Financial Services
• Accounting

• Tax

• Financial Advisory

• Litigation Support

• Valuation

• Internal Audit

• Fraud Detection

• Real Estate Advisory

Employee Services
• Group Health

• Property & Casualty

• COBRA / Flex

• Retirement Planning

• Wealth Management

• Life Insurance

• Human Capital Management

• Payroll Services

• Actuarial Services

• Recruiting

MMP
• Coding and Billing

• Accounts Receivable Management

• Full Practice Management Services

National Practices
• Managed Networking and Hardware Services

• Technical Security Solutions

• Technology Consulting

• Project Management

• Software Solutions

• Health Care Consulting

• Mergers & Acquisitions

See the Annual Report on Form 10-K for the year ended December 31, 2008 for further discussion of external relationships and regulatory factors that currently impact CBIZ's operations.
Executive Summary
Revenue for the six months ended June 30, 2009 grew by $36.7 million, or 9.8%, versus the comparable period in 2008. Revenue from newly acquired operations, net of divestitures, contributed $49.4 million, or 13.3% to the growth in revenue, while same-unit revenue declined by 3.4%, or $12.7 million. Earnings per share from continuing operations increased 8.1% to $0.40 per diluted share for the six months ended June 30, 2009 from $0.37 per diluted share for the comparable period in 2008.
Effective January 1, 2009, CBIZ adopted the provisions of Financial Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"), which impacted the accounting associated with CBIZ's $100.0 million convertible senior subordinated notes ("Notes"). The 2008 results have been restated to reflect this change. The impact to CBIZ of adopting FSP APB 14-1 is described in Notes 1 and 5 to the accompanying consolidated financial statements.
CBIZ acquired Mahoney Cohen & Company and Tofias PC on December 31, 2008. While these units have not been immune to the economic pressures facing all professional services firms, their performance is generally in line with management's expectations.

The Company has instituted several programs to control and reduce expenses. These programs include appropriately matching staffing resources to expected revenue. During the six months ended June 30, 2009, the Company incurred $1.2 million of severance related costs as it has adjusted its workforce, which represents an increase of $1.1 million from the comparable period in 2008. 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 June 1, 2008, revenue for the month of June would be included in same-unit revenue for both years; revenue for the period January 1, 2009 through May 31, 2009 would be reported as revenue from acquired businesses. Divested operations represents operations that were sold or closed and did not meet the criteria for treatment as discontinued operations. Three Months Ended June 30, 2009 and 2008 Revenue - The following table summarizes total revenue for the three months ended June 30, 2009 and 2008 (in thousands, except percentages).

                                                 THREE MONTHS ENDED JUNE 30,
                                          % of                      % of          $            %
                             2009         Total        2008         Total       Change      Change
 Same-unit revenue
 Financial Services        $  70,578        37.3 %   $  75,157        42.9 %   $ (4,579 )      (6.1 )%
 Employee Services            42,515        22.5 %      46,356        26.4 %     (3,841 )      (8.3 )%
 MMP                          41,874        22.1 %      41,899        23.9 %        (25 )      (0.1 )%
 National Practices           10,545         5.6 %      11,028         6.3 %       (483 )      (4.4 )%

 Total same-unit revenue     165,512        87.5 %     174,440        99.5 %     (8,928 )      (5.1 )%

 Acquired businesses          23,560        12.5 %           -           -       23,560
 Divested operations               -           -           951         0.5 %       (951 )

 Total revenue             $ 189,072       100.0 %   $ 175,391       100.0 %   $ 13,681         7.8 %

A detailed discussion of revenue by practice group is included under "Operating Practice Groups".
Gross margin and operating expenses - Operating expenses for the three months ended June 30, 2009 increased by $15.1 million versus the comparable period in 2008. As a result of the December 31, 2008 acquisitions of Mahoney Cohen & Company and Tofias PC, CBIZ incurred additional operating expenses of $20.3 million. The primary components of operating expenses for the three months ended June 30, 2009 and 2008 are illustrated in the following table:

                                           2009                      2008
                                     % of                      % of                    Change in
                                   Operating      % of       Operating      % of          % of
                                    Expense      Revenue      Expense      Revenue      Revenue
  Personnel costs                      73.2 %      65.7 %        72.7 %      64.1 %         1.6 %
  Occupancy costs                       6.8 %       6.1 %         6.6 %       5.8 %         0.3 %
  Depreciation and amortization         2.9 %       2.6 %         2.3 %       2.0 %         0.6 %
  Other (1)                            17.1 %      15.3 %        18.4 %      16.2 %        (0.9 )%

  Total operating expenses                         89.7 %                    88.1 %         1.6 %


  Gross margin                                     10.3 %                    11.9 %        (1.6 )%

(1) Other operating expenses include office expenses, travel and related expenses, equipment costs, professional fees, bad debt and other expenses, none of which are individually significant as a percentage of total operating expenses.

The increase in personnel costs as a percentage of revenue consisted of a 1.3% increase related to salaries and benefits, including the impact of the previously mentioned December 31, 2008 acquisitions and certain severance costs, and a 1.2% increase related to gains on assets held in CBIZ's deferred compensation plan during the second quarter of 2009 compared to a loss on assets for the second quarter of 2008. These increases were offset by a reduction in same-store compensation as a result of reduced staffing levels at certain locations. The increase in occupancy costs and depreciation and amortization expense as a percentage of revenue was the result of the previously mentioned acquisitions. The decline in other operating expenses as a percentage of revenue for the three months ended June 30, 2009 versus the comparable period in 2008 occurred as a result of the Company's cost-control efforts, and primarily related to declines in travel and recruiting fees. Personnel and other operating expenses are discussed in further detail under "Operating Practice Groups". Corporate general and administrative expenses - Corporate general and administrative ("G&A") expenses decreased by $0.1 million to $7.7 million for the three months ended June 30, 2009, from $7.8 million for the comparable period of 2008, and declined as a percentage of revenue to 4.1% from 4.4% for the three months ended June 30, 2009 and 2008, respectively. The primary components of G&A expenses for the three months ended June 30, 2009 and 2008 are illustrated in the following table:

                                            2009                     2008
                                     % of                     % of                    Change in
                                      G&A         % of         G&A         % of          % of
                                    Expense     Revenue      Expense     Revenue       Revenue
   Personnel costs                    53.9 %        2.2 %      53.3 %        2.4 %        (0.2 )%
   Depreciation and amortization       2.3 %        0.1 %       3.9 %        0.2 %        (0.1 )%
   Professional services              13.1 %        0.5 %      17.1 %        0.8 %        (0.3 )%
   Other (1)                          30.7 %        1.3 %      25.7 %        1.0 %         0.3 %


   Total G&A expenses                               4.1 %                    4.4 %        (0.3 )%

(1) Other G&A expenses include occupancy costs, office expenses, equipment and computer costs, insurance expense and other expenses, none of which are individually significant as a percentage of total G&A expenses.

Interest expense - Interest expense increased by $0.7 million to $3.5 million for the three months ended June 30, 2009 from $2.8 million for the comparable period in 2008. The increase in interest expense relates to higher average debt outstanding under the credit facility for the three months ended June 30, 2009 versus the comparable period in 2008, partially offset by a decrease in average interest rates. Average debt outstanding under the facility was $139.3 million and $71.2 million and weighted average interest rates were 4.0% and 4.7% for the three months ended June 30, 2009 and 2008, respectively. The increase in average debt for the three months ended June 30, 2009 versus the comparable period in 2008 was largely attributable to the December 31, 2008 acquisitions of Mahoney Cohen & Company and Tofias PC which were financed through CBIZ's credit facility.
Although the Notes carry a 3.125% coupon payment rate, interest expense for the three months ended June 30, 2009 increased by approximately $0.1 million versus the three months ended June 30, 2008. As required by FSP APB 14-1, CBIZ accounts for the liability and equity components of the Notes in a manner that reflects the convertible debt borrowing rate, absent the conversion feature, when interest expense is recognized over subsequent periods. The effective interest rate on the Notes is 7.8%, and interest expense above the 3.125% coupon rate represents a non-cash charge. CBIZ's Notes and the impact of adopting FSP APB 14-1 are further disclosed in Notes 1 and 5 of the accompanying consolidated financial statements.
Other income (expense), net - Other income (expense), net is primarily comprised of interest income and adjustments to the fair value of investments held in a rabbi trust related to the deferred compensation plan. Adjustments to the fair value of investments related to the deferred compensation contributed $2.6 million to the increase in other income (expense), net for the three months ended June 30, 2009 versus the comparable period in 2008. These adjustments did not impact CBIZ's net income as they were offset by the corresponding increase to compensation expense which was recorded as operating and G&A expenses in the consolidated statements of operations.

Income tax expense - CBIZ recorded income tax expense from continuing operations of $4.5 million and $3.9 million for the three months ended June 30, 2009 and 2008, respectively. The effective tax rate for the three months ended June 30, 2009 was 40.1%, compared to an effective rate of 36.1% for the comparable period in 2008. The increase in the effective tax rate primarily relates to the favorable settlement of a portion of an IRS audit in 2008 and the reversal of certain tax reserves related to the audit in 2008. There were no reversals of estimated tax reserves in the second quarter of 2009. Operating Practice Groups
CBIZ delivers its integrated services through four practice groups: Financial Services, Employee Services, Medical Management Professionals ("MMP") and National Practices. A brief description of these groups' operating results and factors affecting their businesses is provided below. Financial Services

                                            THREE MONTHS ENDED JUNE 30,
                                                                $            %
                                    2009          2008        Change      Change
                                        (In thousands, except percentages)
           Revenue
           Same-unit              $  70,578     $ 75,157     $ (4,579 )      (6.1 )%
           Acquired businesses       23,560            -       23,560

           Total revenue          $  94,138     $ 75,157     $ 18,981        25.3 %

           Operating expenses        83,436       65,884       17,552        26.6 %

           Gross margin           $  10,702     $  9,273     $  1,429        15.4 %


           Gross margin percent        11.4 %       12.3 %

The increase in total revenue was primarily attributable to the acquisitions of Mahoney Cohen & Company and Tofias PC on December 31, 2008. These firms offer accounting, tax and financial advisory services to privately-held and public companies as well as high net worth individuals. Although the Financial Services group increased the rates realized for services, same-unit revenue for the three months ended June 30, 2009 declined versus the comparable period in 2008 due to a reduction in client demand which resulted in a decrease in aggregate hours charged to clients.
CBIZ provides a range of services to affiliated CPA firms under joint referral and administrative service agreements ("ASAs"), including, but not limited to:
administrative functions such as office management, bookkeeping, and accounting; preparing marketing and promotion materials; providing office space, computer equipment, and systems support; and leasing administrative and professional staff. Services are performed in exchange for a fee. Fees earned by CBIZ under the ASAs are recorded as revenue in the accompanying consolidated statements of operations and were approximately $21.9 million and $20.7 million for the three months ended June 30, 2009, and 2008, respectively, a majority of which is related to services rendered to privately-held clients. Typically, in the event that accounts receivable and unbilled work in process become uncollectible by the CPA firms, the service fee due to CBIZ is reduced on a pro rata basis. The ASAs have terms ranging up to eighteen years, are renewable upon agreement by both parties, and have certain rights of extension and termination. The largest components of operating expenses for the Financial Services group are personnel costs, occupancy costs, and travel related expenses which represented 87.4% and 89.3% of total operating expenses for the three months ended June 30, 2009 and 2008, respectively. Personnel costs increased $12.9 million for the three months ended June 30, 2009 compared to the same period in the prior year. The overall increase was driven by a $15.3 million increase in costs associated with the December 31, 2008 acquisitions, and was partially offset by same-unit personnel cost reductions of $2.4 million. Those reductions were attributable to reduced staffing levels in some locations that experienced reduced client demands, partially offset by higher severance costs of $0.8 million. Occupancy costs increased by $1.7 million to 6.3% of revenue for the three months ended June 30, 2009 versus 5.6% of revenue for the comparable period in 2008. The increase in occupancy costs related

to the acquired businesses and several office relocations which were completed subsequent to the second quarter of 2008. Travel related expenses decreased to 2.4% of revenue for the three months ended June 30, 2009 from 3.6% of revenue for the comparable period of 2008, primarily as a result of CBIZ's cost-control efforts.
The decline in gross margin percentage was primarily attributable to an increase in amortization expense related to intangible assets associated with the December 31, 2008 acquisitions of Mahoney Cohen & Company and Tofias PC. In addition, bad debt expense increased to 2.2% of revenue for the three months ended June 30, 2009 from 1.5% of revenue for the comparable period in 2008. The increase in bad debt expense was not related to an overall deterioration in the collectability of accounts receivable, but rather related to specific client receivables.
Employee Services

                                            THREE MONTHS ENDED JUNE 30,
                                                                $            %
                                    2009          2008        Change      Change
                                        (In thousands, except percentages)
           Revenue
           Same-unit              $  42,515     $ 46,356     $ (3,841 )      (8.3 )%
           Divested operations            -          951         (951 )

           Total revenue          $  42,515     $ 47,307     $ (4,792 )     (10.1 )%

           Operating expenses        35,358       38,989       (3,631 )      (9.3 )%

           Gross margin           $   7,157     $  8,318     $ (1,161 )     (14.0 )%


           Gross margin percent        16.8 %       17.6 %

The decrease in same-unit revenue was primarily caused by three factors:
(1) reductions in revenue of approximately $1.2 million in the retirement and advisory businesses whose revenues are aligned with the underlying asset valuations; (2) a decrease of approximately $0.3 million in same-unit payroll revenue primarily as a result of the decline in interest rates which negatively affected the investment income earned on payroll funds held on behalf of clients; and (3) a decrease of approximately $1.2 million in same-unit human resources revenue due to lower client demand for recruiting and other consulting services. In addition, group health and property and casualty same-unit revenues declined for the three months ended June 30, 2009. Group health revenue for the three months ended June 30, 2009 declined approximately 1.7% versus the comparable period in 2008 due the impact of higher rates of unemployment. Property and casualty revenue decreased 3.0% for the three months ended June 30, 2009 versus the comparable period in 2008 due to soft market conditions in pricing. The decline in revenue from divested businesses relates to the sale of a specialty retirement investment advisory operation in Atlanta, Georgia which occurred in the third quarter of 2008. The largest components of operating expenses for the Employee Services group are personnel costs, including commissions paid to third party brokers, and occupancy costs, representing 83.1% and 82.4% of total operating expenses for the second quarter of 2009 and 2008, respectively. Personnel costs decreased $2.6 million, but increased as a percentage of revenue to 63.6% for the second quarter of 2009 from 62.6% for the comparable period in 2008. Approximately $0.5 million of the decline related to the divestiture of the aforementioned business. The increase in personnel costs as a percentage of revenue was primarily attributable to annual merit increases coupled with a decline in revenues at the aforementioned businesses which have a predominantly fixed compensation structure. Occupancy costs are relatively fixed in nature and decreased $0.1 million for the second quarter of 2009 versus the same period in 2008. The decline in gross margin was primarily attributable to lower asset values and interest rates which resulted in the previously mentioned revenue decline. As asset based and investment revenues do not have related direct costs, changes in those revenue sources can have a significant impact on gross margin.

Medical Management Professionals

                                            THREE MONTHS ENDED JUNE 30,
                                                                $            %
                                    2009          2008        Change      Change
                                        (In thousands, except percentages)

           Same-unit revenue      $  41,874     $ 41,899     $    (25 )      (0.1 )%

           Operating expenses        35,271       36,368       (1,097 )      (3.0 )%

           Gross margin           $   6,603     $  5,531     $  1,072        19.4 %


           Gross margin percent        15.8 %       13.2 %

Same-unit revenue decreased 0.1% for the second quarter of 2009 versus the comparable period in 2008 due to an approximate 2.3% increase attributable to existing clients offset by a 2.4% decline in revenue attributable to client terminations, net of new business sold. Revenue from existing clients grew by approximately 4.6% as a result of an increase in volume, mix of medical specialties and reimbursement rates. The growth was offset by a decline in pricing on existing clients of approximately 2.3% resulting in a net increase in existing client revenue of approximately 2.3%. The decline in revenue from client terminations, net of new business sold, relates to an increase in lost business attributable to various reasons, including physician groups losing their hospital contracts and hospital consolidations.
The largest components of operating expenses for MMP are personnel costs, professional service fees (primarily fees related to outside services for off-shore and electronic claims processing), occupancy costs and office expenses (primarily postage related to statement mailing services), representing 87.2% and 86.1% of total operating expenses for the second quarters of 2009 and 2008, respectively. Personnel costs decreased $0.6 million to 54.6% of revenue for the second quarter of 2009 from 55.9% of revenue for the comparable period in 2008, but was partially offset by an increase in professional service fees of $0.4 million. MMP has reduced headcount and related personnel costs with their expanded utilization of off-shore processing. The reductions in headcount and personnel costs in billing operations were partially offset by annual merit increases and some increases in internal support personnel necessary to manage process improvements and centralization efforts. Office expenses decreased to 7.9% of revenue for the second quarter of 2009 versus 8.3% for the comparable period of 2008, primarily as the result of a change in the frequency of statement mailing. Occupancy costs decreased $0.2 million to 6.3% of revenue in the second quarter of 2009 from 6.6% of revenue in the second quarter of 2008 primarily due to lower office rent costs due to office consolidations. MMP has taken various actions to maintain gross margin, including the utilization of off-shore processing and other cost-control measures. These cost-control measures have resulted in declines in various expenses for the second quarter of 2009 versus the comparable period in 2008, including postage and travel. However, the Company expects that margins for the full year 2009 will be comparable to those reported for the full year 2008.

National Practices

                                            THREE MONTHS ENDED JUNE 30,
                                                                 $           %
                                     2009          2008       Change      Change
                                        (In thousands, except percentages)

           Same-unit revenue      $   10,545     $ 11,028     $  (483 )      (4.4 )%
           Operating expenses         10,128       10,262        (134 )      (1.3 )%

           Gross margin           $      417     $    766     $  (349 )     (45.6 )%


           Gross margin percent          4.0 %        6.9 %

The decrease in revenue was primarily due to lower service and service agreement fees of approximately $0.7 million, offset by an increase in product revenues of approximately $0.3 million. Most of the decrease in the service related fees occurred in the technology businesses as clients have deferred capital investments in systems projects due to the current economic environment. The increase in product revenues resulted from a few large sales of hardware equipment that closed during the quarter.
The largest components of operating expenses for the National Practices group are personnel costs, direct costs and occupancy costs, which collectively represented 93.3% and 92.9% of total operating expenses for the three months ended June 30, 2009 and 2008, respectively. Personnel costs remained at 71.4% of revenue for the three months ended June 30, 2009 and 2008, but decreased $0.3 million for the three months ended June 30, 2009 versus the comparable period in 2008. The decrease in personnel costs relates to a reduction in staffing during the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Direct costs relating to the technology businesses consist of product costs, sales commissions and third party labor. Direct costs increased as a percentage of revenue by 3.1%, primarily due to a change in revenue mix more heavily weighted with product sales during the three months ended June 30, 2009 versus the comparable period in 2008. Occupancy costs are relatively fixed in nature and were $0.3 million for the three months ended June 30, 2009 and 2008.
The decline in gross margin relates to the Company's decision to maintain the . . .