x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
(State or Other Jurisdiction of Incorporation or Organization) |
22-2769024
(IRS Employer Identification No.) |
|
6050 Oak Tree Boulevard, South
Suite 500 Cleveland, Ohio (Address of Principal Executive Offices) |
44131 (Zip Code) |
Common Stock, par value $0.01
(Title of class) |
Nasdaq National Market
(Name of exchange on which registered) |
Part III | Portions of the Registrants Definitive Proxy Statement relative to the 2006 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrants fiscal year. |
Page | ||||||||
Business | 3 | |||||||
Risk Factors | 9 | |||||||
Unresolved Staff Comments | 13 | |||||||
Properties | 13 | |||||||
Legal Proceedings | 13 | |||||||
Submission of Matters to a Vote of Security Holders | 13 | |||||||
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 13 | |||||||
Selected Financial Data | 15 | |||||||
Managements Discussion and Analysis of Financial Condition and Results of Operations | 16 | |||||||
Quantitative and Qualitative Disclosures About Market Risk | 34 | |||||||
Financial Statements and Supplementary Data | 34 | |||||||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 34 | |||||||
Controls and Procedures | 34 | |||||||
Other Information | 35 | |||||||
Managements Report on Internal Control Over Financial Reporting | 35 | |||||||
Directors and Executive Officers of the Registrant | 36 | |||||||
Executive Compensation | 39 | |||||||
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 39 | |||||||
Certain Relationships and Related Transactions | 39 | |||||||
Principal Accounting Fees and Services | 40 | |||||||
Exhibits, Financial Statement Schedules | 41 | |||||||
EX-3.5 Name Change | ||||||||
EX-21.1 Subsidiaries | ||||||||
EX-23 Consent | ||||||||
EX-31.1 Certification 302 - CEO | ||||||||
EX-31.2 Certification 302 - CFO | ||||||||
EX-32.1 Certification 906 - CEO | ||||||||
EX-32.2 Certification 906 - CFO |
2
Item 1. | Business |
| to enable our clients to grow and prosper by providing them with superior services and products; | |
| to provide a professionally rewarding career for our employees; and | |
| to create shareholder value. |
| offering a wide array of professional business services; | |
| cross-serving these services to our existing client base; | |
| attracting new clients with our diverse business services offerings; and |
3
| developing our core service offerings in target markets through internal growth and selective acquisitions. |
| have a strong potential for cross-serving to CBIZs clients; | |
| can integrate quickly with existing CBIZ operations; | |
| have strong and energetic leadership; | |
| are accretive to earnings; and | |
| help enhance the core CBIZ service offering in a geographical market. |
4
5
6
7
8
9
10
11
| approximately 15.3 million shares, representing 20.7% of all our outstanding common stock, were owned by Michael G. DeGroote; | |
| approximately 5.8 million shares, representing 7.9% of all our outstanding common stock, were owned by Cardinal Capital Management LLC; | |
| approximately 5.1 million shares, representing 7.0% of all our outstanding common stock, were owned by Dimensional Fund Advisors Inc.; | |
| approximately 29.2 million shares, representing 39.6% of all our outstanding common stock, were owned by our executive officers, directors, and the foregoing as a group. |
12
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | Submission of Matters to a Vote of Security Holders |
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
2005 | 2004 | |||||||||||||||
High | Low | High | Low | |||||||||||||
First quarter
|
$ | 4.60 | $ | 3.89 | $ | 5.15 | $ | 3.34 | ||||||||
Second quarter
|
$ | 4.22 | $ | 3.30 | $ | 5.12 | $ | 4.00 | ||||||||
Third quarter
|
$ | 5.10 | $ | 3.92 | $ | 4.95 | $ | 3.85 | ||||||||
Fourth quarter
|
$ | 6.90 | $ | 4.77 | $ | 4.74 | $ | 4.06 |
13
Maximum | ||||||||||||||||||
Total Number | Number of | |||||||||||||||||
Total | of Shares | Shares That | ||||||||||||||||
Number of | Average | Purchased as | May Yet Be | |||||||||||||||
Shares | Price Paid | Part of Publicly | Purchased | |||||||||||||||
Period | Purchased(1) | Per Share(2) | Announced Plan | Under the Plan | ||||||||||||||
Total first quarter purchases
|
90 | $ | 4.12 | 90 | 4,910 | |||||||||||||
Total second quarter purchases
|
1,786 | $ | 4.03 | 1,786 | 3,124 | |||||||||||||
Total third quarter purchases(3)
|
1,344 | $ | 4.58 | 1,344 | 1,780 | |||||||||||||
Fourth Quarter Purchases by Month
|
||||||||||||||||||
October 1 October 31, 2005(3)
|
583 | $ | 5.03 | 583 | 1,197 | |||||||||||||
November 1 November 30, 2005
|
| | | 1,197 | ||||||||||||||
December 1 December 31, 2005
|
| | | | ||||||||||||||
Total fourth quarter purchases
|
583 | $ | 5.03 | 583 | ||||||||||||||
Total purchases during the year ended December 31, 2005
|
3,803 | $ | 4.38 | 3,803 | ||||||||||||||
(1) | Open market purchases. |
(2) | Average price paid per share includes fees and commissions. |
(3) | CBIZ utilized, and may utilize in the future, a Rule 10b5-1 trading plan to allow for repurchases by the Company during periods when it would not normally be active in the trading market due to regulatory restrictions. Under the Rule 10b5-1 trading plan, CBIZ was unable to repurchase shares above a pre-determined price per share. Additionally, the maximum number of shares that may be purchased by the Company each day is governed by Rule 10b-18. |
14
Item 6. | Selected Financial Data |
Year Ended December 31, | ||||||||||||||||||||||
2005 | 2004(1) | 2003(1) | 2002(1) | 2001(1) | ||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
Statement of Operations Data:
|
||||||||||||||||||||||
Revenue
|
$ | 559,269 | $ | 504,898 | $ | 482,254 | $ | 472,170 | $ | 488,573 | ||||||||||||
Operating expenses
|
485,295 | 438,417 | 419,932 | 417,424 | 417,980 | |||||||||||||||||
Gross margin
|
73,974 | 66,481 | 62,322 | 54,746 | 70,593 | |||||||||||||||||
Corporate general and administrative expense
|
24,911 | 24,099 | 18,745 | 17,673 | 18,741 | |||||||||||||||||
Depreciation and amortization expense
|
15,163 | 16,010 | 16,581 | 19,881 | 39,909 | |||||||||||||||||
Operating income
|
33,900 | 26,372 | 26,996 | 17,192 | 11,943 | |||||||||||||||||
Other income (expense):
|
||||||||||||||||||||||
Interest expense
|
(3,109 | ) | (1,507 | ) | (1,055 | ) | (2,477 | ) | (6,795 | ) | ||||||||||||
Gain (loss) on sale of operations, net
|
314 | 996 | 2,519 | 930 | (7,113 | ) | ||||||||||||||||
Other income (expense), net
|
5,052 | 3,532 | (1,227 | ) | (1,561 | ) | 4,393 | |||||||||||||||
Total other income (expense)
|
2,257 | 3,021 | 237 | (3,108 | ) | (9,515 | ) | |||||||||||||||
Income from continuing operations before income tax expense
|
36,157 | 29,393 | 27,233 | 14,084 | 2,428 | |||||||||||||||||
Income tax expense
|
14,571 | 8,045 | 11,918 | 7,476 | 13,446 | |||||||||||||||||
Income (loss) from continuing operations
|
21,586 | 21,348 | 15,315 | 6,608 | (11,018 | ) | ||||||||||||||||
Loss from operations of discontinued operations, net of tax
|
(6,463 | ) | (5,429 | ) | (725 | ) | (978 | ) | (4,982 | ) | ||||||||||||
Gain (loss) on disposal of discontinued operations, net of tax
|
3,550 | 132 | 726 | (2,471 | ) | | ||||||||||||||||
Cumulative effect of change in accounting principle, net of
tax(2)
|
| | | (80,007 | ) | | ||||||||||||||||
Net income (loss)
|
$ | 18,673 | $ | 16,051 | $ | 15,316 | $ | (76,848 | ) | $ | (16,000 | ) | ||||||||||
Basic weighted average common shares
|
74,448 | 79,217 | 90,400 | 94,810 | 94,818 | |||||||||||||||||
Diluted weighted average common shares
|
76,827 | 81,477 | 92,762 | 96,992 | 94,818 | |||||||||||||||||
Basic earnings (loss) per share:
|
||||||||||||||||||||||
Continuing operations
|
$ | 0.29 | $ | 0.27 | $ | 0.17 | $ | 0.07 | $ | (0.12 | ) | |||||||||||
Discontinued operations
|
(0.04 | ) | (0.07 | ) | | (0.04 | ) | (0.05 | ) | |||||||||||||
Cumulative effect of accounting change
|
| | | (0.84 | ) | | ||||||||||||||||
Net income (loss)
|
$ | 0.25 | $ | 0.20 | $ | 0.17 | $ | (0.81 | ) | $ | (0.17 | ) | ||||||||||
Diluted earnings (loss) per share:
|
||||||||||||||||||||||
Continuing operations
|
$ | 0.28 | $ | 0.26 | $ | 0.17 | $ | 0.07 | $ | (0.12 | ) | |||||||||||
Discontinued operations
|
(0.04 | ) | (0.06 | ) | | (0.04 | ) | (0.05 | ) | |||||||||||||
Cumulative effect of accounting change
|
| | | (0.82 | ) | | ||||||||||||||||
Net income (loss)
|
$ | 0.24 | $ | 0.20 | $ | 0.17 | $ | (0.79 | ) | $ | (0.17 | ) | ||||||||||
OTHER DATA:
|
||||||||||||||||||||||
Total assets
|
$ | 454,578 | $ | 414,115 | $ | 402,145 | $ | 433,111 | $ | 528,349 | ||||||||||||
Long-term debt
|
$ | 33,425 | $ | 55,398 | $ | 14,985 | $ | 18,084 | $ | 55,888 | ||||||||||||
Total liabilities
|
$ | 199,917 | $ | 167,618 | $ | 124,307 | $ | 138,793 | $ | 157,702 | ||||||||||||
Total stockholders equity
|
$ | 254,661 | $ | 246,497 | $ | 277,838 | $ | 294,318 | $ | 370,647 | ||||||||||||
PRO FORMA NET INCOME(3):
|
||||||||||||||||||||||
Net income from continuing operations
|
$ | 9,531 | ||||||||||||||||||||
Basic earnings per share
|
$ | 0.10 | ||||||||||||||||||||
Diluted earnings per share
|
$ | 0.10 |
(1) | Certain amounts have been reclassified to conform to the current year presentation. |
(2) | Effective January 1, 2002, CBIZ adopted Statement of Financial Accounting Standard No., 142 Goodwill and Other Intangible Assets (SFAS 142), which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually at the reporting unit level. CBIZ finalized the required transitional tests of goodwill during 2002, and recorded an impairment charge of $88.6 million on a pre-tax basis. This non-cash charge is reflected as a cumulative effect of a change in accounting principle in the amount of $80.0 million, net of a tax benefit of $8.6 million. |
(3) | Pro forma net income represents income from continuing operations assuming that the change in accounting principle for SFAS No. 142, adopted January 1, 2002, was applied retroactively (net of taxes) to the year ended December 31, 2001. In addition, pro forma diluted weighted average common shares for 2001 are 96,442, as the effect of the incremental shares are not anti-dilutive on a pro forma basis. |
15
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
16
Year Ended December 31, | ||||||||||||||||||||||||||
% of | % of | $ | % | |||||||||||||||||||||||
2005 | Total | 2004 | Total | Change | Change | |||||||||||||||||||||
Same-unit revenue
|
||||||||||||||||||||||||||
Accounting, Tax and Advisory
|
$ | 227,878 | 40.7% | $ | 211,378 | 41.9% | $ | 16,500 | 7.8% | |||||||||||||||||
Benefits and Insurance
|
142,343 | 25.5% | 141,258 | 28.0% | 1,085 | 0.8% | ||||||||||||||||||||
CBIZ MMP
|
97,583 | 17.5% | 87,261 | 17.3% | 10,322 | 11.8% | ||||||||||||||||||||
National Practices Other
|
67,733 | 12.1% | 64,369 | 12.7% | 3,364 | 5.2% | ||||||||||||||||||||
Total National Practices
|
165,316 | 29.6% | 151,630 | 30.0% | 13,686 | 9.0% | ||||||||||||||||||||
Total same-unit revenue
|
535,537 | 95.8% | 504,266 | 99.9% | 31,271 | 6.2% | ||||||||||||||||||||
Acquired businesses
|
23,732 | 4.2% | | 23,732 | ||||||||||||||||||||||
Divested operations
|
| 632 | 0.1% | (632 | ) | |||||||||||||||||||||
Total revenue
|
$ | 559,269 | $ | 504,898 | $ | 54,371 | 10.8% | |||||||||||||||||||
17
Year Ended December 31, | ||||||||||||||
2005 | 2004 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue
|
||||||||||||||
Same-unit
|
$ | 227,878 | $ | 211,378 | $ | 16,500 | ||||||||
Acquired businesses
|
17,671 | | 17,671 | |||||||||||
Divested operations
|
| 632 | (632 | ) | ||||||||||
Total revenue
|
245,549 | 212,010 | 33,539 | |||||||||||
Operating expenses
|
208,316 | 182,564 | 25,752 | |||||||||||
Gross margin
|
$ | 37,233 | $ | 29,446 | $ | 7,787 | ||||||||
Gross margin percent
|
15.2 | % | 13.9 | % | 1.3 | % |
18
Year Ended December 31, | ||||||||||||||
2005 | 2004 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue
|
||||||||||||||
Same-unit
|
$ | 142,343 | $ | 141,258 | $ | 1,085 | ||||||||
Acquired businesses
|
3,873 | | 3,873 | |||||||||||
Divested operations
|
| | | |||||||||||
Total revenue
|
146,216 | 141,258 | 4,958 | |||||||||||
Operating expenses
|
116,149 | 112,987 | 3,162 | |||||||||||
Gross margin
|
$ | 30,067 | $ | 28,271 | $ | 1,796 | ||||||||
Gross margin percent
|
20.6 | % | 20.0% | 0.6 | % |
19
Year Ended December 31, | ||||||||||||||
2005 | 2004 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue
|
||||||||||||||
Same-unit
|
$ | 97,583 | $ | 87,261 | $ | 10,322 | ||||||||
Acquired businesses
|
| | | |||||||||||
Divested operations
|
| | | |||||||||||
Total revenue
|
97,583 | 87,261 | 10,322 | |||||||||||
Operating expenses
|
80,033 | 71,885 | 8,148 | |||||||||||
Gross margin
|
$ | 17,550 | $ | 15,376 | $ | 2,174 | ||||||||
Gross margin percent
|
18.0 | % | 17.6% | 0.4 | % |
20
Year Ended December 31,
2005
2004
Change
(Dollars in thousands)
$
67,733
$
64,369
$
3,364
2,188
2,188
69,921
64,369
5,552
60,969
57,208
3,761
$
8,952
$
7,161
$
1,791
12.8
%
11.1
%
1.7
%
21
Year Ended December 31,
% of
% of
$
%
2004
Total
2003
Total
Change
Change
$
206,537
40.9%
$
199,673
41.5%
$
6,864
3.4%
139,096
27.5%
138,554
28.7%
542
0.4%
87,261
17.3%
75,785
15.7%
11,476
15.1%
62,499
12.4%
58,497
12.1%
4,002
6.8%
149,760
29.7%
134,282
27.8%
15,478
11.5%
495,393
98.1%
472,509
98.0%
22,884
4.8%
9,505
1.9%
9,505
9,745
2.0%
(9,745
)
$
504,898
$
482,254
$
22,644
4.7%
22
Year Ended December 31, | ||||||||||||||
2004 | 2003 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue
|
||||||||||||||
Same-unit
|
$ | 206,537 | $ | 199,673 | $ | 6,864 | ||||||||
Acquired businesses
|
5,473 | | 5,473 | |||||||||||
Divested operations
|
| 2,396 | (2,396 | ) | ||||||||||
Total revenue
|
212,010 | 202,069 | 9,941 | |||||||||||
Operating expenses
|
182,564 | 176,594 | 5,970 | |||||||||||
Gross margin
|
$ | 29,446 | $ | 25,475 | $ | 3,971 | ||||||||
Gross margin percent
|
13.9 | % | 12.6 | % | 1.3 | % |
23
Year Ended December 31, | ||||||||||||||
2004 | 2003 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue
|
||||||||||||||
Same-unit
|
$ | 139,096 | $ | 138,554 | $ | 542 | ||||||||
Acquired businesses
|
2,162 | | 2,162 | |||||||||||
Divested operations
|
| 5,455 | (5,455 | ) | ||||||||||
Total revenue
|
141,258 | 144,009 | (2,751 | ) | ||||||||||
Operating expenses
|
112,987 | 112,136 | 851 | |||||||||||
Gross margin
|
$ | 28,271 | $ | 31,873 | $ | (3,602 | ) | |||||||
Gross margin percent
|
20.0 | % | 22.1 | % | (2.1 | )% |
24
Year Ended December 31,
2004
2003
Change
(Dollars in thousands)
$
87,261
$
75,785
$
11,476
87,261
75,785
11,476
71,885
61,566
10,319
$
15,376
$
14,219
$
1,157
17.6
%
18.8%
(1.2%
)
Year Ended December 31, | ||||||||||||||
2004 | 2003 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue
|
||||||||||||||
Same-unit
|
$ | 62,499 | $ | 58,497 | $ | 4,002 | ||||||||
Acquired businesses
|
1,870 | | 1,870 | |||||||||||
Divested operations
|
| 1,894 | (1,894 | ) | ||||||||||
Total revenue
|
64,369 | 60,391 | 3,978 | |||||||||||
Operating expenses
|
57,208 | 61,176 | (3,968 | ) | ||||||||||
Gross margin
|
$ | 7,161 | $ | (785 | ) | $ | 7,946 | |||||||
Gross margin percent
|
11.1 | % | (1.3 | )% | 12.4 | % |
25
26
27
28
Total | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | ||||||||||||||||||||||
On-Balance Sheet
|
||||||||||||||||||||||||||||
Bank debt(1)
|
$ | 32,200 | $ | | $ | | $ | | $ | 32,200 | $ | | $ | | ||||||||||||||
Notes payable
|
6,309 | 6,107 | 8 | 194 | | | | |||||||||||||||||||||
Capitalized leases
|
1,649 | 626 | 533 | 418 | 72 | | | |||||||||||||||||||||
Restructuring lease obligations(2)
|
12,268 | 3,694 | 2,858 | 1,903 | 1,194 | 787 | 1,832 | |||||||||||||||||||||
Off-Balance Sheet
|
||||||||||||||||||||||||||||
Non-cancelable operating lease obligations(2)
|
191,410 | 33,309 | 28,183 | 25,312 | 21,166 | 18,797 | 64,643 | |||||||||||||||||||||
Letters of credit in lieu of cash security deposits
|
2,027 | 1,415 | | | | 35 | 577 | |||||||||||||||||||||
License bonds and other letters of credit
|
1,282 | | | | | | 1,282 | |||||||||||||||||||||
Performance guarantees
|
2,398 | 937 | 1,025 | 436 | | | | |||||||||||||||||||||
Total
|
$ | 249,543 | $ | 46,088 | $ | 32,607 | $ | 28,263 | $ | 54,632 | $ | 19,619 | $ | 68,334 | ||||||||||||||
(1) | Represents the credit facility that existed at December 31, 2005. CBIZ entered into a new facility effective February 13, 2006, which has a five year term expiring February, 2011. |
(2) | Excludes cash received under subleases. |
29
30
| Commissions relating to brokerage and agency activities whereby CBIZ has primary responsibility for the collection of premiums from insureds (agency or indirect billing) are recognized as of the latter of the effective date of the insurance policy or the date billed to the customer; commissions to be received directly from insurance companies (direct billing) are recognized when the policy becomes effective; and life insurance commissions are recognized when the policy becomes effective. Commission revenue is reported net of sub-broker commissions. Commission revenue is reported net of reserves for estimated policy cancellations and terminations. This reserve is based upon estimates and assumptions using historical cancellation and termination experience and other current factors to project future experience. CBIZ periodically reviews the adequacy of the reserve and makes adjustments as necessary. The use of different estimates or assumptions could produce different results. | |
| Commissions which are based upon certain performance targets are recognized at the earlier of written notification that the target has been achieved, or cash collection. | |
| Fee income is recognized in the period in which services are provided, and may be based on actual hours incurred on an hourly fee basis, fixed fee arrangements, or asset-based fees. |
| Mergers & Acquisitions and Capital Advisory Revenue associated with non-refundable retainers is recognized on a pro rata basis over the life of the engagement. Revenue associated with success fee transactions is recognized when the transaction is completed. | |
| Technology Consulting Revenue associated with hardware and software sales is recognized upon delivery and acceptance of the product. Revenue associated with installation is recognized as services are performed, and revenue associated with service agreements is recognized on a straight-line basis. Consulting revenue is recognized on an hourly or per diem fee basis as services are performed. | |
| Valuation Revenue consists primarily of fees for valuation services such as fairness opinions, business plans, litigation support, purchase price allocations and derivative valuations. Revenues are recorded in the period in which services are provided and meet revenue recognition criteria in accordance with SAB 104. CBIZ bills clients based upon a predetermined agreed-upon fixed fee or actual hours incurred on client projects at expected net realizable rates per hour, plus any out-of -pocket expenses. The cumulative impact on any subsequent revision in the estimated realizable value of unbilled fees for a particular client project is reflected in the period in which the change becomes known. | |
| Payroll Revenue is recognized when the actual payroll processing occurs. |
31
| Medical Management Group Fees for services are primarily based on a percentage of net collections on our clients patient accounts receivable. As such, revenue is determinable, earned, and recognized, when payments are received on our clients patient accounts. |
32
33
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
34
35
Item 10. | Directors and Executive Officers of the Registrant |
Name | Age | Position(s) | ||||
Executive Officers and Directors:
|
||||||
Steven L. Gerard(1)
|
60 | Chairman and Chief Executive Officer | ||||
Rick L. Burdick(1)(3)
|
54 | Director and Vice Chairman | ||||
Gary W. DeGroote(3)
|
50 | Director | ||||
Joseph S. DiMartino(3)(4)
|
62 | Director | ||||
Harve A. Ferrill(2)(3)
|
73 | Director | ||||
Richard C. Rochon(2)(3)(4)
|
48 | Director | ||||
Todd Slotkin(3)(4)
|
53 | Director | ||||
Donald V. Weir(2)(3)
|
64 | Director | ||||
Jerome P. Grisko, Jr.(1)
|
44 | President and Chief Operating Officer | ||||
Ware H. Grove
|
55 | Senior Vice President and Chief Financial Officer | ||||
Leonard Miller
|
66 | Senior Vice President, Accounting, Tax & Advisory | ||||
Robert A. OByrne
|
49 | Senior Vice President, Benefits & Insurance | ||||
Michael W. Gleespen
|
47 | Secretary and General Counsel | ||||
Other Key Employees:
|
||||||
George A. Dufour
|
59 | Senior Vice President and Chief Technology Officer | ||||
Mark M. Waxman
|
49 | Senior Vice President of Marketing | ||||
Teresa E. Bruce
|
41 | Vice President, Human Resources | ||||
Chris Spurio
|
40 | Vice President, Finance | ||||
Michael P. Kouzelos
|
37 | Senior Vice President, Strategic Initiatives | ||||
Kelly J. Kuna
|
35 | Treasurer | ||||
Robert A. Bosak
|
38 | Controller |
(1) | Member of Management Executive Committee |
(2) | Member of Audit Committee |
(3) | Member of Nominating & Governance Committee |
(4) | Member of Compensation Committee |
36
37
38
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions |
39
Item 14. | Principal Accounting Fees and Services |
40
Item 15. | Exhibits, Financial Statement Schedules |
1. Financial Statements. | |
As to financial statements and supplementary information, reference is made to Index to Financial Statements on page F-1 of this Annual Report. | |
2. Financial Statement Schedules. | |
As to financial statement schedules, reference is made to Index to Financial Statements on page F-1 of this Annual Report. | |
3. Exhibits. | |
The following documents are filed as exhibits to this Form 10-K pursuant to Item 601 of Regulation S-K. Since its incorporation, CBIZ has operated under various names including: Republic Environmental Systems, Inc.; International Alliance Services, Inc.; Century Business Services, Inc.; and CBIZ, Inc. Exhibits listed below refer to these names collectively as the Company. |
Exhibit No. | Description | |
3.1
|
Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Companys Registration Statement on Form 10, file no. 0-25890, and incorporated herein by reference). | |
3.2
|
Certificate of Amendment of the Certificate of Incorporation of the Company dated October 17, 1996 (filed as Exhibit 3.2 to the Companys Annual Report on Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). | |
3.3
|
Certificate of Amendment to the Certificate of Incorporation of the Company effective December 23,1997 (filed as Exhibit 3.3 to the Companys Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by reference). | |
3.4
|
Certificate of Amendment of the Certificate of Incorporation of the Company dated September 10, 1998 (filed as Exhibit 3.4 to the Companys Annual Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference). | |
3.5*
|
Certificate of Amendment of the Certificate of Incorporation of the Company, effective August 1, 2005. | |
3.6
|
Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the Companys Registration Statement on Form 10, file no. 0-25890, and incorporated herein by reference). | |
4.1
|
Form of Stock Certificate of Common Stock of the Company (filed as Exhibit 4.1 to the Companys Annual Report Form 10-K for the year ended December 31, 1998, and incorporated herein by reference). | |
4.4
|
Employee Stock Investment Plan (filed as exhibit 4.4 to the Companys Report on Form S-8 filed June 1, 2001, and incorporated herein by reference). | |
10.1
|
2002 Stock Incentive Plan (filed as Appendix A to the Companys Proxy Statement for the 2002 Annual Meeting of Stockholders dated April 1, 2002 and incorporated herein by reference). | |
10.2
|
Severance Protection Agreement by and between the Company and Jerome P. Grisko, Jr. (filed as exhibit 10.11 to the Companys Report on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference). | |
10.3
|
Employment Agreement by and between the Company and Steven L. Gerard (filed as exhibit 10.13 to the Companys Report on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference). | |
10.4
|
Employment Agreement by and the Company and Ware H. Grove (filed as exhibit 10.14 to the Companys Report on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference). | |
10.5
|
Amended and Restated Credit Agreement dated as of August 6, 2004, among the Company, Bank of America, N.A., as Agent, a Lender, Issuing Bank and Swing Line Bank, and The Other Financial Institutions Party Hereto (filed as exhibit 10.12 to the Companys Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference). |
41
Exhibit No.
Description
Amendment No. 1 to Amended and Restated Credit Agreement
effective March 31, 2005 among the Company and each of the
Guarantors (filed as exhibit 10.13 to the Companys
Report on Form 10-Q for the period ended March 31,
2005, and incorporated herein by reference).
Credit Agreement dated as of February 13, 2006 Among the
Company, Bank of America, N.A., as Agent, a Lender, Issuing Bank
and Swing Line Bank, and The Other Financial Institutions Party
Hereto Banc of America Securities, LLC as Sole Lead Arranger and
Book Manager (filed as exhibit 10.14 to the Companys
Current Report on Form 8-K dated February 13, 2006,
and filed February 17, 2006, and incorporated herein by
reference).
List of Subsidiaries of CBIZ, Inc.
Consent of KPMG LLP.
Powers of attorney (included on the signature page hereto).
Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
* | Indicates documents filed herewith. |
42
43
F-1
CBIZ, Inc.
(Registrant)
By
/s/
Ware H. Grove
Ware H. Grove
Chief Financial Officer
March 15, 2006
/s/
Steven L. Gerard
Steven L. Gerard
Chairman and Chief Executive Officer
/s/
Joseph S. DiMartino
Joseph S. DiMartino
Director
/s/
Ware H. Grove
Ware H. Grove
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/
Harve A. Ferrill
Harve A. Ferrill
Director
/s/
Gary W. DeGroote
Gary W. DeGroote
Director
/s/
Richard C. Rochon
Richard C. Rochon
Director
/s/
Rick L. Burdick
Rick L. Burdick
Director
/s/
Todd Slotkin
Todd Slotkin
Director
/s/
Donald V. Weir
Donald V. Weir
Director
Table of Contents
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-39
Table of Contents
F-2
Table of Contents
F-3
Table of Contents
2005
2004
ASSETS
$
8,909
$
5,291
9,873
10,089
99,185
99,021
6,042
1,377
7,146
3,241
3,743
9,504
7,964
6,730
18,305
143,484
152,936
65,669
32,787
209,153
185,723
33,486
36,023
3,575
4,726
9,193
7,200
185,535
172,644
9,803
4,285
3,833
3,514
$
454,578
$
414,115
LIABILITIES
$
26,436
$
24,918
1,115
35,937
24,322
18,332
16,269
5,939
8,146
87,759
73,655
65,669
32,787
153,428
106,442
32,200
53,900
9,803
4,285
4,486
2,991
199,917
167,618
STOCKHOLDERS EQUITY
984
964
450,734
444,584
(94,714
)
(113,387
)
(102,317
)
(85,650
)
(26
)
(14
)
254,661
246,497
$
454,578
$
414,115
F-4
2005
2004
2003
$
559,269
$
504,898
$
482,254
485,295
438,417
419,932
73,974
66,481
62,322
24,911
24,099
18,745
15,163
16,010
16,581
33,900
26,372
26,996
(3,109
)
(1,507
)
(1,055
)
314
996
2,519
5,052
3,532
(1,227
)
2,257
3,021
237
36,157
29,393
27,233
14,571
8,045
11,918
21,586
21,348
15,315
(6,463
)
(5,429
)
(725
)
3,550
132
726
$
18,673
$
16,051
$
15,316
$
0.29
$
0.27
$
0.17
(0.04
)
(0.07
)
$
0.25
$
0.20
$
0.17
$
0.28
$
0.26
$
0.17
(0.04
)
(0.06
)
$
0.24
$
0.20
$
0.17
74,448
79,217
90,400
76,827
81,477
92,762
F-5
Accumulated
Issued
Additional
Other
Common
Common
Paid-In
Accumulated
Treasury
Treasury
Comprehensive
Shares
Stock
Capital
Deficit
Shares
Stock
Loss
Totals
95,121
$
951
$
439,684
$
(144,754
)
220
$
(1,308
)
$
(255
)
$
294,318
15,316
15,316
254
254
15,570
10,036
(33,578
)
(33,578
)
46
(201
)
(201
)
375
4
1,203
1,207
177
2
520
522
95,673
$
957
$
441,407
$
(129,438
)
10,302
$
(35,087
)
$
(1
)
$
277,838
16,051
16,051
(13
)
(13
)
16,038
10,424
(50,419
)
(50,419
)
518
518
30
(144
)
(144
)
519
5
1,696
1,701
215
2
963
965
96,407
$
964
$
444,584
$
(113,387
)
20,756
$
(85,650
)
$
(14
)
$
246,497
18,673
18,673
(12
)
(12
)
18,661
3,803
(16,667
)
(16,667
)
247
2
453
455
1,658
17
5,401
5,418
69
1
296
297
98,381
$
984
$
450,734
$
(94,714
)
24,559
$
(102,317
)
$
(26
)
$
254,661
F-6
2004
2003
2005
(Revised)
(Revised)
$
18,673
$
16,051
$
15,316
6,463
5,429
725
(3,550
)
(132
)
(726
)
(314
)
(996
)
(2,519
)
5,170
4,160
4,891
2,394
(65
)
(743
)
15,163
16,010
16,581
(2,480
)
(3,573
)
1,800
1,466
449
280
216
791
5,968
(5,599
)
(11,987
)
(10,018
)
(8,318
)
(6,782
)
(1,571
)
1,204
(2,666
)
6,110
6,177
(6,974
)
3,789
11,615
4,199
3,530
6,146
4,861
(10,288
)
51,967
18,097
36,262
855
1,589
2,674
52,822
19,686
38,936
(12,611
)
(5,662
)
(3,849
)
133
3,030
5,590
2,000
1,549
1,599
(2,267
)
(913
)
(6,903
)
(7,384
)
(10,408
)
1,672
2,462
2,667
1,457
(317
)
707
(14,252
)
(8,589
)
(4,607
)
253,200
288,855
225,950
87
324
(274,900
)
(248,955
)
(229,450
)
(845
)
(428
)
(1,062
)
(16,667
)
(50,419
)
(33,578
)
4,173
1,350
927
(34,952
)
(9,597
)
(36,889
)
3,618
1,500
(2,560
)
5,291
3,791
6,351
$
8,909
$
5,291
$
3,791
F-7
1. | Organization and Summary of Significant Accounting Policies |
F-8
F-9
Buildings
|
25 years | |
Furniture and fixtures
|
5 to 10 years | |
Capitalized software
|
2 to 7 years | |
Equipment
|
3 to 7 years |
F-10
| Commissions relating to brokerage and agency activities whereby CBIZ has primary responsibility for the collection of premiums from insureds (agency or indirect billing) are recognized as of the latter of the effective date of the insurance policy or the date billed to the customer; commissions to be received directly from insurance companies (direct billing) are recognized when the policy becomes effective; and |
F-11
life insurance commissions are recognized when the policy becomes effective. Commission revenue is reported net of sub-broker commissions. Commission revenue is reported net of reserves for estimated policy cancellations and terminations. This reserve is based upon estimates and assumptions using historical cancellation and termination experience and other current factors to project future experience. CBIZ periodically reviews the adequacy of the reserve and makes adjustments as necessary. The use of different estimates or assumptions could produce different results. | ||
| Commissions which are based upon certain performance targets are recognized at the earlier of written notification that the target has been achieved, or cash collection. | |
| Fee income is recognized in the period in which services are provided, and may be based on actual hours incurred on an hourly fee basis, fixed fee arrangements, or asset-based fees. |
| Mergers & Acquisitions and Capital Advisory Revenue associated with non-refundable retainers is recognized on a pro rata basis over the life of the engagement. Revenue associated with success fee transactions is recognized when the transaction is completed. | |
| Technology Consulting Revenue associated with hardware and software sales is recognized upon delivery and acceptance of the product. Revenue associated with installation is recognized as services are performed, and revenue associated with service agreements is recognized on a straight-line basis. Consulting revenue is recognized on an hourly or per diem fee basis as services are performed. | |
| Valuation Revenue consists primarily of fees for valuation services such as fairness opinions, business plans, litigation support, purchase price allocations and derivative valuations. Revenues are recorded in the period in which services are provided and meet revenue recognition criteria in accordance with SAB 104. CBIZ bills clients based upon a predetermined agreed-upon fixed fee or actual hours incurred on client projects at expected net realizable rates per hour, plus any out-of -pocket expenses. The cumulative impact on any subsequent revision in the estimated realizable value of unbilled fees for a particular client project is reflected in the period in which the change becomes known. | |
| Payroll Revenue is recognized when the actual payroll processing occurs. | |
| Medical Management Group Fees for services are primarily based on a percentage of net collections on our clients patient accounts receivable. As such, revenue is determinable, earned, and recognized, when payments are received on our clients patient accounts. |
F-12
F-13
As Reported | Pro Forma(1) | |||||||||||||||
Basic | Diluted | Basic | Diluted | |||||||||||||
2005
|
||||||||||||||||
Net income
|
$ | 18,673 | $ | 18,673 | $ | 17,573 | $ | 17,573 | ||||||||
Net income per share
|
$ | 0.25 | $ | 0.24 | $ | 0.24 | $ | 0.23 | ||||||||
2004
|
||||||||||||||||
Net income
|
$ | 16,051 | $ | 16,051 | $ | 14,629 | $ | 14,629 | ||||||||
Net income per share
|
$ | 0.20 | $ | 0.20 | $ | 0.18 | $ | 0.18 | ||||||||
2003
|
||||||||||||||||
Net income
|
$ | 15,316 | $ | 15,316 | $ | 14,792 | $ | 14,792 | ||||||||
Net income per share
|
$ | 0.17 | $ | 0.17 | $ | 0.16 | $ | 0.16 | ||||||||
(1) | A tax rate of 40.0% was applied to the fair value of options in determining pro forma net income for each of the years ended December 31, 2005, 2004 and 2003. |
2005 | 2004 | 2003 | ||||||||||
Weighted average grant-date fair value of options granted
|
$ | 1.65 | $ | 1.42 | $ | 0.95 | ||||||
Risk-free interest rate
|
3.90 | % | 3.89 | % | 2.36 | % | ||||||
Expected volatility
|
49.71 | % | 36.57 | % | 35.54 | % | ||||||
Expected option life (in years)
|
5.00 | 5.00 | 5.00 | |||||||||
Dividend yield
|
0.0 | % | 0.0 | % | 0.0 | % |
F-14
2.
Accounts Receivable, Net
2005
2004
$
83,683
$
81,023
19,582
21,353
1,721
2,615
104,986
104,991
(5,801
)
(5,970
)
$
99,185
$
99,021
3. | Notes Receivable |
2005 | 2004 | |||||||||
Current
|
||||||||||
Notes in lieu of cash as consideration for the sale of operations
|
$ | 5,378 | $ | 1,125 | ||||||
Other
|
664 | 252 | ||||||||
Total notes receivable current
|
6,042 | 1,377 | ||||||||
Non-Current
|
||||||||||
Notes in lieu of cash as consideration for the sale of operations
|
1,215 | 2,169 | ||||||||
Other
|
2,360 | 2,557 | ||||||||
Total notes receivable non-current
|
3,575 | 4,726 | ||||||||
Notes receivable
|
$ | 9,617 | $ | 6,103 | ||||||
4. | Property and Equipment, Net |
2005 | 2004 | ||||||||
Buildings and leasehold improvements
|
$ | 12,806 | $ | 12,466 | |||||
Furniture and fixtures
|
18,023 | 16,129 | |||||||
Capitalized software
|
41,874 | 39,683 | |||||||
Equipment
|
28,500 | 28,927 | |||||||
Total property and equipment
|
101,203 | 97,205 | |||||||
Accumulated depreciation and amortization
|
(67,717 | ) | (61,182 | ) | |||||
Property and equipment, net
|
$ | 33,486 | $ | 36,023 | |||||
F-15
5.
Goodwill and Other Intangible Assets, Net
2005
2004
$
168,902
$
159,807
23,498
18,033
1,493
972
24,991
19,005
193,893
178,812
(8,358
)
(6,168
)
$
185,535
$
172,644
Year Ended December 31, | ||||
2006
|
$ | 2,541 | ||
2007
|
$ | 2,444 | ||
2008
|
$ | 2,205 | ||
2009
|
$ | 2,101 | ||
2010
|
$ | 1,859 | ||
F-16
Accounting,
Medical
National
Tax and
Benefits and
Management
Practices-
Total
Advisory
Insurance
Practice
Other
Goodwill
$
91,367
$
44,879
$
17,212
$
4,357
$
157,815
772
628
1,219
2,619
(627
)
(627
)
91,512
45,507
17,212
5,576
159,807
4,860
3,643
592
9,095
$
96,372
$
49,150
$
17,212
$
6,168
$
168,902
6. | Income Taxes |
2005 | 2004 | 2003 | |||||||||||||
Continuing operations:
|
|||||||||||||||
Current:
|
|||||||||||||||
Federal
|
$ | 16,463 | $ | 9,870 | $ | 8,191 | |||||||||
Foreign
|
(58 | ) | | | |||||||||||
State and local
|
646 | 1,748 | 1,927 | ||||||||||||
Total current income tax expense from continuing operations
|
17,051 | 11,618 | 10,118 | ||||||||||||
Deferred:
|
|||||||||||||||
Federal
|
(1,805 | ) | (2,827 | ) | 1,899 | ||||||||||
Foreign
|
| 32 | 102 | ||||||||||||
State and local
|
(675 | ) | (778 | ) | (201 | ) | |||||||||
Total deferred income tax expense from continuing operations
|
(2,480 | ) | (3,573 | ) | 1,800 | ||||||||||
Total income tax expense continuing operations
|
14,571 | 8,045 | 11,918 | ||||||||||||
Operations of discontinued operations
|
(3,795 | ) | (2,773 | ) | (331 | ) | |||||||||
Gain on sale of discontinued operations
|
2,085 | 266 | 731 | ||||||||||||
Total income tax expense
|
$ | 12,861 | $ | 5,538 | $ | 12,318 | |||||||||
F-17
2005
2004
2003
$
12,655
$
10,288
$
9,532
1,403
1,444
1,719
(293
)
(280
)
(3,882
)
(250
)
(276
)
4,555
(3,550
)
640
133
(361
)
539
660
594
517
(374
)
(879
)
$
14,571
$
8,045
$
11,918
40.3
%
27.4
%
43.8
%
2005 | 2004 | ||||||||
Deferred Tax Assets:
|
|||||||||
Net operating loss carryforwards
|
$ | 5,717 | $ | 6,167 | |||||
Allowance for doubtful accounts
|
1,528 | 2,307 | |||||||
Employee benefits and compensation
|
5,637 | 3,452 | |||||||
Cumulative change in accounting principle (SAB 101)
|
2,588 | 2,810 | |||||||
Lease costs
|
2,356 | 1,139 | |||||||
Goodwill and other intangibles
|
257 | 413 | |||||||
State tax credit carryforwards
|
3,848 | 3,782 | |||||||
Excess capital losses over capital gains
|
1,952 | 1,426 | |||||||
Other deferred tax assets
|
473 | 527 | |||||||
Total gross deferred tax assets
|
24,356 | 22,023 | |||||||
Less: valuation allowance
|
(8,033 | ) | (8,283 | ) | |||||
Net deferred tax assets
|
16,323 | 13,740 | |||||||
Deferred Tax Liabilities:
|
|||||||||
Property and equipment depreciation
|
1,841 | 3,462 | |||||||
Other deferred tax liabilities
|
2,048 | (665 | ) | ||||||
Total gross deferred tax liabilities
|
3,889 | 2,797 | |||||||
Net deferred tax asset
|
$ | 12,434 | $ | 10,943 | |||||
F-18
NOL Carryforwards | Deferred Tax Benefit | ||||||||||||||||||||
Expiration | |||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | Dates | |||||||||||||||||
U.S. NOLs
|
$ | 1,538 | $ | 1,940 | $ | 538 | $ | 679 | 2008 | ||||||||||||
Canadian NOLs
|
$ | 4,361 | $ | 4,315 | 1,744 | 1,726 | 2006 | ||||||||||||||
State NOLs
|
$ | 73,291 | $ | 70,404 | 3,435 | 3,762 | Various | ||||||||||||||
Total NOLs
|
5,717 | 6,167 | |||||||||||||||||||
NOL valuation allowances
|
(4,805 | ) | (4,436 | ) | |||||||||||||||||
Net NOLs
|
$ | 912 | $ | 1,731 | |||||||||||||||||
7. | Bank Debt |
2005 | 2004 | |||||||
Revolving credit facility
|
$ | 32,200 | $ | 53,900 | ||||
Weighted average rates
|
5.39 | % | 3.54 | % | ||||
Range of effective rates
|
3.94% - 7.25 | % | 2.98% - 5.25 | % | ||||
F-19
8. | Lease Commitments |
Gross | Net | ||||||||||||
Years Ended | Operating Lease | Operating Lease | |||||||||||
December 31, | Commitments(1) | Subleases(1), (2) | Commitments(1) | ||||||||||
2006
|
$ | 37,003 | $ | 1,730 | $ | 35,273 | |||||||
2007
|
31,041 | 1,611 | 29,430 | ||||||||||
2008
|
27,215 | 1,294 | 25,921 | ||||||||||
2009
|
22,360 | 948 | 21,412 | ||||||||||
2010
|
19,584 | 652 | 18,932 | ||||||||||
Thereafter
|
66,475 | 370 | 66,105 | ||||||||||
Total
|
$ | 203,678 | $ | 6,605 | $ | 197,073 | |||||||
(1) | Includes lease commitments accrued in the consolidation and integration reserve as of December 31, 2005. |
(2) | A substantial portion of the sub-leases relate to restructuring lease obligations and are reflected in consolidation and integration charges as further described in Notes 1 and 10. |
F-20
2005
2004
$
2,715
$
2,031
(588
)
(321
)
$
2,127
$
1,710
Years ended December 31, | |||||
2006
|
$ | 706 | |||
2007
|
577 | ||||
2008
|
467 | ||||
2009
|
91 | ||||
2010
|
| ||||
Thereafter
|
| ||||
Total minimum lease payments
|
1,841 | ||||
Less imputed interest
|
(192 | ) | |||
Present value of minimum lease payments
|
$ | 1,649 | |||
9. | Commitments and Contingencies |
F-21
10. | Consolidation and Integration Reserve |
F-22
Consolidation and
Integration Reserve
$
4,857
2,502
(3,949
)
3,410
3,598
(3,905
)
$
3,103
(1) | Adjustments against income are included in operating expenses in the accompanying consolidated statements of operations. |
(2) | Payments are net of sub-lease payments received. |
2005 | 2004 | 2003 | ||||||||||
Severance expense
|
$ | 93 | $ | | $ | 293 | ||||||
Lease consolidation and abandonment
|
3,598 | 2,502 | 1,086 | |||||||||
Other consolidation charges
|
| 248 | 506 | |||||||||
Total consolidation and integration charges
|
$ | 3,691 | $ | 2,750 | $ | 1,885 | ||||||
11. | Employee Benefits |
F-23
12. | Common Stock |
F-24
13. | Employee Share Plans |
F-25
2005
2004
2003
Weighted
Weighted
Weighted
Average
Average
Average
Number
Exercise
Number
Exercise
Number
Exercise
of
Price Per
of
Price Per
of
Price Per
Options
Share
Options
Share
Options
Share
8,523
$
3.32
10,155
$
4.58
10,952
$
4.81
468
$
3.45
473
$
4.31
558
$
3.12
(1,658
)
$
2.52
(519
)
$
2.60
(375
)
$
2.47
(530
)
$
13.36
(1,586
)
$
11.98
(980
)
$
7.19
6,803
$
2.72
8,523
$
3.32
10,155
$
4.58
4,551
$
2.47
5,390
$
3.46
5,764
$
5.64
Options Outstanding | Options Exercisable | ||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||
Average | Average | Average | |||||||||||||||||||
Remaining | Exercise | Exercise | |||||||||||||||||||
Number of | Contractual | Price Per | Number of | Price Per | |||||||||||||||||
Range of Exercise Price | Options | Life (Years) | Share | Options | Share | ||||||||||||||||
$5.01 - $8.44
|
36 | 0.0 | $ | 8.44 | 36 | $ | 8.44 | ||||||||||||||
$3.00 - $5.00
|
3,698 | 2.4 | $ | 3.56 | 2,007 | $ | 3.50 | ||||||||||||||
$1.13 - $2.99
|
3,069 | 1.4 | $ | 1.63 | 2,508 | $ | 1.55 | ||||||||||||||
Total
|
6,803 | 1.9 | $ | 2.72 | 4,551 | $ | 2.47 | ||||||||||||||
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Number | Price | Number | Price | |||||||||||||
of | Per | of | Per | |||||||||||||
Shares | Share(1) | Shares | Share(1) | |||||||||||||
Outstanding at beginning of year
|
119 | $ | 4.35 | | | |||||||||||
Granted
|
128 | $ | 3.56 | 119 | $ | 4.35 | ||||||||||
Vested and released from restrictions
|
(11 | ) | $ | 4.58 | | | ||||||||||
Forfeited
|
| | | |||||||||||||
Outstanding at end of year
|
236 | $ | 3.91 | 119 | $ | 4.35 | ||||||||||
(1) | Represents weighted average market value of the shares; awards are granted at no cost to the recipients. |
F-26
14. | Earnings Per Share |
Year Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Numerator:
|
|||||||||||||
Net income
|
$ | 18,673 | $ | 16,051 | $ | 15,316 | |||||||
Denominator:
|
|||||||||||||
Basic weighted average common shares
|
74,448 | 79,217 | 90,400 | ||||||||||
Diluted
|
|||||||||||||
Options(1)
|
2,169 | 2,240 | 2,362 | ||||||||||
Restricted stock awards
|
52 | 18 | | ||||||||||
Contingent shares(2)
|
158 | 2 | | ||||||||||
Total diluted weighted average common shares
|
76,827 | 81,477 | 92,762 | ||||||||||
Basic net income per share
|
$ | 0.25 | $ | 0.20 | $ | 0.17 | |||||||
Diluted net income per share
|
$ | 0.24 | $ | 0.20 | $ | 0.17 | |||||||
(1) | For the years ended December 31, 2005, 2004 and 2003, a total of 36, 548 and 4,039 options, respectively, were excluded from the calculation of diluted earnings per share as their exercise price would render them anti-dilutive. |
(2) | Contingent shares represent additional purchase price earned by businesses acquired by CBIZ, that will not be issued until future conditions have been met. See further discussion of acquisitions in Note 17. |
15. | Supplemental Cash Flow Disclosures |
2005 | 2004 | 2003 | ||||||||||
Interest
|
$ | 3,134 | $ | 1,342 | $ | 1,045 | ||||||
Income taxes
|
$ | 6,112 | $ | 14,675 | $ | (2,262 | ) | |||||
F-27
2005
2004
2003
$
407
$
1,857
$
$
3,712
$
2,033
$
4,036
$
201
$
1,865
$
207
$
4,569
$
530
$
494
16. | Related Parties |
F-28
17. | Acquisitions |
F-29
2005 | 2004 | |||||||
Goodwill
|
$ | 9,095 | $ | 2,619 | ||||
Client lists
|
$ | 5,817 | $ | 5,111 | ||||
Other intangible assets
|
$ | 597 | $ | 307 | ||||
18. | Discontinued Operations and Divestitures |
F-30
2005 | 2004 | 2003 | ||||||||||
Revenue
|
$ | 5,980 | $ | 18,531 | $ | 37,034 | ||||||
Loss from operations of discontinued operations before income
tax benefit
|
$ | (10,258 | ) | $ | (8,202 | ) | $ | (1,056 | ) | |||
Income tax benefit
|
(3,795 | ) | (2,773 | ) | (331 | ) | ||||||
Loss from operations of discontinued operations, net of tax
|
$ | (6,463 | ) | $ | (5,429 | ) | $ | (725 | ) | |||
2005 | 2004 | 2003 | ||||||||||
Gain on disposal of discontinued operations, before income tax
expense(1)
|
$ | 5,635 | $ | 398 | $ | 1,457 | ||||||
Income tax expense
|
2,085 | 266 | 731 | |||||||||
Gain on disposal of discontinued operations, net of tax
|
$ | 3,550 | $ | 132 | $ | 726 | ||||||
(1) | Includes contingent proceeds in the amount of $4,569, for the Benefits and Insurance operation that was sold in the third quarter of 2005. |
F-31
2005
2004
$
1,319
$
10,747
1,513
3,392
5,450
414
1,872
92
236
$
6,730
$
18,305
$
317
$
1,090
2,166
1,265
3,392
5,450
64
341
$
5,939
$
8,146
F-32
2005
March 31,
June 30,
September 30,
December 31,
$
154,229
$
138,725
$
134,214
$
132,101
126,097
120,295
119,582
119,321
28,132
18,430
14,632
12,780
6,421
7,449
6,364
4,677
3,900
3,789
3,765
3,709
17,811
7,192
4,503
4,394
(781
)
(845
)
(787
)
(696
)
29
285
558
999
1,279
2,216
(223
)
154
521
1,805
17,588
7,346
5,024
6,199
7,282
2,688
2,151
2,450
10,306
4,658
2,873
3,749
(2,060
)
(1,332
)
(1,640
)
(1,431
)
(109
)
802
2,857
$
8,137
$
3,326
$
2,035
$
5,175
$
0.14
$
0.06
$
0.04
$
0.05
(0.03
)
(0.02
)
(0.01
)
0.02
$
0.11
$
0.04
$
0.03
$
0.07
$
0.13
$
0.06
$
0.04
$
0.05
(0.03
)
(0.02
)
(0.01
)
0.02
$
0.10
$
0.04
$
0.03
$
0.07
75,738
75,175
73,793
73,123
77,718
76,947
75,988
75,947
F-33
2004
March 31,
June 30,
September 30,
December 31,
$
143,692
$
122,508
$
118,814
$
119,884
112,679
107,789
106,212
111,737
31,013
14,719
12,602
8,147
5,726
6,023
6,008
6,342
3,861
4,044
4,017
4,088
21,426
4,652
2,577
(2,283
)
(240
)
(429
)
(369
)
(469
)
384
534
78
531
292
524
2,185
675
397
233
1,716
22,101
5,049
2,810
(567
)
9,061
1,677
1,108
(3,801
)
13,040
3,372
1,702
3,234
(1,459
)
(990
)
(1,584
)
(1,396
)
238
(106
)
$
11,581
$
2,382
$
356
$
1,732
$
0.15
$
0.04
$
0.02
$
0.04
(0.01
)
(0.01
)
(0.01
)
(0.02
)
$
0.14
$
0.03
$
0.01
$
0.02
$
0.15
$
0.04
$
0.02
$
0.04
(0.02
)
(0.01
)
(0.01
)
(0.02
)
$
0.13
$
0.03
$
0.01
$
0.02
85,437
77,885
77,311
76,287
87,912
80,150
79,373
78,449
F-34
F-35
Year Ended December 31, 2005 | ||||||||||||||||||||||||||
Accounting, | Benefits | National | Corporate | |||||||||||||||||||||||
Tax and | and | CBIZ | Practices | and | ||||||||||||||||||||||
Advisory | Insurance | MMP | Other | Other | Total | |||||||||||||||||||||
Revenue
|
$ | 245,549 | $ | 146,216 | $ | 97,583 | $ | 69,921 | $ | | $ | 559,269 | ||||||||||||||
Operating expenses
|
208,316 | 116,149 | 80,033 | 60,969 | 19,828 | 485,295 | ||||||||||||||||||||
Gross margin
|
37,233 | 30,067 | 17,550 | 8,952 | (19,828 | ) | 73,974 | |||||||||||||||||||
Corporate general & admin
|
| | | | 24,911 | 24,911 | ||||||||||||||||||||
Depreciation & amortization
|
3,565 | 3,014 | 2,773 | 572 | 5,239 | 15,163 | ||||||||||||||||||||
Operating income (loss)
|
33,668 | 27,053 | 14,777 | 8,380 | (49,978 | ) | 33,900 | |||||||||||||||||||
Other income (expense):
|
||||||||||||||||||||||||||
Interest expense
|
(115 | ) | (4 | ) | | | (2,990 | ) | (3,109 | ) | ||||||||||||||||
Gain on sale of operations, net
|
| | | | 314 | 314 | ||||||||||||||||||||
Other income, net
|
439 | 422 | 98 | 1,215 | 2,878 | 5,052 | ||||||||||||||||||||
Total other income
|
324 | 418 | 98 | 1,215 | 202 | 2,257 | ||||||||||||||||||||
Income (loss) from continuing operations before income tax
expense
|
$ | 33,992 | $ | 27,471 | $ | 14,875 | $ | 9,595 | $ | (49,776 | ) | $ | 36,157 | |||||||||||||
F-36
Year Ended December 31, 2004
Accounting,
Benefits
National
Corporate
Tax and
and
CBIZ
Practices
and
Advisory
Insurance
MMP
Other
Other
Total
$
212,010
$
141,258
$
87,261
$
64,369
$
$
504,898
182,564
112,987
71,885
57,208
13,773
438,417
29,446
28,271
15,376
7,161
(13,773
)
66,481
24,099
24,099
3,687
2,825
2,719
714
6,065
16,010
25,759
25,446
12,657
6,447
(43,937
)
26,372
(43
)
57
(1
)
20
(1,540
)
(1,507
)
996
996
363
782
25
423
1,939
3,532
320
839
24
443
1,395
3,021
$
26,079
$
26,285
$
12,681
$
6,890
$
(42,542
)
$
29,393
Year Ended December 31, 2003
Accounting,
Benefits
National
Corporate
Tax and
and
CBIZ
Practices
and
Advisory
Insurance
MMP
Other
Other
Total
$
202,069
$
144,009
$
75,785
$
60,391
$
$
482,254
176,594
112,136
61,566
61,176
8,460
419,932
25,475
31,873
14,219
(785
)
(8,460
)
62,322
18,745
18,745
4,272
2,797
2,595
813
6,104
16,581
21,203
29,076
11,624
(1,598
)
(33,309
)
26,996
(49
)
(63
)
(5
)
(1
)
(937
)
(1,055
)
2,519
2,519
652
53
(17
)
185
(2,100
)
(1,227
)
603
(10
)
(22
)
184
(518
)
237
$
21,806
$
29,066
$
11,602
$
(1,414
)
$
(33,827
)
$
27,233
F-37
F-38
COLUMN A
COLUMN B
COLUMN C
COLUMN D
COLUMN E
Additions
Balance at
Charged to
Charged to
Acquisitions
Charge-offs,
Balance at
Beginning of
Cost and
Other
and
Net of
End of
Period
Expense
Accounts
Divestitures
Recoveries
Period
$
5,970
$
5,446
$
(396
)
$
$
(5,219
)
$
5,801
$
6,231
$
4,438
$
374
$
57
$
(5,130
)
$
5,970
$
6,467
$
5,144
$
77
$
(164
)
$
(5,293
)
$
6,231
F-39
1. | That Article One of the Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety as follows: |
2. | That said amendment to the Certificate of Incorporation of the Corporation was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. | |
3. | That this Certificate of Amendment to the Certificate of Incorporation shall become effective on the 1 st day of August, 2005. |
CENTURY BUSINESS SERVICES, INC.
|
||||
By: | /s/ Jerome P. Grisko, Jr. | |||
Jerome P. Grisko, Jr., President | ||||
|
State of Delaware | |
|
Secretary of State | |
|
Division of Corporations | |
|
Delivered 01:13 PM 07/22/2005 | |
|
FILED 01:03 PM 07/22/2005 | |
|
SRV 050606739 2129325 FILE |
CBIZ, INC.
AS OF DECEMBER 31, 2005
Company Name
State of Formation
DE
GA
DE
DE
DE
DE
DE
OH
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
MO
DE
MD
DE
DE
MD
DE
DE
TX
DE
OH
DE
DE
ONTARIO, CAN
DE
DE
OH
DE
DE
OH
OH
DE
DE
OH
OH
OH
OH
OH
OH
OH
DE
DE
OH
DE
OH
OH
OH
1. | I have reviewed this report on Form 10-K of CBIZ, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |||
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 15, 2006
|
/s/ STEVEN L. GERARD | |
|
||
|
Steven L. Gerard | |
|
Chief Executive Officer |
1. | I have reviewed this report on Form 10-K of CBIZ, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |||
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 15, 2006
|
/s/ WARE H. GROVE | |
|
||
|
Ware H. Grove | |
|
Chief Financial Officer |
(i) | the Form 10-K fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | ||
(ii) | the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
Date: March 15, 2006
|
/s/ STEVEN L. GERARD | |
|
||
|
Steven L. Gerard | |
|
Chief Executive Officer | |
Subscribed and sworn to before me
this 15th day of March, 2006.
|
||
|
||
/s/ MICHAEL W. GLEESPEN
|
||
|
||
Title: Notary Public & Attorney-At-Law
|
||
Registered in Franklin County, Ohio
|
||
No Expiration Date
|
(i) | the Form 10-K fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | ||
(ii) | the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
Date: March 15, 2006
|
/s/ WARE H. GROVE | |
|
||
|
Ware H. Grove | |
|
Chief Financial Officer | |
Subscribed and sworn to before me
this 15th day of March, 2006.
|
||
|
||
/s/ MICHAEL W. GLEESPEN
|
||
|
||
Title: Notary Public & Attorney-At-Law
|
||
Registered in Franklin County, Ohio
|
||
No Expiration Date
|