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BBSI Announces Second Quarter 2007 Operating Results, Financial Guidance for 3Q07 and Conference Call

7/25/2007 Print Version

VANCOUVER, Wash.--(BUSINESS WIRE)--July 25, 2007--Barrett Business

Services, Inc. (Nasdaq:BBSI) reported today net income of $4.9 million

for the second quarter ended June 30, 2007, an improvement of $693,000

or 16.5% over net income of $4,188,000 for the second quarter of 2006.

Diluted earnings per share for the 2007 second quarter were $.42, as

compared to diluted earnings per share of $.36 for the same quarter a

year ago.

Net revenues for the second quarter ended June 30, 2007 totaled

$63.9 million, a decrease of approximately $769,000 or 1.2% from the

$64.7 million for the same quarter in 2006.

(Unaudited) (Unaudited)

($ in thousands, except per Second Quarter Ended Six Months Ended

share amounts)

June 30, June 30,

-------------------- ------------------

Results of Operations 2007 2006 2007 2006

----------------------------- ----------- -------- --------- --------

Revenues:

Staffing services $29,747 $ 30,567 $ 57,762 $ 57,228

Professional employer

service fees 34,139 34,088 66,712 65,712

----------- -------- --------- --------

Total revenues 63,886 64,655 124,474 122,940

----------- -------- --------- --------

Cost of revenues:

Direct payroll costs 22,416 22,831 43,558 42,682

Payroll taxes and benefits 20,542 20,437 44,453 43,274

Workers' compensation 5,964 7,198 11,808 13,752

----------- -------- --------- --------

Total cost of revenues 48,922 50,466 99,819 99,708

----------- -------- --------- --------

Gross margin 14,964 14,189 24,655 23,232

Selling, general and

administrative

expenses 7,727 7,882 15,115 15,102

Depreciation and amortization 316 329 665 630

----------- -------- --------- --------

Income from operations 6,921 5,978 8,875 7,500

Other income, net 790 670 1,575 1,302

----------- -------- --------- --------

Income before taxes 7,711 6,648 10,450 8,802

Provision for income taxes 2,830 2,460 3,841 3,257

----------- -------- --------- --------

Net income $ 4,881 $ 4,188 $ 6,609 $ 5,545

----------- -------- --------- --------

Basic earnings per share $ .43 $ .37 $ .58 $ .50

----------- -------- --------- --------

Weighted average basic shares

outstanding 11,263 11,203 11,259 11,140

----------- -------- --------- --------

Diluted earnings per share $ .42 $ .36 $ .57 $ .48

----------- -------- --------- --------

Weighted average diluted

shares

outstanding 11,690 11,683 11,686 11,672

----------- -------- --------- --------

The Company reports its Professional Employer Organization

services ("PEO") revenues on a net basis because it is not the primary

obligor for the services provided by the Company's PEO clients to

their customers. The gross revenues and cost of revenues information

below, although not in accordance with generally accepted accounting

principles ("GAAP"), is presented for comparison purposes and because

management believes such information is more informative as to the

level of the Company's business activity and more useful in managing

its operations.

(Unaudited) (Unaudited)

Second Quarter Ended Six Months Ended

(in thousands) June 30, June 30,

-------------------- --------------------

2007 2006 2007 2006

----------- -------- ----------- --------

Revenues:

Staffing services $ 29,747 $ 30,567 $ 57,762 $ 57,228

Professional employer

services 237,957 226,845 467,470 435,519

----------- -------- ----------- --------

Total revenues 267,704 257,412 525,232 492,747

----------- -------- ----------- --------

Cost of revenues:

Direct payroll costs 224,605 214,247 441,233 410,212

Payroll taxes and benefits 20,542 20,437 44,453 43,274

Workers' compensation 7,593 8,539 14,891 16,029

----------- -------- ----------- --------

Total cost of revenues 252,740 243,223 500,577 469,515

----------- -------- ----------- --------

Gross margin $ 14,964 $ 14,189 $ 24,655 $ 23,232

----------- -------- ----------- --------

Gross revenues of $267.7 million for the second quarter ended June

30, 2007 rose 4.0% over the similar period in 2006. For the first six

months of 2007, gross revenues of $525.2 million increased 6.6% over

the comparable 2006 period.

A reconciliation of non-GAAP gross revenues to net revenues is as

follows:

For the second quarters ended June 30, 2007 and 2006:

(Unaudited)

Three Months Ended June 30,

-------------------------------------------------------

Gross Revenue Net Revenue

(in Reporting Method Reclassification Reporting

thousands) Method

----------------- --------------------- ---------------

2007 2006 2007 2006 2007 2006

-------- -------- ---------- ---------- ------- -------

Revenues:

Staffing

services $ 29,747 $ 30,567 $ - $ - $29,747 $30,567

Professional

employer

services 237,957 226,845 (203,818) (192,757) 34,139 34,088

-------- -------- ---------- ---------- ------- -------

Total

revenues $267,704 $257,412 $(203,818) $(192,757) $63,886 $64,655

-------- -------- ---------- ---------- ------- -------

Cost of

revenues $252,740 $243,223 $(203,818) $(192,757) $48,922 $50,466

-------- -------- ---------- ---------- ------- -------

For the six months ended June 30, 2007 and 2006:

(Unaudited)

Six Months Ended June 30,

---------------------------------------------------------

Gross Revenue Net Revenue

(in Reporting Method Reclassification Reporting Method

thousands)

----------------- --------------------- -----------------

2007 2006 2007 2006 2007 2006

-------- -------- ---------- ---------- -------- --------

Revenues:

Staffing

services $ 57,762 $ 57,228 $ - $ - $ 57,762 $ 57,228

Professional

employer

services 467,470 435,519 (400,758) (369,807) 66,712 65,712

-------- -------- ---------- ---------- -------- --------

Total

revenues $525,232 $492,747 $(400,758) $(369,807) $124,474 $122,940

-------- -------- ---------- ---------- -------- --------

Cost of

revenues $500,577 $469,515 $(400,758) $(369,807) $ 99,819 $ 99,708

-------- -------- ---------- ---------- -------- --------

William W. Sherertz, President and Chief Executive Officer,

commented: "We are pleased with our record second quarter earnings and

anticipate a stronger performance in the third quarter."

The following summarizes the unaudited consolidated balance sheets

at June 30, 2007 and December 31, 2006.

June 30, Dec. 31,

(in thousands) 2007 2006

--------- ---------

Assets

-----------------------------------------------

Current assets:

Cash and cash equivalents $ 71,025 $ 69,874

Marketable securities 3,625 3,159

Trade accounts receivable, net 36,906 31,328

Prepaid expenses and other 2,109 1,940

Deferred income taxes 4,182 4,699

Workers' compensation receivables for insured

claims 225 225

--------- ---------

Total current assets 118,072 111,225

Marketable securities 411 406

Goodwill, net 28,036 27,536

Intangibles, net 62 75

Property, equipment and software, net 13,279 13,502

Restricted marketable securities and workers'

compensation deposits 2,656 2,616

Other assets 1,893 2,143

Workers' compensation receivables for insured

claims 4,295 4,678

--------- ---------

$168,704 $162,181

--------- ---------

Liabilities and Stockholders' Equity

--------------------------------------------------

Current liabilities:

Accounts payable $ 1,327 $ 1,545

Accrued payroll, payroll taxes and related

benefits 34,788 33,372

Income taxes payable 847 -

Other accrued liabilities 937 516

Workers' compensation claims liabilities 3,253 3,843

Workers' compensation claims liabilities for

insured claims 225 225

Safety incentives liabilities 7,815 7,519

--------- ---------

Total current liabilities 49,192 47,020

Customer deposits 689 817

Long-term workers' compensation claims

liabilities 3,976 5,295

Long-term workers' compensation liabilities for

insured claims 2,931 3,011

Deferred income taxes 2,449 1,545

Deferred gain on sale and leaseback 732 793

Stockholders' equity 108,735 103,700

--------- ---------

$168,704 $162,181

--------- ---------

Outlook for Third Quarter 2007

The Company also disclosed today limited financial guidance with

respect to its operating results for the third quarter ending

September 30, 2007. The Company expects gross revenues for the third

quarter of 2007 to range from $296 million to $302 million, an

increase of approximately 9.2% over the third quarter of 2006, and

anticipates diluted earnings per share for the third quarter of 2007

to range from $.56 to $.59 per share, an increase of approximately

19.8% over the $.48 per share for the same period a year ago. These

projected operating results include the effect of the July 2, 2007

acquisition of Strategic Staffing, Inc. A reconciliation of estimated

gross revenues to estimated GAAP net revenues for the third quarter of

2007 is not included because PEO revenues and cost of PEO revenues for

the period are not reasonably estimable.

Conference Call

On July 26 at 9:00 a.m. Pacific Time, William W. Sherertz and

Michael D. Mulholland will host an investor telephone conference call

to discuss second quarter 2007 operating results. To participate in

the call, dial (877) 356-3717. The call identification number is

7359648. The conference call will also be webcast live at

www.barrettbusiness.com. To access the webcast, click on the Investor

Relations section of the Web site and select Webcast. A replay of the

call will be available beginning Thursday, July 26, 2007 at 12:00 p.m.

PT and ending on August 2, 2007. To listen to the recording, dial

(800) 642-1687 and enter conference identification code 7359648.

Statements in this release about future events or performance,

including earnings expectations for the third quarter of 2007, are

forward-looking statements, which involve known and unknown risks,

uncertainties and other factors that may cause the actual results of

the Company to be materially different from any future results

expressed or implied by such forward-looking statements. Factors that

could affect future results include economic conditions in the

Company's service areas, the effect of changes in the Company's mix of

services on gross margin, the Company's ability to successfully

integrate acquired businesses with its existing operations, future

workers' compensation claims experience, the effect of changes in the

workers' compensation regulatory environment in one or more of its

primary markets and the collectibility of accounts receivable, among

others. Other important factors that may affect the Company's future

prospects are described in the Company's 2006 Annual Report on Form

10-K. Although forward-looking statements help to provide complete

information about the Company, readers should keep in mind that

forward-looking statements may be less reliable than historical

information. The Company undertakes no obligation to update or revise

forward-looking statements in this release to reflect events or

changes in circumstances that occur after the date of this release.

BBSI provides a comprehensive range of human resource management

solutions to large and small companies throughout many regions of the

United States.

CONTACT: Barrett Business Services, Inc.

William W. Sherertz

President and Chief Executive Officer

Telephone: 360-828-0700

SOURCE: Barrett Business Services, Inc.