12.

Acquisitions

During the nine months ended September 30, 2013, CBIZ acquired Associated Insurance Agents (“AIA”). AIA, located in Minneapolis, Minnesota, is an insurance brokerage agency specializing in property and casualty insurance, personal lines and health and benefit insurance. The operating results of AIA are reported in the Employee Services practice group. Aggregate consideration for this acquisition consisted of approximately $3.7 million in cash, $0.4 million in guaranteed future consideration, and $4.6 million in contingent consideration.

The aggregate purchase price for this acquisition was preliminarily allocated as follows (in thousands):

Recognized amounts of identifiable assets acquired and liabilities assumed:


Current assets	$	346
Identifiable intangible assets		2,774
Accounts payable		(835	)
Accrued liabilities		(389	)
Deferred tax liability – non-current		(1,165	)

Total identifiable net assets	$	731
Goodwill		7,915

Aggregate purchase price	$	8,646

Under the terms of the acquisition agreement, a portion of the purchase price is contingent on future performance of the business acquired. The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangement is $5.2 million. CBIZ is required to record the fair value of this obligation at the acquisition date. CBIZ determined, utilizing a probability weighted income approach, that the fair value of the contingent consideration arrangement was $4.6 million, which was recorded in the consolidated balance sheet at September 30, 2013. The goodwill of $7.9 million arising from the acquisition in the current year 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 business within the CBIZ organization, including cross-selling opportunities expected with the Company’s Employee Services group, to help strengthen the Company’s existing service offerings and expand the Company’s market position. Goodwill recognized is not deductible for income tax purposes.

CBIZ also purchased one client list, which is reported in the Employee Services practice group. Total consideration for this client list was $0.3 million cash paid at closing and an additional $0.2 million in cash, which is contingent upon future financial performance of the client list.

In addition, CBIZ paid $4.1 million in cash and issued approximately 201,000 shares of common stock during the nine months ended September 30, 2013 as contingent earnouts for previous acquisitions. During the nine months ended September 30, 2013, CBIZ also increased the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $1.1 million due to higher than originally projected future results of the acquired businesses. This increase of $1.1 million is included in “Other income (expense), net” in the consolidated statements of comprehensive income. Refer to Note 8 for further discussion of contingent purchase price liabilities.

During the nine months ended September 30, 2012, CBIZ acquired substantially all of the assets of four companies: Meridian Insurance Group, LLC (“Meridian”), Primarily Care, Inc. (“PCI”), Stoltz and Company, LTD., L.L.P. (“Stoltz”) and Trinity Risk Advisors, Inc. (“Trinity”). Meridian, with offices in Boca Raton, Florida and Atlanta, Georgia, is an insurance brokerage firm specializing in multiple insurance products and services including property and casualty, bonding, personal lines and employee benefits. PCI, located in Cranston, Rhode Island, is an employee benefits brokerage firm that offers long-term healthcare cost reduction strategies through a unique system comprised of technology, innovative plan design, educational tools and tangible financial health incentives. Stoltz, with offices in Midland, San Antonio and Amarillo, Texas, is an insurance brokerage firm offering multiple insurance products and services including property and casualty, personal lines and employee benefits with specialization in oil and gas related risk management. Trinity, located in Atlanta, Georgia, is a specialty property and casualty brokerage firm focused primarily on medical malpractice insurance to the healthcare industry and specialized insurance to the transportation industry. The operating results of all four companies are reported in the Employee Services practice group. Aggregate consideration for these acquisitions consisted of approximately $12.3 million in cash, $1.7 million in CBIZ common stock, $1.7 million in guaranteed future consideration, and $6.8 million in contingent consideration.

During the nine months ended September 30, 2012, CBIZ also purchased two client lists, one of which is reported in the Employee Services practice group and the other is reported in the Financial Services practice group. Aggregate consideration for these client lists consisted of $0.4 million cash paid at closing and up to an additional $2.5 million in cash which is contingent upon future performance of the client lists.

In addition, CBIZ paid $18.8 million in cash and issued approximately 315,000 shares of common stock during the nine months ended September 30, 2012 as contingent earnouts for previous acquisitions, which includes approximately 251,100 shares of common stock that were earned in 2011 and issued in 2012. During the nine months ended September 30, 2012, CBIZ also reduced the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $0.4 million due to lower than originally projected future results of the acquired businesses. This reduction of $0.4 million is included in “Other income (expense), net” in the consolidated statements of comprehensive income. Refer to Note 8 for further discussion of contingent purchase price liabilities.

The operating results of acquired 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 and contingent consideration earned on prior period acquisitions during the nine months ended September 30, 2013 and 2012, respectively, were as follows (in thousands):


	2013		2012
Goodwill	$	8,138	$	14,728

Client lists	$	3,609	$	10,243

Other intangible assets	$	171	$	373

As a result of CBIZ’s acquisition activities during 2012, the following tables provide pro forma financial information as if all the acquisitions were acquired on January 1, 2012. See CBIZ’s Annual Report on Form 10-K for the year ended December 31, 2012 for a detailed description of the businesses that were acquired during 2012. The pro forma financial information includes the effect of certain adjustments to normalize such expenses as interest, amortization, benefits and incentive compensation. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been obtained had these businesses actually been acquired at January 1, 2012, nor are they intended to be a projection of future results of operations. The “Consolidated As Reported” column also includes the impact of treating MMP as discontinued operations.


	Three Months Ended September 30, 2012
	Consolidated As Reported		Pro Forma Adjustments		Pro Forma Consolidated
Revenue	$	149,841	$	10,694	$	160,535
Income from continuing operations after income tax expense	$	3,082	$	653	$	3,735
Earnings per share from continuing operations:
Basic	$	0.06	$	0.01	$	0.07
Diluted	$	0.06	$	0.01	$	0.07
Weighted average common shares outstanding:
Basic		48,895		456		49,351
Diluted		49,109		456		49,565


	Nine Months Ended September 30, 2012
	Consolidated As Reported		Pro Forma Adjustments		Pro Forma Consolidated
Revenue	$	491,603	$	35,487	$	527,090
Income from continuing operations after income tax expense	$	24,029	$	2,734	$	26,763
Earnings per share from continuing operations:
Basic	$	0.49	$	0.05	$	0.54
Diluted	$	0.49	$	0.05	$	0.54
Weighted average common shares outstanding:
Basic		49,014		564		49,578
Diluted		49,278		565		49,843