UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

þ		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

Commission File Number 1-32961

CBIZ, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-2769024
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
6050 Oak Tree Boulevard, South, Suite 500, Cleveland, Ohio		44131
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)		216-447-9000

(Former name, former address and former fiscal year, if changed since last report)

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 proceeding 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 þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes o       No þ

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

Class of Common Stock		Outstanding at April 30, 2010
Common Stock, par value $0.01 per share		62,437,499

 

 

CBIZ, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets — March 31, 2010 and December 31, 2009			3
Consolidated Statements of Operations — Three Months Ended March 31, 2010 and 2009			4
Consolidated Statements of Cash Flows — Three Months Ended March 31, 2010 and 2009			5
Notes to the Consolidated Financial Statements			6-21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22-35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4.Controls and Procedures			36
PART II. OTHER INFORMATION :
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 6. Exhibits			37
Signature			38
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements

CBIZ, INC. AND SUBSIDIARIES

		MARCH 31,				DECEMBER 31,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	5,360			$	9,257
Restricted cash			11,449				15,432
Accounts receivable, net			169,507				128,766
Notes receivable — current, net			1,124				1,766
Income taxes refundable			—				3,391
Deferred income taxes — current			9,013				7,579
Other current assets			11,122				10,701
Assets of discontinued operations			2,075				4,109
Current assets before funds held for clients			209,650				181,001
Funds held for clients — current			65,002				87,925
Total current assets			274,652				268,926
Property and equipment, net			27,266				26,833
Notes receivable — non-current, net			997				1,041
Deferred income taxes — non-current, net			176				237
Goodwill and other intangible assets, net			396,538				375,211
Assets of deferred compensation plan			29,327				27,457
Funds held for clients — non-current			10,361				10,545
Other assets			2,370				2,847
Total assets		$	741,687			$	713,097
LIABILITIES
Current liabilities:
Accounts payable		$	22,496			$	25,707
Income taxes payable — current			8,139				—
Accrued personnel costs			26,696				34,249
Notes payable — current			3,153				13,410
Other current liabilities			21,927				13,883
Liabilities of discontinued operations			991				2,281
Current liabilities before client fund obligations			83,402				89,530
Client fund obligations			78,296				101,279
Total current liabilities			161,698				190,809
Convertible notes, net			94,890				93,848
Bank debt			139,450				110,000
Income taxes payable — non-current			6,810				6,686
Deferred compensation plan obligations			29,327				27,457
Other non-current liabilities			19,186				13,679
Total liabilities			451,361				442,479
STOCKHOLDERS’ EQUITY
Common stock			1,085				1,081
Additional paid-in capital			522,470				518,637
Retained earnings (accumulated deficit)			37,448				21,464
Treasury stock			(269,670	)			(269,642	)
Accumulated other comprehensive loss			(1,007	)			(922	)
Total stockholders’ equity			290,326				270,618
Total liabilities and stockholders’ equity		$	741,687			$	713,097

See the accompanying notes to the consolidated financial statements.

CBIZ, INC. AND SUBSIDIARIES

		THREE MONTHS ENDED
		MARCH 31,
		2010				2009
Revenue		$	210,235			$	216,478
Operating expenses			172,291				173,987
Gross margin			37,944				42,491
Corporate general and administrative expenses			8,984				7,709
Operating income			28,960				34,782
Other income (expense):
Interest expense			(3,168	)			(3,503	)
Gain on sale of operations, net			374				80
Other income (expense), net			2,173				(591	)
Total other expense, net			(621	)			(4,014	)
Income from continuing operations before income tax expense			28,339				30,768
Income tax expense			11,475				12,365
Income from continuing operations after income tax expense			16,864				18,403
Income from operations of discontinued operations, net of tax			(444	)			(229	)
(Loss) gain on disposal of discontinued operations, net of tax			(436	)			7
Net income		$	15,984			$	18,181
Earnings (loss) per share:
Basic:
Continuing operations		$	0.27			$	0.30
Discontinued operations			(0.01	)			—
Net income		$	0.26			$	0.30
Diluted:
Continuing operations		$	0.27			$	0.30
Discontinued operations			(0.01	)			(0.01	)
Net income		$	0.26			$	0.29
Basic weighted average shares outstanding			61,509				61,295
Diluted weighted average shares outstanding			62,065				61,950

See the accompanying notes to the consolidated financial statements.

CBIZ, INC. AND SUBSIDIARIES

		THREE MONTHS ENDED
		MARCH 31,
		2010				2009
Cash flows from operating activities:
Net income		$	15,984			$	18,181
Adjustments to reconcile net income to net cash used in operating activities:
Loss from operations of discontinued operations, net of tax			444				229
Loss (gain) on disposal of discontinued operations, net of tax			436				(7	)
Gain on sale of operations, net			(374	)			(80	)
Amortization of discount on convertible notes			1,042				965
Bad debt expense, net of recoveries			1,078				1,837
Depreciation and amortization expense			5,125				5,044
Adjustment to contingent earnout liability			(721	)			—
Deferred income taxes			(1,326	)			(224	)
Excess tax benefits from share based payment arrangements			(49	)			(102	)
Employee stock awards			1,294				945
Changes in assets and liabilities, net of acquisitions and divestitures:
Restricted cash			3,984				3,677
Accounts receivable, net			(42,224	)			(43,673	)
Other assets			1,300				(678	)
Accounts payable			(3,138	)			(3,928	)
Income taxes payable			12,156				11,917
Accrued personnel costs			(7,658	)			(11,886	)
Other liabilities and other			5,393				(679	)
Net cash used in continuing operations			(7,254	)			(18,462	)
Operating cash flows (used in) provided by discontinued operations			(658	)			702
Net cash used in operating activities			(7,912	)			(17,760	)
Cash flows from investing activities:
Business acquisitions and contingent consideration, net of cash acquired			(26,039	)			(424	)
Proceeds from sales of divested and discontinued operations			874				275
Additions to property and equipment, net			(886	)			(1,442	)
Additions to notes receivable			(129	)			—
Payments received on notes receivable			122				684
Investing cash flows used in discontinued operations			—				(5	)
Net cash used in investing activities			(26,058	)			(912	)
Cash flows from financing activities:
Proceeds from bank debt			137,875				130,025
Payment of bank debt			(108,425	)			(105,025	)
Payment of notes payable and capitalized leases			(41	)			(59	)
Payment for acquisition of treasury stock			(29	)			(6,698	)
Proceeds from exercise of stock options			645				255
Excess tax benefit from exercise of stock awards			49				102
Debt issuance costs			(1	)			(32	)
Net cash provided by financing activities			30,073				18,568
Net decrease in cash and cash equivalents			(3,897	)			(104	)
Cash and cash equivalents at beginning of year			9,257				9,672
Cash and cash equivalents at end of period		$	5,360			$	9,568

See the accompanying notes to the consolidated financial statements.

CBIZ, INC. AND SUBSIDIARIES

1.		Summary of Significant Accounting Policies
		The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements.
		In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting solely of normal recurring adjustments) considered necessary to present fairly the financial position of CBIZ, Inc. and its consolidated subsidiaries (“CBIZ”) as of March 31, 2010 and December 31, 2009, and the consolidated results of their operations and cash flows for the three months ended March 31, 2010 and 2009. Due to seasonality, potential changes in economic conditions, interest rate fluctuations and other factors, the results of operations for such interim periods are not necessarily indicative of the results for the full year. For further information, refer to the consolidated financial statements and notes thereto included in CBIZ’s Annual Report on Form 10-K for the year ended December 31, 2009.
		Principles of Consolidation
		The accompanying consolidated financial statements reflect the operations of CBIZ and all of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements do not reflect the operations or accounts of variable interest entities as the impact is not material to the financial condition, results of operations or cash flows of CBIZ. See CBIZ’s Annual Report on Form 10-K for the year ended December 31, 2009 for further discussion.
		Use of Estimates
		The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses. Management’s estimates and assumptions include, but are not limited to, estimates of collectability of accounts receivable and unbilled revenue, the realizability of goodwill and other intangible assets, the fair value of certain assets, the valuation of stock options in determining compensation expense, estimates of accrued liabilities (such as incentive compensation, self-funded health insurance accruals, legal reserves, future contingent purchase price obligations, and consolidation and integration reserves), the provision for income taxes, the realizability of deferred tax assets, and other factors. Management’s estimates and assumptions are derived from and are continually evaluated based upon available information, judgment and experience. Actual results could differ from those estimates.
		Reclassifications
		Certain amounts in the 2009 consolidated financial statements and disclosures have been reclassified to conform to the current year presentation.
		Revenue Recognition and Valuation of Unbilled Revenues
		Revenue is recognized only when all of the following are present: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee to the client is fixed or determinable, and collectability is reasonably assured.
		CBIZ offers a vast array of products and business services to its clients. Those services are delivered through four practice groups. A description of revenue recognition policies is included in the Annual Report on Form 10-K for the year ended December 31, 2009.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

		New Accounting Pronouncements
		In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), which adds disclosure requirements about transfers in and out of Levels 1 and 2, for activity relating to Level 3 measurements, and clarifies input and valuation techniques. ASU 2010-06 is effective for the first reporting period beginning after December 15, 2009, except as it pertains to the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis. This Level 3 requirement will be effective for fiscal years beginning after December 15, 2010. CBIZ adopted the provisions of the accounting guidance for the interim reporting period ended March 31, 2010. The adoption did not have a material impact on CBIZ’s consolidated financial statements.
		In December 2009, the FASB issued ASU 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”). ASU 2009-17 clarifies and improves financial reporting by entities involved with variable interest entities. ASU 2009-17 is effective as of the beginning of the annual period beginning after November 15, 2009. CBIZ adopted the provisions of this accounting guidance for the interim period ended March 31, 2010. The adoption did not have a material impact on CBIZ’s consolidated financial statements.

2.		Accounts Receivable, Net
		Accounts receivable balances at March 31, 2010 and December 31, 2009 were as follows (in thousands):

3.		Goodwill and Other Intangible Assets, Net
		The components of goodwill and other intangible assets, net at March 31, 2010 and December 31, 2009 were as follows (in thousands):

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

4.		Depreciation and Amortization
		Depreciation and amortization expense for property and equipment and intangible assets for the three months ended March 31, 2010 and 2009 was as follows (in thousands):

		2010				2009
Operating expenses		$	5,016			$	4,860
Corporate general and administrative expenses			109				184
Total depreciation and amortization expense		$	5,125			$	5,044

5.		Borrowing Arrangements
		Convertible Senior Subordinated Notes
		On May 30, 2006, CBIZ sold and issued $100.0 million in senior subordinated notes (“Notes”). The Notes are direct, unsecured, senior subordinated obligations of CBIZ and rank (i) junior in right of payment to all of CBIZ’s existing and future senior indebtedness, (ii) equal in right of payment with any other future senior subordinated indebtedness, and (iii) senior in right of payment to all subordinated indebtedness. The terms of the Notes are governed by the Indenture dated as of May 30, 2006, with U.S. Bank National Association as trustee (“Indenture”). The Notes and Indenture are further described in CBIZ’s Annual Report on Form 10-K for the year ended December 31, 2009.
		The Notes bear interest at a rate of 3.125% per annum, payable in cash semi-annually in arrears on each June 1 and December 1. The Notes mature on June 1, 2026 and may be redeemed by CBIZ in whole or in part anytime after June 6, 2011. The Notes are convertible into CBIZ common stock at a rate equal to 94.1035 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of approximately $10.63 per share), subject to adjustment as described in the Indenture. Upon conversion, CBIZ will deliver for each $1,000 principal amount of Notes, an amount consisting of cash equal to the lesser of $1,000 or the conversion value (as defined in the Indenture) and, to the extent that the conversion value exceeds $1,000, at CBIZ’s election, cash or shares of CBIZ common stock in respect of the remainder.
		CBIZ separately accounts for the debt and equity components of the Notes. The carrying amount of the debt and equity components at March 31, 2010 and December 31, 2009 were as follows (in thousands):

		March 31,				December 31,
		2010				2009
Principal amount of notes		$	100,000			$	100,000
Unamortized discount			(5,110	)			(6,152	)
Net carrying amount		$	94,890			$	93,848
Additional paid-in-capital		$	11,425			$	11,425

The discount on the liability component of the Notes is being amortized using the effective interest method based upon an annual effective rate of 7.80%, which represents the market rate for similar debt without a conversion option at the issuance date. The discount is being amortized over five years from the date of issuance, which coincides with the first date that holders can require CBIZ to repurchase the Notes. At March 31, 2010, the unamortized discount had a remaining amortization period of approximately 14 months.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

During the three months ended March 31, 2010 and 2009, CBIZ recognized interest expense on the Notes as follows (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Contractual coupon interest		$	781			$	781
Amortization of discount			1,042				965
Total interest expense		$	1,823			$	1,746

		Bank Debt
		CBIZ maintains a $214.0 million unsecured credit facility (“credit facility”) with Bank of America as agent bank for a group of six participating banks. The credit facility has a letter of credit sub-facility and matures in November 2012. CBIZ had $139.5 million and $110.0 million of outstanding borrowings under its credit facility at March 31, 2010 and December 31, 2009, respectively. Rates for the three months ended March 31, 2010 and 2009 were as follows:

		2010		2009
Weighted average rates		3.09%		4.15%
Range of effective rates		2.71% - 6.40%		2.09% - 6.40%

		Available funds under the credit facility are reduced by letters of credit and the outstanding balance of the credit facility. At March 31, 2010, CBIZ had approximately $37.4 million available under the credit facility.
		The credit facility provides CBIZ operating flexibility and funding to support seasonal working capital needs and other strategic initiatives such as acquisitions and share repurchases. Under the credit facility, loans are charged an interest rate consisting of a base rate or Eurodollar rate plus an applicable margin, letters of credit are charged based on the same applicable margin, and a commitment fee of 40.0 to 50.0 basis points is charged on the unused portion of the credit facility.
		The credit facility is subject to certain financial covenants that may limit CBIZ’s ability to borrow up to the total commitment amount. Covenants require CBIZ to meet certain requirements with respect to (i) minimum net worth; (ii) maximum leverage ratio; and (iii) a minimum fixed charge coverage ratio. The credit facility also places restrictions on CBIZ’s ability to create liens or other encumbrances, to make certain payments, investments, loans and guarantees and to sell or otherwise dispose of a substantial portion of assets, or to merge or consolidate with an unaffiliated entity. According to the terms of the credit facility, CBIZ is not permitted to declare or make any dividend payments, other than dividend payments made by one of its wholly owned subsidiaries to the parent company. The credit facility contains a provision that, in the event of a defined change in control, the credit facility may be terminated.
		There are no limitations on CBIZ’s ability to acquire businesses or repurchase CBIZ common stock provided that the Leverage Ratio is less than 2.0. The Leverage Ratio is calculated as total debt (excluding the convertible senior subordinated notes) compared to EBITDA as defined by the credit facility. The Leverage Ratio at March 31, 2010 was 1.85, which represents a seasonally high ratio based on the Company’s need to draw on its credit facility to fund its working capital requirements. This ratio has historically decreased as cash is collected and payments are made on the credit facility during the second and third quarters.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

6.		Commitments and Contingencies
		Acquisitions
		The purchase price that CBIZ pays for businesses and client lists has historically consisted of two components: an up-front, non-contingent portion, and a portion which is contingent upon the acquired businesses or client lists’ actual future performance. For acquisitions completed prior to January 1, 2009, the portion of purchase price contingent on future performance is recorded when earned. For acquisitions completed January 1, 2009 and after, the fair value of the contingent purchase price is recorded at the date of acquisition and remeasured each reporting period until the liability is settled. Shares of CBIZ common stock that are issued in connection with acquisitions may be contractually restricted from sale for periods up to two years. Acquisitions are further discussed in Note 12.
		Indemnifications
		CBIZ has various agreements in which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations, warranties, covenants or agreements, related to matters such as title to assets sold and certain tax matters. Payment by CBIZ under such indemnification clauses are generally conditioned upon the other party making a claim. Such claims are typically subject to challenge by CBIZ and to dispute resolution procedures specified in the particular contract. Further, CBIZ’s obligations under these agreements may be limited in terms of time and/or amount and, in some instances, CBIZ may have recourse against third parties for certain payments made by CBIZ. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of CBIZ’s obligations and the unique facts of each particular agreement. Historically, CBIZ has not made any payments under these agreements that have been material individually or in the aggregate. As of March 31, 2010, CBIZ was not aware of any material obligations arising under indemnification agreements that would require payments.
		Employment Agreements
		CBIZ maintains severance and employment agreements with certain of its executive officers, whereby such officers may be entitled to payment in the event of termination of their employment. CBIZ also has arrangements with certain non-executive employees which may include severance and other employment provisions. CBIZ accrues for amounts payable under these contracts and arrangements as triggering events occur and obligations become known. During the three months ended March 31, 2010 and 2009, payments regarding such contracts and arrangements were not material.
		Letters of Credit and Guarantees
		CBIZ provides letters of credit to landlords (lessors) of its leased premises in lieu of cash security deposits which totaled $3.0 million and $3.5 million as of March 31, 2010 and December 31, 2009, respectively. In addition, CBIZ provides license bonds to various state agencies to meet certain licensing requirements. The amount of license bonds outstanding at March 31, 2010 and December 31, 2009 was $1.4 million and $1.5 million, respectively.
		CBIZ acted as guarantor on various letters of credit for a CPA firm with which it has an affiliation, which totaled $3.1 million and $2.6 million as of March 31, 2010 and December 31, 2009, respectively. CBIZ has recognized a liability for the fair value of the obligations undertaken in issuing these guarantees, which is recorded as other current liabilities in the accompanying consolidated balance sheets. Management does not expect any material changes to result from these instruments as performance under the guarantees is not expected to be required.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

		Self-Funded Health Insurance
		CBIZ maintains a self-funded comprehensive health benefit plan. Total expenses under this program are limited by stop-loss coverages on individually large claims. A third party administrator processes claims and payments, but does not assume liability for benefits payable under this plan. CBIZ assumes responsibility for funding the plan benefits out of general assets, however, employees contribute to the costs of covered benefits through premium charges, deductibles and co-pays.
		The third party administrator provides the Company with reports and other information which provides a basis for the estimate of the liability at the end of each reporting period. Although management believes that it uses the best available information to determine the amount of the liability, unforeseen health claims could result in adjustments and higher costs incurred if circumstances differ from the assumptions used in estimating the liability. The liability for the self-funded health insurance plan is included in other current liabilities in the consolidated balance sheets and was $4.3 million and $3.5 million at March 31, 2010 and December 31, 2009, respectively. CBIZ’s net healthcare costs include health claims, administration fees to the third-party administrators and premiums for stop-loss coverage.
		Legal Proceedings
		CBIZ is from time to time subject to claims and suits arising in the ordinary course of business. Although the ultimate disposition of such proceedings is not presently determinable, management does not believe that the ultimate resolution of these matters will have a material adverse effect on the consolidated financial condition, results of operations or cash flows of CBIZ.

7.		Financial Instruments
		Concentrations of Credit Risk
		Financial instruments that may subject CBIZ to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. CBIZ places its cash and cash equivalents with highly-rated financial institutions, limiting the amount of credit exposure with any one financial institution. CBIZ’s client base consists of large numbers of geographically diverse customers dispersed throughout the United States; thus, concentration of credit risk with respect to accounts receivable is not considered significant.
		Corporate Bonds
		CBIZ holds four corporate bonds with par values totaling $9.5 million at March 31, 2010. All bonds are investment grade and are classified as available-for-sale. These bonds have maturity dates ranging from October, 2010 through November, 2036, and are included in “Funds held for clients — current” on the consolidated balance sheets as these investments are highly liquid and are expected to be held for less than one year. CBIZ recorded an unrealized gain on these bonds of $57,000 during the three months ended March 31, 2010, which is recorded as other comprehensive income. No gain or loss was recorded for the three months ended March 31, 2009 as these corporate bonds were purchased subsequent to March 31, 2009.
		Auction Rate Securities (“ARS”)
		At March 31, 2010, CBIZ held three investments in ARS with par values totaling $13.4 million and fair values totaling $10.4 million. The difference between par value and fair value for two of the ARS are currently considered to be temporary and changes in the fair value of these investments are recorded as unrealized losses in accumulated other comprehensive loss, net of tax benefit. The decline in fair value of the remaining ARS was previously determined to be other-than-temporary, with the losses associated with this ARS primarily attributed to credit loss. See Note 8 for further discussion regarding the ARS and related fair values.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

		Due to the failed auctions and the uncertainty regarding the liquidity of these securities, CBIZ classifies its investments in auction-rate securities as funds held for clients — non-current in the consolidated balance sheets. The maturity dates for these ARS investments range from October 2037 through February 2042.
		CBIZ has sufficient liquidity in its client fund assets to fund client obligations and the Company does not anticipate that the current lack of liquidity of these investments will affect its ability to conduct business. CBIZ does not intend to sell the two ARS investments that are temporarily impaired until an anticipated recovery in value occurs.
		Interest Rate Swaps
		CBIZ uses interest rate swaps to manage interest rate risk exposure. Our interest rate swaps effectively mitigate our exposure to interest rate risk, primarily through converting portions of our floating rate debt under the credit facility to a fixed rate basis. These agreements involve the receipt or payment of floating rate amounts in exchange for fixed rate interest payments over the life of the agreements without an exchange of the underlying principal amounts. CBIZ does not enter into derivative instruments for trading or speculative purposes.
		Each of CBIZ’s interest rate swaps have been designated as cash flow hedges. Accordingly, the interest rate swaps are recorded as either assets or liabilities in the consolidated balance sheets at fair value. Changes in fair value are recorded as a component of accumulated other comprehensive loss (“AOCL”) in stockholders’ equity, net of tax, to the extent the swaps are effective. Amounts recorded to AOCL are reclassified to interest expense as interest on the underlying debt is recognized. Net amounts due related to the swaps are recorded as adjustments to interest expense when earned or payable.
		At inception, the critical terms of the interest rate swaps matched the underlying risks being hedged, and as such the interest rate swaps are expected to be highly effective in offsetting fluctuations in the designated interest payments resulting from changes in the benchmark interest rate. The interest rate swaps are assessed for effectiveness and continued qualification for hedge accounting on a quarterly basis. If CBIZ determines that a cash flow hedge is no longer highly effective, the hedge ineffectiveness is recognized in current period earnings and hedge accounting is discontinued with respect to that cash flow hedge.
		As a result of the use of derivative instruments, CBIZ is exposed to risk that the counterparties will fail to meet their contractual obligations. To mitigate the counterparty credit risk, CBIZ only enters into contracts with selected major financial institutions based upon their credit ratings and other factors, and continually assesses the creditworthiness of counterparties. At March 31, 2010, all of the counterparties to CBIZ’s interest rate swaps had investment grade ratings. To date, all counterparties have performed in accordance with their contractual obligations. There are no credit risk-related contingent features in CBIZ’s interest rate swaps nor do the swaps contain provisions under which the Company has, or would be required, to post collateral.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

At March 31, 2010, each of the interest rate swaps was classified as a liability derivative. The following table summarizes CBIZ’s outstanding interest rate swaps and their classification on the consolidated balance sheets at March 31, 2010 and December 31, 2009 (in thousands).

(a)		Represents two interest rate swaps, each with a notional value of $10.0 million and terms of two years expiring in January, 2011. Under the terms of the interest rate swaps, CBIZ pays interest at a fixed rate of 1.55% and 1.59%, respectively, plus applicable margin under the credit agreement, and receives or pays interest that varies with three-month LIBOR. Interest is calculated by reference to the respective $10.0 million notional amount of the interest rate swap and payments are exchanged every three months.
(b)		Represents one interest rate swap with an initial term of two years that expired in January, 2010. Under the terms of the interest rate swap, CBIZ paid interest at a fixed rate of 3.9% plus applicable margin under the credit agreement, and received or paid interest that varied with one-month LIBOR. Interest was calculated by reference to the $10.0 million notional amount of the interest rate swap and payments were exchanged each month.
(c)		See additional disclosures regarding fair value measurements in Note 8.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

8.		Fair Value Measurements
		The valuation hierarchy under GAAP categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

	•		Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	•		Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
	•		Level 3 — inputs to the valuation methodology are unobservable and are significant to the fair value measurement.

		A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
		The following table summarizes CBIZ’s assets and liabilities at March 31, 2010 and December 31, 2009 that are measured at fair value on a recurring basis subsequent to initial recognition, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

		Level		March 31, 2010				December 31, 2009
Deferred compensation plan assets		1		$	29,327			$	27,457
Auction rate securities		3		$	10,361			$	10,545
Corporate bonds		1		$	9,739			$	9,764
Contingent purchase price liabilities		3		$	(14,859	)		$	(5,575	)
Interest rate swaps		2		$	(183	)		$	(190	)

For the three months ended March 31, 2010 and 2009, there were no transfers between the valuation hierarchy Levels 1, 2 or 3. The following table summarizes the change in fair values of the Company’s assets and liabilities identified as Level 3 for the three months ended March 31, 2010 (pre-tax basis) (in thousands):

		Auction Rate				Contingent Purchase
		Securities				Price Liabilities
Balance — December 31, 2009		$	10,545			$	(5,575	)
Transfers into Level 3			—				—
Additions from business acquisitions			—				(9,960	)
Unrealized losses included in accumulated other comprehensive loss			(187	)			—
Change in fair value of contingency			—				721
Change in net present value of contingency			—				(45	)
Increase in expected cash flows of OTTI investment			3				—
Ending balance — March 31, 2010		$	10,361			$	(14,859	)

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

		Auction Rate Securities — CBIZ’s investments in ARS were classified as Level 3 as a result of liquidity issues in the ARS market, an inactive trading market of the securities, and the lack of quoted prices from broker-dealers. Accordingly, a fair value assessment of these securities was performed on each security based on a discounted cash flow model utilizing various assumptions that included maximum interest rates for each issue, probabilities of successful auctions, failed auctions or default, the timing of cash flows, the quality and level of collateral of the securities, and the rate of recovery from bond insurers in the event of default.
		At March 31, 2010, CBIZ held three investments in ARS with par values totaling $13.4 million. For two of the ARS, the declines in fair values are currently considered to be temporary. The par value of these two ARS was $8.4 million at March 31, 2010 and December 31, 2009, respectively, and the fair values were $7.6 million and $7.8 million at March 31, 2010 and December 31, 2009, respectively. The decrease in fair value of $0.2 million during the three months ended March 31, 2010 was recorded as unrealized losses in accumulated other comprehensive loss, net of tax. For both of these ARS issues, CBIZ has determined that the impairment is temporary due to dislocation in the credit markets, the quality of the investments and their underlying collateral, and the probability of a passed auction or redemption in the future, considering the issuers’ ability to refinance if necessary. These two ARS with temporary declines in fair value are classified as “Funds held for clients — non-current”, as CBIZ does not intend to sell these investments until an anticipated recovery of par value occurs.
		The par value of the remaining ARS is $5.0 million and the carrying value was $2.8 million at both March 31, 2010 and December 31, 2009. The decline in fair value for this ARS was determined to be other-than-temporary and accordingly, CBIZ bifurcated the loss into credit loss and other market loss and recorded an impairment charge in “Other income (expense), net” for the year ended December 31, 2008. During the three months ended March 31, 2010, there were no additional impairment charges related to this ARS. The fair value of this ARS is recorded in “Funds held for clients — non-current” in the consolidated balance sheets.
		Contingent Purchase Price Liabilities — Contingent purchase price liabilities resulted from business acquisitions made after January 1, 2009, and are classified as Level 3 due to the utilization of a probability weighted discounted cash flow approach to determine the fair value of the contingency. The contingent purchase price liabilities are included in “Other current liabilities” and “Accrued expenses — non-current”, depending on the expected settlement date. During the three months ended March 31, 2010, the addition of $10.0 million to the liability resulted from CBIZ’s acquisitions of two businesses with contingent earnout provisions, and was offset by $0.7 million as a result of a change in the estimate of future contingent liabilities related to prior year acquisitions. See Note 12 for further discussion of contingent purchase price liabilities.
		The following table provides additional information with regards to the ARS with temporary impairments, aggregated by the length of time that the securities have been in a continuous unrealized loss position (in thousands):

		March 31, 2010
		Less Than 12 Months								12 Months or Greater								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Description of Security		Value				Losses				Value				Losses				Value				Losses
Auction rate securities		$	—			$	—			$	7,602			$	778			$	7,602			$	778

		December 31, 2009
		Less Than 12 Months								12 Months or Greater								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Description of Security		Value				Losses				Value				Losses				Value				Losses
Auction rate securities		$	—			$	—			$	7,784			$	596			$	7,784			$	596

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

The following table presents financial instruments that are not carried at fair value but which require fair value disclosure as of March 31, 2010 and December 31, 2009 (in thousands):

		March 31, 2010								December 31, 2009
		Carrying Value				Fair Value				Carrying Value				Fair Value
Convertible notes		$	94,890			$	94,890			$	93,848			$	94,800

		Although the trading of CBIZ’s convertible notes is limited, the fair value of the convertible notes was determined based upon their most recent quoted market price. The convertible notes are carried at face value less any unamortized debt discount.
		The carrying value of CBIZ’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments. The carrying value of bank debt approximates fair value, as the interest rate on the bank debt is variable and approximates current market rates.

9.		Other Comprehensive Income
		Other comprehensive income is reflected as an increase to stockholders’ equity and is not reflected in CBIZ’s results of operations. Other comprehensive income for the three months ended March 31, 2010 and 2009, net of tax, was as follows (in thousands):

		2010				2009
Net income		$	15,984			$	18,181
Other comprehensive income (loss):
Net unrealized (loss) gain on available-for-sale securities, net of income tax benefit (expense) of $50 and $(28), respectively			(75	)			41
Net unrealized gain (loss) on interest rate swaps, net of income tax (expense) benefit of $(3) and $2, respectively			4				(4	)
Foreign currency translation			(15	)			(22	)
Total other comprehensive (loss) income			(86	)			15
Comprehensive income		$	15,898			$	18,196

Accumulated other comprehensive loss, net of tax, was approximately $1.0 million and $0.9 million at March 31, 2010 and December 31, 2009, respectively. Accumulated other comprehensive loss consisted of adjustments, net of tax, to unrealized gains and losses on available-for-sale securities and interest rate swaps, and foreign currency translation.

10.		Employer Share Plans
		CBIZ has granted various stock-based awards under its 2002 Stock Incentive Plan, which is described in further detail in CBIZ’s Annual Report on Form 10-K for the year ended December 31, 2009. The terms and vesting schedules for stock-based awards vary by type and date of grant. Compensation expense for stock-based awards recognized during the three months ended March 31, 2010 and 2009 was as follows (in thousands):

		2010				2009
Stock options		$	760			$	567
Restricted stock awards			534				378
Total stock-based compensation expense		$	1,294			$	945

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Stock award activity during the three months ended March 31, 2010 was as follows (in thousands, except per share data):

(1)		Represents weighted average market value of the shares; awards are granted at no cost to the recipients.

(1)		A total of 4.5 million and 2.6 million stock based awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2010 and 2009, respectively, as their effect would be anti-dilutive.
(2)		Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by CBIZ once future conditions have been met.

12.		Acquisitions
		During the first quarter of 2010, CBIZ acquired substantially all of the assets of two companies, Goldstein Lewin & Company and National Benefit Alliance. Goldstein Lewin & Company, an accounting and financial services company located in Boca Raton, Florida, provides accounting services and financial advisory services, tax planning and compliance, wealth preservation and estate planning, business valuation and litigation support. The operating results of Goldstein Lewin & Company are

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

		reported in the Financial Services practice group. National Benefit Alliance, an employee benefits company located in Midvale, Utah, designs, implements and administers employee benefit plans for government contractors as well as commercial clients. The operating results of National Benefit Alliance are reported in the Employee Services practice group.
		Aggregate consideration for these acquisitions is expected to be approximately $25.3 million, which consists of $13.2 million in cash and $1.8 million in CBIZ common stock that was paid at closing, $0.3 million in guaranteed future consideration, and $10.0 million in contingent consideration to be settled primarily in cash and a portion in common stock, subject to the acquired operations achieving certain performance targets.
		The preliminary aggregate purchase price for these acquisitions was allocated as follows (in thousands):

Recognized amounts of identifiable assets acquired and liabilities assumed:
Work in process, net		$	538
Prepaid expenses and other current assets			1,230
Fixed assets			1,436
Identifiable intangible assets			5,806
Accrued liabilities			(113	)
Total identifiable net assets		$	8,897
Goodwill			16,441
Aggregate purchase price		$	25,338

		Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired. The potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is between $0 and $10.5 million. CBIZ is required to record the fair value of these obligations at the acquisition date. CBIZ determined, utilizing a probability weighted income approach, that the fair value of the contingent consideration arrangements was $10.0 million, of which $3.9 million was recorded in “Other current liabilities” and $6.1 million was recorded in “Accrued expenses — non-current” in the consolidated balance sheets at March 31, 2010.
		The goodwill of $16.4 million arising from the acquisitions in the current period consists largely of expected future earnings and cash flow from the existing management team, as well as the synergies created by the integration of the new businesses within the CBIZ organization, including cross selling opportunities expected with our Financial Services group and the Employee Services group to help strengthen our existing service offerings and expand our market position. The goodwill recognized is deductible for income tax purposes.
		During the first quarter of 2010, CBIZ adjusted the fair value of the contingent consideration arrangements related to CBIZ’s prior acquisitions from $5.6 million to $4.9 million due to lower than originally projected future results of the acquired businesses.
		In addition, CBIZ paid $12.8 million in cash and approximately 13,100 shares of common stock became issuable during the first quarter of 2010 as contingent proceeds for previous acquisitions.
		CBIZ did not acquire any businesses during the first quarter of 2009. CBIZ did purchase two client lists, one of which is reported in the Financial Services practice group and the other is reported in the Employee Services practice group. Aggregate consideration for these client lists consisted of $0.1 million cash paid at closing and up to an additional $0.4 million in cash which is contingent upon future financial performance of the client lists. In addition, CBIZ paid $0.3 million in cash and issued approximately 26,300 shares of common stock during the first quarter of 2009 as contingent proceeds for previous acquisitions.

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

		The operating results of these businesses are included in the accompanying consolidated financial statements since the dates of acquisition. Client lists and non-compete agreements are recorded at fair value at the time of acquisition. The excess of purchase price over the fair value of net assets acquired, (including client lists and non-compete agreements) is allocated to goodwill.
		Additions to goodwill, client lists and other intangible assets resulting from acquisitions in the first quarter of 2010 and contingent consideration earned on prior period acquisitions during the three months ended March 31, 2010 and 2009 were as follows (in thousands):

		2010				2009
Goodwill		$	18,751			$	2,031
Client lists		$	5,560			$	407
Other intangible assets		$	246			$	—

13.		Discontinued Operations and Divestitures
		CBIZ will divest (through sale or closure) business operations that do not contribute to the Company’s long-term objectives for growth, or that are not complementary to its target service offerings and markets. Divestitures are classified as discontinued operations provided they meet the criteria as provided in FASB ASC 205 “Presentation of Financial Statements — Discontinued Operations — Other Presentation Matters”.
		Discontinued Operations
		Gains or losses from the sale of discontinued operations are recorded as “(Loss) gain on disposal of discontinued operations, net of tax”, in the accompanying consolidated statements of operations. Additionally, proceeds that are contingent upon a divested operation’s actual future performance are recorded as gain on sale of discontinued operations in the period they are earned. During the first quarter of 2010, CBIZ sold two businesses from the National Practices group. Proceeds from these sales consisted of $0.2 million in cash and resulted in a pre-tax loss of approximately $0.8 million. During the first quarter of 2009, CBIZ did not sell any operations.
		For those businesses that qualified for treatment as discontinued operations, the assets, liabilities and results of operations are reported separately in the accompanying consolidated financial statements. Revenue and results from operations of discontinued operations for the three months ended March 31, 2010 and 2009 are separately reported as “Income from operations of discontinued operations, net of tax” in the consolidated statements of operations and were as follows (in thousands):

		2010				2009
Revenue		$	2,260			$	3,595
Loss from operations of discontinued operations, before income tax expense		$	(740	)		$	(393	)
Income tax benefit			296				164
Loss from operations of discontinued operations, net of tax		$	(444	)		$	(229	)

For the three months ended March 31, 2010 and 2009, (loss) gain on the disposal of discontinued operations were as follows (in thousands):

		2010				2009
(Loss) gain on disposal of discontinued operations, before income tax (benefit) expense		$	(890	)		$	11
Income tax (benefit) expense			(454	)			4
(Loss) gain on disposal of discontinued operations, net of tax		$	(436	)		$	7

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

At March 31, 2010 and December 31, 2009, the assets and liabilities of businesses classified as discontinued operations consisted of the following (in thousands):

		March 31,				December 31,
		2010				2009
Assets:
Accounts receivable, net		$	1,164			$	1,945
Goodwill and other intangible assets, net			315				1,436
Property and equipment, net			96				131
Other current assets			500				597
Assets of discontinued operations		$	2,075			$	4,109
Liabilities:
Accounts payable		$	217			$	892
Accrued personnel costs			203				191
Other current liabilities			571				1,198
Liabilities of discontinued operations		$	991			$	2,281

		Divestitures
		Gains and losses from divested operations and assets that do not qualify for treatment as discontinued operations are recorded as “Gain on sale of operations, net” in the consolidated statements of operations. During the first quarter of 2010, CBIZ recognized a gain of $0.4 million from the sale of a client list. Cash proceeds from this sale were $0.4 million. During the first quarter of 2009, there were no sales of operations or assets.

14.		Segment Disclosures
		CBIZ’s business units have been aggregated into four practice groups: Financial Services, Employee Services, Medical Management Professionals (“MMP”), and National Practices. The business units have been aggregated based on the following factors: similarity of the products and services provided to clients; similarity of the regulatory environment in which they operate; and similarity of economic conditions affecting long-term performance. The business units are managed along these segment lines. A general description of services provided by practice group is provided in the following table.

Financial Services		Employee Services		MMP		National Practices
• Accounting		• Group Health		• Coding and Billing		• Managed Networking and
• Tax		• Property & Casualty		• Accounts Receivable		Hardware Services
• Financial Advisory		• COBRA / Flex		Management		• Health Care Consulting
• Litigation Support		• Retirement Planning		• Full Practice		• Mergers & Acquisitions
• Valuation		• Wealth Management		Management Services
• Internal Audit		• Life Insurance
• Fraud Detection		• Human Capital
• Real Estate Advisory		Management
		• Payroll Services
		• Actuarial Services
		• Recruiting

Corporate and Other. Included in Corporate and Other are operating expenses that are not directly allocated to the individual business units. These expenses are primarily comprised of gains or losses

CBIZ, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

attributable to assets held in the Company’s deferred compensation plan, stock-based compensation, certain health care costs, consolidation and integration charges, and certain advertising costs.

Accounting policies of the practice groups are the same as those described in Note 1 to the Annual Report on Form 10-K for the year ended December 31, 2009. Upon consolidation, all intercompany accounts and transactions are eliminated, thus inter-segment revenue is not included in the measure of profit or loss for the practice groups. Performance of the practice groups is evaluated on operating income excluding the costs of certain infrastructure functions (such as information systems, finance and accounting, human resources, legal and marketing), which are reported in the “Corporate and Other” segment. Segment information for the three months ended March 31, 2010 and 2009 was as follows (in thousands):

		THREE MONTHS ENDED MARCH 31, 2010
																		Corporate
		Financial				Employee								National				and
		Services				Services				MMP				Practices				Other				Total
Revenue		$	121,423			$	46,788			$	35,318			$	6,706			$	—			$	210,235
Operating expenses			89,100				37,149				34,090				6,490				5,462				172,291
Gross margin			32,323				9,639				1,228				216				(5,462	)			37,944
Corporate general & admin			—				—				—				—				8,984				8,984
Operating income (loss)			32,323				9,639				1,228				216				(14,446	)			28,960
Other income (expense):
Interest expense			(3	)			(6	)			—				—				(3,159	)			(3,168	)
Gain on sale of operations, net			—				—				—				—				374				374
Other income (expense), net			75				138				89				—				1,871				2,173
Total other income (expense)			72				132				89				—				(914	)			(621	)
Income (loss) from continuing operations before income tax expense		$	32,395			$	9,771			$	1,317			$	216			$	(15,360	)		$	28,339

		THREE MONTHS ENDED MARCH 31, 2009
																		Corporate
		Financial				Employee								National				And
		Services				Services				MMP				Practices				Other				Total
Revenue		$	124,693			$	45,390			$	39,848			$	6,547			$	—			$	216,478
Operating expenses			93,138				37,353				35,136				6,174				2,186				173,987
Gross margin			31,555				8,037				4,712				373				(2,186	)			42,491
Corporate general & admin			—				—				—				—				7,709				7,709
Operating income (loss)			31,555				8,037				4,712				373				(9,895	)			34,782
Other income (expense):
Interest expense			(8	)			(7	)			—				—				(3,488	)			(3,503	)
Gain on sale of operations, net			—				—				—				—				80				80
Other income (expense), net			78				225				74				—				(968	)			(591	)
Total other income (expense)			70				218				74				—				(4,376	)			(4,014	)
Income (loss) from continuing operations before income tax expense		$	31,625			$	8,255			$	4,786			$	373			$	(14,271	)		$	30,768

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

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we”, “our”, “CBIZ”, or the “Company” shall mean CBIZ, Inc., a Delaware corporation, and its operating subsidiaries.

The following discussion is intended to assist in the understanding of CBIZ’s financial position at March 31, 2010 and December 31, 2009, and results of operations and cash flows for the three months ended March 31, 2010 and 2009, and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2009. This discussion and analysis contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2009.

Overview

CBIZ provides professional business services that help clients manage their finances and employees. These services are provided to businesses of various sizes, as well as individuals, governmental entities and not-for-profit enterprises throughout the United States and parts of Canada. CBIZ delivers its integrated services through four practice groups. A general description of services provided by each practice group is provided in the following table:

Financial Services		Employee Services		MMP		National Practices
•      Accounting		•      Group Health		•      Coding and Billing		•      Managed Networking and Hardware Services
•      Tax		•      Property & Casualty		•      Accounts Receivable Management		•      Health Care Consulting
•      Financial Advisory		•      COBRA / Flex		•      Full Practice Management Services		•      Mergers & Acquisitions
•      Litigation Support		•      Retirement Planning
•      Valuation		•      Wealth Management
•      Internal Audit		•      Life Insurance
•      Fraud Detection		•      Human Capital Management
•      Real Estate Advisory		•      Payroll Services
		•      Actuarial Services
		•      Recruiting

See the Annual Report on Form 10-K for the year ended December 31, 2009 for further discussion of external relationships and regulatory factors that currently impact CBIZ’s operations.

Executive Summary

Revenue for the first quarter of 2010 decreased by 2.9% versus the comparable period in 2009. Revenue from newly acquired operations contributed $6.0 million, or 2.8% of revenue growth, which was offset by same-unit revenue declines of 5.6%, or $12.2 million.

Operating expenses declined by 1.0% or $1.7 million, but increased as a percentage of revenue to 82% in the first quarter of 2010 from 80.4% for the first quarter of 2009. Operating expenses included a charge of $1.4 million for restructuring activities, primarily lease consolidation charges, associated with the Company’s acquisition of Goldstein Lewin & Company. CBIZ is continuing to take the appropriate actions to manage costs in order to reduce pressure on gross margin. Earnings per share from continuing operations decreased by 10.0% to $0.27 for the three months ended March 31, 2010 from $0.30 for the three months ended March 31, 2009.

During the first quarter of 2010, CBIZ acquired substantially all of the assets of two companies. Goldstein Lewin & Company, an accounting and financial services company located in Boca Raton, Florida, provides accounting services and financial advisory services, tax planning and compliance, wealth preservation and estate planning, business valuation and litigation support. National Benefit Alliance, an employee benefits company located in Midvale, Utah, designs, implements and administers employee benefit plans for government contractors as well as commercial clients. Goldstein Lewin & Company is reported in the

Financial Services practice group and National Benefit Alliance is reported in the Employee Services practice group.

During the first quarter of 2010, CBIZ sold two businesses that were previously classified as discontinued operations. These businesses were formerly reported in the National Practices group. See Note 13 to the accompanying consolidated financial statements for further disclosure.

On February 11, 2010, CBIZ’s Board of Directors authorized the purchase of up to 5.0 million shares of CBIZ outstanding common stock in open market or privately negotiated purchases through March 31, 2011.

Results of Operations — Continuing Operations

Same-unit revenue represents total revenue adjusted to reflect comparable periods of activity for acquisitions and divestitures. For example, for a business acquired on March 1, 2009, revenue for the month of March would be included in same-unit revenue for first quarter of both years; revenue for the period January 1, 2010 through February 28, 2010 would be reported as revenue from acquired businesses.

Three Months Ended March 31, 2010 and 2009

Revenue

The following table summarizes total revenue for the three months ended March 31, 2010 and 2009 (in thousands, except percentages).

		THREE MONTHS ENDED MARCH 31,
						%of								%of				$				%
		2010				Total				2009				Total				Change				Change
Same-unit revenue
Financial Services		$	117,544				55.9	%		$	124,693				57.6	%		$	(7,149	)			(5.7	)%
Employee Services			44,685				21.3	%			45,390				21.0	%			(705	)			(1.6	)%
MMP			35,318				16.8	%			39,848				18.4	%			(4,530	)			(11.4	)%
National Practices			6,706				3.2	%			6,547				3.0	%			159				2.4	%
Total same-unit revenue			204,253				97.2	%			216,478				100.0	%			(12,225	)			(5.6	)%
Acquired businesses			5,982				2.8	%			—				—				5,982
Divested operations			—				—				—				—
Total revenue		$	210,235				100.0	%		$	216,478				100.0	%		$	(6,243	)			(2.9	)%

A detailed discussion of revenue by practice group is included under “Operating Practice Groups”.

Gross margin and operating expenses — Operating expenses for the first quarter of 2010 decreased by $1.7 million to $172.3 million for the first quarter of 2010, from $174.0 million for the comparable period of 2009, but increased as a percentage of revenue to 82.0% from 80.4% for the first quarters of 2010 and 2009, respectively. The primary components of operating expenses for the first quarters of 2010 and 2009 are illustrated in the following table:

		2010								2009
		% of								% of								Change in
		Operating				%				Operating				% of				% of
		Expense				of Revenue				Expense				Revenue				Revenue
Personnel costs			75.3	%			61.7	%			75.3	%			60.5	%			1.2	%
Occupancy costs			6.7	%			5.5	%			6.8	%			5.4	%			0.1	%
Depreciation and amortization			2.9	%			2.4	%			2.8	%			2.2	%			0.2	%
Travel and related costs			2.6	%			2.1	%			2.5	%			2.0	%			0.1	%
Other (1)			12.5	%			10.3	%			12.6	%			10.3	%			—
Total operating expenses							82.0	%							80.4	%			1.6	%
Gross margin							18.0	%							19.6	%			(1.6	)%