10-Q 1 cdi-20130331x10q.htm 10-Q CDI-2013.03.31-10Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
Form 10-Q
 
(Mark One)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2013
or
¨
Transition Report Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
for the Transition Period from                       to                      .

Commission file number: 001-05519 
 
CDI Corp.
(Exact name of registrant as specified in its charter)
 
 
Pennsylvania
(State of incorporation)
23-2394430
(I.R.S. Employer Identification Number)
 
 
1717 Arch Street, 35th Floor,
Philadelphia, PA 19103-2768
(Address of principal executive offices) (Zip Code)
 
 
(215) 569-2200
(Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). x YES ¨ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
x
Non-accelerated filer 
¨
(Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ YES x NO   
The number of shares outstanding of each of the registrant's classes of common stock as of April 29, 2013 was as follows:
Common stock, $0.10 par value:
Class B common stock, $0.10 par value:
19,413,818 Shares
None

 




CDI CORP.
Form 10-Q
For the Quarterly Period Ended March 31, 2013

TABLE OF CONTENTS

 
 
 
Page No.
Part I:
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
Part II:
 
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.


1




Note About Forward-Looking Statements

This quarterly report on Form 10-Q (including Management's Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address expectations or projections about the future, including, but not limited to, statements about our strategies for growth 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 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 in general economic conditions and levels of capital spending by clients in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our clients' capital projects or the inability of our clients to pay our fees; the inability to successfully execute on our strategic plan; the termination of a major client contract or project; delays or reductions in government spending, including the impact of sequestration on U.S. government defense spending; credit risks associated with our clients; competitive market pressures; 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 temporary employees; our performance on client contracts; negative outcome of pending and future claims and litigation; and government policies, legislation or judicial decisions adverse to our businesses. More detailed information about some of these and other risks and uncertainties may be found in our filings with the SEC, particularly in the “Risk Factors” section in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2012. 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.
Unless the context otherwise requires, all references herein to “CDI,” “the Registrant,” “the Company,” “we,” “us” or “our” are to CDI Corp. and its consolidated subsidiaries.


2




PART 1. FINANCIAL INFORMATION

Item 1.
FINANCIAL STATEMENTS (Unaudited)

CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2013
 
2012
 
 
 
 
Revenue
$
269,466

 
$
280,627

Cost of services
219,315

 
224,942

Gross profit
50,151

 
55,685

Operating and administrative expenses
45,238

 
48,296

Operating profit
4,913

 
7,389

Other income (expense), net
(51
)
 
(38
)
Income before income taxes
4,862

 
7,351

Income tax expense
2,309

 
3,437

Net income
2,553

 
3,914

Less: Income attributable to the noncontrolling interest
62

 
91

Net income attributable to CDI
$
2,491

 
$
3,823

 
 
 
 
Earnings per common share:
 
 
 
Basic
$
0.13

 
$
0.20

Diluted
$
0.13

 
$
0.20



See accompanying notes to consolidated financial statements.

3

CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(in thousands)
(Unaudited)


 
Three Months Ended
 
March 31,
 
2013
 
2012
 
 
 
 
Net income
$
2,553

 
$
3,914

Other comprehensive income:
 
 
 
Foreign currency translation adjustments
(2,171
)
 
1,391

Total comprehensive income
382

 
5,305

Less: Comprehensive income attributable to the noncontrolling interest
110

 
136

Total comprehensive income attributable to CDI
$
272

 
$
5,169



See accompanying notes to consolidated financial statements.

4

CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)


 
March 31,
2013
 
December 31,
2012
 
 
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
18,416

 
$
43,652

Accounts receivable, net of allowances of $2,409 and $2,563
237,065

 
223,630

Prepaid expenses and other current assets
13,149

 
10,515

Prepaid income taxes
1,341

 
698

Deferred income taxes
4,262

 
3,850

Total current assets
274,233

 
282,345

Property and equipment, net of accumulated depreciation of $76,765 and $75,159
20,951

 
22,090

Deferred income taxes
6,936

 
7,061

Goodwill
61,199

 
62,009

Other intangible assets, net
16,375

 
16,782

Other non-current assets
10,934

 
10,418

Total assets
$
390,628

 
$
400,705

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Short-term borrowings
$

 
$
2,751

Cash overdraft
613

 

Accounts payable
32,373

 
41,157

Accrued compensation and related expenses
44,769

 
43,571

Other accrued expenses and other current liabilities
14,010

 
14,970

Income taxes payable
1,180

 
1,759

Total current liabilities
92,945

 
104,208

Deferred compensation
8,604

 
8,398

Deferred income tax
2,482

 
1,875

Other non-current liabilities
6,095

 
6,444

Total liabilities
110,126

 
120,925

Commitments and contingencies

 

Equity:
 
 
 
Preferred stock, $0.10 par value - authorized 1,000 shares; none issued

 

Common stock, $0.10 par value - authorized 100,000 shares; issued 21,877 and 21,822 shares
2,188

 
2,182

Class B common stock, $0.10 par value - authorized 3,175 shares; none issued

 

Additional paid-in-capital
68,197

 
67,863

Retained earnings
262,403

 
259,912

Accumulated other comprehensive (loss) income
(718
)
 
1,501

Common stock in treasury, at cost - 2,463 shares
(52,487
)
 
(52,487
)
Total CDI shareholders' equity
279,583

 
278,971

Noncontrolling interest
919

 
809

Total equity
280,502

 
279,780

Total liabilities and equity
$
390,628

 
$
400,705


See accompanying notes to consolidated financial statements.

5

CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)


 
Three Months Ended
 
March 31,
 
2013
 
2012
 
 
 
 
Operating activities:
 
 
 
Net income
$
2,553

 
$
3,914

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation
2,154

 
2,209

Amortization
407

 
325

Deferred income taxes
332

 
2,664

Stock-based compensation
770

 
1,146

(Gain) Loss on disposal of assets, net
(8
)
 
7

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(15,778
)
 
(22,551
)
Prepaid expenses and other current assets
(2,665
)
 
1,739

Accounts payable
(8,599
)
 
(3,573
)
Accrued expenses and other current liabilities
595

 
(1,234
)
Income taxes prepaid/payable
(1,345
)
 
241

Other non-current assets
322

 
(771
)
Deferred compensation
(34
)
 
1,207

Other non-current liabilities
(324
)
 
(160
)
Net cash used in operating activities
(21,620
)
 
(14,837
)
 
 
 
 
Investing activities:
 
 
 
Additions to property and equipment
(1,093
)
 
(1,259
)
Other
34

 
65

Net cash used in investing activities
(1,059
)
 
(1,194
)
 
 
 
 
Financing activities:
 
 
 
Dividends paid to shareholders

 
(2,500
)
Short-term borrowings of credit facility
18,632

 

Short-term repayments of credit facility
(21,161
)
 

Common shares withheld for taxes
(476
)
 
(599
)
Change in cash overdraft
613

 
(1,339
)
Excess tax benefit from share-based compensation awards
73

 

Net cash used in financing activities
(2,319
)
 
(4,438
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(238
)
 
301

Net decrease in cash and cash equivalents
(25,236
)
 
(20,168
)
Cash and cash equivalents at beginning of period
43,652

 
26,644

Cash and cash equivalents at end of period
$
18,416

 
$
6,476

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
28

 
$
6

Cash paid for income taxes, net
$
3,220

 
$
614


See accompanying notes to consolidated financial statements.

6

CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Equity
(in thousands, except per share amounts)
(Unaudited)


 
Common Stock
 
Treasury Stock
 
Additional Paid-In-Capital
 
Retained Earnings
 
Accum-ulated Other Compre-hensive Income (Loss)
 
Total CDI Share-holders' Equity
 
Non-Controlling Interest
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
21,642

 
$
2,164

 
$
(52,487
)
 
$
63,860

 
$
253,344

 
$
(306
)
 
$
266,575

 
$
456

 
$
267,031

Net income

 

 

 

 
3,823

 

 
3,823

 
91

 
3,914

Translation adjustments

 

 

 

 

 
1,346

 
1,346

 
45

 
1,391

Share-based compensation expense

 

 

 
1,146

 

 

 
1,146

 

 
1,146

Reclassification of equity awards from liabilities, net

 

 

 
698

 

 

 
698

 

 
698

Vesting of equity awards
115

 
12

 

 
(12
)
 

 

 

 

 

Common shares withheld for taxes
(38
)
 
(4
)
 

 
(595
)
 

 

 
(599
)
 

 
(599
)
Cash dividends paid ($0.13 per common share)

 

 

 

 
(2,500
)
 

 
(2,500
)
 

 
(2,500
)
March 31, 2012
21,719
 
$
2,172

 
$
(52,487
)
 
$
65,097

 
$
254,667

 
$
1,040

 
$
270,489

 
$
592

 
$
271,081

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
21,822

 
$
2,182

 
$
(52,487
)
 
$
67,863

 
$
259,912

 
$
1,501

 
$
278,971

 
$
809

 
$
279,780

Net income

 

 

 

 
2,491

 

 
2,491

 
62

 
2,553

Translation adjustments

 

 

 

 

 
(2,219
)
 
(2,219
)
 
48

 
(2,171
)
Share-based compensation expense

 

 

 
770

 

 

 
770

 

 
770

Reclassification of equity awards from liabilities, net

 

 

 
96

 

 

 
96

 

 
96

Vesting of equity awards
83

 
8

 

 
(8
)
 

 

 

 

 

Common shares withheld for taxes
(28
)
 
(2
)
 

 
(474
)
 

 

 
(476
)
 

 
(476
)
Share-based compensation tax deficiency

 

 

 
(50
)
 

 

 
(50
)
 

 
(50
)
March 31, 2013
21,877

 
$
2,188

 
$
(52,487
)
 
$
68,197

 
$
262,403

 
$
(718
)
 
$
279,583

 
$
919

 
$
280,502



See accompanying notes to consolidated financial statements.

7

CDI CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts, unless otherwise indicated)
(Unaudited)


1.
Business

CDI Corp. and Subsidiaries (the Company or CDI) is an integrated engineering and technology services organization providing client-focused solutions in select global industries. The Company derives most of its revenue by providing these services to large and mid-sized companies located primarily in the United States (U.S.), Canada and the United Kingdom (UK).

2.
Principles of Consolidation and Basis of Presentation

Principles of Consolidation -The consolidated financial statements include the accounts of CDI Corp. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Basis of Presentation - The accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States of America (“GAAP”), the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. These statements should be read in conjunction with the Company's Form 10-K filed with the SEC on March 1, 2013. Results for the three months ended March 31, 2013 are not necessarily indicative of results that may be expected for the full year.

3.
Summary of Significant Accounting Policies

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts disclosed in the financial statements and accompanying notes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates.

Significant estimates inherent in the preparation of the accompanying consolidated financial statements include the assumptions used in the determination of the allowance for doubtful accounts receivable, impairment assessment of goodwill, determination of the recoverability of long-lived assets, assessment of legal contingencies and calculation of income taxes.

4.
Fair Value Disclosures

The Company maintains a non-qualified Deferred Compensation Plan for highly compensated employees. The assets of the plan are held in the name of CDI at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in publicly traded mutual funds. The fair value of the plan assets is calculated using the market price of the mutual funds as of the end of the period.

8



CDI CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts, unless otherwise indicated)
(Unaudited)


The following tables summarize the assets and liabilities measured at fair value on a recurring basis by level of the fair value hierarchy for the indicated periods:
 
 
 
 
Fair Value Measurements at March 31, 2013 using
 
 
Fair Value Measurements at March 31, 2013
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Description
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
 
 
 
 
 
Mutual Funds:
 
 
 
 
 
 
 
 
Bond
 
$
2,023

 
$
2,023

 
$

 
$

Large Cap
 
2,096

 
2,096

 

 

International
 
1,099

 
1,099

 

 

Mid Cap
 
408

 
408

 

 

Small Cap
 
571

 
571

 

 

Balanced
 
383

 
383

 

 

Total Mutual Funds
 
6,580

 
6,580

 

 

Money Market Funds
 
1,428

 
1,428

 

 

Total Assets (1)
 
$
8,008

 
$
8,008

 
$

 
$

 
(1) 
At March 31, 2013, $0.4 million and $7.6 million are included in “Prepaid expenses and other current assets” (liability offset in “Other accrued expenses and other current liabilities”) and “Other non-current assets” (liability offset in “Deferred compensation”), respectively, in the consolidated balance sheet reflecting the non-qualified Deferred Compensation Plan assets.

 
 
 
 
Fair Value Measurements At December 31, 2012 using
 
 
Fair Value Measurements at December 31, 2012
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant Unobservable Inputs
Description
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
 
 
 
 
 
Mutual Funds:
 
 
 
 
 
 
 
 
Bond
 
$
1,972

 
$
1,972

 
$

 
$

Large Cap
 
1,980

 
1,980

 

 

International
 
917

 
917

 

 

Mid Cap
 
383

 
383

 

 

Small Cap
 
509

 
509

 

 

Balanced
 
354

 
354

 

 

Total Mutual Funds
 
6,115

 
6,115

 

 

Money Market Funds
 
1,508

 
1,508

 

 

Total Assets (1)
 
$
7,623

 
$
7,623

 
$

 
$

 
(1) 
At December 31, 2012, $0.8 million and $7.1 million are included in “Prepaid expenses and other current assets” (liability offset in “Other accrued expenses and other current liabilities”) and “Other non-current assets” (liability offset in “Deferred compensation”), respectively, in the consolidated balance sheet reflecting the non-qualified Deferred Compensation Plan assets.


9



CDI CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts, unless otherwise indicated)
(Unaudited)

5.
Goodwill and Other Intangible Assets

The Company performed its annual assessment for impairment of goodwill as of July 1, 2012 and determined there was no impairment. The Company's assessment determined that the fair values for each of the Company's reporting units, with the exception of PSS EMEA, comprised primarily of the CDI AndersElite Limited business, were substantially in excess of their related carrying values as of July 1, 2012. The PSS EMEA reporting unit had a fair value in excess of its carrying value of 6% and goodwill of $10.8 million. The Company believes it has made reasonable estimates and assumptions to calculate the fair value of its reporting units. If actual future results are not consistent with management's estimates and assumptions, the Company may have to take an impairment charge in the future related to its goodwill.

The following table summarizes the changes in the Company's carrying value of goodwill by reporting segment for the indicated periods:
 
December 31, 2012
 
 
 
 
 
March 31, 2013
 
Gross
Balance
 
Accumulated Impairment Losses
 
Additions
 
Translation and Other Adjustments
 
Gross
Balance
 
Accumulated Impairment Losses
 
 
 
 
 
 
 
 
 
 
 
 
GETS
$
50,720

 
$
(15,171
)
 
$

 
$

 
$
50,720

 
$
(15,171
)
PSS
25,109

 
(8,312
)
 

 
(663
)
 
24,446

 
(8,312
)
MRI
15,893

 
(6,230
)
 

 
(147
)
 
15,746

 
(6,230
)
Total goodwill
$
91,722

 
$
(29,713
)
 
$

 
$
(810
)
 
$
90,912

 
$
(29,713
)

The following tables summarize the changes in the Company's carrying value of other intangible assets during the indicated periods:
 
December 31, 2012
 
 
 
 
 
March 31, 2013
 
Gross
Balance
 
Accumulated Amortization
 
Additions
 
Amortization
 
Gross
Balance
 
Accumulated Amortization
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Client relationships
$
11,960

 
$
(3,593
)
 
$

 
$
(258
)
 
$
11,960

 
$
(3,851
)
Trademarks
5,200

 
(67
)
 

 
(93
)
 
5,200

 
(160
)
Developed technology
460

 
(184
)
 

 
(23
)
 
460

 
(207
)
Non-compete
150

 
(75
)
 

 
(8
)
 
150

 
(83
)
Reacquired franchise rights
972

 
(206
)
 

 
(25
)
 
972

 
(231
)
Total intangible assets subject to amortization
18,742

 
(4,125
)
 

 
(407
)
 
18,742

 
(4,532
)
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Trademarks
2,165

 

 

 

 
2,165

 

Total other intangible assets
$
20,907

 
$
(4,125
)
 
$

 
$
(407
)
 
$
20,907

 
$
(4,532
)
 
 
 
 
 
 
 
 
 
 
 
 


6.
Restructuring and Other Related Costs

In December 2011, the Company announced a strategic growth initiative. As part of this initiative, the Company approved a restructuring plan (“the Restructuring Plan”) designed to reduce costs and improve efficiencies. Implementation of the Restructuring Plan was completed in 2012 with certain cash payments expected through 2014.
 
The following table summarizes the Restructuring Plan provision, activity and ending balance in “Other accrued expenses and other current liabilities” in the consolidated balance sheets by cost type for the indicated period:
 
Employee severance and related costs
 
Real estate exit and related costs
 
Accrued restructuring liability
 
 
 
 
 
 
Balance as of December 31, 2012
$
427

 
$
507

 
$
934

Cash payments
(224
)
 
(94
)
 
(318
)
Balance as of March 31, 2013
$
203

 
$
413

 
$
616



10



CDI CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts, unless otherwise indicated)
(Unaudited)


7.
Short-Term Borrowings

On November 30, 2012, CDI Corp., its direct wholly-owned subsidiary, CDI Corporation, and its indirect subsidiary, CDI AndersElite Limited (each a “Borrower”), entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. (the “Bank”). The Credit Agreement established a $75.0 million revolving line of credit facility (including a $5.0 million UK overdraft facility) that expires on November 29, 2017. The Company intends to repay outstanding borrowings under the Credit Agreement during 2013 and as a result has recorded these borrowings in "Short-term borrowings" in the consolidated balance sheets. Borrowings under this line of credit may be used by the Company and the other Borrowers for general business purposes or for letters of credit.
 
At March 31, 2013, the Company had no borrowings, letters of credit outstanding of $3.1 million and $71.9 million available to borrow under the Credit Agreement. The Company was in compliance with all covenants under the Credit Agreement as of March 31, 2013.

As of December 31, 2012, the Company had outstanding borrowings of $2.8 million, letters of credit outstanding of $3.1 million and $69.1 million available to borrow under the Credit Agreement. The Company was in compliance with all covenants under the Credit Agreement as of December 31, 2012.

The Company's credit agreement with JPMorgan Chase Bank, N.A. expired on November 30, 2012. Upon expiration, the Company entered into a letter agreement with JPMorgan Chase Bank, N.A. to keep in effect an existing standby letter of credit that expires July 1, 2013. The Company provided cash in the amount of $0.4 million to fully collateralize the standby letter of credit, which is recorded in "Prepaid expenses and other current assets" in the consolidated balance sheets as of March 31, 2013 and December 31, 2012.

 
8.
Basic and Diluted Earnings Per Share (“EPS”) Data

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the indicated periods:
 
Three Months Ended
 
March 31,
 
2013
 
2012
 
 
 
 
Numerator:
 
 
 
Net income attributable to CDI
$
2,491

 
$
3,823

Denominator:
 
 
 
Basic weighted-average shares
19,378

 
19,200

Dilutive effect of stock-based awards
345

 
373

Diluted weighted-average shares
19,723

 
19,573

Earnings per common share:
 
 
 
Basic
$
0.13

 
$
0.20

Diluted
$
0.13

 
$
0.20


There were 375 thousand shares and 680 thousand shares excluded from the computation of EPS for the three months ended March 31, 2013 and 2012, respectively, because their inclusion would have been anti-dilutive.

9.
Commitments and Contingencies
Legal Proceedings
The Company has litigation and other claims pending which have arisen in the ordinary course of business. Management believes there are substantive defenses and/or insurance and specific accounting reserves established such that the outcome of these pending matters should not have a material adverse effect on the business, financial condition or results of operations of the Company.


11



CDI CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts, unless otherwise indicated)
(Unaudited)

10.
Income Taxes

The Company calculates an effective income tax rate each quarter based upon forecasted annual income by jurisdiction, statutory tax rates and other tax-related items. The impact of discrete items is recognized in the interim period in which they occur.
The effective tax rates for the three months ended March 31, 2013 and 2012 were 47.5% and 46.8%, respectively. The rates for both periods were unfavorably impacted by losses in foreign jurisdictions on which no tax benefit has been recognized and reductions to deferred tax assets for share-based compensation grants that expired with no corresponding tax benefit.

11.
Reporting Segments
The Company has the following three reporting segments:
Global Engineering and Technology Solutions (GETS) - The Company provides engineering and information technology solutions for its clients that involve the production of deliverable work products or services performed at a CDI facility or at a client's facility under the supervision of CDI personnel. These solutions typically include analysis of a client's engineering or information technology needs and the development of a solution that generally ranges in duration from several months to multiple years. Depending on the industry, engineering services can include such functions as feasibility studies, technology assessment, conceptual design, cost estimating, preliminary design, execution planning, procurement optimization, detailed design, testing and validation of regulatory compliance, technology integration and operating and maintenance support. Information technology services can include assessments, execution of business application services, web development, help desk support, quality assurance and testing and program management. GETS provides these solutions through a delivery model consisting of: centers of excellence, with concentrated skill sets required for larger, more complex projects; regional centers to service local needs of clients; client-centered offices to deliver site-specific services; and off-shore and near-shore centers to leverage low-cost design resources.
Professional Services Staffing (PSS) - The Company provides skilled technical and professional personnel to its clients for discrete periods of time to augment the client's workforce in times of project, seasonal, peak period or business cycle needs. These engagements can range from several months to multiple years in duration. The Company also provides permanent placement services. The Company provides professional staffing services to targeted industries that include managed services and managed staffing programs, functional staffing outsourcing and business advisory services. The Company delivers these services through its PSS delivery organization, which provides centralized global staffing delivery focused on select engineering and technology skill sets and competencies.
Management Recruiters International, Inc. (MRI) - MRI is a global franchisor that does business as MRINetwork® and provides the use of its trademarks, business systems and training and support services to its franchisees who engage in the search and recruitment of executive, technical, professional and managerial personnel for employment by their clients. The MRI franchisees provide permanent placement services primarily under the brand names Management Recruiters®, Sales Consultants®, CompuSearch® and OfficeMates 5®. MRI also provides training and support, implementation services and back-office services to enable franchisees to pursue contract staffing opportunities.

For purposes of performance measurement, the Company charges certain expenses directly attributable to the reporting segments and allocates certain expenses and support costs. Support costs consist principally of employee benefit administration, accounting support, IT services and shared service center costs. Operating and administrative expenses that are not directly attributable to the reporting segments are classified as corporate. Identifiable assets of the reporting segments exclude corporate assets. Corporate assets consist principally of cash and certain prepaid expenses, non-trade accounts receivable, deferred tax assets attributable to the reporting segments, property and equipment and other assets.


12



CDI CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share amounts, unless otherwise indicated)
(Unaudited)

Reporting segment data is presented in the following table for the indicated periods:
 
Three Months Ended
 
March 31,
 
2013
 
2012
 
 
 
 
Revenue:
 
 
 
GETS
$
78,037

 
$
81,275

PSS
177,108

 
181,733

MRI
14,321

 
17,619

Total revenue
$
269,466

 
$
280,627

 
 
 
 
Gross profit:
 
 
 
GETS
$
21,524

 
$
23,247

PSS
22,270

 
24,438

MRI
6,357

 
8,000

Total gross profit
$
50,151

 
$
55,685

 
 
 
 
Operating profit:
 
 
 
GETS
$
5,275

 
$
5,938

PSS
4,105

 
5,794

MRI
1,877

 
2,253

Corporate
(6,344
)
 
(6,596
)
Total operating profit
4,913

 
7,389

Other income (expense), net
(51
)
 
(38
)
Income before income taxes
$
4,862

 
$
7,351



Inter-segment activity is not significant; therefore, revenue reported for each operating segment is substantially from external clients.

Reporting segment asset data is presented in the following table for the indicated periods:
 
March 31,
 
December 31,
 
2013
 
2012
 
 
 
 
Assets:
 
 
 
GETS
$
134,209

 
$
144,055

PSS
172,499

 
150,318

MRI
26,028

 
26,723

Corporate
57,892

 
79,609

Total assets
$
390,628

 
$
400,705


13



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)

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.

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 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.
First Quarter 2013 Overview
Revenue during the first quarter of 2013 decreased by $11.2 million or 4.0% as compared to the first quarter of 2012, driven by decreases in all three segments. Gross profit decreased by $5.5 million or 9.9% and gross margin decreased to 18.6% from 19.8%, primarily reflecting the decrease in revenue and the shift in mix to lower margin business. Operating and administrative expenses decreased as a percentage of revenue to 16.8% from 17.2%. Operating profit was $4.9 million during the first quarter of 2013 as compared to $7.4 million during the first quarter of 2012 primarily due to lower revenue and gross margins partially offset by ongoing cost savings from cost containment efforts initiated during the second quarter of 2012. Net income attributable to CDI was $2.5 million during the first quarter of 2013 as compared to $3.8 million in the first quarter of 2012.



14



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

Three months ended March 31, 2013 as compared to the three months ended March 31, 2012

Consolidated Discussion

The table that follows presents changes in revenue by segment along with selected financial information and key metrics for the three months ended March 31, 2013 and 2012:
 
Three Months Ended
 
 
 
 
 
March 31,
 
 
 
 
 
2013
 
2012
 
Change
 
$
 
% of Total Revenue
 
$
 
% of Total Revenue
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
GETS
$
78,037

 
29.0
%
 
$
81,275

 
29.0
%
 
$
(3,238
)
 
(4.0
)%
PSS
177,108

 
65.7

 
181,733

 
64.8

 
(4,625
)
 
(2.5
)
MRI
14,321

 
5.3

 
17,619

 
6.3

 
(3,298
)
 
(18.7
)
Total Revenue
$
269,466

 
100.0

 
$
280,627

 
100.0

 
$
(11,161
)
 
(4.0
)
Gross profit
$
50,151

 
18.6

 
$
55,685

 
19.8

 
$
(5,534
)
 
(9.9
)
Operating and administrative expenses
$
45,238

 
16.8

 
$
48,296

 
17.2

 
$
(3,058
)
 
(6.3
)
Operating profit
$
4,913

 
1.8

 
$
7,389

 
2.6

 
$
(2,476
)
 
(33.5
)
Net income attributable to CDI
$
2,491

 
0.9

 
$
3,823

 
1.4

 
$
(1,332
)
 
(34.8
)
Cash flow used in operations
$
(21,620
)
 
 
 
$
(14,837
)
 
 
 
 
 
 
Effective income tax rate
47.5
%
 
 
 
46.8
%
 
 
 
 
 
 
Pre-tax return on net assets (1)
11.6
%
 
 
 
10.0
%
 
 
 
 
 
 
 
(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 in all three segments for the first quarter of 2013 as compared to the first quarter of 2012. GETS' revenue decreased primarily due to reduced infrastructure and government services spending in the "Other" industry vertical partially offset by growth in the OGC vertical. PSS' revenue decreased primarily due to the completion of several projects in the "Other" industry vertical and reduced demand at existing clients in the Hi-Tech vertical partially offset by increased demand by existing clients in the OGC vertical. MRI's revenue decreased primarily due to reduced contract staffing revenue and a decline in royalties.
Gross profit dollars and gross profit margin decreased for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the reduction in revenue and shift in mix to lower margin business in all three segments.
Operating profit decreased primarily due to the reduced gross profit in all three segments partially offset by the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.
The effective income tax rates for both periods were unfavorably impacted by losses in foreign jurisdictions on which no tax benefit has been recognized and reductions to deferred tax assets for share-based compensation grants that expired with no corresponding tax benefit.
Corporate
Corporate expenses consist of operating and administrative expenses that are not allocated to the reporting units under segment reporting. Corporate expenses decreased slightly for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to lower personnel-related costs.

15



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 for the three months ended March 31, 2013 and 2012:
 
Three Months Ended
 
 
 
 
 
March 31,
 
 
 
 
 
2013
 
2012
 
Change
 
$
 
% of Total Revenue
 
$
 
% of Total Revenue
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Oil, Gas and Chemicals ("OGC")
$
29,650

 
38.0
%
 
$
28,264

 
34.8
%
 
$
1,386

 
4.9
 %
Aerospace and Industrial Equipment ("AIE")
16,869

 
21.6

 
16,912

 
20.8

 
(43
)
 
(0.3
)
Hi-Tech
7,621

 
9.8

 
8,065

 
9.9

 
(444
)
 
(5.5
)
Other
23,897

 
30.6

 
28,034

 
34.5

 
(4,137
)
 
(14.8
)
Total revenue
78,037

 
100.0

 
81,275

 
100.0

 
(3,238
)
 
(4.0
)
Cost of services
56,513

 
72.4

 
58,028

 
71.4

 
(1,515
)
 
(2.6
)
Gross profit
21,524

 
27.6

 
23,247

 
28.6

 
(1,723
)
 
(7.4
)
Operating and administrative expenses
16,249

 
20.8

 
17,309

 
21.3

 
(1,060
)
 
(6.1
)
Operating profit
$
5,275

 
6.8

 
$
5,938

 
7.3

 
$
(663
)
 
(11.2
)

GETS' revenue decreased during the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the reduction in revenue in the "Other" and Hi-Tech industry verticals partially offset by growth in the OGC industry vertical. The decrease in the "Other" industry vertical revenue was primarily due to continued weakness in state and local government spending on infrastructure engineering projects and reduced demand for government services. Hi-Tech revenue decreased primarily due to the completion of several projects partially offset by increased demand from existing clients. The increase in OGC revenue was driven by strong growth within existing clients in the oil refining and chemical industries partially offset by the loss of certain nonstrategic clients.

GETS' gross profit dollars and gross profit margin decreased for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the reduction in revenue and decline in higher margin infrastructure and government services business and increase in lower margin business in the OGC vertical.

GETS' operating and administrative expenses decreased during the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.

GETS' operating profit decreased for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the reduction in revenue and the shift in mix to lower margin business partially offset by the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.

16



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 for the three months ended March 31, 2013 and 2012:
 
Three Months Ended
 
 
 
 
 
March 31,
 
 
 
 
 
2013
 
2012
 
Change
 
$
 
% of Total Revenue
 
$
 
% of Total Revenue
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Oil, Gas and Chemicals ("OGC")
$
33,342

 
18.8
%
 
$
30,994

 
17.1
%
 
$
2,348

 
7.6
 %
Aerospace and Industrial Equipment ("AIE")
18,917

 
10.7

 
19,791

 
10.9

 
(874
)
 
(4.4
)
Hi-Tech
71,994

 
40.6

 
74,307

 
40.9

 
(2,313
)
 
(3.1
)
Other
52,855

 
29.8

 
56,641

 
31.2

 
(3,786
)
 
(6.7
)
Total revenue
177,108

 
100.0

 
181,733

 
100.0

 
(4,625
)
 
(2.5
)
Cost of services
154,838

 
87.4

 
157,295

 
86.6

 
(2,457
)
 
(1.6
)
Gross profit
22,270

 
12.6

 
24,438

 
13.4

 
(2,168
)
 
(8.9
)
Operating and administrative expenses
18,165

 
10.3

 
18,644

 
10.3

 
(479
)
 
(2.6
)
Operating profit
$
4,105

 
2.3

 
$
5,794

 
3.2

 
$
(1,689
)
 
(29.2
)

PSS' revenue decreased for the first quarter of 2013 as compared to the first quarter of 2012 due to the reduction in revenue in the "Other", Hi-Tech and AIE industry verticals partially offset by growth in the OGC industry vertical. Revenue in the "Other" industry verticals decreased primarily due to the impact of the completion of several projects for clients in the financial services and construction industries. Hi-Tech revenue declined primarily due to decreased demand at existing clients partially offset by the impact of new clients. AIE revenue decreased primarily due to the Company's election to exit 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.

PSS' gross profit dollars and gross profit margin decreased for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the reduction in revenue and a shift in mix from higher margin retail staffing clients to lower margin program account clients.

PSS' operating and administrative expenses decreased during the first quarter of 2013 as compared to the first quarter of 2012 due primarily to the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.

PSS' operating profit decreased for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the reduction in revenue and the shift in mix to lower margin business partially offset by the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.

17



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 for the three months ended March 31, 2013 and 2012:
 
Three Months Ended
 
 
 
 
 
March 31,
 
 
 
 
 
2013
 
2012
 
Change
 
$
 
% of Total Revenue
 
$
 
% of Total Revenue
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Contract Staffing
$
11,236

 
78.5
%
 
$
13,681

 
77.6
%
 
$
(2,445
)
 
(17.9
)%
Royalties and Franchise Fees
3,085

 
21.5

 
3,938

 
22.4

 
(853
)
 
(21.7
)
Total revenue
14,321

 
100.0

 
17,619

 
100.0

 
(3,298
)
 
(18.7
)
Cost of services
7,964

 
55.6

 
9,619

 
54.6

 
(1,655
)
 
(17.2
)
Gross profit
6,357

 
44.4

 
8,000

 
45.4

 
(1,643
)
 
(20.5
)
Operating and administrative expenses
4,480

 
31.3

 
5,747

 
32.6

 
(1,267
)
 
(22.0
)
Operating profit
$
1,877

 
13.1

 
$
2,253

 
12.8

 
$
(376
)
 
(16.7
)

MRI's revenue decreased for the first quarter of 2013 as compared to the first quarter of 2012 primarily due to lower contract staffing revenue and royalties. Contract staffing revenue decreased as demand for interim technical services weakened and royalty revenue decreased due to reduced permanent placements by MRI franchises.

MRI's gross profit dollars and gross profit margin decreased in the first quarter of 2013 as compared to the first quarter of 2012 primarily due to the decrease in contract staffing revenue and a shift toward lower margin contract staffing clients as well a decrease in royalties.

MRI's operating and administrative expenses decreased during the first quarter of 2013 as compared to the first quarter of 2012 due primarily to the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.
MRI's operating profit decreased for the first quarter of 2013 as compared to the first quarter of 2012 driven primarily due primarily to the decline in revenue partially offset by the ongoing cost savings from cost containment efforts initiated during the second quarter of 2012.


18



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)

Liquidity and Capital Resources

The Company's principal sources of liquidity are cash flows from operations and borrowings under our credit facilities. The Company's principal uses of cash are operating expenses, capital expenditures, working capital requirements, dividends, and debt service. Management expects that the Company's current cash balances, cash generated from operations and unused borrowing capacity will be sufficient to support the Company's planned operating and capital requirements for the foreseeable future and at least the next twelve months.
On November 30, 2012, CDI Corp., its direct wholly-owned subsidiary, CDI Corporation, and its indirect subsidiary, CDI AndersElite Limited (each a “Borrower”), entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. (the “Bank”). The Credit Agreement established a $75.0 million revolving line of credit facility (including a $5.0 million UK overdraft facility), with a five-year term ending on November 29, 2017. Borrowings under this line of credit may be used by the Company and the other Borrowers for general business purposes or for letters of credit. See Note 7-Short-Term Borrowings, in the notes to the consolidated financial statements included in Item1 of this Form 10-Q Report for more information relating to the Credit Agreement.
At March 31, 2013, the Company had cash and cash equivalents of $18.4 million. As of March 31, 2013, there were no outstanding borrowings and $71.9 million available to borrow and $3.1 million of letters of credit outstanding under the Credit Agreement. The Company was in compliance with all financial covenants under the Credit Agreement as of March 31, 2013.
As of March 31, 2013, approximately 72% of the Company's cash and cash equivalents are held by certain non-U.S. subsidiaries, principally a Canadian entity, as well as being denominated in foreign currencies, principally Canadian dollars. The repatriation of cash and cash equivalent balances from non-U.S. subsidiaries could have adverse tax consequences; however, such cash and cash equivalent balances are generally available, without legal restrictions, to fund ordinary business operations at the local level. Deferred income taxes have not been provided on the unremitted earnings of such non-U.S. subsidiaries, because it is management's intention to reinvest such earnings in non-U.S. subsidiaries for the foreseeable future.
The following table summarizes the net cash provided by (used in) for the major captions from the Company's consolidated statements of cash flows for the indicated periods:
 
Three Months Ended
 
 
 
March 31,
 
 
 
2013
 
2012
 
Change
 
 
 
 
 
 
Operating Activities
$
(21,620
)
 
$
(14,837
)
 
$
(6,783
)
Investing Activities
(1,059
)
 
(1,194
)
 
135

Financing Activities
(2,319
)
 
(4,438
)
 
2,119

Operating Activities
For the first three months of 2013, the Company used $21.6 million net cash from operating activities, which was a $6.8 million increase from the comparable period in 2012. Cash used in operating activities increased due to the decline in net income, after adjusting for non-cash items, and, to a lesser extent, an increase in net working capital requirements.
Investing Activities
For the first three months of 2013, the Company used $1.1 million net cash in investing activities which is relatively consistent with the comparable period in 2012.
Financing Activities
For the first three months of 2013, the Company used $2.3 million net cash in financing activities or $2.1 million less cash as compared to the comparable period in 2012 primarily due to the acceleration of the payment of the first quarter 2013 cash dividend into December 2012.

Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts disclosed in this Form 10-Q Report. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the consolidated financial statements and because of the possibility that future events affecting them may differ from current judgments.

19




The critical accounting estimates and assumptions identified in the Company's 2012 Annual Report on Form 10-K filed on March 1, 2013 with the Securities and Exchange Commission have not materially changed.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to risks associated with foreign currency fluctuations and changes in interest rates.

Foreign Currency Risk
The Company's exposure to foreign currency fluctuations relates primarily to its operations denominated in Canadian dollars and British pounds sterling. Exchange rate fluctuations impact the U.S. dollar value of reported earnings derived from these foreign operations as well as the Company's investment in the net assets related to these operations. The Company utilizes derivative financial instruments from time to time to reduce its exposure to certain foreign currency fluctuations.
 
Interest Rate Risk
The interest rate risk associated with the Company's borrowing activities as of March 31, 2013 is not material in relation to its consolidated financial position, results of operations or cash flows. While it may do so in the future, the Company has not used derivative financial instruments to alter the interest rate characteristics of its debt instruments. At March 31, 2013 the Company had no outstanding borrowings.

Item 4.    Controls and Procedures 
Evaluation of disclosure controls and procedures
The management of the Company, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2013. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of that date to provide reasonable assurance that information reported in this Form 10-Q Report is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There were no changes in the Company's internal control over financial reporting during the Company's first quarter ended March 31, 2013, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


20




PART II. OTHER INFORMATION

Item 1.    Legal Proceedings
The Company has litigation and other claims pending which have arisen in the ordinary course of business. Management believes there are substantive defenses and/or insurance and specific accounting reserves established such that the outcome of these pending matters should not have a material adverse effect on the business, financial condition or results of operations of the Company.

Item 1A.    Risk Factors
There have been no material changes from the risk factors disclosed in the “Risk Factors” section (Part I, Item 1A) of the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

Item 2.    Unregistered Sales of Equity and Use of Proceeds
None.

Item 3.    Defaults Upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
None.

Item 5.    Other Information 
None.

Item 6.    Exhibits
The list of exhibits in the Index to Exhibits to this report is incorporated herein by reference.


21




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
CDI Corp.
Date:
May 3, 2013
 
By:
/s/ Robert M. Larney
 
 
 
 
Robert M. Larney
 
 
 
 
Executive Vice President and
 
 
 
 
Chief Financial Officer
 
 
 
 
(Duly Authorized Officer and
 
 
 
 
Principal Financial Officer)


22




INDEX TO EXHIBITS

Exhibit No.
 
Description
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
 
Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
101*
 
 
(101.INS)
 
XBRL Instance Document
(101.SCH)
 
XBRL Taxonomy Extension Schema Document
(101.CAL)
 
XBRL Taxonomy Extension Calculation Linkbase Document
(101.DEF)
 
XBRL Taxonomy Extension Definition Linkbase Document
(101.LAB)
 
XBRL Taxonomy Extension Label Linkbase Document
(101.PRE)
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
*
Pursuant to Regulation S-T, these interactive data files are deemed not filed or incorporated in any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

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