GEVITY HR - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2003.

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File No. 0-22701

GEVITY HR, INC.
(Exact Name of Registrant as Specified in its Charter)

Florida		65-0735612
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

600 301 Blvd West, Suite 202 Bradenton, FL		34205
(Address of principal executive offices)		(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (941) 748-4540

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 x

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes o

No x

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

Class of common stock		Outstanding as of May 9, 2003

Par value $0.01 per share		21,086,736

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PART I.			FINANCIAL INFORMATION

	ITEM 1.		Financial Statements	3

		Condensed Consolidated Statements of Income for the three months ended March 31, 2002 and 2003 (unaudited)		3

		Condensed Consolidated Balance Sheets as of December 31, 2002 and March 31, 2003 (unaudited)		4

		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2003 (unaudited)		5

		Notes to Condensed Consolidated Financial Statements (unaudited)		6

	ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk	26

	ITEM 4.		Controls and Procedures	26

PART II.			OTHER INFORMATION

	ITEM 1.		Legal Proceedings	28

	ITEM 5.		Other Information	29

	ITEM 6.		Exhibits and Reports on Form 8-K	29

SIGNATURES				30

CERTIFICATIONS				31

EXHIBITS				33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED

	FOR THE THREE MONTHS ENDED MARCH 31,

	2002		2003

	(in 000’s, except per share data)
Revenues	$	91,133	$	102,770
Cost of services		68,083		77,992

Gross profit		23,050		24,778
Operating expenses:
Salaries, wages and commissions		13,684		12,528
Other general and administrative		6,312		6,926
Depreciation and amortization		2,062		1,824

Total operating expenses		22,058		21,278

Operating income		992		3,500
Interest income, net		467		400
Other income (expense), net		41		(19	)

Income before income taxes		1,500		3,881
Income tax provision		510		1,281

Net income	$	990	$	2,600

Net income per share
- Basic	$	.05	$	.12

- Diluted	$	.05	$	.12

Weighted average common shares outstanding
- Basic		20,611		20,824

- Diluted		20,875		21,813

See notes to condensed consolidated financial statements.

GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED

	December 31, 2002		March 31, 2003

	(in $000’s, except share and per share data )
ASSETS
Current assets:
Cash and cash equivalents	$	33,769	$	23,350
Certificates of deposit – restricted		13,431		6,281
Marketable securities- restricted		79,023		96,941
Accounts receivable, net		87,302		76,430
Deferred tax asset		7,984		6,789
Other current assets		13,068		12,920

Total current assets		234,577		222,711
Property and equipment, net		16,398		15,091
Goodwill, net of accumulated amortization of $5,979 and $5,979, respectively		8,692		8,692
Deferred tax asset		123		—
Other assets		5,745		5,790

Total assets	$	265,535	$	252,284

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued insurance premiums, health and workers’ compensation insurance reserves	$	33,999	$	30,663
Accrued payroll and payroll taxes		93,379		85,529
Accounts payable and other accrued liabilities		4,420		3,686
Income taxes payable		3,959		2,817
Customer deposits and prepayments		8,150		6,033
Dividends payable		1,041		1,041

Total current liabilities		144,948		129,769
Long-term accrued health and workers’ compensation insurance reserves		61,672		61,672
Deferred tax liability		—		39
Other long-term liabilities		310		222
Commitments and contingencies (See notes)
Shareholders’ equity:
Common stock, $.01 par value		208		209
Shares authorized: 100,000,000
Shares issued and outstanding:
December 31, 2002 - 20,760,562
March 31, 2003 - 20,904,724
Additional paid in capital		39,238		39,652
Retained earnings		19,158		20,718
Accumulated other comprehensive income		1		3

Total shareholders’ equity		58,605		60,582

Total liabilities and shareholders’ equity	$	265,535	$	252,284

See notes to condensed consolidated financial statements.

GEVITY HR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

	For the three months ended March 31,

	2002			2003

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	990		$	2,600
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,062			1,824
Deferred tax (provision) benefit, net		(320	)		1,320
Provision for bad debts		22			62
Other		(39	)		30
Changes in operating working capital:
Accounts receivable, net		5,410			10,810
Other current assets		(339	)		148
Accounts payable and other accrued liabilities		(1,758	)		(734	)
Accrued payroll and payroll taxes		10,012			(7,850	)
Accrued insurance premiums, health and workers’ compensation insurance reserves		3,453			(3,336	)
Income taxes payable		809			(1,142	)
Customer deposits and prepayments		1,148			(2,117	)
Other assets		(1,454	)		(45	)
Long-term accrued health and workers’ compensation insurance reserves		(1,275	)		—
Other long-term liabilities		40			(49	)

Net cash provided by operating activities		18,761			1,521

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and certificates of deposit		(57,297	)		(28,413	)
Maturities of marketable securities and certificates of deposit		32,073			17,650
Capital expenditures		(337	)		(551	)

Net cash used in investing activities		(25,561	)		(11,314	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends to shareholders		(1,030	)		(1,041	)
Proceeds from issuance of common shares, net		573			415

Net cash used in financing activities

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