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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25890
CENTURY BUSINESS SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2769024
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6050 Oak Tree Boulevard, South, Suite 500, Cleveland, Ohio 44131
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) 216-447-9000
---------------------------
N/A
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed since Last Report
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 proceeding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class of Common Stock April 30, 2004
- --------------------- --------------
Par value $.01 per share 78,385,648
1
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2004 and December 31, 2003 ................. 3
Consolidated Statements of Operations -
Three Months Ended March 31, 2004 and 2003 ........... 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2004 and 2003 ........... 5
Notes to the Consolidated Financial Statements ....... 6-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 15-24
Item 3. Quantitative and Qualitative Disclosures About
Market Risk ........................................ 24
Item 4. Controls and Procedures .............................. 25
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings .................................... 26
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities ..................... 26
Item 6. Exhibits and Reports on Form 8-K ..................... 26
Signature ............................................ 27
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2004 2003
---- ----
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 3,344 $ 3,791
Restricted cash .................................... 10,357 10,880
Accounts receivable, net ........................... 134,255 111,556
Notes receivable - current ......................... 1,113 1,315
Income taxes recoverable ........................... -- 438
Deferred income taxes .............................. 3,595 3,707
Other current assets ............................... 9,058 7,758
Assets of businesses held for sale ................. 284 395
--------- ---------
Current assets before funds held for clients ..... 162,006 139,840
Funds held for clients ............................. 45,068 44,917
--------- ---------
Total current assets ............................. 207,074 184,757
Property and equipment, net .......................... 40,808 40,305
Notes receivable - non-current ....................... 2,949 2,433
Deferred income taxes - non-current .................. 3,951 4,180
Goodwill and other intangible assets, net ............ 168,696 167,280
Other assets ......................................... 5,104 3,190
--------- ---------
Total assets ..................................... $ 428,582 $ 402,145
========= =========
LIABILITIES
Current liabilities:
Accounts payable ................................... $ 25,549 $ 28,652
Income taxes payable ............................... 7,546 --
Other current liabilities .......................... 31,672 34,575
Liabilities of businesses held for sale ............ 383 260
--------- ---------
Current liabilities before client fund obligations 65,150 63,487
Client fund obligations ............................ 45,068 44,917
--------- ---------
Total current liabilities ........................ 110,218 108,404
Bank debt ............................................ 23,400 14,000
Other non-current liabilities ........................ 5,011 1,903
--------- ---------
Total liabilities ................................ 138,629 124,307
--------- ---------
STOCKHOLDERS' EQUITY
Common stock ......................................... 958 957
Additional paid-in capital ........................... 441,945 441,407
Accumulated deficit .................................. (117,857) (129,438)
Treasury stock ....................................... (35,087) (35,087)
Accumulated other comprehensive loss ................. (6) (1)
--------- ---------
Total stockholders' equity ....................... 289,953 277,838
--------- ---------
Total liabilities and stockholders' equity ....... $ 428,582 $ 402,145
========= =========
See the accompanying notes to the consolidated financial statements.
3
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
---------
2004 2003
---- ----
Revenue ................................................... $ 147,977 $ 144,758
Operating expenses ........................................ 119,336 116,692
--------- ---------
Gross margin .............................................. 28,641 28,066
Corporate general and administrative expense .............. 5,315 5,249
Depreciation and amortization expense ..................... 3,987 4,272
--------- ---------
Operating income .......................................... 19,339 18,545
Other income (expense):
Interest expense ........................................ (240) (323)
Gain on sale of operations, net ......................... 383 --
Other income (expense), net ............................. 472 (538)
--------- ---------
Total other income (expense), net ..................... 615 (861)
Income from continuing operations before income tax expense 19,954 17,684
Income tax expense ........................................ 8,341 7,525
--------- ---------
Income from continuing operations ......................... 11,613 10,159
Loss from operations of discontinued businesses, net of tax (32) (158)
--------- ---------
Net income ................................................ $ 11,581 $ 10,001
========= =========
Earnings per share:
Basic:
Continuing operations ................................. $ 0.14 $ 0.11
Discontinued operations ............................... -- --
--------- ---------
Net income ............................................ $ 0.14 $ 0.11
========= =========
Diluted:
Continuing operations ................................. $ 0.13 $ 0.10
Discontinued operations ............................... -- --
--------- ---------
Net income ............................................ $ 0.13 $ 0.10
========= =========
Basic weighted average common shares outstanding .......... 85,437 95,087
========= =========
Diluted weighted average common shares outstanding ........ 87,912 96,956
========= =========
See the accompanying notes to the consolidated financial statements.
4
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
---------
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 11,581 $ 10,001
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Loss from operations of discontinued businesses ...... 32 158
Gain on sale of operations ........................... (383) --
Bad debt expense, net of recoveries .................. 1,386 1,124
Impairment of notes receivable ....................... -- 1,625
Depreciation and amortization ........................ 3,987 4,272
Deferred income taxes ................................ 341 (164)
Changes in assets and liabilities, net of
acquisitions and dispositions:
Restricted cash ...................................... 523 2,182
Accounts receivable, net ............................. (24,206) (25,569)
Other assets ......................................... (3,725) (342)
Accounts payable ..................................... (3,052) (487)
Income taxes ......................................... 7,984 9,904
Accrued expenses and other liabilities ............... (2,322) 278
-------- --------
Net cash (used in) provided by continuing operations ... (7,854) 2,982
Net cash provided by (used in) discontinued operations . 202 (911)
-------- --------
Net cash (used in) provided by operating activities .... (7,652) 2,071
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions including contingent consideration
earned, net of cash acquired ......................... (670) (795)
Proceeds from divested operations and client list ...... 526 --
Additions to property and equipment, net ............... (3,701) (3,235)
Net decrease (increase) in notes receivable ............ 70 (475)
-------- --------
Net cash used in investing activities .................... (3,775) (4,505)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank debt ................................ 62,900 46,850
Proceeds from notes payable and capitalized leases ..... 1,820 88
Payment of bank debt ................................... (53,500) (47,350)
Payment of notes payable and capitalized leases ........ (715) (251)
Proceeds from exercise of stock options and warrants ... 475 33
-------- --------
Net cash provided by (used in) financing activities ...... 10,980 (630)
-------- --------
Net decrease in cash and cash equivalents ................ (447) (3,064)
Cash and cash equivalents at beginning of year ........... 3,791 6,351
-------- --------
Cash and cash equivalents at end of year ................. $ 3,344 $ 3,287
======== ========
See the accompanying notes to the consolidated financial statements.
5
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
(GAAP) for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X of the U.S. Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by GAAP for annual financial statements.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments (consisting solely of normal
recurring adjustments) considered necessary to present fairly the
financial position of Century Business Services, Inc. and Subsidiaries
(CBIZ) as of March 31, 2004, and December 31, 2003, and the results of
their operations and cash flows for the three months ended March 31, 2004,
and 2003. The results of operations for such interim periods are not
necessarily indicative of the results for the full year. For further
information, refer to the consolidated financial statements and notes
thereto included in CBIZ's annual report on Form 10-K for the year ended
December 31, 2003. Also, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of
critical accounting policies.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates. Certain
reclassifications have been made to the 2003 consolidated financial
statements to conform to the 2004 presentation.
Operating Expenses
Operating expenses relate to costs incurred directly at the business
units, and consist primarily of personnel and occupancy related expenses.
Personnel costs include base compensation, payroll taxes and benefits,
which are recognized as expense as they are incurred, and incentive
compensation costs which are estimated and accrued on a monthly basis. The
ultimate determination of incentive compensation is made after our
year-end results are finalized; thus, estimates are subject to change.
Total personnel costs were $88.0 million and $87.2 million for the three
months ended March 31, 2004 and 2003, respectively.
The largest components of occupancy costs are rent expense and utilities.
Rent expense is recognized over respective lease terms, and utilities are
recognized as incurred. Total facility costs were $9.1 million and $8.6
million for the three months ended March 31, 2004 and 2003, respectively.
Consolidation and integration charges are included in operating expenses,
and are accounted for in accordance with Statement of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." Accordingly, CBIZ recognizes a liability for noncancellable
lease obligations based upon the net present value of remaining lease
payments, net of estimated sublease payments. The liability is determined
and recognized as of the cease-use date. Adjustments to the liability are
made for changes in estimates in the period in which the change becomes
known. See further discussion in note 6.
Funds Held for Clients and Client Fund Obligations
As part of its payroll and property tax management services, CBIZ is
engaged in the preparation of payroll checks, federal, state, and local
payroll tax returns, and property tax payments. In relation to these
services, CBIZ collects funds from its client's account in advance of
paying these client obligations. Funds that are collected before they are
due are held in an account in CBIZ's name and invested in short-term
investment grade instruments with
6
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
a maturity of twelve months or less from the date of purchase. These
funds, which may include cash, cash equivalents and short-term
investments, are segregated and reported separately as funds held for
clients. There are no regulatory or other contractual restrictions placed
on these funds. Funds held for clients and the related client fund
obligations are included in the consolidated balance sheets as current
assets and current liabilities, respectively. The amount of collected, but
not yet remitted funds for CBIZ's payroll and property tax management
services vary significantly during the year.
Stock-Based Compensation
CBIZ accounts for the stock-based compensation plans under the intrinsic
value method of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. CBIZ does not recognize
compensation expense related to stock options, as all options are granted
at an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on
net income and earnings per share as if CBIZ had applied the fair value
recognition provisions of SFAS 123 to stock-based employee compensation
(in thousands, except per share data).
THREE MONTHS ENDED
MARCH 31
--------
2004 2003
---- ----
Net income as reported .. $ 11,581 $ 10,001
Fair value of stock-based
compensation, net of tax (348) (802)
-------- --------
Pro forma net income .... $ 11,233 $ 9,199
======== ========
Earnings per share:
Basic - as reported ... $ 0.14 $ 0.11
Basic - pro forma ..... $ 0.13 $ 0.10
Diluted - as reported . $ 0.13 $ 0.10
Diluted - pro forma ... $ 0.13 $ 0.10
The above results may not be representative of the effects on net income
for future periods, as the level of forfeitures on existing grants and the
value and amount of new grants issued in future periods may vary.
New Accounting Pronouncements
Effective January 1, 2004, CBIZ adopted FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51" ("FIN 46"), FASB Staff Position ("FSP") 46-e, "Effective Date of
Interpretation 46", and revisions to FIN 46 ("FIN 46(R), FIN 46(R)-1, FIN
46(R)-2 and FIN 46(R)-3). In accordance with the provisions of the
aforementioned standards, CBIZ has determined that its relationship with
certain Certified Public Accounting (CPA) firms with whom we maintain
administrative service agreements (ASAs), qualify as variable interest
entities. The accompanying financial statements do not reflect the
consolidation of the variable interest entities, as the impact is not
material to the financial condition, results of operations or cash flows
of CBIZ.
The CPA firms with which CBIZ maintains service agreements operate as
limited liability corporations, limited liability partnerships or
professional corporations. The firms are separate legal entities with
separate governing bodies and officers. CBIZ has no ownership interest in
any of these CPA firms, and neither the existence of the ASAs nor the
providing of services thereunder is intended to constitute control of the
CPA firms by CBIZ. CBIZ and the CPA firms maintain their own respective
liability and risk of loss in connection with performance of each of its
respective services, and CBIZ does not believe that its arrangements with
these CPA firms result in additional risk of loss. Refer to Item I of our
Annual Report on Form 10-K for the year ended December 31, 2003, for a
more detailed discussion of our relationship with these CPA firms.
7
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. ACCOUNTS RECEIVABLE, NET
Accounts receivable balances were as follows (in thousands):
MARCH 31, DECEMBER 31,
2004 2003
---- ----
Trade accounts receivable .......... $ 87,043 $ 82,867
Unbilled revenue ................... 59,241 37,659
--------- ---------
Total accounts receivable .......... 146,284 120,526
Less allowance for doubtful accounts (12,029) (8,970)
--------- ---------
Accounts receivable, net ........... $ 134,255 $ 111,556
========= =========
3. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
The components of intangible assets, net were as follows (in thousands):
MARCH 31, DECEMBER 31,
2004 2003
---- ----
Goodwill ...................................... $ 158,079 $ 157,815
Intangibles:
Client lists ................................ 14,762 13,493
Other intangibles ........................... 748 682
--------- ---------
Total intangibles ......................... 15,510 14,175
Total goodwill and other intangible assets .... 173,589 171,990
Less accumulated amortization ................. (4,893) (4,710)
--------- ---------
Total goodwill and other intangible assets, net $ 168,696 $ 167,280
========= =========
Client lists are amortized over periods not exceeding ten years. Other
intangibles, which consist primarily of non-compete agreements and website
development costs, are amortized over periods ranging from two to ten
years. Amortization expense of client lists and other intangible assets
was approximately $0.4 million for each of the quarters ended March 31,
2004 and 2003.
4. BANK DEBT
Bank debt balances were as follows (in thousands, except percentages):
MARCH 31, DECEMBER 31,
2004 2003
---- ----
Bank debt:
Revolving credit facility, effective rates
of 3.06% to 4.75% ...................... $ 23,400 $ 14,000
======== ========
Weighted average rates ................... 3.36% 4.39%
======== ========
CBIZ maintains a $73.0 million revolving credit facility with a group of
four banks. The facility was amended during the first quarter 2004 to
allow the repurchase of up to $50.0 million of CBIZ common stock on or
before December 31, 2004, and to permit, under limited circumstances, an
over-advance of $5.0 million to $10.0 million toward the borrowing base
through September 30, 2004. Management believes that the carrying amount
of bank debt recorded at March 31, 2004, approximates its fair value.
8
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Under the facility, loans are charged an interest rate consisting of a
base rate or Eurodollar rate plus an applicable margin. Additionally, a
commitment fee of 40 to 50 basis points is charged on the unused portion
of the facility. Borrowings and commitments by the banks under the credit
facility mature in September, 2005. The credit facility is secured by
substantially all assets and capital stock of CBIZ and its subsidiaries.
The bank agreement contains financial covenants that require CBIZ to meet
certain requirements with respect to (i) minimum net worth; (ii) maximum
leverage ratio; and (iii) a minimum fixed charge coverage ratio.
Limitations are also placed on CBIZ's ability to acquire businesses,
repurchase CBIZ common stock and to divest operations. As of March 31,
2004, CBIZ is in compliance with its covenants.
The bank credit agreement also places restrictions on CBIZ's ability to
create liens or other encumbrances, to make certain payments, investments,
loans and guarantees and to sell or otherwise dispose of a substantial
portion of assets, or to merge or consolidate with an unaffiliated entity.
According to the terms of the agreement, CBIZ is not permitted to declare
or make any dividend payments, other than dividend payments made by one of
its wholly owned subsidiaries to the parent company. The agreement
contains a provision that, in the event of a defined change in control,
the agreement may be terminated.
In the ordinary course of business, CBIZ provides letters of credit to
certain lessors in lieu of security deposits. Letters of credit under the
credit facility were $3.3 million and $3.2 million as of March 31, 2004,
and December 31, 2003, respectively. CBIZ also acted as guarantor on three
letters of credit for a CPA firm with which it has an affiliation. The
letters of credit total $1.3 million and $0.7 million as of March 31,
2004, and December 31, 2003, respectively. In accordance with FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others," CBIZ has recognized a liability for the fair value of the
obligations undertaken in issuing these guarantees, which is recorded as
other current liabilities in the accompanying consolidated financial
statements. Management does not expect any material changes to result from
these instruments because performance is not expected to be required.
At March 31, 2004, based on the borrowing base calculation, CBIZ had
approximately $46.6 million of available funds under its credit facility.
5. CONTINGENCIES
Since September 1999, seven purported stockholder class-action lawsuits
filed against CBIZ and certain of our current and former directors and
officers were consolidated as In Re Century Business Services Securities
Litigation, Case No. 1:99CV2200, in the United States District Court for
the Northern District of Ohio. The plaintiffs alleged that the named
defendants violated certain provisions of the Securities Exchange Act of
1934 and certain rules promulgated thereunder in connection with certain
statements made during various periods from February, 1998, through
January, 2000, by, among other things, improperly amortizing goodwill and
failing to adequately monitor changes in operating results. The United
States District Court dismissed the matter with prejudice on June 27,
2002. The matter was appealed by the plaintiffs to the Sixth Circuit Court
of Appeals. On March 30, 2004, the Court of Appeals affirmed the dismissal
of the plaintiffs' complaint in its entirety. The Court also upheld the
lower court's denial of the planitiffs' request for leave to amend their
complaint. CBIZ expects that this opinion and order will end proceedings
in this case, although further appeal technically is permissible.
In addition to those items disclosed above, CBIZ is from time to time
subject to claims and suits arising in the ordinary course of business.
Although the ultimate disposition of such proceedings is not presently
determinable, management does not believe that the ultimate resolution of
these matters will have a material adverse effect on the financial
condition, results of operations or cash flows of CBIZ.
9
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. CONSOLIDATION AND INTEGRATION CHARGES
In an effort to meet its strategy to deliver services to clients
conveniently, and to promote cross-serving between various practice
groups, CBIZ has initiated consolidation activities in several markets,
including a consolidation of the Dallas market during the first quarter of
2004. Consolidation and integration charges, which include non-cancelable
lease obligations, adjustments to lease accruals based on sublease
assumptions, severance obligations, and other costs such as moving costs,
were $0.4 million and $0.3 million for the three months ended March 31,
2004, and 2003, respectively.
Consolidation and integration reserve balances for leases as of December
31, 2003, and activity during the three-month period ended March 31, 2004,
was as follows (in thousands):
LEASE
CONSOLIDATION
-------------
Reserve balance at December 31, 2003 $ 2,804
Amounts adjusted against income (1) . 216
Payments ............................ (537)
-------
Reserve balance at March 31, 2004 ... $ 2,483
=======
(1) Amounts adjusted against income are included in operating expenses
in the accompanying consolidated statements of operations.
7. EARNINGS PER SHARE
CBIZ presents both basic and diluted earnings per share. The following
data shows the amounts used in computing earnings per share and the effect
on the weighted average number of dilutive potential common shares (in
thousands, except per share data).
THREE MONTHS ENDED
MARCH 31,
---------
2004 2003
---- ----
Numerator:
Net income .......................... $11,581 $10,001
======= =======
Denominator:
Basic:
Weighted average common shares .... 85,437 95,087
Diluted:
Options and restricted stock awards 2,475 1,869
------- -------
Total ........................... 87,912 96,956
======= =======
Basic net income per share ............ $ 0.14 $ 0.11
======= =======
Diluted net income per share .......... $ 0.13 $ 0.10
======= =======
8. ACQUISITIONS
During the first quarter of 2004, CBIZ completed the acquisition of a
benefits and insurance firm. Consideration consisted of approximately $0.5
million cash and 12,000 shares of restricted common stock (estimated stock
value of $0.1 million at acquisition) paid at closing, and up to an
additional $0.9 million (payable in cash and stock) which is contingent on
the business meeting certain future revenue targets.
During the first quarter of 2003, CBIZ completed the acquisition of a
benefits and insurance firm in Boca Raton, Florida, and the client lists
of two benefits agencies. The aggregate purchase price of the acquisitions
was approximately $1.5 million, comprised of $1.0 million in cash and
177,000 shares of restricted common stock (estimated stock value of $0.5
million at acquisition) paid at closing, and up to
10
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
an additional $3.1 million cash which is contingent on the businesses
meeting certain future revenue targets.
The operating results of these firms and client lists have been included
in the accompanying consolidated financial statements since the dates of
acquisition.
The excess of purchase price over fair value of net assets acquired was
allocated to client lists, non-compete agreements, and goodwill.
Acquisitions, including contingent consideration earned, resulted in
increases to goodwill, client lists and other intangible assets during the
first quarter of 2004, of $0.5 million, $1.5 million, and $0.1 million,
respectively. Acquisitions completed during the first quarter of 2003
resulted in an increase of $1.7 million to client lists; there was no
impact on goodwill or other intangible assets.
9. DIVESTITURES
During the first quarter of 2004, CBIZ sold an Accounting, Tax, and
Advisory (ATA) business operation and a client list within the ATA
practice group, for aggregate proceeds of $0.5 million cash and $0.4
million notes receivable. The sales resulted in a $0.4 million pretax
gain, which is reported as gain on sale of operations, net from continuing
operations in the consolidated financial statements. These sales did not
satisfy the criteria for treatment as discontinued operations.
There were no business operations or client lists sold during the first
quarter of 2003.
10. SEGMENT DISCLOSURES
CBIZ's business units have been aggregated into three practice groups:
Accounting, Tax and Advisory Services, Benefits and Insurance and National
Practices. The business units have been aggregated based on the following
factors: similarity of the products and services; similarity of the
regulatory environment; the long-term performance of these units is
affected by similar economic conditions; and the business is managed along
these segment lines, which each report to a Practice Group Leader. The
medical practice management unit under the National Practices group
exceeds the quantitative threshold of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," prompting CBIZ to
disclose this reporting unit separately.
Accounting, Tax and Advisory Services. The Accounting, Tax and Advisory
Services practice group offers services in the following areas: cash flow
management; strategic planning; consulting; record-keeping; federal, state
and local tax return preparation; tax planning based on financial and
investment alternatives; tax structuring of business transactions such as
mergers and acquisitions; quarterly and year-end payroll tax reporting;
corporate, partnership and fiduciary tax planning and return preparation;
outsourced chief financial officer services and other financial staffing
services; financial investment analysis; succession, retirement, and
estate planning; profitability, operational and efficiency enhancement
consulting to a number of specialized industries, internal audit services
and Sarbanes-Oxley consulting and compliance services.
Benefits and Insurance Services. The Benefits and Insurance practice group
offers services in the following areas: employee benefits, brokerage,
consulting, and administration, including the design, implementation and
administration of qualified plans, such as 401(k) plans, profit-sharing
plans, defined benefit plans, and money purchase plans; actuarial
services; health and welfare benefits consulting, including group health
insurance plans; dental and vision care programs; group life insurance
programs; accidental death and dismemberment and disability programs;
COBRA administration and voluntary insurance programs; health care and
dependent care spending accounts; premium reimbursement plans;
communications services to inform and educate employees about their
benefit programs; executive benefits consulting on non-qualified
retirement plans and business continuation plans; specialty high-risk life
insurance; employee benefit worksite marketing; and wealth management
services, including Registered Investment Advisory Services, Investment
Policy Statements, also known as IPS, mutual fund selection based on IPS
and ongoing mutual fund monitoring.
11
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
National Practices. The National Practices group offers services in the
following areas: payroll processing and administration; valuations of
commercial, tangible, and intangible assets and financial securities;
mergers and acquisitions and capital advisory services, health care
consulting, government relations; process improvement; and technology
consulting, including strategic technology planning, project management,
development, network design and implementation and software selection and
implementation.
Medical Practice Management. CBIZ Medical Management Professionals (CBIZ
MMP), CBIZ's medical practice management subsidiary of the National
Practice group, offers services in the following areas: billing and
accounts receivable management; coding and automated claims filing;
comprehensive delinquent claims follow up and collections; compliance
plans to meet government and other third party regulations; local office
management; and comprehensive statistical and operational reporting;
financial reporting, accounts payable, payroll, general ledger processing;
design and implementation of managed care contracts with focus on
negotiation strategies, pricing, cost containment and utilization
tracking; review and negotiation of hospital contracts; evaluation of
other strategic business partners; identification and coordination of
practice manager and integration opportunities; and coordination of
practice expansion efforts.
Corporate and other charges represent costs at the corporate office that
are not allocated to the business units.
Segment information for the three-month periods ended March 31, 2004 and
2003 were as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 2004
---------------------------------
NATIONAL
PRACTICE GROUP
--------------
ACCOUNTING MEDICAL NATIONAL
TAX & BENEFITS & PRACTICE PRACTICE CORPORATE
ADVISORY INSURANCE MGMT. - OTHER AND OTHER TOTAL
-------- --------- ----- ------- --------- -----
Revenue ........................... $ 70,730 $ 38,040 $ 20,540 $ 18,667 $ -- $ 147,977
Operating expenses ................ 49,338 32,125 17,397 16,507 3,969 119,336
--------- --------- --------- --------- --------- ---------
Gross margin .................... 21,392 5,915 3,143 2,160 (3,969) 28,641
Corporate general & administrative -- -- -- -- 5,315 5,315
Depreciation and amortization ..... 910 737 662 221 1,457 3,987
--------- --------- --------- --------- --------- ---------
Operating income (loss) ......... 20,482 5,178 2,481 1,939 (10,741) 19,339
Other income (expense):
Interest expense ................ (5) (8) -- -- (227) (240)
Gain on sale of operations, net . -- -- -- -- 383 383
Other income (expense), net ..... 215 (21) -- 165 113 472
--------- --------- --------- --------- --------- ---------
Total other income (expense), net 210 (29) -- 165 269 615
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes .. $ 20,692 $ 5,149 $ 2,481 $ 2,104 $ (10,472) $ 19,954
========= ========= ========= ========= ========= =========
12
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2003
---------------------------------
NATIONAL
PRACTICE GROUP
--------------
ACCOUNTING MEDICAL NATIONAL
TAX & BENEFITS & PRACTICE PRACTICE CORPORATE
ADVISORY INSURANCE MGMT. - OTHER AND OTHER TOTAL
-------- --------- ----- ------- --------- -----
Revenue ............................. $ 68,974 $ 39,881 $ 17,578 $ 18,325 $ -- $ 144,758
Operating expenses .................. 47,906 32,083 15,155 19,067 2,481 116,692
--------- --------- --------- --------- --------- ---------
Gross margin ...................... 21,068 7,798 2,423 (742) (2,481) 28,066
Corporate general & administrative .. -- -- -- -- 5,249 5,249
Depreciation and amortization ..... 1,240 754 601 314 1,363 4,272
========= ========= ========= ========= ========= =========
Operating income (loss) ......... 19,828 7,044 1,822 (1,056) (9,093) 18,545
Other income (expense):
Interest expense .................. (13) (23) (1) (1) (285) (323)
Other income (expense), net ....... 78 52 (1) 222 (889) (538)
--------- --------- --------- --------- --------- ---------
Total other income (expense), net 65 29 (2) 221 (1,174) (861)
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes .... $ 19,893 $ 7,073 $ 1,820 $ (835) $ (10,267) $ 17,684
========= ========= ========= ========= ========= =========
11. DISCONTINUED OPERATIONS
During 2003, CBIZ adopted formal plans to divest of five business
operations. These business operations are reported as discontinued
operations and the net assets and liabilities and results of operations
are reported separately in the consolidated financial statements. During
the first quarter of 2004, there were no transactions resulting in the
classification of any additional business operations as discontinued
operations.
There were no discontinued operations that were sold or closed during the
first quarters of 2004 or 2003, and there were no business operations
available for sale at March 31, 2004, or December 31, 2003.
Revenue and loss from operations of discontinued businesses for the
quarters ended March 31, 2004 and 2003 were as follows (in thousands):
THREE MONTHS ENDED
MARCH 31,
---------
2004 2003
---- ----
Revenue ............................ $ -- $ 1,971
======= =======
Loss from operations of discontinued
businesses before income taxes ... (60) (229)
Income tax benefit ................. 28 71
------- -------
Loss from operations of discontinued
businesses, net of tax ........... $ (32) $ (158)
======= =======
13
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The assets and liabilities of the business units classified as
discontinued operations consisted of the following (in thousands):
MARCH 31, DECEMBER 31,
2004 2003
---- ----
Accounts receivable, net ................ $ 40 $ 152
Property and equipment, net ............. 235 234
Other assets ............................ 9 9
------ ------
Assets of businesses held for sale .... $ 284 $ 395
====== ======
Accounts payable ........................ $ 228 $ 98
Other current liabilities ............... 155 162
------ ------
Liabilities of businesses held for sale $ 383 $ 260
====== ======
12. SUBSEQUENT EVENTS
In April of 2004, CBIZ concluded its tender offer which resulted in the
purchase of approximately 7.5 million shares of common stock at a purchase
price of $5.00 per share, or a total cost of approximately $37.5 million.
The credit facility was utilized to fund the share repurchase.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Unless the context otherwise requires, references in this Form 10-Q to "we",
"our", "CBIZ", or the "Company" shall mean Century Business Services, Inc., a
Delaware corporation, and its operating subsidiaries.
The following discussion is intended to assist in the understanding of CBIZ's
financial position at March 31, 2004 and December 31, 2003, and results of
operations and cash flows for the three months ended March 31, 2004 and 2003,
and should be read in conjunction with our Consolidated Financial Statements and
related notes included elsewhere in this Quarterly Report on Form 10-Q and in
conjunction with our Annual Report on Form 10-K for the fiscal year ended
December 31, 2003.
EXECUTIVE SUMMARY
CBIZ is a diversified services company which, acting through its subsidiaries,
provides professional outsourced business services to businesses of various
sizes, as well as individuals, governmental entities and not- for-profit
enterprises throughout the United States and Toronto, Canada. CBIZ delivers
integrated services through three practice groups: Accounting, Tax and Advisory;
Benefits and Insurance; and National Practices.
CBIZ's business strategy is to grow in the professional outsourced business
services industry by:
- offering a wide array of infrastructure support services;
- cross-serving these services to our existing customer base;
- attracting new customers with our diverse business services offerings;
- leveraging our practice area expertise across all our businesses; and
- developing our core service offerings in target markets through
selective acquisitions.
CBIZ is looking to strengthen our operations and customer service capabilities
by making acquisitions in markets where we currently operate and where the
prospects are favorable to increase our market share and become a more
significant provider of a comprehensive range of outsourced business services.
During the first quarter of 2004, CBIZ acquired a business that enhances our
benefits and insurance services.
CBIZ continually evaluates its business operations and sells or closes those
operations that are underperforming, located in secondary markets, or do not
provide the level of synergistic cross-serving opportunities with other CBIZ
businesses that is desired. During the first quarter of 2004, CBIZ sold a
business operation and a client list within the accounting, tax and advisory
practice group.
A disproportionately large amount of CBIZ's revenue occurs in the first half of
the year, primarily in the first quarter. This is due to the Company's
accounting and tax practice, which is subject to seasonality related to heavy
volume in the first four months of the year. These higher revenue levels are
supported by operating costs that are primarily fixed in nature, and thus result
in higher operating margins in the first half of the year. For the year ended
December 31, 2003, total ATA revenue of $203.4 million was earned in the
following proportions: 33.9%, 24.6%, 20.9% and 20.6% in each of the quarters
ended March 31, June 30, September 30, and December 31, 2003, respectively.
CBIZ believes that repurchasing shares of its common stock is a use of cash that
provides value to stockholders, and accordingly concluded a tender offer in
April 2004. The tender offer resulted in the purchase of approximately 7.5
million shares of common stock at a purchase price of $5.00 per share, or a
total cost of approximately $37.5 million. The credit facility was utilized to
fund the share repurchase.
15
OUTSOURCED BUSINESS SERVICES
A comprehensive description of the outsourced business services currently
offered by CBIZ through its three practice groups is included in the Annual
Report on Form 10-K for the fiscal year ended December 31, 2003. Following is a
further description of the services provided through our Accounting, Tax and
Advisory (ATA) practice group.
The ATA practice group does not offer audit and attest services, but it does
maintain joint-referral relationships with independent licensed CPA firms. These
firms are owned by licensed CPAs who are employed by CBIZ subsidiaries, and
provide audit and attest services to clients including CBIZ's clients. Under our
service agreements with these firms, we provide administrative services, office
space and staff in exchange for a fee. Revenue from these agreements is
reflected in our financial statements and amounts to approximately $31.7 million
for the quarter ended March 31, 2004, a majority of which is related to services
rendered to privately-held clients. With respect to CPA firm clients that are
required to file audited financial statements with the SEC, the SEC staff views
CBIZ and the CPA firms with which we have contractual relationships as a single
entity in applying independence rules established by the accountancy regulators
and the SEC. Accordingly, we do not hold any financial interest in an
SEC-reporting attest client of an associated CPA firm, enter into any business
relationship with an SEC-reporting attest client that the CPA firm performing an
audit could not maintain, or sell any non-audit services to an SEC-reporting
attest client that the CPA firm performing an audit could not maintain, under
the auditor independence limitations set out in the Sarbanes-Oxley Act of 2002
and other professional accountancy independence standards. Applicable
professional standards generally permit the ATA practice group to provide
additional services to privately-held companies, in addition to those services
which may be provided to SEC-reporting attest clients of an associated CPA firm.
CBIZ and the CPA firms with which we are associated have implemented policies
and procedures designed to enable us to maintain independence and freedom from
conflicts of interest in accordance with applicable standards. Given the
pre-existing limits set by CBIZ on its relationships with SEC-reporting attest
clients of associated CPA firms, and the limited number and size of such
clients, the imposition of Sarbanes-Oxley Act independence limitations did not
and is not expected to materially affect CBIZ revenue.
RESULTS OF OPERATIONS - CONTINUING OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
OPERATING PRACTICE GROUPS
CBIZ currently delivers products and services through three practice groups. A
brief description of these groups' operating results and factors affecting their
businesses is provided below.
ACCOUNTING, TAX AND ADVISORY SERVICES. The ATA group contributed approximately
$70.7 million and $69.0 million of revenue, or approximately 48% of CBIZ's first
quarter revenue in 2004 and 2003, respectively. The increase in revenue of $1.8
million, or 2.5%, was a result of acquisitions and growth in same-unit revenue.
Acquisitions, net of divestitures, resulted in a net increase in revenue of $0.8
million in 2004, most of which was derived from Sarbanes-Oxley consulting
services from CBIZ Harborview, which was acquired in September 2003. CBIZ
expects revenue from these services to continue to be strong in the second
quarter. For ATA businesses with a full period of operations for the three
months ended March 31, 2004 and 2003, same-unit revenue increased approximately
$1.0 million, or 1.4%. Modest billing rate increases on engagements accounted
for approximately 1.0% of same-unit revenue growth. Gross margins decreased
slightly from 30.5% in 2003 to 30.2% in 2004 primarily due to increased facility
and equipment costs associated with consolidations completed in 2003.
BENEFITS AND INSURANCE SERVICES. The Benefits and Insurance group contributed
approximately $38.0 million and $39.9 million of revenue, or approximately 26%
and 27% of CBIZ's total revenue for the three months ended March 31, 2004 and
2003, respectively. The decrease in revenue is largely attributable to the
divestiture of Health Administrative Services in the second quarter of 2003.
Divestitures, net of acquisitions, accounted for approximately $2.5 million of
the decline in revenue from the quarter ended March 31, 2003. For Benefits and
Insurance businesses with a full period of operations for the three months ended
March 31, 2004 and 2003, same-unit revenue increased $0.6 million, or 1.7%,
primarily attributable to earlier receipt of contingent commission bonus
payments typically received throughout the first six months of the year. The
same-unit revenue growth was affected by several large life insurance sales that
closed in the first quarter of 2003. We
16
expect a modest increase in same-unit revenue for the Benefits and Insurance
group in 2004. Gross margin for the Benefits and Insurance group for the three
months ended March 31, 2004 was 15.6% as compared to 19.6% for the three-months
ended March 31, 2003. The decline in margin is primarily attributable to
additional costs associated with client support personnel at certain units that
experienced significant growth, as well as additional investment in sales
personnel. CBIZ believes these investments will result in margin improvement in
future periods.
NATIONAL PRACTICES SERVICES. The National Practices group contributed
approximately $39.2 million and $35.9 million of revenue, or approximately 26%
and 25% of CBIZ's total revenue for the quarter ended March 31, 2004 and 2003,
respectively.
CBIZ Medical Management Professionals (CBIZ MMP), CBIZ's medical practice
management unit, which is included in the results of the National Practices
group, contributed approximately $20.5 million and $17.6 million, or 14% and
12%, of CBIZ's total revenue for the three months ended March 31, 2004 and 2003,
respectively. CBIZ MMP's revenue growth of 16.9% is primarily attributable to
the addition of new clients obtained since the first quarter of 2003. Gross
margin for CBIZ MMP for the three months ended March 31, 2004 was 15.3% as
compared to 13.8% for the three months ended March 31, 2003. The improvement in
gross margin is primarily attributable to the maturation of clients added in the
latter half of 2003, combined with better management of operating costs.
The other units within the National Practices group, excluding CBIZ MMP,
contributed approximately $18.7 million and $18.3 million of revenue, or
approximately 12% and 13% of CBIZ's total revenue for the three months ended
March 31, 2004 and 2003, respectively. Same-unit revenue increased $1.3 million,
offset by a decline in revenue of $0.9 million related to the closure of
unprofitable locations in the property tax and technology businesses during
2003. Approximately $1.8 million of the increase in same-unit revenue was a
result of two transactions closed during the first quarter of 2004 in CBIZ's
mergers and acquisition business. Gross margin for National Practices - Other
for the three months ended March 31, 2004 was 11.6% as compared to a loss of
4.0% for the three-months ended March 31, 2003. The improvement in gross margin
is attributable to revenue associated with the mergers and acquisitions
business, combined with improvements and operational efficiencies in the
payroll, technology and valuation businesses.
Revenue
Total revenue for the three months ended March 31, 2004 was $148.0 million as
compared to $144.8 million for the three months ended March 31, 2003,
representing an increase of $3.2 million, or 2.2%. The increase in revenue
attributable to acquisitions completed subsequent to March 31, 2003 was $2.5
million, and was offset by a decrease in revenue of $5.1 million due to
divestitures completed subsequent to March 31, 2003. For business units with a
full period of operations for the three months ended March 31, 2004 and 2003,
revenue increased $5.8 million or 4.2%. A more comprehensive analysis of revenue
by each operating practice group is discussed above.
Expenses
Operating expenses increased to $119.3 million for the three-month period ended
March 31, 2004, from $116.7 million for the comparable period in 2003, an
increase of $2.6 million or 2.3%. The increase in operating expenses supported
growth in revenue, and remained unchanged as a percentage of revenue at 80.6%
for the three months ended March 31, 2004 and 2003. The primary components of
operating expenses are personnel costs and occupancy expense, representing 81.4%
and 82.1% of total operating expenses for the three months ended March 31, 2004
and 2003, respectively. Personnel costs were $88.0 million or 59.5 % of total
revenue for the three months ended March 31, 2004 and $87.2 million or 60.2% of
total revenue for the three months ended March 31, 2003. Personnel costs
decreased as a percent of revenue due to efficiencies gained through staff
reductions that occurred during 2003. This decrease was offset by an increase in
professional fees to 1.5% of total revenue at March 31, 2004 from 1.1% of total
revenue at March 31, 2003, which was driven by the acquisition of two
Accounting, Tax and Advisory firms that were purchased during the second and
third quarters of 2003.
Corporate general and administrative expenses increased to $5.3 million for the
three-month period ended March 31, 2004, from $5.2 million for the comparable
period in 2003. Corporate general and administrative expenses represented 3.6%
of total revenues for the three-month periods ended March 31, 2004 and 2003.
While costs have remained relatively flat, compensation expenses have decreased
during the three-months ended March 31,
17
2004, primarily due to $0.5 million of severance expense paid during the
three-month period ended March 31, 2003. This decrease was offset by an increase
in medical insurance premiums, and legal fees in connection with a case that was
tried during the first quarter of 2004.
Depreciation and amortization expense decreased to $4.0 million for the
three-month period ended March 31, 2004, from $4.3 million for the comparable
period in 2003, a decrease of $0.3 million, or 6.7%. The decrease is primarily
attributable to the shift from purchasing computer-related items and furniture
to leasing such items. These operating lease costs are recorded as operating
expenses, rather than capitalized and recorded as depreciation, and total $0.6
million for the quarter ended March 31, 2004. As a percentage of total revenue,
depreciation and amortization expense was 2.7% for the three-month period ended
March 31, 2004, compared to 3.0% for the comparable period in 2003.
Interest expense decreased to $0.2 million for the three-month period ended
March 31, 2004, from $0.3 million for the comparable period in 2003, a decrease
of $0.1 million, or 25.7%. The decrease is the result of lower weighted average
interest rates of approximately 3.4% during the first quarter of 2004, as
compared to 5.1% during the first quarter 2003. Average debt was $19.6 million
and $19.4 million for the three-months ended March 31, 2004 and 2003,
respectively. Interest expense for the first quarter of 2003 included fees
related to an interest rate swap that was terminated during the third quarter of
2003.
Gain on sale of operations, net was $0.4 million for the three months ended
March 31, 2004, and was related to the sale of an operation and a client list in
the Accounting, Tax and Advisory practice group. There were no businesses sold
during the three months ended March 31, 2003.
CBIZ reported other income of $0.5 million for the three-month period ended
March 31, 2004, compared to other expense of $0.5 million for the comparable
period in 2003, a decrease in expenses of $1.0 million. Other income (expense),
net is comprised primarily of interest income earned on funds held for clients
at CBIZ's payroll business, gain and losses on sale of assets, charges for legal
reserves and settlements and miscellaneous income such as contingent royalties
from previous divestitures. The change is primarily related to $1.6 million of
impairment charges to notes receivable during the first quarter of 2003 that did
not recur in the first quarter of 2004, offset by a reserve adjustment taken in
the first quarter of 2003 in connection with a legal case for which CBIZ
received a favorable judgment.
CBIZ recorded income tax expense from continuing operations of $8.3 million and
$7.5 million for the three-month periods ended March 31, 2004 and 2003,
respectively. Income taxes were adjusted in the first quarter of 2004 based on
an annual effective tax rate of 41.8% for 2004, compared to an annual effective
tax rate of 42.5% for the comparable period in 2003. The annual effective tax
rate for 2004 is higher than the statutory federal and state tax rates primarily
due to the non-deductibility of goodwill written off upon the sale of a
business, as well as non-deductible meal and entertainment expenses.
RESULTS OF OPERATIONS - DISCONTINUED OPERATIONS
During 2003, CBIZ adopted formal plans to divest of five non-core operations
which were no longer part of CBIZ's strategic long-term growth objectives. These
operations have been classified as discontinued operations in accordance with
the adoption of Statement of Financial Accounting Standards (SFAS) 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," and the net
assets, liabilities, and results of operations are reported separately in the
consolidated financial statements. At December 31, 2003, all operations
classified as discontinued operations had been sold or were in the process of
being closed. There were no additional plans to divest of operations adopted
during the first quarter of 2004, and there were no operations available for
sale at March 31, 2004.
There is no revenue associated with discontinued operations for the three-months
ended March 31, 2004; revenue associated with discontinued operations for the
three-months ended March 31, 2003 totaled $2.0 million. The loss from
operations, net of tax, associated with these divestitures for the three-months
ended March 31, 2004 and 2003 was $32,000 and $0.2 million, respectively.
18
FINANCIAL CONDITION
Total assets were $428.6 million, total liabilities were $138.6 million and
shareholders equity was $290.0 million as of March 31, 2004. Current assets of
$207.1 million exceeded current liabilities of $110.2 million by $96.9 million.
Cash and cash equivalents decreased $0.4 million to $3.3 million for the quarter
ended March 31, 2004. Restricted cash was $10.4 million at March 31, 2004, a
decrease of $0.5 million from a quarter ago. Restricted cash represents those
funds held in connection with CBIZ's NASD regulated operations and funds held in
connection with the pass through of insurance premiums to the carrier. Cash and
restricted cash fluctuate during the year based on the timing of cash receipts
and related payments.
Accounts receivable, net were $134.3 million at March 31, 2004, an increase of
$22.7 million from December 31, 2003. The increase in accounts receivable is
attributed to the seasonal increase in first quarter revenue, namely tax
services, generated by the ATA practice group. Days sales outstanding (DSO),
which are calculated based on gross accounts receivable balance at the end of
the period divided by daily revenue, increased from 82 days at December 31, 2003
to 86 days at March 31, 2004. CBIZ provides 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.
Goodwill and other intangible assets, net of accumulated amortization, increased
$1.4 million from December 31, 2003. Acquisitions, including contingent
consideration earned, resulted in a $2.1 million increase in intangibles in the
first quarter of 2004. In addition, intangibles decreased by $0.7 million as a
result of divestitures completed during the three-months ended March 31, 2004,
and amortization expense for client lists and other intangibles.
Other current assets increased $1.3 million due to the timing of prepaid assets;
CBIZ prepays insurance and software maintenance costs in the first quarter, and
amortizes them over twelve months. Other assets (non-current) increased $1.9
million, primarily due to assets held in a rabbi trust in connection with the
deferred compensation plan that was implemented during the first quarter of
2004; these assets are directly offset by liabilities which are recorded as
other non-current liabilities in the accompanying consolidated financial
statements.
As further described in note 1 to the accompanying consolidated financial
statements, funds held for clients are directly offset by client fund
obligations. Funds held for clients fluctuate during the year based on the
timing of cash receipts and related payments.
The accounts payable balance of $25.5 million at March 31, 2004, reflects
amounts due to suppliers and vendors; balances fluctuate during the year based
on the timing of cash payments. Other current liabilities decreased $2.9 million
to $31.7 million at March 31, 2004, as the result of incentive compensation
payments, offset by increases in unearned revenue (primarily retainers received
at the beginning of the year and amortized throughout the year) and contingent
consideration earned in connection with various acquisitions. The increase in
income taxes payable to $7.5 million at March 31, 2004, from income taxes
recoverable of $0.4 million at December 31, 2003, is due to tax refunds received
in fiscal 2003 that are not expected to recur in 2004. Client fund obligations
of $45.1 million were directly related to funds held for clients in the same
amount as reflected in current assets. Bank debt for amounts due on CBIZ's
credit facility was $23.4 million at March 31, 2004, an increase of $9.4 million
from December 31, 2003. The increase in bank debt was primarily the result of
incentive compensation payments made during the first quarter of 2004. Other
non-current liabilities increased $3.1 million due to the deferred compensation
plan as described above, and capitalized furniture and equipment leases in
connection with consolidation activities in Kansas City.
LIQUIDITY AND CAPITAL RESOURCES
CBIZ's bank line of credit is a $73.0 million revolving credit facility with
Bank of America as the agent bank. The credit facility carries an option to
increase the total commitment to $80.0 million and allows for the allocation of
funds for strategic initiatives, including acquisitions and the repurchase of
CBIZ common stock. CBIZ expects to use the facility for working capital,
internal growth initiatives, and its acquisition program. The facility has a
three-year term with an expiration date of September 2005. CBIZ is currently in
compliance with all covenants under its credit facility.
19
At March 31, 2004, CBIZ had $23.4 million outstanding under its credit facility,
leaving approximately $46.6 million of available funds under the facility based
on the borrowing base calculation. Management believes that those available
funds, along with cash generated from operations, will be sufficient to meet its
liquidity needs in the foreseeable future, including the funding to repurchase
up to 8.5 million shares of its outstanding common stock, 7.5 million of which
was purchased on April 1, 2004, as authorized by its Board of Directors on March
3, 2004. See Note 4 to CBIZ's consolidated financial statements included
herewith for additional information regarding the credit facility.
SOURCES AND USES OF CASH
Cash provided by operating activities and funds available from CBIZ's credit
facility provide the resources to support current operations, projected growth,
acquisitions, capital expenditures, and share repurchases. Net cash used in
operating activities was $7.7 million for the three months ended March 31, 2004;
however, during the same period in 2003, net cash provided by operating
activities was $2.1 million. In comparison to 2003, the resulting cash used in
operating activities during 2004 was primarily a result of the change in net
working capital. CBIZ's principal source of net operating cash is derived from
the collection of fees from professional services rendered to its clients and
commissions earned in the areas of accounting, tax, valuation and advisory
services, benefits consulting and administration services, insurance, human
resources and payroll solutions, capital advisory, retirement and wealth
management services and technology solutions.
Net cash used in investing activities during the three months ended March 31,
2004 of $3.8 million primarily consisted of $3.7 million used for capital
expenditures and approximately $0.7 million used toward a benefits & insurance
business acquisition. Cash provided by investing activities include $0.5 million
of proceeds from the divestiture of an operation and a client list within the
ATA practice group. Capital expenditures consisted of leasehold improvements and
equipment in connection with the consolidation of certain offices, IT capital to
support the growth of the medical practice management unit and equipment
purchases in relation to normal replacement. Net cash used in investing
activities during the quarter ended March 31, 2003 of $4.5 million primarily
consisted of $3.2 million used for capital expenditures, and $0.8 million used
toward the acquisition of a benefits and insurance firm and the client lists of
two benefits agencies.
Net cash provided by financing activities was $11.0 million during the three
months ended March 31, 2004. During the same period in 2003, net cash used in
investing activities was $0.6 million. Proceeds from bank debt and net cash
provided by operating activities were the primary sources used to fund the
change in net working capital.
A summary of CBIZ's contractual obligations remaining as of March 31, 2004 is as
follows (in thousands):
FISCAL YEAR ENDING
---------------------------------------------------------------------------------
TOTAL 2004 2005 2006 2007 2008 THEREAFTER
-------- -------- -------- -------- -------- -------- ----------
ON-BALANCE SHEET
Bank debt .............................. $ 23,400 $ -- $ 23,400 $ -- $ -- $ -- $ --
Notes payable and capitalized
leases ............................... 4,446 2,333 578 430 409 696 --
Non-cancelable operating
lease obligations .................... 185,108 21,616 25,557 22,079 18,969 17,348 79,539
Restructuring lease
obligations (1)....................... 11,089 2,587 2,353 2,134 2,033 1,311 671
OFF-BALANCE SHEET
Letters of credit ...................... 3,304 2,688 286 -- -- -- 330
Performance guarantees for non-
consolidated affiliates .............. 1,338 934 404 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total .................................. $228,685 $ 30,158 $ 52,578 $ 24,643 $ 21,411 $ 19,355 $ 80,540
======== ======== ======== ======== ======== ======== ========
(1) Excludes cash payments for subleases.
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OFF-BALANCE SHEET ARRANGEMENTS
CBIZ maintains administrative service agreements with 14 CPA firms, as described
more fully in our Annual Report on Form 10-K for the year ended December 31,
2003, which qualify as variable interest entities under FASB Interpretation No.
46 (FIN 46), "Consolidation of Variable Interest Entities," as amended. The
impact to CBIZ of this accounting pronouncement is not material to the financial
condition, results of operations or cash flows of CBIZ, and is further discussed
in note 1 of the accompanying consolidated financial statements.
CBIZ provided guarantees of performance obligations for a CPA firm with which
CBIZ maintains an administrative services agreement. Potential obligations under
the guarantees totaled $1.3 million and $0.7 million at March 31, 2004 and
December 31, 2003, respectively. CBIZ expects the guarantees to expire without
the need to advance any cash. In accordance with FASB Interpretation No. 45 ("
FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others", CBIZ has recognized a
liability for the fair value of the obligation undertaken in issuing these
guarantees. The liability is recorded as other current liabilities in the
accompanying consolidated financial statements.
Letters of credit are issued under our credit facility and are discussed in
note 4 of the accompanying consolidated financial statements.
We have various agreements in which we may be obligated to indemnify the other
party with respect to certain matters. Generally, these indemnification clauses
are included in contracts arising in the normal course of business under which
we customarily agree to hold the other party harmless against losses arising
from a breach of representations, warranties, covenants or agreements, related
to such matters as title to assets sold and certain tax matters. It is not
possible to predict the maximum potential amount of future payments under these
indemnification agreements due to the conditional nature of our obligations and
the unique facts of each particular agreement. Historically, payments made by us
under these agreements have not been material. As of March 31, 2004, we were not
aware of any indemnification agreements that would require material payments.
INTEREST RATE RISK MANAGEMENT
The company has used interest rate swaps to manage the interest rate mix of its
credit facility and related overall cost of borrowing. Interest rate swaps
involve the exchange of floating for fixed rate interest payments to effectively
convert floating rate debt into fixed rate debt based on one, three, or
six-month U.S. dollar LIBOR. Interest rate swaps allow the company to maintain a
target range of fixed to floating rate debt. During the quarter ending March 31,
2004, management did not utilize interest rate swaps due to the combination of a
low level of debt and low interest rates. Management will continue to evaluate
the potential use of interest rate swaps as it deems appropriate under certain
operating and market conditions.
CRITICAL ACCOUNTING POLICIES
The policies discussed below are considered by management to be critical to the
understanding of CBIZ's consolidated financial statements because their
application places significant demand on management's judgment, and financial
reporting results rely on estimation about the effects of matters that are
inherently uncertain. Specific risks for these critical accounting policies are
described in the following paragraphs. For all of these policies, management
cautions that estimates may require adjustment if future events develop
differently than forecasted.
REVENUE RECOGNITION AND VALUATION OF UNBILLED REVENUES
Revenue is recognized only when all of the following are present: persuasive
evidence of an arrangement exists, delivery has occurred or services have been
rendered, our fee to the client is fixed or determinable, and collectibility is
reasonably assured, which is in accordance with GAAP and SAB 104. CBIZ offers a
vast array of products and outsourced business services to its clients. Those
services are delivered through three practice groups. A description of revenue
recognition, as it relates to those groups, is provided below:
ACCOUNTING, TAX AND ADVISORY SERVICES -- Revenue consists primarily of fees
for accounting services, preparation of tax returns and consulting services
including Sarbanes-Oxley consulting and compliance projects. 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
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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.
BENEFITS & INSURANCE -- Revenue consists primarily of brokerage and agency
commissions, and fee income for administering health and retirement plans. A
description of the revenue recognition, based on the insurance product and
billing arrangement, is described below:
- Commissions relating to brokerage and agency activities whereby CBIZ has
primary responsibility for the collection of premiums from insured's
(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.
- Contingent commissions are recognized at the earlier of notification
that the contingency has been satisfied 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.
NATIONAL PRACTICES -- The business units that comprise this practice group
offer a variety of services. A description of revenue recognition associated
with the primary services is provided below:
- Mergers & Acquisitions and Capital Advisory -- Revenue associated with
non-refundable retainers are recognized on a pro rata basis over the
life of the engagement. Revenue associated with success fee transactions
are recognized when the transaction is completed.
- Technology Consulting -- Revenue associated with hardware and software
sales are recognized upon delivery and acceptance of the product.
Revenue associated with installation and service agreements are
recognized as services are performed. Consulting revenue is recognized
on an hourly or per diem fee basis as services are performed.
- Valuation and Property Tax -- Revenue associated with retainer contracts
are recognized on a pro rata basis over the life of the contract, which
is generally twelve months. Revenue associated with contingency
arrangements is recognized once written notification is received from an
outside third party (e.g., assessor in the case of a property tax
engagement) acknowledging that the contingency has been resolved.
- Medical Management Group -- Fees for services are primarily based on a
percentage of net collections on our client's patient accounts
receivable. As such, revenue is determinable, earned, and recognized,
when payments are received on our clients' patient accounts.
VALUATION OF ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE
The preparation of consolidated financial statements requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Specifically, management must make estimates of the
collectibility of our accounts receivable, including unbilled accounts
receivable, related to current period service revenue. Management analyzes
historical bad debts, client credit-worthiness, and current economic trends and
conditions when evaluating the adequacy of the allowance for doubtful accounts
and the collectibility of notes receivable. Significant management judgments and
estimates must be made and used in connection with establishing the allowance
for doubtful accounts in any accounting period. Material differences may result
if management made different judgments or utilized different estimates.
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VALUATION OF GOODWILL AND OTHER INTANGIBLE ASSETS
CBIZ utilizes the purchase method of accounting for all business combinations in
accordance with Statement of Financial Accounting Standard No., 141, "Business
Combinations" (SFAS 141). Intangible assets include client lists and non-compete
agreements, which are amortized principally by the straight-line method over
their expected period of benefit, not to exceed ten years.
In accordance with the provisions of SFAS 142, goodwill is not amortized.
Goodwill is tested for impairment annually during the fourth quarter of each
year, and between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its
carrying value. There was no goodwill impairment during the three months ended
March 31, 2004 or 2003.
LOSS CONTINGENCIES
Loss contingencies, including litigation claims, are recorded as liabilities
when it is probable that a liability has been incurred and the amount of the
loss is reasonably estimable. Contingent liabilities are often resolved over
long time periods. Estimating probable losses requires analysis that often
depends on judgment about potential actions by third parties.
ESTIMATES OF INCENTIVE COMPENSATION COSTS AND EFFECTIVE INCOME TAX RATES
Incentive compensation costs and income tax expense are two significant expense
categories that are highly dependent upon management estimates and judgments,
particularly at each interim reporting date. In arriving at the amount of
expense to recognize, management believes it makes reasonable estimates and
judgments using all significant information available. Incentive compensation
costs are accrued on a monthly basis, and the ultimate determination is made
after our year-end results are finalized; thus, estimates are subject to change.
Circumstances that could cause our estimates of effective income tax rates to
change include the impact of information that subsequently became available as
we prepared our corporate income tax returns; the level of actual pre-tax
income; revisions to tax positions taken as a result of further analysis and
consultation, and changes mandated as a result of audits by taxing authorities.
OTHER SIGNIFICANT POLICIES
Other significant accounting policies not involving the same level of
measurement uncertainties as those discussed above are nevertheless important to
understanding the consolidated financial statements. Those policies are
described in Note 1 to the consolidated financial statements contained in our
Annual Report on Form 10-K for the year ended December 31, 2003.
NEW ACCOUNTING PRONOUNCEMENTS
There were no new accounting pronouncements issued during the three months ended
March 31, 2004 that had or are expected to have a material impact on our
financial position, operating results or disclosures.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements other than statements of
historical fact included in this Quarterly Report on Form 10-Q, including
without limitation, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding CBIZ's financial position, business
strategy and plans and objectives for future performance are forward-looking
statements. Forward-looking statements are commonly identified by the use of
such terms and phrases as "intends," "believes," "estimates," "expects,"
"projects," "anticipates," "foreseeable future," "seeks," and words or phases of
similar import. Such statements are subject to certain risks, uncertainties or
assumptions. Should one or more of these risks or assumptions materialize, or
should the underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected. Such risks and
uncertainties include, but are not limited to, CBIZ's ability to adequately
manage its growth; CBIZ's dependence on the services of its CEO and other key
employees; competitive pricing pressures; general business and economic
conditions; and changes in governmental regulation and tax laws affecting its
operations. Consequently, no forward-looking statement can be guaranteed. A more
detailed description of risks and uncertainties may be found in CBIZ's
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Annual Report on Form 10-K for the year ended December 31, 2003. CBIZ undertakes
no obligation to publicly update forward-looking statements, whether as a result
of new information, future events or otherwise. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative Disclosures About Market Risk. CBIZ's floating rate debt under its
credit facility exposes the Company to interest rate risk. A change in the
Federal Funds Rate, or the Reference Rate set by the Bank of America (San
Francisco), would affect the rate at which CBIZ could borrow funds under its
credit facility. If market interest rates were to increase or decrease
immediately and uniformly by 100 basis points from the levels at March 31, 2004,
interest expense would increase or decrease by approximately $0.2 million
annually.
CBIZ does not engage in trading market risk sensitive instruments. The company
has used interest rate swaps to manage the interest rate mix of its credit
facility and related overall cost of borrowing. Interest rate swaps involve the
exchange of floating for fixed rate interest payments to effectively convert
floating rate debt into fixed rate debt based on one, three, or six-month U.S.
dollar LIBOR. Interest rate swaps allow the Company to maintain a target range
of fixed to floating rate debt. Management will continue to evaluate the
potential use of interest rate swaps as it deems appropriate under certain
operating and market conditions.
Qualitative Disclosures About Market Risk. CBIZ's primary market risk exposure
is that of interest rate risk. A change in the Federal Funds Rate, or the
reference rate set by the Bank of America (San Francisco), would affect the rate
at which CBIZ could borrow funds under its credit facility. See "Quantitative
Disclosures about Market Risk" for a further discussion on the potential impact
of a change in interest rates.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We evaluated the effectiveness of our disclosure controls and procedures
("Disclosure Controls") as of the end of the period covered by this report. This
evaluation ("Controls Evaluation") was done with the participation of our
Chairman and Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO").
Disclosure Controls are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934 ("Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. Disclosure Controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our CEO and
CFO, as appropriate to allow timely decisions regarding required disclosure.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS
Our management, including our CEO and CFO, does not expect that our Disclosure
Controls or our internal controls over financial reporting ("Internal Controls")
will prevent all error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, but not absolute, assurance
that the objectives of a control system are met. Further, any control system
reflects limitations on resources, and the benefits of a control system must be
considered relative to its costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within CBIZ have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of a control. A design of a control system is also based upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
24
CONCLUSIONS
Based upon the Controls Evaluation, our CEO and CFO have concluded that, subject
to the limitations noted above, the Disclosure Controls are effective in
providing reasonable assurance that material information relating to CBIZ is
made known to management on a timely basis during the period when our periodic
reports are being prepared.
There were no changes in our Internal Controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect, our Internal Controls.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Since September 1999, seven purported stockholder class-action lawsuits filed
against CBIZ and certain of our current and former directors and officers were
consolidated as In Re Century Business Services Securities Litigation, Case No.
1:99CV2200, in the United States District Court for the Northern District of
Ohio. The plaintiffs alleged that the named defendants violated certain
provisions of the Securities Exchange Act of 1934 and certain rules promulgated
thereunder in connection with certain statements made during various periods
from February 1998 through January 2000 by, among other things, improperly
amortizing goodwill and failing to adequately monitor changes in operating
results. The United States District Court dismissed the matter with prejudice on
June 27, 2002. The matter was appealed by the plaintiffs to the Sixth Circuit
Court of Appeals. On March 30, 2004, the Court of Appeals affirmed the dismissal
of the plaintiffs' complaint in its entirety. The Court also upheld the lower
court's denial of the planitiffs' request for leave to amend their complaint.
CBIZ expects that this opinion and order will end proceedings in this case,
although further appeal technically is permissible.
In addition to those items disclosed above, CBIZ is from time to time subject to
claims and suits arising in the ordinary course of business. Although the
ultimate disposition of such proceedings is not presently determinable,
management does not believe that the ultimate resolution of these matters will
have a material adverse effect on the financial condition, results of operations
or cash flows of CBIZ.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
On March 3, 2004, the Board of Directors authorized a share repurchase of up to
8.5 million shares of CBIZ common stock. On April 1, 2004, CBIZ concluded a
tender offer under which 7.5 million shares of outstanding common stock were
purchased at a price of $5.00 per share. There have been no share repurchases
during the period covered by this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed during the
three months ended March 31, 2004:
On February 24, 2004, CBIZ filed a current report on Form 8-K to
provide investors with its financial results for the fourth
quarter and year ended December 31, 2003, as released to the
public and discussed on a conference call on February 17, 2004.
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Century Business Services, Inc.
-------------------------------
(Registrant)
Date: May 10, 2004 By: /s/ WARE H. GROVE
------------------- --------------------------
Ware H. Grove
Chief Financial Officer
-
27