Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CDI > SEC Filings for CDI > Form 10-Q on 1-Nov-2013All Recent SEC Filings

Show all filings for CDI CORP

Form 10-Q for CDI CORP


1-Nov-2013

Quarterly Report

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 I, Item 1 of this Form 10-Q Report as well as the Note About Forward-Looking Statements.

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, service desk support, 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 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 economic uncertainty in some of the markets where we operate. The Company will continue to monitor this uncertainty to position itself to respond to changing conditions. Third Quarter 2013 Overview
Revenue during the third quarter of 2013 decreased by $1.5 million or 0.5% as compared to the third quarter of 2012 due to decreases in GETS and MRI partially offset by an increase in PSS. Gross profit and gross profit margin decreased primarily due to the shift in mix to lower margin business within GETS. Operating and administrative expenses remained relatively flat. Operating profit was $6.9 million during the third quarter of 2013 as compared to $9.0 million during the third quarter of 2012 primarily due to lower gross profit margins. Net income attributable to CDI was $4.5 million during the third quarter of 2013 as compared to $5.3 million in the third quarter of 2012.


Table of Contents
                           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)

Results of Operations

Consolidated Discussion

Three months ended September 30, 2013 as compared to the three months ended
September 30, 2012

The table that follows presents changes in revenue by segment along with
selected financial information and key metrics for the three months ended
September 30, 2013 and 2012:
                                           Three Months Ended
                                              September 30,
                                     2013                       2012                     Change
                                         % of Total                 % of Total
                                $         Revenue          $         Revenue          $            %

Revenue:
GETS                       $  81,495       29.3 %     $  83,550       29.9 %     $  (2,055 )     (2.5 )%
PSS                          182,002       65.5         178,372       63.8           3,630        2.0
MRI                           14,419        5.2          17,468        6.3          (3,049 )    (17.5 )
Total Revenue              $ 277,916      100.0       $ 279,390      100.0       $  (1,474 )     (0.5 )
Gross profit               $  52,697       19.0       $  54,720       19.6       $  (2,023 )     (3.7 )
Operating and
administrative expenses    $  45,751       16.5       $  45,711       16.4       $      40        0.1
Operating profit           $   6,946        2.5       $   9,009        3.2       $  (2,063 )    (22.9 )
Net income attributable to
CDI                        $   4,528        1.6       $   5,349        1.9       $    (821 )    (15.3 )
Cash flow provided by
operations                 $  12,784                  $   9,014
Effective income tax rate       33.7 %                     39.7 %
Pre-tax return on net
assets (1)                       9.9 %                      9.1 %

(1) 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.

Revenue decreased for the third quarter of 2013 as compared to the third quarter of 2012 due to decreases in GETS and MRI partially offset by an increase in PSS. GETS revenue decreased primarily due to reduced government services and infrastructure spending in the "Other" industry vertical and to a lesser extent decreases in the Hi-Tech and AIE verticals partially offset by growth in the OGC vertical. PSS revenue increased primarily due to increased demand at existing pipeline inspection clients in the OGC vertical, partially offset by a decrease in demand at existing clients in the Hi-Tech vertical and the Company's election to exit certain low margin AIE business. MRI's revenue decreased primarily due to lower contract staffing revenue.
Gross profit and gross profit margin decreased for the third quarter of 2013 as compared to the third quarter of 2012 primarily due to the shift in mix to lower margin business within GETS.
Operating profit decreased for the third quarter of 2013 as compared to the third quarter of 2012 predominantly due to the reduced gross profit. The effective income tax rates for both periods were impacted by immaterial discrete items and the mix of domestic and foreign pre-tax income and losses with no tax benefit that had a significant impact on the effective income tax rates due to the levels of pre-tax income for both periods. As such, comparison of effective income tax rates for the third quarter of 2013 as compared to the third quarter of 2012 is not meaningful. Corporate
Corporate expenses consist of operating and administrative expenses that are not allocated to the reporting units under segment reporting. Corporate expenses remained relatively flat at $5.9 million for the third quarter of 2013 compared to $5.8 million for the third quarter of 2012.


Table of Contents
                           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)

Consolidated Discussion - Continued

Nine months ended September 30, 2013 as compared to the nine months ended
September 30, 2012

The table that follows presents changes in revenue by segment along with
selected financial information and key metrics for the nine months ended
September 30, 2013 and 2012:
                                            Nine Months Ended
                                              September 30,
                                     2013                       2012                     Change
                                         % of Total                 % of Total
                                $         Revenue          $         Revenue          $            %

Revenue:
GETS                       $ 239,483       29.5 %     $ 245,587       29.4 %     $  (6,104 )     (2.5 )%
PSS                          527,869       65.1         535,380       64.2          (7,511 )     (1.4 )
MRI                           43,393        5.4          53,448        6.4         (10,055 )    (18.8 )
Total Revenue              $ 810,745      100.0       $ 834,415      100.0       $ (23,670 )     (2.8 )
Gross profit               $ 154,393       19.0       $ 165,933       19.9       $ (11,540 )     (7.0 )
Operating and
administrative expenses    $ 137,292       16.9       $ 141,671       17.0       $  (4,379 )     (3.1 )
Operating profit           $  17,101        2.1       $  24,262        2.9       $  (7,161 )    (29.5 )
Net income attributable to
CDI                        $  10,457        1.3       $  14,124        1.7       $  (3,667 )    (26.0 )
Cash flow provided by
operations                 $     777                  $   1,182
Effective income tax rate       37.3 %                     40.3 %

Revenue decreased in all three segments for the first nine months of 2013 as compared to the first nine months of 2012. MRI's revenue decreased due to reduced contract staffing revenue and a decline in royalties. GETS revenue decreased primarily due to reduced infrastructure and government services spending in the "Other" industry vertical, decreased demand in the Hi-Tech vertical partially offset by growth in the OGC vertical. PSS revenue decreased primarily due to reduced demand at existing clients in the Hi-Tech vertical and the completion of several projects in the "Other" industry vertical partially offset by increased demand by existing clients in the OGC vertical. Gross profit decreased for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to the shift in mix to lower margin business in GETS and PSS and a reduction in revenue in all three segments. Gross profit margin decreased for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to the shift in mix to lower margin business in GETS and PSS.
Operating profit decreased primarily due to the reduced gross profit in all three segments partially offset by the cost savings from cost containment efforts initiated during the second quarter of 2012.
The effective income tax rates for both periods were impacted by immaterial discrete items and the mix of domestic and foreign pre-tax income and losses with no tax benefit that had a significant impact on the effective income tax rates due to the levels of pre-tax income for both periods. As such, comparison of income tax rates for the first nine months of 2013 as compared to the first nine months of 2012 is not meaningful.
Corporate
Corporate expenses consist of operating and administrative expenses that are not allocated to the reporting units under segment reporting. Corporate expenses increased slightly to $18.7 million for the first nine months of 2013 compared to $18.3 million for the first nine months of 2012.


Table of Contents
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 ")

Three months ended September 30, 2013 as compared to the three months ended September 30, 2012

The following table presents changes in revenue by industry vertical, cost of services, gross profit, operating and administrative expenses and operating profit for GETS for the three months ended September 30, 2013 and 2012:

                                           Three Months Ended
                                              September 30,
                                     2013                       2012                     Change
                                         % of Total                 % of Total
                                $         Revenue          $         Revenue          $            %

Revenue:
Oil, Gas and Chemicals
("OGC")                    $  31,677       38.9 %     $  27,713       33.2 %     $   3,964       14.3  %
Aerospace and Industrial
Equipment ("AIE")             19,012       23.3          19,500       23.3            (488 )     (2.5 )
Hi-Tech                        7,559        9.3           8,502       10.2            (943 )    (11.1 )
Other                         23,247       28.5          27,835       33.3          (4,588 )    (16.5 )
Total revenue                 81,495      100.0          83,550      100.0          (2,055 )     (2.5 )
Cost of services              58,830       72.2          59,309       71.0            (479 )     (0.8 )
Gross profit                  22,665       27.8          24,241       29.0          (1,576 )     (6.5 )
Operating and
administrative expenses       16,189       19.9          16,726       20.0            (537 )     (3.2 )
Operating profit           $   6,476        7.9       $   7,515        9.0       $  (1,039 )    (13.8 )

Revenue decreased during the third quarter of 2013 as compared to the third quarter of 2012 primarily due to the reduction in revenue in the "Other", Hi-Tech and AIE industry verticals partially offset by growth in the OGC industry vertical. The decrease in the "Other" industry vertical revenue was primarily due to reduced demand for government services as a result of automatic reductions in U.S. Federal government spending that went into effect in the first quarter of 2013 and continued weakness in state and local government spending on infrastructure engineering projects. The decrease in the Hi-Tech industry vertical revenue was primarily due to reduced demand by existing clients. The decrease in AIE revenue was primarily due to decreased demand in defense-related aerospace spending partially offset by growth in demand by commercial aviation clients. The increase in OGC revenue is due to increased demand by new and existing clients in the oil refining and chemical industries.

Gross profit decreased for the third quarter of 2013 as compared to the third quarter of 2012 primarily due to the shift in mix to lower margin business and to a lesser extent, reduced demand. Gross profit margin decreased for the third quarter of 2013 as compared to the third quarter of 2012 primarily due to a shift in mix from the higher margin infrastructure and government services business to the lower margin OGC vertical.

Operating and administrative expenses decreased slightly during the third quarter of 2013 as compared to the third quarter of 2012.

Operating profit decreased for the third quarter of 2013 as compared to the third quarter of 2012 primarily due to the decrease in gross profit.


Table of Contents
                           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)

Global Engineering and Technology Solutions - Continued

Nine months ended September 30, 2013 as compared to the nine months ended
September 30, 2012

The following table presents changes in revenue by industry vertical, cost of
services, gross profit, operating and administrative expenses and operating
profit for GETS for the nine months ended September 30, 2013 and 2012:
                                            Nine Months Ended
                                              September 30,
                                     2013                       2012                     Change
                                         % of Total                 % of Total
                                $         Revenue          $         Revenue          $            %

Revenue:
Oil, Gas and Chemicals
("OGC")                    $  91,463       38.2 %     $  83,908       34.2 %     $   7,555        9.0  %
Aerospace and Industrial
Equipment ("AIE")             54,395       22.7          53,918       22.0             477        0.9
Hi-Tech                       22,704        9.5          24,653       10.0          (1,949 )     (7.9 )
Other                         70,921       29.6          83,108       33.8         (12,187 )    (14.7 )
Total revenue                239,483      100.0         245,587      100.0          (6,104 )     (2.5 )
Cost of services             172,539       72.0         174,645       71.1          (2,106 )     (1.2 )
Gross profit                  66,944       28.0          70,942       28.9          (3,998 )     (5.6 )
Operating and
administrative expenses       49,185       20.5          51,468       21.0          (2,283 )     (4.4 )
Operating profit           $  17,759        7.4       $  19,474        7.9       $  (1,715 )     (8.8 )

Revenue decreased during the first nine months of 2013 as compared to the first nine months of 2012 primarily due to the reduction in revenue in the "Other" and Hi-Tech industry verticals partially offset by growth in the OGC and AIE industry verticals. The decrease in the "Other" industry vertical revenue was primarily due to reduced demand for government services as a result of automatic reductions in U.S. Federal government spending that went into effect in the first quarter of 2013 and continued weakness in state and local government spending on infrastructure engineering projects. Hi-Tech revenue decreased primarily due to the completion of several projects. The increase in OGC revenue is due to increased demand by new and existing clients in the oil refining and chemical industries. The increase in AIE revenue was primarily due to growth in demand by commercial aviation clients partially offset by decreased demand in defense-related aerospace spending.

Gross profit decreased for the first nine months of 2013 as compared to the first nine months of 2012 due to the shift in mix to lower margin business and reduced demand. Gross profit margin decreased for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to a shift in mix from the higher margin infrastructure and government services business to the lower margin OGC vertical.

Operating and administrative expenses decreased during the first nine months of 2013 as compared to the first nine months of 2012 primarily due to the cost savings from cost containment efforts initiated during the second quarter of 2012.

Operating profit decreased for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to decrease in gross profit partially offset by the reduction in operating and administrative expenses.


Table of Contents
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")

Three months ended September 30, 2013 as compared to the three months ended September 30, 2012

The following table presents changes in revenue by industry vertical, cost of services, gross profit, operating and administrative expenses and operating profit for PSS for the three months ended September 30, 2013 and 2012:

                                           Three Months Ended
                                              September 30,
                                     2013                       2012                     Change
                                         % of Total                 % of Total
                                $         Revenue          $         Revenue          $            %

Revenue:
Oil, Gas and Chemicals
("OGC")                    $  41,120       22.6 %     $  31,551       17.7 %     $   9,569       30.3  %
Aerospace and Industrial
Equipment ("AIE")             18,360       10.1          21,555       12.1          (3,195 )    (14.8 )
Hi-Tech                       68,528       37.7          72,136       40.4          (3,608 )     (5.0 )
Other                         53,994       29.7          53,130       29.8             864        1.6
Total revenue                182,002      100.0         178,372      100.0           3,630        2.0
Cost of services             159,012       87.4         155,693       87.3           3,319        2.1
Gross profit                  22,990       12.6          22,679       12.7             311        1.4
Operating and
administrative expenses       18,795       10.3          18,154       10.2             641        3.5
Operating profit           $   4,195        2.3       $   4,525        2.5       $    (330 )     (7.3 )

Revenue increased for the third quarter of 2013 as compared to the third quarter of 2012 due to the increase in revenue primarily in the OGC and "Other" industry vertical partially offset by the decrease in the Hi-Tech and AIE industry verticals. OGC revenue growth was primarily due to increased demand for pipeline-related inspection activities at existing clients and increased demand by clients in the chemical industry. Revenue in Hi-Tech declined primarily due to decreased demand at large existing clients. AIE revenue decreased primarily due to the Company's election to exit certain low margin business, which was partially offset by an increase at existing clients. Revenue in the "Other" industry vertical increased primarily due to the growth in the UK region, while we also experienced a slowdown in non-program staffing.

Gross profit and gross profit margin remained relatively flat for the third quarter of 2013 as compared to the third quarter of 2012.

Operating and administrative expenses increased during the third quarter of 2013 as compared to the third quarter of 2012 primarily due to the increase in business volume.

Operating profit decreased slightly for the third quarter of 2013 as compared to the third quarter of 2012.


Table of Contents
                           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 - Continued

Nine months ended September 30, 2013 as compared to the nine months ended
September 30, 2012

The following table presents changes in revenue by industry vertical, cost of
services, gross profit, operating and administrative expenses and operating
profit for PSS for the first nine months ended September 30, 2013 and 2012:
                                            Nine Months Ended
                                              September 30,
                                     2013                       2012                     Change
                                         % of Total                 % of Total
                                $         Revenue          $         Revenue          $            %

Revenue:
Oil, Gas and Chemicals
("OGC")                    $ 101,483       19.2 %     $  85,589       16.0 %     $  15,894       18.6  %
Aerospace and Industrial
Equipment ("AIE")             56,640       10.7          62,743       11.7          (6,103 )     (9.7 )
Hi-Tech                      211,979       40.2         222,869       41.6         (10,890 )     (4.9 )
Other                        157,767       29.9         164,179       30.7          (6,412 )     (3.9 )
Total revenue                527,869      100.0         535,380      100.0          (7,511 )     (1.4 )
Cost of services             460,736       87.3         464,502       86.8          (3,766 )     (0.8 )
Gross profit                  67,133       12.7          70,878       13.2          (3,745 )     (5.3 )
Operating and
administrative expenses       55,439       10.5          55,490       10.4             (51 )     (0.1 )
Operating profit           $  11,694        2.2       $  15,388        2.9       $  (3,694 )    (24.0 )

Revenue decreased for the first nine months of 2013 as compared to the first nine months of 2012 due to the revenue decline in the Hi-Tech, "Other" and AIE industry verticals partially offset by growth in the OGC industry vertical. Hi-Tech revenue declined primarily due to decreased demand at large existing clients partially offset by the full year impact of a new client. Revenue in the "Other" industry vertical decreased primarily due to a slowdown in non-programming staffing and the impact of the completion of several projects for a client in the financial services, partially offset by strong growth in a program staffing account and growth in the UK region. AIE revenue decreased primarily due to the Company's election to exit certain low margin business partially offset by growth within existing clients. OGC revenue growth was primarily due to increased demand for pipeline-related inspection activities at existing clients and increased demand by clients in the chemical industry.

Gross profit decreased for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to the shift in mix to lower margin business and, to a lesser extent, decrease in business volume. Gross profit margin declined for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to a shift in mix from higher margin non-program staffing clients to lower margin program staffing clients.

Operating and administrative expenses remained relatively flat during the first nine months of 2013 as compared to the first nine months of 2012.

Operating profit decreased for the first nine months of 2013 as compared to the first nine months of 2012 primarily due to the decrease in gross profit.


Table of Contents
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")

. . .

  Add CDI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CDI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.