Century Business Services, Inc., Reports 137 Percent Increase in Third-Quarter Net Income
Favorable Internal Growth Rate Contributes to Strong Results
Michael G. DeGroote, President and CEO, Announces His Intention to Purchase One to Two Million Shares or More of Century's Common Stock
CLEVELAND, Oct. 27 /PRNewswire/ -- Century Business Services, Inc. (Nasdaq: CBIZ - news; ''Century''), the nation's fastest emerging outsourced business services company, today announced that for the 1998 third quarter, pro forma net income from continuing operations increased 137% to $9.4 million, or $0.13 per diluted share, from pro forma net income of $4.0 million, or $0.07 per diluted share, for 1997's third quarter. Pro forma net income is presented to reflect the tax effects of enterprises acquired under the pooling-of-interest method of accounting that previously had not been subjected to income taxes. For the third quarter of 1998, there were approximately 40% more weighted average shares used in the diluted per-share calculation.
Total revenue for the third quarter of 1998 increased 114% to $84.4 million from $39.4 million for the third quarter of 1997. Revenue for Century's Business Services segment increased 156% to $70.3 million for the quarter compared with $27.5 million for the third quarter of 1997. Business Services revenue now comprises 83% of Century's total revenue. Century's Specialty Insurance group, which represents 17% of total revenue, recorded 18% revenue growth over last year's third quarter to $14.1 million from $11.9 million for the third quarter of 1997.
Pro forma net income from continuing operations for the nine months ended September 30, 1998, increased 130% to $26.4 million from 1997's comparable pro forma net income from continuing operations of $11.5 million, on a revenue increase of 125% to $237.9 million from $105.8 million for the previous year. On a diluted per share basis, for the nine months ended September 30, 1998, pro forma net income grew 73% to $0.38 from $0.22 for the comparable 1997 period. For the nine months, the average diluted shares increased to 70.328 million from 51.493 million for the previous year's nine-month period.
Please note that revenue, income, earnings per share, number of shares outstanding, and certain balance sheet items have been restated to reflect business combinations closed during the third quarter of 1998 and year-to- date, which were accounted for under the pooling-of-interests method of accounting. These items have also been restated for the third quarter and nine months ended September 30, 1997.
Century recorded a pro forma net after-tax margin from continuing operations of 11.1% for the third quarter of 1998, versus a pro forma net after-tax margin from continuing operations of 10.0% for the same quarter of 1997. This expansion was realized even though the net profit margin from the Specialty Insurance group was down somewhat during the third quarter, and the third quarter is the slowest period for the Company's accounting and tax group, which represents the largest single component of Company revenue. Pre- tax income for Century's Business Services segment increased to 20.8% for the third quarter of 1998 from 17.3% for 1997's third quarter. For the nine-month period, pre-tax income for Century's Business Services segment expanded to 19.8% from 14.9% for the nine months ended September 30, 1997.
Commenting on the Company's results, Michael G. DeGroote, President and Chief Executive Officer stated, ''Our entire network of professional services recorded solid progress for the third quarter as well as the nine months and produced good bottom-line growth for both periods. This was achieved through the integration of several newly acquired companies and meaningful progress in our goal of increasing internal growth.''
The Company's balance sheet remains strong with shareholders' equity of $319 million, compared with $156 million at December 31, 1997. Bank debt is still below the Company's cash and cash equivalent balance. During the last quarter, the Company also arranged an increase in its credit facility to $100 million from $50 million.
During the third quarter of 1998, Century closed 10 acquisitions (of which five were accounted for under the pooling-of-interest method of accounting), plus 15 tuck-in acquisitions, adding more than $90 million to the Company's annualized revenue.
Internal Growth
Including all pooling transactions and all companies that were a part of Century for the full nine-month period ended September 30, 1998 and 1997, the Company achieved an internal revenue growth rate of 16.7% for the nine-month period to $118.9 million, from $101.8 million for the comparable 1997 period. The Company's Business Services segment recorded internal revenue growth of 14.6%, while Century's Specialty Insurance group recorded 21% internal revenue growth. Including all companies that were part of Century for the three-month period ended September 30, 1998 and 1997, the Company achieved internal revenue growth of 16.5% to $45.9 million from $39.4 million in 1997. The Business Services segment, which represented 83% of revenue for the third quarter, recorded internal revenue growth of 15.9% over 1997's third-quarter business services revenue, while Century's insurance group recorded internal revenue growth of 17.9% over 1997's third-quarter insurance revenue.
Internal revenue growth in the Ohio market, principally Cleveland where the Company began to offer professional outsourced business services in the beginning of 1997, has exceeded 21% for the nine months ended September 30, 1998. The Company's revenue in this market for the nine months has grown from $33.3 million to $40.3 million, reflecting the full array of services now offered by the Company. For the three months ended September 30, 1998, Century recorded an internal revenue growth rate of 19%, to $15.8 million from $13.2 million in the Ohio market for 1997.
''Several key markets of the Company's business service segment are at various stages of being built-out and are starting to show excellent progress in their internal growth rates,'' commented Gregory Skoda, Century's Executive Vice President. ''Some of these markets are growing at a rate of well over 15% per annum. Overall, the Company's internal growth rate is very encouraging, especially in view of the fact that the Company only recently commenced its cross-servicing efforts. The Company has also begun to distribute national products in a few markets over the last several months. Our management is well aware of the importance of internal growth and is pleased with our progress to-date.''
Michael G. DeGroote, President and Chief Executive Officer also announced today that he intends to purchase one to two million shares or more of the Company's common stock in the open market through a company controlled by him. The quantity of stock actually purchased by Mr. DeGroote in the open market, from time to time, will depend on a number of factors, including future prices and market conditions.
''The Company's stock price has significantly declined over the past few weeks for reasons unrelated to its performance and future prospects,'' stated Mr. DeGroote. ''I continue to believe that the Company has a solid business strategy, remains on track in its implementation, and its stock remains a sound investment.''
Century Business Services, Inc. is a leading provider of outsourced business services to small and medium sized companies throughout the United States. The Company provides integrated services in the following areas: accounting systems, advisory and tax; benefits design and administration; human resources; information technology systems; payroll administration; specialty insurance; valuation; and workers' compensation. These services are provided throughout a network of more than 145 Company offices in 29 states, as well as through its subsidiary, Century Small Business Solutions, a franchisor of accounting services with 650 franchisee offices in 47 states. The Company services approximately 102,000 clients, of which approximately 54,000 are serviced through the Century Small Business Solutions franchisee network. Management estimates that its clients employ more than 1.4 million employees, including 400,000 employed by clients of the Century Small Business Solutions network, which services small businesses with an average of eight employees.
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 integrate its newly acquired operations effectively with its existing businesses; the Company's ability to locate and acquire other businesses in furtherance of its aggressive growth strategy; the Company's ability to adequately estimate its liability reserves for its insurance businesses; the lack of market reverses in its investment portfolios; competitive pricing pressures; general business and economic conditions; and changes in governmental regulation affecting its insurance business or tax law changes affecting its business services operations, which are described in further detail in the Company's filings with the Securities and Exchange Commission. |
