Modern Engineering, a Subsidiary of CDI Corp., Completes Sale of Automotive Prototype Unit
15 September 1997
Modern Engineering, a Subsidiary of CDI Corp., Completes Sale of Automotive Prototype Unit
CDI Expects Higher 1998 Earnings, But Lower Operating Estimates
For Second Half of 1997
PHILADELPHIA, Sept. 15 -- CDI Corp. , a leading
provider of broad-based outsourcing solutions through technical and temporary
staffing services and management recruiting, announced today that its wholly
owned subsidiary, Modern Engineering, Inc., has completed the sale of its
Stamping Engineering & Prototype Operation division (the assets of Modern
Prototype Co.) to Western Atlas' Lamb Division. The sale of Modern Prototype
Co., which designs and builds prototypes of automotive parts and tools for
original equipment manufacturers (OEM), completes the divestiture of CDI's
automotive manufacturing technology business. (Editors note: For financial
reporting purposes, this unit has already been classified as a discontinued
operation and has not been included in CDI's continuing operating results.)
President and Chief Executive Officer Mitch Wienick stated, "While this
business has been an important source of CDI revenue in prior years, it has
long been vulnerable to the cyclicality and volatility of the automotive
industry. Even more important, this operation has become increasingly
tangential to our core staffing business. As a result, divestiture of this
business clearly makes sense and we have been actively pursuing that course of
action for several months. The sale of Modern Prototype, a highly capital
intensive business, will enable CDI to focus its attention and resources on
our core staffing business, which in general is benefiting from favorable
market trends and a strong growth curve."
Mr. Wienick went on to add, "Over the years, CDI has built strong long-
term customer relationships in the automotive business. We are particularly
pleased to say that Modern Prototype has been sold to Western Atlas, a high-
quality supplier of automotive body welding systems to the OEM market and a
company that has been actively expanding its leadership in that segment."
"The sale of the Stamping Engineering & Prototype Operation will allow us
to focus on providing the highest level of satisfaction to our customers,"
added George Kubicke, President of Modern Engineering. "With our recent
achievement of ISO registration, we're committed to providing customers with a
wide range of superior quality automotive engineering staffing services."
Modern Engineering, a wholly owned subsidiary of CDI Corp., has been a
supplier to the transportation industry since 1946, and employs more than
2,000 engineers, technicians, and suppliers in support of its key automotive
customers.
Outlook for 1997 Second Half and Full Year 1997
CDI Corp. also announced today that the Company expects that third quarter
earnings will be in the high 60 cents per share range, which will be inclusive
of an approximately 10 cent special one-time income tax credit. In the third
quarter of 1996, the Company reported 65 cents per share from continuing
operations, which was inclusive of a six cent one-time workers compensation
credit in that quarter. The Company reported that the fourth quarter of 1997
is anticipated to be relatively flat compared to the corresponding period of
1996. Nonetheless, the Company continues to expect that results for the full
1997 fiscal year will be approximately 8 to 10% higher than 1996 due to the
strong first half of the year.
In commenting on CDI's outlook, Mr. Wienick remarked, "Although our three
core businesses remain strong in general, continued weakness in the
petrochemical/hydrocarbons industry will negatively impact earnings from
continuing operations in the second half of the year."
Mr. Wienick also went on to say, "We are also optimistic that CDI is on
track to report record results from continuing operations in 1998 for several
reasons. While the petrochemical/hydrocarbons industry is cyclical, it offers
attractive margins and revenue growth over the longer term. In fact, for the
five-year period ended December 31, 1996, the compound annual growth rate
(CAGR) for this segment's contribution to CDI's Technical Services was 15%. We
have, however, begun to identify initiatives designed to diversify our small
project engineering contracts across a broader range of industries and to step
up marketing efforts to improve penetration of existing clients, both of which
are expected to mitigate the impact of more cyclical businesses."
The Company is experiencing strong momentum in securing major new
contracts for its Technical Services segment, most recently with NEC, Transco,
Bell Atlantic, GTE, BankBoston and Mackey Design. Additionally, revenues for
CDI's IT sector are running at a strong annual rate of $280 million, 40% ahead
of the year ago pace, and should accelerate given the strong demand for
information technology services and staffing.
"Temporary Services (Todays Temporary) continues to achieve stronger
profits and margins under new management and Management Recruiters
International, CDI's highest margin segment, continues to benefit from the
corporate trend toward consolidation of high-quality professional staffing
suppliers of similar services and the subsequent dramatic increase in
multiple-position assignments from its largest customers.
Importantly, CDI is well along in its strategic planning process, and we
believe that the Company has the proper platform from which to emphasize high-
growth, high-margin staffing and outsourcing services. In short, while the
second half of 1997 represents a brief pause in CDI's earnings growth, we are
very optimistic about the Company's long-term potential," concluded
Mr. Wienick.
CDI Corp. is a leading provider of outsourcing solutions through technical
and temporary staffing services and management recruiting to a diverse blue
chip client base. With more than 30,000 employees and offices throughout the
U.S., Canada and the U.K. and revenues of $1.4 billion in 1996, CDI serves its
customers through three business segments. It is the nation's largest provider
of technical staffing services, providing supplemental technical, engineering,
telecommunications, and information technology services. Through its network
of Todays Temporary offices, CDI provides temporary and full-time office
clerical and administrative staffing services. CDI is also the world's largest
search and recruitment organization; Management Recruiters International
operates from a network of more than 700 franchise and company-owned offices.
With the exception of the historical information contained in the release,
the matters described herein contain forward-looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve various risks and may cause actual
results to differ materially. These risks include, but are not limited to
competitive market pressures, material changes in customer demand,
availability of labor, the Company's ability to perform contracts, trends in
flexible staffing and outsourcing, government policies adverse to the staffing
industry, changing industry, economic and competitive conditions, unforeseen
events associated with the divestiture of the discontinued businesses, and
other risks outside the control of the Company referred to in the Company's
registration statement and periodic reports filed with the Securities and
Exchange Commission.
For more information on CDI Corp. via fax at no charge, please dial
1-800-PRO-INFO and enter ticker symbol CDI or visit CDI's web site at
http://www.cdicorp.com
SOURCE CDI Corp.