##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 OR o 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
    
    23-2394430(State or other jurisdiction
of incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 1717 Arch Street, 35thFloor, Philadelphia, PA 19103-2768  (Address of principal executive offices)
 Registrants telephone number, including area code:
    
    (215) 569-2200
 Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or15(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. Yesþ       Noo Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Section 12b-2 of the Exchange Act.) Yesþ       Noo Outstanding shares of each of the Registrants classes of common stock as
of July 26, 2004 were: Common stock, $.10 par value
    
    19,699,105 sharesClass B common stock, $.10 par value
    
    None




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CDI CORP. Table of Contents Part I:
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003Consolidated Statements of Earnings for the three and six months ended June 30, 2004 and 2003 (unaudited)Consolidated Statements of Shareholders' Equity for the three and six months ended June 30, 2004 and 2003 (unaudited)Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003 (unaudited)Notes to Consolidated Financial Statements (unaudited)Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RisksItem 4.
    
    Controls and ProceduresPart II:
    
    OTHER INFORMATIONItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 6.
    
    Exhibits and Reports on Form 8-KSIGNATURESINDEX TO EXHIBITSCERTIFICATION OF CEO PURSUANT TO SECTION 302CERTIFICATION OF CFO PURSUANT TO SECTION 302CERT. OF CEO AND CFO PURSUANT TO 18 U.S.C.




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##### Table of Contents



PART 1. FINANCIAL INFORMATION 
   
  (In thousands, except share data)
 June 30,
    
    December 31,2004
    
    2003(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    49,195
    
    
    
    50,230Accounts receivable, less allowance for
doubtful accounts of $5,025 - June
30, 2004; $5,496- December 31, 2003
    
    
    203,600
    
    
    
    199,630Short-term investments
    
    
    29,857
    
    
    
    22,606Prepaid expenses
    
    
    9,873
    
    
    
    8,744Deferred income taxes
    
    
    7,186
    
    
    
    8,484Total current assets
    
    
    299,711
    
    
    
    289,694Property and equipment, at cost:Computers and systems
    
    
    87,863
    
    
    
    85,426Equipment and furniture
    
    
    26,639
    
    
    
    26,256Leasehold improvements
    
    
    13,566
    
    
    
    13,297128,068
    
    
    
    124,979Accumulated depreciation
    
    
    (98,654
    )
    
    
    (93,858
    )Property and equipment, net
    
    
    29,414
    
    
    
    31,121Deferred income taxes
    
    
    6,418
    
    
    
    7,133Goodwill, net
    
    
    68,211
    
    
    
    68,211Other assets
    
    
    3,908
    
    
    
    5,403Total assets
    
    $
    407,662
    
    
    
    401,562
 See accompanying notes to consolidated financial statements. 1




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##### Table of Contents



CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets(In thousands, except share data) June 30,
    
    December 31,2004
    
    2003(unaudited)Liabilities and Shareholders EquityCurrent liabilities:Obligations not liquidated because of
outstanding checks
    
    $
    3,561
    
    
    
    5,848Accounts payable
    
    
    20,484
    
    
    
    23,824Withheld payroll taxes
    
    
    4,435
    
    
    
    2,596Accrued compensation and related expenses
    
    
    50,187
    
    
    
    44,343Other accrued expenses
    
    
    12,656
    
    
    
    18,191Income taxes payable
    
    
    1,217
    
    
    
    464Total current liabilities
    
    
    92,540
    
    
    
    95,266Deferred compensation
    
    
    7,606
    
    
    
    8,945Total liabilities
    
    
    100,146
    
    
    
    104,211Shareholders equity:Preferred stock, $.10 par value -
authorized 1,000,000 shares; none issued
    
    
    
    
    
    
    Common stock, $.10 par value -
authorized 100,000,000 shares; issued
20,661,499 shares  June 30, 2004;
20,535,835 shares  December 31, 2003
    
    
    2,066
    
    
    
    2,054Class B common stock, $.10 par value -
authorized 3,174,891 shares; none issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    31,501
    
    
    
    28,205Retained earnings
    
    
    293,079
    
    
    
    286,466Accumulated other comprehensive income
    
    
    3,588
    
    
    
    3,467Unamortized value of restricted stock issued
    
    
    (408
    )
    
    
    (544
    )Less common stock in treasury, at cost -
963,934 shares  June 30, 2004;
963,465 shares  December 31, 2003
    
    
    (22,310
    )
    
    
    (22,297
    )Total shareholders equity
    
    
    307,516
    
    
    
    297,351Total liabilities and shareholders equity
    
    $
    407,662
    
    
    
    401,562
 See accompanying notes to consolidated financial statements. 2




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##### Table of Contents



CDI CORP. AND SUBSIDIARIES 
  (Unaudited)
(In thousands, except per share data)
 Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    264,839
    
    
    
    269,994
    
    
    
    520,826
    
    
    
    539,520Cost of services
    
    
    201,806
    
    
    
    204,824
    
    
    
    396,545
    
    
    
    405,974Gross profit
    
    
    63,033
    
    
    
    65,170
    
    
    
    124,281
    
    
    
    133,546Operating and administrative expenses
    
    
    56,781
    
    
    
    56,452
    
    
    
    110,633
    
    
    
    116,466Gain on sale of assets
    
    
    (1,295
    )
    
    
    
    
    
    
    (1,295
    )
    
    
    Operating profit
    
    
    7,547
    
    
    
    8,718
    
    
    
    14,943
    
    
    
    17,080Interest income, net and other
    
    
    136
    
    
    
    252
    
    
    
    404
    
    
    
    626Earnings before income taxes
    
    
    7,683
    
    
    
    8,970
    
    
    
    15,347
    
    
    
    17,706Income tax expense
    
    
    2,474
    
    
    
    2,867
    
    
    
    5,202
    
    
    
    6,143Net earnings
    
    $
    5,209
    
    
    
    6,103
    
    
    
    10,145
    
    
    
    11,563Basic earnings per share
    
    $
    0.27
    
    
    
    0.32
    
    
    
    0.52
    
    
    
    0.60Diluted earning per share
    
    $
    0.26
    
    
    
    0.31
    
    
    
    0.51
    
    
    
    0.59
 See accompanying notes to consolidated financial statements. 3




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##### Table of Contents



CDI CORP. AND SUBSIDIARIES 
  (Unaudited)
(In thousands)
 Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Common stockBeginning of period
    
    $
    2,058
    
    
    
    2,034
    
    
    
    2,054
    
    
    
    2,031Exercise of stock options
    
    
    7
    
    
    
    3
    
    
    
    10
    
    
    
    4Stock purchase plans
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    4End of period
    
    $
    2,066
    
    
    
    2,039
    
    
    
    2,066
    
    
    
    2,039Additional paid-in capitalBeginning of period
    
    $
    29,157
    
    
    
    23,424
    
    
    
    28,205
    
    
    
    22,975Exercise of stock options
    
    
    1,833
    
    
    
    579
    
    
    
    2,542
    
    
    
    703Restricted stock  change in value
    
    
    1
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (3
    )Stock purchase plans
    
    
    250
    
    
    
    418
    
    
    
    335
    
    
    
    733Tax benefit from stock plans
    
    
    260
    
    
    
    99
    
    
    
    420
    
    
    
    111End of period
    
    $
    31,501
    
    
    
    24,519
    
    
    
    31,501
    
    
    
    24,519Retained earningsBeginning of period
    
    $
    289,637
    
    
    
    311,799
    
    
    
    286,466
    
    
    
    306,339Net earnings
    
    
    5,209
    
    
    
    6,103
    
    
    
    10,145
    
    
    
    11,563Dividends paid to shareholders
    
    
    (1,767
    )
    
    
    
    
    
    
    (3,532
    )
    
    
    End of period
    
    $
    293,079
    
    
    
    317,902
    
    
    
    293,079
    
    
    
    317,902Accumulated other comprehensive income (loss)Beginning of period
    
    $
    4,097
    
    
    
    (810
    )
    
    
    3,467
    
    
    
    (610
    )Foreign currency translation adjustment
    
    
    (446
    )
    
    
    2,356
    
    
    
    184
    
    
    
    2,156Unrealized loss on investments
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )
    
    
    End of period
    
    $
    3,588
    
    
    
    1,546
    
    
    
    3,588
    
    
    
    1,546Unamortized value of restricted stock issuedBeginning of period
    
    $
    (474
    )
    
    
    (737
    )
    
    
    (544
    )
    
    
    (800
    )Restricted stock  vesting/forfeiture
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    Restricted stock  change in value
    
    
    (1
    )
    
    
    1
    
    
    
    1
    
    
    
    3Restricted stock  amortization of value
    
    
    67
    
    
    
    68
    
    
    
    122
    
    
    
    129End of period
    
    $
    (408
    )
    
    
    (668
    )
    
    
    (408
    )
    
    
    (668
    )Treasury stockBeginning of period
    
    $
    (22,310
    )
    
    
    (22,134
    )
    
    
    (22,297
    )
    
    
    (22,134
    )Restricted stock  forfeiture
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    End of period
    
    $
    (22,310
    )
    
    
    (22,134
    )
    
    
    (22,310
    )
    
    
    (22,134
    )Comprehensive incomeNet earnings
    
    $
    5,209
    
    
    
    6,103
    
    
    
    10,145
    
    
    
    11,563Foreign currency translation adjustment
    
    
    (446
    )
    
    
    2,356
    
    
    
    184
    
    
    
    2,156Unrealized loss on investment
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )
    
    
    End of period
    
    $
    4,700
    
    
    
    8,459
    
    
    
    10,266
    
    
    
    13,719
 See accompanying notes to consolidated financial statements. 4




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##### Table of Contents



CDI CORP. AND SUBSIDIARIES 
  (Unaudited)
(In thousands)
 Six months endedJune 30,2004
    
    2003Operating activities:Net earnings
    
    $
    10,145
    
    
    
    11,563Adjustments to reconcile net earnings to cash provided by operating activities:Depreciation
    
    
    4,839
    
    
    
    6,893Deferred income tax expense
    
    
    2,013
    
    
    
    5,107Gain on sale of assets
    
    
    (1,295
    )
    
    
    Tax benefit from stock plans
    
    
    420
    
    
    
    111Change in assets and liabilities, net of effects of divestitures:Accounts receivable, net
    
    
    (3,951
    )
    
    
    (13,280
    )Prepaid expenses
    
    
    (3,151
    )
    
    
    (2,575
    )Accounts payable
    
    
    (3,334
    )
    
    
    (3,489
    )Accrued expenses other current liabilities
    
    
    4,072
    
    
    
    (3,552
    )Other assets, long-term liabilities and other
    
    
    552
    
    
    
    1,057Net cash flow provided by operating activities
    
    
    10,310
    
    
    
    1,835Investing activities:Purchases of property and equipment
    
    
    (3,106
    )
    
    
    (7,786
    )Purchases of short-term investments
    
    
    (7,251
    )
    
    
    (287
    )Proceeds from sale of assets
    
    
    2,162
    
    
    
    Proceeds from notes receivable
    
    
    
    
    
    
    3,050Other
    
    
    (24
    )
    
    
    475Net cash flow used in investing activities
    
    
    (8,219
    )
    
    
    (4,548
    )Financing activities:Dividends paid to shareholders
    
    
    (3,532
    )
    
    
    Obligations not liquidated because of outstanding checks
    
    
    (2,287
    )
    
    
    7,434Proceeds from exercises of employee stock options
    
    
    2,552
    
    
    
    707Net cash flow (used in) provided by financing activities
    
    
    (3,267
    )
    
    
    8,141Effect of exchange rate changes on cash
    
    
    141
    
    
    
    38Net (decrease) increase in cash and cash equivalents
    
    
    (1,035
    )
    
    
    5,466Cash and cash equivalents, beginning of period
    
    
    50,230
    
    
    
    41,148Cash and cash equivalents, end of period
    
    $
    49,195
    
    
    
    46,614Supplemental disclosure of cash flow information:Cash paid during the period for income taxes, (net of refunds)
    
    $
    1,346
    
    
    
    (3,887
    )
 See accompanying notes to consolidated financial statements. 5




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##### Table of Contents



CDI Corp. 
 Notes to Consolidated Financial Statements
 (Dollars in thousands, except share and per share amounts, unless otherwise indicated)
(unaudited)
  1.
    Basis of Presentation The accompanying consolidated financial statements of CDI Corp. (CDI or the
Company) are unaudited. The balance sheet as of December 31, 2003 is derived
from the audited balance sheet of the Company at that date. These statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission pertaining to reports on Form 10-Q and
should be read in conjunction with the Companys consolidated financial
statements and the notes thereto for the year ended December 31, 2003 reported
in Form 10-K, filed March 12, 2004. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The consolidated financial statements for the unaudited interim periods
presented include all adjustments (consisting of only normal, recurring
adjustments) necessary for a fair presentation of financial position, results
of operations and cash flows for such interim periods. Certain amounts in
prior periods have been reclassified to conform to the current period
classification. In that regard, cash flow from operations, investing
activities and financing activities for the six months ended June 30, 2003 were
revised by $2.4 million, $3.1 million and $0.7 million, respectively,
principally to reflect proceeds from a note receivable. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, revenues and expenses and disclosure of contingent
assets and liabilities. Actual results could differ from those estimates.
Results for the three and six month periods ended June 30, 2004 are not
necessarily indicative of results that may be expected for the full year or any
portion thereof.  2.
    Cash, Cash Equivalents and Short-Term Investments Cash, cash equivalents and short-term investments as of June 30, 2004 and
December 31, 2003 were comprised of the following: June 30,
    
    December 31,2004
    
    2003Cash
    
    $
    5,967
    
    
    
    5,139Cash equivalents
    
    
    43,228
    
    
    
    45,091Total cash and cash equivalents
    
    
    49,195
    
    
    
    50,230Short-term investments
    
    
    29,857
    
    
    
    22,606Total cash, cash equivalents and
short-term investments
    
    $
    79,052
    
    
    
    72,836
 Cash equivalents and short-term investments are in liquid, high quality debt
securities with diversification among the investments based upon the Companys
guidelines. Amortized cost approximates fair value. Gains and losses during
the three and six month periods ended June 30, 2004 were immaterial. All of the Companys short-term investments are held as available-for-sale
securities, and reflect investments in corporate bonds, various government
agencies and commercial paper. Available-for-sale securities as of June 30, 2004 of $29.9 million include
$25.6 million for securities maturing in one year or less and $4.3 million for
securities maturing in one to three years. 6




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##### Table of Contents



3.
    Restructuring There were no restructuring charges during the first six months of 2004 and
2003. The table presented below shows the current year activity related to previous
restructurings from a balance sheet perspective: Net Accrual at
    
    
    
    
    
    Net Accrual atDecember 31,
    
    
    
    
    
    June 30,2003
    
    Payments
    
    2004Severance
    
    $
    633
    
    
    
    (573
    )
    
    
    60Lease obligations
    
    
    2,934
    
    
    
    (1,631
    )
    
    
    1,303$
    3,567
    
    
    
    (2,204
    )
    
    
    1,363
 The remaining liability for severance will be substantially paid during the
balance of 2004. The Company anticipates that the remaining liability for the
termination of operating leases will be substantially paid by December 31,
2005. The accrual for restructuring charges is included in other accrued
expenses in the accompanying consolidated balance sheets.  4.
    Real Estate Exiting Costs During the first half of 2004, the Company experienced continued declines in
demand in its Life Sciences vertical within the Business Solutions segment. As
a result, in the second quarter of 2004, management reorganized certain office
space and determined that there was excess real estate capacity within the Life
Sciences vertical. In addition, management also determined that there was
excess real estate capacity in the MRI segment. Accordingly, certain real
estate properties were permanently vacated resulting in the Company recording a
pre-tax charge of approximately $1.0 million in the second quarter of 2004.
This charge is included in operating and administrative expenses in the
accompanying consolidated statements of earnings. The table presented below shows the current year activity by reportable
segments: Net AccrualBusiness
    
    
    
    
    
    at June 30,Solutions
    
    MRI
    
    2004Balance as of December 31, 2003
    
    $
    
    
    
    
    
    
    
    
    Charge for real estate exiting costs
    
    
    834
    
    
    
    164
    
    
    
    998Payments
    
    
    
    
    
    
    (53
    )
    
    
    (53
    )Balance as of June 30, 2004
    
    $
    834
    
    
    
    111
    
    
    
    945
 The future payments related to the above lease obligations are expected to
extend through 2006. The accrual for vacant lease obligations is included in
other accrued expenses in the accompanying consolidated balance sheets.  5.
    Earnings Per Share Both basic and diluted earnings per share for all periods are calculated based
on the reported earnings in the Companys consolidated statements of earnings. The number of common shares used to calculate basic and diluted earnings per
share for three and six months ended June 30, 2004 and 2003 was determined as
follows: 7




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##### Table of Contents



Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003BasicAverage shares outstanding
    
    
    19,648,123
    
    
    
    19,400,900
    
    
    
    19,619,615
    
    
    
    19,383,796Restricted shares issued not vested
    
    
    (30,900
    )
    
    
    (45,000
    )
    
    
    (31,088
    )
    
    
    (45,187
    )19,617,223
    
    
    
    19,355,900
    
    
    
    19,588,527
    
    
    
    19,338,609DilutedShares used for basic calculation
    
    
    19,617,223
    
    
    
    19,355,900
    
    
    
    19,588,527
    
    
    
    19,338,609Dilutive effect of stock options
    
    
    369,650
    
    
    
    257,673
    
    
    
    320,143
    
    
    
    183,680Dilutive effect of restricted shares
issued not vested  time based
    
    
    12,136
    
    
    
    12,690
    
    
    
    10,171
    
    
    
    9,474Dilutive effect of restricted shares issued
not vested  performance based
    
    
    250
    
    
    
    250
    
    
    
    188
    
    
    
    188Dilutive effect of units issuable under
stock purchase plans
    
    
    100,091
    
    
    
    112,752
    
    
    
    99,128
    
    
    
    114,80020,099,350
    
    
    
    19,739,265
    
    
    
    20,018,157
    
    
    
    19,646,751
  6.
    Stock Based Plans The Company uses the intrinsic value method of accounting for stock options and
other forms of stock-based compensation granted to employees and directors, in
accordance with Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees. No compensation cost has been
recognized for grants of stock options because option exercise prices are not
less than the fair market value of the underlying common stock at dates of
grant. Compensation cost has been recognized for restricted stock issued and
for units granted under the Stock Purchase Plan and Stock Unit Plan. SFAS No. 123, Accounting for Stock Based Compensation, uses a fair value
based method of accounting for stock-based compensation. The following table
reflects the pro-forma effect on net earnings and earnings per share for the
three and six month periods ended June 30, 2004 and 2003 as if the Company had
adopted the fair value recognition provisions of SFAS No. 123: Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Net earnings, as reported
    
    $
    5,209
    
    
    
    6,103
    
    
    $
    10,145
    
    
    
    11,563Stock-based employee and
director compensation
cost included in
reported earnings, net
of income tax effect
    
    
    88
    
    
    
    200
    
    
    
    251
    
    
    
    434Stock-based employee and
director compensation
cost under fair
value-based method, net
of income tax effect
    
    
    (485
    )
    
    
    (619
    )
    
    
    (992
    )
    
    
    (1,203
    )Pro forma net earnings
    
    $
    4,812
    
    
    
    5,684
    
    
    $
    9,404
    
    
    
    10,794Net earnings per share:Basic  as reported
    
    $
    0.27
    
    
    
    0.32
    
    
    $
    0.52
    
    
    
    0.60Basic  pro forma
    
    
    0.25
    
    
    
    0.29
    
    
    
    0.48
    
    
    
    0.56Diluted  as reported
    
    $
    0.26
    
    
    
    0.31
    
    
    $
    0.51
    
    
    
    0.59Diluted  pro forma
    
    
    0.24
    
    
    
    0.29
    
    
    
    0.47
    
    
    
    0.55
 8




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##### Table of Contents



7.
    Reporting Segments In January 2004, the Company implemented a new structure and leadership
alignment. As a result, the Company is reporting its segments as follows:
Business Solutions, AndersElite, Todays Staffing (Todays) and Management
Recruiters International (MRI). Todays and MRI segments remain unchanged
from prior reporting periods. Prior year segment reporting has been restated
to conform to the new organizational structure. Business Solutions includes most of the former Professional Services and
Project Management reporting segments. It operates principally through five
key verticals: CDI-Aerospace, CDI-Government Services, CDI-Information
Technology (IT) Services, CDI-Life Sciences and CDI-Process & Industrial (P&I).  
    
    CDI-Aerospace provides a full range of engineering,
design, project management, professional IT and engineering
staffing and outsourcing solutions to both the commercial and
military aerospace markets.
    
    CDI-Government Services focuses on providing engineering,
design and logistics services to the defense industry and serves
as a provider of IT and professional staffing for federal
agencies.
    
    CDI-IT Services provides IT staffing and IT outsourcing
solutions to a broad range of primarily service-based industries.
    
    CDI-Life Sciences offers design validation, project
management, engineering, professional staffing and outsourcing
solutions to clients in the pharmaceutical, bio-pharmaceutical and
regulated medical services industries.
    
    CDI-Process & Industrial provides a full range of
engineering, project management, design, professional staffing and
outsourcing solutions to firms in two different sectors  the
process sector which includes firms in oil, gas and chemicals and
the industrial sector which includes firms in power generation and
energy transmission, telecommunications and heavy manufacturing. Business Solutions also
provides services to businesses in the automotive and financial services industries. AndersElite, formerly part of the Professional Services segment, is a leading
United Kingdom firm specializing in sourcing professionals from architects and
surveyors to electrical and construction engineers to information technology
professionals in private and government-funded design and construction
projects. Todays provides temporary and permanent administrative, clerical and legal
staffing services as well as managed staffing services. MRI is a franchisor providing support services to its franchisees who engage in
the search and recruitment of primarily management and sales personnel for
employment by their customers. It also provides temporary management staffing
services. 9




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##### Table of Contents



Operating segment data is presented in the following tables: Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Revenues:Business Solutions
    
    $
    179,634
    
    
    
    182,046
    
    
    $
    352,086
    
    
    
    367,605AndersElite
    
    
    40,387
    
    
    
    35,403
    
    
    
    79,902
    
    
    
    69,125Todays
    
    
    31,223
    
    
    
    36,441
    
    
    
    61,124
    
    
    
    71,013MRI
    
    
    13,595
    
    
    
    16,104
    
    
    
    27,714
    
    
    
    31,777$
    264,839
    
    
    
    269,994
    
    
    $
    520,826
    
    
    
    539,520Earnings before income taxes:Operating profit:Business Solutions
    
    $
    5,741
    
    
    
    6,330
    
    
    $
    11,965
    
    
    
    14,280AndersElite
    
    
    851
    
    
    
    2,064
    
    
    
    2,369
    
    
    
    3,830Todays
    
    
    834
    
    
    
    2,145
    
    
    
    1,290
    
    
    
    3,537MRI
    
    
    3,793
    
    
    
    1,869
    
    
    
    6,119
    
    
    
    2,552Corporate
    
    
    (3,672
    )
    
    
    (3,690
    )
    
    
    (6,800
    )
    
    
    (7,119
    )7,547
    
    
    
    8,718
    
    
    
    14,943
    
    
    
    17,080Interest income, net and other
    
    
    136
    
    
    
    252
    
    
    
    404
    
    
    
    626$
    7,683
    
    
    
    8,970
    
    
    $
    15,347
    
    
    
    17,706
 June 30,
    
    December 31,2004
    
    2003Assets:Business Solutions
    
    $
    205,248
    
    
    
    198,890AndersElite
    
    
    51,995
    
    
    
    50,949Todays
    
    
    41,012
    
    
    
    40,495MRI
    
    
    29,792
    
    
    
    37,838Corporate
    
    
    79,615
    
    
    
    73,390$
    407,662
    
    
    
    401,562
  8.
    Sale of Assets During June 2004, the Company recorded a pre-tax gain of $1.3 million in
connection with a sale of certain assets and liabilities of its MRI operations.
Under the terms of the sale agreement dated June 30, 2003, the Company
received a $0.5 million non-refundable payment and a non-recourse note with a
face value of $2.2 million. Since a substantial portion of the sales price received was in the form of a
non-recourse note secured only by the business sold, and completion of the sale
was contingent upon the buyer obtaining independent third-party financing for
the remaining purchase price, the Company did not record this transaction as a
sale until the buyer obtained third party funding. The buyer obtained such
third party funding in June 2004 and paid the Company $2.2 million. The book
value of the net assets relating to this sale, were $1.4 million.  9.
    Subsequent Event On July 20, 2004, the Board of Directors voted to pay a special dividend of
$2.00 per share and a quarterly dividend of $0.11 per share to all shareholders
of record as of August 4, 2004. Both dividends will be paid on August 18,
2004. As of July 26, 2004, there were 19,699,105 shares outstanding. 10




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-looking InformationCertain information in this report, including Managements Discussion and
Analysis of Financial Condition and Results of Operations, contains
forward-looking statements as such term is defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Certain forward-looking statements can be identified by the use of
forward-looking terminology such as, believes, expects, may, will,
should, seeks, approximately, intends, plans, estimates, or
anticipates or the negative thereof or other comparable terminology, or by
discussions of strategy, plans or intentions. Forward-looking statements
involve risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. These include risks
and uncertainties such as the effects of, and changes in general economic
conditions, competitive market pressures, material changes in demand from
larger customers, availability of labor, the Companys performance on
contracts, changes in customers attitudes toward outsourcing, government
policies or judicial decisions adverse to the staffing industry, and ability to
successfully complete the implementation and integration of the Companys
vertical go-to-market strategy on a timely basis and other uncertainties set
forth herein and in the Companys 2003Form 10-K, and as may be set forth in
the Companys subsequent press releases and/or Forms 10-Q, 8-K and other
filings with the Securities and Exchange Commission. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only
as of the date hereof. The Company assumes no obligation to update such
information. Results of Operations Overview The table that follows presents year-over-year trends of key performance
indicators for the Company: Three months ended
    
    Six months ended(dollars in millions)
    
    June 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    264.8
    
    
    
    270.0
    
    
    $
    520.8
    
    
    
    539.5Gross profit as a
percentage of revenue
    
    
    23.8
    %
    
    
    24.1
    %
    
    
    23.9
    %
    
    
    24.8
    %Operating and
administrative expenses
    
    $
    56.8
    
    
    
    56.5
    
    
    $
    110.6
    
    
    
    116.5Operating and
administrative expenses as a
percentage of revenue
    
    
    21.4
    %
    
    
    20.9
    %
    
    
    21.2
    %
    
    
    21.6
    %Cash, cash equivalents and
short-term investments
    
    
    
    
    
    
    
    
    
    $
    79.1
    
    
    
    105.4Cash flow provided by
operations
    
    
    
    
    
    
    
    
    
    $
    10.3
    
    
    
    1.8Pre-tax return on equity (1)
    
    
    
    
    
    
    
    
    
    
    10.1
    %
    
    
    8.6
    %
  (1)
    
    Current quarter combined with the three preceding quarters earnings
before income taxes divided by the average shareholders equity. 11




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##### Table of Contents



Consolidated revenues for the three and six month periods ended June 30, 2004
declined 1.9% and 3.5%, respectively, in comparison to the corresponding
periods in 2003. These declines were primarily due to sluggish capital project
spending by many of the Companys large clients and slower than anticipated
ramp up of new customer contract awards. Management has initiated a number of strategic actions to bolster its sales and
marketing capabilities. In January 2004, the Company initiated a new vertical go-to-market
strategy to improve revenue opportunities as the economy rebounds by providing
a more cohesive and relevant marketing and sales approach to new and existing
customers. Concurrently, the Company also re-engineered its recruiting
organization to improve efficiency and productivity by, among other things,
changing the work flow for recruiters, appointing lead recruiters in each
office and changing the incentive compensation arrangements for recruiters.
Finally, MRI has executed a strategy to grow its international franchise
organization through the sale of master franchise licenses. MRI executed a
master franchise deal in the first quarter of 2004 in Japan and other global
opportunities are being pursued. As a result of these initiatives, combined with a modest rebound in the economy
and customer spending patterns, the Company has won a number of new contracts
and is experiencing increased permanent placement activity within its MRI
franchise organization. The Company has improved its revenue trends during the
second quarter of 2004 above normal seasonal patterns. On a sequential basis
consolidated revenue for the second quarter of 2004 increased 3.5%. This is
the first quarter of consolidated sequential revenue growth since the second
quarter of 2000. Management anticipates further sequential improvements in its
revenue trends during the second half of 2004. Consolidated Results of Operations for the Three and Six Months Ended June 30,
2004 Revenues for the three and six months ended June 30, 2004 were lower compared
to 2003, primarily due to weak demand, sluggish capital spending by customers
as well as slower than anticipated ramp up of new project-based contract awards
in the Business Solutions segment, ongoing competitive pressures within the
Todays segment and to the exit of company-owned offices during the first half
of 2003 within the MRI segment. These revenue declines were partially offset
by revenue growth within the AndersElite segment due primarily to favorable
exchange rates. Excluding the effects of exchange rates, AndersElites
year-over-year revenue growth for the three and six months ended June 30, 2004
was 2.5% and 2.1%, respectively. The decline in gross profit as a percentage of revenue in the three months
ended June 30, 2004, as compared to 2003, was principally due to continued
competitive pressures on national accounts and a shift in the mix from higher
margin retail accounts to lower margin national accounts in the Todays segment.
The decline in gross profit as a percentage of revenue in the first half of
2004, as compared to 2003 was primarily due to growth in lower margin staffing
work and shrinkage in higher margin project business within the Business
Solutions segment as well as a shift in business mix between higher margin
retail accounts to lower margin national accounts in the Todays segment.
Management is focusing on ways to reverse these trends. The Company also
incurred substantial increases in state unemployment insurance (SUI) rates
during 2004. In addition, the Company incurred a settlement in excess of
established reserves for a prior year SUI dispute during the first quarter of
2004. The increase in operating and administrative expenses in the second quarter of
2004 was due principally to a pre-tax charge of $1.0 million related to real
estate that was permanently vacated primarily associated with the Life Sciences
vertical within the Business Solutions segment. In addition, there was $0.4
million of expense related to Sarbanes-Oxley compliance efforts. Partially
offsetting this increase were reductions in variable expenses resulting from
lower year-over-year volume as well as benefits from various restructuring
efforts completed during 2003. The improvement in operating and administrative expenses in the first half of
2004 was due primarily to the reductions in variable expenses indicated above
as well as to reversing a reserve of approximately $1.0 million, because the
exposure for which it was originally established never materialized. During the second half of 2004, the Company recorded a $1.3 million pre-tax
gain resulting from the sale of the last company-owned office within the MRI
segment. The Companys effective income tax rate for the second quarter of 2004 was
32.2%, as compared to 32.0% in the same period last year. For the first half
of 2004, the effective income tax rate was 33.9%, as compared to 34.7%
for 2003. This decrease in the effective income tax rate for the first half of
2004 was due primarily to the utilization 12




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##### Table of Contents



of a previously reserved capital loss carry forward of $0.4 million, which was applied against the gain from the sale
of the last company-owned MRI office, and $0.1 million of realized benefits
associated with refunds of state income taxes. During the first half of 2004, the Company improved its working capital
position as evidenced by the increase in cash and short-term investments from
$72.8 million at December 31, 2003 to $79.1 million at June 30, 2004. This
improvement is due to the generation of cash flow from operations of $10.3
million in 2004. Accordingly, the Board of Directors declared a special dividend of $2.00 per
share and a quarterly dividend of $0.11 per share on July 20, 2004, payable to
shareholders of record as of August 4, 2004. Both dividends will be paid on
August 18, 2004. Segment Results Business Solutions For the three months ended
    
    For the six months endedPercent
    
    
    
    
    
    
    
    
    
    Percent(dollars in millions)
    
    June 30,
    
    Change
    
    June 30,
    
    Change2004
    
    2003
    
    (%)
    
    2004
    
    2003
    
    (%)Revenues
    
    $
    179.6
    
    
    
    182.1
    
    
    
    (1.3
    )
    
    $
    352.1
    
    
    
    367.6
    
    
    
    (4.2
    )Gross profit
    
    $
    35.5
    
    
    
    35.9
    
    
    
    (1.0
    )
    
    $
    69.4
    
    
    
    75.6
    
    
    
    (8.3
    )Gross profit margin
    
    
    19.8
    %
    
    
    19.7
    %
    
    
    
    
    
    
    19.7
    %
    
    
    20.6
    %Operating and
administrative
expenses
    
    $
    29.8
    
    
    
    29.6
    
    
    
    0.8
    
    
    $
    57.4
    
    
    
    61.3
    
    
    
    (6.4
    )Operating profit
    
    $
    5.7
    
    
    
    6.3
    
    
    
    (9.3
    )
    
    $
    12.0
    
    
    
    14.3
    
    
    
    (16.2
    )
 Business Solutions segment recorded revenues of $179.6 million and $352.1
million for the three and six month periods ended June 30, 2004, respectively.
This represents decreases of $2.4 million, or 1.3% and $15.5 million, or 4.2%,
respectively, compared with 2003. The revenue declines for the second quarter
and first half of 2004 were primarily related to:  
    
    Reduced demand for engineering staffing in the Aerospace
and P & I verticals due primarily to the ongoing softness in
capital spending by key customers.
    
    Reduced volume due to the loss of business within the
Life Sciences vertical. These declines were partially offset by increased volume in the IT Services and
Government Services verticals. Business Solutions gross profit of $35.5 million in the second quarter of
2004 decreased by $0.4 million, or 1.0%, as compared to the second quarter of
2003. Gross profit in the first half of 2004 decreased by $6.2 million, or
8.3%, as compared to the same period in 2003. The gross profit declines for
the second quarter and first half of 2004 were primarily driven by:  
    
    Volume reductions in the P & I and Life Science verticals
noted above along with a lower margin mix of business.
    
    Lower margin mix of business in the IT Services vertical
coupled with the SUI rate increases as previously discussed. Business Solutions operating and administrative expenses increased by $0.2
million to $29.8 million, or 0.8% in the second quarter of 2004, as compared to
2003. This increase was due primarily to a $0.8 million charge related to real
estate that was vacated during the second quarter of 2004 primarily associated
with the Life Sciences vertical. In response to continuing declines in demand within the
Life Sciences vertical, management reorganized certain office space and
determined that the Life Sciences vertical had excess real estate capacity. 13




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##### Table of Contents



Partially offsetting this charge was a reduction in variable expenses due to
lower volume. Business Solutions operating and administrative expenses improved by $3.9 million to $57.4 million, or 6.4% in the first half of 2004, as
compared to the same period of 2003. This improvement was due principally to
reductions in variable expenses due to lower volume as well as benefits from
restructuring efforts completed in 2003 and the reversal of a reserve of
approximately $1.0 million because the exposure for which it was originally
established never materialized. Partially offsetting this decline was the real
estate charge noted above. AndersElite Below are the comparative operating results of AndersElite for 2004 and 2003 in
U.S. dollars: For the three months ended
    
    For the six months endedPercent
    
    
    
    
    
    
    
    
    
    Percent(U.S. dollars in millions)
    
    June 30,
    
    Change
    
    June 30,
    
    Change2004
    
    2003
    
    (%)
    
    2004
    
    2003
    
    (%)Revenues
    
    $
    40.4
    
    
    
    35.4
    
    
    
    14.1
    
    
    $
    79.9
    
    
    
    69.1
    
    
    
    15.6Gross profit
    
    $
    10.0
    
    
    
    8.8
    
    
    
    13.3
    
    
    $
    19.8
    
    
    
    17.5
    
    
    
    13.0Gross profit margin
    
    
    24.6
    %
    
    
    24.7
    %
    
    
    
    
    
    
    24.7
    %
    
    
    25.3
    %Operating and
administrative expenses
    
    $
    9.1
    
    
    
    6.7
    
    
    
    35.5
    
    
    $
    17.4
    
    
    
    13.7
    
    
    
    27.3Operating profit
    
    $
    0.9
    
    
    
    2.1
    
    
    
    (58.8
    )
    
    $
    2.4
    
    
    
    3.8
    
    
    
    (38.1
    )
 To effectively discuss the comparative results of operations for the three and
six months ended June 30, 2004 and 2003, the following tables presents
AndersElite results on a constant currency basis (i.e., British Pounds  £): For the three months ended
    
    For the six months endedPercent
    
    
    
    
    
    
    
    
    
    Percent(British pounds in millions)
    
    June 30,
    
    Change
    
    June 30,
    
    Change2004
    
    2003
    
    (%)
    
    2004
    
    2003
    
    (%)Revenues
    
    £
    22.3
    
    
    
    21.9
    
    
    
    2.1
    
    
    £
    44.0
    
    
    
    43.0
    
    
    
    2.5Gross profit
    
    £
    5.5
    
    
    
    5.4
    
    
    
    1.4
    
    
    £
    10.9
    
    
    
    10.9
    
    
    
    0.1Gross profit margin
    
    
    24.6
    %
    
    
    24.7
    %
    
    
    
    
    
    
    24.7
    %
    
    
    25.3
    %Operating and
administrative
expenses
    
    £
    5.0
    
    
    
    4.1
    
    
    
    21.3
    
    
    £
    9.6
    
    
    
    8.5
    
    
    
    12.8Operating profit
    
    £
    0.5
    
    
    
    1.3
    
    
    
    (63.0
    )
    
    £
    1.3
    
    
    
    2.4
    
    
    
    (45.2
    )
 On a constant currency basis, AndersElites revenues for the second quarter of
2004 increased 2.1% over 2003, while gross profit increased by 1.4%. For the
first half of 2004, revenues on a constant currency basis increased 2.5% over
2003, while gross profit remained essentially flat due primarily to competitive
pressure on staffing contracts. Operating profit on a constant currency basis
declined 63.0% and 45.2%, respectively, for the three and six month periods
ended June 30, 2004 over the same periods last year. These declines in
operating profits were due largely to accelerated hiring and training costs
incurred to standardize and upgrade the segments recruiting and business
development capabilities. Typically, there is a period of six months or so
before newly-hired recruiters generate revenue in excess of their costs.
Additionally, in 2004, there were costs incurred related to replacement hirings
resulting from staff turnover in the latter part of 2003. 14




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##### Table of Contents



Todays Staffing (Todays) For the three months ended
    
    For the six months endedPercent
    
    
    
    
    
    
    
    
    
    Percent(dollars in millions)
    
    June 30,
    
    Change
    
    June 30,
    
    Change2004
    
    2003
    
    (%)
    
    2004
    
    2003
    
    (%)Revenues
    
    $
    31.2
    
    
    
    36.4
    
    
    
    (14.3
    )
    
    $
    61.1
    
    
    
    71.0
    
    
    
    (13.9
    )Gross profit
    
    $
    8.2
    
    
    
    10.1
    
    
    
    (18.2
    )
    
    $
    16.2
    
    
    
    19.9
    
    
    
    (18.4
    )Gross profit margin
    
    
    26.4
    %
    
    
    27.6
    %
    
    
    
    
    
    
    26.5
    %
    
    
    28.0
    %Operating and
administrative
expenses
    
    
    7.4
    
    
    
    7.9
    
    
    
    (6.5
    )
    
    $
    14.9
    
    
    
    16.4
    
    
    
    (8.7
    )Operating profit
    
    $
    0.8
    
    
    
    2.2
    
    
    
    (61.1
    )
    
    $
    1.3
    
    
    
    3.5
    
    
    
    (63.5
    )
 Todays segment recorded revenues of $31.2 million for the second quarter of
2004, a decrease of $5.2 million or 14.3%, as compared to the second quarter of
2003. For the six months ended June 30, 2004, revenues were $61.1 million, a
decrease of $9.9 million or 13.9%, as compared to the same period of 2003. The
lower revenues in both the second quarter and the first half of 2004 reflect
continued competitive pressure on national accounts and declines in higher
margin retail accounts. In addition, Todays experienced reduced volume from
customers in the mortgage industry during the second quarter and first half of
2004. Management is focusing on ways to reverse these trends. Todays gross profit for the second quarter of 2004 was $8.2 million, a
decrease of $1.9 million or 18.2%, as compared to the second quarter of 2003.
Gross profit of $16.2 million in the first half of 2004 was lower by $3.7
million, or 18.4%, as compared to the first half of 2003. The reductions in
gross profit were due to the revenue declines noted above coupled with
reductions in gross profit margins from 27.6% to 26.4% and from 28.0% to 26.5%
for the second quarter and first half of 2004, respectively. Gross profit
margins decreased as a result of continued competitive pressures on national
accounts, increased SUI rates and a shift in the mix of business between higher
margin retail accounts to lower margin national accounts. Todays operating and administrative expenses improved by $0.5 million to $7.4
million and $1.5 million to $14.9 million, respectively, for the second quarter
and first half of 2004, as compared to 2003. The declines were due primarily
to reductions in variable expenses due to lower volume partially offset by
additional expenses as a result of the ramping up of sales and recruitment
staff. Management Recruiters International (MRI) For the three months ended
    
    For the six months endedPercent
    
    
    
    
    
    
    
    
    
    Percent(dollars in millions)
    
    June 30,
    
    Change
    
    June 30,
    
    Change2004
    
    2003
    
    (%)
    
    2004
    
    2003
    
    (%)Revenues
    
    $
    13.6
    
    
    
    16.1
    
    
    
    (15.6
    )
    
    $
    27.7
    
    
    
    31.8
    
    
    
    (12.8
    )Gross profit
    
    $
    9.3
    
    
    
    10.4
    
    
    
    (10.6
    )
    
    $
    18.9
    
    
    
    20.5
    
    
    
    (7.9
    )Gross profit margin
    
    
    68.7
    %
    
    
    64.9
    %
    
    
    
    
    
    
    68.1
    %
    
    
    64.5
    %Operating and
administrative
expenses
    
    $
    6.8
    
    
    
    8.6
    
    
    
    (20.3
    )
    
    $
    14.1
    
    
    
    17.9
    
    
    
    (21.7
    )Operating profit
    
    $
    3.8
    
    
    
    1.8
    
    
    
    102.9
    
    
    $
    6.1
    
    
    
    2.6
    
    
    
    139.8
 MRIs segment recorded revenues of $13.6 million for the second quarter of
2004, a decrease of $2.5 million, or 15.6%, as compared to the second quarter
of 2003. For the first half of 2004, MRIs revenues declined $4.1 15




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##### Table of Contents



million, or 12.8%, to $27.7 million, as compared to the first half of 2003.
The decreases in revenues were due to the exit of company-owned offices in the
second quarter of 2003. An important development in the first half of 2004 was
MRIs entry in the Japanese market through the signing of a master franchise
agreement with Fuji Staff, Inc., a Tokyo-based staffing business. MRI is
pursuing other similar global opportunities. MRIs gross profit of $9.3 million in the second quarter of 2004 was lower by
$1.1 million or 10.6%, as compared to the second quarter of 2003. Gross profit
for the first half of 2004 decreased $1.6 million, or 7.9%, as compared to the
same period in 2003. These decreases in gross profit margin were related to
the exit of company-owned offices in 2003 partially offset by the improved
gross profit margins from 64.9% to 68.7% and from 64.5% to 68.1% for the second
quarter and first half of 2004, respectively. The profit margin improvements
were driven primarily by the increase in franchise royalty revenues. MRIs operating and administrative expenses improved by $1.8 million to $6.8
million and by $3.8 million to $14.1 million for the second quarter and first
half of 2004, respectively, as compared to 2003. The improvements were due
primarily to cost containment measures and the exit of company-owned offices in
2003. MRIs operating profit was $3.8 million in the second quarter of 2004, as
compared to $1.8 million in the second quarter of 2003. Operating profit for
the first half of 2004 was $6.1 million, as compared to $2.6 million for the
first half of 2003. These improvements in operating profit were due primarily
to the pre-tax gain of $1.3 million from the sale of the last company-owned MRI
office and to reductions in operating and administrative expenses noted above,
partially offset by declines in gross profit and to a charge of $0.2 million
related to real estate that was permanently vacated during the second quarter
of 2004. Corporate Corporate expenses of $3.7 million were essentially flat for the second quarter
of 2004, as compared to 2003. During the first six months of 2004, corporate
expenses were $6.8 million, as compared to $7.1 million for the same period of
2003. Corporate expenses for the first half of 2004 were in line with
expectations except for $0.4 million of incremental spending for Sarbanes-Oxley
compliance during the second quarter of 2004, which management anticipates will
continue at least at this level for the balance of 2004. Liquidity and Capital Resources The following table summarizes the major captions from the Companys
Consolidated Statements of Cash Flows: Six months endedJune 30,(in millions)
    
    2004
    
    2003Operating Activities
    
    $
    10.3
    
    
    $
    1.8Investing Activities
    
    $
    (8.2
    )
    
    $
    (4.5
    )Financing Activities
    
    $
    (3.3
    )
    
    $
    8.1
 Operating Activities During the first six months of 2004, CDI generated approximately $10.3 million
of cash flows from operating activities, as compared to $1.8 million during the
same period in 2003. This increase in operating cash flow primarily reflects
improvement in working capital management. In this regard, the Company
continues to institute enhanced managerial controls and standardization over
its contracting, receivables collection and disbursement processes. Investing Activities CDI invested $3.1 million in the first half of 2004 for purchases of property
and equipment versus $7.8 million in the corresponding period of 2003. During
the first half of 2003, the Company incurred capital investment to support the
acquisition, configuration and implementation of a new back-office accounting
system. Cash generated from operating activities has been conservatively
invested and is readily available to fund Company 16




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operations and investment opportunities. During the first half of 2004, the
Company purchased $7.3 million of short-term investments resulting principally
from stronger operating cash flows. Financing Activities The Company paid shareholders quarterly dividends totaling $3.5 million during
the first half of 2004. Additionally, CDI reduced its level of obligations not
liquidated because of outstanding checks due to its working capital management
in 2004. Summary At June 30, 2004, cash, cash equivalents, and short-term investments totaled
$79.1 million and the Company has no bank debt. Management believes that its
current funds and funds generated from operations will be sufficient to meet
currently anticipated working capital, dividends and other capital
requirements. Should the Company require additional funds in the future,
management believes that it will be able to obtain these funds at competitive
rates. On July 20, 2004, the Board of Directors approved a quarterly dividend of $0.11
per share and a special dividend of $2.00 per share. Both dividends, which
will approximate $42.0 million, are to be paid on August 18, 2004 to
shareholders of record as of August 4, 2004. The declaration and payment of
any future dividends will be at the discretion of the Companys Board of
Directors and will depend upon many factors including the Companys earnings,
financial condition and capital requirements. Critical Accounting Policies and Estimates These financial statements were prepared in accordance with generally accepted
accounting principles, which require management to make subjective decisions,
assessments and estimates about the effect of matters that are inherently
uncertain. As the number of variables and assumptions affecting the judgment
increases, such judgments become even more subjective. While management
believes its assumptions are both reasonable and appropriate, actual results
may be materially different than estimated. The critical accounting policies,
estimates and assumptions identified in the Companys 2003 Annual Report on
Form 10-K filed March 12, 2004 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. The Companys exposure to foreign currency
fluctuations relates to its operations in foreign countries conducted
principally through subsidiaries operating primarily in the United Kingdom and
Canada. Exchange rate fluctuations impact the U. S. dollar value of reported
earnings derived from these foreign operations as well as the carrying value of
the Companys investment in the net assets related to these operations. During
the first quarter of 2004, the Company entered into a foreign exchange put
option contract to hedge a portion of its U.K. foreign operations 2004
forecasted net earnings. The effects of foreign currency exchange rate
fluctuations historically have been immaterial on CDIs consolidated earnings. The Companys exposure to interest rate changes is not significant. As of June
30, 2004, there were no bank borrowings and only immaterial amounts of other
debt outstanding, none of which was variable rate debt. The Companys
investment in money market and other short-term instruments are primarily at
variable rates. 17




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Item 4. CONTROLS AND PROCEDURES The Company has conducted an evaluation of the effectiveness of its disclosure
controls and procedures under the supervision of its Chief Executive Officer
and its Chief Financial Officer as of June 30, 2004. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Companys disclosure controls and procedures are effective
in providing reasonable assurance that information required to be disclosed by
the Company in reports filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported upon in such reports within the
time periods specified for their filing. It should be noted that the design of
any system of controls is based in part on certain assumptions about the
likelihood of future events. A control system, no matter how well designed and
implemented, can provide only reasonable, not absolute assurance, that the
objectives of the control system will be met. There have been no significant changes in the Companys internal control over
financial reporting that occurred during the most recently completed fiscal
quarter that materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting. 
 PART II. OTHER INFORMATION 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 25, 2004, the Company held its annual meeting of shareholders. The
matters of business approved at the meeting were: (1) the election of eight
directors of the Company, (2) the ratification of KPMG LLP as the Companys
independent auditor for 2004, (3) the Companys 2004 Omnibus Stock Plan, and
(4) the Companys Stock Purchase Plan for Management Employees and Non-Employee
Directors. The vote for the ratification of KPMG LLP as independent auditor for 2004 was
as follows: For
    
    
    17,793,776Against
    
    
    547,570Abstain
    
    
    3,966Broker non-votes
    
    None
 The vote for the 2004 Omnibus Stock Plan was as follows: For
    
    
    15,347,641Against
    
    
    2,492,810Abstain
    
    
    16,474Broker non-votes
    
    
    488,387
 The vote for the Stock Purchase Plan for Management Employees and Non-Employee Directors was as follows: For
    
    
    17,171,584Against
    
    
    665,297Abstain
    
    
    20,044Broker non-votes
    
    
    488,387
 18




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##### Table of Contents



Item 6. EXHIBITS AND REPORTS ON FORM 8-K  (a)
    
    Exhibits 10.a.
    
    CDI Corp. 2004 Omnibus Stock Plan, incorporated herein by
reference to the Registrants Proxy Statement filed on April 21,
2004. (Constitutes a management contract or compensatory plan or
arrangement)10.b.
    
    Amended and Restated CDI Corp. Stock Purchase Plan for
Management Employees and Non-Employee Directors, incorporated herein
by reference to the Registrants Proxy Statement filed on April 21,
2004. (Constitutes a management contract or compensatory plan or
arrangement)31.a.
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.b.
    
    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.
  (b)
    
    Reports on Form 8-K during the three-month period ended June 30, 2004.On April 22, 2004, the Company filed a report on Form 8-K to provide a
copy of a news release announcing the Companys financial results for the
first fiscal quarter ended March 31, 2004.On April 28, 2004, the Company filed a report on Form 8-K to provide
information regarding the Companys cash flow during the quarter ended
March 31, 2004.On June 1, 2004, the Company filed a report on Form 8-K to disclose
information in connection with Regulation FD. 19




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##### Table of Contents



SIGNATURES 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.August 5, 2004
    
    By:
    
    /s/ Jay G. StuartJay G. StuartExecutive Vice President and Chief
Financial Officer
(Principal Financial Officer)
 20




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INDEX TO EXHIBITS Number
    
    Exhibit10.a.
    
    CDI Corp. 2004 Omnibus Stock Plan, incorporated herein by reference to
the Registrants Proxy Statement filed on April 21, 2004. (Constitutes a
management contract or compensatory plan or arrangement)10.b.
    
    Amended and Restated CDI Corp. Stock Purchase Plan for Management
Employees and Non-Employee Directors, incorporated herein by reference
to the Registrants Proxy Statement filed on April 21, 2004.
(Constitutes a management contract or compensatory plan or arrangement)31.a.
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.b.
    
    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.
 21