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or

Commission file number 001-5519

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.   YES     X     NO             

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.             

Indicate whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   YES     X     NO             

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, on the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange.

The outstanding shares of each of the Registrant’s classes of common stock as of March 10, 2005 were:

Documents Incorporated by Reference

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s 2005 Annual Meeting are incorporated by reference in Part III.

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Forward-looking Information

Certain 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 and capital spending by customers, 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 other uncertainties set forth herein, 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 (“SEC”). 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. Certain other risk factors are discussed more fully under “Risk Factors” in Part I, Item 1 of this filing.

Restatement of Financial Statements

(dollars in thousands, unless otherwise indicated)

As part of its 2004 year-end closing process, the Company identified approximately $4.0 million of pre-tax adjustments which pertained to 2003 and the first three quarters of 2004. Approximately $2.0 million related to the first three quarters of 2004 and the remaining $2.0 million related to 2003. As a result, the Company’s consolidated financial statements for these periods have been restated to reflect a decrease of pre-tax earnings of approximately $928, $696, and $346 for the third, second, and first quarters, respectively, of 2004, and a decrease in pre-tax earnings of approximately $879, $886, and $398 for the fourth, third, and first quarters of 2003, respectively, and an increase in pre-tax earnings of approximately $161 for the second quarter of 2003. Accordingly, the consolidated financial statements of the Company for these periods and the segment data for the Business Solutions segment for these periods included in prior filings with the SEC should no longer be relied upon.

All applicable financial information contained in this Annual Report on Form 10-K gives effect to these restatements. For information concerning the background of the 2003 restatement and the specific adjustments made, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Restatement of Financial Statements”, and Note 2 of the Notes to Consolidated Financial Statements and Quarterly Results (Unaudited) Supplementary Data included in Item 8. Remedial measures that were recommended or identified in the course of the restatement process are summarized in Item 9A, “Controls and Procedures.”

General

CDI Corp., (the “Company” or “CDI”) (NYSE:CDI), which was founded in 1950 in Philadelphia, Pennsylvania, provides engineering and information technology outsourcing solutions and professional services, specialized staffing and permanent placement services, and franchise services. The Company derives the majority of its revenues from Fortune 1000 companies serviced primarily in the United States.

Overview

CDI’s primary services are to provide temporary and managed staffing, project outsourcing, permanent placement, and franchise services to a diversified group of customers located primarily in the United States. These services are described as follows:

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In the fourth quarter of 2003, the Company initiated a business integration plan to align the Company’s organizational structure with the key vertical markets it serves. This integration plan was designed to better serve the needs of the Company’s customers, create synergies within its existing operating units, achieve greater operating efficiencies, and generate higher revenue.

In January 2004, the Company implemented organizational and reporting changes in support of its vertical go-to-market strategy. The new organizational structure has four reporting segments—Business Solutions (“BS”), AndersElite (“Anders”), Todays Staffing (“Todays”), and Management Recruiters International (“MRI”). Management integrated its former Professional Services and Project Management segments to form BS, which focuses on specific vertical markets—information technology services, process and industrial, aerospace, government services, and life sciences. Anders, previously part of the Professional Services reporting segment, is a major provider of building and construction professionals and operates primarily in the United Kingdom. The Todays and MRI segments remain unchanged.

The following tables summarize the Company’s revenue by category, and reporting segment for 2004, 2003, and 2002:

Reporting Segments

See Note 19 of the Notes to the consolidated financial statements for additional information regarding the Company’s operating segments. All prior year presentations have been revised for the effect of the restatement as well as for the new reporting segments.

Business Solutions (“BS”)

BS provides temporary and managed staffing, project outsourcing, and permanent placement staffing solutions to customers seeking engineering, design, consulting, information technology resources, and professional staff, in approximately 70 offices in the United States and 6 international offices in Canada and Germany. In 2004, approximately 7% of BS’ total revenue was generated outside the United States.

Services

BS offers its services to customers through the following targeted verticals:

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The following table shows the percentage of revenue derived from each of these verticals within the BS segment for 2004, 2003, and 2002:

BS segment’s staffing service delivery is tailored to the needs of the customer. The most basic service is providing skilled professionals to work at a single customer location on a temporary or permanent basis. The segment’s highest staffing value to customers is in the provision of customized managed staffing solutions, which may include: serving as the lead recruiter among several vendors, the procurement of hundreds of professional employees across a broad geographic area, the provision of on-site management of staffing requirements and certain human resource functions, and the utilization of web-based technology to support these functions.

When providing staffing services, the segment recruits and hires employees and provides these personnel to customers for assignments that, on average, last close to one year. The vast majority of these services are performed in the customers’ facilities. Customers use the segment’s employees to meet peak period personnel needs, to fill in for employees who are ill or on vacation, to provide additional capabilities in times of expansion and change, and to work on projects requiring specialized skills. At the end of the project, an employee is either reassigned to another project for the current customer, assigned to perform services with another customer, or employment is terminated.

When supplying staffing services, the segment provides not only the employees but may also manage all of the customer’s contract staffing needs, as well as certain human resource functions required to manage the customer’s contract workforce. When providing managed staffing services, the segment frequently establishes on-site offices at one or more of the customer’s facilities, staffs it with employees from the segment, and ties that office into the segment’s business systems. If desired, managed staff services utilize web-based technology to help accelerate and streamline the procurement, management, and supervision of contract employees.

Although services are usually performed at the customer’s premises, BS remains the employer of its temporary employees and is responsible for administrative matters and employment-related taxes of these temporary employees. When services are performed at CDI’s offices, BS generally provides supervision for employees, and may have increased responsibility for the performance of work that is generally monitored in conjunction with customer personnel.

BS offers a wide range of project management, outsourcing services, and technical consulting services to customers in high technology and capital-intensive vertical markets. These services include feasibility studies, turnaround management, validation services, and technical publications. In addition, BS provides information technology outsourcing services such as infrastructure management, enterprise support services, and technology advisory services. These high value-added engineering and consulting contractual engagements are generally more than a year in duration.

The high-value added engineering services typically involve managing a discrete portion or portions of a customer’s capital project, including, but not limited to, preliminary or detailed plant design and construction management, validation and commissioning of a facility, and lifecycle support. To the extent such activities entail design and planning work, they are typically performed at CDI’s offices. However, construction management, validation, commissioning, and lifecycle support activities are generally performed on-site.

In providing information technology outsourcing services, the segment usually manages a customer’s technical department by staffing the department with its employees, and monitoring the results of the department. In most instances, the managed department is located on-site at the customer’s premises, but in some cases the customer may prefer an off-site location. In this case, the segment may need to maintain a stand-alone operation.

Pricing

Under a substantial number of temporary and managed staffing contracts between BS and its customers, pricing is generally based on mark-ups on contractual rates of pay. Contracts generally do not obligate the customer to pay for any fixed number of hours. Generally, the customer has the right to terminate the contract, usually on short notice. BS maintains the right to terminate its staffing employees at will.

Project outsourcing services are generally based on mark-ups on contractual hourly rates of pay. Contracts generally do not obligate the customer to pay for any fixed number of hours. To a lesser extent, BS’ revenues are derived from fixed-price and outsourcing contracts. Customers typically invite several companies to bid for contracts, which are awarded primarily on the basis of price, technological capability, value-added services, and prior performance. Many times customers grant multi-vendor contracts.

Permanent placement services are contingent upon filling an assigned position. If the customer hires the candidate, BS is compensated based upon an agreed-upon rate, which generally amounts to a percentage of first year compensation for the candidate placed.

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Customers / Markets

Marketing activities are conducted by national, divisional, and regional management to ascertain opportunities in specific vertical markets and geographical areas. Each office assists in identifying the potential markets for services in its geographic area, and develops that market through personal contact with prospective and existing customers. The segment’s operating management stays abreast of emerging demand for services so that efforts can be expanded or redirected to take advantage of potential business in either established or new marketing areas.

The segment’s quarterly operating results are affected by the seasonality of its customers’ businesses. This seasonality is due to customers’ plant closures and vacation and holiday schedules. Demand for BS’ staffing and project outsourcing services is generally lower in the fourth quarter of a calendar year and increases during the first, second, and third quarters. In 2004, no one customer exceeded 10% of total segment revenue. In 2004, governmental contract service business represented approximately 8% of BS’ total segment revenues. Most of this business is in the Government Services vertical, with the balance primarily in the IT vertical.

AndersElite (“Anders”)

Anders provides temporary and permanent placement staffing solutions for customers seeking building, construction, and other related professional services in 13 company-owned offices principally in the United Kingdom. Services provided include architecture, building services, commercial and industrial construction, consulting engineering, facilities management, interior design, surveying, and town planning projects in both private and government-funded capital infrastructure investments.

Services

Temporary staffing services are performed at customer jobsites by Anders’ workers who are hired to work on customers’ projects. The period of assignment depends on the need for the skills of the individual worker and can range from several days to many months. The average assignment duration can vary significantly depending on the assignment. At the end of the project, the worker is either reassigned to another project for the current customer, assigned to perform services with another customer, or is terminated.

Anders provides temporary workers to work at customer jobsites. Anders contracts for the temporary workers’ services either with the individual worker or with a limited company. In the case of individual workers, Anders is responsible for related tax deductions and national insurance contributions, whereas in the case of limited company workers, the limited company employer is responsible for such deductions and contributions. The customer has supervisory control and responsibility for performance of the temporary workers.

Pricing

Temporary staffing services are generally billed by the hour for the number of hours worked. Pricing is based on mark-ups on contractual rates of pay, and arrangements with the customer generally do not obligate the customer to pay for any fixed number of hours. Fees for permanent placement services are contingent upon filling an assigned position. If the customer hires the candidate, Anders is generally compensated based on a percentage of first year compensation for the candidate placed.

Customers / Markets

Anders’ primary markets include national and regional U.K.-based customers that operate within the public and private sector. These customers span industrial, commercial, government and defense, housing, retail, and the rail industries. The segment’s quarterly operating results are affected by the seasonality of its customers’ businesses. This seasonality is due to weather and daylight limitations, as well as governmental budget constraints. Demand for Anders’ staffing services is generally lower in the first quarter and fourth quarter of a calendar year and increases during the second and third quarters. Although Anders provides services to the governmental sector, the segment has no significant dependency on governmental contract services. In 2004, no one customer represented more than 10% of total segment revenue.

Todays Staffing (“Todays”)

Todays provides temporary and managed staffing and permanent placement staffing solutions for customers seeking office administrative, legal professionals, and financial staff, through approximately 70 company-owned and franchised offices in the United States and 10 company-owned offices in Canada. In 2004, approximately 12% of Todays’ total revenue was generated in Canada.

Services

Temporary and managed staffing services are performed in customers’ facilities by Todays employees who are hired to work on customers’ projects. The period of assignment depends on the need for the skills of the individual employee and can range from several days to many weeks. The duration of most assignments ranges from six to nine weeks. At the end of the assignment, the employee is either reassigned to another project for the current customer, assigned to perform services with another customer, or is terminated.

Although services are provided in the customer’s facilities, Todays remains the employer of its temporary employees, with responsibility for administrative matters and employment-related taxes for these individuals. The customer retains supervisory control and responsibility for the performance of the employee’s services.

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Pricing

Temporary and managed staffing services are generally billed by the hour for the number of hours worked. Pricing is typically based on mark-ups on contractual rates of pay, and arrangements with the customer generally do not obligate the customer to pay for any fixed number of hours. Permanent placement services are contingent upon filling an assigned position. If the customer hires the candidate, Todays is generally compensated based on a percentage of first year compensation for the candidate placed.

Todays supports seven franchised offices and employs all of their personnel, including those recruited by the franchised offices, and also bears the responsibility for billing services to customers. Franchisees are responsible for selling services to customers, recruiting temporary personnel, and administrative costs, such as rent and utilities. The franchisee receives a portion of the gross profit on the franchised accounts.

Customers / Markets

Customers retain Todays to supplement their existing workforces, to meet peak manpower needs, and to staff special projects. Marketing activities are conducted by divisional and regional management to ascertain opportunities in specific markets and geographical areas. Each office assists in identifying the potential markets for services in its geographic area, and develops that market through personal contact with prospective and existing customers. Todays focuses on larger national accounts, as well as small to medium-sized customers in the financial, medical, educational, and communications industries, including: financial and legal services, technology, education, energy, and telecommunications.

The segment’s quarterly operating results are affected by the seasonality of its customers’ businesses. Demand for Todays’ staffing services is generally lower in the first and third quarters of a calendar year and increases during the second and fourth quarters. Although Todays provides services to the governmental sector, the segment has no significant dependency on governmental contract services. In 2004, revenues from no one customer represented more than 10% of total segment revenue.

Management Recruiters International (“MRI”)

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 the franchisees’ customers. The MRI franchisees provide permanent placement services primarily under the MRI brand umbrella name. In addition, MRI provides temporary staffing services to its franchisees as support to the franchisees’ network. As of December 31, 2004, MRI had approximately 800 franchised offices in the United States and approximately 150 franchised offices located in 35 other countries throughout the world. In 2004, approximately 8% of MRI’s total revenue was generated outside the United States.

Services

Support for MRI’s franchise network is provided by administrative offices in New Castle, Delaware, Philadelphia, Pennsylvania, Cleveland, Ohio, and in the United Kingdom for international franchise operations. The broad geographic scope of operations and underlying support and related systems enables franchisees to provide international recruiting and matching of employers with job candidates.

Pricing

Initial franchise fees and ongoing royalties are the primary component of MRI’s revenues. Individual franchises and international master franchises may be acquired by qualified candidates both in the United States and internationally. Franchisees located in the United States pay an initial fee approximating $79,000, while franchisees located internationally pay an initial fee approximating $60,000. Ongoing royalty fees are based on a contractual percentage of the franchisee’s permanent placement service fees and any other revenue collected. New franchise agreements generally have a term of 10 years.

In accordance with the franchise agreement, the franchisee is entitled to the use of MRI’s intellectual property, such as trademarks and trade names, as well as ongoing field service and public relations support, training, and purchasing leverage. Franchisees also have access to MRI’s extensive performance development curriculum which is designed specifically for the recruitment industry, and an inter-office referral network which provides franchisees international recruiting capabilities in fulfilling customer requirements. MRI does not control the business operations of its franchisees.

In addition, in conjunction with MRI, franchisees offer temporary staffing services to their customers in the areas of administrative, legal, finance, and other professions. Franchisees are responsible for selling these services to their customers and for recruiting temporary personnel. MRI employs the temporary personnel recruited by the franchised offices, and also bears the responsibility for billing and collection services to customers. The franchisee receives a portion of the gross profit on the temporary staffing service accounts.

Customers / Markets

MRI’s primary objectives are to sell new franchises, renew existing franchises, and, most importantly, provide superior service, training, and support to its franchisees in a way that enables them to increase their revenues. New franchisees are brought into the MRI network primarily on a referral basis. The ability of MRI’s franchisees to compete in the staffing services industry is important to the segment’s prospects for growth.

The ability of an individual franchisee to compete and operate successfully may be affected by the location and service quality

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of its office, the number of permanent placement offices in the area, community reputation, and other general and local economic factors. The potential negative effect of these conditions on the segment’s results of quarterly and annual operations is generally reduced by the diverse geographical locations of its franchisees. No part of MRI’s business is dependent on a single franchisee.

Other Information

Competition

All segments of the Company’s operations face competition in attracting both clients and high-quality specialized employment candidates. The temporary and permanent placement businesses are very competitive and highly fragmented, with limited barriers to entry into the market. CDI competes in global, national, regional, and local markets with numerous temporary staffing and permanent placement companies. In many areas, the local companies are the strongest competitors. In 2004, some of CDI’s largest competitors included: Kelly Services, Inc.; Adecco, S.A.; Spherion Corporation; Volt Information Services, Inc.; and Jacobs Engineering Group, Inc.

Competition varies from market to market. In most areas, no single company has a dominant share of the market. Many customers use more than one staffing services company; however, the practice of using a primary supplier has become increasingly prevalent among the largest customers. This has led to intense price competition within the staffing and recruitment industry in recent years. These sole supplier relationships can have a significant impact on the Company’s revenue and operating profit growth as volume reductions by such customers, whether related to economic factors or otherwise, could have an adverse effect on the Company’s results in any period.

Key factors that influence success in CDI’s industries include quality of service, price, and geographic location. The Company believes it derives a competitive advantage from its long experience in and commitment to its industries, its national presence, and its various marketing activities.

Safeguards—Business, Disaster and Contingency Planning

CDI has a number of safeguards to protect the Company from various system-related risks. Given the significant amount of data generated in the Company’s key processes including recruiting, payroll, and customer invoicing, CDI has established redundant processing capability within the Company’s primary data center. This redundancy mitigates the risks related to hardware failure. Additionally, CDI has contracted with a third-party provider to restore its primary data center operations in the event of a disruption. Finally, the Company maintains site disaster plans for a majority of its operating offices as well as maintaining data back-up requirements throughout the Company.

Employees

As of December 31, 2004, CDI had approximately 1,700 staff employees. In addition, there were approximately 15,000 employees and workers as billable personnel. The number of billable employees and workers varies in relation to the number of assignments in progress at any particular time.

Risk Factors

The Company’s business involves a number of risks, some of which are beyond its control. The risk and uncertainties described below are not the only ones the Company faces. Management believes that the more significant of these risks and uncertainties are as follows:

Economic Trends

The demand for the Company’s services, in particular its temporary and managed staffing and permanent placement services, is highly dependent upon the state of the economy and upon the staffing needs of the Company’s customers. The pace of customer capital spending programs, new product launches, and similar activities has a direct impact on the need for temporary and permanent employees and for project outsourcing. Any variation in the economic condition or employment levels of the United States or any of the foreign countries in which the Company does business, or in any specific industry, could have a material adverse effect on the Company’s business, financial condition, or results of operations.

Government Regulations

Changes in government regulations could result in prohibition or restriction of certain types of employment services or the imposition of new or additional benefits, licensing, or tax requirements with respect to the provision of employment services that may reduce CDI’s future earnings. There can be no assurance that CDI would be able to increase the fees charged to its clients in a timely manner or in a sufficient amount to cover increased costs as a result of any of the foregoing.

Material Weakness in Internal Controls over Financial Reporting

As of December 31, 2004, the Company has identified a material weakness in its internal controls over financial reporting. CDI is committed to, and is actively engaged in, remedying these matters. See Item 9A “Controls and Procedures”, in this Form 10-K for further information. The failure to implement, or delays in implementing, the improvements necessary to remedy the material weakness could adversely affect the ability of the Company to report reliable financial information on a timely basis and to comply with the financial reporting requirements under applicable governmental and stock exchange rules.

Highly Competitive Business

The staffing services business is highly competitive and fragmented with limited barriers to entry. CDI competes in global, national, regional, and local markets with numerous temporary

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staffing and permanent placement engineering and IT outsourcing companies. Price competition is significant, and pricing pressures from competitors and customers are increasing. There has been a significant increase in the number of customers consolidating their staffing services and engineering and IT outsourcing purchases with a single provider or with a small number of providers. The trend to consolidate purchases has in some cases made it more difficult for the Company to obtain or retain customers. The Company also faces the risk that certain customers may decide to provide similar services internally. Additionally, pricing pressures have intensified as customers have continued to competitively bid new contracts. This trend is expected to continue for the foreseeable future which could limit CDI’s ability to maintain or increase its market share or profitability.

Offshore Outsourcing Markets

There is increasing pressure on companies to outsource certain areas of their businesses to low-cost offshore outsourcing firms. Many staffing, engineering and IT outsourcing companies are now seeking an offshore solution to support their technology and business process functions, and as a result, a significant amount of technology and financial staffing may be replaced by offshore resources. CDI has established partnering arrangements with offshore companies to provide lower cost options to its customers. However, offshore solution providers could develop direct relationships with CDI’s customers which could result in the Company losing significant market share and revenue.

Availability of Qualified Candidates

CDI depends upon its ability to attract qualified personnel who possess the skills and experience necessary to meet the requirements of its customers or to successfully bid for new customer projects. CDI must continually evaluate its base of available qualified personnel to keep pace with changing customer needs and emerging technologies. Competition for individuals with proven professional or technical skills always exists, and demand for such individuals is expected to remain very strong in the foreseeable future. There is always uncertainty whether qualified personnel will continue to be available to CDI in sufficient numbers and on terms of employment acceptable to CDI.

Potential Liability to Employees, Customers and Subcontractors

From time to time, various types of legal claims can be alleged against CDI that arise in connection with the ordinary course of its business. Employees of the Company may make a variety of claims including workplace injury claims and employment-related claims such as discrimination, harassment, and wage and hour claims. Since the Company’s staffing business involves employing individuals on a temporary basis and placing them in customer workplaces where CDI has limited ability to control the workplace environment, these types of claims may arise more frequently in those business operations. Customers of the Company may make claims based on the Company’s alleged failure to perform in accordance with contract requirements. Since the Company’s project business often involves responsibility to produce specified deliverables, these types of claims may arise more frequently in those business operations. Customers in the staffing business may allege claims based on the conduct of staffing employees assigned to the customer’s worksite. Customers and subcontractors may make claims alleging the Company’s failure to abide by certain contract provisions.

Fixed-Price Contracts

CDI, within its BS segment, enters into fixed-price contracts with customers, largely for engineering project services. Revenue recognized under fixed-price contracts accounts for less than 5% of consolidated revenue over the past three years. Under these fixed-price contracts, prices are established based on cost and scheduling estimates, which in turn are based in part on assumptions about the prices and availability of skilled personnel, equipment, and materials. If the Company’s price estimates for a particular project prove to be inaccurate, then cost overruns may occur, and CDI could experience reduced profits or a loss for that project. Cost overruns may also be caused by changes in the scope of the project after the contract has been entered into or by a failure of the parties to adequately define and agree upon the entire scope of the project upfront. In those cases, there may be disputes between the parties over who should pay for the cost overruns. In general, fixed-price contracts can offer greater profit potential but also entail more inherent risk—both in terms of possible financial losses and the potential for significant disputes with customers—than contracts containing pricing on a time-and-materials basis.

Workers’ Compensation

The Company self-insures a portion of the exposure for losses related to workers’ compensation. The Company has established reserves for workers’ compensation claims based on historical loss statistics and periodic independent actuarial valuations. While management believes that its assumptions and estimates are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Company’s future financial results.

Dependence Upon Personnel

The Company’s operations depend on the continued efforts of its officers and executive management. The loss of key officers and members of executive management may cause a significant disruption to the Company’s business. CDI also depends on the performance and productivity of its local managers and field personnel. The Company’s ability to attract and retain new business is significantly affected by local relationships and the quality of service rendered. The loss of key managers and field personnel may also jeopardize existing client relationships, which could cause future revenues to decline in that event.

Concentration of Stock Ownership

Certain members of CDI’s directors, and trusts for which some of the Company’s directors serve as trustee, own, in the aggregate, a substantial portion of the Company’s outstanding common stock. By virtue of this stock ownership, such share - -

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holders have the power to significantly influence CDI’s affairs and are able to influence the outcome of matters required to be submitted to shareholders for approval, including the election of members of any Board of Directors and the amendment of the Company’s Articles of Incorporation or Bylaws. Such shareholders could exercise influence over the Company in a manner detrimental to the interests of CDI’s other shareholders.

Foreign Currency Fluctuations

The Company is exposed to risks associated with foreign currency fluctuations and changes in exchange rates. CDI’s exposure to foreign currency fluctuations relates primarily to operations in foreign countries conducted through subsidiaries, principally 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 CDI’s investment in the net assets related to these operations. From time to time, the Company engages in hedging activities with respect to its foreign operations. Historically, the effects of foreign currency exchange fluctuations have been immaterial on CDI’s consolidated earnings.

Acquisitions

The Company may selectively pursue acquisitions as an element of its growth strategy. Acquisitions involve a number of risks, including the diversion of management’s attention from its existing operations, the failure to retain key personnel or customers of an acquired business, the assumption of unknown liabilities of the acquired business, and the inability to successfully integrate the business. There can be no assurance that any future acquired businesses will generate anticipated revenues or earnings.

Data Center Capacity and Telecommunication Links

The Company’s ability to protect its data centers against damage from fire, power loss, telecommunications failure, and other disasters is critical. In order to provide many of its services, CDI must be able to store, retrieve, process, and manage large databases and periodically expand and upgrade its capabilities. Any damage to the Company’s data centers or any failure of the Company’s telecommunication links that interrupts its operations or results in an inadvertent loss of data could adversely affect CDI’s ability to meet its customers’ needs and their confidence in utilizing CDI for future services.

Access to Company Information

The Company electronically files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports with the Securities and Exchange Commission (SEC). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy, information statements, and other information regarding issuers that file electronically.

CDI makes available, free of charge, through its website or by responding to requests addressed to the Company’s Vice President of Corporate Communications, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed by the Company with the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act, as amended. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. CDI’s website address is http://www.cdicorp.com. CDI posts its audit committee, compensation committee, and governance and nominating committee charters, corporate governance principles, and code of ethics on the Company’s website. The information contained on the Company’s website, or on other websites linked to the Company’s website, is not part of this document.

The Company presently maintains its principal executive offices at 1717 Arch Street, Philadelphia, Pennsylvania 19103, in approximately 22,000 square feet of leased office space under a lease expiring in 2013. The Company also maintains corporate offices at 1801 Market Street, Philadelphia, Pennsylvania 19103, in approximately 65,000 square feet of leased office space of which approximately 15,000 and 50,000 square feet expire in 2005 and 2016, respectively. During 2004, the Company renegotiated and extended the leases associated with its executive offices and a portion of its corporate offices.

The Company has closed or exited approximately 100 operating sites during 2002 and 2003 primarily in the United States, as a result of its restructuring and cost reduction efforts. Many of these facilities are under non-cancelable operating leases. Accordingly, the Company has negotiated lease buy-outs or subleases to minimize the cash outflow requirements. In connection with the Company’s office closings, reserves were established to reflect the net estimated future cash outlays related to closed office leases. Actual future cash outlays could exceed these reserves in the event of sublease defaults. Refer to Note 16 to Consolidated Financial Statements for further information concerning operating lease commitments and related sublease arrangements.

In addition, during 2004, the Company vacated excess office space primarily associated with the contraction of its Life Sciences vertical within the BS segment and a portion of the former headquarters of its MRI segment. Refer to Note 8 to the Consolidated Financial Statements for further information concerning real estate exit costs.

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As part of the Company’s restructuring and reorganization efforts, some of the Company’s offices accommodate more than one operating segment. In such cases, square-foot usage is allocated among the segments primarily based on utilization.

Each reporting segment has numerous active facilities and locations under operating lease agreements. Most of the leased space is devoted to sales, marketing and administrative functions, in-house services, and back-office functions. These facilities are leased under terms generally extending up to five years. The Company believes that its facilities are adequate to meet its current needs and future operations.

The Company has litigation and other claims pending which have arisen in the ordinary course of business. The Company is a party to two arbitration proceedings involving disputes regarding amounts due under two separate fixed-price contracts with customers. The amounts claimed by the Company total $6.9 million, a portion of which has been recorded in accounts receivable as of December 31, 2004. The amounts claimed by the customers total approximately $10.0 million, none of which has been reserved as a liability. While management anticipates a favorable resolution of these disputes, a favorable resolution cannot be assured, and an unfavorable resolution of these disputes could be material to the Company’s consolidated financial statements.

There were no matters submitted to a vote of security holders during the fourth quarter of the year covered by this report.

Market information

CDI’s common shares are traded on the New York Stock Exchange (trading symbol “CDI”). The following table sets forth the high and low quarterly sales prices of the Company’s common shares during the two most recent years (all as reported by The Wall Street Journal):

Shareholders

Shareholders of record on March 7, 2005 numbered 474. This number counts each street name account as only one shareholder, when in fact such an account may represent multiple owners. Taking into account such multiple owners, the total number of shareholders on March 7, 2005 approximated 3,800.

Dividends

The Company paid a dividend of $0.09 per share on March 23 and May 19, 2004, with a total of approximately $1.8 million being distributed to shareholders at each date. On August 18, 2004, the Company paid a dividend of $0.11 per share and an additional special dividend of $2.00 per share, with a total of $41.6 million being distributed to shareholders on that date. On November 17, 2004, the Company paid a dividend of $0.11 per share, with a total of $2.2 million being distributed to shareholders on that date. The declaration and payment of 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, capital requirements, and other factors.

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The following is selected financial data derived from the Company’s audited consolidated financial statements for each of the last five years. The data should be read in conjunction with the Company’s consolidated financial statements (and related notes) appearing elsewhere in this report and with Item 7 of this report. The data presented below is in thousands, except for per share data.

For information concerning the background of the 2003 restatement and the specific adjustments made, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Restatement of Financial Statements”, and Note 2 of the Notes to Consolidated Financial Statements and Quarterly Results (Unaudited) Supplementary Data included in Item 8. Remedial measures that were recommended or identified in the course of the restatement process are summarized in Item 9A, “Controls and Procedures.”

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Executive Overview

Despite the improvement in economic conditions in both the United States and abroad, as well as the implementation of the Company’s new go-to-market strategy, CDI’s 2004 revenues declined slightly from 2003. This was due primarily to a number of factors, including slower then anticipated ramp-up of significant new contracts and continued weak capital spending by clients in key business verticals, particularly within the Business Solutions (“BS”) segment. Additionally, the Company incurred higher costs related to incremental hiring of revenue-generating personnel at its Todays Staffing (“Todays”) and AndersElite (“Anders”) segments as a result of higher than normal turnover in both the management and recruitment functions and the inherent delay before newly hired sales staff generate revenue.

The Company also reported lower profits from a year ago. This decline was primarily due to higher operating and administrative expenses across the Company driven by costs associated with investment in hiring sales and recruitment management personnel as described above, as well as expenses and legal fees associated with resolution of several items of litigation, claims and disputes, incremental spending for Sarbanes-Oxley compliance, and costs of exiting various leased facilities.

The Company continues to believe it is well positioned to benefit from business trends favoring outsourcing of non-core, highly skilled functions and operations. CDI offers a broad range of services from high-value engineering, design, consulting, information technology staffing, and project management to traditional staffing and permanent placement services. With this broad level of service offerings, CDI can address demand in the marketplace for more cost effective, single-source providers of engineering and information technology solutions, and professional staffing.

CDI believes that its integrated vertical go-to-market strategy should improve revenue opportunities. The success of this strategy is dependent on the Company’s ability to leverage its broad and integrated service offerings to its customers while continuing to focus on leveraging its existing infrastructure, maintaining cost discipline and strong control over its contracting processes, and management of its working capital.

Internal Control Over Financial Reporting

In compiling its financial results for the fourth quarter ended December 31, 2004, management identified a material weakness in the Company’s internal control over financial reporting relating to account analysis practices and procedures employed by the Company in its period-end financial reporting process. Specifically, management identified circumstances in which certain financial statement accounts were not being analyzed by appropriate personnel, resulting in an accumulation of accounting errors that were not detected on a timely basis. The financial statement accounts in which accounting errors were identified included primarily accounts receivable, which was overstated in prior annual and interim periods, and accrued payroll, which was understated in prior annual and interim periods. These deficiencies in the Company’s internal control over financial reporting resulted in misstatements to prior annual and interim financial statements and, accordingly, certain prior annual and interim financial statements have been restated to reflect the correction of accounting errors as more fully described in Note 2 to the Company’s consolidated financial statements.

The Company has identified and is in the process of implementing action plans to remediate the material weakness described above. Specifically, the Company has developed and implemented new account analysis procedures to ensure that accounts are being analyzed on a timely basis, analyses are being independently reviewed, all identified adjustments are recorded on a timely basis, and all account balances are substantiated by supporting detail. The Company is currently in the process of hiring additional accounting staff as well as reorganizing its accounting and finance departments. While the Company is in the process of implementing remediation plans, the aforementioned material weakness will not be considered remediated until the new internal controls operate for a sufficient period of time, are tested, and management concludes that these controls are operating effectively. As a result, the Company did not consider these remediation efforts in the Company’s assessment of its internal control over financial reporting as of December 31, 2004. See Item 9A, “Controls and Procedures,” in this report.

Restatement of Financial Statements

The net effect of the $4.0 million restatement referred to above was to decrease pre-tax earnings by approximately $928, $696, and $346 for the third, second, and first quarters, respectively, of 2004 and decrease pre-tax earnings by approximately $879, $886, and $398 for the fourth, third, and first quarters of 2003, respectively, and to increase pre-tax earnings by approximately $161 for the second quarter of 2003. Accordingly, the consolidated financial statements of the Company for these periods and the segment data for the Business Solutions (“BS”) segment for these periods (which was the only segment affected by the restatement) included in prior filings with the SEC should no longer be relied upon. See Item 8, “Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements”, in Note 2 of the Notes to the Consolidated Financial Statements and Quarterly Results (Unaudited) Supplementary Data.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects the restatement of the Company’s Consolidated Financial Statements for 2003 as well as for new segment reporting structure as discussed in Note 19 to the Consolidated Financial Statements.

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Three-year Financial Overview

Key Financial Trends:

The table that follows presents a three-year trend of key performance indicators that management focuses on in managing the Company:

In late 2001, CDI launched a multi-phased plan to restructure the Company. The initial phase of the plan focused on implementation of a more operationally efficient and financially disciplined business model. This required the exiting of lower margin customer contracts, the re-deployment of assets to support higher margin businesses, and the lowering of the Company’s breakeven point through structural cost reductions. These measures extended to all segments of the Company and were substantially completed during 2003.

The consolidated revenue reduction noted over the past three years is primarily attributable to the above-referenced exit of lower margin contracts as well as to the sale of Management Recruiters International (“MRI”) company-owned permanent placement offices in 2002 and 2003. The remaining portion of the revenue decline is largely attributable to the contraction in BS’ Life Sciences and Aerospace verticals, which was not offset by new contracts due to the slower than expected ramp-up and to weak capital spending by clients in several key verticals. The decline in gross profit margins was due principally to the sale of MRI’s company-owned offices which had historically higher margins, growth in lower margin staffing work, and to substantial increases in state unemployment insurance (SUI) rates, as well as costs attributable to settlements of, or reserves established for, SUI-related contingencies.

The impact of the contraction in revenue and related gross profit margins was more than offset in 2003 by substantial reductions in costs from the Company’s restructuring program. In 2004, the increase in operating and administrative expenses was due principally to the expenses described above.

Over the past three years, CDI has been successful in reducing its accounts receivable balances which was a major component in the $118.9 million in cash flow from operations during this period. CDI also has remained debt-free and funded its operations from internal cash generation. In addition, the Company was able to pay dividends during 2004 and 2003 aggregating $89.7 million while still maintaining an adequate level of working capital to fund potential future growth.

Consolidated Results of Operations

2004 versus 2003

The following table presents year-over-year changes in consolidated revenues, gross profit, operating expenses, and operating profit from 2003 to 2004:

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Consolidated revenues for 2004 were $1,045.2 million, compared to $1,060.2 million in 2003. Revenues in three of the four Company segments decreased. The $15.0 million decrease in consolidated revenues was primarily due to declines in BS and Todays partially offset by increased revenues in Anders. The declines in the BS segment were mostly in the Aerospace and Life Sciences verticals which were partially offset by increased revenues in the IT vertical. BS continues to be negatively impacted by ongoing project delays in new business ramp-up. Todays’ decline is primarily due to ongoing competitive pricing pressures. Although MRI’s revenues declined slightly largely to the exit of the last of the Company-owned offices in the first half of 2003, there was an increase in permanent placement and royalty revenue. The increase in revenue of $15.8 million in Anders was almost entirely driven by favorable exchange rates. On a constant currency basis, Anders’ revenue has remained essentially flat.

The Company’s consolidated gross profit of $245.4 million was 4.5% lower than 2003. The decrease in gross profit was due largely to lower sales volume as well as to a decrease in gross profit margin from 24.2% in 2003 to 23.5% in 2004. The gross profit margin decrease was driven principally by growth in lower margin staffing work, higher SUI rates and ongoing competitive pricing pressures. The decrease in gross profit margin was partially offset by higher margins within MRI due largely to the increase in franchise royalty revenues.

Operating and administrative expenses in 2004 of $237.5 million increased $11.6 million, or 5.1%, from 2003. This increase was due to:

The increase in operating and administrative expenses was partially offset by:

During the second quarter 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.

Net interest income was $0.5 million in 2004 as compared to net interest income of $1.1 million in 2003. This decrease is the result of lower average invested balances primarily due to dividend payments of $47.3 million during 2004.

The Company’s effective income tax rate for continuing operations decreased from 34.1% in 2003 to 23.9% in 2004. The reduction in the effective tax rate relates primarily to favorable resolution of prior years’ tax exposure and a decrease in the valuation allowance attributable to capital loss carry-forwards. Refer to Note 12 to the Consolidated Financial Statements for further information concerning the Company’s income taxes.

Segment Discussion

Business Solutions (“BS”)

The following table presents year-over-year changes in revenues, cost of services, gross profit, operating and administrative expenses, and operating profit for BS from 2003 to 2004:

BS’ revenue of $700.8 million decreased $16.4 million, or 2.3%, in 2004 as compared to 2003. This revenue decline was largely attributable to:

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The declines noted above were partially offset by volume growth in the Information Technology vertical consistent with the average growth in the IT staffing industry.

BS’ gross profit of $133.8 million in 2004 decreased $12.4 million, or 8.5%, as compared to $146.2 million in 2003. This decline in gross profit was primarily due to:

BS’ operating and administrative expenses of $122.4 million increased $1.7 million, or 1.4%, from the prior year. This increase was due primarily to:

The increase in operating and administrative expenses was partially offset by:

AndersElite (“Anders”)

The following table presents year-over-year changes in revenues, cost of services, gross profit, operating and administrative expenses, and operating profit for Anders from 2003 to 2004 in U.S. dollars:

To more effectively discuss the comparative results of operations of Anders for the years ended December 31, 2004 and 2003, the following table present Anders’ results on a constant currency basis (i.e., British Pounds—£):

On a constant currency basis, Anders’ revenues and gross profit were essentially flat for 2004, as compared with 2003. Anticipated growth in revenue and gross profit in 2004 was not achieved due to lower staffing revenue resulting from significant turnover of its recruiting and sales personnel and the inherent delay before newly hired sales staff generates revenue.

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On a constant currency basis, Anders’ operating and administrative expenses increased £3.1 million, or 18.1%, as compared to 2003. This increase was largely due to:

Todays Staffing (“Todays”)

The following table presents year-over-year changes in revenues, cost of services, gross profit, operating and administrative expenses, and operating profit for Todays from 2003 to 2004:

Todays’ revenues of $122.3 million in 2004 decreased $13.5 million, or 9.9%, from 2003. The lower revenue was due to:

In response to this trend, management has established dedicated teams to more effectively manage and grow its national accounts while also redirecting local office efforts to grow in high margin talent lines including retail, finance and accounting, legal and permanent placement.

Todays’ gross profit of $32.7 million in 2004 was lower by $4.6 million, or 12.4%, as compared to 2003. The decrease in gross profit was primarily due to:

Todays’ operating and administrative expenses of $30.5 million decreased $0.6 million, or 2.1%, from 2003. This decrease was due primarily to the reduction in variable expenses due to lower volume, partially offset by higher investment associated with hiring sales and recruitment management personnel.

Management Recruiters International (“MRI”)

The following table presents year-over-year changes in revenues, cost of services, gross profit, operating and administrative expenses, and operating profit for MRI from 2003 to 2004:

MRI’s revenues of $56.0 million in 2004 declined $.9 million, or 1.4%, as compared to 2003. The decrease in revenue was primarily attributable to:

The decline in MRI’s revenues was partially offset by:

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MRI’s gross profit of $38.8 million in 2004 was higher by $2.4 million, or 6.4%, as compared to 2003. This increase in gross profit resulted from:

MRI’s operating and administrative expenses decreased $2.4 million, or 7.4%, from the prior year. This improvement was largely due to:

This improvement was partially offset by a charge of $2.1 million related to real estate that was permanently vacated and incremental spending related to Sarbanes-Oxley compliance.

In addition, MRI recognized $1.3 million of pre-tax gains resulting from the sale of its company-owned offices in 2003 which was recorded in 2004.

Corporate

Corporate expenses totaled $16.8 million in 2004 as compared to $13.0 million in 2003. The increase of $3.8 million in corporate expenses was the result of:

Consolidated Results of Operations

2003 versus 2002

The following table presents year-over-year changes in consolidated revenues, gross profit, operating expenses, and operating profit from 2002 to 2003:

Consolidated revenues for 2003 were $1,060.2 million, compared to $1,169.5 million in 2002. Revenues in three of the four Company segments decreased. The $109.3 million, or 9.3%, decrease in revenues was due primarily to:

Partially offsetting these declines was strong revenue growth in AndersElite (a large portion of which was due to exchange rate fluctuations) and the Process and Industrial vertical in BS.

The Company’s consolidated gross profit of $257.0 million was 15.7% lower than 2002 due largely to:

Operating and administrative expenses of $225.9 million decreased $58.4 million, or 20.5%, from the prior year. This improvement was due primarily to:

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