CDI Corp. (CDI) to Cut 200 Positions, Guides FY14 Revs, Profit Margins

CDI Corp. (NYSE: CDI) announced business model and organization changes aligned with a new growth vision to make CDI an engineering and technology solutions company with global capabilities in select markets. These changes will grow CDI's solutions business, optimize the Company's professional staffing operations, and prioritize the geographic markets and industries to which the Company will deliver engineering and technology solutions.

CDI currently provides solutions for clients in more than 20 industries. While the Company expects to continue serving clients in a variety of business segments, going forward CDI will focus on providing end-to-end engineering and technology solutions primarily for the oil & gas, chemicals, aerospace, industrial products and hi-tech industries. The Company will also leverage its strong staffing capabilities into a global professional services operation that provides cross-industry, in-demand skills in the engineering and technology markets that best serve its clients.

Key elements of the strategic plan include:

• Create an organization that includes a new client engagement model in three geographic regions -- the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific (APAC) -- to enhance client service and relationships across the portfolio of CDI services;
  
  
• Reorganize CDI's existing Engineering Solutions (ES) and IT Solutions (ITS) services into a Global Engineering and Technology Solutions (GETS) service line with a primary focus on service excellence;
  
  
• Create a Professional Services Staffing (PSS) service line combining CDI's staffing and advisory services, including the current AndersElite business, into a global talent sourcing and delivery service line focused on technical and professional talent;
  
  
• Prioritize investments in five select industry verticals, including Oil & Gas, Chemicals, Aerospace, Industrial Products and Hi-Tech;
  
  
• Maintain Management Recruiters International (MRI) as a separate reporting entity;
  
  
• Centralize support functions and processes into a global model to optimize execution and more effectively manage costs.

Fnancial Overview

The strategic plan will result in a reduction in staff headcount of approximately 200 employees.

CDI anticipates that this program will result in a pre-tax restructuring charge of approximately $8 to $9 million in the fourth quarter of 2011 reflecting employee severance and related costs.

As a result, CDI anticipates pre-tax cost savings of approximately $22 million in 2012. In order to accelerate growth and support the new organizational structure, CDI is planning to make select employee hires in 2012 which will cost approximately $3.5 million. The Company is also planning additional investments in 2012 to support the new strategic plan, including technology upgrades and restoration of certain employee benefits that were reduced during the financial crisis. Taking into account these investments, CDI expects that at least one-half of the net savings of approximately $18.5 million will benefit pre-tax earnings in 2012.

Business Segment Reporting

"This strategic plan will make CDI more focused and better aligned with current and future client needs while optimizing our service delivery organization for maximum efficiency and operational excellence," noted Eberhart. Beginning in 2012, the Company will report revenue, gross profit and operating profit geographically. Additionally, the Company will report revenue and gross profit by service lines. MRI, the Company's franchise delivery model focusing on mid-level and senior-level permanent placement recruitment and staffing, will continue to be reported as a separate business segment and will report revenue, gross profit and operating profit.

Reporting segments will include:

• The Americas
  
• EMEA
  
• APAC
  
• MRI

Service lines will include:

• Global Engineering and Technology Solutions (GETS). This service line will comprise engineering outsourcing services currently provided by CDI's ES verticals including Aerospace, Process and Industrial (P&I), Government Services, and Infrastructure, as well as IT outsourcing services provided by the Company's current ITS segment.
  
  
• Professional Services Staffing (PSS). This service line will comprise staffing services currently provided by CDI's ES verticals including P&I, Government Services, Aerospace, the AndersElite segment and the ITS segment.

Increased Shareholder Value

When the planned organizational changes, more efficient operating platform, emphasis on higher margin solutions business and professional staffing, and new growth-focused vision are fully implemented, the Company's plan contemplates:

• Producing organically grown revenues of $1.3 to $1.4 billion by 2014, up from $1.0 billion in the 12 months ended September 30, 2011;
  
  
• Increasing operating profit margins to a range of 3.5% to 4.5% by 2014, up from 1.0% in the 12 months ended September 30, 2011 (excluding a $9.7 million benefit from a successful legal appeal in the second quarter of 2011 and $8.3 million in impairments incurred in the fourth quarter of 2010); or up from 1.4% in the 9 months ended September 30, 2011 (excluding a $9.7 million benefit from a successful legal appeal in the second quarter of 2011).

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