CBIZ, Inc. 2009 Annual Report (10-K) Summary
Business Context and Reporting Period
This filing covers the fiscal year ended December 31, 2009. CBIZ, Inc. is a diversified professional services firm operating through four practice groups: Financial Services (accounting, tax, advisory), Employee Services (benefits, payroll, insurance), Medical Management Professionals (MMP) (billing, practice management), and National Practices (technology, consulting, M&A). The company serves over 90,000 clients across the U.S. and Canada.
Key Financial Metrics (Year Ended Dec 31, 2009)
| Metric | 2009 Value | 2008 Value |
|---|---|---|
| Total Revenue | $739.7 million | $685.9 million |
| Net Income | $31.4 million | $30.4 million |
| Diluted EPS | $0.51 | $0.49 |
| Operating Income | $57.7 million | $69.1 million |
| Gross Margin | 11.9% | 14.3% |
| EBITDA | $84.8 million | $76.4 million |
| Total Assets | $712.0 million | $698.6 million |
| Long-Term Debt | $203.8 million | $214.9 million |
| Cash & Cash Equivalents | $9.3 million | $9.7 million |
| Operating Cash Flow | $49.4 million | $41.1 million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 7.8% to $739.7 million, driven primarily by acquisitions ($92.9 million) which offset a 5.3% decline in same-unit revenue due to reduced client demand in Financial Services and MMP.
- Margin Compression: Gross margin percentage declined from 14.3% to 11.9%. This was attributed to fixed personnel costs, increased amortization from 2008 acquisitions, and lower interest rates impacting payroll float income.
- Operating Income: Decreased 16.5% to $57.7 million, reflecting the margin compression and higher interest expense ($13.4 million vs. $10.8 million in 2008) due to higher average debt levels.
- Acquisitions & Divestitures: Acquired EAO Consultants and MeyersDining in 2009. Divested three businesses (classified as discontinued operations) from the National Practices group.
- Share Repurchases: Repurchased 1.8 million shares for $13.3 million, reducing the share count.
Guidance, Outlook, and Risks
Management Commentary: Management continues to focus on organic growth, cross-selling, and strategic acquisitions. Cost control initiatives, including furloughs and reductions in force, were implemented to align staffing with revenue levels. The company maintains a $214 million credit facility with approximately $75.9 million available.
Risks and Contingencies:
- Auction Rate Securities (ARS): CBIZ holds $13.4 million par value of ARS (fair value $11.4 million). Failed auctions have impaired liquidity, though the company believes it has sufficient liquidity to meet obligations. Two ARS are temporarily impaired; one is other-than-temporarily impaired.
- Healthcare Regulation: Changes in Medicare/Medicaid reimbursement and healthcare legislation could adversely affect the MMP segment.
- Goodwill Impairment: The company tests goodwill annually. While no impairment was recorded in 2009, future declines in revenue or stock price could trigger impairment charges.
- Seasonality: Revenue is heavily weighted in the first half of the year due to tax season, creating cash flow seasonality.
Investor Verification Checklist
- Same-Unit Revenue Trends: Verify the sustainability of the 5.3% decline in same-unit revenue and the effectiveness of cost-cutting measures in stabilizing margins.
- ARS Liquidity: Monitor the status of the $13.4 million in Auction Rate Securities and any potential future impairment charges or liquidity constraints.
- Acquisition Integration: Assess the accretive impact of the 2009 and early 2010 acquisitions (EAO, MeyersDining, Goldstein Lewin, National Benefit Alliance) on future earnings.
- Debt Covenants: Confirm continued compliance with the credit facility covenants, specifically the leverage ratio (1.60x as of year-end) and fixed charge coverage.
- Discontinued Operations: Track the sale progress of the three divested National Practices businesses to realize the expected gains.