0001564590-18-010248.txt : 20180502 0001564590-18-010248.hdr.sgml : 20180502 20180502150742 ACCESSION NUMBER: 0001564590-18-010248 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 91 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180502 DATE AS OF CHANGE: 20180502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CBIZ, Inc. CENTRAL INDEX KEY: 0000944148 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 222769024 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32961 FILM NUMBER: 18799202 BUSINESS ADDRESS: STREET 1: 6050 OAK TREE BOULEVARD, SOUTH STREET 2: SUITE 500 CITY: CLEVELAND STATE: OH ZIP: 44131 BUSINESS PHONE: 2164479000 MAIL ADDRESS: STREET 1: 6050 OAK TREE BOULEVARD, SOUTH STREET 2: SUITE 500 CITY: CLEVELAND STATE: OH ZIP: 44131 FORMER COMPANY: FORMER CONFORMED NAME: CENTURY BUSINESS SERVICES INC DATE OF NAME CHANGE: 19980218 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL ALLIANCE SERVICES INC DATE OF NAME CHANGE: 19961031 10-Q 1 cbz-10q_20180331.htm 10-Q cbz-10q_20180331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from________ to ________

Commission File Number 1-32961

 

CBIZ, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

22-2769024

(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer

Identification No.)

 

 

6050 Oak Tree Boulevard, South, Suite 500, Cleveland, Ohio

44131

(Address of principal executive offices)

(Zip Code)

 

216-447-9000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes     No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Class of Common Stock

Outstanding at April 30, 2018

Common Stock, par value $0.01 per share

55,075,132

 

 

 


 

CBIZ, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

PART I.

FINANCIAL INFORMATION:

Page

 

 

 

Item 1.

Condensed Financial Statements (Unaudited)

3

 

 

 

 

 

 

Consolidated Balance Sheets – March 31, 2018 and December 31, 2017

3

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2018 and 2017

4

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2018 and Year Ended December 31, 2017

5

 

 

 

 

 

 

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2018 and 2017

6

 

 

 

 

 

 

Notes to the Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

30

 

 

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

 

PART II.

OTHER INFORMATION:

 

 

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

 

 

Item 1A.

Risk Factors

32

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

32

 

 

 

 

 

Item 4.

Mine Safety Disclosures

33

 

 

 

 

 

Item 5.

Other Information

33

 

 

 

 

 

Item 6.

Exhibits

34

 

 

 

 

 

Signature

35

 

 


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

CBIZ, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

295

 

 

$

424

 

Restricted cash

 

 

29,773

 

 

 

32,985

 

Accounts receivable, net

 

 

261,336

 

 

 

188,300

 

Income taxes refundable/receivable

 

 

 

 

 

813

 

Other current assets

 

 

24,503

 

 

 

22,539

 

Current assets before funds held for clients

 

 

315,907

 

 

 

245,061

 

Funds held for clients

 

 

147,655

 

 

 

203,112

 

Total current assets

 

 

463,562

 

 

 

448,173

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

27,318

 

 

 

26,081

 

Goodwill and other intangible assets, net

 

 

631,956

 

 

 

613,206

 

Assets of deferred compensation plan

 

 

86,581

 

 

 

85,589

 

Notes receivable

 

 

909

 

 

 

620

 

Other non-current assets

 

 

4,027

 

 

 

2,562

 

Total non-current assets

 

 

750,791

 

 

 

728,058

 

Total assets

 

$

1,214,353

 

 

$

1,176,231

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

63,157

 

 

$

51,375

 

Income taxes payable

 

 

13,586

 

 

 

 

Accrued personnel costs

 

 

30,790

 

 

 

45,264

 

Notes payable

 

 

1,743

 

 

 

1,861

 

Contingent purchase price liability

 

 

16,293

 

 

 

15,151

 

Other current liabilities

 

 

14,118

 

 

 

17,013

 

Current liabilities before client fund obligations

 

 

139,687

 

 

 

130,664

 

Client fund obligations

 

 

148,654

 

 

 

203,582

 

Total current liabilities

 

 

288,341

 

 

 

334,246

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Bank debt

 

 

214,700

 

 

 

178,500

 

Debt issuance costs

 

 

(698

)

 

 

(828

)

Total long-term debt

 

 

214,002

 

 

 

177,672

 

Notes payable

 

 

1,824

 

 

 

2,164

 

Income taxes payable

 

 

4,555

 

 

 

4,454

 

Deferred income taxes, net

 

 

2,791

 

 

 

3,339

 

Deferred compensation plan obligations

 

 

86,581

 

 

 

85,589

 

Contingent purchase price liability

 

 

28,331

 

 

 

22,423

 

Other non-current liabilities

 

 

16,312

 

 

 

15,465

 

Total non-current liabilities

 

 

354,396

 

 

 

311,106

 

Total liabilities

 

 

642,737

 

 

 

645,352

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Common stock

 

 

1,305

 

 

 

1,301

 

Additional paid in capital

 

 

679,208

 

 

 

675,504

 

Retained earnings

 

 

382,775

 

 

 

345,302

 

Treasury stock

 

 

(491,604

)

 

 

(491,046

)

Accumulated other comprehensive loss

 

 

(68

)

 

 

(182

)

Total stockholders’ equity

 

 

571,616

 

 

 

530,879

 

Total liabilities and stockholders’ equity

 

$

1,214,353

 

 

$

1,176,231

 

 

 

 

 

 

 

 

 

 

 

See the accompanying notes to the consolidated financial statements

3


 

CBIZ, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Revenue

 

$

266,090

 

 

$

241,459

 

Operating expenses

 

 

204,750

 

 

 

192,766

 

Gross margin

 

 

61,340

 

 

 

48,693

 

Corporate general and administrative expenses

 

 

10,028

 

 

 

8,768

 

Operating income

 

 

51,312

 

 

 

39,925

 

Other (expense) income:

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,780

)

 

 

(1,517

)

Gain on sale of operations, net

 

 

663

 

 

 

22

 

Other (expense) income, net

 

 

(1,229

)

 

 

2,737

 

Total other (expense) income, net

 

 

(2,346

)

 

 

1,242

 

Income from continuing operations before income tax

   expense

 

 

48,966

 

 

 

41,167

 

Income tax expense

 

 

13,156

 

 

 

16,141

 

Income from continuing operations

 

 

35,810

 

 

 

25,026

 

Gain (loss) from discontinued operations, net of tax

 

 

41

 

 

 

(152

)

Net income

 

$

35,851

 

 

$

24,874

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.66

 

 

$

0.47

 

Discontinued operations

 

 

 

 

 

 

Net income

 

$

0.66

 

 

$

0.47

 

Diluted:

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.64

 

 

$

0.45

 

Discontinued operations

 

 

 

 

 

 

Net income

 

$

0.64

 

 

$

0.45

 

Basic weighted average shares outstanding

 

 

54,071

 

 

 

53,293

 

Diluted weighted average shares outstanding

 

 

55,924

 

 

 

55,214

 

Comprehensive income:

 

 

 

 

 

 

 

 

Net income

 

$

35,851

 

 

$

24,874

 

Other comprehensive income, net of tax

 

 

114

 

 

 

180

 

Comprehensive income

 

$

35,965

 

 

$

25,054

 

 

See the accompanying notes to the consolidated financial statements

 

4


 

CBIZ, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Issued

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Treasury

 

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Treasury

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Shares

 

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Stock

 

 

Loss

 

 

Totals

 

December 31, 2017

 

 

130,075

 

 

 

75,484

 

 

 

$

1,301

 

 

$

675,504

 

 

$

345,302

 

 

$

(491,046

)

 

$

(182

)

 

$

530,879

 

Cumulative-effect adjustment (Note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,622

 

 

 

 

 

 

 

 

 

1,622

 

Adjusted balance at January 1, 2018

 

 

130,075

 

 

 

75,484

 

 

 

$

1,301

 

 

$

675,504

 

 

$

346,924

 

 

$

(491,046

)

 

$

(182

)

 

$

532,501

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,851

 

 

 

 

 

 

 

 

 

35,851

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

114

 

 

 

114

 

Share repurchases

 

 

 

 

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

(558

)

 

 

 

 

 

(558

)

Stock options exercised

 

 

339

 

 

 

 

 

 

 

4

 

 

 

2,267

 

 

 

 

 

 

 

 

 

 

 

 

2,271

 

Share-based compensation

 

 

56

 

 

 

 

 

 

 

 

 

 

1,437

 

 

 

 

 

 

 

 

 

 

 

 

1,437

 

March 31, 2018

 

 

130,470

 

 

 

75,515

 

 

 

$

1,305

 

 

$

679,208

 

 

$

382,775

 

 

$

(491,604

)

 

$

(68

)

 

$

571,616

 

 

See the accompanying notes to the consolidated financial statements

 

5


 

CBIZ, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

35,851

 

 

$

24,874

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

5,775

 

 

 

5,641

 

Bad debt expense, net of recoveries

 

 

1,766

 

 

 

734

 

Adjustment to contingent earnout liability

 

 

1,609

 

 

 

616

 

Other

 

 

(1,244

)

 

 

195

 

Changes in assets and liabilities, net of acquisitions and divestitures:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(64,111

)

 

 

(46,077

)

Other assets

 

 

(2,571

)

 

 

1,088

 

Accounts payable

 

 

5,501

 

 

 

1,285

 

Income taxes payable

 

 

15,413

 

 

 

17,837

 

Accrued personnel costs

 

 

(15,262

)

 

 

(18,800

)

Other liabilities

 

 

(3,366

)

 

 

(1,767

)

Operating cash flows used in continuing operations

 

 

(20,639

)

 

 

(14,374

)

Operating cash flows provided by (used in) discontinued operations

 

 

139

 

 

 

(118

)

Net cash used in operating activities

 

 

(20,500

)

 

 

(14,492

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Business acquisitions and purchases of client lists, net of cash acquired

 

 

(15,568

)

 

 

(4,344

)

Purchases of client fund investments

 

 

(6,170

)

 

 

(10,418

)

Proceeds from the sales and maturities of client fund investments

 

 

3,345

 

 

 

3,425

 

Increase in funds held for clients

 

 

57,827

 

 

 

61,922

 

Additions to property and equipment

 

 

(2,641

)

 

 

(1,760

)

Other

 

 

662

 

 

 

22

 

Net provided by investing activities

 

 

37,455

 

 

 

48,847

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from bank debt

 

 

274,900

 

 

 

139,700

 

Payment of bank debt

 

 

(238,700

)

 

 

(118,400

)

Payment for acquisition of treasury stock

 

 

(558

)

 

 

(2,271

)

Decrease in client funds obligations

 

 

(54,928

)

 

 

(54,802

)

Proceeds from exercise of stock options

 

 

2,271

 

 

 

2,453

 

Payment of contingent consideration of acquisitions

 

 

(3,223

)

 

 

(3,231

)

Other

 

 

(58

)

 

 

(103

)

Net cash used in financing activities

 

 

(20,296

)

 

 

(36,654

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(3,341

)

 

 

(2,299

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

33,409

 

 

 

31,374

 

Cash, cash equivalents and restricted cash at end of period

 

$

30,068

 

 

$

29,075

 

 

 

 

 

 

 

 

 

 

See the accompanying notes to the consolidated financial statements

 

6


 

CBIZ, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

 

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business: CBIZ, Inc. is a diversified services company which, acting through its subsidiaries, has been providing professional business services since 1996, primarily to small and medium-sized businesses, as well as individuals, governmental entities, and not-for-profit enterprises throughout the United States and parts of Canada. CBIZ, Inc. manages and reports its operations along three practice groups; Financial Services, Benefits and Insurance Services and National Practices. A further description of products and services offered by each of the practice groups is provided in Note 16, Segment Disclosures, to the accompanying consolidated financial statements.

Basis of Consolidation: The accompanying unaudited condensed consolidated financial statements include the operations of CBIZ, Inc. and all of its wholly-owned subsidiaries (“CBIZ”, the “Company”, “we”, “us”, or “our”), after elimination of all intercompany balances and transactions. These condensed consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to the financial condition, results of operations or cash flows of CBIZ.

Unaudited Interim Financial Statements: The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

In our opinion, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2018.

Use of Estimates: The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Changes in circumstances could cause actual results to differ materially from these estimates.

Changes in Accounting Policies: We have consistently applied the accounting policies for the periods presented as described in Note 1, Basis of Presentation and Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Effective January 1, 2018, we adopted Accounting Standards Update (“ASU”) No. 2015-14, “Revenue from Contracts with Customers” (“Topic 606”). As a result, we have changed our accounting policy for revenue recognition as described below in Note 2, New Accounting Pronouncements.

NOTE 2. New Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP other than the SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an accounting standard to communicate changes to the FASB codification. We assess and review the impact of all accounting standards. Any accounting standards not listed below were reviewed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

Accounting Standards Adopted in 2018

Modification Accounting for Share-Based Payment Awards: Effective January 1, 2018, we adopted ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting.” The new standard clarifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. Modification accounting is required if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. We typically do not change either the terms or conditions of share-based payment awards once they are granted; therefore, this new guidance had no impact on our consolidated financial statements.

7


CBIZ, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

 

Restricted Cash - Statement of Cash Flows: Effective January 1, 2018, we adopted ASU No. 2016-18, “Statement of Cash Flows (Topic 230). The new standard requires that the reconciliation of the beginning and end of period cash amounts shown in the statement of cash flows include restricted cash. When restricted cash is presented separately from cash and cash equivalents on the balance sheet, a reconciliation is required between the amounts presented on the statement of cash flows and the balance sheet, as well as a disclosure of information about the nature of the restrictions. The adoption of this new standard resulted in a $3.2 million decrease and $1.2 million increase in cash used in operating activities for the first quarter of 2018 and 2017.

Restricted cash consists of funds held by us in relation to our capital and investment advisory services as those funds are restricted in accordance with applicable Financial Industry Regulatory Authority regulations. Restricted cash also consists of funds on deposit from clients in connection with the pass-through of insurance premiums to the carrier with the related liability for these funds is recorded in “Accounts payable” in the accompanying Consolidated Balance Sheets.

The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported in the accompanying Consolidated Balance Sheets that sum to the total of the same such amount shown in the accompanying Consolidated Statements of Cash Flows (in thousands):

 

 

 

March 31,

 

 

March 31,

 

 

 

2018

 

 

2017

 

Cash and cash equivalents

 

$

295

 

 

$

2,424

 

Restricted cash

 

 

29,773

 

 

 

26,651

 

Total cash, cash equivalents and restricted cash

 

$

30,068

 

 

$

29,075

 

 

Statement of Cash Flows: Effective January 1, 2018, we adopted ASU No. 2016-15, “Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments.” The new standard provides guidance on eight specific cash flow issues. The eight specific cash flow issues were not applicable to us under our current practice.

Revenue from Contracts with Customers: Effective January 1, 2018, we adopted Topic 606 using the modified retrospective transition method.  We recognized the cumulative effect of initially applying the new standard as an adjustment directly to the opening balance of “Retained earnings” at January 1, 2018. The comparative information has not been restated and continues to be reported under the legacy standard.

We evaluate our revenue contracts with customers based on the five-step model under Topic 606; (i) identify the contract with the customer; (ii) identify the performance obligation in the contract; (iii) determine the contract price; (iv) allocate the transaction price; and (v) recognize revenue (or as) each performance obligation is satisfied. If we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met.

Revenue recognition is consistent under both the legacy standard and Topic 606 for the majority of our revenue streams, with the exception of two business units within our Benefits and Insurance Services practice group. The revenue recognition policies in our Benefits and Insurance Services practice group have been modified under the new standard.

 

In our Property and Casualty business unit, commission revenue under agency billing arrangements (we bill the insured, collect the funds and remit the premium to the insurance carrier less our commissions) was previously recognized as of the later of the effective date of the insurance policy or the date billed to the customer. We now recognize the commission revenue on the effective date of the insurance policy.

Also in our Property and Casualty business unit, commission revenue under direct billing arrangements (the insurance carrier bills the insured directly and remits the commissions to us) was previously recognized when the data necessary from the carriers was available, whereas now we recognize the commission revenue on the effective date of the insurance policy.

 

In our Retirement Plan Services business unit, certain defined benefit administration arrangements charge new clients an initial, non-refundable, set-up fee as part of a multi-year service agreement. Previously, these fees were recognized over the initial set up period, whereas now we defer the set-up fees and associated costs and recognize them over the life of the contract or the expected customer relationship, whichever is longer.

8


CBIZ, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

 

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet was as follows (in thousands):

 

 

 

Balance at

 

 

 

 

 

 

Balance at

 

 

 

December 31,

 

 

Adjustments due to

 

 

January 1,

 

Balance Sheet

 

2017

 

 

Topic 606

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

188,300

 

 

$

9,446

 

 

$

197,746

 

Other current assets

 

 

259,873

 

 

 

80

 

 

 

259,953

 

Other non-current assets

 

 

728,058

 

 

 

728

 

 

 

728,786

 

Total assets

 

$

1,176,231

 

 

$

10,254

 

 

$

1,186,485

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

51,375

 

 

 

6,281

 

 

 

57,656

 

Accrued personnel costs

 

 

45,264

 

 

 

595

 

 

 

45,859

 

Other current liabilities

 

 

237,607

 

 

 

113

 

 

 

237,720

 

Deferred income taxes, net

 

 

3,339

 

 

 

631

 

 

 

3,970

 

Other non-current liabilities

 

 

307,767

 

 

 

1,012

 

 

 

308,779

 

Total liabilities

 

 

645,352

 

 

 

8,632

 

 

 

653,984

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

345,302

 

 

 

1,622

 

 

 

346,924

 

Other stockholders' equity

 

 

185,577

 

 

 

 

 

 

185,577

 

Total stockholders' equity

 

 

530,879

 

 

 

1,622

 

 

 

532,501

 

Total liabilities and

   stockholders' equity

 

$

1,176,231

 

 

$

10,254

 

 

$

1,186,485

 

The following tables summarize the impact of adopting Topic 606 on our consolidated financial statements for the first quarter of 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Balances

without

 

First Quarter 2018

Balance Sheet

 

As reported

 

 

Adjustments

 

 

adoption of

Topic 606

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

261,336

 

 

$

(12,623

)

 

$

248,713

 

Other current assets

 

 

202,226

 

 

 

(80

)

 

 

202,146

 

Other non-current assets

 

 

750,791

 

 

 

(707

)

 

 

750,084

 

Total assets

 

$

1,214,353

 

 

$

(13,410

)

 

$

1,200,943

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

63,157

 

 

$

(8,990

)

 

$

54,167

 

Accrued personnel costs

 

 

30,790

 

 

 

(646

)

 

 

30,144

 

Other current liabilities

 

 

194,394

 

 

 

(115

)

 

 

194,279

 

Deferred income taxes, net

 

 

2,791

 

 

 

(745

)

 

 

2,046

 

Other non-current liabilities

 

 

351,605

 

 

 

(981

)

 

 

350,624

 

Total liabilities

 

 

642,737

 

 

 

(11,477

)

 

 

631,260

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

382,775

 

 

 

(1,933

)

 

 

380,842

 

Other stockholders' equity

 

 

188,841

 

 

 

 

 

 

188,841

 

Total shareholders' equity

 

 

571,616

 

 

 

(1,933

)

 

 

569,683

 

Total liabilities and stockholders' equity

 

$

1,214,353

 

 

$

(13,410

)

 

$

1,200,943

 

9


CBIZ, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

 

 

 

 

 

 

 

 

 

 

 

 

Balances

without

 

First Quarter 2018

Income Statement

 

As reported

 

 

Adjustments

 

 

adoption of

Topic 606

 

Revenue

 

$

266,090

 

 

$

(498

)

 

$

265,592

 

Operating expenses

 

 

204,750

 

 

 

(73

)

 

 

204,677

 

Gross margin

 

 

61,340

 

 

 

(425

)

 

 

60,915

 

Corporate general and administrative expenses

 

 

10,028

 

 

 

 

 

 

10,028

 

Operating income

 

 

51,312

 

 

 

(425

)

 

 

50,887

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,780

)

 

 

 

 

 

(1,780

)

Gain on sale of operations, net

 

 

663

 

 

 

 

 

 

663

 

Other expense, net

 

 

(1,229

)

 

 

 

 

 

(1,229

)

Total other expense, net

 

 

(2,346

)

 

 

 

 

 

(2,346

)

Income from continuing operations before income tax

   expense

 

 

48,966

 

 

 

(425

)

 

 

48,541

 

Income tax expense

 

 

13,156

 

 

 

(114

)

 

 

13,042

 

Income from continuing operations

 

 

35,810

 

 

 

(311

)

 

 

35,499

 

Gain from discontinued operations, net of tax

 

 

41

 

 

 

 

 

 

41

 

Net income

 

$

35,851

 

 

$

(311

)

 

$

35,540

 

 

 

 

 

 

 

 

 

 

 

 

Balances

without

 

First Quarter 2018

Cash Flow Statement

 

As reported

 

 

Adjustments

 

 

adoption of

Topic 606

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

35,851

 

 

$

(311

)

 

$

35,540

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

7,906

 

 

 

 

 

 

7,906

 

Changes in assets and liabilities, net of acquisitions and divestitures:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(64,111

)

 

 

3,177

 

 

 

(60,934

)

Other assets

 

 

(2,571

)

 

 

(22

)

 

 

(2,593

)

Accounts payable

 

 

5,501

 

 

 

(2,708

)

 

 

2,793

 

Accrued personnel costs

 

 

(15,262

)

 

 

(51

)

 

 

(15,313

)

Other liabilities

 

 

(3,366

)

 

 

(85

)

 

 

(3,451

)

Other

 

 

15,413

 

 

 

 

 

 

15,413

 

Operating cash flows used in continuing operations

 

 

(20,639

)

 

 

 

 

 

(20,639

)

Operating cash flows provided by discontinued operations

 

 

139