CBIZ, Inc. (CBZ)
Q2 2010 Earnings Conference Call
July 27, 2010 11:00 AM ET
Steven Gerard – Chairman and CEO
Ware Grove – CFO
Josh Vogel – Sidoti & Co.
Bill Sutherland – Boenning & Scattergood
Jim MacDonald – First Analysis
Robert Kirkpatrick – Cardinal Capital
Vincent Colicchio – Noble Financial Group
Welcome to the CBIZ second quarter results conference call. My name is Sandra and I will be your operator for today’s call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.
I will now turn the call over to Mr. Steven Gerard. Mr. Gerard, you may begin.
Good morning everyone and thank you for calling into CBIZ’s second quarter and first half 2010 conference call. Before I begin my comments, I’d like to remind you of a few things.
As with all of 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’re welcome to listen in; however, I ask if you have questions you hold them until after the call and we’ll be happy to address them at that time.
The call is also being webcast and you can access the call over our website. You should have all received a copy of the press release we issued this morning. If you did not, you can access it on our website or you can call our corporate office.
Finally remember, that during the course of the call, we may make forward-looking statements. These statements represent management’s intentions, hopes, beliefs, expectations, and predictions of the future. Actual results can and sometimes do differ materially from those projected in forward-looking statements.
Additional information concerning the factors that would cause actual results to differ materially from those in the forward-looking statements is contained in our SEC filings, 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 announced our earnings for the second quarter and the six months. Despite some challenges in growing revenue, we have been able to perform satisfactory during the quarter by managing our expenses and better positioning ourselves in our markets and the result was our earnings per share were flat to a year ago. I will turn it over to Ware now to give you all the details and then I’ll return afterward to give you some more insight into the business.
Thanks, Steve. As is our normal practice, I want to take a few minutes to share some of the highlights of the second quarter and year-to-date results for 2010 that we released today.
Now as a reminder, please remember that 2009 results are restated for the impact of the discontinued operations that occurred in the fourth quarter of 2009. As we expected earlier in this year the economic environment continues to present challenges to achieving revenue growth in 2010 and high unemployment continues to persist and the midsize businesses that are typically served by CBIZ have generally not yet enjoyed a rebound in business activity.
For the second quarter same unit revenue declined by 5.1% and for the six months same unit revenue decline by 5.4%. There are positives developing for our businesses, however, and when compared with the results we experienced in the second half of 2009 sequentially we are seeing improving trends.
In light of the challenges to growing revenue in this economic environment, we have taken a number of measures to align headcount with revenue and client demand and we have continued to carefully manage costs in order to protect margins and earnings.
Now as you look at the results for the first six months, I want to remind you that results in 2010 included a $1.4 million charge in the first quarter for restructuring in connection with the integration of Goldstein Lewin & Company, a financial services firm located in Boca Raton, Florida and that we acquired at the beginning of 2010.
Also included in 2010 results is an increase in legal fees of about $1.3 million that was incurred primarily in the first quarter in connection with a successful resolution of several long standing legal matters. As we commented in the first quarter call earlier this year, we expect to be able to record favorable settlements but these matters have not yet progressed to that point.
Now together, these two items negatively impact our first half pretax income margin by 70 basis points. You will also note a lower effective tax rate in the second quarter this year. This is the result of releasing an estimated tax reserve in connection with a statutory expiration of the review period for this reserve that occurred during the second quarter this year.
For the six months the effective tax rate is about 37.3% and for the full year 2010, we now expect an effective tax rate of approximately 38% as a result of this favorable adjustment that occurred in the second quarter.
Now for the second quarter of 2010 earnings per share from continuing operations was $0.11 per share, which compares with a $0.11 per share for the same quarter a year ago. For the six months ended June 30, 2010, earnings per share was $0.38 per share and this compares with $0.41 per share for the first six months a year ago.