 )%
Pre-tax return on net
assets (2)                          8.7 %                      (1.5 )%

(1) In 2011, the Company's PSS segment recorded a $9.7 million benefit related to the successful legal appeal of the OFT matter.

(2) Income (loss) before income taxes for the year, divided by the average net assets at the beginning and end of the year for the prior 12 consecutive months. Net assets include total assets minus total liabilities excluding cash and cash equivalents, income tax accounts and debt.

NM-Not meaningful.

Revenue increased in 2011 as compared to 2010 driven by growth in all segments. GETS revenue increased primarily as a result of the inclusion of a full year of revenue in 2011 from the acquisitions of the L.R. Kimball and DSPCon businesses in June and December 2010, respectively, and growth in the OGC industry vertical. PSS revenue increased due to growth in all industry verticals partially offset by the deterioration in the UK transportation business in the "Other" industry vertical. MRI increased revenue primarily due to growth in franchisees' staffing services.

Gross profit dollars increased during 2011 as compared to 2010 primarily due to the increases in revenue. Gross profit margin increased primarily due to the inclusion of a full year of profits in 2011 from the acquisitions of the L.R. Kimball and DSPCon businesses in June and December 2010, respectively, partially offset by $4.1 million of HIRE Act payroll tax credits received in 2010.

Consolidated operating and administrative expenses for 2011 increased as compared to 2010, primarily due to the inclusion of a full year of activity in 2011 from the acquisitions of the L.R. Kimball and DSPCon businesses in June and December of 2010, respectively, and increased consulting costs in the corporate reporting unit as the Company made investments to support a change to its organizational structure. These increases were partially offset by the OFT fine reduction of $9.7 million in the second quarter of 2011 and the impact of cost reduction measures taken throughout 2011.

Operating profit increased primarily due to increases in business volume, the OFT fine reduction in the second quarter of 2011, the $8.3 million goodwill impairment charge in 2010 and the impact of cost reduction measures in 2011. This increase was partially offset by the $8.1 million restructuring expense in 2011, $4.1 million HIRE Act payroll tax credits in 2010 and the $1.8 million benefit realized in 2010 as a result of a legal settlement. Operating profit margin increased from 0.0% in 2010 to 1.9% in 2011, primarily due to the factors that affected operating profit described above.

The effective tax rates for 2011 and 2010 were 25.5% and (243.7)%, respectively. The effective income tax rate for 2011 was favorably impacted by a reduction in the reserve for the OFT matter, which was not subject to tax. The 2011 period was also favorably impacted by Federal income tax credits under the HIRE Act of $0.9 million. However, these credits were offset by a $0.8 million reduction to deferred tax assets for stock-based compensation grants that vested or expired. In addition, the 2011 rate was unfavorably impacted by losses in the UK and Australia for which no tax benefit had been recognized.

The negative income tax rate for the 2010 period reflects an income tax expense on a pre-tax loss. The income tax rate for the 2010 period was unfavorably impacted primarily by: certain foreign tax attributes, including a $2.8 million charge for a full valuation allowance against deferred tax assets in the UK operations of Anders; the $2.9 million tax effect of an $8.3 million impairment charge related to a non-deductible goodwill write-down in the PSS segment; losses in foreign jurisdictions on which no tax benefit had been recognized or on which the tax benefit was recognized at tax rates lower than the U.S. rate; and additional tax expense related to a non-realizable tax asset. These unfavorable items were partially offset by the favorable impact of the 2010 reduction in the reserve for the 2009 claim under the US False Claims Act brought by the Civil Division of the Department of Justice ("DOJ") and an individual relator (the "DOJ matter"), which was largely not taxable.

In December 2011, the Company announced a strategic growth initiative. As part of that initiative, the Company approved a Restructuring Plan that was designed to reduce costs and improve efficiencies. The Restructuring Plan eliminated approximately 200 positions, consolidated facilities and reduced related operating costs. Restructuring Plan actions started in December 2011.

In the fourth quarter of 2011, the Company recorded an aggregate pre-tax charge of $8.1 million to "Restructuring and other related costs" in the consolidated statement of operations, comprised of $5.7 million of employee severance and related costs, $0.8 million of real estate exit and related costs and $1.5 million of asset write-offs.

Corporate
Corporate expenses consist of operating and administrative expenses that are not . . .