CENTURY BUSINESS SERVICES is a diversified services company which acting through its subsidiaries provides business services primarily to small and medium-sized businesses as well as individuals governmental entities and not-for-profit enterprises throughout the United States and in Toronto Canada. Their business is classified in three reportable segments: Business Solutions; Benefits and Insurance; and National Practices. CBIZ Inc. has a market cap of $462.1 million; its shares were traded at around $7.47 with a P/E ratio of 13.6 and P/S ratio of 0.7. CBIZ Inc. had an annual average earning growth of 14.9% over the past 5 years.
Highlight of Business Operations:Revenue for the first quarter of 2009 grew by 11.7% versus the comparable period in 2008 and earnings per share from continuing operations grew by 11.5%. Revenue from newly acquired operations, net of divestitures, contributed $26.8 million, or 13.6% to the growth in revenue and same-unit revenue declined by 1.9%, or $3.8 million. CBIZ is taking a number of actions to manage costs in order to reduce pressure on gross margin.
The increase in operating expenses as a percentage of revenue attributable to personnel costs consisted of an approximately 0.4% increase related to lower losses on assets held in relation to CBIZs deferred compensation plan, and 0.3% related to certain compensation arrangements related to the previously mentioned acquisitions. The increase in depreciation and amortization expense as a percentage of revenue is the result of the previously mentioned acquisitions. The decline in other operating expenses as a percentage of revenue for the first quarter of 2009 verses the comparable period in 2008 occurred as a result of the Companys cost-control efforts, and primarily relates to declines in travel and recruiting fees. Personnel and other operating expenses are discussed in further detail under Operating Practice Groups.
Corporate general and administrative expenses Corporate general and administrative (G&A) expenses increased by $0.4 million to $7.7 million for the first quarter of 2009, from $7.3 million for the comparable period of 2008, however, declined as a percentage of revenue to 3.5% from 3.7% for the first quarters of 2009 and 2008, respectively. The primary components of G&A expenses for the first quarters of 2009 and 2008 are illustrated in the following table:
Although the convertible notes carry a fixed interest rate of 3.125%, interest expense for the first quarter of 2009 increased by approximately $0.1 million versus the first quarter of 2008. As required by FSP APB 14-1, CBIZ accounts for the liability and equity components of the convertible notes in a manner that reflects the convertible debt borrowing rate, absent the conversion feature, when interest expense is recognized over subsequent periods. The effective interest rate on the convertible notes is 7.8% and interest expense above the 3.125% coupon rate is non-cash. CBIZs convertible notes and the impact of adopting FSP APB 14-1 are further disclosed in Notes 1 and 5 of the accompanying consolidated financial statements.
Income tax expense CBIZ recorded income tax expense from continuing operations of $12.1 million and $11.2 million for the first quarters of 2009 and 2008, respectively. The effective tax rate for the first quarter of 2009 was 40.2%, compared to an effective rate of 40.1% for the comparable period in 2008.
The largest components of operating expenses for the Financial Services group are personnel costs, occupancy costs, and travel related expenses representing 88.6% and 88.7% of total operating expenses for the first quarters of 2009 and 2008, respectively. Personnel costs increased $16.8 million for the first quarter of 2009 compared to the same period in the prior year, of which $16.0 million was related to the acquired businesses. The remainder of the increase was attributable to annual merit increases to existing employees, partially offset by decreases in personnel at several units experiencing reduced client demand. Occupancy costs increased by $1.9 million to 4.9% of revenue for the first quarter of 2009 versus 4.2% of revenue for the comparable period in 2008. The increase in occupancy costs relates to the acquired businesses and several office relocations which were completed subsequent to the first quarter of 2008. Travel related expenses decreased to 1.8% of revenue for the first quarter of 2009 from 2.0% of revenue for the comparable period of 2008, primarily as a result of CBIZs cost control efforts.
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