(Mark One)
ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Florida (State or other jurisdiction of incorporation or organization) |
65-0735612 (I.R.S. Employer Identification No.) | |
| 600 301 Blvd West, Suite 202 Bradenton, FL Address of principal executive offices) |
34205 (Zip Code) |
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 ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ý No o
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 November 7, 2003 | |
| Par value $0.01 per share | 18,995,408 |
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
2003 |
2002 | |||||||||||
| Revenues | $ | 102,833 | $ | 94,417 | $ | 307,745 | $ | 278,450 | ||||||
| Cost of services | 74,039 | 72,215 | 226,312 | 210,627 | ||||||||||
| Gross profit | 28,794 | 22,202 | 81,433 | 67,823 | ||||||||||
| Operating expenses: | ||||||||||||||
| Salaries, wages and commissions | 13,280 | 12,996 | 38,797 | 39,738 | ||||||||||
| Other general and administrative | 7,974 | 5,833 | 23,004 | 18,498 | ||||||||||
| Depreciation and amortization | 1,803 | 1,950 | 5,419 | 6,010 | ||||||||||
| Total operating expenses | 23,057 | 20,779 | 67,220 | 64,246 | ||||||||||
| Operating income | 5,737 | 1,423 | 14,213 | 3,577 | ||||||||||
| Interest income, net | 416 | 521 | 1,231 | 1,477 | ||||||||||
| Other non-operating (expense) income, net | (7 | ) | 43 | (19 | ) | 114 | ||||||||
| Income before income taxes | 6,146 | 1,987 | 15,425 | 5,168 | ||||||||||
| Income tax provision | 2,028 | 676 | 5,090 | 1,757 | ||||||||||
| Net income | 4,118 | 1,311 | 10,335 | 3,411 | ||||||||||
| Non-cash charges attributable to beneficial | ||||||||||||||
| conversion feature and accretion of redemption | ||||||||||||||
| value of convertible, redeemable preferred stock | 69 | -- | 86 | -- | ||||||||||
| Preferred stock dividend | 201 | -- | 477 | -- | ||||||||||
| Net income attributable to common shareholders | $ | 3,848 | $ | 1,311 | $ | 9,772 | $ | 3,411 | ||||||
| Net income per common share | ||||||||||||||
| - Basic | $ | 0.21 | $ | 0.06 | $ | 0.49 | $ | 0.16 | ||||||
| - Diluted | $ | 0.16 | $ | 0.06 | $ | 0.43 | $ | 0.16 | ||||||
| Weighted average common shares outstanding | ||||||||||||||
| - Basic | 18,641,055 | 20,757,685 | 19,903,406 | 20,709,551 | ||||||||||
| - Diluted | 26,093,818 | 21,094,417 | 23,990,849 | 21,047,038 | ||||||||||
See notes to condensed consolidated financial statements.
| September 30, 2003 |
December 31, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 40,063 | $ | 33,769 | ||||
| Certificates of deposit - restricted | 6,032 | 13,431 | ||||||
| Marketable securities - restricted | 81,563 | 79,023 | ||||||
| Accounts receivable, net | 87,776 | 87,302 | ||||||
| Deferred tax asset | 1,081 | 7,984 | ||||||
| Other current assets | 8,581 | 13,068 | ||||||
| Total current assets | 225,096 | 234,577 | ||||||
Property and equipment, net | 12,918 | 16,398 | ||||||
| Goodwill | 8,692 | 8,692 | ||||||
| Workers' compensation receivable | 22,947 | -- | ||||||
| Long-term marketable securities - restricted | 17,000 | -- | ||||||
| Deferred tax asset | -- | 123 | ||||||
| Other assets | 5,644 | 5,745 | ||||||
| Total assets | $ | 292,297 | $ | 265,535 | ||||
| LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accrued insurance premiums, health and | ||||||||
| workers' compensation insurance reserves | $ | 43,383 | $ | 33,999 | ||||
| Accrued payroll and payroll taxes | 93,277 | 93,379 | ||||||
| Accounts payable and other accrued liabilities | 4,003 | 4,408 | ||||||
| Income taxes payable | -- | 3,971 | ||||||
| Customer deposits and prepayments | 11,120 | 8,150 | ||||||
| Dividends payable | 1,148 | 1,041 | ||||||
| Total current liabilities | 152,931 | 144,948 | ||||||
Long-term accrued health and workers' compensation insurance reserves | 52,990 | 61,672 | ||||||
| Deferred tax liability | 296 | -- | ||||||
| Other long-term liabilities | 384 | 310 | ||||||
| Total liabilities | 206,601 | 206,930 | ||||||
Commitments and contingencies (see notes) | ||||||||
Series A convertible, redeemable preferred stock, $0.01 par value, | ||||||||
| ($30,000 liquidation preference) 30,000 shares authorized, issued and | ||||||||
| outstanding as of September 30, 2003 | 474 | -- | ||||||
Shareholders' equity: | ||||||||
| Common stock, $.01 par value | ||||||||
| Shares authorized: 100,000,000 | ||||||||
| Shares issued and outstanding: | ||||||||
| September 30, 2003 - 22,010,364 | ||||||||
| December 31, 2002 - 20,810,557 | 220 | 208 | ||||||
| Additional paid in capital | 75,301 | 39,344 | ||||||
| Retained earnings | 26,018 | 19,158 | ||||||
| Treasury Stock (3,062,751 and 50,517 shares at cost, respectively) | (16,292 | ) | (106 | ) | ||||
| Accumulated other comprehensive (loss) income | (25 | ) | 1 | |||||
| Total shareholders' equity | 85,222 | 58,605 | ||||||
| Total liabilities, convertible redeemable preferred | ||||||||
| stock and shareholders' equity | $ | 292,297 | $ | 265,535 | ||||
See notes to condensed consolidated financial statements.
| For the nine months ended September 30, | |||||
|---|---|---|---|---|---|
| 2003 |
2002 | ||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
| Net income | $ 10,335 | $ 3,411 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||
| Depreciation and amortization | 5,419 | 6,010 | |||
| Deferred tax provision (benefit), net | 4,104 | (598 | ) | ||
| Provision for bad debts | 248 | 434 | |||
| Other | 64 | (54 | ) | ||
| Changes in operating working capital: | |||||
| Accounts receivable, net | (722 | ) | (2,217 | ) | |
| Other current assets | 4,487 | (1,173 | ) | ||
| Workers' compensation receivable | (22,947 | ) | -- | ||
| Other assets | 99 | (1,500 | ) | ||
| Accrued insurance premiums, health and workers' | |||||
| compensation insurance reserves | 9,384 | 11,809 | |||
| Accrued payroll and payroll taxes | (102 | ) | 14,714 | ||
| Accounts payable and other accrued liabilities | (405 | ) | (1,970 | ) | |
| Income taxes payable | 2,060 | 742 | |||
| Customer deposits and prepayments | 2,970 | 342 | |||
| Health and workers' compensation reserves -long-term | (8,682 | ) | (1,275 | ) | |
| Other long-term liabilities | 74 | 40 | |||
| Net cash provided by operating activities | 6,386 | 28,715 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
| Purchases of marketable securities and certificates of deposit | (82,569 | ) | (123,312 | ) | |
| Maturities of marketable securities and certificates of deposit | 70,389 | 75,543 | |||
| Capital expenditures | (2,001 | ) | (375 | ) | |
| Net cash used in investing activities | (14,181 | ) | (48,144 | ) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
| Payment of cash dividends to common shareholders | (3,282 | ) | (3,107 | ) | |
| Proceeds from issuance of Series A Convertible, | |||||
| Redeemable Preferred Stock, net of issuance costs | 27,686 | -- | |||
| Purchase of treasury stock | (16,272 | ) | (98 | ) | |
| Proceeds from issuance of common shares | 5,957 | 623 | |||
| Net cash provided by (used in) financing activities | 14,089 | (2,582 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 6,294 | (22,011 | ) | ||
| Cash and cash equivalents - beginning of period | 33,769 | 55,929 | |||
| Cash and cash equivalents - end of period | $ 40,063 | $ 33,918 | |||
| Supplemental disclosure of cash flow information: | |||||
| Income taxes paid | $ 1,742 | $ 1,633 | |||
See notes to condensed consolidated financial statements.
1. GENERAL
The accompanying unaudited condensed consolidated financial statements of Gevity HR, Inc., and its subsidiaries (the “Company” or “Gevity”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2002, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission (the “Form 10-K”). The financial information furnished reflects all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.
Gevity is a leading United States provider of human capital management solutions. The Company offers its clients, which are typically small to medium-sized businesses with between five and one hundred employees, a broad range of products and services that provide a complete solution for the clients’ human resources (“HR”) outsourcing needs. The Company’s products and services include providing clients assistance with finding the right employees for their business, developing their people, retaining the best employees, managing employee related paperwork and protecting their business by providing guidance on human resource policies, practices and regulatory compliance. The Company’s services are designed to improve the productivity and profitability of its clients’ businesses by allowing managers of those businesses to focus on revenue producing activities by relieving them of the time consuming and complex burdens associated with employee administration. As of September 30, 2003, the Company served 6,131 clients, as measured by individual client Federal Employer Identification Numbers (“FEIN”), with 88,100 active worksite employees, and maintained offices in Alabama, Arizona, California, Colorado, Florida, Georgia, Minnesota, New York, North Carolina, Tennessee and Texas.
In order to utilize the Company’s products and services, a client transfers certain employment-related risks and liabilities to the Company and retains other risks and liabilities. In this context, the client and the Company are each viewed as and become a “co-employer” of the client’s worksite employees. In this regard, the Company is a licensed Professional Employer Organization (“PEO”).
As a co-employer, employment-related liabiliti