UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 27, 2004
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CENTURY BUSINESS SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2769024
- --------------------------------------------- --------------------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
0-25890
(Commission File Number)
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
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Item 7(c). Exhibits
Exhibit 99.1 Press Release of Century Business Services, Inc. dated July 27,
2004, announcing its financial results for the second quarter
ended June 30, 2004.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 27, 2004, Century Business Services, Inc. (CBIZ) announced its earnings
for the second quarter ended June 30, 2004. A copy of the press release is filed
herewith as Exhibit 99.1. In addition, on July 27, 2004, Century conducted its
earnings conference call for the quarter ended June 30, 2004. On this conference
call, CBIZ disclosed the following additional information:
- A unit within the benefits and insurance segment has experienced
significant growth and is expected to generate between $12 million and
$15 million in revenue during 2004. The business unit was not
positioned for growth at this rate and suffered system, client service
and other operational issues as a result. 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. Revenue adjustments resulting from higher policy
terminations than originally estimated, combined with higher expenses
to support growth by this unit resulted in a negative impact to CBIZ
consolidated pre-tax earnings of approximately $900,000 for the second
quarter of 2004 and $2.5 million for the first six months of 2004. The
impact on year to date earnings per share was approximately $0.02 per
share.
- CBIZ recorded approximately $1.3 million in higher legal expenses in
the first half of 2004 over the first half 2003, approximately half of
which were incurred in the second quarter, to address several
long-standing litigation issues. Legal expenses are classified as
general and administrative expenses.
- To date bank debt is $42 million, a reduction of approximately
$5 million from June 30, 2004.
Barring significant acquisitions or share repurchases, the run rate
for interest expense is expected to be approximately 3.5% on an
average balance of about $40 million for the balance of the year.
- Tax rate for the full year 2004 is expected to be 41% - 42%, down from
approximately 42.5% in prior years. Cash taxes are expected to be
between $8 million and $10 million for 2004.
- To date, CBIZ has achieved approximately $5.2 million in cross-serving
revenue towards our full year target of $9 million incremental
revenue.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTURY BUSINESS SERVICES, INC.
Date: August 2, 2004
/s/ WARE H. GROVE
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Ware H. Grove
Chief Financial Officer
Exhibit 99.1
PRESS
[CENTURY BUSINESS SERVICES, INC. LOGO] RELEASE
FOR IMMEDIATE RELEASE CONTACT: WARE GROVE
Chief Financial Officer
-or-
LORI NOVICKIS
Corporate Relations
Century Business Services, Inc.
Cleveland, Ohio
(216) 447-9000
CBIZ REPORTS SECOND-QUARTER 2004 RESULTS
Cleveland, Ohio (July 27, 2004)--CBIZ (Century Business Services, Inc.) (NASDAQ:
CBIZ) today announced its financial results for the second quarter of 2004.
CBIZ reported revenue of $127.2 million for the quarter ended June 30, 2004, an
increase of approximately $2.8 million over last year's second-quarter revenue
of $124.4 million. Same-unit revenue for the second quarter increased by 3.2%,
or $3.9 million, compared with a year ago. Revenue from newly acquired
operations contributed $2.6 million, while divested operations resulted in a
revenue decline of $3.7 million compared with the second quarter a year ago. Net
income from continuing operations for the quarter was $2.6 million, or $0.03 per
diluted share, compared with $3.6 million, or $0.04 per diluted share, recorded
for the second quarter of 2003.
Second-quarter 2003 results include a $1.8 million pre-tax gain on sale,
primarily related to the sale of Health Administration Services, Inc. in May of
2003. Also included in the second-quarter 2003 results is an impairment charge
of approximately $400,000 relating to a note receivable which is reflected in
other income (expense).
As of June 30, 2004, bank debt stood at $46.8 million compared to $23.4 million
at the end of the first quarter. During the second quarter of 2004 CBIZ
completed a tender offer resulting in the repurchase of approximately 7.5
million shares of its common stock for a total cost of approximately $37.5
million. In addition, the Company purchased approximately 464,000 shares in the
open market. The Company also completed two acquisitions during the second
quarter.
For the six-month period ended June 30, 2004, CBIZ reported revenue of $274.8
million compared with $268.6 million for the six-month period a year ago, an
increase of $6.2 million. Same-unit revenue increased by 3.8%, or $9.9 million,
for the first six months. Acquisitions contributed $5.2 million to revenue
growth for the first six months of 2004 and divested operations accounted for a
decline in revenue of $8.9 million compared to the first six months a year ago.
Net income from continuing operations was $14.3 million in 2004, or $0.17 per
diluted share, compared with $13.9 million for the first six months of 2003, or
$0.14 per diluted share.
Page 1 of 5
6050 Oak Tree Boulevard, South o Suite 500 o Cleveland, OH 44131 o
Phone (216) 447-9000 o Fax (216) 447-9007
"CBIZ continues to make progress," remarked Steven L. Gerard, Chairman and Chief
Executive Officer. "During the second quarter, we utilized our cash flow and our
strong balance sheet to complete our second share repurchase within the past
twelve months. In addition, we acquired two operations that will complement our
existing businesses in the Denver, Colorado, and Cleveland, Ohio markets. The
pace of our same-unit growth over the past six quarters is encouraging.
Operating margins suffered in the second quarter as we incurred higher than
anticipated legal expenses to address several long-standing litigation issues
and added personnel to our wealth management and benefit services units to
support their growth. We also experienced some operating challenges due to the
rapid growth of a business unit that is underperforming to our expectations. We
are addressing those issues, and are confident we will achieve our full year
goal of a 25% - 30% increase in earnings per share which we outlined earlier in
the year," continued Gerard.
CBIZ will host a conference call today at 11 a.m. (ET) to discuss these results.
The call will be webcast in a listen-only mode over the Internet for the media
and the public, and can be accessed at www.cbiz.com. Investors and analysts can
participate in the conference call by dialing 1-800-559-2403 several minutes
before 11:00 a.m. (ET). If you are dialing from outside the United States, dial
1-847-619-6534. A replay of the call will be available starting at 1:00 p.m.
(ET) July 27, through midnight (ET), July 30, 2004. The dial-in number for the
replay is 1-877-213-9653. If you are listening from outside the United States,
dial 1-630-652-3041. The access code for the replay is 9345961. A replay of the
webcast will also be available on the Company's web site at www.cbiz.com.
CBIZ is a provider of outsourced business services to small and medium-sized
companies throughout the United States. As the largest benefits specialist and
one of the largest accounting, valuation and medical practice management
companies in the United States, CBIZ provides integrated services in the
following areas: accounting and tax; employee benefits; wealth management;
property and casualty insurance; payroll; IS consulting; and HR consulting. CBIZ
also provides valuation; litigation advisory; government relations; commercial
real estate advisory; wholesale life and group insurance; healthcare consulting;
medical practice management; worksite marketing; and capital advisory services.
These services are provided throughout a network of more than 160 Company
offices in 34 states and the District of Columbia.
Forward-looking statements in this release are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Such risks
and uncertainties include, but are not limited to, the Company's ability to
adequately manage its growth; the Company's dependence on the current trend of
outsourcing business services; the Company's dependence on the services of its
CEO and other key employees; competitive pricing pressures; general business and
economic conditions; and changes in governmental regulation and tax laws
affecting its insurance business or its business services operations. A more
detailed description of such risks and uncertainties can be found in the
Company's filings with the Securities and Exchange Commission.
For further information regarding CBIZ, call the Investor Relations Office at
(216) 447-9000 or visit www.cbiz.com.
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Page 2 of 5
6050 Oak Tree Boulevard, South o Suite 500 o Cleveland, OH 44131 o
Phone (216) 447-9000 o Fax (216) 447-9007
CENTURY BUSINESS SERVICES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(In thousands, except percentages and per share data)
THREE MONTHS ENDED
JUNE 30,
------------------------------------------------------------
2004 % 2003(1) %
---------- ---------- ---------- ----------
Revenue ................................................... $ 127,151 100.0% $ 124,416 100.0%
Operating expenses ........................................ 113,451 89.2% 110,408 88.7%
---------- ---------- ---------- ----------
Gross margin .............................................. 13,700 10.8% 14,008 11.3%
Corporate general and administrative expense(2) ........... 6,055 4.8% 4,912 3.9%
Depreciation and amortization expense ..................... 4,148 3.3% 4,318 3.5%
---------- ---------- ---------- ----------
Operating income .......................................... 3,497 2.8% 4,778 3.8%
Other income (expense):
Interest expense ..................................... (429) -0.3% (297) -0.2%
Gain on divested operations, net ..................... 534 0.4% 1,784 1.4%
Other income (expense), net(2) ....................... 295 0.2% (17) 0.0%
---------- ---------- ---------- ----------
Total other income, net ..................... 400 0.3% 1,470 1.2%
Income from continuing operations before income tax expense 3,897 3.1% 6,248 5.0%
Income tax expense ........................................ 1,319 2,624
---------- ---------- ---------- ----------
Income from continuing operations ......................... 2,578 2.0% 3,624 2.9%
Loss from operations of discontinued businesses, net of tax (196) (194)
Loss on disposal of discontinued businesses, net of tax ... - (183)
---------- ---------- ---------- ----------
Net income ................................................ $ 2,382 1.9% $ 3,247 2.6%
========== ==========
Diluted earnings per share:
Continuing operations ................................ $ 0.03 $ 0.04
Discontinued operations .............................. - (0.01)
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Net income ........................................... $ 0.03 $ 0.03
========== ==========
Diluted shares outstanding ........................... 80,150 97,178
OTHER DATA FROM CONTINUING OPERATIONS:
EBIT(3) ................................................... $ 3,792 $ 4,761
EBITDA(3) ................................................. $ 7,940 $ 9,079
(1) Certain amounts in the 2003 financial statements have been reclassified to
account for discontinued operations.
(2) Corporate general and administrative expense includes legal settlements,
which were previously classified as other income (expense), net.
(3) EBIT represents income from continuing operations before income taxes,
interest expense, gain on divested operations, and impairment charges for a note
receivable related to the divestiture of an operation in 1997. There were no
impairment charges related to this note for the three months ended June 30, 2004
and 2003.
EBITDA represents EBIT as defined above before depreciation and amortization
expense. The Company has included EBIT and EBITDA data because such data is
commonly used as a performance measure by analysts and investors and as a
measure of the Company's ability to service debt. EBIT and EBITDA should not be
regarded as an alternative or replacement to any measurement of performance
under generally accepted accounting principles (GAAP).
Page 3 of 5
6050 Oak Tree Boulevard, South o Suite 500 o Cleveland, OH 44131 o
Phone (216) 447-9000 o Fax (216) 447-9007
CENTURY BUSINESS SERVICES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(In thousands, except percentages and per share data)
SIX MONTHS ENDED
JUNE 30,
--------------------------------------------------------------
---------- ---------- ---------- ----------
2004 % 2003(1) %
---------- ---------- ---------- ----------
Revenue ................................................... $ 274,757 100.0% $ 268,570 100.0%
Operating expenses ........................................ 232,326 84.6% 226,296 84.3%
---------- ---------- ---------- ----------
Gross margin .............................................. 42,431 15.4% 42,274 15.7%
Corporate general and administrative expense(2) ........... 11,434 4.2% 9,693 3.6%
Depreciation and amortization expense ..................... 8,129 3.0% 8,581 3.2%
---------- ---------- ---------- ----------
Operating income .......................................... 22,868 8.3% 24,000 8.9%
Other income (expense):
Interest expense ..................................... (669) -0.2% (620) -0.2%
Gain on divested operations, net ..................... 917 0.3% 1,784 0.7%
Other income (expense), net(2) ....................... 831 0.3% (1,023) -0.4%
---------- ---------- ---------- ----------
Total other income, net ..................... 1,079 0.4% 141 0.1%
Income from continuing operations before income tax expense 23,947 8.7% 24,141 9.0%
Income tax expense ........................................ 9,660 10,221
---------- ---------- ---------- ----------
Income from continuing operations ......................... 14,287 5.2% 13,920 5.2%
Loss from operations of discontinued businesses, net of tax (324) (489)
Loss on disposal of discontinued businesses, net of tax ... - (183)
---------- ---------- ---------- ----------
Net income ................................................ $ 13,963 5.1% $ 13,248 4.9%
========== ==========
Diluted earnings per share:
Continuing operations ................................ $ 0.17 $ 0.14
Discontinued operations .............................. - -
---------- ----------
Net income ........................................... $ 0.17 $ 0.14
========== ==========
Diluted shares outstanding ........................... 84,038 97,073
OTHER DATA FROM CONTINUING OPERATIONS:
EBIT(3) ................................................... $ 23,699 $ 24,602
EBITDA(3) ................................................. $ 31,828 $ 33,183
(1) Certain amounts in the 2003 financial statements have been reclassified to
account for discontinued operations.
(2) Corporate general and administrative expense includes legal settlements,
which were previously classified as other income (expense), net.
(3) EBIT represents income from continuing operations before income taxes,
interest expense, gain on divested operations, and impairment charges for a note
receivable related to the divestiture of an operation in 1997. Impairment
charges for the six months ended June 30, 2004 and 2003 were $0 and $1,625,
respectively.
EBITDA represents EBIT as defined above before depreciation and amortization
expense. The Company has included EBIT and EBITDA data because such data is
commonly used as a performance measure by analysts and investors and as a
measure of the Company's ability to service debt. EBIT and EBITDA should not be
regarded as an alternative or replacement to any measurement of performance
under generally accepted accounting principles (GAAP).
Page 4 of 5
6050 Oak Tree Boulevard, South o Suite 500 o Cleveland, OH 44131 o
Phone (216) 447-9000 o Fax (216) 447-9007
CENTURY BUSINESS SERVICES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except percentages and ratios)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2004 2003(3) 2004 2003(3)
--------- --------- --------- ---------
REVENUE
Accounting, Tax & Advisory Services $ 49,679 $ 50,058 $ 120,408 $ 119,032
Benefits & Insurance Services ..... 38,892 38,490 76,932 78,371
National Practices - Other ........ 17,061 17,198 35,358 34,919
Medical Practice Management ....... 21,519 18,670 42,059 36,248
TOTAL ........................ $ 127,151 $ 124,416 $ 274,757 $ 268,570
GROSS MARGIN
Accounting, Tax & Advisory Services $ 3,701 $ 4,711 $ 25,093 $ 25,779
Benefits & Insurance Services ..... 6,851 7,768 12,766 15,566
National Practices - Other ........ 1,636 (375) 3,887 (917)
Medical Practice Management ....... 3,705 3,441 6,848 5,864
TOTAL(1) ..................... $ 13,700 $ 14,008 $ 42,431 $ 42,274
SELECT BALANCE SHEET DATA AND RATIOS
JUNE 30, DECEMBER 31,
2004 2003(3)
--------- ---------
Cash and cash equivalents ........................ $ 4,262 $ 3,791
Restricted cash .................................. $ 12,540 $ 10,880
Accounts receivable, net ......................... $ 118,482 $ 111,222
Total current assets before funds held for clients $ 149,997 $ 139,875
Funds held for clients ........................... $ 36,203 $ 44,917
Goodwill and other intangible assets ............. $ 171,382 $ 167,280
TOTAL ASSETS ..................................... $ 411,222 $ 402,145
Current liabilities before client fund obligations $ 68,726 $ 63,487
Client fund obligations .......................... $ 36,203 $ 44,917
Bank debt ........................................ $ 46,825 $ 14,000
TOTAL LIABILITIES ................................ $ 157,940 $ 124,307
Treasury stock ................................... $ (75,004) $ (35,087)
TOTAL STOCKHOLDERS' EQUITY ....................... $ 253,282 $ 277,838
Bank debt to equity .............................. 18.5% 5.0%
Days sales outstanding(2) ........................ 79 82
Shares outstanding ............................... 77,781 85,371
========= =========
Basic shares outstanding ......................... 81,661 90,400
========= =========
Diluted shares outstanding ....................... 84,038 92,762
========= =========
(1) Includes operating expenses recorded by corporate and not directly
allocated to the business units of $2,193 and $1,537 for the three months
ended, and $6,163 and $4,018 for the six months ended June 30, 2004 and
2003, respectively.
(2) Days sales outstanding (DSO) represent accounts receivable at the end of
the period (before the allowance for doubtful accounts) divided by daily
revenue (year-to-date revenue divided by number of days in the period). The
Company has included DSO data because such data is commonly used as a
performance measure by analysts and investors and as a measure of the
Company's ability to collect on receivables in a timely manner. DSO should
not be regarded as an alternative or replacement to any measurement of
performance under generally accepted accounting principles (GAAP).
(3) Certain amounts in the 2003 financial statements have been reclassified to
account for discontinued operations.
Page 5 of 5
6050 Oak Tree Boulevard, South o Suite 500 o Cleveland, OH 44131 o
Phone (216) 447-9000 o Fax (216) 447-9007
