CENTURY BUSINESS SERVICES INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 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

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 (IRS Employer
of Incorporation or Organization) Identification No.)

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $339.1 million as of June 30, 2004. The number
of outstanding shares of the registrant's common stock is 75,873,931 as of
February 28, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Part III Portions of the Registrant's Definitive Proxy Statement relative to
the 2005 Annual Meeting of Stockholders.

CENTURY BUSINESS SERVICES, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

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THE FOLLOWING TEXT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES
THERETO) APPEARING ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. UNLESS THE
CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS ANNUAL REPORT TO "WE", "OUR",
"CBIZ", OR THE "COMPANY" SHALL MEAN CENTURY BUSINESS SERVICES, INC., A DELAWARE
CORPORATION, AND ITS OPERATING SUBSIDIARIES.

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

OVERVIEW

CBIZ is a diversified services company which, acting through its
subsidiaries, provides professional 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 the following three practice groups:

- Accounting, Tax and Advisory;

- Benefits and Insurance; and

- National Practices.

CBIZ provides services through 69 reporting business units with more than
140 offices located in 34 states, the District of Columbia, and Toronto, Canada.
Included in this total, and managed within the National Practices group, is the
Company's medical practice management business unit which has 76 offices.

CBIZ's goal is to be the leading provider of business services within its
target markets by providing clients with a broad range of high-quality products
and services while expanding locally through internal growth, acquisitions and
cross-serving. CBIZ built its professional services business through acquiring
accounting, benefits, valuation and other service firms throughout the United
States, and has been established as a national provider over the last several
years. During 2004, CBIZ acquired four businesses that enhance our technology,
benefits and insurance and accounting and tax services in our existing markets.
Our intention is to continue to selectively acquire businesses with
complementary services in target markets.

Formed as a Delaware corporation in 1987 under the name Stout Associates,
CBIZ was acquired by Republic Industries, Inc. in 1992. In April 1995, Republic
spun off its hazardous waste operations, including CBIZ's predecessor company,
to stockholders. Re-named Republic Environmental Systems, Inc., CBIZ's common
stock began trading on the Nasdaq National Market under the symbol "RESI." On
June 24, 1996, we changed our trading symbol to "IASI" in anticipation of our
merger with Century Surety Company and Commercial Surety Agency, Inc., which
resulted in a name change to "International Alliance Services, Inc." This name
change signaled our move away from the hazardous waste business. CBIZ divested
all remaining hazardous waste operations in 1997. On December 23, 1997, CBIZ
changed its name to Century Business Services, Inc. and began trading under the
symbol "CBIZ."

CBIZ'S PRINCIPAL EXECUTIVE OFFICE IS LOCATED AT 6050 OAK TREE BOULEVARD, SOUTH,
SUITE 500, CLEVELAND, OHIO 44131, AND OUR TELEPHONE NUMBER IS (216) 447-9000.

BUSINESS STRATEGY

CBIZ's business strategy is to grow in the professional 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.

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Providing a range of business services to a client results in advantages
for both the client and for CBIZ. Working with one provider for several tasks
saves the client the time of having to coordinate with multiple vendors. For
example, the employee data used to process payroll can also be used by a CBIZ
health and welfare insurance agent and benefits consultant to provide
appropriate benefits package to a client's employee base. In addition, the
relationship our accounting and tax advisors have with their clients allows us
to identify financial planning, wealth management, and other business
opportunities. The ability to combine several services and offer them through
one trusted provider distinguishes CBIZ from other service providers.

CBIZ is looking to strengthen our operations and customer service
capabilities by making selective acquisitions in markets where we currently
operate and where the prospects are favorable to increase our market share and
become a significant provider of a comprehensive range of business services.
CBIZ's strategy is to acquire companies that generally:

- have a strong potential for cross-serving to CBIZ's clients;

- can integrate quickly with existing CBIZ operations;

- have strong and energetic leadership;

- are accretive to earnings; and

- help enhance the core CBIZ service offering in a geographical market.

In accordance with our strategy to deliver services to clients locally and
to promote cross-serving between our various service groups, CBIZ consolidates
office locations wherever practical. Since 2000, CBIZ consolidated offices in
Atlanta, Boca Raton, Chicago, Cleveland, Columbus, Dallas, Denver, Kansas City,
Los Angeles, Minneapolis, Orlando, Philadelphia, Salt Lake City, San Jose and
St. Louis. CBIZ will continue to combine offices, with consolidations planned in
the Denver, Atlanta, and San Diego markets in 2005. As further consolidations
occur, the Company may incur additional costs associated with these
consolidations.

BUSINESS SERVICES

The following is a description of the business services currently offered
by CBIZ.

Accounting, Tax and Advisory. The business units that comprise CBIZ's
Accounting, Tax and Advisory (ATA) group offer services in the following areas:
federal, state and local tax return preparation, planning and consulting for
individuals, corporations, partnerships, estates and trusts; strategic planning;
consulting; record-keeping and financial statement 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; outsourced chief financial officer services and other financial
staffing services; financial investment analysis; succession, retirement, and
estate planning; cash flow management; profitability, operational and efficiency
enhancement consulting to a number of specialized industries; litigation support
services; internal audit services and Sarbanes-Oxley consulting and compliance
services.

Restrictions imposed by independence requirements and state accountancy
laws and regulations preclude CBIZ from rendering audit and attest services
(other than internal audit services). As such, CBIZ and its subsidiaries
maintain joint-referral relationships and administrative service agreements
(ASAs) with independent licensed Certified Public Accounting (CPA) firms under
which audit and attest services may be provided to CBIZ's clients by such CPA
firms. These firms are owned by licensed CPAs who are employed by CBIZ
subsidiaries.

Under these ASAs, CBIZ provides a range of services to the CPA firms,
including (but not limited to): administrative functions such as office,
bookkeeping, and accounting; preparing marketing and promotion materials;
providing office space, computer equipment, and systems support; and leasing
administrative and professional staff. Services are performed in exchange for a
fee. Fees earned by CBIZ under the ASAs are recorded as revenue in the
accompanying consolidated statements of operations and amounted to approximately
$46.3 million and $39.8 million for the years ended December 31, 2004 and 2003,
respectively, a majority of which is related to services rendered to
privately-held clients. In the event that accounts receivable and unbilled

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work in process become uncollectible by the CPA firms, the service fee due to
CBIZ is reduced on a pro-rata basis.

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 revenues.

The CPA firms with which CBIZ maintains ASAs operate as limited liability
corporations, limited liability partnerships or professional corporations. The
firms are separate legal entities with separate governing bodies and officers.
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 its respective services. Attest services can not be performed by
any individual or entity which is not licensed to do so. CBIZ can not perform
audits or reviews, does not contract to perform them and does not provide audit
or review reports. Given this legal prohibition and course of conduct, CBIZ does
not believe it is likely that we would bear the risk of litigious losses related
to attest services provided by the CPA firms.

At December 31, 2004, CBIZ maintained administrative service agreements
with 16 CPA firms, which has decreased from 41 during 2002. Most of the members
and/or shareholders of the CPA firms are also CBIZ employees, and CBIZ renders
services to the CPA firms as an independent contractor. The number of firms with
which CBIZ maintains administrative service agreements decreased when a majority
of the partners of CPA firms with whom we previously maintained ASAs joined
Mayer Hoffman McCann, P.C. (MHM P.C.) an independent national CPA firm
headquartered in Kansas City, Kansas. MHM P.C. has 178 shareholders, a vast
majority of which are also employees of CBIZ. MHM maintains a six member Board
of Directors. There are no board members of MHM P.C. who hold senior officer
positions at CBIZ. CBIZ's association with MHM P.C. offers clients access to the
multi-state resources and expertise of a national CPA firm. The advantage to
CBIZ of these consolidations is a reduction in the number of different firms
with which we maintain ASAs.

Although the ASAs do not constitute control, CBIZ is one of the
beneficiaries of the agreements and may bear certain economic risks. As such,
the CPA firms with which CBIZ maintains administrative service agreements
qualify as variable interest entities under FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities". See further discussion in Note 1
of the accompanying consolidated financial statements.

CBIZ's ATA practice is divided into four regions, representing the East,
Midwest, Great Lakes, and West regions of the United States. Each of these
regions is headed by a designated regional director, all of whom report to the
Senior Vice President, Accounting, Tax and Advisory Services. The Accounting,
Tax and Advisory group contributed approximately $209.1 million of revenue,
representing approximately 40.2% of CBIZ's annual revenue in 2004.

Benefits & Insurance Services. The business units that comprise CBIZ's
Benefits & Insurance group are organized by the following two groups: Retail and
National Services. The Retail group is divided into three geographical regions
representing the East, Central, and West regions of the United States. Each of
the retail operations provides a broad range of primarily commercial employee
benefit and property and casualty insurance
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services within their geographic area. Specific services include: consulting and
brokerage of group health and welfare plans (group health, dental, vision, life
and disability programs); the design, implementation and administration of
qualified retirement plans, such as profit-sharing plans (including 401-k
plans), defined benefit plans, and money purchase plans; actuarial services for
health and welfare plans and qualified retirement plans; COBRA and Section 125
plan administration and voluntary insurance programs for employees;
communications services to educate employees about their benefit programs;
executive benefits consulting on non-qualified retirement plans; and business
continuation plans. In addition, the Benefits & Insurance Services group
provides some personal lines brokerage for property and casualty and individual
life and health insurance.

The National Services group is comprised of several specialty operations
that provide unique services on a national scale. The services include:
specialty high-risk life insurance and clinical underwriting; employee benefit
worksite marketing; wholesale insurance brokerage services; bank-owned executive
life insurance; and wealth management services, including registered investment
advisory services, investment policy statements; mutual fund selections; and
ongoing mutual fund monitoring.

CBIZ's Benefits and Insurance group also provides an on-line enrollment
service, CBIZSolutions that in concert with our payroll services, enables
employers and employees of a client to access information such as health and
welfare benefits, retirement fund balances and payroll information; enroll for
benefit plans; and access certain human resource documents like employee
handbooks and policies.

CBIZ's Benefits and Insurance Services group maintains relationships with
some but not all insurance carriers. Some of these carriers have compensation
arrangements with CBIZ whereby some portion of payments due may be contingent
upon meeting certain performance goals. These compensation arrangements are
provided to CBIZ as a result of our performance and expertise by which products
and services are provided to the client and may result in enhancing CBIZ's
ability to access certain insurance markets and services on behalf of CBIZ
clients. The aggregate of these payments received in 2004 was less than 2.0% of
consolidated CBIZ revenues.

During 2004, state insurance regulators have conducted inquiries to clarify
the nature of compensation arrangements within the insurance brokerage industry.
To date, CBIZ, along with other major insurance brokerage operations, has
received several requests for information regarding our compensation
arrangements related to these practices from such authorities. CBIZ has
discussed the nature of these inquires and compensation arrangements with each
of the major insurance carriers with whom we have established these
arrangements, and we believe that our arrangements are appropriate and that any
changes to compensation arrangements in the future will have minimal impact on
CBIZ, barring future regulatory action. Future regulatory action may limit or
eliminate our ability to enhance revenue through all current compensation
arrangements, and may result in a diminution of future revenue from these
sources.

CBIZ's Benefits & Insurance Services group operates under one Senior Vice
President, who oversees the three retail regions and their respective regional
directors, as well as each of the National Services companies.

The Benefits & Insurance group has grown in recent years due to
acquisitions, the expansion of our client base, and in part due to rising
healthcare costs which positively impacted the group benefits business and
increased demand for benefits consulting. In addition, the life insurance
product line, including executive compensation, bank compensation plans and
individual life sales, has also prospered due to continued favorable tax
treatment and estate planning concerns among the general public. CBIZ expects
growth to continue in the benefits and insurance group based on our intention to
aggressively pursue appropriate acquisitions, continue to provide superior
consulting and brokerage services for our commercial clients, increase our sales
staff in select markets, and seek cross-serving opportunities within CBIZ to
garner new business and grow market share and strengthen existing client
relationships in order to promote retention.

The Benefits & Insurance group contributed approximately $152.2 million of
revenue, or 29.3% of CBIZ's annual revenue, in 2004.

National Practices. The business units that comprise CBIZ's National
Practices group offer services in the following areas: payroll processing and
administration; valuation services including financial valuations, tangible and
intangible asset valuations and litigation support services; property tax
consulting, compliance and administrative services; mergers and acquisitions
services; health care consulting; government relations; and
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information technology consulting, including strategic technology planning,
project management, development, network design and implementation, software
selection and implementation and telephony. CBIZ's medical practice management
business, CBIZ Medical Management Professionals (CBIZ MMP), is managed within
the National Practices group and is described below.

The business units within the National Practices group report to CBIZ's
President and Chief Operating Officer.

The National Practices group contributed approximately $158.7 million of
revenue, or 30.5% of CBIZ's annual revenue, in 2004. Included in the results of
the National Practices group are those of CBIZ MMP, which contributed
approximately $87.3 million of revenue, or 16.8% of CBIZ's annual revenue, in
2004.

CBIZ MMP. CBIZ's wholly-owned subsidiary, CBIZ MMP, provides coding and
billing as well as full-practice management services for hospital-based
physicians practicing anesthesiology, pathology, radiology, emergency medicine,
and other areas. CBIZ MMP's billing services include: billing and accounts
receivable management; automated claims processing and collection; comprehensive
delinquent claims follow up; compliance programming to meet government
regulations; and comprehensive statistical and operational reporting. The
practice management services provided by CBIZ MMP include: financial reporting,
accounts payable, payroll, general ledger processing; design of physician
employment, stock and compensation arrangements; and comprehensive budgeting,
forecasting, and financial analysis. Additionally, CBIZ MMP conducts analyses of
managed care contracts with a focus on negotiation strategies, pricing, cost
containment and utilization tracking; reviews and negotiates contracts with
hospitals and other entities; identifies and coordinates practice merger and
integration opportunities; and coordinates practice expansion efforts.

SALES AND MARKETING

CBIZ's key competitive factors in attracting and retaining clients include
our:

- long-term established relationships;

- industry and technical expertise of our professional staff;

- strong local and regional presence;

- ability to match client requirements with available services;

- ability to offer a number of services from one provider; and

- ability to offer services at competitive rates.

CBIZ believes that by combining a local entrepreneurial marketing strategy
with the resources of a nationally branded company, we will be able to
significantly increase our market penetration. CBIZ expects that we can
cross-serve new products and services to existing clients who do not currently
utilize all of the services CBIZ offers.

CBIZ's primary marketing strategy is to deepen our relationships with
clients by providing them with additional CBIZ services that would be in the
best interest of their business. CBIZ refers to this strategy of penetrating our
existing client base as cross-serving. Because cross-serving is most effective
when it makes outsourcing more convenient for the client, the location of the
service provider is a key consideration. This requires marketing functions to be
carried out on a geographic basis. Using major metropolitan areas as our
marketing focal points, CBIZ, under the direction of a Senior Vice President of
National Marketing, has developed marketing plans that consider the needs of all
CBIZ business units in a common local area. While each business unit continues
to be individually responsible for executing a marketing plan and is accountable
for its own performance, marketing planning and resources are coordinated
nationally. These resources include print and radio advertisements, printed
material such as brochures and stationery, and CBIZ-branded merchandise for
trade shows and other client-oriented events. CBIZ continues to be focused on
creating business development tools and programs on a national level that can be
easily customized for use at the local level. Additionally, CBIZ has developed a
centralized client database, CNECT, which is now being utilized by a majority of
our locations. CNECT supports marketing and distribution efforts such as
improved client service, new business development
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and product development. New clients are generated primarily through local
networking, referrals from existing clients, and targeted new business efforts.

CUSTOMERS

CBIZ provides professional business services to approximately 80,000
clients. CBIZ's clients prefer to focus their resources on operational
competencies while outsourcing non-core administrative functions to CBIZ.
Outsourcing administrative functions allows clients to enhance productivity,
reduce costs and improve service, quality and efficiency by focusing on their
core business. Depending on a client's size and capabilities, it may choose to
utilize some or many of CBIZ's broad array of services, which it typically
accesses initially through its original CBIZ representative.

CBIZ's clients come from a large variety of industries and markets, and no
single client individually comprises more than 3.0% of our total consolidated
revenue. Edward Jones, a financial services firm and client of CBIZ Network
Solutions for electronic networking and information services, is our largest
client and contributed approximately 2.7% of CBIZ's consolidated revenue in
2004.

Management believes that such diversity helps insulate CBIZ from a downturn
in a particular industry. Nevertheless, economic conditions among selected
clients and groups of clients may have an impact on the demand for such
services.

COMPETITION

The professional business services industry is highly fragmented and
competitive, with a majority of industry participants, such as accounting,
employee benefits, payroll firms or professional employee organizations,
offering only a limited number of services. Competition is based primarily on
customer relationships, range and quality of services or product offerings,
customer service, timeliness, geographic proximity, and competitive rates. CBIZ
competes with a number of multi-location regional or national professional
services firms and a large number of relatively small independent firms in local
markets. CBIZ's competitors in the professional business services industry
include, but are not limited to, independent consulting services companies,
independent accounting and tax firms, payroll service providers, and divisions
of diversified services companies, such as insurance brokers and banks.

ACQUISITIONS AND DIVESTITURES

CBIZ seeks to strengthen its operations and customer service capabilities
by making acquisitions in markets where it currently operates and where the
prospects are favorable to increase its market share and become a more
significant provider of a comprehensive range of business services. During 2004,
CBIZ acquired benefits and brokerage firms in Owing Mills, MD, and Chicago, IL,
a technology firm in Cleveland, OH and an accounting firm in Denver, CO. CBIZ
will continue to actively seek acquisitions in the future.

In 2004, CBIZ sold or closed five business operations in an effort to
rationalize our business by divesting units that were either underperforming,
located in secondary markets, or did not provide the level of synergistic
cross-serving opportunities with other CBIZ businesses that is desired. These
divestitures are consistent with CBIZ's plan to focus on metropolitan markets in
which we can strengthen our core service offerings. Going forward, CBIZ may,
from time to time, recognize additional gains and/or losses on divestitures.

REGULATION

CBIZ's operations are subject to regulations by federal, state, and local
governing bodies. Accordingly, our business services may be impacted by
legislative changes by these bodies, particularly with respect to provisions
relating to payroll, benefits administration and insurance services, pension
plan administration, tax and accounting. CBIZ remains abreast of regulatory
changes affecting our business, as these changes often affect clients'
activities with respect to employment, taxation, benefits, and accounting. For
instance, changes in income, estate, or property tax laws may require additional
consultation with clients subject to these changes to ensure their activities
comply with revised regulations.

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CBIZ itself is subject to industry regulation and changes, including
changes in laws, regulations, and codes of ethics governing its accounting,
insurance, valuation, and broker-dealer operations, as well as in other
industries, the interpretation of which may restrict CBIZ's operations. CBIZ is
currently in compliance with laws and regulations that have been recently
changed or imposed, and is not aware of any proposed changes that will have a
negative impact on CBIZ's operations, or our ability to comply with such
existing or proposed regulations.

CBIZ is subject to certain privacy and information security laws and
regulations, including, but not limited to those under the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), The Financial Modernization
Act of 1999 (the Gramm-Leach-Bliley Act), and other provisions of federal and
state law which may restrict CBIZ's operations and give rise to expenses related
to compliance. CBIZ is currently in compliance with such laws and regulations,
and expects to remain in compliance in future periods.

As a public company, CBIZ is subject to the provisions of the
Sarbanes-Oxley Act of 2002 to reform the oversight of public company auditing,
improve the quality and transparency of financial reporting by those companies
and strengthen the independence of auditors. CBIZ is currently in compliance
with those requirements.

LIABILITY INSURANCE

CBIZ carries policies including those for commercial general liability,
automobile liability, property, crime, professional liability, directors and
officers liability, fiduciary liability, employment practices liability and
workers' compensation subject to prescribed state mandates. Excess liability is
carried over the underlying limits provided by the commercial general liability
and automobile liability policies.

EMPLOYEES

At December 31, 2004, CBIZ employed approximately 4,900 employees,
approximately half of whom hold professional certifications or degrees. CBIZ
believes that it has a good relationship with its employees. CBIZ realizes that
as a professional services company that differentiates itself from competitors
through the quality and diversity of our service offerings, the Company's
employees are our most important asset. Accordingly, CBIZ strives to remain
competitive as an employer while increasing the capabilities and performance of
our employees.

SEASONALITY

A disproportionately large amount of CBIZ's revenue occurs in the first
half of the year. This is due primarily to our accounting and tax practice,
which is subject to seasonality related to heavy volume in the first four months
of the year. CBIZ's ATA group generated approximately 43% of its revenue in the
first four months of 2004. Like most professional service companies, most of
CBIZ's operating costs are fixed, resulting in higher operating margins in the
first half of the year.

PROPERTIES

CBIZ's corporate headquarters is located at 6050 Oak Tree Boulevard, South,
Suite 500, Cleveland, Ohio 44131, in leased premises. Some of CBIZ's property
and equipment are subject to liens securing payment of indebtedness of CBIZ and
its subsidiaries. CBIZ and its subsidiaries lease more than 140 offices in 34
states, the District of Columbia and one in Toronto, Canada, as well as office
equipment and company vehicles. As CBIZ continues to consolidate and rationalize
its operations, we expect to reduce the number of leases we currently hold. CBIZ
believes that our current facilities are sufficient for our needs.

OTHER INFORMATION

Our website is located at http://www.cbiz.com. CBIZ makes available, free
of charge on its website, through the Investor Information page, its annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to all those reports as soon as reasonably practicable after
CBIZ files (or furnishes) such reports with the U.S. Securities and Exchange
Commission. In addition, our corporate code of conduct and ethics and the
charters of the Audit Committee, the Compensation Committee and the Nominating

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and Governance Committee of the Board of Directors are available on the Investor
Relations page of CBIZ's website, referenced above, and in print to any
shareholder who requests them.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS

This Annual Report 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 Annual Report, including without limitation, "Business and
Properties" and "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.
You can identify these statements by the fact that they do not relate strictly
to historical or current facts. 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 in connection with any discussion
of future operating or financial performance. In particular, these include
statements relating to future actions, future performance or results of current
and anticipated services, sales efforts, expenses, and financial results. From
time to time, we also may provide oral or written forward-looking statements in
other materials we release to the public. Any or all of our forward-looking
statements in this 10-K, in the 2004 Annual Report and in any other public
statements that we make, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Such
forward-looking statements can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Many factors mentioned in
the discussion below will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Our actual future
results may vary materially.

We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in the quarterly, periodic and annual reports we file with the SEC.
Also note that we provide the following cautionary discussion of risks,
uncertainties and possibly inaccurate assumptions relevant to our businesses.
These are factors that we think could cause our actual results to differ
materially from expected and historical results. Other factors besides those
described here could also adversely affect operating or financial performance.
This discussion is provided as permitted by the Private Securities Litigation
Reform Act of 1995.

FACTORS THAT MAY EFFECT FUTURE RESULTS

The following factors may affect our actual operating and financial results
and could cause results to differ materially from those in any forward-looking
statements. There may be other factors, and new risk factors may emerge in the
future. You should carefully consider the following information.

A REVERSAL OF OR DECLINE IN THE CURRENT TREND OF OUTSOURCING BUSINESS SERVICES
MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Our business and growth depend in large part on the trend toward
outsourcing business services. We can give you no assurance that this trend in
outsourcing will continue. Current and potential customers may elect to perform
such services with their own employees. A significant reversal of, or a decline
in, this trend would have a material adverse effect on our business, financial
condition and results of operations.

WE MAY BE MORE SENSITIVE TO REVENUE FLUCTUATIONS THAN OTHER COMPANIES, WHICH
COULD RESULT IN FLUCTUATIONS IN THE MARKET PRICE OF OUR COMMON STOCK.

A substantial majority of our operating expenses such as personnel and
related costs, depreciation and rent, are relatively fixed in the short term. As
a result, we may not be able to quickly reduce costs in response to any decrease
in revenue. For example, any decision by a significant client to delay or cancel
our services may cause significant variations in operating results and could
result in losses for the applicable quarters. Additionally, the general
condition of the United States economy has and will continue to affect our
business. Potential new clients may defer from switching service providers when
they believe economic conditions are unfavorable. Any of these

10

factors could cause our quarterly results to be lower than expectations of
securities analysts, which could result in a decline in the price of our common
stock.

WE HAVE A RISK THAT PAYMENTS ON ACCOUNTS RECEIVABLE OR NOTES RECEIVABLE MAY BE
SLOWER THAN EXPECTED, OR THAT AMOUNTS DUE ON RECEIVABLES OR NOTES MAY NOT BE
FULLY COLLECTIBLE.

Professional services firms often experience higher average accounts
receivable days outstanding compared to many other industries. If collections
become slower, our liquidity may be adversely impacted. We monitor the aging of
receivables regularly and make assessments of the ability of customers to pay
amounts due. We accrue for potential bad debts each month and recognize
additional reserves against bad debts as we deem it appropriate. Notwithstanding
these measures, our customers may face unexpected circumstances that adversely
impact their ability to pay their trade receivables or note obligations to us
and we may face unexpected losses as a result.

WE ARE DEPENDENT ON THE SERVICES OF OUR EXECUTIVE OFFICERS AND OTHER KEY
EMPLOYEES, THE LOSS OF ANY OF WHOM MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Our success depends in large part upon the abilities and continued services
of our executive officers and other key employees, such as our business unit
presidents. In the course of business operations, employees may resign and seek
employment elsewhere. Certain principal employees, however, are bound in writing
to non-compete agreements barring competitive employment, client solicitation,
and solicitation of employees for a period of between two and ten years
following his or her resignation. We cannot assure you that we will be able to
retain the services of our key personnel. If we cannot retain the services of
key personnel, there could be a material adverse effect on our business,
financial condition and results of operations. While we generally have
employment agreements and non-competition agreements with key personnel, courts
are at times reluctant to enforce such non-competition agreements. In addition,
many of our executive officers and other key personnel are either participants
in our stock option plan or holders of a significant amount of our common stock.
We believe that these interests provide additional incentives for these key
employees to remain with us. In order to support our growth, we intend to
continue to effectively recruit, hire, train and retain additional qualified
management personnel. Our inability to attract and retain necessary personnel
could have a material adverse effect on our business, financial condition and
results of operations.

RESTRICTIONS IMPOSED BY INDEPENDENCE REQUIREMENTS AND CONFLICT OF INTEREST
RULES MAY LIMIT OUR ABILITY TO PROVIDE SERVICES TO CLIENTS OF THE ATTEST FIRMS
WITH WHICH WE HAVE CONTRACTUAL RELATIONSHIPS AND THE ABILITY OF SUCH ATTEST
FIRMS TO PROVIDE ATTESTATION SERVICES TO CLIENTS OF OURS.

Restrictions imposed by independence requirements and state accountancy
laws and regulations preclude CBIZ from rendering audit and attest services
(other than internal audit services). As such, CBIZ and its subsidiaries
maintain joint-referral relationships and administrative service agreements
(ASAs) with independent licensed Certified Public Accounting (CPA) firms under
which audit and attest services may be provided to CBIZ's clients by such CPA
firms. These firms are owned by licensed CPAs who are employed by CBIZ
subsidiaries.

Under these ASAs, CBIZ provides a range of services to the CPA firms,
including (but not limited to): administrative functions such as office,
bookkeeping, and accounting; preparing marketing and promotion materials;
providing office space, computer equipment, and systems support; and leasing
administrative and professional staff. Services are performed in exchange for a
fee. Fees earned by CBIZ under the ASAs are recorded as revenue in the
accompanying consolidated statements of operations. In the event that accounts
receivable and unbilled work in process become uncollectible by the CPA firms,
the service fee due to CBIZ is reduced on a pro-rata basis.

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-

11

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
revenues.

There can be no assurance that following the policies and procedures
implemented by us and the attest firms will enable us and the attest firms to
avoid circumstances that would cause us and them to lack independence from an
SEC-reporting attest client; nor can there be any assurance that state
accountancy authorities will not extend current restrictions on the profession
to include private companies. To the extent that licensed CPA firms for whom we
provide administrative and other services are affected, we may experience a
decline in fee revenue from these businesses as well. To date, revenues derived
from providing services in connection with attestation engagements of the attest
firms performed for SEC-reporting clients have not been material.

GOVERNMENTAL REGULATIONS AND INTERPRETATIONS ARE SUBJECT TO CHANGES.

Laws and regulations often result in changes in the amount or the type of
business services required by businesses and individuals. We cannot be sure that
future laws and regulations will provide the same or similar opportunities for
us to provide business consulting and management services to businesses and
individuals. Accordingly, CBIZ's ability to continue to operate in some states
may depend on our flexibility to modify our operational structure in response to
these changes in regulations.

WE ARE SUBJECT TO RISKS RELATING TO PROCESSING CUSTOMER TRANSACTIONS FOR OUR
PAYROLL, MEDICAL PRACTICE MANAGEMENT, PROPERTY TAX MANAGEMENT, AND OTHER
TRANSACTION PROCESSING BUSINESSES.

The high volume of client funds and data processed by us in our transaction
related businesses entails risks for which we may be held liable if the accuracy
or timeliness of the transactions processed is not correct. We could incur
significant legal expense to defend any claims against us, even those claims
without merit. While we carry insurance against these potential liabilities, we
cannot be certain that circumstances surrounding such an error would be entirely
reimbursed through insurance coverage. We believe we have controls and
procedures in place to address our fiduciary responsibility and mitigate these
risks. However, if we are not successful in managing these risks, our business,
financial condition and results of operations may be harmed.

WE ARE SUBJECT TO RISK AS IT RELATES TO SOFTWARE THAT WE LICENSE FROM THIRD
PARTIES.

We license software from third parties, much of which is integral to our
systems and our business. The licenses are terminable if we breach our
obligations under the license agreements. If any of these relationships were
terminated or if any of these parties were to cease doing business or cease to
support the applications we currently utilize, we may be forced to spend
significant time and money to replace the licensed software. However, we cannot
assure you that the necessary replacements will be available on reasonable
terms, if at all.

WE COULD BE HELD LIABLE FOR ERRORS AND OMISSIONS.

All of our professional business services entail an inherent risk of
professional malpractice and other similar claims. Therefore, we maintain errors
and omissions insurance coverage. Although we believe that our insurance
coverage is adequate, we cannot be certain that actual future claims or related
legal expenses would not exceed the coverage amounts. In addition, we cannot be
certain that the different insurance carriers which provide errors and omissions
coverage for different lines of our business will not dispute their obligation
to cover a particular claim. If we have a large claim, or a large number of
claims, on our insurance, the rates for such insurance may increase, and amounts
expended in defense or settlement of these claims prior to exhaustion of
deductible or self-

12

retention levels may become significant, but contractual arrangements with
clients may constrain our ability to incorporate such increases into service
fees. Insurance rate increases, disputes by carriers over coverage questions,
payments by us within deductible or self-retention limits, as well as any
underlying claims or settlement of such claims, could have a material adverse
effect on our business, financial condition and results of operations.

OUR PRINCIPAL STOCKHOLDERS MAY HAVE SUBSTANTIAL CONTROL OVER OUR OPERATIONS.

As of February 28, 2005, the stockholders identified below owned the
following aggregate amounts and percentages of our common stock, including
shares that may be acquired by exercising options:

- approximately 15,250,278 shares, representing 20.1% of all our
outstanding common stock, were owned by Michael G. DeGroote;

- approximately 4,617,199 shares, representing 6.1% of all our outstanding
common stock, were owned by Cardinal Capital Management LLC;

- approximately 4,209,794 shares, representing 5.5% of all our outstanding
common stock, were owned by Dimensional Fund Advisors Inc.;

- approximately 27,362,259 shares, representing 36.1% of all our
outstanding common stock, were owned by our executive officers,
directors, and the foregoing as a group.

Because of their stock ownership, these stockholders may exert substantial
influence or actions that require the consent of a majority of our outstanding
shares, including the election of directors. CBIZ's share repurchase activities
may serve to increase the ownership percentage of these individuals and
therefore increase the influence they may exert, if they do not participate in
these share repurchase transactions.

WE HAVE SHARES ELIGIBLE FOR FUTURE SALE THAT COULD ADVERSELY AFFECT THE PRICE
OF OUR COMMON STOCK.

Future sales or issuances of common stock, or the perception that sales
could occur, could adversely affect the market price of our common stock and
dilute the percentage ownership held by our stockholders. We have authorized 250
million shares, and have issued and outstanding approximately 76 million shares.
More than 47 million of these shares have been issued in connection with
acquisitions. As part of many acquisition transactions, the shares were
contractually restricted from sale for periods up to two years, most of which
expired by the end of 2001. As of February 28, 2005, approximately 260,000
shares of common stock were under lock-up contractual restrictions. We cannot be
sure when sales by holders of our stock will occur, how many shares will be sold
or the effect that sales may have on the market price of our common stock. As of
February 28, 2005, we also have, registered under the Securities Act, 15 million
shares of our common stock, nearly all of which remain available to be offered
from time to time by us in connection with acquisitions under our acquisition
shelf registration statement.

WE ARE RELIANT ON INFORMATION PROCESSING SYSTEMS.

Our ability to provide business services depends on our capacity to store,
retrieve process and manage significant databases, and expand and upgrade
periodically our information processing capabilities. Interruption or loss of
our information processing capabilities through loss of stored data, breakdown
or malfunctioning of computer equipment and software systems, telecommunications
failure, or damage caused by fire, tornadoes, lightning, electrical power
outage, or other disruption could have a material adverse effect on our
business, financial condition and results of operations. Although we have
disaster recovery procedures in place and insurance to protect against such
contingencies, we cannot be sure that insurance or these services will continue
to be available at reasonable prices, cover all our losses or compensate us for
the possible loss of clients occurring during any period that we are unable to
provide business services.

13

WE MAY NOT BE ABLE TO ACQUIRE AND FINANCE ADDITIONAL BUSINESSES WHICH MAY
LIMIT OUR ABILITY TO PURSUE OUR BUSINESS STRATEGY.

We made four acquisitions in 2004, and it is our intention to selectively
acquire businesses that are complementary in building out our service offerings
in our target markets. However, we cannot be certain that we will be able to
continue identifying appropriate acquisition candidates and acquire them on
satisfactory terms. We cannot assure you that such acquisitions, even if
completed, will perform as expected or will contribute significant revenues or
profits. In addition, we may also face increased competition for acquisition
opportunities, which may inhibit our ability to complete transactions on terms
that are favorable to us. There are certain provisions under our credit facility
that may limit our ability to acquire additional businesses. In the event that
we are not in compliance with certain covenants as specified in our credit
facility, we could be restricted from making acquisitions, restricted from
borrowing funds from our credit facility for other uses, or required to pay down
the outstanding balance on the line of credit. However, management believes that
funds available under the credit facility, along with cash generated from
operations, will be sufficient to meet our liquidity needs, including planned
acquisition activity, in the foreseeable future. See Note 7 to CBIZ's
consolidated financial statements included herewith.

THE BUSINESS SERVICES INDUSTRY IS COMPETITIVE AND FRAGMENTED. IF WE ARE UNABLE
TO COMPETE EFFECTIVELY, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS MAY BE HARMED.

We face competition from a number of sources in both the business services
industry and from specialty insurance agencies. Competition in both industries
has led to consolidation. Many of our competitors are large companies that may
have greater financial, technical, marketing and other resources than us. In
addition to these large companies and specialty insurance agencies, we face
competition in the business services industry from in-house employee services
departments, local business services companies and independent consultants, as
well as from new entrants into our markets. We cannot assure you that, as our
industry continues to evolve, additional competitors will not enter the industry
or that our clients will not choose to conduct more of their business services
internally or through alternative business services providers. Although we
intend to monitor industry trends and respond accordingly, we cannot assure you
that we will be able to anticipate and successfully respond to such trends in a
timely manner. We cannot be certain that we will be able to compete successfully
against current and future competitors, or that competitive pressure will not
have a material adverse effect on our business, financial condition and results
of operations.

ITEM 3. LEGAL PROCEEDINGS

The Company has entered into settlements to resolve the Heritage Bond
Litigation, comprised of multiple lawsuits pending in the Central District of
California arising from losses sustained by investors in numerous municipal bond
offerings between December 1996 and March 1999. In those lawsuits, plaintiffs
alleged numerous claims, including mismanagement and misappropriation of funds
from the bond offerings, against unrelated parties, including the Heritage
Entities and the trustee, U.S. Trust Corp. The Betker Action, CV 02-5752-DT
(RCx), includes claims against two entities acquired by the Company, Valuation
Counselors Group, Inc. ("VC") and Zelenkofske, Axelrod & Co., Ltd. ("ZA"), for
negligent misrepresentation and negligence, and for joint and several liability
under California Corporations Code sec. 25504.2 (against VC only). In the
Consolidated Class Action, 02-ML-1475-DT (RCx), the Court permitted plaintiffs
to substitute CBIZ Valuation Group, Inc. ("CBIZ-VC") in place of VC, and CBIZ
Accounting, Tax & Advisory, Inc. ("CBIZ-ZA") in place of ZA, as defendants. In
addition, plaintiffs named Century Business Services, Inc. ("CBIZ") itself as a
defendant. CBIZ-VC and CBIZ-ZA are subsidiaries of CBIZ. That complaint includes
claims against CBIZ, CBIZ-VC and CBIZ-ZA for negligence, and claims against
CBIZ-VC and CBIZ-ZA for conspiracy to commit fraud, negligent misrepresentation
and intentional misrepresentation. These claims have been pending since 2001 and
relate to the provision of valuation and feasibility study services from 1996
through 1999. Management believes that the settlements are fair, reasonable and
adequate, and in the best interests of all parties concerned. The settlement of
the Consolidated Class Action has been preliminarily approved by the Court,
which also entered an order approving notice to the Class. The Class Settlement
is conditioned upon, among other things, standard class action opt-out
procedures, objections by litigants, the Court's entry of a bar order and final
judicial approval of

14

the settlement by the Court after notice to the class. The settlement of the
Betker Action has been approved by the Court and is subject to, among other
things, the final entry of a bar order. Additional proceedings may be necessary
as a consequence of any opt-out or objection that may occur. The resolution of
these matters did not have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.

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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of CBIZ's stockholders during the
fourth quarter of the fiscal year covered by this Annual Report.

15

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

PRICE RANGE OF COMMON STOCK

The common stock of CBIZ is quoted on the Nasdaq National Market under the
trading symbol "CBIZ". The table below sets forth the range of high and low
sales prices for our Common Stock as reported on the Nasdaq National Market for
the periods indicated.

On December 31, 2004, the last reported sale price of CBIZ's Common Stock
as reported on the Nasdaq National Market (Nasdaq Amex-Online) was $4.36 per
share. As of February 28, 2005, CBIZ had approximately 8,100 holders of record
of its common stock, and the last sale of CBIZ's common stock as of that date
was $4.19.

DIVIDEND POLICY

CBIZ has not paid cash dividends on its common stock since April 27, 1995,
and does not anticipate paying cash dividends in the foreseeable future. CBIZ's
Board of Directors has discretion over the payment and level of dividends on
common stock. The Board of Directors' decision is based among other things on
results of operations and financial condition. In addition, CBIZ's credit
facility does not permit CBIZ to declare or make any dividend payments, other
than dividend payments made by one of its wholly owned subsidiaries to the
parent company. CBIZ currently intends to retain future earnings to finance the
ongoing operations and growth of the business. Any future determination as to
dividend policy will be made at the discretion of the Board of Directors and
will depend on a number of factors, including future earnings, capital
requirements, financial condition and future prospects, limitations on dividend
payments pursuant to credit or other agreements and such other factors as the
Board of Directors may deem relevant.

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. A supplement to the plan was
approved by the Board of Directors on May 27, 2004, authorizing CBIZ to purchase
an additional 2.0 million shares of CBIZ common stock, for a total of 10.5
million shares. These plans expired on December 31, 2004, and subsequently on
February 10, 2005, the Board of Directors authorized the purchase of up to 5.0
million shares of CBIZ common stock during 2005. Stock repurchase activity
during the year ended December 31, 2004 is summarized in the table below (in
thousands, except per share data).

16

ISSUER PURCHASES OF EQUITY SECURITIES

- ---------------

(1) Average price paid per share includes fees and commissions.

(2) Open market purchases.

(3) The Company utilized a Rule 10b5-1 trading plan to allow for repurchases by
the Company during periods when it would not normally be active in the
trading market due to regulatory restrictions. Under the Rule 10b5-1 trading
plan, the Company was unable to repurchase shares above a pre-determined
price per share. Additionally, the maximum number of shares purchased by the
Company each day was governed by Rule 10b-18.

17

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected historical financial data for CBIZ
and is derived from the historical consolidated financial statements and notes
thereto. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements notes thereto, which are
included elsewhere in this Annual Report.

- ---------------

(1) Pro forma net income (loss) represents income from continuing operations
assuming the change in accounting principle for Financial Accounting
Standards Board (SFAS) No. 142, adopted January 1, 2002, was applied
retroactively, net of taxes, for all periods presented.

(2) Pro forma diluted weighted average common shares for 2001 are 96,442, as the
effect of the incremental shares are not anti-dilutive on a pro forma basis.

(3) Certain amounts have been reclassified to conform to the current year
presentation.

18

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion is intended to assist in the understanding of
CBIZ's financial position at December 31, 2004 and 2003, and results of
operations and cash flows for each of the years ended December 31, 2004, 2003
and 2002. This discussion should be read in conjunction with CBIZ's consolidated
financial statements and notes thereto included elsewhere in this Annual Report.

OVERVIEW

CBIZ provides professional business services to businesses of various
sizes, as well as individuals, governmental entities and not-for-profit
enterprises throughout the United States (see further description under Items 1
and 2 "Business and Properties"). The substantial portion of our revenue is
derived from professional service activities provided for our clients, and our
revenue is driven by our ability to generate new opportunities, by the prices we
obtain for our service offerings and by the utilization of our professional
workforce.

CBIZ seeks to strengthen its operations and customer service capabilities
by making acquisitions in markets where it currently operates and where the
prospects are favorable to increase its market share and become a more
significant provider of a comprehensive range of business services. During 2004,
CBIZ acquired benefits and brokerage firms in Owing Mills, MD, and Chicago, IL,
a technology firm in Cleveland, OH and an accounting firm in Denver, CO. CBIZ
will continue to actively seek acquisitions under the same strategy earlier
described.

As part of its strategy to promote and strengthen cross-serving, CBIZ has
continued its program of consolidating and co-locating fragmented markets. This
program is expected to continue in 2005, specifically in the Denver, Atlanta and
San Diego markets. CBIZ also plans to continue consolidation activities that
have been initiated in the Chicago market.

CBIZ continually evaluates its business operations, and may from time to
time sell or close 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 2004, CBIZ sold or closed
five business operations in an effort to rationalize our business by divesting
units that were either underperforming, located in secondary markets, or did not
provide the level of synergistic cross-serving opportunities with other CBIZ
businesses that is desired. These divestitures are consistent with CBIZ's plan
to focus on metropolitan markets in which we can strengthen our core service
offerings. Going forward, CBIZ may, from time to time, recognize additional
gains and/or losses on divestitures.

CBIZ believes that repurchasing shares of its common stock is a use of cash
that provides value to stockholders, and accordingly completed 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 (including expenses) of approximately $37.8 million. In addition,
CBIZ completed open market repurchases of approximately 2.9 million shares at a
cost of approximately $12.6 million during the year ended December 31, 2004. The
credit facility and net cash provided by CBIZ operations were utilized to fund
the share repurchases. On February 10, 2005, the Board of Directors authorized
the purchase of up to 5.0 million shares of CBIZ common stock during 2005. The
shares may be repurchased in the open market or through privately negotiated
purchases.

Effective August 9, 2004, CBIZ completed a modification of its credit
facility. The new facility has a total commitment amount of $100.0 million, and
expires August 2009. The modified credit facility is discussed in further detail
in the notes to the accompanying consolidated financial statements.

RESULTS OF OPERATIONS -- CONTINUING OPERATIONS

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 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. The services offered under each of
these groups are described in Part I of this report.

19

Same-unit revenue represents total revenue adjusted to reflect comparable
periods of activity for acquisitions and divestitures. For example, for an
operation divested on July 1, 2004, revenue from the periods July 1 through
December 31, 2003 are reported as revenue from divested operations; thus,
same-unit revenue includes revenue for the periods January 1 through June 30 of
both years. Revenue from divested operations represents operations that did not
meet the criteria for treatment as discontinued businesses.

Accounting, Tax and Advisory Services.

Same-unit revenue for the twelve months ended December 31, 2004 increased
by $6.4 million or 3.2% from the twelve months ended December 31, 2003. The
growth experienced for same-unit revenue was primarily due to an increase in the
aggregate number of hours charged to clients for litigation support and
Sarbanes-Oxley consulting services, combined with modest price increases for
traditional accounting and tax services.

The growth in revenue from acquisitions was primarily from Sarbanes-Oxley
consulting services provided by CBIZ HarborView, which was acquired in September
2003, as well as accounting services provided by the acquisitions of firms in
Denver, Colorado, and Orange County, California. Divested operations represent
several smaller units that did not provide opportunity for growth and
cross-serving capabilities.

The largest components of operating expenses for the ATA group are
personnel costs, occupancy costs and professional service fees paid to third
parties, representing 88.1% and 87.3% of total operating expenses for the years
ended December 31, 2004 and 2003, respectively. Personnel costs increased $3.1
million primarily due to increases in staff to accommodate the revenue growth,
as well as annual increases in compensation rates. As a percentage of revenue,
personnel costs were 66.6% and 68.2% for the years ended December 31, 2004 and
2003, respectively. Occupancy costs, which are generally fixed in nature, were
7.1% and 7.3% of revenue for the years ended December 31, 2004 and 2003,
respectively. Professional service fees paid to third parties increased $3.3
million to 2.3% percent of revenue for the year ended December 31, 2004 from
0.8% for the same period a year ago, as the result of outsourced professional
services utilized primarily at two business units; one unit that delivers
services requiring specialization in state agency compliance and CBIZ HarborView
that delivers Sarbanes-Oxley consulting services.

Gross margin has improved by 1.2% for the twelve months ended December 31,
2004, primarily due to growth in Sarbanes-Oxley consulting services, as well as
modest increases in hourly billing rates. CBIZ expects Sarbanes-Oxley consulting
to continue to be strong, and also expects modest increases in hourly billing
rates in 2005 for traditional accounting and tax services. While the accounting
industry is experiencing growth and increases in billing rates, the industry is
also experiencing pricing pressures on compensation, as firms compete for
qualified candidates in the market to support the revenue growth. Due to these
pricing pressures on compensation, CBIZ expects modest improvement in gross
margin in 2005.

20

Benefits & Insurance Services.

On a same-unit basis, the Benefits & Insurance (B&I) group experienced a
decrease in revenue of $6.6 million, or 4.2% for the twelve months ended
December 31, 2004 compared to a year ago. The decline in revenue is primarily
attributable to one national business unit which experienced lower enrollments
compared with a year ago, and recorded revenue adjustments resulting from higher
policy terminations than originally estimated. This decline was partially offset
by the strength of the group health business, which has experienced an increase
in the number of policies sold.

The increase in revenue from acquired businesses pertains to business units
providing primarily group benefits and property and casualty services in the
Chicago, Salt Lake City, and Maryland markets. The decline in revenue from
divested operations relates primarily to Health Administration Services, which
was sold in May 2003.

The largest components of operating costs for the B&I group are personnel
costs, commissions paid to third party brokers, and occupancy costs,
representing 84.8% and 83.8% of total operating expenses in 2004 and 2003,
respectively. Personnel costs increased as a percentage of revenue to 58.3% from
53.7%, primarily as a result of investments in sales and support personnel
intended to promote organic growth during the year, and also due to the
year-over-year revenue decline. CBIZ expects the investments in sales personnel
to result in margin improvement in future periods, once production levels have
been established. Commissions paid to third party brokers have increased to 7.4%
of revenue in 2004 from 6.8% in 2003, primarily due to a higher portion of
revenue being generated with third party brokers during the current year than a
year ago. Occupancy expenses are relatively fixed in nature, but have increased
as a percent of revenue to 6.0% for the twelve months ended December 31, 2004,
from 5.9% for the comparable period a year ago, primarily due to the decline in
revenue previously discussed.

Gross margin has decreased compared to a year ago, primarily as the result
of the one national business unit mentioned above. This unit has experienced
significant growth over the last three years, which has resulted in system,
client service and other operational challenges. CBIZ has allocated resources to
support the current level of revenue and future growth, and is in the process of
implementing new systems, including a new client service interface. The decline
in revenue, combined with higher expenses to support growth in this unit, have
resulted in a negative impact on gross margin of approximately $7.1 million.
CBIZ believes that the resources dedicated to improve processes and controls at
this insurance unit have positioned the unit for future growth; therefore, CBIZ
expects a significant improvement in revenue, and expects the unit to produce a
modest profit in 2005. CBIZ expects gross margins for the B&I group to return to
historical levels based on the favorable impact on this unit's future results,
combined with continued organic growth from its existing retail businesses
driven by a continuing increase in group health rates.

National Practices Services. The National Practices group contributed
approximately $158.7 million and $145.1 million of revenue, or approximately
30.5% and 28.6% of CBIZ's total revenue for the years ended December 31, 2004
and 2003, respectively.

21

CBIZ Medical Management Professionals (CBIZ MMP)

CBIZ MMP revenue increased by $11.5 million, or 15.1%, for twelve months
ended December 31, 2004 as compared to the twelve months ended December 31,
2003. Approximately $4.2 million of the growth was attributable to new clients
obtained during 2004. The remaining revenue growth was the result of the
maturation of clients obtained in 2003 and strong existing client sales.

The largest components of operating expenses for CBIZ MMP are personnel
costs, occupancy costs and office expenses (primarily postage), representing
88.9% and 90.0% of total operating expenses for the years ended December 31,
2004 and 2003, respectively. Personnel costs increased by $7.7 million to 58.9%
of revenue for the year ended December 31, 2004, from 57.6% of revenue for the
year ended December 31, 2003. This increase was directly related to an increase
in the number of client service staff employed by MMP during 2004 verses 2003,
required to support the growth in revenue. Additionally, MMP added personnel in
compliance and technology to support the current infrastructure and to position
the unit for continued growth in the future. Occupancy costs as a percentage of
revenue were 6.7% and 7.2%, for the years ended December 31, 2004 and 2003,
respectively. Office expenses as a percentage of revenue were 7.6% and 8.3%, for
the years ended December 31, 2004 and 2003, respectively.

Gross margin has declined in 2004 from a year ago, primarily as a result of
investments made in additional staff to support and facilitate growth. CBIZ
expects operating expenses to increase in 2005 based on significant investments
to upgrade their operating system to allow for future growth. As a result of
these investments, gross margin is expected to remain consistent with 2004;
however, gross margin as a percentage of revenue will decline slightly in 2005.

National Practice Services - Other

On a same-unit basis, the National Practices group, excluding CBIZ MMP,
experienced higher revenues of $2.8 million for the year ended December 31, 2004
as compared to the year ended December 31, 2003.
22

Approximately $2.1 million of the same-unit revenue growth was attributable to
four transactions that closed during the first six months of 2004 in CBIZ's
mergers and acquisition business. The remainder of the increase was primarily
from our payroll processing unit and valuation business. The payroll processing
unit made investments in their business processes and systems during 2003 to
position the unit for growth. These investments, along with the increased client
satisfaction (evidenced by lower than anticipated attrition rate), have resulted
in favorable revenue results in 2004 as compared to 2003. This increase was
offset by lower revenues in CBIZ's technology, health care consulting and
property tax businesses in 2004. Revenue from acquired businesses relates to the
technology business located in Cleveland, OH, which CBIZ acquired in June 2004.
Revenue from divested operations relates to the closure of unprofitable
locations in the property tax and technology businesses during 2003.

The largest components of operating expenses for the National Practices
Services - Other segment are personnel costs, direct costs and occupancy costs,
representing 87.6% and 87.9% of total operating expenses in 2004 and 2003,
respectively. Personnel costs decreased by $3.1 million, and decreased as a
percentage of revenue to 63.3% for the year ended December 31, 2004, from 69.8%
for the year ended December 31, 2003. The decrease is primarily as a result of
reduction of personnel related to the closure of unprofitable locations in the
mergers and acquisitions group. Direct costs primarily consist of product costs
associated with hardware sales in the technology businesses. These costs have
decreased by $0.5 million, and have decreased as a percentage of revenue to 9.9%
for the year ended December 31, 2004, from 11.0% for the year ended December 31,
2003. The decrease is primarily a result of lower product costs at our
technology division due to the closure of unprofitable locations during 2003.
Occupancy costs are typically fixed in nature and have decreased as a percentage
of revenue to 6.8% in 2004 from 7.3% in 2003, primarily as a result of the
shutdown of unprofitable facilities in the property tax and technology
businesses described above.

The improvement in gross margin for the year ended December 31, 2004 from
the year ended December 31, 2003 was realized as the result of closing
unprofitable locations in the property tax and technology businesses and
discontinuing unprofitable product lines, combined with the four mergers and
acquisitions transactions as previously discussed, and improvements and
operational efficiencies in the payroll, technology and valuation businesses.
Due to the unpredictable nature of the mergers and acquisitions business, CBIZ
expects gross margin for 2005 to be in line with 2004 levels.

Revenue

Total revenue for the year ended December 31, 2004 was $520.1 million as
compared to $506.8 million for the year ended December 31, 2003, representing an
increase of $13.3 million, or 2.6%. The increase in revenue attributable to
acquisitions completed subsequent to December 31, 2003 was $9.5 million, and was
offset by a decrease in revenue of $10.3 million due to divested operations
completed subsequent to December 31, 2003. For business units with comparable
periods of operations for the years ended December 31, 2004 and 2003, revenue
increased $14.1 million or 2.8%. A more comprehensive analysis of revenue by
each operating practice group is discussed above.

Expenses

Operating expenses increased to $459.4 million for the year ended December
31, 2004, from $441.7 million for the comparable period in 2003, an increase of
$17.7 million or 4.0%. As a percent of revenue, operating expenses (excluding
consolidation and integration charges) were 87.8% and 86.8% for the years ended
December 31, 2004 and 2003, respectively. The primary components of operating
expenses are personnel costs and occupancy expense, representing 79.9% and 80.1%
of total operating expenses and 70.6% and 69.8% of revenue for the years ended
December 31, 2004 and 2003, respectively. A more comprehensive analysis of
operating expenses (excluding consolidation and integration charges) and their
impact on gross margin is discussed by operating practice group, above.

Consolidation and integration charges are reported as operating expenses in
the accompanying consolidated statements of operations, and increased as a
percent of revenue to 0.5% from 0.4% for the years ended

23

December 31, 2004 and 2003, respectively. The increase in consolidation and
integration charges was due primarily to real estate leasing costs in the
Chicago market during 2004.

Corporate general and administrative expenses increased to $24.8 million
and 4.7% of revenue for the year ended December 31, 2004, from $19.5 million and
3.9% of revenue for the comparable period in 2003. The increase in 2004 over
2003 was primarily the result of an increase in legal expenses, settlements (net
of recoveries), and litigation reserves of approximately $3.2 million, to
address several long-standing litigation issues. Additionally, CBIZ incurred
approximately $1.0 million in expenses during 2004 associated with its
compliance efforts in connection with Section 404 of the Sarbanes-Oxley Act of
2002.

Depreciation and amortization expense decreased to $16.4 million for the
year ended December 31, 2004, from $17.1 million for the comparable period in
2003, a decrease of $0.7 million, or 3.9%. 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 $2.6
million for the year ended December 31, 2004 and $1.7 million for the year ended
December 31, 2003. As a percentage of total revenue, depreciation and
amortization expense was 3.2% for the year ended December 31, 2004, compared to
3.4% for the comparable period in 2003.

Interest expense increased to $1.5 million for the year ended December 31,
2004, from $1.1 million for the comparable period in 2003, an increase of $0.5
million, or 42.8%. The increase is the result of higher average debt during the
year ended December 31, 2004, of $40.9 million, compared to $18.2 million during
the year ended December 31, 2003. Higher debt during 2004 is primarily due to
share repurchase activity and is further described under "Liquidity and Capital
Resources". The increase in interest expense due to higher average debt balances
was offset by a decrease in average interest rates to 3.5% for the year ended
December 31, 2004 from 4.4% for the year ended December 31, 2003. Additionally,
interest expense for year ended December 31, 2003 included fees related to an
interest rate swap that was terminated during the second quarter of 2003.

Gain on sale of operations, net was $1.0 million for the year ended
December 31, 2004, and was related to the sale of two operations and three
client lists in the ATA practice group, and a client list in the B&I practice
group. For the year ended December 31, 2003, gain on sale of operations, net was
$2.5 million and related primarily to the sale of Health Administrative Services
(HAS) from the B&I practice group. Three businesses from the ATA practice group
were also sold during the year ended December 31, 2003. See Note 17 to the
consolidated financial statement included herewith, for further discussion. In
addition to this divestiture activity, CBIZ classified three operations as
discontinued businesses in 2004, and five operations as discontinued businesses
in 2003. The results of these operations are disclosed separately in the
consolidated financial statements included herewith, and are discussed
separately under "Results of Operations - Discontinued Businesses," below.

CBIZ reported other income of $3.6 million for the year ended December 31,
2004, compared to other expense of $1.2 million for the comparable period in
2003, an increase $4.8 million. Other income (expense), net is comprised
primarily of interest income earned on funds held for clients at CBIZ's payroll
business, adjustments to the fair value of assets held in a rabbi trust related
to the deferred compensation plan implemented in the first quarter of 2004,
gains and losses on sale of assets, and miscellaneous income such as contingent
royalties from previous divestitures. The change in other income (expense) for
the year ended December 31, 2004 from the year ended December 31, 2003 is
primarily related to $2.8 million of impairment charges to notes receivable
during the year ended December 31, 2003 that did not recur in 2004. Of those
impairment charges, $2.4 million related to the impairment of a note taken in
connection with the divestiture of the hazardous waste operation in 1997, that
filed bankruptcy in 2003. Additionally, other income for the year ended December
31, 2004 includes approximately $0.4 million of interest income related to a tax
refund that is discussed in further detail below, and approximately $0.4 million
related to the deferred compensation plan that was implemented during the first
quarter of 2004.

CBIZ recorded income taxes from continuing operations of $5.7 million for
the year ended December 31, 2004, compared to $12.5 million for the year ended
December 31, 2003. The effective tax rate decreased to 25.3% for the year ended
December 31, 2004, from 43.4% for the comparable period in 2003. The effective
tax rate for the year ended December 31, 2004 is lower than statutory federal
and state tax rates of approximately
24

40.0% due to a $3.5 million tax benefit related to a favorable tax position
which was successfully resolved upon completion of the Internal Revenue Service
examination for the years ended December 31, 1998, 1999, and 2000. The effective
tax rate for the year ended December 31, 2003 was higher than the statutory
federal and state tax rates of approximately 40.0%, primarily due to capital
losses resulting from certain impairment charges that were not offset by capital
gains and were not deductible in the period.

RESULTS OF OPERATIONS -- CONTINUING OPERATIONS

COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002

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. The services offered under each of
these groups are described in Part I of this report.

Accounting, Tax and Advisory Services.

Same-unit revenue decreased by $3.0 million primarily due to a transfer of
certain technology businesses from ATA to National Practices in January 2003,
which resulted in a decrease in revenue of $5.1 million. Excluding the impact of
such transfers, same-unit revenue increased $2.1 million or 1.1% primarily due
to price increases. The impact of the price increases was offset by a decrease
in the number of hours charged to clients at a few of our units. Acquired
businesses in 2003 represent a firm in Orange County, California and the
acquisition of HarborView in September 2003, which provides Sarbanes-Oxley
consulting services. Divested operations represent several smaller units that
did not provide opportunity for growth and cross-serving capabilities.

The largest components of operating expenses for the ATA group are
personnel costs, occupancy costs and professional service fees paid to third
parties, representing 87.3% and 87.2% of total operating expenses for the years
ended December 31, 2003 and 2002, respectively. As a percentage of revenue,
personnel costs were 68.2% and 67.2% for the years ended December 31, 2003 and
2002, respectively. Occupancy costs are generally fixed in nature, and were 7.3%
and 7.4% of revenue for the years ended December 31, 2003 and 2002,
respectively. Professional service fees paid to third parties increased to 0.8%
percent of revenue for the year ended December 31, 2003 from 0.6% for year ended
December 31, 2002, as the result of outsourced professional services utilized at
units with same-unit revenue growth and for CBIZ HarborView for Sarbanes-Oxley
consulting services that were initiated in 2003.

The decline in gross margin for the year ended December 31, 2003 from
December 31, 2002 was primarily due to compensation and benefits costs that rose
at a rate higher than revenue.

25

Benefits & Insurance Services

On a same-unit basis, the B&I group experienced an increase in revenue of
8.2% for the year ended December 31, 2003 from the year ended December 31, 2002.
The increase in revenue was attributable to organic growth in both the retail
and national services divisions, as well as an increase in supplemental
commissions from insurance carriers. The worksite marketing business experienced
significant revenue growth due to new clients obtained in 2003. The life
insurance business also experienced revenue growth through the sale of several
large life cases and special risk insurance cases, combined with bank-owned life
insurance placements related to one major carrier. The increase in revenue from
acquired businesses pertains to business units providing group benefits and
property and casualty services in the Salt Lake City, Maryland and southern
Florida markets. The decline in revenue from divested operations relates to
Health Administration Services, which was sold in May 2003.

The largest components of operating costs for the B&I group are personnel
costs, commissions paid to third party brokers, and occupancy costs,
representing 83.8% and 83.3% of total operating expenses in 2003 and 2002,
respectively. Personnel costs decreased as a percentage of revenue to 53.7% from
56.1%, primarily due to the revenue growth experienced in 2003. Commissions paid
to third party brokers increased to 6.8% from 5.9% for the years ended December
31, 2003 and 2002, respectively, primarily due to a higher portion of revenue
being generated with third party brokers, particularly at the special risk
insurance and bank-owned life insurance businesses. Occupancy expenses declined
as a percentage of revenue to 5.9% in 2003 from 6.3% in 2002, due to the revenue
growth previously discussed.

The improvement in gross margin in 2003 over 2002 was primarily the result
of increases in group benefit premium rates. In addition, the number of life
insurance cases that closed in 2003 contributed to margin improvement, as these
cases generally experience higher margins than traditional group health and
property and casualty products.

National Practices Services. The National Practices group contributed
approximately $145.1 million and $139.7 million of revenue, or approximately
28.6% and 28.3% of CBIZ's total revenue for the years ended December 31, 2003
and 2002, respectively.

26

CBIZ Medical Management Professionals (CBIZ MMP)

CBIZ MMP's revenue growth of 14.5% was attributable to the addition of new
clients, and expansion into new markets (such as the entrance into the Colorado
market). Revenue for CBIZ MMP is based on a percentage of amounts collected for
their clients.

The largest components of operating expenses for CBIZ MMP are personnel
costs, occupancy costs and office expenses (primarily postage), which
represented 90.0% and 90.6% of total operating expenses for the years ended
December 31, 2003 and 2002, respectively. Personnel costs increased by $5.2
million but decreased as a percentage of revenue to 57.6% from 58.2%, for the
years ended December 31, 2003 and 2002, respectively. The increase in personnel
costs was directly related to an increase in staffing levels to support revenue
growth. Personnel costs decreased as a percentage of revenue primarily due to
the revenue growth as previously discussed. Occupancy costs as a percentage of
revenue were 7.2% and 7.3%, for the years ended December 31, 2003 and 2002,
respectively. Occupancy costs as a percent of revenue remained consistent in
2003 from 2002 despite the growth in revenue, due to additional costs incurred
in connection with our expansion into new markets as discussed above. Office
expenses declined as a percentage of revenue to 8.3% in 2003 from 9.1% in 2002,
primarily as a result of the growth in revenue.

The improvement in gross margin for the year ended December 31, 2003 from
2002, was primarily due to efficiencies gained by CBIZ MMP as the result of
investments made in systems and new technologies.

National Practices -- Other

On a same-unit basis, the National Practices group, excluding CBIZ MMP
experienced lower revenues in 2003 as compared to 2002. The majority of the
decrease in revenue was related to the lack of transactions in CBIZ's Mergers
and Acquisition Group (CBIZ M&A), as compared to 2002, in which one significant
transaction closed in the fourth quarter. In addition to the decrease in CBIZ
M&A's revenue, the valuation, property tax and

27

information technology (IT) businesses suffered from decreased revenue in 2003
primarily due to rationalization of certain unproductive offices and business
lines.

The largest components of operating expenses for the National Practices
Services - Other segment are personnel costs, direct costs and occupancy costs,
representing 87.9% and 85.4% of total operating expenses in 2003 and 2002,
respectively. Personnel costs as a percentage of revenue were 69.8% and 64.0%
for the years ended December 31, 2003 and 2002, respectively. The increase in
personnel costs as a percentage of revenue was directly related to the decrease
in revenue in 2003 from 2002. Direct costs primarily consist of product costs
associated with hardware sales in the technology businesses, and were 11.0% and
13.2% of revenue for the years ended December 31, 2003, and 2002, respectively.
Occupancy costs are typically fixed in nature and were 7.3% and 6.8% of revenue
for the years ended December 31, 2003, and 2002, respectively. Occupancy costs
increased as a percentage of revenue, as a result of the decline in revenue as
previously discussed.

The decline in gross margins for the year ended December 31, 2003 from
December 31, 2002 was primarily due to certain unproductive offices and product
lines within the property tax, mergers and acquisitions, and IT businesses, and
the lack of transactions in CBIZ's Mergers and Acquisition Group in 2003 as
compared to 2002.

Revenues

Total revenue for the year ended December 31, 2003 was $506.8 million as
compared to $493.0 million for the year ended December 31, 2002, representing an
increase of $13.8 million, or 2.7 %. The increase in revenue attributable to
acquisitions completed during the year ended December 31, 2003 was $9.0 million,
offset by decreases in revenue attributable to divested operations of $9.3
million. For business units with comparable periods of operations for the years
ended December 31, 2003 and 2002, revenue increased $14.1 million or 2.9%. A
more comprehensive analysis of revenue is discussed by each operating practice
group, above.

Expenses

Operating expenses increased to $441.7 million for the year ended December
31, 2003, from $434.4 million for the comparable period in 2002, representing an
increase of $7.3 million. As a percent of revenue, operating expenses (excluding
consolidation and integration charges), were 86.8% and 87.4%, for the years
ended December 31, 2003 and 2002, respectively. The primary components of
operating expenses were personnel costs and occupancy expense, representing
80.1% and 79.2% of total operating expenses and 69.8% of revenue for the years
ended December 31, 2003 and 2002, respectively. A more comprehensive analysis of
operating expenses (excluding consolidation and integration charges) and their
impact on gross margin is discussed by operating practice group, above.

Consolidation and integration charges are reported as operating expenses in
the consolidated statements of operations and are discussed more fully in Note 9
to the consolidated financial statements included herewith. Consolidation and
integration charges decreased as a percent of revenue to 0.4% from 0.7% for the
years ended December 31, 2003 and 2002, respectively. Consolidation and
integration charges were higher in 2002, primarily as the result of $1.7 million
of costs recognized during 2002 for consolidation activities in the Kansas City
market, related to non-cancelable lease obligations.

Corporate general and administrative expenses increased slightly to $19.5
million from $19.2 million for the years ended December 31, 2003, and 2002,
respectively. While total costs remained relatively flat, compensation expenses
increased in 2003, primarily due to $0.7 million of severance expense.
Expenditures for legal costs to pursue cases concerning non-competition
violations by former employees, insurance coverage issues, and other cases in
which CBIZ was involved, decreased approximately $1.4 million. Corporate general
and administrative expenses represented 3.8% of total revenues for the year
ended December 31, 2003, compared to 3.9 % for the comparable period in 2002.

Depreciation and amortization expense decreased to $17.1 million for the
year ended December 31, 2003, from $20.4 million for the comparable period in
2002, representing a decrease of $3.3 million, or 16.2%. The decrease primarily
related to dispositions and assets that became fully depreciated, offset by
increases related to additional capital expenditures made since December 31,
2002. In addition, approximately $0.9 million of the

28

decrease was directly related to the shift from purchasing certain assets to
leasing assets, which are recorded as operating leases in operating expense. As
a percentage of revenue, depreciation and amortization expense decreased to 3.4%
for the year ended December 31, 2003 from 4.1% for the comparable period in
2002.

Interest expense decreased to $1.1 million for the year ended December 31,
2003, from $2.5 million for the comparable period in 2002, a decrease of $1.4
million, or 57.4%. The decrease was the result of both lower average outstanding
debt balances and a lower average interest rate in 2003. The average debt
balance was $18.2 million for the year ended December 31, 2003 compared to $38.6
million for the year ended December 31, 2002. The weighted average interest rate
on bank debt was 4.4% for the year ended December 31, 2003 compared to 5.6% for
the same period in 2002.

CBIZ recorded a net gain from divested operations of $2.5 million for the
year ended December 31, 2003, as compared to a net gain of $0.9 million for the
year ended December 31, 2002. CBIZ completed the divestiture of six non-core
business operations during the year ended December 31, 2003, either through sale
or closure. During 2002, the net gain was attributable to the divestiture of
eleven non-core operations. In addition to this divestiture activity, CBIZ
classified five operations as discontinued operations during 2003 and 2002,
respectively, in accordance with Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
144)." The results of these operations are disclosed separately in the
consolidated financial statements and discussed separately under "Results of
Operations -- Discontinued Businesses," below.

Other expense, net was $1.2 million and $1.6 million for the years ended
December 31, 2003 and 2002, respectively. Other expense, net is comprised
primarily of interest income earned in CBIZ's payroll business, gains and losses
on the sale of assets, and miscellaneous income such as contingent royalties
from previous divestitures. For 2003, other income was offset by $2.8 million of
impairment charges, of which $2.4 million related to the impairment of a note
taken in connection with the divestiture of the hazardous waste operation in
1997, that filed bankruptcy in 2003. For 2002, other income was offset by $2.4
million of charges related to the write-down of CBIZ's investment in two
high-tech start-up ventures, including $0.8 million impairment charge related to
the note previously discussed. In addition, interest income decreased $0.4
million related to lower interest rates in 2003.

CBIZ recorded income tax expense from continuing operations of $12.5
million for the year ended December 31, 2003, compared with $8.2 million in
2002. The effective tax rate was 43.4% for the year ended December 31, 2003. The
effective tax rate for the year ended December 31, 2003, is higher than the
statutory federal and state tax rates of approximately 40% primarily due to
differences such as the establishment of a valuation allowance related to asset
impairment charges, portions of certain meal and entertainment expenses that are
not fully deductible for tax purposes, and tax credit carryforwards.

RESULTS OF OPERATIONS -- DISCONTINUED BUSINESSES

During the years ended December 31, 2004, 2003 and 2002, CBIZ divested of
three, six and five business operations, respectively, which were no longer part
of CBIZ's strategic long-term growth objectives. One business unit was available
for sale at December 31, 2002, and was sold in 2003. There were no businesses
available for sale at December 31, 2004 or 2003.

These operations qualified for treatment as discontinued businesses, and
have been classified as such in accordance with Statement of Financial
Accounting Standards (SFAS) 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." Accordingly, the net assets, liabilities, and results of
operations of these businesses are reported separately in the consolidated
financial statements included herewith. Based upon the sales proceeds and costs
of closure, CBIZ recorded a gain on disposal of discontinued businesses, net of
tax, of $0.1 million and $0.7 million for the years ended December 31, 2004 and
2003, respectively and a loss of $2.5 million for the year ended December 31,
2002. Revenue associated with discontinued businesses for the years ended
December 31, 2004, 2003 and 2002 was $3.4 million, $12.5 million and $18.6
million, respectively. The loss from operations of these discontinued
businesses, net of tax, for the years ended December 31, 2004, 2003 and 2002 was
$0.9 million, $1.7 million and $2.1 million respectively.

29

RESULTS OF OPERATIONS -- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Effective January 1, 2002, CBIZ adopted Statement of Financial Accounting
Standard No., 142 "Goodwill and Other Intangible Assets" (SFAS 142), which
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead be tested for impairment at least annually at
the reporting unit level. SFAS 142 also requires intangible assets with finite
useful lives to be amortized over their respective estimated useful lives and
reviewed for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." CBIZ finalized the required
transitional tests of goodwill during 2002, and recorded an impairment charge of
$88.6 million on a pre-tax basis. This non-cash charge is reflected as a
cumulative effect of a change in accounting principle in the amount of $80.0,
net of a tax benefit of $8.6 million.

FINANCIAL CONDITION

Total assets were $413.8 million, total liabilities were $167.3 million and
shareholders equity was $246.5 million as of December 31, 2004. Current assets
of $184.0 million exceeded current liabilities of $106.1 million by $77.9
million.

Cash and cash equivalents increased $1.5 million to $5.3 million for the
year ended December 31, 2004. Restricted cash was $10.1 million at December 31,
2004, a decrease of $0.8 million from December 31, 2003. Restricted cash
represents those funds held in connection with CBIZ's securities 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 $109.7 million at December 31, 2004, an
increase of $0.3 million from December 31, 2003. The increase in accounts
receivable is attributed to the increase in revenue from internal growth and
acquisitions, offset by an improvement in collections from a year ago. Days
sales outstanding (DSO), from continuing operations, which are calculated based
on gross accounts receivable balance at the end of the period divided by daily
revenue, decreased from 81 days at December 31, 2003 to 79 days at December 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 $5.4 million from December 31, 2003. Acquisitions, including
contingent consideration earned, resulted in a $8.0 million increase in goodwill
and other intangible assets during 2004. In addition, goodwill and other
intangible assets decreased by $2.6 million as a result of divestitures
completed during the year ended December 31, 2004, and amortization expense for
client lists and other intangibles. See further discussion in Note 5 to the
consolidated financial statements included herewith.

The increase in income taxes recoverable to $7.1 million at December 31,
2004, is related to a favorable tax position which was successfully resolved
upon completion of the IRS examination of prior year tax provisions, and is
further discussed in Note 6 to the consolidated financial statements included
herewith. In addition, CBIZ is due approximately $0.4 million in interest in
relation to the aforementioned tax position, which is recorded as other current
assets in the accompanying consolidated balance sheet at December 31, 2004. The
overall increase in other current assets of $0.5 million from December 31, 2003
is primarily attributable to this interest receivable.

CBIZ implemented a deferred compensation plan in the first quarter of 2004.
Assets of the plan are held in a rabbi trust, and are directly offset by
liabilities of the plan. The plan is discussed in further detail in Note 10 of
the consolidated financial statements included herewith.

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 $25.9 million at December 31, 2004 reflects
amounts due to suppliers and vendors; balances fluctuate during the year based
on the timing of cash payments. Accrued personnel costs represent amounts due
for payroll, payroll taxes, employee benefits and incentive compensation;
balances

30

fluctuate during the year based on the timing of payments and our estimate of
incentive compensation costs, which is described more fully under "Estimates of
Incentive Compensation Costs and Effective Income Tax Rates, below". Other
current liabilities increased $4.1 million to $17.2 million at December 31,2004,
primarily as the result of an increase in unearned revenue from a year ago,
which relates primarily to our Valuation and Property Tax business, and set up
and license fees related to flexible benefits services provided by our ATA
practice group. See further discussion under "Revenue Recognition and Valuation
of Unbilled Revenues," below. The increase in other current liabilities at
December 31, 2004 from December 31, 2003 was also a result of acquisition
activity, costs related to client service related obligations, and capitalized
lease obligations in connection with consolidation activities in Kansas City.
These increases were offset by a decrease in our consolidation and integration
reserve which is described in Note 9 to the consolidated financial statements
included herewith.

Bank debt for amounts due on CBIZ's credit facility increased by $39.9
million to $53.9 million at December 31, 2004 from December 31, 2003, primarily
as a result of stock repurchases made during 2004. Other non-current liabilities
increased $1.1 million primarily due to capitalized lease obligations in
connection with consolidation activities in Kansas City.

Stockholders' equity decreased $31.3 million in 2004 from 2003, primarily
due to CBIZ repurchasing 10.4 million shares of its common stock for a total
cost (including expenses) of $50.4 million (7.5 million shares were purchased in
a tender offer and the remaining 2.9 million shares were repurchased in the open
market). Funds used to purchase shares were provided by cash flow generated from
CBIZ's operations, as well as borrowings under CBIZ's credit facility. The
decrease in stockholders' equity resulting from the share repurchases was offset
by net income of $16.1 million earned for the year ended December 31, 2004, and
$1.7 million related to the exercise of stock options.

LIQUIDITY AND CAPITAL RESOURCES

CBIZ's principal source of net operating cash is derived from the
collection of fees and commissions from professional services rendered to its
clients. In addition, CBIZ supplements net operating cash with a senior secured
credit facility. The $100.0 million facility carries an option to increase the
commitment to $125.0 million and allows for the allocation of funds for
strategic initiatives, including acquisitions and the repurchase of CBIZ stock.
The primary use of the credit facility is for working capital, expansion and
continued improvement of new and existing service offerings, and business
acquisitions. The facility has a five year term with an expiration date of
August 2009. The credit facility is secured by substantially all assets and
capital stock of CBIZ and its subsidiaries. Under the credit facility, CBIZ is
required to meet certain financial covenants with respect to (i) minimum net
worth; (ii) maximum leverage ratio; and (iii) a minimum fixed charge coverage
ratio. CBIZ was in compliance with its covenants as of December 31, 2004 and
projects that it will remain in compliance during 2005.

At December 31, 2004, CBIZ had $53.9 million outstanding under its credit
facility, and $4.2 million in letters of credit outstanding. Available funds
under the facility based on the terms of the commitment were approximately $17.4
million at December 31, 2004. Management believes the available funds from the
credit facility, along with cash generated from operations provides CBIZ the
financial resources needed to meet business requirements for the next twelve
months, including capital expenditures, working capital requirements, and
strategic investments. See Note 7 to CBIZ's consolidated financial statements
included herewith.

CBIZ may also obtain funding by offering securities or debt, through the
public markets or private markets. CBIZ currently has a number of shelf
registrations active, under which it can offer such securities. See Note 11 to
the consolidated financial statements contained herein for a description of the
aforementioned registration filings.

SOURCES AND USES OF CASH

Cash provided by operating activities represents net income adjusted for
certain non-cash items and changes in assets and liabilities. During 2004, cash
provided by operating activities was $20.4 million compared to $39.9 million in
2003. The majority of the decrease in cash provided by operating activities in
2004 was due to an increase in income taxes of approximately $10.8 million. The
increase in income taxes is attributed to deferred
31

tax assets utilized in 2003 in connection with the divestiture of two non-core
business units. The remaining decrease in cash provided by operating activities
is due to an increase in net cash used toward discontinued operations of $7.3
million.

Net cash provided by operating activities in 2003 was $39.9 million versus
$42.3 million in 2002, a decrease of $2.4 million. The decrease in 2003 is due
to an increase in cash used toward working capital of $8.3 million, offset by an
increase in net income adjusted for certain non-cash items of $3.4 million and
an increase in cash provided by discontinued operation of $2.5 million.

Cash flows from investing activities consist primarily of payments toward
capital expenditures and business acquisitions, proceeds from divested
operations and the collection of notes receivable. CBIZ used $9.3 million in net
cash for investing activities during 2004, compared to $5.5 million during 2003.
The increase in cash used in investing activities during 2004 resulted from an
increase in business acquisitions of $1.8 million along with reductions in
proceeds from divested operations of $2.6 million and the net change in notes
receivable of $1.6 million. Net additions to property and equipment were $8.4
million and $10.6 million in 2004 and 2003, respectively, reflecting a lower
investment in 2004 of $2.2 million. Capital expenditures primarily consisted of
leasehold improvements and equipment in connection with the consolidation of
certain offices, IT capital to support future growth in the benefits and
insurance, medical practice management, property tax and flexible spending
service offerings, and equipment purchases in relation to normal replacement.

CBIZ used $5.5 million in net cash for investing activities during 2003,
compared to $3.0 million during 2002. The increase in cash used in investing
activities during 2003 primarily resulted from a reduction in proceeds from
discontinued operations of $3.0 million. Proceeds from divestitures increased
$2.5 million while investment in business acquisitions decreased $0.7 million,
offsetting the net uses of cash. Net additions to property and equipment were
$10.6 million and $8.1 million in 2003 and 2002, respectively, reflecting a
higher investment in 2003 of $2.5 million. Capital expenditures primarily
consisted of continued expenditures toward leasehold improvements and equipment
in connection with the consolidation of certain offices, IT capital of
internally developed software to support cross selling initiatives, growth in
the medical practice management unit and equipment purchases in relation to
normal replacement.

Cash flows from financing activities consist primarily of repurchases of
common stock, net borrowing activity from the credit facility, payments toward
notes payable and capitalized leases, and proceeds from the exercise of stock
options. CBIZ used $9.6 million in net cash for financing activities in 2004
compared to $36.9 million in 2003. During 2004 we purchased 10.4 million shares
of common stock for $50.4 million, compared to the purchase of 10.0 million
shares of common stock for $33.6 million in 2003. Financing sources of cash
during 2004 were primarily $39.9 million in net proceeds from the credit
facility compared to $3.5 million of net payments in 2003, and $1.4 million in
proceeds from the exercise of stock options compared to $0.9 million in 2003.

CBIZ used $36.9 million in net cash for financing activities in 2003
compared to $37.3 million in 2002. During 2003, the company purchased 10.0
million shares of its common stock for $33.6 million. Financing uses of cash
during 2003 also included $3.5 million of net payments toward the credit
facility versus $37.5 million in

32

2002. CBIZ's aggregate amount of future obligations for the next five years and
thereafter is set forth below (in thousands):

- ---------------

(1) Excludes cash payments for subleases.

OFF-BALANCE SHEET ARRANGEMENTS

CBIZ maintains administrative service agreements with independent CPA
firms, as described more fully under the "Business Services" section of Items 1
and 2, Business and Properties. These CPA firms 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 consolidated
financial statements included herewith.

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 December 31, 2004
and 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", as amended, 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 balance sheets.

CBIZ provides letters of credit to landlords (lessors) of its leased
premises in lieu of security deposits. Letters of credit under our facility at
December 31, 2004 and 2003 were $2.9 million and $3.2 million, respectively.

CBIZ has 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
December 31, 2004, we were not aware of any indemnification agreements that
would require material payments.

INTEREST RATE RISK MANAGEMENT

CBIZ 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 a one, three, or
six-month U.S. dollar LIBOR. Interest rate swaps allow CBIZ to maintain a target
range of fixed to floating rate debt. During June 2003, CBIZ paid its
33

revolving credit facility balance down to zero, thus requiring it to terminate
its interest rate swap. The interest rate swap was scheduled to expire during
August 2003 and carried a fixed rate of 5.58% (fixed Libor rate of 3.58% plus an
applicable margin of 2.0%). During 2004, management did not utilize interest
rate swaps. 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, with financial
reporting results relying 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 Generally
Accepted Accounting Principles (GAAP) and SEC Staff Accounting Bulletin No. 104
(SAB 104). CBIZ offers a vast array of products and 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.

Certain of our client arrangements encompass multiple deliverables. CBIZ
accounts for these arrangements in accordance with Emerging Issues Task Force
No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables"
(EITF 00-21). If the deliverables meet the criteria in EITF 00-21, the
deliverables are divided into separate units of accounting and revenue is
allocated to the deliverables based on their relative fair values. Revenue for
each unit is recognized separately in accordance with CBIZ's revenue recognition
policy for each unit. For those arrangements where the deliverables do not
qualify as a separate unit of accounting, revenue from all deliverables are
treated as one accounting unit and recognized on a pro-rata basis over the term
of the arrangement.

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 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.

Through one of its ATA units, CBIZ provides flexible benefits
administration services to clients, grants access of its proprietary software to
third parties, and provides hosting to these parties. Revenue associated with
set up and license fees related to our flexible benefits services are deferred
and recognized pro rata over the life of the contract.

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

34

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.

- Supplemental commissions, which are based upon certain performance
targets, are recognized at the earlier of notification that the target
has been achieved, or cash collection.

- Fee income is recognized in the period in which services are provided,
and may be based on actual hours incurred on an hourly fee basis, fixed
fee arrangements, or asset-based fees.

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 is recognized on a pro rata basis over the life
of the engagement. Revenue associated with success fee transactions is
recognized when the transaction is completed.

- Technology Consulting -- Revenue associated with hardware and software
sales is recognized upon delivery and acceptance of the product. Revenue
associated with installation and service agreements is 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
is 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 clients' 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, the age of accounts receivable
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.

VALUATION OF GOODWILL

Effective January 1, 2002, CBIZ adopted the non-amortization provisions of
SFAS 142, and accordingly ceased amortization of our remaining goodwill balance.
CBIZ evaluated the goodwill for impairment using the fair value impairment
guidelines of SFAS 142. During 2002, CBIZ completed the process of evaluating
our goodwill for impairment using the fair market impairment guidelines of SFAS
142. This change to a new method of accounting for goodwill resulted in a
non-cash impairment charge of $88.6 million on a pretax basis ($80.0 million net
of tax), which was recorded as a cumulative effect of a change in accounting
principle as of January 1, 2002. CBIZ evaluates goodwill for impairment annually
during the fourth quarter of each fiscal year. During 2003 and 2004, there was
no impairment of goodwill based on our annual evaluation.

35

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 herein.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
the revised Statement of Financial Accounting Standards ("FAS") No. 123,
Share-Based Payment ("FAS 123R"), which addresses the accounting for share-based
payment transactions in which the Company obtains employee services in exchange
for (a) equity instruments of the Company or (b) liabilities that are based on
the fair value of the Company's equity instruments or that may be settled by the
issuance of such equity instruments. This statement eliminates the ability to
account for employee share-based payment transactions using APB Opinion No. 25
and requires instead that such transactions be accounted for using the
grant-date fair value based method. This statement will be effective as of the
beginning of the first interim or annual reporting period that begins after June
15, 2005.

FAS 123(R) applies to all awards granted or modified after the Statement's
effective date. In addition, compensation cost for the unvested portion of
previously granted awards that remain outstanding on the Statement's effective
date shall be recognized on or after the effective date, as the related services
are rendered, based on the awards' grant-date fair value as previously
calculated for the pro-forma disclosure under FAS 123. Compensation expense
calculated in accordance with SFAS 123(R) in future periods may differ from the
pro forma amounts disclosed in Note 1 to the consolidated financial statements
included herewith. The amount of compensation expense will vary depending on the
number of options granted in 2005, the market value of our common stock and
changes in other variables impacting stock option valuation estimates. In
addition, upon adoption of SFAS 123(R), we may choose to use a different
valuation model to estimate stock option fair value.

In December 2004, the FASB issued FAS No. 153, "Exchanges of Non-Monetary
Assets -- An Amendment of APB Opinion No. 29" ("FAS 153"). FAS 153 amends APB
Opinion No. 29, "Accounting for Non-Monetary Transactions." The amendments made
by FAS 153 are based on the principle that exchanges of non-monetary assets
should be measured based on the fair value of the assets exchanged. Further, the
amendments eliminate the exception for non-monetary exchanges of similar
productive assets and replace it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. The provisions in FAS
153 are effective for non-monetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. Early application of the FAS 153 is permitted.
The provisions of this statement shall be applied prospectively. We do not
expect the adoption of FAS 153 to have a material effect on CBIZ's financial
statements or results of operations.
36

ITEM 7A. QUANTITATIVE AND QUALITATIVE 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 December 31, 2004, interest expense would increase or decrease by
approximately $0.5 million annually.

CBIZ does not engage in trading market risk sensitive instruments. CBIZ 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 a one, three, or six-month U.S. dollar
LIBOR. Interest rate swaps allow CBIZ 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data required hereunder are
included in this Annual Report as set forth in Item 15(a) hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. 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.
37

We have expended extensive internal and external resources to document and
test our internal controls as required by Section 404 of the Sarbanes-Oxley Act
of 2002. The report of our management regarding internal control over financial
reporting and the attestation report of our independent registered public
accounting firm are included in Item 8 of this Annual Report, starting on page
F-1.

In the course of our ongoing evaluation, we have identified internal
control deficiencies in a number of business processes. These deficiencies were
not material to our operations or financial reporting either individually or in
the aggregate. In each instance, we have undertaken efforts to remediate any
deficiencies identified. We are continuing our initiatives to implement new IT
systems where needed to support corporate functions or business unit operations
in order to further enhance operating efficiencies. As these new systems and
procedures are implemented, we continue to evaluate the effectiveness of our
disclosure controls and our internal controls over financial reporting.

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 required to be
disclosed by us in the reports that we file or submit under the Exchange act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms.

Other than disclosed above, there were no changes in our Internal Controls
that occurred during the quarter ended December 31, 2004 that have materially
affected, or are reasonably likely to materially affect, our Internal Controls.

ITEM 9B. OTHER INFORMATION

None

38

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to this item not included below is incorporated by
reference from CBIZ's definitive proxy statement for the 2005 Annual
Stockholders' Meeting to be filed with the Securities and Exchange Commission no
later than 120 days after the end of CBIZ's fiscal year.

The following table sets forth certain information regarding the directors,
executive officers and certain key employees of CBIZ. Each executive officer of
CBIZ named in the following table has been elected to serve until his successor
is duly appointed or elected or until his earlier removal or resignation from
office. No arrangement or understanding exists between any executive officer of
CBIZ and any other person pursuant to which he or she was selected as an
officer.

- ---------------

(1) Member of Management Executive Committee

(2) Member of Audit Committee

(3) Member of Nominating & Governance Committee

(4) Member of Compensation Committee

EXECUTIVE OFFICERS AND DIRECTORS:

Steven L. Gerard was elected by the Board to serve as its Chairman in
October, 2002. He was appointed Chief Executive Officer and Director in October,
2000. Mr. Gerard was Chairman and CEO of Great Point Capital, Inc., a provider
of operational and advisory services from 1997 to October 2000. From 1991 to
1997, he was Chairman and CEO of Triangle Wire & Cable, Inc. and its successor
Ocean View Capital, Inc. Mr. Gerard's prior experience includes 16 years with
Citibank, N.A. in various senior corporate finance and banking positions,
including ultimately Senior Managing Director, responsible for the risk
management of Citibank's commercial and investment banking activities in the
United States, Europe, Australia and Japan. Further, Mr. Gerard served

39

seven years with the American Stock Exchange, where he last served as Vice
President of the Securities Division. Mr. Gerard also serves on the Boards of
Directors of Fairchild Company, Inc., Lennar Corporation, TIMCO Aviation
Services, Inc. and Joy Global, Inc.

Rick L. Burdick has served as a Director of CBIZ since October 1997, when
he was elected as an independent director. In October 2002, he was elected by
the Board as Vice Chairman, a non-officer position. Mr. Burdick has been a
partner at the law firm of Akin Gump Strauss Hauer & Feld L.P since April 1988.
Mr. Burdick serves on the Board of Directors of AutoNation, Inc.

Gary W. DeGroote has served as a Director of CBIZ since October, 2002, when
he was elected as an independent director to serve the remaining term of his
father, Michael G. DeGroote, who resigned from the Board for health reasons. Mr.
DeGroote is the President of GWD Management Inc., a private Canadian diversified
investment holding company founded in 1980 with an office in Burlington,
Ontario. Mr. DeGroote also serves as a Director and Officer of other private
companies. From 1976 to 1989, Mr. DeGroote held several positions with Laidlaw
Inc., a public waste services and transportation company, ending as
Vice-President and Director in 1989. From 1991 to 1994, Mr. DeGroote served as
President of Republic Environmental Systems Ltd., and Director of Republic
Industries Inc. He is currently a Director of Waste Services, Inc.

Joseph S. DiMartino has served as a Director of CBIZ since November 1997,
when he was elected as an independent director. Mr. DiMartino has been Chairman
of the Board of the Dreyfus Family of Funds since January 1995. Mr. DiMartino
served as President, Chief Operating Officer and Director of The Dreyfus
Corporation from October 1982 until December 1994 and also served as a director
of Mellon Bank Corporation. Mr. DiMartino also serves on the Board of Directors
of LEVCOR International, Inc. (formerly Carlyle Industries, Inc.), The Newark
Group, and the Muscular Dystrophy Association.

Harve A. Ferrill has served as a Director of CBIZ since October 1996, when
he was elected as an independent director. Mr. Ferrill served as Chief Executive
Officer and Chairman of Advance Ross Corporation, a company that provides tax
refunding services, from 1992 to 1996. Mr. Ferrill served as President of
Advance Ross Corporation from 1990 to 1992. Since 1996, Advance Ross Corporation
has been a wholly-owned subsidiary of Cendant Corporation. Mr. Ferrill serves as
a Director of Horny Toad, Inc., a manufacturer of sports clothing.

Richard C. Rochon has served as a Director of CBIZ since October 1996, when
he was elected as an independent director. Mr. Rochon is Chairman and Chief
Executive Officer of Royal Palm Capital Partners, a private investment and
management firm. Mr. Rochon serves as a director with Bancshares of Florida
(BOFL), a Florida Banking Corporation. He is also a director of Devcon
International (DEVC), a materials and aggregates and electronic securities
company. Mr. Rochon is Chairman of the Board of Sunair, Inc. (SNR), a specialty
radio communications and pest control company. From 1985 to February 2002, Mr.
Rochon served in various capacities with, and most recently as, President of
Huizenga Holdings, Inc., a management and holding company owned by H. Wayne
Huizenga. Mr. Rochon was a former director of Boca Resorts, Inc. from 1996
through 2004. From 1979 until 1985, Mr. Rochon was employed as a certified
public accountant by the public accounting firm of Coopers & Lybrand, L.L.P.

Todd Slotkin has served as a Director of CBIZ since September 2, 2003, when
he was elected as an independent director. Mr. Slotkin serves as Executive Vice
President and CFO of MacAndrews and Forbes Holdings, and as Executive Vice
President and CFO of publicly owned MYF Worldwide (NYSE:MFW). Prior to joining
MacAndrews & Forbes in 1992, Mr. Slotkin spent 17 years with Citicorp,
ultimately serving as senior managing director and senior credit officer. Mr.
Slotkin serves on the Board of Managers of Spectaguard and the Board of
Directors of TransTech Pharma; formerly served as director of CalFed Bank; and
is Chairman and co-founder of the Food Allergy Institute.

Donald V. Weir has served as a Director of CBIZ since September 2, 2003,
when he was elected as an independent director. Mr. Weir has served as financial
consultant with Sanders Morris Harris for the past four years. Prior to this Mr.
Weir was CFO and director of publicly-held Deeptech International and two of its
subsidiaries, Tatham Offshore and Leviathan Gas Pipeline Company, the latter of
which was a publicly -- held company. Prior to his employment with Deeptech, Mr.
Weir worked for eight years with Sugar Bowl Gas

40

Corporation, as Controller and Treasurer and later in a consulting capacity. Mr.
Weir was associated with Price Waterhouse, an international accounting firm,
from 1966 to 1979.

Jerome P. Grisko, Jr. has served as President and Chief Operating Officer
of CBIZ since February 1, 2000. Mr. Grisko joined CBIZ as Vice President,
Mergers & Acquisitions in September 1998 and was promoted to Senior Vice
President, Mergers & Acquisitions and Legal Affairs in December of 1998. Prior
to joining CBIZ, Mr. Grisko was associated with the law firm of Baker &
Hostetler LLP, where he practiced from September 1987 until September 1998,
serving as a partner of such firm from January 1995 to September 1998. While at
Baker & Hostetler, Mr. Grisko concentrated his practice in the area of mergers,
acquisitions and divestitures.

Ware H. Grove has served as Senior Vice President and Chief Financial
Officer of CBIZ since December 2000. Before joining CBIZ, Mr. Grove served as
Senior Vice President and Chief Financial Officer of Bridgestreet
Accommodations, Inc., which he joined in early 2000 to restructure financing,
develop strategic operating alternatives, and assist with merger negotiations.
Prior to joining Bridgestreet, Mr. Grove served for three years as Vice
President and Chief Financial Officer of Lesco, Inc. Since beginning his career
in corporate finance in 1972, Mr. Grove has held various financial positions
with large companies representing a variety of industries, including Revco D.S.,
Inc., Computerland/Vanstar, Manville Corporation, The Upjohn Company, and First
of America Bank. In September, 2004, Mr. Grove was appointed to the Board of
Directors for Applica, Inc. (NYSE: APN) and is a member of the Audit Committee.

Leonard Miller has served as CBIZ Accounting, Tax and Advisory Services
Practice Head since November 2000 and was appointed Senior Vice President in
February 2002. Mr. Miller was the President and Director of Financial Operations
for Miller Wagner & Company, Ltd. in Phoenix, Arizona for 22 years before the
firm joined the Century Business Services family and became Miller Wagner
Business Services, Inc. and Miller Wagner & Company, PLLC. Mr. Miller was the
Regional Managing Partner for Lester Witte and Company, and was responsible for
11 of its offices prior to co-founding Miller Wagner & Company, Ltd. With over
40 years of experience, Mr. Miller is a recognized expert in the fields of
finance, real estate, general business consulting and various litigation support
matters. Mr. Miller's professional affiliations include the American Institute
of Certified Public Accountants (AICPA), the Arizona Society of Certified Public
Accountants (ASCPA) and the Illinois Society of Certified Public Accountants
(ISCPA).

Robert A. O'Byrne has serves as a Senior Vice President of CBIZ since
December 1998 and is responsible for CBIZ' Benefits and Insurance Services. Mr.
O'Byrne served as President and Chief Executive Officer of employee benefits
brokerage/consulting firms Robert D. O'Byrne and Associates, Inc. and The Grant
Nelson Group, Inc. prior to their acquisition by CBIZ in December 1997. Mr.
O'Byrne has more than 25 years of experience in the insurance and benefits
consulting field.

Michael W. Gleespen has served as Corporate Secretary since April 2001 and
General Counsel since June 2001. Mr. Gleespen is an attorney and has served as
CBIZ' Vice President of Regulatory Compliance and Accountancy Compliance Officer
and Technical Director since February 1998. Prior to joining CBIZ, Mr. Gleespen
was an Assistant Ohio Attorney General in the Business & Government Regulation
Section and the Court of Claims Defense Section from 1988 until 1998, during
which time he was counsel to the Ohio Accountancy Board, the Ohio State Teachers
Retirement System and represented many other state departments and agencies. Mr.
Gleespen also held the post of Associate Attorney General for Pension,
Disability and Annuity Plans and was the Co-Chairman of the Public Pension Plan
Working Group. Mr. Gleespen is a member of the Board of Directors of the Cancer
Hope Foundation and is a member of the American Society of Corporate
Secretaries.

OTHER KEY EMPLOYEES:

George A. Dufour was appointed Senior Vice President and Chief Technology
Officer in July 2001. Prior to joining CBIZ, Mr. Dufour served as Corporate
Director of Information Access Services for University Hospitals Health Systems
(UHHS), where he achieved substantial cost savings by consolidating IS resources
throughout the health system. Prior to joining UHHS in 1999, Mr. Dufour acted as
Vice President and CIO for Akron General Health Systems. From 1986 through 1994,
Mr. Dufour was with Blue Cross/Blue Shield of Ohio and served most recently
there as Director of Information Systems Development. Mr. Dufour commenced his
career in
41

information technology, which includes tenures at Cook United, Cole National
Corporation, General Tire & Rubber, Picker Corporation, and Sherwin Williams, in
1971 as the Director of Education for the Institute of Computer Management, a
division of Litton Industries. Mr. Dufour is a member of the northeast Ohio
chapter of the Healthcare Information Management Systems Society. Mr. Dufour
earned his MBA from Baldwin Wallace College.

Mark M. Waxman has over twenty years experience in marketing and branding.
Prior to joining CBIZ, he was CEO/Creative Director of one of Silicon Valley's
most well-known advertising agencies, Carter Waxman. Most recently, he was a
founding partner of SK Consulting (acquired by CBIZ in 1998) providing strategic
marketing and branding services to a wide range of companies and industries. Mr.
Waxman has been a featured marketing columnist and contributor to many business
and trade publications, and currently serves on the Board of Trustees of the
Montalvo Center for the Arts, the West Valley Mission Foundation, and Catholic
Charities, and he recently served as the Chairman of the Board of the Silicon
Valley Chamber of Commerce.

Teresa E. Bruce has served as Vice President of Human Resources since
January 1999. From 1995 to 1999 Ms. Bruce served as Director of Human Resources
for Robert D. O'Byrne & Associates, Inc. and The Grant Nelson Group, Inc.,
subsidiaries of CBIZ now known as CBIZ Benefits and Insurance Services, Inc. Ms.
Bruce has over 18 years of experience in human resources and is an active member
of the Greater Kansas City Chapter of The Human Resources Management Association
and Society of Human Resources Management, and is certified as a Senior
Professional in Human Resources (SPHR).

Chris Spurio has served as Vice President of Finance since July 1999.
Previously, Mr. Spurio was Controller since January 1998. Mr. Spurio also served
as Acting Chief Financial Officer from May 2000 to December 2000. Mr. Spurio was
associated with KPMG LLP, an international accounting firm, from July 1988 to
January 1998, serving as a Senior Manager of such firm from July 1995 to January
1998. Mr. Spurio is a CPA and a member of the American Institute of Certified
Public Accountants and the Ohio Society of Certified Public Accountants.

Michael P. Kouzelos has served as Vice President of Strategic Initiatives
since April 2001. Mr. Kouzelos served as Vice President of Shared Services from
August 2000 to March 2001 and Director of Business Integration from June 1998 to
July 2000. Mr. Kouzelos was associated with KPMG LLP, an international
accounting firm, from 1990 to September 1996 and received his Masters in
Business Administration from The Ohio State University in May of 1998. Mr.
Kouzelos is a CPA and a member of the American Institute of Certified Public
Accountants and the Ohio Society of Certified Public Accountants.

Kelly J. Kuna has served as Corporate Controller since July 1999. Ms. Kuna
served as Manager of External Reporting from December 1998 to June 1999. Prior
to joining CBIZ, Ms. Kuna was associated with KPMG LLP, an international
accounting firm, from 1992 to December 1998, serving as a Senior Manager of such
firm from July 1998 to December 1998. Ms. Kuna is a CPA and a member of the
American Institute of Certified Public Accountants and the Ohio Society of
Certified Public Accountants.

David S. Azzolina joined CBIZ in April 1999 and was appointed Corporate
Treasurer in May 2000. Prior to joining CBIZ, Mr. Azzolina spent 13 years at
Bioproducts, Inc. in a broad range of financial assignments, including strategic
initiatives, financial planning and analysis, accounting, and cash management.
Mr. Azzolina has over twenty years of financial experience. He received a B.S.
degree in accounting from The Ohio State University in 1983 and an M.B.A. degree
from The University of Akron in 1998. Mr. Azzolina is a licensed Certified
Public Accountant, State of Ohio.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this item is incorporated by reference from the
discussion under the heading "Executive Compensation" in CBIZ's definitive proxy
statement for the 2005 Annual Stockholders' Meeting to be filed with the
Securities and Exchange Commission no later than 120 days after the end of
CBIZ's fiscal year.

42

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to this item is incorporated by reference from
CBIZ's definitive proxy statement for the 2005 Annual Stockholders' Meeting to
be filed with the Securities and Exchange Commission no later than 120 days
after the end of CBIZ's fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a summary of certain agreements and transactions between
or among CBIZ and certain related parties. It is CBIZ's policy to enter into
transactions with related parties on terms that, on the whole, are no less
favorable than those that would be available from unaffiliated parties. Based on
CBIZ's experience and the terms of its transactions with unaffiliated parties,
it is the Board of Directors' belief that the transactions described below met
these standards at the time of the transactions.

A number of the businesses acquired since October 1996 are located in
properties owned indirectly by and leased from persons employed by CBIZ. In the
aggregate, CBIZ paid approximately $1.3 million, $1.4 million, and $0.8 million
for the years ended 2004, 2003 and 2002, respectively, under such leases which
management believes were at market rates.

Rick L. Burdick, a director of CBIZ, is a partner of Akin, Gump, Strauss,
Hauer & Feld, L.L.P. (Akin, Gump.) Akin, Gump performed legal work for CBIZ
during 2004, 2003 and 2002 for which the firm received approximately $0.2
million, $0.2 million, and $0.1 million from CBIZ, respectively.

Robert A. O'Byrne, a Senior Vice President, has an interest in a
partnership that receives commissions from CBIZ that are paid to certain
eligible benefits and insurance producers in accordance with a formal program to
provide benefits in the event of death, disability, retirement or other
termination. The program was in existence at the time CBIZ acquired the former
company, of which Mr. O'Byrne was an owner.

CBIZ maintains joint-referral relationships and administrative service
agreements with independent licensed CPA firms under which CBIZ provides
administrative services in exchange for a fee. 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. 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
administrative service agreements 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.

Although the service agreements do not constitute control, CBIZ is one of
the beneficiaries of the agreements and may bear certain economic risks. As
such, the CPA firms with which CBIZ maintains administrative service agreements
may qualify as variable interest entities under FASB Interpretation No. 46 (FIN
46), "Consolidation of Variable Interest Entities". The impact to CBIZ of this
accounting pronouncement is discussed in the notes to CBIZ's consolidated
financial statements included herewith.

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 December 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" and its amendments ("FIN 45-1" and "FIN 45-2"), 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 as performance is not expected
to be required.

In 2002, CBIZ executed a note receivable with a CPA firm whose partner
group has since joined MHM, PC, a CPA firm with which CBIZ maintains an
administrative services agreement. The balance on the note at December 31, 2004
and 2003 was approximately $0.2 million and $0.2 million, respectively.

43

CBIZ divested several operations during 2004, 2003, and 2002, in an effort
to rationalize the business and sharpen the focus on non-strategic businesses.
In accordance with this strategy, CBIZ has sold and may sell in the future
businesses to former employees or shareholders. Management believes these
transactions were priced at market rates, competitively bid, and entered into at
arm's length terms and conditions.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information with respect to this item is incorporated by reference from
CBIZ's definitive proxy statement for the 2005 Annual Stockholders' Meeting to
be filed with the Securities and Exchange Commission no later than 120 days
after the end of CBIZ's fiscal year.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report or
incorporated by reference:

1. Financial Statements.

As to financial statements and supplementary information, reference is
made to "Index to Financial Statements" on page F-1 of this Annual Report.

2. Financial Statement Schedules.

As to financial statement schedules, reference is made to "Index to
Financial Statements" on page F-1 of this Annual Report.

3. Exhibits.

The following documents are filed as exhibits to this Form 10-K pursuant to
Item 601 of Regulation S-K.

- ---------------

* Indicates documents filed herewith.

(b) Reports on Form 8-K

The following Current Report on Form 8-K was filed during the three months
ended December 31, 2004:

(a) On November 1, 2004, CBIZ furnished a current report on Form 8-K
to provide investors with its third quarter earnings, as released to the
public and discussed on a conference call on October 26, 2004.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Century Business Services, Inc. has duly caused this
Annual Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

CENTURY BUSINESS SERVICES, INC.
(REGISTRANT)

By /s/ WARE H. GROVE
------------------------------------
Ware H. Grove
Chief Financial Officer
March 15, 2005

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below on this Annual Report hereby constitutes and appoints Steven L. Gerard and
Ware H. Grove, and each of them, with full power to act without the other, his
true and lawful attorney-in-fact and agent, with full power of substitution for
him and his name, place and stead, in all capacities (until revoked in writing),
to sign any and all amendments to this Annual Report of Century Business
Services, Inc. and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary fully to all
intents and purposes as he might or could do in person, thereby ratifying and
confirming all that each attorney-in-fact and agent, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of
Century Business Services, Inc. and in the capacities and on the date indicated
above.

/s/ STEVEN L. GERARD /s/ JOSEPH S. DIMARTINO
- -------------------------------------------- --------------------------------------------
Steven L. Gerard Joseph S. DiMartino
Chairman and Chief Executive Officer Director

/s/ WARE H. GROVE /s/ HARVE A. FERRILL
- -------------------------------------------- --------------------------------------------
Ware H. Grove Harve A. Ferrill
Chief Financial Officer Director
(Principal Financial and Accounting Officer)

/s/ GARY W. DEGROOTE /s/ RICHARD C. ROCHON
- -------------------------------------------- --------------------------------------------
Gary W. DeGroote Richard C. Rochon
Director Director

/s/ RICK L. BURDICK /s/ TODD SLOTKIN
- -------------------------------------------- --------------------------------------------
Rick L. Burdick Todd Slotkin
Director Director

/s/ DONALD V. WEIR
- --------------------------------------------
Donald V. Weir
Director

46

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

F-1

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the
supervision of management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of our internal control over
financial reporting based on the framework provided in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO Framework).

Our assessment of the design of controls and our testing to determine the
effectiveness of controls over financial reporting required under Sections 404
of the Sarbanes-Oxley Act of 2002 has indicated that we have some deficiencies
in internal control over financial reporting, and management is working to
remediate those deficiencies. Our management has concluded that those
deficiencies, individually and in the aggregate, do not constitute a material
weakness in internal control over financial reporting. Because of the inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
disclosure. Based on our evaluation under the COSO Framework, our management has
concluded that our internal control over financial reporting was effective as of
December 31, 2004 at a reasonable assurance level.

Our management's assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2004 has been audited by KPMG, LLP,
an independent registered public accounting firm, as stated in their report
which is included in Item 8 of our Annual Report on Form 10-K.

/s/ STEVEN L. GERARD
- ---------------------------------------------------------
Steven L. Gerard
Chairman and Chief Executive Officer

/s/ WARE H. GROVE
- ---------------------------------------------------------
Ware H. Grove
Chief Financial Officer
Principal Financial and Accounting Officer

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Stockholders
Century Business Services, Inc.:

We have audited management's assessment, included in the accompanying
Management's report on internal control over financial reporting, that Century
Business Services, Inc. and subsidiaries (Company) maintained effective internal
control over financial reporting as of December 31, 2004, based on criteria
established in Internal Control -- Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external purposes
in accordance with generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the consolidated
financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that the Company maintained
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on criteria established in
Internal Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Also, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets of Century Business Services, Inc. and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2004, and our report dated March 15, 2005 expressed an
unqualified opinion on those consolidated financial statements.

/s/KPMG LLP
Cleveland, Ohio
March 15, 2005
F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Century Business Services, Inc.:

We have audited the consolidated financial statements of Century Business
Services, Inc. and subsidiaries (Company) as listed in the accompanying index on
page F-1. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule as listed in
the accompanying index on page F-1. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Century
Business Services, Inc. and subsidiaries as of December 31, 2004 and 2003, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of the
Company's internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control -- Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 15, 2005 expressed an unqualified opinion on
management's assessment of, and the effective operation of, internal control
over financial reporting.

/s/ KPMG LLP
Cleveland, Ohio
March 15, 2005

F-4

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2004 AND 2003

(IN THOUSANDS)

See the accompanying notes to the consolidated financial statements.
F-5

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(IN THOUSANDS, EXCEPT PER SHARE DATA)

See the accompanying notes to the consolidated financial statements.
F-6

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(IN THOUSANDS)

See the accompanying notes to the consolidated financial statements.
F-7

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(IN THOUSANDS)

See the accompanying notes to the consolidated financial statements.
F-8

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Century Business Services, Inc. and its wholly-owned subsidiaries (CBIZ)
are a diversified services company which, acting through its subsidiaries,
provides professional business services primarily to small and medium-sized
businesses, as well as individuals, governmental entities, and not-for-profit
enterprises throughout the United States and Toronto, Canada. CBIZ offers
integrated services through its three practice groups: accounting, tax and
advisory services, benefits and insurance services, and national practices.

Principles of Consolidation

The accompanying consolidated financial statements reflect the operations
of CBIZ and all of its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation. The accompanying
consolidated financial statements do not reflect the operations or accounts of
variable interest entities as the impact is not material to the financial
condition, results of operations or cash flows of CBIZ. See further discussion
under "Variable Interest Entities" below.

Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities and
the reported amounts of revenue and expenses. Management's estimates and
assumptions include, but are not limited to, estimates of collectibility of
accounts receivable and unbilled revenue, the realizability of goodwill and
other intangible assets, accrued liabilities (such as incentive compensation),
income taxes and other factors. Management's estimates and assumptions are
derived from and continually evaluated based upon available information,
judgment and experience. However, actual results could differ from those
estimates.

Reclassifications

Certain amounts in the 2003 and 2002 consolidated financial statements have
been reclassified to conform to the current year presentation. Reclassifications
include: legal settlements (previously reported as other income (expense), net,
which are now reported as corporate general and administrative expense) and
discontinued operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term highly liquid
investments with a maturity of three months or less at the date of purchase. The
carrying amount approximates fair value because of the short maturity of those
instruments.

Restricted Cash

Restricted cash represents fees earned by CBIZ in relation to its capital
and investment advisory services, as those funds are restricted in accordance
with applicable NASD regulations and funds on deposit from clients in connection
with the pass through of insurance premiums to the carrier. The related
liability for these funds is recorded in other current liabilities in the
consolidated balance sheets.

Funds Held for Clients and Client Fund Obligations

As part of our payroll and property tax management services, CBIZ is
engaged in the preparation of payroll checks, federal, state, and local payroll
tax returns, property tax payments and flexible spending account

F-9

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

administration. In relation to these services, CBIZ collects funds from its
clients' accounts 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 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. Other than certain federal and state regulations
pertaining to flexible spending account administration, 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 amounts of
collected but not yet remitted funds may vary significantly during the year.

Derivative Instruments and Hedging Activities

CBIZ records derivative instruments in accordance with SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as subsequently
amended by SFAS 137, SFAS 138 and SFAS 149. Derivatives are recognized as either
assets or liabilities in the statement of financial position and are measured at
fair value. The treatment of gains and losses resulting from changes in the fair
values of derivative instruments is dependent on the use of the respective
derivative instruments and whether they qualify for hedge accounting.

In 2001, CBIZ entered into an interest rate swap agreement that qualified
as a cash flow hedge, which was used to manage the interest rate mix of its
credit facility and related overall cost of borrowing. For the year ended
December 31, 2002, the change in fair value relating to CBIZ's hedging activity
resulted in a loss of approximately $0.3 million, which is recorded in
stockholders' equity under accumulated other comprehensive loss. The interest
rate swap was terminated in the third quarter, 2003, and CBIZ did not utilize
derivative instruments during the year ended December 31, 2004.

Other Financial Instruments

The carrying amount of CBIZ's accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments. The
carrying value of bank debt approximates fair value, as the interest rate on the
bank debt is variable and approximates current market rates.

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).

Effective January 1, 2002, CBIZ adopted Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead be tested for impairment at least annually at
the reporting unit level. CBIZ conducts a formal impairment test of goodwill on
an annual basis, 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.

Other identifiable intangible assets include finite-lived purchased
intangible assets, which primarily consist of client lists and non-compete
agreements. These assets are amortized using the straight-line method over their
expected period of benefit, generally two to ten years. In accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", these
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be fully recoverable.
Recoverability of long-lived assets is assessed by a comparison of the carrying
amount of the asset to the estimated undiscounted future net cash flows expected
to be generated by the asset.

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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property and Equipment

Property and equipment is recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided on the
straight-line basis over the following estimated useful lives:

Buildings................................................ 25 years
Leasehold improvements................................... Contractual term of the lease
Furniture and fixtures................................... 5 to 10 years
Computers, related equipment and software................ 2 to 7 years

Capitalized Software

The cost of software purchased or developed for internal use is capitalized
in accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The costs are
amortized to expense by the straight line method over an estimated useful life
not to exceed seven years. Capitalized software is classified in property and
equipment.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due and deferred taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. State income tax credits
are accounted for by the flow-through method.

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. CBIZ determines
a valuation allowance based on the analysis of amounts available in the
statutory carryback or carryforward periods, consideration of future deductible
amounts, and assessment of the consolidated and/or separate company
profitability of certain acquired entities.

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 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.

Certain of our client arrangements encompass multiple deliverables. CBIZ
accounts for these arrangements in accordance with Emerging Issues Task Force
No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables"
(EITF 00-21). If the deliverables meet the criteria in EITF 00-21, the
deliverables are divided into separate units of accounting and revenue is
allocated to the deliverables based on their relative fair values. Revenue for
each unit is recognized separately in accordance with CBIZ's revenue recognition
policy for each unit. For those arrangements where the deliverables do not
qualify as a separate unit of accounting, revenue from all deliverables are
treated as one accounting unit and recognized on a pro-rata basis over the term
of the arrangement.

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 the arrangement meets
revenue recognition criteria in accordance with SAB 104. CBIZ bills clients
based upon a predetermined agreed-upon fixed fee or actual hours incurred on
client projects at expected net realizable rates per hour, plus any out-of-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

Through one of its ATA units, CBIZ provides flexible benefits
administration services to clients, grants access of its proprietary software to
third parties, and provides hosting to these parties. Revenue associated with
set up and license fees related to our flexible benefits services are deferred
and recognized pro rata over the life of the contract.

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.

- Supplemental commissions, which are based upon certain performance
targets, are recognized at the earlier of notification that the target
has been achieved, or cash collection.

- Fee income is recognized in the period in which services are provided and
the arrangement meets revenue recognition criteria in accordance with SAB
104. Fees 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 is recognized on a pro rata basis over the life
of the engagement. Revenue associated with success fee transactions is
recognized when the transaction is completed.

- Technology Consulting -- Revenue associated with hardware and software
sales is recognized upon delivery and acceptance of the product. Revenue
associated with installation and service agreements is 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
is 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 clients' patient accounts
receivable. As such, revenue is determinable, earned, and recognized,
when payments are received on our clients' patient accounts.

Operating Expenses

Operating expenses represent costs incurred by our business units, and
consist primarily of personnel, occupancy and consolidation and integration
related expenses. Personnel costs include base compensation,
F-12

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 $332.0 million , $319.1 million and $309.9 million
for the years ended December 31, 2004, 2003, and 2002, 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 $35.2 million, $34.8 million
and $34.3 million for the years ended December 31, 2004, 2003, and 2002,
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 9.

Variable Interest Entities

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", "FIN
46(R)-3", and "FIN 46(R)-4"). 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.

Fees earned by CBIZ under the ASAs are recorded as revenue in the
consolidated statements of operations. In the event that accounts receivable and
unbilled work in process become uncollectible by the CPA firms, the service fee
due to CBIZ is reduced on a pro-rata basis. Although the service agreements do
not constitute control, CBIZ is one of the beneficiaries of the agreements and
may bear certain economic risks.

Earnings (loss) per Share

Basic earnings (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per share is computed by dividing net income by weighted
average diluted shares. Weighted average diluted shares are determined using the
weighted average number of common shares outstanding during the period plus the
dilutive effect of potential future issues of common stock relating to CBIZ's
stock option programs and other potentially dilutive securities. In calculating
diluted earnings (loss) per share, the dilutive effect of stock options is
computed using the average market price for the period in accordance with the
treasury stock method.

F-13

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock Based Awards

CBIZ accounts for its employee stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeds the exercise price. CBIZ
provides pro forma net income and pro forma earnings per share disclosures for
employee stock option grants as if the fair-value-based method had been applied
in accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." Had the cost of stock option plans
been determined based on the fair value of options at the grant date, CBIZ's net
income (loss) and earnings (loss) per share pro forma amounts would be as
follows (amounts in thousands, except per share data):

- ---------------

(1) A tax rate of 40.0% was applied to the fair value of options in determining
pro-forma net income for each of the years ended December 31, 2004, 2003 and
2002.

The above results may not be representative of the effects on net income
for future years. CBIZ applied the Black-Scholes option-pricing model to
determine the fair value of each option granted in 2004, 2003 and 2002. Below is
a summary of the assumptions used in the calculation:

Restricted stock awards are independent of option grants, and are granted
at no cost to the recipients. The market value of shares awarded is recorded as
unearned compensation, and is expensed ratably over the period which
restrictions lapse. See Note 12 to the consolidated financial statements for a
complete description of employee share plans.

Guarantees

CBIZ recognizes a liability for the fair value of obligations undertaken in
issuing guarantees, in accordance with the Financial Accounting Standards Board
issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to
Others", as amended (FIN 45). The liability is recognized at the inception of
such guarantees, and is recorded as other current liabilities in the
consolidated balance sheets. See Note 7 for additional disclosures regarding
guarantees.

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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. ACCOUNTS RECEIVABLE, NET

Accounts receivable balances at December 31, 2004 and 2003 were as follows
(in thousands):

3. NOTES RECEIVABLE

Notes receivable balances at December 31, 2004 and 2003 were as follows (in
thousands):

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net at December 31, 2004 and 2003 consisted of the
following (in thousands):

Depreciation expense (including amortization of capitalized software) was
approximately $12.5 million, $13.6 million, and $15.6 million during the years
ended December 31, 2004, 2003 and 2002, respectively.

F-15

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The components of goodwill and other intangible assets, net at December 31,
2004 and 2003 were as follows (in thousands):

Client lists are amortized over periods not exceeding ten years. Other
intangibles, which consist primarily of non-compete agreements, are amortized
over periods ranging from two to ten years. Amortization expense (excluding
impairment charges as described below) of client lists and other intangible
assets was approximately $1.8 million, $1.5 million and $2.2 million during the
years ended December 31, 2004, 2003 and 2002, respectively. Amortization expense
for client lists and other intangible assets for each of the next five years is
estimated to be (in thousands):

This estimate excludes the impact of events that may occur subsequent to
December 31, 2004, including acquisitions, divestitures, and additional purchase
price that may be earned in connection with acquisitions that occurred prior to
December 31, 2004.

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets", CBIZ recorded non-cash pre-tax impairment charges of $0.2
million and $0.3 million during the years ended December 31, 2004 and 2003,
respectively. The impairment charges are recorded as depreciation and
amortization expense in the accompanying consolidated statements of operations
and relate to client lists from our Accounting, Tax and Advisory, and Benefits
and Insurance practice groups that were purchased in 2000 and 1999,
respectively.

During 2002, in connection with the adoption of SFAS No. 142, "Goodwill and
Other Intangible Assets," CBIZ recorded a non-cash impairment charge to goodwill
of $88.6 million on a pretax basis. The charge is recorded as a cumulative
effect of a change in accounting principle in the accompanying consolidated
statement of operations. Based upon our annual impairment review conducted
during the fourth quarter, CBIZ determined there was no impairment of goodwill
for the years ended December 31, 2004 or 2003.

F-16

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in goodwill for the years ended December 31, 2004 and 2003 were as
follows (in thousands):

6. INCOME TAXES

A summary of income tax expense (benefit) included in the consolidated
statements of operations is as follows (in thousands):

F-17

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision for income taxes attributable to earnings from continuing
operations differed from the amount obtained by applying the federal statutory
income tax rate to income from continuing operations before income taxes, as
follows (in thousands, except percentages):

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities from continuing
operations at December 31, 2004 and 2003, are as follows (in thousands):

During the fourth quarter of 2004, the Internal Revenue Service (IRS) made
a final determination relative to its examination of CBIZ's federal income tax
returns for the years ended December 31, 1998, 1999, and 2000. The IRS agreed
with CBIZ's favorable tax position, which resulted in an income tax refund of
$4.0 million for the years under examination. At December 31, 2004, this amount
was recorded as income taxes recoverable in the accompanying consolidated
balance sheet. CBIZ also recorded a deferred tax liability of $1.3 million, and
reversed an accrual for income taxes payable of $0.8 million related to the
audit results. These items resulted in a

F-18

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

net tax benefit of $3.5 million during the year ended December 31, 2004. The tax
refund was received in February 2005.

CBIZ's U.S. NOL carryforwards arose from the separate return years of
certain acquired entities and are subject to limitations regarding the offset of
CBIZ's future taxable income. Net operating loss (NOL) carryforwards for
continuing operations at December 31, 2004 and 2003 are summarized below (in
thousands). The availability of NOL's is reported as deferred tax assets, net of
applicable valuation allowances, in the accompanying consolidated balance
sheets.

CBIZ established valuation allowances for portions of the Canadian and
state NOL carryforwards, state income tax credit carryforwards, and for an asset
impairment charge. The overall net change in the valuation allowance for the
year ended December 31, 2004 was a decrease of $0.7 million, due to a decrease
in the valuation allowance for NOL carryforwards.

The net change in the valuation allowance for the year ended December 31,
2003 was an increase of $4.6 million, due to increases in the valuation
allowances for NOL carryforwards of $1.9 million, state tax credit carryforwards
of $2.5 million, and asset impairment charges of $1.3 million. These increases
were offset by a decrease in the valuation allowance for state deferred taxes
related to an impairment of tax deductible goodwill of $1.1 million.

7. BANK DEBT

Bank debt balances for the years ended December 31, 2004 and 2003 were as
follows (in thousands, except percentages):

Effective August 9, 2004, CBIZ modified its credit facility increasing the
total commitment from $73.0 million to $100.0 million, with an option to
increase the commitment to $125.0 million. The modified facility provides CBIZ
additional operating flexibility and funding to support seasonal working capital
needs and other strategic initiatives such as acquisitions and share
repurchases.

The credit facility is maintained with Bank of America as agent bank for a
group of five participating banks and has a five year term expiring August 2009.
The credit facility is secured by substantially all assets and capital stock of
CBIZ and its subsidiaries. Management believes that the carrying amount of bank
debt approximates its fair value, and CBIZ had approximately $17.4 million of
available funds under the facility at December 31, 2004.

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 30 to 45 basis points is charged on the unused portion of

F-19

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the facility. The borrowing base calculation required under the previous
facility is not required under the current facility; however, the current
facility is subject to certain financial covenants, that may limit CBIZ's
ability to borrow up to the total commitment amount.

The bank agreement contains financial covenants and restrictions which are
similar to those under the previous facility. Covenants 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 December 31, 2004, CBIZ was in compliance
with its covenants.

The bank 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.

CBIZ provides letters of credit to landlords (lessors) of its leased
premises in lieu of security deposits. Letters of credit under the credit
facility were $2.9 million and $3.2 million as of December 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 December 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," as amended, 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 as performance is not expected to be
required.

8. COMMITMENTS AND CONTINGENCIES

Operating Leases

CBIZ leases certain of its office facilities and equipment under various
operating leases. At December 31, 2004, non-cancelable, future minimum rental
commitments becoming payable under operating leases were as follows (in
thousands):

Total rental expense incurred under operating leases was $31.7 million,
$29.8 million, and $27.6 million during the years ended December 31, 2004, 2003,
and 2002, respectively.

F-20

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Capital Leases

CBIZ leases furniture and fixtures for certain office facilities under
various capital lease agreements. Depreciation of furniture and fixtures
acquired under capital lease agreements is reported as depreciation and
amortization expense in the accompanying consolidated statement of operations.
The following is a summary of property under capital leases, that is included in
property and equipment, net in the accompanying consolidated balance sheets at
December 31, 2004 and 2003 (in thousands):

Future minimum lease payments under the capital leases and the present
value of such payments at December 31, 2004 were as follows:

Legal Proceedings

The Company has entered into settlements to resolve the Heritage Bond
Litigation, comprised of multiple lawsuits pending in the Central District of
California arising from losses sustained by investors in numerous municipal bond
offerings between December 1996 and March 1999. In those lawsuits, plaintiffs
alleged numerous claims, including mismanagement and misappropriation of funds
from the bond offerings, against unrelated parties, including the Heritage
Entities and the trustee, U.S. Trust Corp. The Betker Action, CV 02-5752-DT
(RCx), includes claims against two entities acquired by the Company, Valuation
Counselors Group, Inc. ("VC") and Zelenkofske, Axelrod & Co., Ltd. ("ZA"), for
negligent misrepresentation and negligence, and for joint and several liability
under California Corporations Code sec. 25504.2 (against VC only). In the
Consolidated Class Action, 02-ML-1475-DT (RCx), the Court permitted plaintiffs
to substitute CBIZ Valuation Group, Inc. ("CBIZ-VC") in place of VC, and CBIZ
Accounting, Tax & Advisory, Inc. ("CBIZ-ZA") in place of ZA, as defendants. In
addition, plaintiffs named Century Business Services, Inc. ("CBIZ") itself as a
defendant. CBIZ-VC and CBIZ-ZA are subsidiaries of CBIZ. That complaint includes
claims against CBIZ, CBIZ-VC and CBIZ-ZA for negligence, and claims against
CBIZ-VC and CBIZ-ZA for conspiracy to commit fraud, negligent misrepresentation
and intentional misrepresentation. These claims have been pending since 2001 and
relate to the provision of valuation and feasibility study services from 1996
through 1999. Management believes that the settlements are fair, reasonable and
adequate, and in the best interests of all parties concerned. The settlement of
the Consolidated Class Action has been preliminarily approved by the Court,
which also entered an order approving notice to the Class. The Class Settlement
is conditioned upon, among other things, standard class action opt-out
procedures, objections by litigants, the Court's entry of a bar order and final
judicial approval of

F-21

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the settlement by the Court after notice to the class. The settlement of the
Betker Action has been approved by the Court and is subject to, among other
things, the final entry of a bar order. Additional proceedings may be necessary
as a consequence of any opt-out or objection that may occur. The resolution of
these matters did not have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.

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. CONSOLIDATION AND INTEGRATION RESERVE

Consolidation and integration charges are comprised of expenses associated
with the Company's on-going efforts to consolidate fragmented markets to allow
for convenient delivery of services to clients, and to promote cross-serving
between various practice groups. These expenses result from individual actions
in several markets and are not part of one company-wide program. Consolidation
and integration charges include costs for moving facilities, non-cancelable
lease obligations, severance obligations, and other expense-reduction
initiatives.

During 2004, CBIZ incurred consolidation and integration charges of
approximately $1.0 million related to real estate leasing costs in the Chicago
market. Other consolidation and integration initiatives during 2004 were
individually insignificant. During 2003, CBIZ initiated the consolidation of
offices in Orange County, California, and Cleveland, Ohio, which resulted in
$0.5 million of costs for non-cancelable lease obligations and moving expenses.
In addition, CBIZ continued the consolidation in the Kansas City market, which
was initiated in 2002. During 2002, CBIZ recognized $1.7 million of costs for
consolidations in Kansas City, related to non-cancelable lease obligations.

Consolidation and integration reserve balances at December 31, 2004, 2003
and 2002, and activity during the years ended December 31, 2004 and 2003 were as
follows (in thousands):

- ---------------

(1) Adjustments against income are included in operating expenses in the
accompanying consolidated statements of operations.

F-22

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Consolidation and integration charges incurred for years ended December 31,
2004, 2003 and 2002, and recorded as operating expenses in the accompanying
consolidated statements of operations were as follows (in thousands):

10. EMPLOYEE BENEFITS

Employee Savings Plan

CBIZ sponsors a qualified 401(k) defined contribution plan that covers
substantially all of its employees. Participating employees may elect to
contribute (subject to a maximum permissible contribution under Section 401(k)
of the Internal Revenue Code), on a tax-deferred basis, up to 80% of their
pre-tax annual compensation. Matching contributions by CBIZ are 50% of the first
6% of base compensation that the participant contributes, and additional amounts
may be contributed at the discretion of the Board of Directors. Participants may
elect to invest their retirement funds in various stock, fixed income, stable
value, and balanced - lifecycle funds. Employer contributions (net of
forfeitures) made to the plan during the years ended December 31, 2004, 2003 and
2002, were approximately $5.2 million, $5.1 million, and $5.3 million,
respectively.

Deferred Compensation Plan

CBIZ implemented a deferred compensation plan during the first quarter of
2004, under which certain members of management and other highly compensated
employees may elect to defer receipt of a portion of their annual compensation,
subject to maximum and minimum percentage limitations. The amount of
compensation deferred under the plan is credited to each participant's deferral
account and a deferred compensation liability is established by CBIZ. An amount
equaling each participant's compensation deferral is transferred into a rabbi
trust and invested in various debt and equity securities. The assets of the
rabbi trust are held by CBIZ and recorded as assets of deferred compensation
plan in the accompanying consolidated balance sheets.

Assets of the deferred compensation plan consist primarily of investments
in mutual funds, money market funds and equity securities. The values of these
investments are based on published market quotes at the end of the period.
Adjustments to the fair value of these investments are recorded as other income
(expense), offset by adjustments to operating expenses in the consolidated
statement of operations. Gross realized and unrealized gains and losses from
trading securities have not been material. These investments are specifically
designated as available to CBIZ solely for the purpose of paying benefits under
the deferred compensation plan. However, in the event that CBIZ became
insolvent, the investments would be available to all unsecured general
creditors.

The deferred compensation liability relates to obligations due to
participants under the plan. The deferred compensation liability balance
represents accumulated participant deferrals, and earnings thereon, since the
inception of the plan, net of withdrawals. The deferred compensation liability
is an unsecured general obligation of CBIZ, and is recorded as liabilities of
deferred compensation plan in the accompanying consolidated balance sheets.

11. COMMON STOCK

CBIZ's authorized common stock consists of 250 million shares of common
stock, par value $0.01 per share (Common Stock). The holders of CBIZ's Common
Stock are entitled to one vote for each share held on all

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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

matters submitted to a vote of stockholders. There are no cumulative voting
rights with respect to the election of directors. Accordingly, the holder or
holders of a majority of the outstanding shares of Common Stock will be able to
elect the directors of CBIZ then standing for election as terms expire. Holders
of Common Stock have no preemptive rights and are entitled to such dividends as
may be declared by the Board of Directors of CBIZ out of funds legally available
therefore. The Common Stock is not entitled to any sinking fund, redemption or
conversion provisions. On liquidation, dissolution or winding up of CBIZ, the
holders of Common Stock are entitled to share ratably in the net assets of CBIZ
remaining after the payment of any and all creditors. The outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and non-assessable.
The transfer agent and registrar for the Common Stock is Computershare Investor
Services, LLC.

CBIZ completes registration filings related to its Common Stock to register
shares under the Securities Act of 1933. Currently, CBIZ has registered 15
million shares of our Common Stock, all of which remain available to be offered
from time to time in connection with acquisitions under our acquisition shelf
registration statement.

Treasury Stock

In March 2004, CBIZ's Board of Directors authorized share repurchases of up
to 8.5 million shares of CBIZ common stock. A supplement to the plan was
approved by the Board of Directors in May 2004, authorizing CBIZ to purchase an
additional 2.0 million shares of CBIZ common stock, for a total of 10.5 million
shares. In April 2004, CBIZ completed a tender offer that resulted in the
purchase of approximately 7.5 million shares of CBIZ common stock, at a purchase
price of $5.00 per share, or a total cost (including legal and other direct
expenses) of approximately $37.8 million. During the year ended December 31,
2004, CBIZ also repurchased approximately 2.9 million shares of its common stock
in the open market, at an aggregate purchase price of approximately $12.6
million. The repurchase plan expired December 31, 2004.

In June 2003, CBIZ's Board of Directors authorized a share repurchase of up
to 15.0 million shares of CBIZ common stock (not to exceed $52.5 million). In
July 2003, CBIZ completed a modified Dutch Auction tender offer which resulted
in the purchase of approximately 10.0 million shares of CBIZ common stock at a
purchase price of $3.30 per share, or a total cost (including legal and other
direct expenses) of approximately $33.2 million. During the year ended December
31, 2003, CBIZ also repurchased 104,000 shares of its common stock in the open
market, at an aggregate purchase price of approximately $0.4 million. The
repurchase plan expired December 31, 2003.

Repurchased shares are held in treasury, and may be reserved for future use
in connection with acquisitions, employee share plans and other general
purposes. The repurchase plans allow CBIZ to purchase shares through the open
market or through privately negotiated purchases. The repurchase programs do not
obligate CBIZ to acquire any specific number of shares and may be suspended at
any time. Repurchases are subject to annual dollar and financial ratio
limitations under our current credit facility. At December 31, 2004, CBIZ was in
compliance with this covenant.

Warrants

In 1999, CBIZ issued 1.8 million restricted shares of common stock and
900,000 warrants to an outside party for a $25.0 million equity investment in
CBIZ. The restrictions on the common stock expired in 2001, and the warrants
were exercisable under the following terms: 300,000 shares for three years at
$20.00 per share; 300,000 shares for four years at $25.00 per share; and 300,000
for five years at $30.00 per share. All of the warrants have expired as of
December 31, 2004.

F-24

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information relating to warrants to purchase common stock is summarized
below (in thousands):

- ---------------

(a) Exercise prices for warrants outstanding and exercisable at December 31,
2003 were $30.00. Exercise prices for warrants outstanding and exercisable
at December 31, 2002 ranged from $25.00 to $30.00.

12. EMPLOYEE SHARE PLANS

Employee Stock Investment Plan

Effective June 1, 2001, CBIZ established the Employee Stock Investment Plan
which provides CBIZ employees with a method of purchasing shares of CBIZ's
common stock. Participation in the plan is open to all CBIZ employees whose
payroll is processed by the designated CBIZ payroll provider. CBIZ pays all
opening and transaction charges related to the enrollment and purchase of stock,
other than those due upon the sale of the shares. CBIZ does not provide a
discount to employees for the purchase of CBIZ common stock.

Participants may also purchase shares of CBIZ stock by making optional cash
investments in accordance with the provisions of the plan. Shares of CBIZ stock
purchased by participants in the plan may be treasury or new issue stock, or at
CBIZ's option, CBIZ stock purchased in the open market or negotiated
transactions. Treasury or new issue stock is purchased from CBIZ at the market
price on the applicable investment date. The price of CBIZ stock purchased in
the open market or in negotiated transactions is the weighted average price at
which the shares are actually purchased.

Stock Options

Under the 1997 Agents Stock Option Plan, a maximum of 1.2 million options
may be awarded. The purpose of the plan is to provide performance-based
compensation to certain insurance agencies and individual agents who write
quality surety business for CBIZ's insurance subsidiaries. The options vest only
to the extent the agents satisfy minimum premium commitments and certain loss
ratio performance criteria. These options terminated in June 2002.

Under the 1996 Employee Stock Option Plan, a maximum of 15.0 million
options may be awarded. The options awarded are subject to a 20% incremental
vesting schedule over a five-year period commencing from the date of grant. The
options are awarded at a price not less than fair market value at the time of
the award and expire six years from the date of grant. Further, under the 1996
plan 250,000 options were granted to non-employee directors. These options
became exercisable immediately upon being granted with a six-year expiration
term from the date of grant.

The 2002 Stock Incentive Plan is an amendment and restatement of the 1996
Employee Stock Option Plan. A maximum of 15.0 million shares may be awarded,
which number shall include those shares that are available for grants under the
prior plan. Stock options, restricted stock and other stock based compensation
awards may be made under the plan. Total shares available for future grant under
the plan were approximately 5.3 million, 4.4 million and 4.0 million at December
31, 2004, 2003 and 2002, respectively.

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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock options may be granted alone or in addition to other awards granted
under the plan and may be of two types: incentive stock options and nonqualified
stock options. The options awarded under this plan are subject to a 20%
incremental vesting schedule over a five-year period commencing from the date of
grant. At the discretion of the Compensation Committee of the Board of
Directors, the options may vest immediately, or in a time period shorter than
five years. The options are awarded at a price not less than fair market value
at the time of the award and expire six years from the date of grant. In the
event the optionee of an incentive stock option owns, at the time such stock
option is awarded or granted, more than ten percent (10%) of the voting power of
all classes of stock of CBIZ, the option price shall not be less than 110% of
such fair market value.

Information relating to the stock option plans is summarized below (in
thousands, except per share data):

- ---------------

(a) Options were exercised at prices ranging from: $1.07 to $3.45 in 2004, $1.53
to $3.45 in 2003, and $1.53 to $3.41 in 2002.

Information about stock options outstanding at December 31, 2004 is as
follows:

Restricted Stock Awards

Under the 2002 Stock Incentive Plan (described above), certain employees
and non-employee directors were granted restricted stock awards. Restricted
stock awards are independent of option grants, and are granted at no cost to the
recipients. The awards are subject to forfeiture if employment terminates prior
to the release of restrictions, generally one to five years from the date of
grant. Recipients of restricted stock awards are entitled to the same dividend
and voting rights as holders of other CBIZ common stock. However, shares granted
under the plan cannot be sold, pledged, transferred or assigned during the
vesting period.

F-26

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 2004, CBIZ granted 119,000 restricted stock awards, at prices
ranging from $4.30 to $4.58, and averaging $4.35. The market value of shares
awarded during 2004 was $0.5 million and was recorded as unearned compensation.
Unearned compensation is being expensed ratably over the period which
restrictions lapse and amounted to $0.1 million during the year ended December
31, 2004. Awards will be released from restrictions at dates ranging from
February 2005 through May 2009. As of December 31, 2004, none of the awards have
been forfeited, vested, or released from restriction.

13. EARNINGS PER SHARE

CBIZ presents both basic and diluted earnings per share. The following data
shows the amounts used in computing earnings (loss) per share and the effect on
the weighted average number of dilutive potential common shares (in thousands,
except per share data).

- ---------------

(1) Contingent shares represent shares that will not be issued until future
conditions have been met.

14. SUPPLEMENTAL CASH FLOW DISCLOSURES

Cash paid (received) for interest and income taxes during the years ended
December 31, 2004, 2003 and 2002 was as follows (in thousands):

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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Supplemental Disclosures of Non-Cash Investing and Financing Activities

Non-cash investing and financing activities during the years ended December
31, 2004, 2003 and 2002 were as follows (in thousands):

Non-cash consideration paid for business acquisitions and proceeds received
from divested operations were generally in the form of notes receivable, notes
payable and CBIZ common stock.

15. RELATED PARTIES

The following is a summary of certain agreements and transactions between
or among CBIZ and certain related parties. It is CBIZ's policy to enter into
transactions with related parties on terms that, on the whole, are no less
favorable than those that would be available from unaffiliated parties. Based on
CBIZ's experience and the terms of its transactions with unaffiliated parties,
it is the Board of Directors' belief that the transactions described below met
these standards at the time of the transactions.

A number of the businesses acquired since October 1996 are located in
properties owned indirectly by and leased from persons employed by CBIZ. In the
aggregate, CBIZ paid approximately $1.3 million, $1.4 million, and $0.8 million
for the years ended 2004, 2003 and 2002, respectively, under such leases which
management believes were at market rates.

Rick L. Burdick, a director of CBIZ, is a partner of Akin, Gump, Strauss,
Hauer & Feld, L.L.P. (Akin, Gump.) Akin, Gump performed legal work for CBIZ
during 2004, 2003 and 2002 for which the firm received approximately $0.2
million, $0.2 million, and $0.1 million from CBIZ, respectively.

Robert A. O'Byrne, a Senior Vice President, has an interest in a
partnership that receives commissions from CBIZ that are paid to certain
eligible benefits and insurance producers in accordance with a formal program to
provide benefits in the event of death, disability, retirement or other
termination. The program was in existence at the time CBIZ acquired the former
company, of which Mr. O'Byrne was an owner.

CBIZ maintains joint-referral relationships and administrative service
agreements with independent licensed CPA firms under which CBIZ provides
administrative services in exchange for a fee. 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. 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
administrative service agreements 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.
Although the service agreements do not constitute control, CBIZ is one of the
beneficiaries of the agreements and may bear certain economic risks. As such,
the CPA firms with which CBIZ maintains administrative service agreements
qualify as variable interest entities under FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities". See further discussion in Note 1.

F-28

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CBIZ acted as guarantor on various 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 December 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" and its amendments ("FIN 45-1" and "FIN 45-2"), 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 as performance is not expected
to be required.

In 2002, CBIZ executed a note receivable with a CPA firm whose partner
group has since joined MHM, PC, a CPA firm with which CBIZ maintains an
administrative services agreement. The balance on the note at December 31, 2004
and 2003 was approximately $0.2 million and $0.2 million, respectively.

CBIZ divested several operations during the years ended December 31, 2004,
2003, and 2002, that were underperforming, located in secondary markets, or did
not provide the level of synergistic cross-serving opportunities with other CBIZ
businesses that was desired. CBIZ has sold and may sell in the future businesses
to former employees or shareholders. Management believes these transactions were
priced at market rates, competitively bid, and entered into at arm's length
terms and conditions.

16. ACQUISITIONS

During the year ended December 31, 2004, CBIZ completed acquisitions of
benefits and insurance firms in Chicago, Illinois, and Owing Mills, Maryland, as
well as an accounting tax and advisory firm in Denver, Colorado, and a
technology firm in Cleveland, Ohio which is reported as part of our National
Practices -- Other segment. Aggregate consideration for the acquisitions
consisted of approximately $3.7 million cash and 215,500 shares of restricted
common stock (estimated stock value of $1.0 million at acquisition) paid at
closing, and up to an additional $8.0 million (payable in cash and stock) which
is contingent on the businesses meeting certain future revenue and earnings
targets.

In addition to the businesses acquired during 2004, CBIZ purchased three
client lists which compliment our National Practices -- Other segment. The
purchase price of the client lists is primarily dependent upon future results,
and is not expected to be material individually or in the aggregate.

During the year ended December 31, 2003, CBIZ completed the acquisition of
benefits and insurance firms in Boca Raton, Florida and Salt Lake City, Utah, as
well as accounting, tax & advisory firms in Orange County, California and
Stamford, Connecticut. In addition to the acquisitions of these businesses, CBIZ
purchased the client lists of four benefits agencies. The aggregate purchase
price of these acquisitions and client lists was approximately $11.2 million,
comprised of $2.8 million in cash and 177,000 shares of restricted common stock
(estimated stock value of $0.3 million at acquisition) paid at closing, $2.1
million of notes contributed, and up to an additional $6.0 million payable in
cash which is contingent on the businesses meeting certain future revenue
targets.

During 2002, CBIZ acquired a benefits and insurance firm located in
Calverton, Maryland for an aggregate purchase price of approximately $4.1
million in cash.

The operating results of these firms and client lists have been included in
the accompanying consolidated financial statements since the dates of
acquisition. Client lists and non-compete agreements were recorded at fair value
at the time of acquisition. The excess of purchase price over the fair value of
net assets acquired, client lists and non-compete agreements was allocated to
goodwill. Acquisitions, including contingent consideration earned,

F-29

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

resulted in increases to goodwill, client lists and other intangible assets
during the years ended December 31, 2004, and 2003 as follows (in thousands):

17. DIVESTITURES

During 2004, CBIZ sold or closed five business operations, consisting of
four ATA operations, and an operation from our National Practices -- Other
segment. In addition to the divestiture of these operations, CBIZ sold three
client lists from our ATA practice group and a client list from our B&I practice
group. Sales were made for aggregate proceeds of $4.6 million cash, $2.3 million
in notes receivable and CBIZ stock valued at $0.1 million. Three of the
divestitures qualified for treatment as discontinued businesses and are
classified as such in the accompanying consolidated financial statements
(further discussed in Note 20). Operations that did not qualify for treatment as
discontinued businesses were sold for a pre-tax gain of $1.0 million, that is
reported as gain on sale of operations, net from continuing operations.

During 2003, CBIZ sold or closed eight business operations consisting of
four ATA operations, two Benefit and Insurance operations and two National
Practice operations. CBIZ also sold four client lists and related assets within
the ATA practice group. These businesses and client lists were sold for
aggregate proceeds of $7.2 million cash, $0.2 million in stock, $0.4 million in
notes receivable, and $0.1 million in other receivables. Six of the business
operations satisfied the criteria for treatment as discontinued businesses, and
were classified as such in the accompanying financial statements. The two
operations and client lists which did not qualify for treatment as discontinued
businesses were sold for a pretax gain of $2.5 million, which is reported as
gain on sale of operations, net from continuing operations.

During 2002, CBIZ sold, closed, or committed to sale the divestiture of
sixteen businesses. The businesses were sold for aggregate proceeds of $7.8
million cash, and $4.2 million of notes receivable. Five of the operations have
been classified as discontinued businesses. The remaining eleven operations were
either initiated before CBIZ's adoption of SFAS No. 144 "Accounting for the
Impairment of or the Disposal of Long-Lived Assets", or did not meet the
criteria for treatment as a discontinued business. These businesses were sold
for a pre-tax gain of $0.9 million which is reported as gain on sale of
operations, net from continuing operations. Of these eleven operations, CBIZ
completed the sale or closing of eight ATA operations, one Benefit and Insurance
operation, and two National Practice operations.

CBIZ may earn additional proceeds on the sale of certain client lists,
which are contingent upon future revenue generated by the client lists. CBIZ
records these proceeds as other income when they are earned.

F-30

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations
for the years ended December 31, 2004 and 2003 (in thousands, except per share
amounts):

F-31

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the fourth quarter of 2004, CBIZ recorded a $3.5 million tax benefit
related to a favorable tax position which was successfully resolved upon
completion of the Internal Revenue Service examination for the years ended
December 31, 1998, 1999 and 2000. In addition, CBIZ recorded $0.4 million in
interest income related to the refund, which is recorded as other income
(expense), net in the accompanying consolidated statements of operations. See
further discussion of the tax benefit and refund in Note 6.

F-32

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the fourth quarter of 2003, CBIZ recorded impairment charges of $0.8
million related to the impairment of a note taken in connection with the
divestiture of the hazardous waste operation in 1997 that filed for bankruptcy
in 2003. The impairment charges are recorded as other income (expense), net in
the accompanying consolidated statements of operations.

19. 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, which reports under the National Practices group, exceeds the quantitative
threshold of SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," for aggregation and therefore is reported as a separate
segment.

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; litigation support services; 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.

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. The CBIZ MMP 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.

F-33

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Included in corporate and other, are operating expenses that are not
directly allocated to the business units. These expenses are primarily comprised
of incentive compensation, and consolidation and integration charges.

CBIZ operates in the United States and Toronto, Canada and there is no one
customer that represents a significant portion of sales.

Segment information for the years ended December 31, 2004, 2003, and 2002
was as follows (in thousands):

F-34

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. DISCONTINUED BUSINESSES

From time to time, CBIZ will divest (through sale or closure) business
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 years ended December 31, 2004, 2003 and
2002, CBIZ divested of

F-35

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

three, six and five business operations respectively. One business unit remained
available for sale at December 31, 2002, which was sold in 2003. There were no
businesses available for sale at December 31, 2004 or 2003.

These business operations are reported as discontinued businesses and the
net assets, liabilities and results of operations are reported separately in the
accompanying consolidated financial statements. Revenue and loss from operations
of discontinued businesses for the years ended December 31 2004, 2003 and 2002
were as follows (in thousands):

Gain (loss) on disposal of discontinued businesses for the years ended
December 31 2004, 2003 and 2002 were as follows (in thousands):

At December 31, 2004 and 2003, the assets and liabilities of business
operations classified as discontinued businesses consisted of the following (in
thousands):

21. SUBSEQUENT EVENTS (UNAUDITED)

On February 10, 2005, the Board of Directors authorized the repurchase of
up to 5.0 million shares of CBIZ common stock. The common stock may be
repurchased in open market or privately negotiated purchases.

In January 2005, CBIZ completed the acquisitions of two companies. Gallery
Asset Management, Inc. is an Ohio-based registered investment advisor, which
will compliment our wealth management business. Nation Smith Hermes Diamond is
an accounting, tax and advisory firm located in San Diego, California.

F-36

CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES FOR THE YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002

(IN THOUSANDS)

F-37