What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-26 compared with 2020-02-26 · 498 added, 387 removed, 1157 unchanged (43% of the section changed)

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Management’s Report on Internal Control Over Financial Reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision of management, including our CEO and CFO, we conducted an evaluation of our internal control over financial reporting based on the framework provided in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework).

Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2020.

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No arrangement or understanding exists between any executive officer of CBIZ and any other person pursuant to which he or she was selected as an officer.

Name Age Position(s)

Executive Officers and Directors:

59 President & Chief Executive Officer, Director

Burdick (1)(3)(4)

69 Lead Director and Vice Chairman

DiMartino (3)(4)

France (2)(3)

Hudson (2)(4)

Slotkin (2)(4)

Haag Sherman (2)

Benaree Pratt Wiley (3)(4)

Senior Vice President and Chief Financial Officer

President, Financial Services

President, Benefits and Insurance Services

Grove 70 Senior Vice President and Chief Financial Officer

Chris Spurio 55 President, Financial Services

Kouzelos 52 President, Benefits and Insurance Services

Other Key Employees:

Chief Operating Officer, Financial Services

Secretary and General Counsel

Senior Vice President and Chief Information Officer

Senior Vice President and Chief Marketing Officer

Senior Vice President and Chief Human Resources Officer

Vice President, Tax

Mills 65 Chief Operating Officer, Financial Services

Gleespen 62 Secretary and General Counsel

Fleischer 59 Senior Vice President and Chief Information Officer

Waxman 62 Senior Vice President and Chief Marketing Officer

Kowalski 60 Vice President, Tax

Sobe 53 Treasurer

Noftsinger 50 Vice President of Finance and Corporate Controller

(1) Member of Executive Management Committee

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(3) Member of Nominating & Governance Committee

Member of Compensation Committee

(4) Member of Compensation & Human Capital Committee

Gerard was elected by the Board to serve as its Chairman in October 2002.

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board from January 2003 until April 2015.

Hudson is also Chairman of the Florida Chapter of the National Association of Corporate Directors.

Hudson is also Chairman Emeritus of the Florida Chapter of the National Association of Corporate Directors.

Hudson retired from Deloitte & Touche, LLP in August 2002, after 37 years of service.

Slotkin has served as a Director of CBIZ since September 2003, when he was elected as an independent director.

Slotkin has served since 2014 as the Global Business Head of Alvarez & Marsal’s Asset Management Services.

Slotkin is President & COO of KMP Music LLC, a music publishing firm.

He is also currently a Senior Advisor at Alvarez & Marsal, and between 2014 and 2020 he served as the Global Business Head of Alvarez &

Marsal’s Asset Management Services.

Slotkin is also an independent director of the Apollo Closed End Fund Complex (Apollo Floating Rate Fund, Apollo Tactical Income Fund).

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Slotkin is a co-founder of the Food Allergy Research & Education, Inc., formerly known as the Food Allergy Initiative.

Weir has served as a Director of CBIZ since September 2003, when he was elected as an independent director.

Weir is Vice President of Private Equity for Sanders Morris Harris Group Inc.

(“SMHG”) and has been with SMHG for the past fifteen years.

Prior to this Mr.

Weir was Chief Financial Officer and director of publicly-held Deeptech International Inc.

and two of its subsidiaries, Tatham Offshore, Inc.

and Leviathan Gas Pipeline Company, both of which were publicly-held companies.

Prior to his employment with Deeptech, Mr.

Weir worked for eight years with Sugar Bowl Gas Corporation, as Controller and Treasurer and later in a consulting capacity.

Weir was associated with Price Waterhouse, an international accounting firm, from 1966 to 1979.

Haag Sherman has served as a Director of CBIZ since August 2020, when he was elected as an independent director.

Sherman has served as the Chief Executive Officer and a director of Tectonic Financial, Inc.

(and its predecessor), a banking and financial holding company, since February 2015.

Prior thereto, Mr.

Sherman co-founded Salient Partners, LP, a Huston-based investment firm, in 2002 and served in various executive positions, including Chief Executive Officer and Chief Investment Officer, through October 2011.

In addition, he previously served as an executive officer and partner of The Redstone Companies from 1998 to 2002 where he, among other things, managed a private equity portfolio.

Sherman has served as a director of Hilltop Holdings, Inc.

since its acquisition of PlainsCapital Corporation in November 2012.

He previously served as a director of PlainsCapital from September 2009 to November 2012.

He previously served as a member of the board of directors of Salient MLP & Energy Infrastructure Fund, Blue Dolphin Energy Company, Miller Energy Resources, Inc.

and ZaZa Energy Corp.

Sherman has served as an adjunct professor of law at The University of Texas School of Law.

Sherman previously practiced corporate law at Akin Gump Strauss Hauer & Feld LLP from 1992 to 1996 and was an auditor at Price Waterhouse, a public accounting firm, from 1988 to 1989.

Sherman is an attorney and certified public accountant.

Benaree Pratt Wiley has served as a Director of CBIZ since May 2008, when she was elected as an independent director.

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He was appointed President of the Benefits & Insurance practice group in May 2015, and was appointed Senior Vice President of Strategic Initiatives in September 2005.

Kouzelos also served as the Chief Operating Officer of the Benefits & Insurance division between April 2007 and May 2015, as Vice President of Strategic Initiatives from April 2001 through August 2005, as Vice President of Shared Services from August 2000 to March 2001, and as Director of Business Integration from June 1998 to July 2000.

Kouzelos also served as the Chief Operating Officer of the Benefits &

Insurance division between April 2007 and May 2015, as Vice President of Strategic Initiatives from April 2001 through August 2005, as Vice President of Shared Services from August 2000 to March 2001, and as Director of Business Integration from June 1998 to July 2000.

Kouzelos was associated with KPMG LLP, an international accounting firm, from 1990 to September 1996 and received his Master of Business Administration degree from The Ohio State University in May of 1998.

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He has served as the Chairman of the Board for organizations including the Silicon Valley Chamber of Commerce, Artsopolis.com, the Silicon Valley Ad Club, and The San Jose Repertory Theatre.

Bur has been responsible for the Human Resources function at CBIZ since 1999 when she was appointed Vice President of Human Resources.

Her role was elevated in 2006 when she was appointed Senior Vice President and again in 2014 when she was appointed Chief Human Resources Officer.

From 1995 to 1999 Ms.

Bur served as Director of Human Resources for Robert D.

O’Byrne & Associates, Inc.

and The Grant Nelson Group, Inc., subsidiaries of CBIZ now known as CBIZ Benefits and Insurance Services, Inc.

Bur served as an Executive Board member of CBIZ Women’s Advantage from 2006-2014 where she chaired the Professional Development committee.

Bur has over 25 years of experience in human resources, is an active member of the Society of Human Resources Management, and is certified as a SPHR and SHRM — SCP.

Kowalski joined CBIZ in December 2003 as Corporate Tax Manager and was appointed Vice President — Tax in April 2008.

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Sobe held various financial and accounting positions with companies representing a variety of industries, including Associated Materials, LLC, Jo-Ann Stores, LLC, Revco D.S., Inc., and Ernst & Young, LLP.

Sobe is a CPA (inactive), and she received a Master of Business Administration from Case Western Reserve University in May 2000.

Sobe is a CPA (inactive), and she received a

Master of Business Administration from Case Western Reserve University in May 2000.

Sobe is a member of the American Institute of Certified Public Accountants and the Association for Financial Professionals.

Dambrosio joined CBIZ in September 2012 as Controller.

Prior to joining CBIZ, Mr.

Dambrosio served as Controller and Executive Director of Financial Planning and Analysis for American Greetings Corporation’s North American Greeting Card Division from January 2004 through February 2012.

Prior to joining American Greetings Corporation, Mr.

Dambrosio was Corporate Controller for LESCO, Inc.

from December 2000 through January 2004.

Since beginning his career in 1979, Mr.

Dambrosio has held various financial and accounting positions with companies representing a variety of industries, including American Greetings.COM, Picker International, Inc., Medusa Corporation and NACCO Industries, Inc.

Dambrosio is a CPA and a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants.

Noftsinger was appointed Vice President of Finance and Corporate Controller for CBIZ in March 2020.

Prior to his current role, Mr.

Noftsinger has served in various leadership positions within CBIZ organizations, particularly as President of CBIZ's Employee Service Organization and President of CBIZ Payroll.

Noftsinger also created the CBIZ Small Business Employment Index, which is a metric designed to gauge hiring in companies with less than 300 employees across the United States.

Noftsinger can be seen on Fox Business, CNBC and Bloomberg on occasion to discuss the state of small business hiring and employment.

His comments on the state of small businesses have also been carried in multiple print and web outlets including Smart Money, Accounting Today and The Wall Street Journal.

Prior to joining CBIZ in September of 2004, Mr.

Noftsinger was controller of Fortegra, Incorporated, a highly specialized IT consultation and integration firm in the energy and health-care industries.

Noftsinger is a CPA and a member of the American Institute of Certified Public Accountants.

EXECUTIVE COMPENSATION.

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Information with respect to this item is incorporated by reference from our Definitive Proxy Statement for the 2021 Annual Stockholders’ Meeting to be filed with the SEC no later than 120 days after the end of our fiscal year.

The following documents are filed as part of this Annual Report or incorporated by reference:

(a) The following documents are filed as part of this Annual Report or incorporated by reference:

Financial Statements.

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000-333-62148, dated June 1, 2001, and incorporated herein by reference).

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.3 to the Company's Annual Report Form 10-K for the year ended December 31, 2019, File No.

001-32961, dated February 26, 2020, and incorporated herein by reference).

2002 Stock Incentive Plan (filed as Appendix A to the Company’s Proxy Statement for the 2002 Annual Meeting of Stockholders, File No.

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333-197284, and incorporated herein by reference).

First Amendment to Loan Agreement by and among CBIZ Benefit and Insurance, Inc.

and the Huntington National Bank (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, File No.

001-32961, on November 1, 2019, and incorporated herein by reference).

Second Amendment to Loan Agreement by and among CBIZ Benefit and Insurance, Inc.

and the Huntington National Bank (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, File No.

001-32961, on November 1, 2020, and incorporated herein by reference).

List of Subsidiaries of CBIZ, Inc.

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XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*

Inline XBRL Taxonomy Extension Schema Document*

Inline XBRL Taxonomy Extension Definition Linkbase Document*

Inline XBRL Taxonomy Extension Calculation Linkbase Document*

Inline XBRL Taxonomy Extension Label Linkbase Document*

Inline XBRL Taxonomy Extension Presentation Linkbase Document*

101.SCH Inline XBRL Taxonomy Extension Schema Document*

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document*

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document*

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)*

______________________________________________________

* Indicates documents filed herewith.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

By /s/ WARE H.

Chief Financial Officer

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Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated above.

Signature Title Date

/s/ JEROME P.

President & Chief Executive Officer, Director

(Principal Executive Officer)

February 26, 2020

Chief Financial Officer

(Principal Financial and Accounting Officer)

February 26, 2020

(Principal Executive Officer) February 26, 2021

GROVE Chief Financial Officer

(Principal Financial and Accounting Officer) February 26, 2021

/s/ STEVEN L.

February 26, 2020

Lead Director

February 26, 2020

GERARD Chairman February 26, 2021

BURDICK Lead Director and Vice Chairman February 26, 2021

/s/ MICHAEL H.

February 26, 2020

DE GROOTE Director February 26, 2021

/s/ JOSEPH S.

February 26, 2020

DI MARTINO Director February 26, 2021

FRANCE Director February 26, 2021

/s/ SHERRILL W.

February 26, 2020

/s/ DONALD V.

February 26, 2020

/s/ BENAREE PRATT WILEY

February 26, 2020

HUDSON Director February 26, 2021

SLOTKIN Director February 26, 2021

HAAG SHERMAN Director February 26, 2021

A.Haag Sherman

/s/ BENAREE PRATT WILEY Director February 26, 2021

Benaree Pratt Wiley

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases effective January 1, 2019 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842, Leases .

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue recognition effective January 1, 2018 due to the adoption of FASB ASC Topic 606, Revenue from Contracts with Customers .

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases .

Basis for Opinions

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of losses related to billed and unbilled receivables

Evaluation of the estimation of losses for certain billed and unbilled receivables

As discussed in Note 1 to the consolidated financial statements, the Company maintains allowances for doubtful accounts and unbilled services for estimated losses.

As of December 31, 2020, the allowance for doubtful accounts was $14.9 million, or 6.4% of total accounts receivable.

The allowance for doubtful accounts and unbilled services is recorded based on the Company’s historical bad debts, client credit-worthiness, the age of accounts receivable, and economic trends and conditions.

We have identified the evaluation of the Company’s estimation of losses related specifically to the Financial Services practice for billed and unbilled receivables as a critical audit matter.

There is a high degree of subjectivity in assessing the assumptions, which are used in estimating losses related to billed and unbilled receivables including the probability of the Company’s collection of receivables based on historical experience, the consideration of economic conditions that may affect the ability of clients to pay billed and unbilled fees, and the Company’s ability to successfully execute the contracts in line with the current estimated level of effort.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s process to develop the assumptions used to estimate losses related to billed and unbilled receivables.

For specific clients, we inquired of relevant Company personnel to evaluate the rationale for establishing an allowance for doubtful accounts and unbilled services.

We evaluated the Company’s cash collections and billings subsequent to December 31, 2019.

We obtained and inspected relevant underlying documentation, including contractual documents, historical trends, age of accounts receivable and realization analyses to assess the Company’s loss estimation rationale.

We performed the following analyses over billed and unbilled receivables and related accounts to identify and address evidence that might be contrary to assumptions used by the Company:

The allowance for doubtful accounts and unbilled services is recorded based on the Company’s historical experience, client credit-worthiness, the age of accounts receivable, and economic trends and conditions.

We have identified the evaluation of the Company’s estimation of losses related to the Financial Services practice for billed and unbilled receivables as a critical audit matter.

There is a high degree of subjectivity in assessing the assumptions, which are used in estimating losses related to billed and unbilled receivables.

The assumptions include the probability of the Company’s collection of receivables based on historical experience, the consideration of economic conditions that may affect the ability of clients to pay billed and unbilled fees, and the Company’s ability to successfully execute the contracts in line with the current estimated level of effort.

The following are the primary procedures we performed to address the critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to develop the assumptions used to estimate losses related to billed and unbilled receivables.

For specific clients, we evaluated the established allowance for doubtful accounts and unbilled services by inquiring of relevant Company personnel.

For a selection of clients, we evaluated the Company’s cash collections and billings subsequent to December 31, 2020.

We assessed the Company’s loss estimation by inspecting relevant underlying documentation, including contractual documents, historical trends, age of accounts receivable, and contract realization analyses.

We performed the following analyses over billed and unbilled receivables and related accounts:

• Compared actual incurred bad debt for certain billed and unbilled receivables to the corresponding previously established allowance for doubtful accounts and unbilled services, and

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Total non-current assets 1,077,323 944,754

Total assets $ 1,513,754 $ 1,400,774

Current liabilities:

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Non-current liabilities:

Bank debt 108,000 105,500

Debt issuance costs ( 808 ) ( 1,167 )

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shares authorized 250,000 ;

issued 133,056 and 131,404 ;

shares issued 134,144 and 133,056 ;

shares outstanding 54,099 and 55,419

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Treasury stock, 80,045 and 77,637 shares

( 595,297 ) ( 535,693 )

Accumulated other comprehensive loss ( 2,269 ) ( 680 )

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(In thousands, except per share data)

2020 2019 2018

Revenue $ 963,897 $ 948,424 $ 922,003

Operating expenses 825,351 823,496 790,283

Gross margin 138,546 124,928 131,720

Corporate general and administrative expenses 46,066 44,406 39,173

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Interest expense ( 4,983 ) ( 5,765 ) ( 6,645 )

Gain on sale of operations, net

(Loss) gain on sale of operations, net ( 509 ) 417 1,025

Other income (expense), net 16,500 17,715 ( 7,087 )

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Loss from operations of discontinued operations, net of tax ( 48 ) ( 335 ) ( 3 )

Net income $ 78,299 $ 70,714 $ 61,570

Earnings (loss) per share:

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Discontinued operations — ( 0.01 ) —

Net income $ 1.44 $ 1.30 $ 1.13

Continuing operations $ 1.42 $ 1.27 $ 1.09

Discontinued operations ( 0.01 ) ( 0.01 ) —

Net income $ 1.41 $ 1.26 $ 1.09

Basic weighted average common shares outstanding 54,288 54,299 54,561

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Comprehensive income:

Net income $ 78,299 $ 70,714 $ 61,570

Other comprehensive income:

Net unrealized gain(loss) on available-for-sale securities, net of income

tax expense (benefit) of $ 351 , $( 96 ) and $( 16 )

Net unrealized gain (loss) on interest rate swaps, net of income

tax expense (benefit) of $( 380 ), $( 8 ) and $ 107

Net unrealized (loss) gain on available-for-sale securities, net of income tax (benefit) expense of $( 14 ), $ 351 and $( 96 )

( 42 ) 940 ( 259 )

Net unrealized (loss) on interest rate swaps, net of income tax (benefit) of $( 494 ), $( 380 ) and $( 8 )

( 1,525 ) ( 1,222 ) ( 17 )

Foreign currency translation ( 22 ) ( 17 ) ( 24 )

Total other comprehensive (loss) income

Total other comprehensive loss ( 1,589 ) ( 299 ) ( 300 )

Total comprehensive income $ 76,710 $ 70,415 $ 61,270

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(In thousands)

Shares Treasury

Shares Common

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

December 31, 2017 130,075 75,484 $ 1,301 $ 675,504 $ 345,302 $ ( 491,046 ) $ ( 182 ) $ 530,879

Other comprehensive income

Cumulative-effect adjustment — — — — 2,091 — — 2,091

Adjusted balance at January 1, 2018 130,075 75,484 1,301 675,504 347,393 ( 491,046 ) ( 182 ) 532,970

Net income — — — — 61,570 — — 61,570

Other comprehensive loss — — — — — — ( 300 ) ( 300 )

Share repurchases — 848 — — — ( 17,484 ) — ( 17,484 )

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Cumulative-effect adjustment ( 101 ) 101 —

Adjusted balance at January 1, 2018

Other comprehensive income

Net income — — — — 70,714 — — 70,714

Other comprehensive loss — — — — — — ( 299 ) ( 299 )

Share repurchases — 1,305 — — — ( 27,163 ) — ( 27,163 )

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December 31, 2019 133,056 77,637 1,331 714,704 479,576 ( 535,693 ) ( 680 ) 659,238

Cumulative-effect of accounting changes adjustment (Note 1)

Net income — — — — 78,299 — — 78,299

Other comprehensive loss — — — — — — ( 1,589 ) ( 1,589 )

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(In thousands)

2020 2019 2018

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating

Net income $ 78,299 $ 70,714 $ 61,570

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on sale of operations, net of tax 509 ( 417 ) ( 1,025 )

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Excess tax benefits from share based payment arrangements ( 2,394 ) ( 4,773 ) ( 3,260 )

Other, net 485 1,077 400

Changes in assets and liabilities, net of acquisitions and divestitures:

Accounts receivable, net 6,714 ( 15,529 ) ( 10,668 )

Other assets 1,472 907 ( 3,344 )

Accounts payable ( 8,800 ) 9,829 974

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Net cash provided by continuing operations 146,916 98,523 105,432

Operating cash flows (used in) provided by discontinued operations

Operating cash flows used in discontinued operations ( 71 ) ( 338 ) ( 184 )

Net cash provided by operating activities 146,845 98,185 105,248

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Additions to property and equipment ( 11,576 ) ( 13,873 ) ( 14,624 )

Other, net 2,560 1,190 2,316

Net cash used in investing activities ( 46,406 ) ( 27,685 ) ( 47,576 )

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Proceeds from exercise of stock options 6,486 10,608 6,291

Other, net ( 453 ) ( 606 ) ( 1,891 )

Net cash used in financing activities ( 76,609 ) ( 54,549 ) ( 109,380 )

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash 23,830 15,951 ( 51,708 )

Cash, cash equivalents and restricted cash at beginning of year 146,505 130,554 182,262

Cash, cash equivalents and restricted cash at end of year $ 170,335 $ 146,505 $ 130,554

Reconciliation of cash, cash equivalents and restricted cash to the

Consolidated Balance Sheets

Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets

Cash and cash equivalents $ 4,652 $ 567 $ 640

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ASU - Accounting Standards Update.

CECL - Current expected credit losses.

CPA firm - Certified Public Accounting firm.

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New Lease Standard - ASC Topic 842, Leases

ROU- Right of Use.

SEC - United States Securities & Exchange Commission.

Tax Act - Tax Cuts and Jobs Act of 2017.

Topic 326 - ASU No.

2018-02, Income Statement – Reporting Comprehensive Income.

Topic 606 – ASC Topic 606, Revenue from Contracts with Customers.

Topic 815 - ASU No.

2017-12, Derivatives and Hedging.

2016-13, Financial Instruments - Credit Losses.

Organization - CBIZ, Inc.

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Fees earned by us under the ASAs are recorded at net realizable value as a component of “Revenue” in the accompanying Consolidated Statements of Comprehensive Income and were approximately $ 159.4 million, $ 157.6 million and $ 154.0 million for the years ended December 31, 2020, 2019 and 2018, respectively, the majority of which was related to services rendered to privately-held clients.

In the event that accounts receivable and unbilled work in process become uncollectible by the CPA firms, the service fee due to us is typically reduced on a proportional basis.

Although the ASAs do not constitute control, we are one of the beneficiaries of the agreements and may bear certain economic risks.

Refer to Note 17, Related Parties, for further discussion regarding the ASAs.

In the event that accounts receivable and unbilled work in process become uncollectible by the CPA firms, the service fee due to us is typically reduced on a

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

proportional basis.

Although the ASAs do not constitute control, we are one of the beneficiaries of the agreements and may bear certain economic risks.

Refer to Note 17, Related Parties, for further discussion regarding the ASAs.

Significant Accounting Policies - We consider the following policies to be beneficial in understanding the judgments that are involved in the preparation of our consolidated financial statements and the uncertainties that could impact our financial condition, results of operations and cash flows.

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Actual results may differ materially from these estimates.

Revenue Recognition - We account for revenue in accordance with Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018 using the modified retrospective transition method.

Revenue Recognition - We account for revenue in accordance with Topic 606, Revenue from Contracts with Customers.

We recognize revenue based on the five-step model;

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(iv) allocate the transaction price;

and (v) recognize revenue (or as) each performance obligation is satisfied.

and (v) recognize revenue as each performance obligation is satisfied.

If we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met.

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The grant date fair value of stock options is based on the Black-Scholes-Merton pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate and the expected dividend yield.

The grant date fair value of restricted stock is based on the closing price of the underlying stock on the date of issuance.

The grant date fair value of restricted stock and restricted stock unit is based on the closing price of the underlying stock on the date of issuance.

The grant date fair value of the performance share unit is based on the closing price of the underlying stock on the date of issuance and recorded based on achievement of target performance metrics.

The expense related to stock options and restricted stocks is recognized over the requisite service period which is generally three to four years .

The expense related to stock options, restricted stock, and restricted stock units is recognized over the requisite service period which is generally three to four years .

The expense related to performance share units is recorded over the three-year performance period based on the fair value on the grant date and adjusted each reporting period for the achievement of the performance metrics, based on our best estimate using available information.

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For additional discussion regarding share-based awards, refer to Note 14, Employee Share Plans, to the accompanying consolidated financial statements.

Operating Leases – We have leases for our office space and facilities, automobiles, and certain information technology equipment.

Operating Leases – We determine if a contract is a lease at inception.

We have leases for office space and facilities, automobiles, and certain information technology equipment.

Certain of these leases include options to extend the lease and some include options to terminate the lease early.

Effective January 1, 2019, we adopted the New Lease Standard using the modified retrospective method of applying the new standard at the adoption date.

Under the New Lease Standard, all of our existing leases are classified as operating leases.

The adoption of the New Lease Standard resulted in recording of the right of use (“ROU”) assets and the corresponding lease liabilities associated with our leases.

Under the New Lease Standard, all of our leases are classified as operating leases and the majority of which are for office space and facilities.

The ROU assets and lease liabilities are recognized as of the commencement date based on the present value of the lease payments over the lease term.

The lease term may include the options to extend or terminate the lease when it is reasonably certain that we will exercise the applicable option.

Related rent expense under such leases is recognized evenly throughout the term of the lease when the total lease commitment is a known amount, and recorded on an as incurred basis when future rent payment increases under the obligation are unknown due to rent escalations being tied to factors that are not currently measurable (such as increases in the consumer price index).

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

unknown due to rent escalations being tied to factors that are not currently measurable (such as increases in the consumer price index).

Differences between rent expense recognized and the cash payments required under these leases are recorded as a component of “Operating lease liability” in the Non-current liabilities section of the accompanying Consolidated Balance Sheets.

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Such incentives are recorded as a change in lease payments and may require us to remeasure the lease liability to reflect the change in lease payments.

For further information on the adoption of New Lease Standard, refer to “Accounting Standards Adopted in 2019” section of this Note.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Cash and Cash Equivalents - Cash and cash equivalents consist of cash on hand and investments with an original maturity of three months or less when purchased.

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Depreciation and amortization are provided on a straight-line basis over the following estimated useful lives:

25 to 40 years

Furniture and fixtures

5 to 10 years

Capitalized software

Buildings 25 to 40 years

Furniture and fixtures 5 to 10 years

Capitalized software 2 to 7 years

Equipment 3 to 7 years

Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the remaining respective lease term.

The cost of software purchased or developed for internal use is capitalized and amortized using the straight-line method over an estimated useful life not to exceed seven years .

We periodically review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable.

We periodically review long-lived assets for impairment whenever events or changes in business circumstances

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

indicate that the carrying value of the assets may not be recoverable.

Under those circumstances, if the fair value were less than the carrying amount of the asset, we would recognize a loss for the difference.

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We carry client lists and non-compete agreements at cost, less accumulated amortization, in the accompanying Consolidated Balance Sheets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Goodwill is reviewed for impairment annually during the fourth quarter or more frequently in the event of an impairment indicator.

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We record a liability to the extent that a tax position taken or expected to be taken on a tax return exceeds the amount recognized in the consolidated financial statements.

Business Combinations - We recognize and measure identifiable assets acquired and liabilities assumed as of the acquisition date at fair value.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Business Combinations - We recognize and measure identifiable tangible and intangible assets acquired and liabilities assumed as of the acquisition date at fair value.

Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets.

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The purchase price is equivalent to the fair value of consideration transferred.

Tangible and identifiable intangible assets acquired and liabilities assumed as of the date of acquisition are recorded at fair value as of the acquisition date.

Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Contingent Purchase Price Liabilities - Contingent purchase price liabilities consisting of cash payments and common stock issuances result from our business acquisitions and are recorded at fair value at the time of acquisition as “Contingent purchase price liability - current” and “Contingent purchase price liability - non-current” in the accompanying Consolidated Balance Sheets.

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Any change in the fair value estimate, including the revaluation of common stock, is recorded in the earnings of that period.

For the years ended December 31, 2019, 2018 and 2017, we recorded other (expense) income of ($ 1.6 ) million, ($ 2.6 ) million and $ 1.5 million, respectively, related to net changes in the fair value of contingent consideration.

Refer to Note 7, Fair Value Measurements, and Note 18, Acquisitions, for further discussion of our contingent purchase price liabilities and acquisitions.

For the years ended December 31, 2020, 2019 and 2018, we recorded other income (expense) of $ 0.6 million, ($ 1.6 ) million and $( 2.6 ) million, respectively, related to net changes in the fair value of contingent consideration.

Refer to Note 7, Fair Value Measurements, and Note 18, Business Combinations, for further discussion of our contingent purchase price liabilities and acquisitions.

Interest Rate Derivative Instruments - We maintain interest rate swaps that are designated as cash flow hedges to manage the market risk from changes in interest rates on our floating-rate debt under our $ 400.0 million unsecured credit facility, by and among CBIZ Operations, Inc., CBIZ, Inc.

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Accounting Standards Adopted in 2020

Effective January 1, 2019, we adopted the New Lease Standard using the modified retrospective method of applying the new standard at the adoption date.

We elected the package of practical expedients permitted under the transition guidance which allowed us to carry forward historical lease classifications.

The adoption of the New Lease Standard had a significant impact on our consolidated balance sheets and resulted in the recording of the operating lease ROU assets and corresponding operating lease liabilities.

The consolidated balance sheet prior to January 1, 2019 was not restated and continues to be reported under the Legacy ASC Topic 840, which did not require the recognition of operating lease ROU assets and liabilities.

The expense recognition for operating leases and finance leases under the New Lease Standard is consistent with the Legacy ASC Topic 840, therefore, as a result, there is no significant impact on our results of operations, liquidity or debt covenant compliance under our current credit agreements.

Credit Losses:

Effective January 1, 2020, we adopted Topic 326, which replaces the incurred loss model with an expected loss model that is referred to as the current expected credit loss model.

The CECL model requires the Company to immediately recognize an estimate of credit losses that are expected to occur over the life of financial instruments recorded at amortized cost, including trade receivables.

Topic 326 also amends the other-than-temporary impairment model for available-for-sale securities by requiring the recognition of credit loss impairments as an allowance rather than a write-down on available-for-sale securities.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

The following table presents the impact of adopting the New Lease Standard on our consolidated balance sheet.

Operating lease right-of-use asset, net

Operating lease liability - current

Total current liabilities

Operating lease liability - non-current

Total non-current liabilities

Total liabilities and stockholders' equity

Office facility leases generally account for approximately 96 % of our total lease liability.

The lease liability for our office facilities is based on the present value of the remaining minimum lease payments, discounted utilizing our secured incremental borrowing rate at the effective date of January 1, 2019.

We also have other leases that consist primarily of information technology equipment and automobiles.

The present value of the lease liability associated with other leases are measured based on the discounted remaining minimum lease payments at the effective date of January 1, 2019.

The Company has elected not to separate lease and non-lease components and elected the practical expedient to exclude short-term leases at adoption.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income:

On January 1, 2019, we adopted Topic 220 which provides the optional election for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act.

The adoption of Topic 220 resulted in a reclassification between accumulated other comprehensive loss and retained earnings of $ 0.1 million, and had no impact on our consolidated financial position or results of operations.

Derivatives and Hedging:

On January 1, 2019, we adopted Topic 815 which improved and simplified accounting rules for hedge accounting to better present the economic results of an entity’s risk management activities in its financial statements and improves the disclosures of hedging arrangements.

The adoption of Topic 815 did not have a material impact on our consolidated financial position or results of operations.

Internal-Use Software:

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those of developing or obtaining internal-use software.

This standard is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted.

We early adopted this guidance on January 1, 2019 and the impact of adoption on our consolidated financial position and results of operations was not material.

Accounting Standards Issued But Not Yet Adopted

length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

For financial instruments recorded at amortized cost, we did not recognize a cumulative-effect adjustment to retained earnings as the adoption of Topic 326 did not have a material impact on our consolidated financial statements.

For available-for-sale securities, the updated guidance was applied prospectively.

Fair Value Measurement:

In August 2018, the FASB issued ASU No.

On January 1, 2020, we adopted ASU No.

2018-13, Fair Value Measurement (Topic 820):

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This standard amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures.

2018-13 will be effective for us as of January 1, 2020, with early adoption permitted.

We are currently reviewing the effect of this new standard on our consolidated financial statements.

Credit Losses:

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses.

This ASU introduces a “current expected credit loss” (“CECL”) model which requires us to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

The CECL model replaces the existing incurred loss model and is applicable to the measurement of credit losses of financial assets, including trade receivables.

2016-13 will be effective for us as of January 1, 2020.

We are currently reviewing the effect of this new standard on our consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Income Taxes:

On January 1, 2020, we adopted ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Reference Rate Reform :

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU are effective for all entities through December 31, 2022.

We are currently evaluating the effect of this new standard on our consolidated financial statements.

The following tables disaggregate our revenue by source (in thousands):

For the Year Ended December 31, 2020

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 629,778 $ — $ — $ 629,778

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For the Year Ended December 31, 2019

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 616,567 $ — $ — $ 616,567

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Total revenue $ 616,567 $ 296,228 $ 35,629 $ 948,424

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

For the Year Ended December 31, 2018

Services Benefits &

Insurance National

Practices Consolidated

Accounting, tax, advisory and consulting $ 600,926 $ — $ — $ 600,926

Core Benefits and Insurance Services — 276,496 — 276,496

Non-core Benefits and Insurance Services — 11,941 — 11,941

Managed networking, hardware services — — 24,404 24,404

National Practices consulting — — 8,236 8,236

Total revenue $ 600,926 $ 288,437 $ 32,640 $ 922,003

Financial Services

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The cumulative impact on any subsequent revision in the estimated realizable value of unbilled fees for a particular client project is reflected in the period in which the change becomes known.

We applied the guidance of Topic 606 in determining the appropriate accounting for outcome-based arrangements.

Prior to recognizing revenue, we estimate the transaction price, including variable consideration that is subject to a constraint based on risks specific to the arrangement.

Prior to recognizing revenue for outcome-based arrangement, we estimate the transaction price, including variable consideration that is subject to a constraint based on risks specific to the arrangement.

We evaluate the estimate in each reporting period and recognize revenue to the extent it is probable that a significant reversal of revenue will not occur.

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Revenue also includes investment income related to client payroll funds that are held in CBIZ accounts, as is industry practice.

Under Topic 606, the cost to obtain a contract must be capitalized unless the contract period is one year or less .

We capitalize the cost to obtain a contract unless the contract period is one year or less.

We pay commissions monthly and require the recipient of the commission to be employed by us at the time of the payment.

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Therefore, we have determined that the requirement of continued employment is substantive and accordingly, do not consider the commissions to be incremental costs of obtaining the customer contract and consequently a contract acquisition cost is not recognized for those commissions.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Revenue related to group health benefits consulting consists of (i) commissions, (ii) fee income which can be fixed or variable based on a price per participant and (iii) contingent revenue.

• Commission revenue and fee income are recognized over the contract period as these services are provided to clients continuously throughout the term of the arrangement.

Our customers benefit from each month of service on its own and although volume and the number of participants may differ month to month, our obligation to perform substantially remains the same.

Our customers benefit from

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

each month of service on its own and although volume and the number of participants may differ month to month, our obligation to perform substantially remains the same.

• Contingent revenue arrangements are related to carrier-based performance targets.

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Changes in the allowance for doubtful accounts on accounts receivable are as follows (in thousands):

2020 2019 2018

Balance at beginning of period $ ( 14,379 ) $ ( 13,389 ) $ ( 13,827 )

Provision for losses

Provision ( 9,323 ) ( 8,433 ) ( 7,052 )

Charge-offs, net of recoveries 8,808 7,443 7,490

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Property and equipment, net at December 31, 2020 and 2019 consisted of the following (in thousands):

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Buildings and leasehold improvements $ 37,022 $ 33,284

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Capitalized software 34,503 37,203

Equipment 23,467 21,088

Total property and equipment 122,998 119,135

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Property and equipment, net $ 41,346 $ 39,412

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Depreciation expense for property and equipment was $ 9.6 million, $ 8.3 million and $ 6.1 million in 2020, 2019 and 2018, respectively.

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A summary of changes in the carrying amount of goodwill by operating segment for the years ended December 31, 2020 and 2019 were as follows (in thousands):

Services Benefits and

Services National

Practices Total

December 31, 2018 $ 329,626 $ 233,008 $ 1,666 $ 564,300

Additions 5,077 19,292 — 24,369

Divestitures and other adjustment ( 456 ) — — ( 456 )

December 31, 2019 $ 334,247 $ 252,300 $ 1,666 $ 588,213

Additions 34,785 62,654 — 97,439

Divestitures and other adjustment ( 993 ) ( 1,576 ) — ( 2,569 )

December 31, 2020 $ 368,039 $ 313,378 $ 1,666 $ 683,083

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The components of goodwill and other intangible assets, net at December 31, 2020 and 2019 were as follows (in thousands):

Goodwill $ 683,083 $ 588,213

Intangibles :

Client lists 207,084 188,898

Other intangibles 11,244 9,882

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Accumulated amortization:

Client lists ( 137,284 ) ( 125,887 )

Other intangibles ( 7,377 ) ( 6,435 )

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Other intangible assets are amortized over periods ranging from 2 to 10 years.

Based on the amount of intangible assets subject to amortization at December 31, 2019, the estimated amortization expense is $ 13.1 million for 2020, $ 11.6 million for 2021, $ 9.9 million for 2022, $ 8.7 million for 2023 and $ 7.6 million for 2024.

Based on the amount of intangible assets subject to amortization at

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

December 31, 2020, the estimated amortization expense is $ 14.0 million for 2021, $ 12.3 million for 2022, $ 11.1 million for 2023, $ 9.6 million for 2024 and $ 8.2 million for 2025.

FINANCIAL INSTRUMENTS

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As a result, the fair value measurement of our bank debt is classified as Level 2 in the fair value hierarchy.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Concentrations of Credit Risk - Financial instruments that may subject us to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable.

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thus, concentration of credit risk with respect to accounts receivable is not significant.

Bonds - We held corporate and municipal bonds with net par values totaling $ 58.9 million and $ 55.7 million at December 31, 2019 and 2018, respectively.

All bonds are investment grade and are classified as available-for-sale.

Our bonds have maturity dates or callable dates ranging from January 2020 through February 2024 , and are included in “Funds held for clients — current” in the accompanying Consolidated Balance Sheets based on our intent and ability to sell these investments at any time under favorable conditions.

Available-For-Sale Debt Securities - Available-for-sale debt securities consist primarily of corporate and municipal bonds and US treasury bills.

The net par values of these securities total $ 24.9 million and $ 58.9 million at December 31, 2020 and 2019, respectively.

The bonds have maturity dates or callable dates ranging from January 2021 through November 2024, and are included in “Funds held for clients — current” in the accompanying Consolidated Balance Sheets based on our intent and ability to sell these investments at any time under favorable conditions.

At December 31, 2020, unrealized losses on the securities totaling approximately $ 0.1 million have not been recognized as a credit loss because the bonds are investment grade quality and management is not required or does not intend to sell prior to an expected recovery in value.

The bond issuers continue to make timely principal and interest payments.

The following table summarizes our bond activity for the years ended December 31, 2020 and 2019 (in thousands):

Fair value at January 1 $ 60,659 $ 56,556

Purchases 3,447 27,216

Sales ( 22,078 ) ( 1,686 )

Maturities and calls ( 15,409 ) ( 22,272 )

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Fair value at December 31 $ 25,708 $ 60,659

In addition to the available-for-sale securities discussed above, we also hold certified deposits and other depository assets in the amount of $ 2.5 million and $ 2.3 million at December 31, 2019 and December 31, 2018, respectively, related to the funds held for clients.

Interest Rate Swaps - We do not purchase or hold any derivative instruments for trading or speculative purposes.

We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2018 credit facility.

In addition to the available-for-sale securities discussed above, we also held certified deposits and other depository assets in the amount of $ 2.5 million at December 31, 2019.

We did no t have any depository items at December 31, 2020.

Interest Rate Swaps - We utilize interest rate swaps to manage interest rate risk exposure associated with our floating-rate debt under the 2018 credit facility, or the forecasted acquisition of such liability.

Under these interest rate swap contracts, we receive cash flows from counterparties at variable rates based on LIBOR and pay the counterparties a fixed rate.

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There are no credit risk-related contingent features in our interest rate swaps nor do the swaps contain provisions under which we would be required to post collateral.

We do not purchase or hold any derivative instruments for trading or speculative purposes.

The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument.

A derivative qualifies for hedge accounting treatment if, at inception, it meets defined correlation and effectiveness criteria.

A derivative qualifies for hedge accounting

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

treatment if, at inception, it meets defined correlation and effectiveness criteria.

These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged.

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For the years ended December 31, 2020 and 2019, the interest rate swaps were deemed to be highly effective.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

The following table summarizes our outstanding interest rate swaps and their classification in the accompanying Consolidated Balance Sheets at December 31, 2020 and 2019 (in thousands).

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December 31, 2020

Balance Sheet

Interest rate swaps

Other non-current liabilities

Interest rate swap

Other current assets

Value Balance Sheet Location

Interest rate swap $ 10,000 $ ( 13 ) Other current liability

Interest rate swaps $ 85,000 $ ( 2,552 ) Other non-current liabilities

December 31, 2019

Balance Sheet

Interest rate swaps

Other non-current assets

Value Balance Sheet Location

Interest rate swaps $ 45,000 $ ( 591 ) Other non-current liabilities

Interest rate swap $ 25,000 $ 66 Other current assets

During 2020, we entered into a new 5-year interest rate swap with a notional value of $ 50.0 million and terminated one interest rate swap with a notional value of $ 25.0 million.

As of December 31, 2020, we have four interest rate swaps outstanding.

Under the terms of the interest rate swaps, we pay interest at a fixed rate of interest plus applicable margin as stated in the agreement, and receive interest that varies with the one-month LIBOR.

The notional value, fixed rate of interest and expiration date of each interest rate swap as of December 31, 2019 is (i) $ 25 million – 1.300 % - October 2020, (ii) $ 10 million – 1.120 % - February 2021 and (iii) $ 20 million – 1.770 % - May 2022 and (iv) $ 15 million – 2.640 % - June 2023.

The notional value, fixed rate of interest and expiration date of each interest rate swap as of December 31, 2020 is (i) $ 10 million – 1.120 % - February, 2021, (ii) $ 20 million – 1.770 % - May, 2022, (iii) $ 15 million – 2.640 % - June, 2023 and (iv) $ 50.0 million - 0.885 % - April, 2025.

During the next twelve months, the amount of the December 31, 2020 AOCL balance that will be reclassified to earnings is expected to be immaterial.

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Loss recognized in

AOCL, net of tax

Gain reclassified from

AOCL, net of tax (Loss) Gain reclassified from

AOCL into expense

Twelve Months Ended December 31,

Interest rate swaps

Interest expense

Twelve Months Ended December 31, Twelve Months Ended December 31, Location

2020 2019 2020 2019

Interest rate swaps $ ( 1,525 ) $ ( 1,222 ) $ ( 974 ) $ 399 Interest expense

FAIR VALUE MEASUREMENTS

FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

orderly transaction between market participants at the measurement date (exit price).

The inputs used to measure fair value are classified into the following hierarchy:

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As circumstances change, we will reassess the level in which the inputs are included in the fair value hierarchy.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

For the years ended December 31, 2020 and 2019, there were no transfers between the valuation hierarchy Levels 1, 2 and 3.

The following table summarizes our assets and liabilities at December 31, 2020 and 2019 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 us to determine such fair value (in thousands):

December 31, 2019

December 31, 2018

Level December 31, 2020 December 31, 2019

Deferred compensation plan assets 1 127,332 106,851

Corporate and municipal bonds

Available-for-sale debt securities 1 25,708 60,659

Deferred compensation plan liabilities 1 ( 127,332 ) ( 106,851 )

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Contingent purchase price liabilities 3 ( 54,391 ) ( 32,089 )

Contingent Purchase Price Liabilities - During the years ended December 31, 2019 and December 31, 2018, we recorded expense of $ 1.6 million and $ 2.6 million, respectively, due to accretion, adjusting for expected results of acquired businesses and the revaluation of stock related to contingent payments.

These increases are included in “Other Income, net” in the accompanying Consolidated Statements of Comprehensive Income.

Refer to Note 18, Acquisitions, for further discussion of our acquisitions and contingent purchase price liabilities.

Contingent Purchase Price Liabilities - During the years ended December 31, 2020 and 2019, we recorded income of $ 0.6 million and expense of $ 1.6 million, respectively, due to accretion, adjusting for expected results of acquired businesses and the revaluation of stock related to contingent payments.

These changes are included in Other income (expense), net in the accompanying Consolidated Statements of Comprehensive Income.

Refer to Note 18, Business Combinations, for further discussion of our acquisitions and contingent purchase price liabilities.

The following table summarizes the change in fair value of our contingent purchase price liabilities identified as Level 3 for the years ended December 31, 2020 and 2019 (pre-tax basis, in thousands):

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Balance — December 31, 2020 $ ( 54,391 )

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

For financial reporting purposes, income from continuing operations before income taxes includes the following components (in thousands):

2020 2019 2018

United States $ 103,306 $ 92,710 $ 79,669

Foreign (Canada) 182 179 171

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Total $ 103,488 $ 92,889 $ 79,840

Income tax expense (benefit) included in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):

2020 2019 2018

Continuing operations :

Federal $ 21,926 $ 12,776 $ 12,626

Foreign 78 48 45

State and local 5,584 4,110 2,808

Total 27,588 16,934 15,479

Federal ( 1,968 ) 3,685 2,047

State and local ( 479 ) 1,221 741

Total income tax expense from continuing

Total ( 2,447 ) 4,906 2,788

Total income tax expense from continuing operations 25,141 21,840 18,267

Discontinued operations :

Operations of discontinued operations:

Current ( 11 ) ( 107 ) 2

Deferred — ( 1 ) ( 1 )

Total income tax expense from discontinued

operations ( 11 ) ( 108 ) 1

Total income tax expense $ 25,130 $ 21,732 $ 18,268

The provision for income taxes attributable to income from continuing operations differed from the amount obtained by applying the federal statutory income tax rate to income from continuing operations before income taxes, as follows (in thousands, except percentages):

2020 2019 2018

federal statutory rates $ 21,733 $ 19,507 $ 16,766

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Share-based compensation ( 2,394 ) ( 4,773 ) ( 3,260 )

Impact of the Tax Cuts and Jobs Act of 2017

Non-deductible expenses 787 713 785

Other, net 317 ( 37 ) 176

Provision for income taxes from continuing operations $ 25,141 $ 21,840 $ 18,267

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Employee benefits and compensation 30,151 26,442

Lease costs 6,291 4,889

State tax credit carryforwards 1,291 1,322

Property and equipment

Deferral of employer FICA taxes 3,983 —

Other deferred tax assets 424 30

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We have established valuation allowances for deferred tax assets related to certain employee benefits and compensation, state net operating loss (“NOL”) carryforwards and state income tax credit carryforwards at December 31, 2020 and December 31, 2019.

The net increase in the valuation allowance of $ 1.0 million for the year ended December 31, 2019 primarily related to changes in the valuation allowance for NOLs.

The net decrease in the valuation allowance of $ 0.1 million for the year ended December 31, 2020 primarily related to changes in the valuation allowance for NOLs.

In assessing the realization of deferred tax assets, management considers all available positive and negative evidence, including projected future taxable income, scheduled reversal of deferred tax liabilities, historical financial operations and tax planning strategies.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

2020 2019 2018

Balance at January 1 $ 2,536 $ 2,819 $ 3,882

3 unchanged sentences

Balance at December 31 $ 1,536 $ 2,536 $ 2,819

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Included in the balance of unrecognized tax benefits at December 31, 2020 are $ 0.9 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate.

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We recognize interest expense, and penalties related to unrecognized tax benefits as a component of income tax expense.

During 2019, we accrued interest expense of less than $ 0.1 million and, as of December 31, 2019, had recognized a liability for interest expense and penalties of $ 0.7 million and $ 0.2 million, respectively, relating to unrecognized tax benefits.

During 2020, we recorded an immaterial decrease in accrued interest, and, as of December 31, 2020, we had recognized a liability for interest expense and penalties of $ 0.4 million and $ 0.2 million, respectively, relating to unrecognized tax benefits.

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Our primary financing arrangement is the 2018 credit facility, which provides us with the capital necessary to meet our working capital needs as well as the flexibility to continue with our strategic initiatives, including business acquisitions and share repurchases.

The 2018 credit facility matures in 2023 .

The 2018 credit facility matures on April 3, 2023.

The balance outstanding under the 2018 credit facility was $ 108.0 million and $ 105.5 million at December 31, 2020 and 2019, respectively.

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2.12 % - 5.50 %

2.12% - 5.50%

We have approximately $ 286.4 million of available funds under the 2018 credit facility at December 31, 2020, based on the terms of the commitment.

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As of December 31, 2020, we are in compliance with all covenants.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Other line of credit

We have an unsecured $ 20 million line of credit by and among CBIZ Benefits and Insurance, Inc.

and the Huntington Bank.

We have an unsecured $ 20 million line of credit by and among CBIZ Benefits and Insurance, Inc., our wholly owned subsidiary, and the Huntington Bank.

We utilize this line of credit to support our short-term funding requirements of payroll client fund obligations due to the investment of client funds, rather than liquidating client funds that have already been invested in available-for-sale securities.

Refer to Note 6, Financial Instruments, for further discussion regarding these investments.

The line of credit, which was renewed in August 2019 , will terminate on August 6, 2020 .

It did no t have a balance outstanding at December 31, 2019 and 2018.

The line of credit, which was renewed on August 6, 2020 and will terminate on August 5, 2021, did no t have a balance outstanding at December 31, 2020 and 2019.

Borrowings under the line of credit bear interest at the prime rate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Interest expense

Interest expense, including amortization of deferred financing costs, commitment fees, line of credit fees, and other applicable bank charges, was as follows (in thousands):

2020 2019 2018

2018 credit facility

$ 4,919 $ 5,672 $ 6,509

Other line of credit 1 22 1

Other 63 71 135

$ 4,983 $ 5,765 $ 6,645

ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss at December 31, 2020 and 2019 were as follows (in thousands):

Net unrealized gain (loss) on available-for-sale securities, net

of income tax expense (benefit) of $ 220 and $( 183 ), respectively

Net unrealized gain (loss) on interest rate swap, net of income

tax expense (benefit) of $( 320 ) and $ 213 , respectively

Net unrealized gain on available-for-sale securities, net of income tax expense of $ 128 and $ 220 , respectively

Net unrealized loss on interest rate swap, net of income tax benefit of $ 618 and $ 320 , respectively

( 1,900 ) ( 375 )

Foreign currency translation ( 720 ) ( 698 )

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Shares of our common stock that are issued in connection with acquisitions may be contractually restricted from sale for periods up to one year.

Acquisitions are further disclosed in Note 18, Acquisitions.

Acquisitions are further disclosed in Note 18, Business Combinations.

Indemnifications - We have various agreements in which we may be obligated to indemnify the other party with respect to certain matters.

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Further, our obligations under these agreements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us.

It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement.

It is not possible to predict the maximum potential amount of future payments under these

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement.

Historically, we have not made any payments under these agreements that have been material individually or in the aggregate.

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During the years ended December 31, 2020, 2019 and 2018, payments under such contracts and arrangements were not material.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Letters of Credit and Guarantees - We provide letters of credit to landlords (lessors) of our leased premises in lieu of cash security deposits which totaled $ 1.7 million and $ 1.3 million at December 31, 2020 and 2019, respectively.

In addition, we provide license bonds to various state agencies to meet certain licensing requirements.

The amount of license bonds outstanding was $ 2.3 million and $ 2.9 million at Decembe r 31, 2019 and 201 8 , respectively .

The amount of license bonds outstanding was $ 2.2 million and $ 2.3 million at December 31, 2020 and 2019, respectively.

Legal Proceedings - In 2010, CBIZ, Inc.

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The plaintiff now seeks compensatory damages of between $ 124.0 million and $ 266.0 million, plus punitive damages.

The Court recently denied CBIZ Benefits’ motion for a summary judgment and trial is set for May 2020.

The Court recently denied CBIZ Benefits’ motion for a summary judgment and trial is set for June 2021.

On December 19, 2016, CBIZ Operations, Inc.

(“CBIZ Operations”) was named as a defendant in a lawsuit filed by Zotec Partners, LLC ("Zotec") in the Marion County Indiana Superior Court.

After various amendments, the lawsuit asserts claims under Indiana law for securities, statutory and common law fraud or deception, unjust enrichment, breach of contract, and vicarious liability against CBIZ Operations and a former employee of CBIZ MMP in connection with the sale of the CBIZ MMP medical billing practice to Zotec.

The plaintiff claims that CBIZ Operations had a duty to disclose the unknown fact that the former employee had a financial arrangement with a Zotec vendor at the time CBIZ Operations sold CBIZ MMP to Zotec.

The plaintiff is now seeking damages of up to $ 177.0 million out of the $ 200.0 million transaction price.

Trial is scheduled for August 2021.

We cannot predict the outcome of the above matters or estimate the possible loss or range of possible loss, if any.

Although the proceedings are subject to uncertainties inherent in the litigation process and the ultimate disposition of these proceedings is not presently determinable, we intend to vigorously defend these cases and we believe we have meritorious defenses to these claims.

Although the proceedings are subject to uncertainties inherent in the litigation process and the ultimate

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

disposition of these proceedings is not presently determinable, we intend to vigorously defend these cases and we believe we have meritorious defenses to these claims.

In addition to those items disclosed above, we are, from time to time, subject to claims and suits arising in the ordinary course of business.

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The amount of compensation deferred under the plan is credited to each participant’s deferral account and a non-qualified deferred compensation plan obligation is established by us.

An amount equal to each participant’s compensation deferral is transferred into a rabbi trust and

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

invested in various debt and equity securities as directed by the participants.

An amount equal to each participant’s compensation deferral is transferred into a rabbi trust and invested in various debt and equity securities as directed by the participants.

The assets of the rabbi trust are held by us and recorded as “Assets of deferred compensation plan” in the accompanying Consolidated Balance Sheets.

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Adjustments to the fair value of these investments are recorded in “Other income, net,” offset by the same adjustments to compensation expense (recorded as “Operating expenses” or “G&A expenses” in the accompanying Consolidated Statements of Comprehensive Income).

We recorded income of $ 19.2 million for the year ended December 31, 2019 and expense of $ 4.9 million for the year ended December 31, 2018 and income of $ 12.1 million for the years ended December 31, 2017, related to these investments.

We recorded income of $ 15.4 million for the year ended December 31, 2020 and income of $ 19.2 million for the year ended December 31, 2019 and expense of $ 4.9 million for the year ended December 31, 2018, related to these investments.

These investments are specifically designated as available to us solely for the purpose of paying benefits under the non-qualified deferred compensation plan.

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When leverage is greater than 3.0 , the annual share repurchase is limited to $ 35.0 million.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Under the Share Repurchase Program, we repurchased 2.3 million and 1.2 million shares on the open market at a cost (including fees and commissions) of $ 57.6 million and $ 25.3 million during the years ended December 31, 2020 and 2019, respectively.

Shares repurchased to settle statutory employee withholding related to vesting of stock awards were 0.1 million shares at a cost of $ 2.0 million during the year ended December 31, 2020 and 0.1 million shares at a cost of $ 1.9 million during the year ended December 31, 2019.

Employee Share Plans

EMPLOYEE STOCK PLANS

Employee Stock Purchase Plan - The 2007 Employee Stock Purchase Plan (“ESPP”), which has a termination date of June 30, 2022, allows qualified employees to purchase shares of common stock through payroll deductions up to a limit of $ 25,000 of stock per calendar year.

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Other than a one-year holding period from the date of purchase, there are no vesting or other restrictions on the stock purchased by employees under the ESPP.

The total number of shares of common stock that can be purchased under the ESPP shall not exceed two million shares.

The total number of shares of common stock that can be purchased under the ESPP shall not exceed 2.0 million shares.

Stock Awards – Effective May 9, 2019, the CBIZ shareholders approved CBIZ, Inc.

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2014 Stock Incentive Plan (“2014 Plan”), of which we have granted various stock-based awards through the year ended December 31, 2020.

Effective January 1, 2020, the 2019 Plan replaced and superseded the 2014 Plan.

The operating terms of the 2019 Plan are substantially similar to those of the 2014 Plan.

Under the 2019 Plan, which expires in 2029, a maximum of 3.1 million stock options, restricted stock or other stock based compensation awards may be granted.

Shares subject to award under the 2019 Plan may be either authorized but unissued shares of our common stock or treasury shares.

The terms and vesting schedules for the share-based awards vary by type and date of grant.

At December 31, 2020, approximately 2.7 million shares were available for future grant under the 2019 Plan.

Effective January 1, 2020, the 2019 Plan will replace and, for future grants, supersede the 2014 Plan.

The operating terms of the 2019 Plan are substantially similar to those of the 2014 Plan.

Under the 2019 Plan, which expires in 2029 , a maximum of 3.1 million stock options, restricted stock or other stock based

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

compensation awards may be granted.

Shares subject to award under the 2019 Plan may be either authorized but unissued shares of our common stock or treas ury shares.

During the years ended December 31, 2020, 2019 and 2018, we recognized compensation expense (before income tax expense) for these awards as follows (in thousands):

2020 2019 2018

Stock options $ 1,878 $ 1,848 $ 2,609

Restricted stock awards

Restricted stock units and awards 4,960 4,375 4,257

Performance share units 2,031 1,031 —

Total share-based compensation expense $ 8,869 $ 7,254 $ 6,866

Stock Options - Stock options granted during the years ended December 31, 2018 and 2017 were generally subject to a 25 % incremental vesting schedule over a four-year period commencing from the date of grant.

Stock options expire six years from the date of grant and are awarded with an exercise price equal to the market value of our common stock on the date of grant.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Stock Options - Certain employees and non-employee directors were granted stock options.

Stock options awarded to non-employee directors have generally been granted with immediate vesting.

Stock options awarded to employees are generally subject to a 25 % incremental vesting schedule over a four-year period commencing from the date of grant.

At the discretion of the Compensation Committee of the Board of Directors, options awarded under the 2019 Plan may vest in a time period shorter than four years .

Under the 2014 Plan, stock options awarded to non-employee directors have generally been granted with immediate vesting.

Stock options expire six years from the date of grant and are awarded with an exercise price equal to the market value of our common stock on the date of grant.

Stock options may be granted alone or in addition to other awards and may be of two types:

incentive stock options and nonqualified stock options.

incentive stock options and non-qualified stock options.

During the year ended December 31, 2020, we granted 50 thousand stock options to a non-employee director.

We did no t grant any stock options during the year ended December 31, 2019.

Stock option activity during the year ended December 31, 2020 was as follows (number of options in thousands):

Options Weighted

Exercise Price

Contractual Term

Per Share Weighted

Contractual Term Aggregate

(in millions)

Outstanding at December 31, 2019 2,412 $ 13.58

Granted 50 $ 24.62

Exercised ( 634 ) $ 10.23

Expired or canceled ( 8 ) $ 18.15

Outstanding at December 31, 2019

Vested and exercisable at December 31, 2019

Outstanding at December 31, 2020 1,820 $ 15.02 2.28 years $ 21.1

Vested and exercisable at December 31, 2020 1,375 $ 14.00 2.04 years $ 17.3

• The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2020 and 2018 was $ 0.3 million and $ 3.0 million, respectively.

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The fair value of stock options granted during the years ended December 31, 2020 and 2018 were $ 5.79 and $ 4.73 , respectively.

We didn’t grant any stock options during the year ended December 31, 2019.

The following weighted average assumptions were utilized:

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(1) The expected volatility assumption was determined based upon the historical volatility of our stock price, using daily price intervals.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(2) The expected option life was determined based upon our historical data using a midpoint scenario, which assumes all options are exercised halfway between the expiration date and the weighted average time it takes the option to vest.

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We do not expect to change our dividend payout policy in the foreseeable future.

Restricted Stock Awards - Under the 2014 Plan, certain employees and non-employee directors were granted restricted stock awards.

Restricted stock awards are independent of option grants and vest at no cost to the recipients.

The awards are subject to forfeiture if employment terminates prior to the release of restrictions, generally one to four years from the date of grant.

Recipients of restricted stock awards are entitled to the same dividend and voting rights as holders of other CBIZ common stock, subject to certain restrictions during the vesting period, and the awards are considered to be issued and outstanding from the date of grant.

Restricted Stock Units and Awards - Under the 2019 Plan, certain employees and non-employee directors were granted restricted stock units and awards.

Restricted stock units and awards are independent of option grants and

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

vest at no cost to the recipients.

Restricted stock units and awards are subject to forfeiture if employment terminates prior to the release of restrictions, generally one to four years from the date of grant.

Recipients of restricted stock units and awards are entitled to the same dividend and voting rights as holders of other CBIZ common stock, subject to certain restrictions during the vesting period, and these are considered to be issued and outstanding from the date of grant.

Shares granted under the 2019 Plan cannot be sold, pledged, transferred or assigned during the vesting period .

Restricted stock award activity during the year ended December 31, 2019 was as follows:

(in thousands)

Restricted stock units and awards activity during the year ended December 31, 2020 was as follows (in thousands, except per share data):

Fair Value (1)

Non-vested at December 31, 2019 577 $ 17.87

Granted 178 $ 24.48

Vested ( 276 ) $ 16.74

Forfeited ( 18 ) $ 19.56

Non-vested at December 31, 2020 461 $ 21.03

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

At December 31, 2019, we had unrecognized compensation cost for restricted stock awards of $ 10.3 million to be recognized over a weighted average period of approximately 1.02 years.

• At December 31, 2020, we had unrecognized compensation cost for restricted stock units and awards of $ 6.2 million to be recognized over a weighted average period of approximately 1.20 years.

• The total fair value of shares vested during the years ended December 31, 2020, 2019 and 2018 was approximately $ 4.6 million, $ 3.9 million and $ 4.1 million, respectively.

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This market value was recorded as unearned compensation and is recognized as expense ratably over the periods which the restrictions lapse.

Awards outstanding at December 31, 2019 will be released from restrictions at dates ranging from February 2020 through May 2022 .

• Awards outstanding at December 31, 2020 will be released from restrictions at dates ranging from February, 2021 through February, 2023.

Performance Share Units (“PSUs”) – PSUs are earned based on our financial performance over a contractual term of three years and the associated expense is recognized over that period based on the fair value of the award.

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For performance achieved above specified levels, the recipient may earn additional shares of stock, not to exceed 200 % of the number of PSUs initially granted.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

The following table presents our PSU award activity during the twelve months ended December 31, 2020 (in thousands, except per share data):

(in thousands)

Outstanding at beginning of year

Adjustments for performance results

(in thousands) Grant-Date

Outstanding at December 31, 2019 200 $ 19.82

Granted 132 $ 25.75

Expired or cancelled ( 25 ) $ 22.14

Outstanding at December 31, 2020 307 $ 22.18

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

EARNINGS PER SHARE

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Year Ended December 31,

2020 2019 2018

Income from continuing operations $ 78,347 $ 71,049 $ 61,573

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Stock options (1)

802 1,288 1,542

Restricted stock awards 195 234 302

Contingent shares (2)

Diluted weighted average common shares

Diluted weighted average common shares outstanding (3)

55,359 55,895 56,487

Earnings Per Share:

Basic earnings per share from continuing operations $ 1.44 $ 1.31 $ 1.13

Diluted earnings per share from continuing

Diluted earnings per share from continuing operations $ 1.42 $ 1.27 $ 1.09

(1) For the years ended December 31, 2020, 2019 and 2018, a total of 0.3 million, 0.5 million and 0.4 million stock based awards, respectively, were excluded from the calculation of diluted earnings per share as their exercise prices would render them anti-dilutive.

(2) Contingent shares represent additional shares to be issued for purchase price earned by former owners of businesses acquired by us once future conditions have been met.

For further details, refer to Note 18, Acquisitions .

For further details, refer to Note 18, Business Combinations .

(3) The denominator used in calculating diluted earnings per share did not include 0.3 million and 0.2 million performance share units for the twelve months ended December 31, 2020 and 2019, respectively.

The performance conditions associated with these performance share units were not met and consequently none of these performance share units were considered as issuable for the years ended December 31, 2020 and 2019.

We determine if a contract is a lease at inception.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Balance sheet information related to the Company’s leases as of December 31, 2019 was as follows (in thousands):

December 31, 2019

Operating lease ROU assets

Current portion of operating lease liabilities

Noncurrent portion of operating lease liabilities

Total operating lease liabilities

December 31, 2019

Weighted-average remaining lease term

Supplemental balance sheet information related to the Company’s operating leases as of December 31, 2020 and 2019 was as follows (in thousands):

December 31, 2020 December 31, 2019

Weighted-average remaining lease term 6.7 years 6.9 years

Weighted-average discount rate 3.6 % 3.6 %

The components of lease cost and other lease information as of and during the year ended December 31, 2019 are as follows (in thousands):

December 31, 2019

The components of lease cost and other lease information as of and during the year ended December 31, 2020 and 2019 are as follows (in thousands):

December 31, 2020 December 31, 2019

Operating lease cost $ 34,781 $ 37,275

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Because the Company is not reasonably certain to exercise these renewal options, the options are not included in the lease term, and associated potential option payments are excluded from lease payments.

Lease expense, as accounted for under Legacy ASC Topic 840, was $ 38.0 million and $ 38.4 million for the years ended December 31, 2018 and 2017, respectively.

Lease expense, as accounted for under Legacy ASC Topic 840, was $ 38.0 million for the year ended December 31, 2018.

Maturities of operating lease liabilities at December 31, 2020 and minimum cash commitments under operating leases at December 31, 2019 were as follows (in thousands):

December 31, 2020

2021 $ 36,270

Thereafter 52,432

Total undiscounted lease payments 193,828

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December 31, 2019

Total future minimum rental commitments

2020 $ 34,775

Thereafter 67,025

Total undiscounted lease payments 206,134

imputed interest ( 45,086 )

Total lease liabilities $ 161,048

RELATED PARTIES

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Related Parties

The following is a summary of certain agreements and transactions between or among us and certain related parties.

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In the aggregate, we paid approximately $ 2.2 million, $ 2.4 million and $ 3.0 million during the years ended December 31, 2020, 2019 and 2018, respectively, under such leases.

Burdick, a Lead Director of CBIZ, is a Partner Emeritus of Akin Gump Strauss Hauer & Feld LLP (“Akin Gump”) and was a Partner in the firm from 1988 until 2019.

Akin Gump performed legal work for us during the years ended December 31, 2019, 2018 and 2017 for which we paid approximately $ 0.2 million, $ 0.2 million and $ 0.2 million, respectively.

We maintain joint-referral relationships and administrative service agreements with independent licensed CPA firms under which we provide administrative services in exchange for a fee.

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CBIZ and the CPA firms maintain their own respective liability and risk of loss in connection with performance of each of its respective services, and we do not believe that our arrangements with these CPA firms result in additional risk of loss.

BUSINESS COMBINATIONS

Our acquisition strategy focuses on businesses with a leadership team that is committed to best in class culture, extraordinary client service and cross-serving potential.

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The valuation of any business is a subjective process and includes industry, geography, profit margins, expected cash flows, client retention, nature of recurring or non-recurring project-based work, growth rate assumptions and competitive market conditions.

Business Acquisitions in 2019

During the year ended December 31, 2020, we completed the following acquisitions:

• Effective February 1, 2020, we acquired substantially all the assets of Alliance Insurance Services, Inc.

("Alliance"), a provider of insurance and advisory services based in Washington DC.

Alliance is included as a component of our Benefits and Insurance Services practice group.

• Effective February 1, 2020, we acquired substantially all the assets of Pension Dynamics, LLC ("PD"), a full service retirement and benefits plan advisor based in Pleasant Hill, California.

PD is included as a component of our Benefits and Insurance Services practice group.

• Effective February 1, 2020, we acquired substantially all the assets of Sunshine Systems, Inc.

("Sunshine"), a payroll solutions provider based in Massachusetts.Sunshine is included as a component of our Benefits and Insurance Services practice group.

• Effective July 1, 2020, we acquired substantially all the assets of Prince-Wood Insurance, L.L.C.

("PWI"), a provider of financial insurance and advisory services based in Woodbridge, Virginia.

PWI is included as a component of our Benefits and Insurance practice group.

• Effective September 1, 2020, we acquired substantially all the assets of ARC Consulting LLC and ARC Placement Group LLC (collectively "ARC"), a provider of financial, insurance and advisory services based in San Francisco, California.

ARC is included as a component of our Financial Services practice group.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

• Effective December 1, 2020, we acquired substantially all the assets of BeyondPay, Inc., a full service human capital management and payroll service provider based in Clinton, New Jersey.

BeyondPay is included as a component of our Benefits and Insurance practice group.

• Effective December 31, 2020, we acquired substantially all the assets of Borden Perlman Insurance Agency, Inc.

("BP"), a leading provider of financial, insurance and advisory services located in Ewing, New Jersey.

BP is included as a component of our Benefits and Insurance practice group.

Aggregated consideration for these seven acquisitions consisted of approximately $ 73.4 million in cash (including $ 1.7 million acquired client funds and $ 0.5 million cash acquired), $ 8.7 million in our common stock, and $ 38.9 million in contingent consideration.

The maximum potential undiscounted amount of all future payments that we could be required to make under the contingent arrangement is $ 43.0 million.

As of December 31, 2020, the aggregated fair value of the contingent consideration related to these acquisitions was $ 38.0 million, of which $ 10.9 million was recorded in “Contingent purchase price liability – current” and $ 27.1 million was recorded in “Contingent purchase price liability – non-current” in the accompanying Consolidated Balance Sheets.

Refer to Note 7, Fair Value Measurements, for additional information regarding contingent purchase price liability fair value and fair value adjustments.

Annualized aggregated revenue for these acquisitions is estimated to be approximately $ 45.2 million.

Pro forma results of operations for these acquisitions are not presented because the effects of these acquisitions were not significant either individually or in aggregate to our consolidated “Income from continuing operations before income taxes.”

During the year ended December 31, 2019, we acquired substantially all of the assets of the following businesses.

• Effective January 1, 2019, we acquired substantially all of the assets of Wenner Group, LLC (“Wenner”), located in Denver, Colorado.

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Gavion is included as a component of our Benefit and Insurance Services practice group.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

• Effective August 1, 2019, we acquired substantially all of the assets of QBA Benefits, LLC.

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BTZ is included as a component of our Financial Services practice group.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Aggregated consideration for these six acquisitions consisted of approximately $ 19.4 million in cash (including $ 6.9 million acquired client funds and $ 0.8 million cash acquired), $ 2.0 million in our common stock, and $ 11.2 million in contingent consideration.

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Business Acquisitions in 2018

During the year ended December 31, 2018, we acquired substantially all of the assets of the following businesses.

The acquisition of Laurus , located in Denver, Colorado, was effective February 1, 2018 .

Laurus provides financial and accounting due diligence and advisory services with respect to mergers and acquisition transactions.

Operating results are reported in the Financial Services practice group.

The acquisition of InR , located in Media, Pennsylvania, was effective April 1, 2018 .

InR is a pension consultant and provider of investment advisory services for public and private sector clients.

Operating results are reported in the Benefits and Insurance practice group.

The acquisition of Sequoia , located in Cleveland, Ohio, was effective December 1, 2018 .

Sequoia provides retirement plan and advisory services.

Operating results are reported in the Benefits and Insurance practice group.

Aggregate consideration for the acquisitions consisted of approximately $ 27.9 million in cash (including $ 0.3 million cash acquired), $ 0.9 million in our common stock, and $ 13.4 million in contingent consideration.

The maximum potential undiscounted amount of all future payments that we could be required to make under the contingent arrangements is $ 15.3 million.

We are required to record the fair value of this obligation at the acquisition date which was determined to be $ 13.4 million, of which $ 3.9 million was recorded in “Contingent purchase price liability - current” and $ 9.5 million was recorded in “Contingent purchase price liability - non-current” in the accompanying Consolidated Balance Sheets at December 31, 2018.

Refer to Note 7, Fair Value Measurements, for additional information regarding contingent purchase price liability fair value and fair value adjustments.

Annualized revenue for these acquisitions is estimated to be approximately $ 11.0 million.

Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in aggregate, were not material to our “Income from continuing operations before income taxes.”

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

We anticipate completion of the purchase accounting for certain 2020 acquisitions by June 30, 2021, and, as such, provisional amounts of certain assets acquired, liabilities assumed, and purchase price are reported as of December 31, 2020.

The following table summarizes the amounts of identifiable assets acquired, liabilities assumed and aggregate purchase price for the acquisitions in 2020 and 2019 (in thousands):

Cash $ 536 $ 826

Accounts receivable, net 5,381 1,843

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Operating lease right-of-use asset, net 2,746 2,789

Other assets 431 99

Identifiable intangible assets 20,703 7,725

Operating lease liability - current ( 793 ) ( 1,013 )

Other current liability

Other current liabilities ( 3,460 ) ( 2,245 )

Operating lease liability - noncurrent ( 1,953 ) ( 1,776 )

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Total identifiable net assets 23,591 8,248

Goodwill 97,439 24,369

Aggregate purchase price $ 121,030 $ 32,617

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Acquisitions of client lists

In 2020, we purchased three client lists reported in the Benefits and Insurance Services practice group and one client list reported in the Financial Services practice group.

Total consideration for these client lists was $ 0.6 million, of which $ 0.4 million was contingent.

In 2019, we purchased one client list, which was recorded in the Benefits and Insurance Services practice group.

Total consideration for this client list was $ 0.3 million, of which $ 0.2 million was contingent.

In 2018, we purchased one client list, which was recorded in the Financial Services practice group.

Total consideration for this client list was $ 0.3 million in cash paid at closing and an additional $ 0.2 million in contingent consideration.

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We are required to evaluate in subsequent reporting periods the fair value of contingent consideration related to previous acquisitions.

We increased the fair value of the contingent purchase price liability related to prior acquisitions in 2019 and 2018 by $ 1.6 million and $ 2.6 million, respectively, due to expected results of acquired businesses and the revaluation of stock related to contingent payments.

The increases are included as expense in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income.

We decreased the fair value of the contingent purchase price liability related to prior acquisitions in 2020 by $ 0.6 million due to expected results of acquired businesses and the revaluation of stock

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

related to contingent payments.

We increased the fair value of the contingent purchase price liability related to prior acquisitions in 2019 by $ 1.6 million, due to expected results of acquired businesses and the revaluation of stock related to contingent payments.

The changes are included in "Other income (expense), net" in the accompanying Consolidated Statements of Comprehensive Income.

For further discussion on contingent purchase price liabilities, refer to Note 7, Fair Value Measurements, to the accompanying consolidated financial statements.

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In the years ended December 31, 2020 and 2019, we paid $ 0.4 million and $ 0.9 million, respectively, in cash for previous client list purchases.

Discontinued Operations and Divestitures

We divest (through sale or closure) business operations that do not contribute to our long-term objectives for growth, or that are not complementary to our target service offerings and markets.

Divested operations and assets that do not qualify for treatment as discontinued operations are recorded as “(Loss) gain on sale of operations, net” in the accompanying Consolidated Statements of Comprehensive Income.

In 2020, we sold a small book of business in the Benefit and Insurance practice group and two small accounting firms in the Financial Services practice group and recorded a loss of $ 0.5 million.

In 2019, we sold a small office in the Financial Services practice group and recorded a gain of $ 0.4 million.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Discontinued Operations

Divestitures are classified as discontinued operations provided they meet the criteria and treatment as discontinued operations.

Discontinued operations primarily consist of two small businesses under the Financial Services segment that were sold in 2015.

During the years ended December 31, 2019 and 2018, we did no t discontinue the operations of any of our businesses.

Divested operations and assets that do not qualify for treatment as discontinued operations are recorded as “Gain on sale of operations, net” in the accompanying Consolidated Statements of Comprehensive Income.

In 2019, we sold a small office in the Financial Services practice group and recorded a gain of $ 0.4 million from the sale.

In 2018, we sold a small office in the Financial Services practice group, along with two small books of business, both in the Benefits and Insurance practice group in 2018 and recorded a gain of $ 1.0 million from the sale.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2020 and 2019 (in thousands, except per share amounts).

September 30,

March 31, June 30, September 30, December 31,

Revenue $ 277,455 $ 236,943 $ 238,389 $ 211,110

Operating expenses 199,827 209,016 204,760 211,748

Gross margin 77,628 27,927 33,629 ( 638 )

Corporate general and administrative expenses 10,489 11,160 11,339 13,078

Operating income

Operating income (loss) 67,139 16,767 22,290 ( 13,716 )

Other (expense) income:

Interest expense ( 1,119 ) ( 2,074 ) ( 974 ) ( 816 )

Gain on sale of operations, net

Gain (loss) on sale of operations, net 95 57 ( 74 ) ( 587 )

Other (expense) income, net ( 15,800 ) 13,336 5,914 13,050

Total other (expense) income, net ( 16,824 ) 11,319 4,866 11,647

Income (loss) from continuing operations before

income tax expense

Income (loss) from continuing operations before income tax expense 50,315 28,086 27,156 ( 2,069 )

Income tax expense (benefit) 13,453 6,607 7,060 ( 1,979 )

Income (loss) from continuing operations 36,862 21,479 20,096 ( 90 )

Gain (loss) from operations of discontinued operations,

Loss from operations of discontinued operations, net of tax ( 14 ) ( 11 ) ( 19 ) ( 4 )

Net income (loss) $ 36,848 $ 21,468 $ 20,077 $ ( 94 )

10 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

September 30,

March 31, June 30, September 30, December 31,

Revenue $ 269,998 $ 235,498 $ 239,790 $ 203,138

Operating expenses 215,496 198,148 209,146 200,706

Gross margin 54,502 37,350 30,644 2,432

Corporate general and administrative expenses 11,680 10,566 11,670 10,490

Operating income (loss) 42,822 26,784 18,974 ( 8,058 )

Other income:

Other income (expense):

Interest expense ( 1,401 ) ( 1,587 ) ( 1,521 ) ( 1,256 )

Gain on sale of operations, net

Other income, net

Total other income, net

Income from continuing operations before income

Gain (loss) on sale of operations, net 497 50 ( 145 ) 15

Other income (expense), net 9,260 ( 3,311 ) 6,767 4,999

Total other income (expense), net 8,356 ( 4,848 ) 5,101 3,758

Income (loss) from continuing operations before income tax expense 51,178 21,936 24,075 ( 4,300 )

Income tax expense (benefit) 13,613 5,322 6,069 ( 3,164 )

Income from continuing operations

(Loss) gain from operations of discontinued

operations, net of tax

Income (loss) from continuing operations 37,565 16,614 18,006 ( 1,136 )

Loss from operations of discontinued operations, net of tax ( 96 ) ( 22 ) ( 200 ) ( 17 )

Net income (loss) $ 37,469 $ 16,592 $ 17,806 $ ( 1,153 )

Earnings (loss) per share:

1 unchanged sentence

Discontinued operations — — — —

Net income (loss) $ 0.69 $ 0.31 $ 0.33 $ ( 0.02 )

Continuing operations $ 0.67 $ 0.30 $ 0.32 $ ( 0.02 )

Discontinued operations — — — —

Net income (loss) $ 0.67 $ 0.30 $ 0.32 $ ( 0.02 )

Basic weighted average common shares 54,287 54,090 54,268 54,547

4 unchanged sentences

(i) Financial Services, (ii) Benefits and Insurance Services and (iii) National Practices, based on the following factors:

similarity of the products and services provided to clients, similarity of the regulatory environment and similarity of economic conditions affecting long-term performance.

similarity of the products and services provided to clients, similarity of the regulatory environment and similarity of economic conditions affecting

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

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 table below.

Financial Services

Benefits and Insurance Services

National Practices

• Accounting and Tax

• Group Health Benefits Consulting

• Managed Networking and Hardware Services

• Government Healthcare Consulting

• Financial Advisory

• Property & Casualty

• Healthcare Consulting

• Retirement Plan Services

Financial Services Benefits and Insurance Services National Practices

Accounting and Tax Group Health Benefits Consulting Managed Networking and Hardware Services

Government Healthcare Consulting Payroll Healthcare Consulting

Financial Advisory Property and Casualty

Valuation Retirement Plan Services

Risk & Advisory Services

1 unchanged sentence

These expenses are primarily comprised of certain healthcare costs, gains or losses attributable to assets held in our non-qualified deferred compensation plan, share-based compensation, consolidation and integration charges, certain professional fees, certain advertising costs and other various expenses.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Upon consolidation, intercompany accounts and transactions are eliminated, thus inter-segment revenue is not included in the measure of profit or loss for the practice groups.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

United States $ 962,272 $ 946,801 $ 920,481

Canada 1,625 1,623 1,522

Total revenue $ 963,897 $ 948,424 $ 922,003

There is no one customer that represents a significant portion of our revenue.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Segment information for the years ended December 31, 2020, 2019 and 2018 is presented below (in thousands).

1 unchanged sentence

For the Year Ended December 31, 2020

Services Benefits and

Services National

Practices Corporate

and Other Total

Revenue $ 629,778 $ 297,758 $ 36,361 $ — $ 963,897

Operating expenses 525,209 248,357 32,637 19,148 825,351

Gross margin 104,569 49,401 3,724 ( 19,148 ) 138,546

Corporate general and administrative expenses — — — 46,066 46,066

Operating income (loss) 104,569 49,401 3,724 ( 65,214 ) 92,480

Other (expense) income:

Other income (expense):

Interest expense — ( 34 ) — ( 4,949 ) ( 4,983 )

Gain on sale of operations, net

Other (expense) income, net

(Loss) gain on sale of operations, net ( 612 ) 103 — — ( 509 )

Other income, net 262 196 1 16,041 16,500

Total other (expense) income ( 350 ) 265 1 11,092 11,008

Income (loss) from continuing operations before

income tax expense

Income (loss) from continuing operations before income tax expense $ 104,219 $ 49,666 $ 3,725 $ ( 54,122 ) $ 103,488

For the Year Ended December 31, 2019

Services Benefits and

Services National

Practices Corporate

and Other Total

Revenue $ 616,567 $ 296,228 $ 35,629 $ — $ 948,424

Operating expenses 515,240 246,245 32,474 29,537 823,496

Gross margin 101,327 49,983 3,155 ( 29,537 ) 124,928

Corporate general and administrative expenses — — — 44,406 44,406

2 unchanged sentences

Interest expense — ( 57 ) — ( 5,708 ) ( 5,765 )

Gain on sale of operations, net

Other income (expense), net

Total other income (expense)

Income (loss) from continuing operations before

income tax expense

Gain (loss) on sale of operations, net 578 — — ( 161 ) 417

Other (expense) income, net ( 121 ) 238 1 17,597 17,715

Total other income 457 181 1 11,728 12,367

Income (loss) from continuing operations before income tax expense $ 101,784 $ 50,164 $ 3,156 $ ( 62,215 ) $ 92,889

AND SUBSIDIARIES

1 unchanged sentence

For the Year Ended December 31, 2018

Services Benefits and

Services National

Practices Corporate

and Other Total

Revenue $ 600,926 $ 288,437 $ 32,640 $ — $ 922,003

Operating expenses 508,653 239,646 30,003 11,981 790,283

Gross margin 92,273 48,791 2,637 ( 11,981 ) 131,720

Corporate general and administrative expenses — — — 39,173 39,173

3 unchanged sentences

Gain on sale of operations, net — — — 1,025 1,025

Other income, net

Total other income

Income (loss) from continuing operations before

income tax expense

Other (expense) income, net ( 263 ) 493 3 ( 7,320 ) ( 7,087 )

Total other (expense) income ( 263 ) 391 3 ( 12,838 ) ( 12,707 )

Income (loss) from continuing operations before income tax expense $ 92,010 $ 49,182 $ 2,640 $ ( 63,992 ) $ 79,840

SUBSEQUENT EVENTS

Subsequent to December 31, 2020 up to February 16, 2021, we repurchased approximately 0.6 million shares of our common stock in the open market at a total cost of approximately $ 16.2 million.

On February 6, 2020, our Board of Directors authorized the continuation of the Share Repurchase Program, which has been renewed annually for the past sixteen years .

It is effective beginning April 1, 2020, to which the amount of shares to be purchased will be reset to 5.0 million, and expires one year from the respective effective date.

On February 11, 2021, our Board of Directors authorized the continuation of the Share Repurchase Program, which has been renewed annually for the past seventeen years .

It is effective beginning March 31, 2021, to which the amount of shares to be purchased will be reset to 5.0 million, and expires one year from the respective effective date.

This authorization allows us to purchase shares of our common stock (i) in the open market, (ii) in privately negotiated transactions, or (iii) under Rule 10b5-1trading plans.

We acquired substantially all of the assets of following business subsequent to December 31, 2019:

Effective February 1, 2020 , we acquired substantially all the assets of Alliance Insurance Services, Inc.

(“Alliance”), a provider of insurance and advisory services based in Washington, DC.

Operating results will be reported in the Benefits and Insurance Services practice group.

Effective February 1, 2020 , we acquired substantially all the assets of Pension Dynamics Company, LLC (“PD”), a full-service retirement and benefits plan advisor based in Pleasant Hill, California.

Operating results will be reported in the Benefits and Insurance Services practice group.

Effective February 1, 2020 , we acquired substantially all the assets of Sunshine Systems , (“Sunshine”), a payroll solutions provider based in Massachusetts.

Operating results will be reported in the Benefits and Insurance Services practice group.

Annualized revenue from the acquired businesses is estimated to be more than $ 6.0 million.

Effective January 1, 2021, we acquired substantially all the assets of the Middle Market Advisory Group (“MMA”).

MMA, based in Englewood, CO, is a provider of tax compliance and consulting services to middle market companies and family groups in the real estate, automotive, technology and SAAS, construction, and manufacturing industries.

Annualized revenue is estimated to be approximately $ 3.6 million.

MMA will be included as a component of our Financial Services practice group.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures