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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended June 30, 2003

OR

For the transition period from                 to               

Commission file number 1-5519

CDI CORP.

1717 Arch Street, 35^th Floor, Philadelphia, PA 19103-2768

Registrant’s telephone number, including area code:  (215) 569-2200

     Indicate 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.

                          Yes  (X)   No  (   )

     Indicate whether the Registrant is an accelerated filer (as defined in Section 12b-2 of the Exchange Act.)

                          Yes  (X)   No  (   )

     Outstanding shares of each of the Registrant’s classes of common stock as of July 30, 2003 were:

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CDI CORP.

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PART I. FINANCIAL INFORMATION

CDI CORP. AND SUBSIDIARIES

     See accompanying notes to consolidated financial statements.

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CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)

     See accompanying notes to consolidated financial statements.

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CDI CORP. AND SUBSIDIARIES

     See accompanying notes to consolidated financial statements.

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CDI CORP. AND SUBSIDIARIES

     See accompanying notes to consolidated financial statements.

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CDI CORP. AND SUBSIDIARIES

     See accompanying notes to consolidated financial statements.

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CDI Corp.

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, 2002 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, 2002 reported in Form 10-K, filed March 27, 2003. 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.

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 month and six month periods ended June 30, 2003 are not necessarily indicative of results that may be expected for the full year or any portion thereof.

2.     New Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 146 (“SFAS 146”) Accounting for Costs Associated with Exit or Disposal Activities, which supersedes Emerging Issues Task Force Number 94-3, (“EITF No. 94-3”), Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred, rather than at the date of a commitment to an exit or disposal plan as required by EITF No. 94-3. SFAS 146 is effective for restructuring activities initiated after December 31, 2002. This Statement does not require companies to adjust restructuring reserves recorded before 2003. The Company will apply SFAS 146 to any future restructurings.

Effective December 15, 2002, the Company adopted FASB Interpretation Number 45 (“FIN 45”) Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company has assessed this Interpretation and has provided the necessary disclosures on Form 10-K filed with the SEC on March 27, 2003 in Note 16 of the Notes to Consolidated Financial Statements. For the six months ended June 30, 2003, there were no significant changes from year-end.

In December 2002, the FASB issued Statement of Financial Accounting Standard No. 148 (“SFAS 148”) - Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123 (“SFAS 123”); Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about

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the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The required interim disclosure is shown in Note 8. The transition provisions of SFAS 148 are effective for years beginning after December 15, 2002. The Company is currently assessing the potential impact this Statement may have on the Company’s financial position or results of operations should it elect to apply the transition provisions of this Statement.

In January 2003, the FASB issued FASB Interpretation Number 46 (“FIN 46”) - Consolidation of Variable Interest Entities an interpretation of ARB No. 51. FIN 46 applies to all variable interest entities created after January 31, 2003; for the first fiscal year or interim period beginning after June 15, 2003 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. At this time the Company has no variable interest entities.

In April 2003, the FASB issued Statement of Financial Accounting Standard No. 149 (“SFAS 149) - Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 is applicable for contracts entered into or modified after June 30, 2003; for hedging relationships designated after June 30, 2003; for provisions that relate to Statement 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, apply in accordance with their respective effective dates; for paragraphs 7(a) and 23(a), apply to both existing contracts and new contracts entered into after June 30, 2003. The Company is currently assessing if there will be any impact.

3.     Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments as of June 30, 2003 and December 31, 2002 were comprised of the following:

These investments are in liquid, high quality debt securities with diversification among the investments based upon the Company’s guidelines. Amortized cost approximates fair value. Realized gains and losses during the three and six month periods ended June 30, 2003 were immaterial and there were no transfers of investments between classifications of short-term investments.

All of the Company’s available-for-sale securities reflect investments in corporate bonds, various government agencies and commercial paper. In May 2003, the $15.2 million certificate-of-deposit being held-to-maturity matured and the proceeds were reinvested in available-for-sale and cash equivalent securities. Contractual maturities of available-for-sale securities as of June 30, 2003 of $9.1 million were for securities maturing in one year or less and $ 49.7 million for securities maturing in one to four years.

4.     Goodwill

The adoption of FASB Statement of Financial Accounting Standard No. 142 (“SFAS 142”), Goodwill and Other Intangible Assets, required testing as of January 1, 2002 for impairment of goodwill carried in the Company’s balance sheet as of that date. The valuations performed on the various units identified by the Company indicated that goodwill for some of the units was impaired. The fair value of these units was less than the carrying cost of the underlying net assets. The valuation was determined by using the current and projected earnings, cash flows and market comparables. Testing for impairment of goodwill prior to January 1, 2002 was based upon undiscounted cash flows from the related assets, as compared to the fair value approach required under SFAS 142.

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As of January 1, 2002, impairment charges for the write-off of goodwill were $21.4 million (Professional Services - $15.0 million; Project Management - $0.2 million; Management Recruiters - $6.2 million), or $14.0 million net of income tax. These charges were recorded in the Company’s Consolidated Statements of Earnings as a cumulative effect of a change in accounting.

SFAS 142 also requires the Company to test for impairment on an annual basis. The Company conducts its annual goodwill impairment test as of July 1 of each year.

5.     Provision for Restructure

During the six months ended June 30, 2003, there were no restructuring charges, as compared to $4.1 million recorded in the first quarter of 2002. The restructuring charges recorded in the first half of 2002 primarily impacted the Project Management segment ($3.5 million) and the Professional Services segment ($0.6 million).

The table presented below shows the year-to-date activity from a balance sheet perspective:

The remaining liability for severance will be substantially paid during 2003. The Company anticipates that the remaining liability for the termination of operating leases will be substantially paid by December 31, 2005. Management intends to liquidate the Company’s remaining lease obligations as soon as possible. The accrual for the provision for restructure is included in accrued expenses in the accompanying consolidated balance sheets.

6.     Discontinued Operations

In June of 2002, the Company sold the net operating assets of its Modern Engineering, Inc. (“Modern”) subsidiary that operated in its Project Management segment. Modern provided technical staffing services to the automotive industry. The operations of Modern were a component of CDI, as that term is defined in FASB Statement of Financial Accounting Standard No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long Lived Assets, and accordingly, are reflected as discontinued operations in the accompanying financial statements.

The earnings from discontinued operations for the three and six month periods ended June 30, 2002 were as follows:

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7.     Earnings (Loss) Per Share

Earnings (loss) used to calculate both basic and diluted earnings (loss) per share for all periods are the reported earnings in the Company’s consolidated statements of earnings. All reported earnings (loss) pertain to common shareholders and no assumed adjustments are necessary. In the six months ended June 30, 2002, the number of basic and diluted shares are the same because including the effect of common stock equivalents would have been antidilutive.

The number of common shares used to calculate basic and diluted earnings per share for three and six months ended June 30, 2003 and 2002 was determined as follows:

8.     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 123 uses a fair value based method of accounting for stock-based compensation. The following table reflects the pro-forma effect on net earnings (loss) and earnings (loss) per share for the three month and six month periods ended June 30, 2003 and 2002 as if the Company had adopted the fair value recognition provisions of SFAS 123:

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