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): February 9, 2015
CBIZ, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 1-32961 | 22-2769024 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
6050 Oak Tree Boulevard, South, Suite 500
Cleveland, Ohio 44131
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: 216-447-9000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On February 9, 2015, CBIZ, Inc. (the “Company”) issued a press release announcing its financial results for the three and twelve months ended December 31, 2014. A copy of the press release is furnished herewith as Exhibit 99.1. A transcript of CBIZ’s earnings conference call held on February 9, 2015 is furnished herewith as Exhibit 99.2. The exhibits contain, and may implicate, forward-looking statements regarding the Company and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.
Item 5.02(d) Election of New Directors.
Effective February 11, 2015, the Board of CBIZ, Inc. (the “Company”) expanded the number of its directors to nine and elected Ms. Gina D. France and Mr. Sherrill W. Hudson to serve as independent Directors of CBIZ, Inc. Both directors will serve through the 2015 Annual Meeting, at which time they are expected to stand for re-election. As non-employee directors they will receive the standard compensation for a CBIZ non-employee director as outlined in the Company’s 2014 Proxy Statement and as amended since that time. As new directors each of them has been granted 50,000 immediately vested options as of February 11, 2015, along with an annual equity compensation award. Neither individual is a party to any related party transactions outlined in Item 404(a) of Regulation S-K. Both individuals have been appointed to serve on the Company’s Nominating and Governance Committee. A copy of the press release is furnished herewith as Exhibit 99.3.
Item 8.01 Other Events.
On February 11, 2015, the Board of CBIZ, Inc. (the “Company”) authorized the continuation of the Company’s Share Repurchase Program, which has been renewed annually for the past eleven years. This authorization renews the 5.0 million share authorization currently in place which expires on March 31, 2015. The Board of Directors of the Company has authorized the purchase of up to 5.0 million additional shares of its outstanding common stock to be obtained in open market, privately negotiated, or 10b5-1 trading plan purchases through March 31, 2016. A copy of the press release is furnished herewith as Exhibit 99.3.
As of December 31, 2014, CBIZ had approximately 51.5 million shares of diluted weighted average common stock outstanding. CBIZ’s Board of Directors believes that the repurchase plan is a prudent use of the Company’s financial resources, and that investing in its own shares is an attractive use of capital and an efficient means to provide value to CBIZ stockholders. CBIZ anticipates that it will obtain all of the funds necessary to purchase shares under the repurchase program, and to pay related fees and expenses, from operating cash flow and by borrowing under its credit facility. This authorization allows such purchases to the extent permitted under the Company’s current or any future credit facility, without further amendment.
Item 9.01(d) Exhibits.
| Exhibit 99.1 | Press Release of CBIZ, Inc. dated February 9, 2015, announcing its financial results for the three and twelve months ended December 31, 2014. | |
| Exhibit 99.2 | Transcript of earnings conference call held on February 9, 2015, discussing CBIZ’s financial results for the three and twelve months ended December 31, 2014. | |
| Exhibit 99.3 | Press Release of CBIZ, Inc. dated February 11, 2015, announcing the appointment of Gina D. France and Sherrill W. Hudson to the CBIZ Board of Directors and the continuation of the CBIZ Share Repurchase Program. | |
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.
Dated: February 13, 2015
| CBIZ, Inc. | ||
| By: | /s/ Michael W. Gleespen | |
| Name: | Michael W. Gleespen | |
| Title: | Corporate Secretary and General Counsel | |
Exhibit 99.1
| FOR IMMEDIATE RELEASE | CONTACT: | Ware Grove | ||||
| Chief Financial Officer | ||||||
| -or- | ||||||
| Lori Novickis | ||||||
| Director, Corporate Relations | ||||||
| CBIZ, Inc. | ||||||
| Cleveland, Ohio | ||||||
| (216) 447-9000 |
CBIZ REPORTS FOURTH-QUARTER AND FULL-YEAR 2014 RESULTS
FOURTH-QUARTER REVENUE UP 7.1%; FULL-YEAR UP 6.2%
2014 INCOME FROM CONTINUING OPERATIONS UP 19.8%; EPS $0.59
2014 ADJUSTED EPS $0.61 EXCLUDING SHARE COUNT IMPACT OF CONVERTIBLE NOTES
Cleveland, Ohio (February 9, 2015)—CBIZ, Inc. (NYSE: CBZ) (“Company”) today announced fourth-quarter and full-year results for the period ended December 31, 2014.
For the fourth quarter ended December 31, 2014, CBIZ reported revenue of $157.0 million, an increase of $10.4 million, or 7.1%, compared with $146.7 million for the fourth quarter of 2013. Same-unit organic revenue increased by $3.1 million, or 2.1%, for the 2014 fourth quarter compared with the same period a year ago. Newly acquired operations contributed $7.3 million, or 5.0%, to revenue in the 2014 fourth quarter. CBIZ reported a loss from continuing operations of $1.4 million, or ($0.03) per diluted share, compared with a loss of $2.9 million, or ($0.06) per diluted share, reported in the fourth quarter of 2013. Adjusted EBITDA for the quarter ended December 31, 2014 was $3.5 million, compared with $2.3 million for the 2013 fourth quarter.
CBIZ reported revenue of $719.5 million for the full year, an increase of $42.3 million, or 6.2%, over the $677.2 million recorded for the prior year. Same-unit organic revenue increased by $18.6 million, or 2.7%, compared with the same period a year ago. Newly acquired operations contributed $23.7 million, or 3.5%, to revenue during 2014. Income from continuing operations was $30.4 million, or $0.59 per diluted share, compared with $25.4 million, or $0.52 per diluted share for the prior year. Adjusted EBITDA was $82.2 million, compared with $75.5 million for the same period a year ago.
The fully diluted weighted average share count increased to 51.5 million shares at December 31, 2014, from 49.1 million shares a year ago, primarily due to the accounting for approximately 2.0 million common share equivalents related to the 2010 Convertible Notes (“Notes”). Normalized to exclude the impact of the increase in share equivalents related to the Notes, fully diluted earnings per share were $0.61 for the full-year 2014.
During the fourth quarter, CBIZ announced the completion of one acquisition and for the full year 2014, the Company completed six acquisitions. During 2014, the Company used $53.9 million for acquisition-related payments, including earn-out payments for prior-year acquisitions. In addition, during 2014, the Company used $26.6 million to repurchase 3.2 million shares of its common stock. Since December 31, 2014, the Company repurchased an additional 0.6 million shares through February 6, 2015 for $4.7 million under a 10(b) 5-1 program. The outstanding balance on the Company’s unsecured bank line of credit at December 31, 2014, was $107.4 million compared with a balance of $48.5 million at December 31, 2013.
Steven L. Gerard, CBIZ Chairman and CEO stated, “We are pleased with the results for 2014. As expected, we are seeing strengthening trends in same-unit organic revenue growth, and we were able to improve our margin in 2014. As a result, with 6.2% total revenue growth in 2014, our normalized EPS grew by over 17% compared with the prior year. We are pleased to have completed six acquisitions during 2014 and we expect a similar level of activity in the year ahead. Our cash flow continues to be steady and strong, and our balance sheet remains solid. With the new $400 million unsecured credit facility established during 2014, we are well-positioned to address the upcoming maturity of the remaining $97.6 million balance on the 4.875% convertible Notes due October 1, 2015.”
2015 Outlook: For 2015, the Company expects continued improvement in same-unit organic revenue growth rates and expects total revenue growth within a range of 5% to 7%. Assuming a constant share count compared with 2014, diluted earnings per share from continuing operations is expected to grow within a range of 12% to 15% over 2014. Cash flow is expected to continue to be positive, and Adjusted EBITDA is projected to increase within a range of 8% to 10% over the $82.2 million reported for 2014.
CBIZ will host a conference call at 11:00 a.m. (ET) this morning to discuss its 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. Shareholders and analysts who would like to participate in the call can register at http://dpregister.com/10058746 to receive the dial-in number and unique pin number. Participants may register at any time, including up to and after the call start time.
A replay of the webcast will be available approximately two hours following the call on the Company’s web site at www.cbiz.com. For those without internet access, a replay of the call will also be available starting at approximately 1:00 p.m. (ET) February 9, through 5:00 p.m. (ET), February 13, 2015. The dial-in number for the replay is 1-877-344-7529. If you are listening from outside the United States, dial 1-412-317-0088. The access code for the replay is 10058746.
CBIZ, Inc. provides professional business services that help clients better manage their finances and employees. CBIZ provides its clients with financial services including accounting, tax, financial advisory, government health care consulting, risk advisory, real estate consulting, and valuation services. Employee services include employee benefits consulting, property and casualty insurance, retirement plan consulting, payroll, life insurance, HR consulting, and executive recruitment. As one of the largest accounting, insurance brokerage and valuation companies in the United States, the Company’s services are provided through more than 100 Company offices in 34 states.
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 and sustain 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 the Company’s insurance business or its business services operations. A more detailed description of such risks and uncertainties may be found in the Company’s filings with the Securities and Exchange Commission.
For further information regarding CBIZ, call our Investor Relations Office at (216) 447-9000 or visit our web site at www.cbiz.com.
CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
(In thousands, except percentages and per share data)
| THREE MONTHS ENDED DECEMBER 31, |
||||||||||||||||
| 2014 | % | 2013 (1) | % | |||||||||||||
| Revenue |
$ | 157,022 | 100.0 | % | $ | 146,652 | 100.0 | % | ||||||||
| Operating expenses (2) |
154,316 | 98.3 | % | 144,291 | 98.4 | % | ||||||||||
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| Gross margin |
2,706 | 1.7 | % | 2,361 | 1.6 | % | ||||||||||
| Corporate general and administrative expenses (3) |
6,790 | 4.3 | % | 7,821 | 5.3 | % | ||||||||||
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| Operating loss |
(4,084 | ) | -2.6 | % | (5,460 | ) | -3.7 | % | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense |
(2,991 | ) | -1.9 | % | (3,358 | ) | -2.3 | % | ||||||||
| Gain on sale of operations, net |
1,210 | 0.8 | % | 7 | 0.0 | % | ||||||||||
| Other income, net (4) (5) |
2,350 | 1.5 | % | 3,203 | 2.2 | % | ||||||||||
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| Total other income (expense), net |
569 | 0.4 | % | (148 | ) | -0.1 | % | |||||||||
| Loss from continuing operations before income tax expense |
(3,515 | ) | -2.2 | % | (5,608 | ) | -3.8 | % | ||||||||
| Income tax benefit |
(2,137 | ) | (2,698 | ) | ||||||||||||
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| Loss from continuing operations |
(1,378 | ) | -0.9 | % | (2,910 | ) | -2.0 | % | ||||||||
| Gain (loss) from operations of discontinued businesses, net of tax |
60 | (1,130 | ) | |||||||||||||
| (Loss) gain on disposal of discontinued businesses, net of tax |
(7 | ) | 93 | |||||||||||||
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| Net loss |
$ | (1,325 | ) | -0.8 | % | $ | (3,947 | ) | -2.7 | % | ||||||
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| Diluted loss per share: |
||||||||||||||||
| Continuing operations |
$ | (0.03 | ) | $ | (0.06 | ) | ||||||||||
| Discontinued operations |
— | (0.02 | ) | |||||||||||||
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| Net loss |
$ | (0.03 | ) | $ | (0.08 | ) | ||||||||||
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| Diluted weighted average common shares outstanding |
48,455 | 46,981 | ||||||||||||||
| Other data from continuing operations: |
||||||||||||||||
| Adjusted EBIT (6) |
$ | (1,734 | ) | $ | (2,257 | ) | ||||||||||
| Adjusted EBITDA (6) |
$ | 3,537 | $ | 2,336 | ||||||||||||
| (1) | Certain amounts in the 2013 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations. |
| (2) | Includes expense of $1,567 and $2,802 for the three months ended December 31, 2014 and 2013, respectively, in compensation expense associated with net gains from the Company’s deferred compensation plan (see note 4). Excluding this item, “operating expenses” would be $152,749 and $141,489, or 97.3% and 96.5% of revenue, for the three months ended December 31, 2014 and 2013, respectively. |
| (3) | Includes expense of $222 and $311 for the three months ended December 31, 2014 and 2013, respectively, in compensation associated with net gains from the Company’s deferred compensation plan (see note 4). Excluding this item, “corporate general and administrative expenses” would be $6,568 and $7,510, or 4.2% and 5.1% of revenue, for the three months ended December 31, 2014 and 2013, respectively. |
| (4) | Includes net gains of $1,789 and $3,113 for the three months ended December 31, 2014 and 2013, respectively, attributable to assets held in the Company’s deferred compensation plan. These net gains do not impact “loss from continuing operations before income tax expense” as they are directly offset by compensation adjustments included in “operating expenses” and “corporate general and administrative expenses.” |
| (5) | For the three months ended December 31, 2014 and 2013, amount includes income of $396 and $197, respectively, related to net decreases in the fair value of contingent consideration related to CBIZ’s prior acquisitions. |
| (6) | Adjusted EBIT represents loss from continuing operations before income taxes, interest expense, and gain on sale of operations, net. Adjusted EBITDA represents Adjusted EBIT before depreciation and amortization expense of $5,271 and $4,593 for the three months ended December 31, 2014 and 2013, respectively. The Company has included Adjusted EBIT and Adjusted EBITDA data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company’s ability to service debt. Adjusted EBIT and Adjusted EBITDA should not be regarded as an alternative or replacement to any measurement of performance or cash flow under generally accepted accounting principles. |
CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
TWELVE MONTHS ENDED DECEMBER 31, 2014 AND 2013
(In thousands, except percentages and per share data)
| TWELVE MONTHS ENDED DECEMBER 31, |
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| 2014 | % | 2013 (1) | % | |||||||||||||
| Revenue |
$ | 719,483 | 100.0 | % | $ | 677,171 | 100.0 | % | ||||||||
| Operating expenses (2) |
629,804 | 87.5 | % | 593,339 | 87.6 | % | ||||||||||
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| Gross margin |
89,679 | 12.5 | % | 83,832 | 12.4 | % | ||||||||||
| Corporate general and administrative expenses (3) |
34,183 | 4.8 | % | 34,398 | 5.1 | % | ||||||||||
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| Operating income |
55,496 | 7.7 | % | 49,434 | 7.3 | % | ||||||||||
| Other income (expense): |
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| Interest expense |
(13,124 | ) | -1.9 | % | (15,374 | ) | -2.3 | % | ||||||||
| Gain on sale of operations, net |
1,303 | 0.2 | % | 79 | 0.0 | % | ||||||||||
| Other income, net (4) (5) |
6,893 | 1.0 | % | 7,817 | 1.2 | % | ||||||||||
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| Total other expense, net |
(4,928 | ) | -0.7 | % | (7,478 | ) | -1.1 | % | ||||||||
| Income from continuing operations before income tax expense |
50,568 | 7.0 | % | 41,956 | 6.2 | % | ||||||||||
| Income tax expense |
20,154 | 16,577 | ||||||||||||||
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| Income from continuing operations |
30,414 | 4.2 | % | 25,379 | 3.7 | % | ||||||||||
| (Loss) income from operations of discontinued businesses, net of tax |
(754 | ) | 2,148 | |||||||||||||
| Gain on disposal of discontinued businesses, net of tax |
99 | 58,336 | ||||||||||||||
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| Net income |
$ | 29,759 | 4.1 | % | $ | 85,863 | 12.7 | % | ||||||||
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| Diluted earnings per share: |
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| Continuing operations |
$ | 0.59 | $ | 0.52 | ||||||||||||
| Discontinued operations |
(0.01 | ) | 1.23 | |||||||||||||
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| Net income |
$ | 0.58 | $ | 1.75 | ||||||||||||
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| Diluted weighted average common shares outstanding |
51,487 | 49,141 | ||||||||||||||
| Other data from continuing operations: |
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| Adjusted EBIT (6) |
$ | 62,389 | $ | 57,251 | ||||||||||||
| Adjusted EBITDA (6) |
$ | 82,220 | $ | 75,542 | ||||||||||||
| (1) | Certain amounts in the 2013 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations. |
| (2) | Includes expenses of $3,221 and $7,373 for the twelve months ended December 31, 2014 and 2013, respectively, in compensation associated with net gains from the Company’s deferred compensation plan (see note 4). Excluding this item, “operating expenses” would be $626,583 and $585,966, or 87.1% and 86.5% of revenue, for the twelve months ended December 31, 2014 and 2013, respectively. |
| (3) | Includes expenses of $500 and $783 for the twelve months ended December 31, 2014 and 2013, respectively, in compensation associated with gains from the Company’s deferred compensation plan (see note 4). Excluding this item, corporate general and administrative expenses would be $33,683 and $33,615, or 4.7% and 5.0% of revenue, for the twelve months ended December 31, 2014 and 2013, respectively. |
| (4) | Includes net gains of $3,721 and $8,156 for the twelve months ended December 31, 2014 and 2013, respectively, attributable to assets held in the Company’s deferred compensation plan. These net gains do not impact “income from continuing operations before income tax expense” as they are directly offset by compensation adjustments included in “operating expenses” and “corporate general and administrative expenses.” |
| (5) | For the twelve months ended December 31, 2014 and 2013, amount includes income of $3,988 and expense of $865, respectively, related to net decreases and increases in the fair value of contingent consideration related to CBIZ’s prior acquisitions. Also included in other income, net, for the twelve months ended December 31, 2014, is a $1.5 million loss from the early retirement of $32.4 million face value of its 2010 convertible senior subordinated notes that mature in 2015. |
| (6) | Adjusted EBIT represents income from continuing operations before income taxes, interest expense, and gain on sale of operations, net. Adjusted EBITDA represents Adjusted EBIT before depreciation and amortization expense of $19,831 and $18,291 for the twelve months ended December 31, 2014 and 2013, respectively. The Company has included Adjusted EBIT and Adjusted EBITDA data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company’s ability to service debt. Adjusted EBIT and Adjusted EBITDA should not be regarded as an alternative or replacement to any measurement of performance or cash flow under generally accepted accounting principles. |
CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except per share data)
SELECT SEGMENT DATA
| THREE MONTHS ENDED DECEMBER 31, |
TWELVE MONTHS ENDED DECEMBER 31, |
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| 2014 | 2013 (1) | 2014 | 2013 (1) | |||||||||||||
| Revenue |
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| Financial Services |
$ | 92,297 | $ | 88,462 | $ | 465,130 | $ | 441,788 | ||||||||
| Employee Services |
57,419 | 50,181 | 224,898 | 204,862 | ||||||||||||
| National Practices |
7,306 | 8,009 | 29,455 | 30,521 | ||||||||||||
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| Total |
$ | 157,022 | $ | 146,652 | $ | 719,483 | $ | 677,171 | ||||||||
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| Gross Margin |
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| Financial Services |
$ | (2,150 | ) | $ | (3,235 | ) | $ | 65,347 | $ | 61,128 | ||||||
| Employee Services |
10,282 | 9,029 | 38,896 | 36,165 | ||||||||||||
| National Practices |
409 | 862 | 2,657 | 2,933 | ||||||||||||
| Operating expenses - unallocated (2): |
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| Other |
(4,268 | ) | (1,493 | ) | (14,000 | ) | (9,021 | ) | ||||||||
| Deferred compensation |
(1,567 | ) | (2,802 | ) | (3,221 | ) | (7,373 | ) | ||||||||
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| Total |
$ | 2,706 | $ | 2,361 | $ | 89,679 | $ | 83,832 | ||||||||
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| (1) | Certain amounts in the 2013 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations. |
| (2) | Represents operating expenses not directly allocated to individual businesses, including stock-based compensation, consolidation and integration charges and certain advertising expenses. “Operating expenses - unallocated” also include gains or losses attributable to the assets held in the Company’s deferred compensation plan. These gains or losses do not impact “income from continuing operations before income tax expense” as they are directly offset by the same adjustment to “other income, net” in the consolidated statements of comprehensive income. Gains or losses recognized from adjustments to the fair value of the assets held in the deferred compensation plan are recorded as compensation expense in “operating expenses” and as income or expense in “other income, net.” |
NON-GAAP EARNINGS AND PER SHARE DATA
Reconciliation of Income from Continuing Operations to Non-GAAP Earnings from Continuing Operations (3)
| THREE MONTHS ENDED DECEMBER 31, | ||||||||||||||||
| 2014 | Per Share | 2013 (1) | Per Share | |||||||||||||
| Loss from Continuing Operations |
$ | (1,378 | ) | $ | (0.03 | ) | $ | (2,910 | ) | $ | (0.06 | ) | ||||
| Selected non-cash items: |
||||||||||||||||
| Amortization |
3,799 | 0.08 | 3,365 | 0.06 | ||||||||||||
| Depreciation |
1,472 | 0.03 | 1,228 | 0.03 | ||||||||||||
| Non-cash interest on convertible notes |
595 | 0.01 | 736 | 0.02 | ||||||||||||
| Stock-based compensation |
1,393 | 0.03 | 1,381 | 0.03 | ||||||||||||
| Adjustment to contingent earnouts |
(396 | ) | (0.01 | ) | (197 | ) | — | |||||||||
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| Non-cash items |
6,863 | 0.14 | 6,513 | 0.14 | ||||||||||||
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| Non-GAAP earnings - Continuing Operations |
$ | 5,485 | $ | 0.11 | $ | 3,603 | $ | 0.08 | ||||||||
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| TWELVE MONTHS ENDED DECEMBER 31, | ||||||||||||||||
| 2014 | Per Share | 2013 (1) | Per Share | |||||||||||||
| Income from Continuing Operations |
$ | 30,414 | $ | 0.59 | $ | 25,379 | $ | 0.52 | ||||||||
| Selected non-cash items: |
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| Amortization |
14,478 | 0.29 | 13,535 | 0.27 | ||||||||||||
| Depreciation (4) |
5,353 | 0.10 | 4,756 | 0.10 | ||||||||||||
| Non-cash interest on convertible notes |
2,728 | 0.05 | 2,840 | 0.06 | ||||||||||||
| Stock-based compensation |
6,205 | 0.12 | 5,655 | 0.12 | ||||||||||||
| Adjustment to contingent earnouts |
(3,988 | ) | (0.08 | ) | 865 | 0.01 | ||||||||||
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| Non-cash items |
24,776 | 0.48 | 27,651 | 0.56 | ||||||||||||
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| Non-GAAP earnings - Continuing Operations |
$ | 55,190 | $ | 1.07 | $ | 53,030 | $ | 1.08 | ||||||||
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| (3) | The Company believes Non-GAAP earnings and Non-GAAP earnings per diluted share more clearly illustrate the impact of certain non-cash charges and credits to “income from continuing operations” and are a useful measure for the Company and its analysts. Non-GAAP earnings is defined as income from continuing operations excluding: depreciation and amortization, non-cash interest expense, non-cash stock-based compensation expense, and adjustments to the fair value of contingent consideration related to prior acquisitions. Non-GAAP earnings per diluted share is calculated by dividing Non-GAAP earnings by the number of weighted average diluted common shares outstanding for the period indicated. Non-GAAP earnings and Non-GAAP earnings per diluted share should not be regarded as a replacement or alternative to any measurement of performance under generally accepted accounting principles. |
| (4) | Capital spending was $1.2 million and $1.9 million for the three months ended December 31, 2014 and 2013, and $5.2 million and $6.2 million for the twelve months ended December 31, 2014 and 2013, respectively. |
CBIZ, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except percentages and ratios)
SELECT BALANCE SHEET DATA AND RATIOS
| DECEMBER 31, 2014 |
DECEMBER 31, 2013 (1) |
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| Cash and cash equivalents |
$ | 965 | $ | 677 | ||||
| Restricted cash |
$ | 28,293 | $ | 22,112 | ||||
| Accounts receivable, net |
$ | 143,048 | $ | 138,063 | ||||
| Current assets before funds held for clients |
$ | 196,479 | $ | 187,734 | ||||
| Funds held for clients - current and non-current |
$ | 182,847 | $ | 164,389 | ||||
| Goodwill and other intangible assets, net |
$ | 526,462 | $ | 467,648 | ||||
| Total assets |
$ | 991,244 | $ | 897,459 | ||||
| Notes payable - current |
$ | 760 | $ | 1,602 | ||||
| Current liabilities before client fund obligations |
$ | 207,801 | $ | 228,862 | ||||
| Client fund obligations |
$ | 183,936 | $ | 164,311 | ||||
| Bank debt |
$ | 107,400 | $ | 48,500 | ||||
| Convertible notes - current |
$ | 96,569 | $ | 125,256 | ||||
| Total liabilities |
$ | 591,399 | $ | 523,013 | ||||
| Treasury stock |
$ | (425,685 | ) | $ | (397,548 | ) | ||
| Total stockholders’ equity |
$ | 399,845 | $ | 374,446 | ||||
| Debt to equity (2) |
51.2 | % | 46.8 | % | ||||
| Days sales outstanding (DSO) - continuing operations (3) |
70 | 73 | ||||||
| Shares outstanding |
49,487 | 48,964 | ||||||
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| Basic weighted average common shares outstanding |
48,343 | 48,632 | ||||||
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| Diluted weighted average common shares outstanding |
51,487 | 49,141 | ||||||
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| (1) | Certain amounts in the 2013 financial data have been reclassified to conform to the current year presentation and revised to reflect the impact of discontinued operations. |
| (2) | Ratio is convertible notes, bank debt and notes payable divided by total stockholders’ equity. |
| (3) | DSO is provided for continuing operations and represents accounts receivable, net and unbilled revenue (net of realization adjustments) at the end of the period, divided by trailing twelve month daily revenue. The Company has included DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company’s ability to collect on receivables in a timely manner. DSO should not be regarded as an alternative or replacement to any measurement of performance under generally accepted accounting principles. |
Exhibit 99.2
Transcript of earnings conference call held on February 9, 2015
CORPORATE PARTICIPANTS
Ware Grove CBIZ, Inc. - SVP and CFO
Steve Gerard CBIZ, Inc. - Chairman and CEO
CONFERENCE CALL PARTICIPANTS
Jim Macdonald First Analysis Securities - Analyst
PRESENTATION
Operator
Good morning, and welcome to the CBIZ fourth-quarter and full-year 2014 results conference call. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Steve Gerard. Please go ahead.
Steve Gerard - CBIZ, Inc. - Chairman and CEO
Thank you, Amy. Good morning, everyone, and thank you for calling into CBIZ’s fourth-quarter and full-year 2015 conference call. Before I begin my comments, I would like to remind you of a few things. As with all our conference calls, this call is intended to answer the questions of our shareholders and analysts. If there are media representatives on the call, you are welcome to listen in. However, I ask that if you have questions, you hold them until after the call, and we’ll be happy to address it at that time.
This call is also being webcast, and you can access it over our website. You should have all received copy of the press release which we issued this morning. If you did not, you can also access that on our website.
Finally, please remember that during the course of the call, we may make forward-looking statements. Those statements represent management’s intentions, hopes, beliefs, expectations, and possibly predictions of the future. Actual results can, and sometimes do, differ materially from those projected in the forward-looking statements.
Additional information concerning the factors that could cause actual results to differ materially from those in forward-looking statements is contained in our SEC filings, our Form 10-K, and press releases.
Joining me on the call this morning is Jerry Grisko, our President and Chief Operating Officer; and Ware Grove, our Chief Financial Officer.
Prior to the opening this morning, we were very pleased to report our full-year 2014 results, highlighted by revenue growth in excess of 6%, and normalized earnings per share growth of over 17%. Both of these numbers are well within the upper end of the guidance we gave a year ago. So the year 2014 came in very much on a positive note, and very much the way we thought it was going to.
With that, let me turn it over to Ware to give you details, and then I’ll come back at the end to take your questions and to give you some color on the market.
Ware Grove - CBIZ, Inc. - SVP and CFO
Thanks, Steve, and good morning, everyone. I wanted to take a few minutes to run through the highlights of the numbers we released this morning for the fourth quarter and full year ended December 31, 2014. Bear in mind that as we look at 2014 results and compare results to the prior year, the results are restated to reflect the impact of several discontinued operations.
Now, thanks to the many efforts of the many CBIZ associates who are working hard to serve clients in our various offices throughout the US, as Steve indicated, CBIZ reported total revenue for the full-year 2014 of $719.5 million, which is an increase of $42.3 million, or up by 6.2% compared with the prior year. Same-unit revenue increased by $18.6 million or 2.7% in 2014. And revenue from acquired businesses contributed another $23.7 million, or 3.5%, to revenue growth.
The pre-tax income margin from continuing operations improved by 80 basis points in 2014, and this resulted in an increase in pre-tax income of slightly over 20%. Eliminating the impact of the share equivalents associated with accounting for the convertible notes, the normalized earnings per share was $0.61 compared with $0.52 the prior year, or an increase of 17.3%, which is, as Steve indicated, within the range of the 15% to 18% growth that we expected for 2014 compared to the prior year.
Now, beyond recording very good financial results from operations, we accomplished several other important things during 2014. First of all, during the year we announced six new acquisitions, and we continue to have an active pipeline of potential transactions.
This acquisition activity continues to strengthen our service offerings and targeted markets throughout the US. And this is an important component for our growth strategy as we continue to combine organic same-unit revenue growth with acquisition activity.
As has been our pattern over time, we typically expect to close 4 to 6 transactions each year. Secondly, during the year we established a new $400 million credit facility, which positions us very well to address the upcoming October 1, 2015, maturity of the remaining balance outstanding on the 4 7/8% convertible notes. During 2014, in two separate privately negotiated transactions with current noteholders, we retired $32.4 million of the notes. Today we have $97.6 million remaining on the convertible notes.
The $400 million credit facility gives us the capacity to refinance the convertible notes, and also gives us considerable flexibility to continue an active acquisition program and also opportunistically continue to repurchase shares.
With the current interest rate environment, the borrowing cost on our credit facility is currently well under 3%. And that compares with a 7.5% interest rate we are currently recording on the outstanding balance of the convertible notes.
We will continue to evaluate further early repurchases of these notes that may occur before maturity. But it is unclear if additional transactions can be completed; or, if so, on what terms.
Our first priority for using capital continues to be focused on building our business through acquisitions. In recent years, share repurchase activity has been focused on maintaining a constant share count. During 2014, we repurchased 3.2 million shares of our common stock at a cost of approximately $26.7 million.
Since year end, and through February 5 this year, we have repurchased an additional 600,000 shares through a 10b5-1 program that we have had in place. The fully diluted weighted average share count at year-end 2014 was 51.5 million shares compared with 49.1 million shares a year ago.
Now, based on an average share price of $8.71 during 2014, the fully diluted weighted average share count at year end includes approximately 2 million share equivalents that are associated with accounting for the convertible note. Given the very unpredictable nature of this share count calculation, please remember that our earnings guidance for 2014 excluded the impact of these share equivalents.
Our reported earnings per share this year, or for 2014, was $0.59. However, excluding the impact of the additional 2 million share equivalents, the earnings per share is adjusted to $0.61.
CBIZ has the option to settle the convertible notes either in cash or by issuing shares. And, of course, the new $400 million credit facility gives us more than sufficient capacity to settle in cash.
Turning to our financial services group, during the fourth quarter total revenue for this group increased by 4.3% compared with the prior year. For the full-year 2014, total revenue for this group increased by 5.3%. Same-unit revenue for the fourth quarter increased by 2.1%. And for the full year, same-unit revenue grew by 2.9% compared with the prior year.
During 2014, we recorded growth in our core accounting businesses, and we also saw continued strong growth in our government healthcare consulting business, where we continue to see a robust pipeline of RFPs that are converting into engagements for us at a very nice rate.
Within employee services, total revenue increased by 14.4% in the fourth quarter. And for the full year, total revenue increased by 9.8% for this group. Same-unit revenue increased by 3.7% in the fourth quarter. And for the full year, same-unit revenue increased by 3.2% for this group compared with the prior year.
Margin was impacted within this group as result of the investments we made to improve and strengthen client service staffing levels, business development, actuarial wellness, and pharmacy benefit services over this past year.
With the exception of our small life insurance business, we continue to record growth in all areas within employee services.
Cash flow from operating activities continues to be strong. During 2014, we used $53.9 million for acquisition-related purposes, including $6.5 million for earnouts on prior acquisitions. As I commented earlier, we also used approximately $26.7 million for share repurchases during 2014.
At year-end, our total debt was approximately $205 million, which resulted in a leverage ratio compared to EBITDA of approximately 2.5 times. The outstanding balance on the $400 million revolver at year-end was $107.4 million compared to $48.5 million a year ago.
Now, as we look at future payment obligations in connection with acquisition earnouts, we estimate future payments of approximately $13.3 million in 2015; $8.1 million in 2016; $5.2 million in 2017; and approximately $1 million in 2018, for approximately $27.5 million of our total balance, or our obligation.
Capital spending for 2014 was $5.2 million, of which $1.2 million was in the fourth quarter. This is very consistent with our historic capital spending levels, so that typically they fall within a range of $4 million to $6 million in any given year.
Days sales outstanding on receivables stood at 70 days at the end of this year compared with 73 days a year ago. Bad debt expense for 2014 was 76 basis points of revenue compared with 65 basis points a year ago.
The effective tax rate for 2014 was 39.9%, which was effectively flat compared with the effective tax rate a year ago. Looking ahead to 2015, we expect our effective tax rate will continue to be very close to 40% in the year ahead.
As I commented earlier, we continue to be active with our share repurchase activity. Over time, we have returned considerable capital to our shareholders through share repurchase activity. And including the recent 10b5-1 purchases through February 5, plus the activity through 2014, we have used slightly over $31 million to repurchase approximately 3.8 million shares of our common stock over the past 14 months.
This activity is opportunistic; and at this time, again, our goal is to maintain a constant share count, and that is our expectation as we look at 2015 compared to 2014.
Again, looking ahead to 2015, we continue to expect positive trends in our business, and we expect continued stronger organic revenue growth in 2015 compared to the levels achieved in 2014.
I want to remind you that we announced the sale of our Miami financial services office in the fourth quarter of 2014. With approximately $5.5 million of revenue in 2014, this will have a small impact on our reported revenue growth as we look at 2015 compared with 2014.
Now, considering the impact of acquisitions we have already made to date, and adjusting for the operations sold in 2014, we expect revenue growth in 2015 to be within a range of 5% to 7% over 2014. With continued margin expansion opportunities, we expect earnings per share in 2015 to increase within a range of approximately 12% to 15% over the normalized $0.61 we achieved in 2014.
Cash flow will continue to be strong, and we expect EBITDA to grow within a range of 8% to 10% over the $82.2 million that we recorded in 2014.
So with these comments, I will conclude, and I will turn it back over to Steve.
Steve Gerard - CBIZ, Inc. - Chairman and CEO
Thank you, Ware. Just a few general comments. Ware mentioned our share repurchase program. I would like to remind our investors and shareholders that since we began our share repurchase, we have spent slightly under $500 million returning capital to shareholders in the share repurchase program since 2003.
Our M&A pipeline, as Ware points out, is consistently strong. I’m confident that we will be able to do the four to six transactions we normally do. Our sense of the market today is that our clients continue to be cautious, but slightly more optimistic than they were, perhaps, a year ago.
We think that 2015 revenue opportunities, because of the improving view of our clients, has some opportunity to grow on the upside. So, as Ware pointed out, we are well positioned for next year. Our cash flow is expected to continue to increase. And we will be able to take out the convert in October, as planned.
With that, let me stop and ask for questions of our listeners.
QUESTION AND ANSWER
Operator
(Operator Instructions) Jim Macdonald, First Analysis.
Jim Macdonald - First Analysis Securities - Analyst
Just clarifying on financial services, so you are removing the $5.5 million Miami office from your previous results for comparison purposes?
Ware Grove - CBIZ, Inc. - SVP and CFO
Yes, we are, Jim. We will continue to report it, because it’s not really a discontinued operation for accounting purposes. But, essentially, it’s gone. And we will continue to remind you as we go through 2015 that that adjustment will need to be made.
Jim Macdonald - First Analysis Securities - Analyst
Okay. And were there other adjustments, or maybe you could talk about the — I think there was a one-time gain on the P&L this quarter.
Ware Grove - CBIZ, Inc. - SVP and CFO
Yes. When we sold the Miami operation, we recorded a gain of approximately $1.2 million. And that’s in the fourth quarter. That certainly will not recur next year. And that’s also included in our guidance.
Jim Macdonald - First Analysis Securities - Analyst
And just in general on financial services — so excluding those items, it was a pretty good quarter, and you are still seeing good internal growth in financial services.
Ware Grove - CBIZ, Inc. - SVP and CFO
Yes, we are. I just want to remind you that both the third and the fourth quarter are little less predictable than the first half of the year. But as we look at 2015 compared to the whole year 2014, we are very positive about the outlook, and we continue to expect stronger trends in 2015 versus 2014.
Jim Macdonald - First Analysis Securities - Analyst
Moving on to employee services, any comments about impact of the Affordable Care Act during this enrollment season?
Steve Gerard - CBIZ, Inc. - Chairman and CEO
No. We continue to categorize the Affordable Care Act as the gift that keeps on giving for us. With new reporting requirements and new data collection requirements, we are still essential to our clients to help guide them through this rather complicated process.
We have not seen any significant amount of migration to the exchanges in this enrollment period. We really have seen very much business as usual; but with more questions now being asked to make sure that as they get ready for the next year, they can report properly as to the status of their workforce.
Jim Macdonald - First Analysis Securities - Analyst
Great. And just a couple other technical ones for me here — could you tell us how many shares you repurchased in the fourth quarter?
Ware Grove - CBIZ, Inc. - SVP and CFO
Boy, Jim, I don’t have that at my fingertips. I’d have to go back to third quarter. And I can get that to you; I just don’t know off the top of my head.
Jim Macdonald - First Analysis Securities - Analyst
And one more — on the G&A line, it was a little bit lighter than expected, or lighter than last year. Anything unusual going on there?
Ware Grove - CBIZ, Inc. - SVP and CFO
No, nothing unusual in G&A. We continue to leverage G&A through process improvement. And basically as we make acquisitions, we’re not really growing G&A in any significant way as a result of acquisition growth. So that’s very leverageable.
Jim Macdonald - First Analysis Securities - Analyst
Great. Thanks very much, guys. Good quarter.
Operator
(Operator Instructions) I show no further questions.
Would you like to make any closing remarks?
Steve Gerard - CBIZ, Inc. - Chairman and CEO
Yes, thank you, Amy. Okay, to all our shareholders and all of our associates, thanks for your continued support. 2014 was a good year for us, one of the best. It came in where we thought we would be, with aggressive goals. I particularly want to thank all of our associates for their hard work. And I’m actually looking forward to a much stronger 2015.
Thank you, and I look forward to speaking to you all with the release of our first-quarter earnings.
Operator
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
Exhibit 99.3
CBIZ BOARD APPOINTS TWO NEW INDEPENDENT DIRECTORS
BOARD APPROVES CONTINUATION OF STOCK PURCHASE PLAN
Cleveland, Ohio (February 11, 2015)—CBIZ, Inc. (NYSE: CBZ) (“Company”) today announced the appointment of two new independent directors to the Company’s Board of Directors, effective February 11, 2015. The appointments of Gina D. France, 56, and Sherrill W. Hudson, 71, bring the total number of CBIZ directors to nine, seven of whom are independent directors.
Ms. France currently serves as President and CEO of France Strategic Partners, LLC, a corporate strategy and transaction advisory firm. Prior to founding her own company, Ms. France served as a partner with Ernst & Young and held senior-level positions with both a large national consulting firm and a major Wall Street investment banking firm. Ms. France currently serves on the boards of FirstMerit Corporation and Cedar Fair, L.P. She has also served on several private company and various not-for-profit boards.
Ms. France graduated summa cum laude with an MBA in finance from the J.L. Kellogg Graduate School of Management at Northwestern University, where she was an Austin Scholar. She holds a Bachelor of Science in finance with highest distinction from Indiana University.
Mr. Hudson is the Chairman of the Board of TECO Energy, Inc. and has been a member of the board since 2003. He served as TECO’s executive chairman from August 2010 until December 2012 after having served as chairman and CEO since July 2004. Mr. Hudson joined TECO after retiring from Deloitte & Touche, LLP in August 2002, following 37 years of service in various positions. Mr. Hudson currently serves on the boards of Publix Super Markets, Lennar Corporation and United Insurance Holdings Corporation.
Mr. Hudson is a member of the Florida Institute of Certified Public Accountants and has held numerous positions with Florida-based charitable and philanthropic organizations. He graduated valedictorian and cum laude with a Bachelors of Science in accounting from Ashland University.
CBIZ Chairman and CEO, Steven L. Gerard stated, “We are very pleased to welcome Gina and Sherrill to the CBIZ’s Board of Directors. They each have extensive financial and operating expertise and both bring a wealth of public company knowledge and experience to CBIZ.”
In addition, on February 11, 2015, the CBIZ Board of Directors authorized the purchase of up to 5.0 million additional shares of its outstanding common stock to be obtained in open market, privately negotiated, or 10b5-1 trading plan purchases through March 31, 2016. This authorization has been renewed for the past eleven years and replaces the 5.0 million share authorization currently in place which expires on March 31, 2015.
As of December 31, 2014, CBIZ had approximately 51.5 million shares of diluted weighted average common stock outstanding. CBIZ continues to generate significant cash flow from operations. This cash flow will be deployed to fund the continued growth of operations, fund future acquisitions, and to repurchase shares of common stock as authorized by the Board of Directors.
The CBIZ Board of Directors believes that the repurchase plan is a prudent use of the Company’s financial resources, and that investing in its own shares is an attractive use of capital and an efficient means to provide value to CBIZ stockholders. CBIZ anticipates that it will obtain all of the funds necessary to purchase shares under the repurchase program, and to pay related fees and expenses, from operating cash flow and by borrowing under its credit facility. This authorization allows such purchases to the extent permitted under the Company’s current or any future credit facility, without further amendment.
CBIZ, Inc. provides professional business services that help clients better manage their finances and employees. CBIZ provides its clients with financial services including accounting, tax, financial advisory, government health care consulting, risk advisory, real estate consulting, and valuation services. Employee services include employee benefits consulting, property and casualty insurance, retirement plan consulting, payroll, life insurance, HR consulting, and executive recruitment. As one of the largest accounting, insurance brokerage and valuation companies in the United States, the Company’s services are provided through more than 100 Company offices in 34 states.
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 and sustain 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 the Company’s insurance business or its business services operations. A more detailed description of such risks and uncertainties may be found in the Company’s filings with the Securities and Exchange Commission.