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CDI Corp. Reports First Quarter 2016 ResultsPHILADELPHIA, May 4, 2016 /PRNewswire/ -- CDI Corp. (NYSE: CDI) (the "Company") today reported results for the first quarter ended March 31, 2016. "During the first quarter we made progress on implementing our long-term strategic plan. In multiple areas of our business, we are beginning to realize the benefits of our focus on client service and new business development," said CEO and President Scott J. Freidheim. "While there is evidence of success from our performance improvement programs, much work remains. We will continue to channel resources to our strategic areas of focus to execute our plan." First Quarter Overview
In the first quarter 2016, the Company's net loss attributable to CDI was $4.8 million, versus net income attributable to CDI of $0.5 million in the prior-year quarter. In the first quarter 2016, the Company's net loss per diluted share was $(0.24) versus earnings of $0.02 per diluted share in the prior-year quarter. 1 Adjusted EBITDA excludes from net income (loss) attributable to CDI, interest, income taxes, depreciation and amortization expense, restructuring and other related costs, share-based compensation expense, leadership transition costs, loss on disposition, certain acquisition related items and earnout reversals. Adjusted EPS excludes from diluted earnings per common share restructuring and other related costs, leadership transition costs, loss on disposition, certain acquisition related items, earnout reversals, amortization of acquired intangibles and the related income tax effect of each of the adjustments. See the financial tables accompanying this release for more information on non-GAAP financial measures and the reconciliation of these measures to GAAP measures. Summary Results from Operations for the First Quarter Effective this quarter, CDI is reporting on four new operating segments aligned with the Company's strategy: Enterprise Talent; Specialty Talent and Technology Solutions; Engineering Solutions and Management Recruiters International (MRI). Historical results have been reclassified to facilitate comparisons to prior periods and are available in a Form 8-K filed by the Company on April 8, 2016. For the first quarter 2016, revenue decreased by $23.9 million or 9.3% (7.6% in constant currency) as compared to the prior-year first quarter. Results for the first quarter of 2016 include $10.0 million in revenue from EdgeRock Technologies, LLC, acquired in October 2015 and now comprising our Specialty Talent vertical within the Specialty Talent and Technology Solutions segment. During the quarter, revenue decreased versus the prior-year period in three of the Company's four reporting segments, but most significantly in Enterprise Talent. Enterprise Talent revenue declined $21.8 million or 13.5% from the prior-year period. Revenue declined in both the North America Staffing and UK Staffing verticals. North America Staffing decreased 12.6% (10.2% in constant currency), driven primarily by decreased spending among certain oil and gas pipeline clients and the Company's largest client. UK Staffing declined 17.8% (13.3% in constant currency), driven by softness in both network rail and general construction contract hiring. Specialty Talent and Technology Solutions revenue more than doubled year-over-year to $18.4 million, principally as a result of the inclusion of $10.0 million in revenue from the acquisition of EdgeRock (now the Specialty Talent vertical). In Technology Solutions, revenue increased $0.7 million or 8.9% due to increased spending by existing and new clients. Engineering Solutions revenue declined $11.6 million or 15.5% versus the prior-year period, with declines in the Energy, Chemicals & Infrastructure and Aerospace & Industrial Equipment verticals, partially offset by an increase in the Government Services vertical. MRI revenue in the first quarter decreased $1.3 million or 9.5% compared to the prior year, led primarily by a decline in contract staffing. Gross profit decreased by $3.5 million as a decrease in volume was partially offset by an increase in gross margin rates resulting primarily from a shift in revenue mix toward higher margin Specialty Talent and Technology Solutions, largely as a result of the acquisition of EdgeRock. The Company reported an operating loss in the first quarter of $3.8 million compared to an operating profit of $1.1 million in the year-ago quarter, primarily due to a decrease in gross profit and an increase in operating and administrative expenses. Operating and administrative expenses in the first quarter increased $1.8 million, or 3.9%, compared to the first quarter of 2015, primarily due to expenses associated with EdgeRock. On an organic basis, operating expenses were down versus the prior-year quarter as increased personnel expenses for business development, corporate development and business management were offset by reductions in professional fees, international business development and depreciation. More detailed segment data are included in the tables incorporated in this release and in the Company's Form 10-Q Report. Balance Sheet and Liquidity CDI ended the first quarter with $9.8 million in cash and cash equivalents versus $16.9 million at the end of the fourth quarter 2015 and $28.1 million at the end of the first quarter 2015. Total debt outstanding was $16.9 million at March 31, 2016, versus $18.8 million at December 31, 2015. Net cash generated by operating activities was a deficit of $(0.7) million in the first quarter 2016 versus a deficit of $(4.6) million used in the prior-year quarter. Total liquidity, including availability under CDI's bank and credit facilities, totaled $136.6 million at March 31, 2016, versus $137.6 million at the end of the fourth quarter 2015. Business Outlook and Strategy The Company estimates revenue for the second quarter of 2016 in the range of $225 million to $235 million. Our guidance anticipates some sequential improvement in Specialty Talent and Technology Solutions, Engineering Solutions and MRI, offset by Enterprise Talent as a result of seasonality in the Western Canada oil and gas business within North America Staffing. As noted last quarter, the Company is pursuing its CDI 2020 strategic plan. As part of our strategic plan:
Conference Call At 8:30 a.m. Eastern Time on May 5, 2016, Scott J. Freidheim, CEO and President, and Michael S. Castleman, CFO and Executive Vice President, will host a conference call to discuss the 2016 first quarter results and business outlook. The call can be accessed live, via the Internet, at www.cdicorp.com. About CDI CDI Corp. (NYSE: CDI) seeks to create extraordinary outcomes with our clients by delivering solutions based on highly skilled and professional talent. Our business is comprised of four segments: Enterprise Talent, Specialty Talent & Technology Solutions, Engineering Solutions and MRI. Our client offerings include an array of engineering design project solutions, information technology project solutions and managed services, specialty technology staff augmentation, and program and managed staffing services. Our clients are corporations in multiple industries, including energy, chemicals, infrastructure, aerospace, industrial equipment, technology, as well as municipal and state governments, and the U.S. Department of Defense. We have offices and delivery centers in the United States, Canada and the United Kingdom. In addition, we also provide recruiting and staffing services through our global MRINetwork® of franchisees. Learn more at www.cdicorp.com. Caution Concerning Forward-Looking Statements This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, we and our representatives may make statements that are forward-looking. All statements that address expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue, gross profit, operating profit, cash flow and tax rate), are forward-looking statements. Some of the forward-looking statements can be identified by words like "anticipates," "believes," "expects," "may," "will," "could," "should," "intends," "plans," "estimates" and similar references to future periods. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and one or more assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: weakness or volatility in general economic conditions and levels of capital spending by customers in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our customers' projects or the inability of our customers to pay for our fees; the termination of one or more major customer contracts or projects; the uncertain timing and funding of new contract awards and renewals; a high concentration of our business with a few large customers; the failure to achieve the anticipated benefits of acquisitions, and difficulties in integrating acquired businesses with CDI; the inability to obtain favorable price and other terms for any acquisitions and divestitures we may do; delays or reductions in U.S. government spending; credit risks associated with our customers; competitive market pressures; foreign currency fluctuations; restrictions on availability of funds and on our activities under our asset-based, secured credit facility; the availability and cost of qualified labor; our level of success in attracting, training and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our professional employees and our temporary employees; our performance on customer contracts; negative outcome of pending and future claims and litigation; improper disclosure or loss of sensitive or confidential company, customer, employee or candidate information, including personal data; and government policies, legislation or judicial decisions adverse to our businesses. More detailed information about these and other risks and uncertainties may be found in our filings with the United States Securities and Exchange Commission (SEC), particularly in the "Risk Factors" section in part 1 item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2015. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. Use of Non-GAAP Financial Measures This press release contains financial information calculated other than pursuant to U.S. Generally Accepted Accounting Principles (GAAP). In particular, it includes Adjusted EBITDA and Adjusted EBITDA Margin, which are adjusted to exclude from net income (loss) attributable to CDI, interest, income taxes, depreciation and amortization expense, restructuring and other related costs, share-based compensation expense, leadership transition costs, loss on disposition, certain acquisition related items and earnout reversals, and Adjusted EPS, which excludes from diluted earnings per common share restructuring and other related costs, leadership transition costs, loss on disposition, certain acquisition related items, earnout reversals, amortization of acquired intangibles and the related income tax effect of each of the adjustments. We present these as supplemental measures of performance. These non-GAAP measures have limitations as analytical tools, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations of Adjusted EBITDA and Adjusted EPS as analytical tools are: (i) these measures do not reflect all our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) these measures do not reflect changes in, or cash requirements for, our working capital needs; (iii) these measures do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; (v) share-based compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it from Adjusted EBITDA as an expense when evaluating our ongoing operating performance for a particular period; (vi) these measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and (vii) other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure. We present these non-GAAP financial measures because we believe these assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are also used by management in its evaluation of core operations and financial and operational decision-making. Financial Tables Follow
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Reconciliations of non-GAAP Financial Measures to U.S. GAAP Financial Measures:
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