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) October 26, 2004
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CENTURY BUSINESS SERVICES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-25890 22-2769024
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
6050 Oak Tree Boulevard South, Suite 500 Cleveland, Ohio 44131
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 216-447-9000
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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 October 26, 2004, Century Business Services, Inc. (CBIZ) announced its
earnings for the third quarter ended September 30, 2004. A copy of the press
release is filed herewith as Exhibit 99.1. In addition, on October 26, 2004,
CBIZ conducted its earnings conference call for the quarter ended September 30,
2004. On this conference call, CBIZ disclosed the following additional
information:
o CBIZ has exceeded its incremental cross-serving revenue goal of $9.0
million for 2004.
o CBIZ entered into an agreement to acquire Gallery Asset Management, to
be effective January 1, 2005, and acquired Hart Benefit Services, LLC
effective October 1, 2004. These businesses are expected to aggregately
contribute $4.0 million in incremental first year revenue.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit 99.1 Press Release of Century Business Services, Inc. dated
October 26, 2004, announcing its financial results for the third
quarter ended September 30, 2004.
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: November 1, 2004 /s/ Ware H. Grove
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Ware H. Grove
Chief Financial Officer
Exhibit 99.1
Logo PRESS RELEASE
Century Business Services, Inc.
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 THIRD-QUARTER 2004 RESULTS
Cleveland, Ohio (October 26, 2004)--CBIZ (Century Business Services, Inc.)
(NASDAQ: CBIZ) today announced its financial results for the third quarter of
2004.
CBIZ reported revenue of $121.6 million for the quarter ended September 30,
2004, an increase of approximately $4.2 million over last year's third-quarter
revenue of $117.4 million. Same-unit revenue for the third quarter increased by
2.3%, or by $2.7 million, compared with a year ago. Business units acquired
since the third quarter a year ago added $2.3 million to revenue, while units
divested resulted in a revenue decline of $860,000. Net income from continuing
operations for the quarter was $490,000, or $0.01 per diluted share, compared
with $324,000, or $0.00 per diluted share recorded for the third quarter of
2003.
As of September 30, 2004, bank debt stood at $52.5 million compared with $14.0
million at the beginning of 2004. In addition to the tender offer completed
during the second quarter of 2004 which resulted in the repurchase of
approximately 7.5 million shares, the Company has also completed open market
purchases of approximately 1.8 million shares of its common stock for a total
cost of $45.3 million during 2004.
For the nine-month period ended September 30, 2004, CBIZ reported revenue of
$394.5 million compared with $383.9 million for the nine-month period a year
ago, an increase of $10.6 million. Same-unit revenue increased by 3.4%, or by
$12.9 million, for the first nine months. Acquisitions have contributed $7.5
million to revenue growth for the first nine months of 2004 and divested
operations accounted for a decline in revenue of $9.7 million compared with the
first nine months a year ago. Net income from continuing operations was $14.7
million in 2004, or $0.18 per diluted share, compared with $14.0 million for the
first nine months of 2003, or $0.15 per diluted share.
Operating expenses for the three months and nine months ended September 30,
2004, include additional restructuring expenses primarily associated with real
estate leasing costs in the Chicago market. For the third quarter, restructuring
expenses increased by $380,000, and for the nine months, restructuring costs
increased by $744,000 compared with the same periods a year earlier. In
addition, corporate general and administrative expenses for the three and nine
months ended September 30, 2004 include higher legal fees associated with
several long standing litigation issues as well as higher expenses associated
with the company's compliance efforts in connection with Section 404 of the
Sarbanes Oxley Act. For the third quarter, these expenses increased by
approximately $1.4 million, and for the nine months, these expenses increased by
approximately $2.0 million compared with the same periods a year earlier.
Page 1 of 5
"During the third quarter, we announced the signing of a new $100 million credit
agreement for CBIZ which gives us added flexibility to fund our growth, make
acquisitions and conduct share repurchases," stated Steven L. Gerard, Chairman
and CEO. "We recently announced two acquisitions and for the year we have made
four acquisitions that will strengthen our presence in the markets we serve. We
continue to be encouraged by our same unit revenue growth, and our progress in
developing cross-serving revenue is exceeding our expectations. However, we have
continued to experience operating difficulties in one business unit due to its
rapid growth over the past two years and that unit is performing well below our
expectations. The pre-tax income contribution from that unit has declined by
approximately $4.0 million through the first nine months compared with a year
ago, which is the equivalent of $0.03 per share" continued Gerard. "Combined
with the additional legal and other expenses we have incurred through the first
nine months, the full year impact of these items on earnings per share is
estimated to be about $0.05 per share. Notwithstanding this, our current outlook
for the full year is that we expect earnings per share will increase by 20% to
25% above the $0.17 per share we reported for 2003", concluded 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 1-888-862-6557 several minutes
before 11:00 a.m. (ET). If you are dialing from outside the United States, dial
1-630-691-2748. A replay of the call will be available starting at 1:00 p.m.
(ET) October 26, through midnight (ET), October 29, 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 10012580. 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; property tax solutions; 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.
Page 2 of 5
CENTURY BUSINESS SERVICES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(In thousands, except percentages and per share data)
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------------
--------- ----- --------- -----
2004 % 2003 (1) %
--------- ----- --------- -----
Revenue ...................................................... $ 121,550 100.0% $ 117,396 100.0%
Operating expenses ........................................... 109,877 90.4% 107,394 91.5%
--------- ----- --------- -----
Gross margin ................................................. 11,673 9.6% 10,002 8.5%
Corporate general and administrative expense (2) ............. 6,841 5.6% 4,940 4.2%
Depreciation and amortization expense ........................ 4,105 3.4% 4,095 3.5%
--------- ----- --------- -----
Operating income ............................................. 727 0.6% 967 0.8%
Other income (expense):
Interest expense ........................................ (369) -0.3% (234) -0.2%
Gain on sale of operations, net ......................... 78 0.1% 207 0.2%
Other income, net (2) ................................... 527 0.4% 452 0.4%
--------- ----- --------- -----
Total other income, net ........................ 236 0.2% 425 0.4%
Income from continuing operations before income tax expense .. 963 0.8% 1,392 1.2%
Income tax expense ........................................... 473 1,068
--------- ----- --------- -----
Income from continuing operations ............................ 490 0.4% 324 0.3%
Loss from operations of discontinued businesses, net of tax .. (372) (352)
Gain (loss) on disposal of discontinued businesses, net of tax 238 (210)
--------- ----- --------- -----
Net income (loss) ............................................ $ 356 0.3% $ (238) -0.2%
========= =========
Diluted earnings (loss) per share:
Continuing operations ................................... $ 0.01 $ --
Discontinued operations ................................. -- --
--------- ---------
Net income .............................................. $ 0.01 $ --
========= =========
Diluted shares outstanding .............................. 79,373 88,971
OTHER DATA FROM CONTINUING OPERATIONS:
EBIT (3) ..................................................... $ 1,254 $ 1,419
EBITDA (3) ................................................... $ 5,359 $ 5,514
(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 September 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
CENTURY BUSINESS SERVICES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(In thousands, except percentages and per share data)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------------
--------- ----- --------- -----
2004 % 2003 (1) %
--------- ----- --------- -----
Revenue ...................................................... $ 394,515 100.0% $ 383,893 100.0%
Operating expenses ........................................... 340,617 86.3% 332,034 86.5%
--------- ----- --------- -----
Gross margin ................................................. 53,898 13.7% 51,859 13.5%
Corporate general and administrative expense (2) ............. 18,275 4.6% 14,633 3.8%
Depreciation and amortization expense ........................ 12,216 3.1% 12,653 3.3%
--------- ----- --------- -----
Operating income ............................................. 23,407 6.0% 24,573 6.4%
Other income (expense):
Interest expense ........................................ (1,038) -0.3% (854) -0.2%
Gain on sale of operations, net ......................... 996 0.3% 1,991 0.5%
Other income (expense), net (2) ......................... 1,358 0.3% (558) -0.1%
--------- ----- --------- -----
Total other income, net ........................ 1,316 0.3% 579 0.2%
Income from continuing operations before income tax expense .. 24,723 6.3% 25,152 6.6%
Income tax expense ........................................... 10,053 11,155
--------- ----- --------- -----
Income from continuing operations ............................ 14,670 3.7% 13,997 3.6%
Loss from operations of discontinued businesses, net of tax .. (589) (594)
Gain (loss) on disposal of discontinued businesses, net of tax 238 (393)
--------- ----- --------- -----
Net income ................................................... $ 14,319 3.6% $ 13,010 3.4%
========= =========
Diluted earnings (loss) per share:
Continuing operations ................................... $ 0.18 $ 0.15
Discontinued operations ................................. (0.01) (0.01)
--------- ---------
Net income .............................................. $ 0.17 $ 0.14
========= =========
Diluted shares outstanding .............................. 82,480 94,267
OTHER DATA FROM CONTINUING OPERATIONS:
EBIT (3) ..................................................... $ 24,765 $ 25,640
EBITDA (3) ................................................... $ 36,981 $ 38,293
(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 nine months ended September 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
CENTURY BUSINESS SERVICES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except percentages and ratios)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2004 2003 (3) 2004 2003 (3)
--------- --------- --------- ---------
REVENUE
Accounting, Tax & Advisory Services $ 45,144 $ 41,619 $ 163,760 $ 158,578
Benefits & Insurance Services ..... 36,449 37,364 113,382 115,734
National Practices - Other ........ 17,695 18,910 53,051 53,817
Medical Practice Management ....... 22,262 19,503 64,322 55,764
TOTAL ........................ $ 121,550 $ 117,396 $ 394,515 $ 383,893
GROSS MARGIN
Accounting, Tax & Advisory Services $ 2,615 $ (176) $ 27,563 $ 25,220
Benefits & Insurance Services ..... 5,306 6,517 18,072 22,083
National Practices - Other ........ 1,563 1,071 5,417 154
Medical Practice Management ....... 4,333 4,141 11,181 10,005
TOTAL (1) .................... $ 11,673 $ 10,002 $ 53,898 $ 51,859
SELECT BALANCE SHEET DATA AND RATIOS
SEPTEMBER 30, DECEMBER 31,
2004 2003 (3)
------------- ------------
Cash and cash equivalents ........................ $ 3,977 $ 3,791
Restricted cash .................................. $ 13,807 $ 10,880
Accounts receivable, net ......................... $ 112,116 $ 109,436
Total current assets before funds held for clients $ 145,215 $ 140,050
Funds held for clients ........................... $ 48,027 $ 44,917
Goodwill and other intangible assets ............. $ 170,924 $ 167,280
TOTAL ASSETS ..................................... $ 420,639 $ 402,145
Current liabilities before client fund obligations $ 64,762 $ 63,499
Client fund obligations .......................... $ 48,027 $ 44,917
Bank debt ........................................ $ 52,500 $ 14,000
TOTAL LIABILITIES ................................ $ 171,567 $ 124,307
Treasury stock ................................... $ (80,518) $ (35,087)
TOTAL STOCKHOLDERS' EQUITY ....................... $ 249,072 $ 277,838
Bank debt to equity .............................. 21.1% 5.0%
Days sales outstanding (2) ....................... 78 81
Shares outstanding ............................... 76,621 85,371
========= =========
Basic shares outstanding ......................... 80,200 90,400
========= =========
Diluted shares outstanding ....................... 82,480 92,762
========= =========
(1) Includes operating expenses recorded by corporate and not directly allocated
to the business units of $2,144 and $1,551 for the three months ended, and
$8,335 and $5,603 for the nine months ended September 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
