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 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 April 30, 2005 | |
| Par value $0.01 per share | 27,661,213 |
| For the Three Months Ended March 31, |
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|---|---|---|---|---|---|---|---|---|
| 2005 |
2004 |
|||||||
| Revenues | $ | 153,880 | $ | 125,912 | ||||
| Cost of services | 110,251 | 90,122 | ||||||
| Gross profit | 43,629 | 35,790 | ||||||
| Operating expenses: | ||||||||
| Salaries, wages and commissions | 17,387 | 16,278 | ||||||
| Other general and administrative | 10,460 | 8,128 | ||||||
| Depreciation and amortization | 3,753 | 2,180 | ||||||
| Total operating expenses | 31,600 | 26,586 | ||||||
| Operating income | 12,029 | 9,204 | ||||||
| Interest income, net | 157 | 286 | ||||||
| Other income, net | 16 | 10 | ||||||
| Income before income taxes | 12,202 | 9,500 | ||||||
| Income tax provision | 4,027 | 3,135 | ||||||
| Net income | 8,175 | 6,365 | ||||||
| Non-cash charges attributable to beneficial conversion | ||||||||
| feature and accretion of redemption value of convertible, | ||||||||
| redeemable preferred stock | -- | 94 | ||||||
| Preferred stock dividends | -- | 321 | ||||||
| Assumed preferred stock dividend (assuming full | ||||||||
| distribution of net income) | -- | 1,061 | ||||||
| Net income attributable to common shareholders | $ | 8,175 | $ | 4,889 | ||||
| Net income per common share | ||||||||
| - Basic | $ | 0.30 | $ | 0.25 | ||||
| - Diluted | $ | 0.29 | $ | 0.24 | ||||
| Weighted average common shares outstanding | ||||||||
| - Basic | 27,457,849 | 19,319,674 | ||||||
| - Diluted | 28,571,780 | 26,771,949 | ||||||
See notes to condensed consolidated financial statements.
| March 31, 2005 |
December 31, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current assets: | ||||||||
Cash and cash equivalents | $ | 66,781 | $ | 40,776 | ||||
Certificates of deposit – restricted | 6,033 | 6,033 | ||||||
Marketable securities – restricted | 4,188 | 4,168 | ||||||
Accounts receivable, net | 122,006 | 99,790 | ||||||
Short-term workers' compensation receivable, net | 39,405 | 33,405 | ||||||
Other current assets | 11,493 | 5,982 | ||||||
| Total current assets | 249,906 | 190,154 | ||||||
Property and equipment, net | 9,774 | 10,079 | ||||||
Long-term marketable securities – restricted | 7,947 | 8,435 | ||||||
Long-term workers' compensation receivable, net | 87,426 | 79,310 | ||||||
Intangible assets, net | 37,723 | 40,133 | ||||||
Goodwill | 8,692 | 8,692 | ||||||
Deferred tax asset, net | 2,631 | 2,380 | ||||||
Other assets | 375 | 404 | ||||||
| Total assets | $ | 404,474 | $ | 339,587 | ||||
See notes to condensed consolidated financial statements.
| March 31, 2005 |
December 31, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
Accrued payroll and payroll taxes | $ | 142,295 | $ | 111,687 | ||||
Accrued insurance premiums, health and | ||||||||
| workers' compensation insurance reserves | 22,883 | 23,191 | ||||||
Customer deposits and prepayments | 35,275 | 11,897 | ||||||
Accounts payable and other accrued liabilities | 4,531 | 4,907 | ||||||
Income taxes payable | 14,140 | 11,786 | ||||||
Deferred tax liability, net | 3,034 | 1,718 | ||||||
Dividends payable | 1,936 | 1,642 | ||||||
| Total current liabilities | 224,094 | 166,828 | ||||||
Long-term accrued workers' compensation | ||||||||
| insurance reserves | 700 | 700 | ||||||
Other long-term liabilities | 6,206 | 6,885 | ||||||
| Total liabilities | 231,000 | 174,413 | ||||||
Commitments and contingencies (see notes) | ||||||||
Shareholders' equity: | ||||||||
Common stock, $.01 par value, 100,000,000 shares authorized, | ||||||||
| 30,694,307 and 30,408,220 issued and outstanding as of March 31, | ||||||||
| 2005 and December 31, 2004, respectively | 307 | 304 | ||||||
Additional paid-in capital | 156,551 | 152,670 | ||||||
Retained earnings | 34,659 | 28,417 | ||||||
Deferred compensation | (1,677 | ) | -- | |||||
Treasury stock (3,033,677 and 3,034,974 shares at cost, respectively) | (16,366 | ) | (16,217 | ) | ||||
| Total shareholders' equity | 173,474 | 165,174 | ||||||
| Total liabilities and shareholders' equity | $ | 404,474 | $ | 339,587 | ||||
See notes to condensed consolidated financial statements.
| For the Three Months Ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2005 |
2004 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 8,175 | $ | 6,365 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization | 3,753 | 2,180 | ||||||
| Deferred tax provision, net | 1,065 | 1,190 | ||||||
| Provision for bad debts | 117 | 164 | ||||||
| Other | 51 | 86 | ||||||
| Changes in operating working capital: | ||||||||
| Accounts receivable, net | (22,333 | ) | (26,923 | ) | ||||
| Other current assets | (5,511 | ) | (6,279 | ) | ||||
| Workers' compensation receivable, net | (14,116 | ) | (14,715 | ) | ||||
| Other assets | 29 | (159 | ) | |||||
| Accrued insurance premiums, health and | ||||||||
| workers' compensation insurance reserves | (308 | ) | 4,325 | |||||
| Accrued payroll and payroll taxes | 30,608 | 21,842 | ||||||
| Accounts payable and other accrued liabilities | (376 | ) | 1,497 | |||||
| Income taxes payable | 3,514 | 1,605 | ||||||
| Customer deposits and prepayments | 23,378 | 15,699 | ||||||
| Other long-term liabilities | (175 | ) | 49 | |||||
| Net cash provided by operating activities | 27,871 | 6,926 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of marketable securities and certificates of deposit | (36 | ) | (29,060 | ) | ||||
| Maturities of marketable securities and certificates of deposit | -- | 28,583 | ||||||
| Assets acquired in business acquisitions | -- | (37,274 | ) | |||||
| Capital expenditures | (1,034 | ) | (1,232 | ) | ||||
| Net cash used in investing activities | (1,070 | ) | (38,983 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payment of cash dividends to shareholders | (1,639 | ) | (1,267 | ) | ||||
| Proceeds of credit line borrowing | -- | 20,000 | ||||||
| Debt issuance costs | -- | (192 | ) | |||||
| Proceeds from issuance of common shares | 843 | 1,155 | ||||||
| Net cash (used in) provided by financing activities | (796 | ) | 19,696 | |||||
| Net increase (decrease) in cash and cash equivalents | 26,005 | (12,361 | ) | |||||
| Cash and cash equivalents - beginning of period | 40,776 | 44,682 | ||||||
| Cash and cash equivalents - end of period | $ | 66,781 | $ | 32,321 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Income taxes paid | $ | 552 | $ | 340 | ||||
| Interest paid | $ | 43 | $ | 10 | ||||
See notes to condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements of Gevity HR, Inc. and subsidiaries (collectively, 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 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, 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.
The Company’s significant accounting policies are disclosed in Note 1 of the Company’s consolidated financial statements contained in the Form 10-K. The Company’s critical accounting estimates are disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Form 10-K. On an ongoing basis, the Company evaluates its policies, estimates and assumptions, including those related to revenue recognition, workers’ compensation receivable/reserves, intangible assets, medical benefit plan liabilities, state unemployment taxes, allowance for doubtful accounts, and deferred taxes. Since the date of the Form 10-K, there have been no material changes to the Company’s significant accounting policies and critical accounting estimates.
Certain prior period amounts have been reclassified to conform to current period presentation.
Significant Accounting Policies
Stock-Based Compensation — In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS No. 123. This statement provides alternative methods of transition for a voluntary change to the fair-value based method of accounting for stock-based employee compensation. This statement also amends the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, and Accounting Principles Board (“APB”) Opinion No. 28, Interim Financial Reporting, to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company implemented SFAS No. 148 effective January 1, 2003 regarding disclosure requirements for condensed financial statements for interim periods.
As permitted by SFAS No. 123, and as amended by SFAS No. 148, the Company has elected to continue to account for its stock option plans in accordance with the intrinsic value method prescribed by APB Opinion No. 25 and related interpretations. Intrinsic value per share is the amount by which the market price of the underlying stock exceeds the exercise price of the stock option or award on the measurement date, generally the date of grant. This has resulted in no compensation expense recognized for stock options issued and compensation expense recognized for awards of restricted stock under the Company’s stock compensation plans (see Note 9). Had compensation cost for the stock options granted under the plans been determined based on the fair value at the grant date consistent with the method prescribed by SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:
| Three Months Ended
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| March 31, 2005 |
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