CBIZ Reports Second-Quarter and First-Half 2013 Results

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 2013 AND 2012

(In thousands, except percentages and per share data) 

 THREE MONTHS ENDED 

 JUNE 30, 

2013

%

2012 (1)

%

Revenue

$

172,511

100.0%

$

154,206

100.0%

Operating expenses (2)

151,627

87.9%

136,013

88.2%

Gross margin

20,884

12.1%

18,193

11.8%

Corporate general and administrative expenses (3)

7,649

4.4%

7,575

4.9%

Operating income

13,235

7.7%

10,618

6.9%

Other income (expense): 

Interest expense

(4,145)

-2.4%

(3,831)

-2.5%

Gain on sale of operations, net

48

0.0%

50

0.0%

Other income (expense), net (4) (5)

515

0.3%

-0.5%

     Total other expense, net

(3,582)

-2.1%

(4,665)

-3.0%

Income from continuing operations before income tax expense

9,653

5.6%

5,953

3.9%

Income tax expense

4,202

2,198

Income from continuing operations

5,451

3.2%

3,755

2.4%

Gain from operations of discontinued businesses, net of tax

1,791

2,075

Gain on disposal of discontinued businesses, net of tax

1,905

18

Net income

$

9,147

5.3%

$

5,848

3.8%

Diluted earnings per share:

Continuing operations

$

0.11

$

0.08

Discontinued operations

0.07

0.04

Net income

$

0.18

$

0.12

Diluted weighted average common shares outstanding

49,929

49,244

Other data from continuing operations:

Adjusted EBIT (6)

$

13,750

$

9,734

Adjusted EBITDA (6) 

$

18,499

$

13,883

(1)

Certain amounts in the 2012 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations.

(2)

Includes expense of $154 and a benefit of $850 for the three months ended June 30, 2013 and 2012, respectively, in compensation associated with net gains and losses from the Company's deferred compensation plan (see note 4). Excluding this item, "operating expenses" would be $151,473 and $136,863, or 87.8% and 88.8% of revenue, for the three months ended June 30, 2013 and 2012, respectively.

(3)

Includes a benefit of $35 for the three months ended June 30, 2013 and 2012, in compensation associated with losses from the Company's deferred compensation plan (see note 4). Excluding this item, "corporate general and administrative expenses" would be $7,684 and $7,610, or 4.5% and 4.9% of revenue, for the three months ended June 30, 2013 and 2012, respectively.

(4)

Includes net gains of $119 and net losses of $885 for the three months ended June 30, 2013 and 2012, respectively, attributable to assets held in the Company's deferred compensation plan. These net losses or gains do not impact "income from continuing operations before income tax expense" as they are directly offset by compensation adjustments included in "operating expenses" and "corporate general and administrative expenses."

(5)

For the three months ended June 30, 2013 and 2012, amount includes expenses of $17 and $147, respectively, related to net increases in the fair value of contingent consideration related to CBIZ's prior acquisitions.

(6)

Adjusted EBIT represents income from continuing operations before income taxes, interest expense, and gain on sale of operations, net. Adjusted EBITDA represents Adjusted EBIT before depreciation and amortization expense of $4,749 and $4,149 for the three months ended June 30, 2013 and 2012, respectively. The Company has included Adjusted EBIT and Adjusted EBITDA data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company's ability to service debt. Adjusted EBIT and Adjusted EBITDA should not be regarded as an alternative or replacement to any measurement of performance under generally accepted accounting principles.

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(In thousands, except percentages and per share data) 

 SIX MONTHS ENDED 

 JUNE 30, 

2013

%

2012 (1)

%

Revenue

$

373,945

100.0%

$

341,762

100.0%

Operating expenses (2)

311,625

83.3%

285,579

83.6%

Gross margin

62,320

16.7%

56,183

16.4%

Corporate general and administrative expenses (3)

17,633

4.7%

18,119

5.3%

Operating income

44,687

12.0%

38,064

11.1%

Other income (expense): 

Interest expense

(8,201)

-2.2%

(7,622)

-2.2%

Gain on sale of operations, net

66

0.0%

2,639

0.8%

Other income, net (4) (5)

2,243

0.6%

2,481

0.7%

     Total other expense, net

(5,892)

-1.6%

(2,502)

-0.7%

Income from continuing operations before income tax expense

38,795

10.4%

35,562

10.4%

Income tax expense

16,441

14,615

Income from continuing operations

22,354

6.0%

20,947

6.1%

Gain from operations of discontinued businesses, net of tax

3,168

3,646

Gain on disposal of discontinued businesses, net of tax

1,928

40

Net income

$

27,450

7.3%

$

24,633

7.2%

Diluted earnings per share:

Continuing operations

$

0.45

$

0.42

Discontinued operations

0.10

0.08

Net income

$

0.55

$

0.50

Diluted weighted average common shares outstanding

49,891

49,391

Other data from continuing operations:

Adjusted EBIT (6)

$

46,930

$

40,545

Adjusted EBITDA (6) 

$

56,304

$

48,806

(1)

Certain amounts in the 2012 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations.

(2)

Includes expense of $2,381 and $1,835 for the six months ended June 30, 2013 and 2012, respectively, in compensation associated with net gains from the Company's deferred compensation plan (see note 4). Excluding this item, "operating expenses" would be $309,244 and $283,744, or 82.7% and 83.0% of revenue, for the six months ended June 30, 2013 and 2012, respectively.

(3)

Includes expenses of $240 and $278 for the six months ended June 30, 2013 and 2012, respectively, in compensation associated with gains from the Company's deferred compensation plan (see note 4).  Excluding this item, corporate general and administrative expenses would be $17,393 and $17,841, or 4.7% and 5.2% of revenue, for the six months ended June 30, 2013 and 2012, respectively.

(4)

Includes net gains of $2,621 and $2,113 for the six months ended June 30, 2013 and 2012, respectively, attributable to assets held in the Company's deferred compensation plan. These net gains do not impact "income from continuing operations before income tax expense" as they are directly offset by compensation adjustments included in "operating expenses" and "corporate general and administrative expenses."

(5)

For the six months ended June 30, 2013 and 2012, amount includes an expense of $904 and income of $103, respectively, related to net increases and decreases in the fair value of contingent consideration related to CBIZ's prior acquisitions.

(6)

Adjusted EBIT represents income from continuing operations before income taxes, interest expense, and gain on sale of operations, net. Adjusted EBITDA represents Adjusted EBIT before depreciation and amortization expense of $9,374 and $8,261 for the six months ended June 30, 2013 and 2012, respectively. The Company has included Adjusted EBIT and Adjusted EBITDA data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company's ability to service debt. Adjusted EBIT and Adjusted EBITDA should not be regarded as an alternative or replacement to any measurement of performance under generally accepted accounting principles.

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

(In thousands, except per share data) 

SELECT SEGMENT DATA

 THREE MONTHS ENDED 

 SIX MONTHS ENDED 

 JUNE 30, 

 JUNE 30, 

2013

2012 (1)

2013

2012 (1)

Revenue

Financial Services

$     113,808

$     101,336

$     254,978

$       233,500

Employee Services

51,489

45,609

104,267

93,668

National Practices

7,214

7,261

14,700

14,594

Total

$     172,511

$     154,206

$     373,945

$       341,762

Gross Margin

Financial Services

$       14,579

$       12,205

$       50,234

$         47,136

Employee Services

8,621

7,089

18,777

15,700

National Practices

339

602

875

1,213

Operating expenses - unallocated (2):

Other

(2,501)

(2,553)

(5,185)

(6,031)

Deferred compensation

(154)

850

(2,381)

(1,835)

Total

$       20,884

$       18,193

$       62,320

$         56,183

(1)

Certain amounts in the 2012 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations.

(2)

Represents operating expenses not directly allocated to individual businesses, including stock-based compensation, consolidation and integration charges and certain advertising expenses. "Operating expenses - unallocated" also include gains or losses attributable to the assets held in the Company's deferred compensation plan. These gains or losses do not impact "income from continuing operations before income tax expense" as they are directly offset by the same adjustment to "other income, net" in the consolidated statements of comprehensive income. Gains or losses recognized from adjustments to the fair value of the assets held in the deferred compensation plan are recorded as additional compensation expense in "operating expenses" and as income or expense in "other income, net."

NON-GAAP EARNINGS AND PER SHARE DATA

Reconciliation of Income from Continuing Operations to Non-GAAP Earnings from Continuing Operations (3)

THREE MONTHS ENDED JUNE 30,

2013

 Per Share 

2012 (1)

 Per Share 

Income from Continuing Operations

$         5,451

$           0.11

$         3,755

$            0.08

Selected non-cash items:

Amortization

3,586

0.07

2,949

0.06

Depreciation

1,163

0.02

1,200

0.02

Non-cash interest on convertible notes

710

0.02

659

0.01

Stock-based compensation

1,488

0.03

1,363

0.03

Adjustment to contingent earnouts

17

-

147

-

Non-cash items

6,964

0.14

6,318

0.12

Non-GAAP earnings - Continuing Operations

$       12,415

$           0.25

$       10,073

$            0.20

SIX MONTHS ENDED JUNE 30,

2013

 Per Share 

2012 (1)

 Per Share 

Income from Continuing Operations

$       22,354

$           0.45

$       20,947

$            0.42

Adjustment for gain on sale of operations

-

-

(1,547)

(0.03)

Selected non-cash items:

Amortization

7,042

0.14

5,851

0.12

Depreciation (4)

2,332

0.05

2,410

0.05

Non-cash interest on convertible notes

1,394

0.03

1,295

0.03

Stock-based compensation

2,924

0.06

2,869

0.05

Adjustment to contingent earnouts

904

0.01

(103)

-

Non-cash items

14,596

0.29

12,322

0.25

Non-GAAP earnings - Continuing Operations

$       36,950

0.74

$       31,722

$            0.64

(3)

The Company believes Non-GAAP earnings and Non-GAAP earnings per diluted share more clearly illustrate the impact of certain non-cash charges and credits to "income from continuing operations" and are a useful measure for the Company and its analysts. Non-GAAP earnings is defined as income from continuing operations excluding: depreciation and amortization, non-cash interest expense, non-cash stock-based compensation expense, and adjustments to the fair value of contingent consideration related to prior acquisitions. Non-GAAP earnings per diluted share is calculated by dividing Non-GAAP earnings by the number of weighted average diluted common shares outstanding for the period indicated. Non-GAAP earnings and Non-GAAP earnings per diluted share should not be regarded as a replacement or alternative to any measurement of performance under generally accepted accounting principles.

(4)

Capital spending was $3.1 million and $2.2 million for the six months ended June 30, 2013 and 2012, respectively.

CBIZ, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

(In thousands, except percentages and ratios) 

SELECT BALANCE SHEET DATA AND RATIOS

 JUNE 30, 

 DECEMBER 31, 

Cash and cash equivalents

$          1,187

$             899

Restricted cash

$        28,219

$        19,627

Accounts receivable, net

$      161,402

$      137,058

Assets of discontinued operations

$      102,087

$      103,291

Current assets before funds held for clients

$      318,011

$      278,587

Funds held for clients - current and non-current

$      116,370

$      154,447

Goodwill and other intangible assets, net

$      474,981

$      470,997

Total assets

$      980,229

$      970,946

Notes payable - current

$          4,875

$          6,217

Liabilities of discontinued operations

$        11,553

$        14,144

Current liabilities before client fund obligations

$      170,215

$      159,278

Client fund obligations

$      116,338

$      154,119

Notes payable - long-term

$          1,222

$          1,222

Convertible notes - non-current

$      123,810

$      122,416

Bank debt

$      204,000

$      208,900

Total liabilities

$      655,577

$      675,714

Treasury stock

$     (371,890)

$     (371,080)

Total stockholders' equity

$      324,652

$      295,232

Debt to equity (2)

102.9%

114.7%

Days sales outstanding (DSO) - continuing operations (3)

83

77

Shares outstanding

50,918

50,365

Basic weighted average common shares outstanding

49,535

49,002

Diluted weighted average common shares outstanding

49,891

49,252

(1)

Certain amounts in the 2012 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations.

(2)

Ratio is convertible notes and bank debt divided by total stockholders' equity.

(3)

DSO is provided for continuing operations and represents accounts receivable, net and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve month daily revenue. The Company has included DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company's ability to collect on receivables in a timely manner. DSO should not be regarded as an alternative or replacement to any measurement of performance under generally accepted accounting principles. DSO at June 30, 2012 was 83.

 CBIZ, INC. 

 SELECT PRO FORMA FINANCIAL INFORMATION 

 FOR THE YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010 

 (In thousands, except per share data) 

2012

 CBIZ as 

 Reported 

 Adjustments for 

 Sale of MMP (1) 

 CBIZ 

 Pro Forma (2) 

 Revenue

$

766,094

$

138,016

$

628,078

 Operating expenses

680,195

122,958

557,237

 Gross margin

85,899

15,058

70,841

 Corporate general and administrative expenses

30,422

213

30,209

 Operating income

$

55,477

$

14,845

$

40,632

 Total other expense, net

$

(5,074)

$

(1,054)

$

(4,020)

 Income after income tax expense

$

31,075

$

8,442

$

22,633

 (Loss) gain from operations of discontinued businesses, net of tax

(19)

(8,442)

8,423

 Gain on disposal of discontinued businesses, net of tax

90

-

90

 Net income

$

31,146

$

-

$

31,146

 Diluted weighted average common share outstanding

49,252

49,252

49,252

 Diluted earnings per share: 

    Continuing operations

$

0.63

$

0.17

$

0.46

    Discontinued operations

0.00

(0.17)

0.17

    Net income

$

0.63

$

-

$

0.63

 Adjusted EBITDA

$

85,294

$

19,715

$

65,579

2011

 CBIZ as 

 Adjustments for 

 CBIZ 

 Reported 

 Sale of MMP (1) 

 Pro Forma (2) 

 Revenue

$

733,805

$

141,046

$

592,759

 Operating expenses

644,269

124,668

519,601

 Gross margin

89,536

16,378