News

BBSI Announces Second Quarter 2011 Operating Results, Financial Guidance for 3Q11 and Conference Call

7/26/2011 Print Version

VANCOUVER, Wash., Jul 26, 2011 (GlobeNewswire via COMTEX) -- Barrett Business Services, Inc. (BBSI) (Nasdaq:BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Financial Results

Net revenues for the second quarter ended June 30, 2011 totaled $76.0 million, an increase of approximately $8.6 million or 12.8% over the $67.4 million for the same quarter in 2010.

Total non-GAAP gross revenues in the second quarter of 2011 increased 23.5% to $366.9 million over the $297.1 million in the same quarter of 2010 (see "Reconciliation of Non-GAAP Financial Measures" below).

Net income totaled $3.4 million for the second quarter ended June 30, 2011 compared to net income of $2.3 million for the second quarter of 2010. Diluted earnings per share for the 2011 second quarter were $.34, as compared to $.22 for the same quarter a year ago.

Net income without the benefit of a favorable tax rate for the second quarter of 2011 was $2.9 million or $.28 per diluted share.

Management Commentary

"The second quarter's results from operations were driven by a continued build in our net client count. Although we did not see a significant increase in hours worked or hiring from existing clients, we do continue to see a strong build of new clients as well as stability within our existing clients," said Michael L. Elich, President and CEO of BBSI. "We continue to make investments in infrastructure to support growth while looking to existing systems for improvement in efficiencies within operations and to support existing pipelines of new business opportunities," Elich continued.

Third Quarter 2011 Outlook

The Company disclosed today limited financial guidance with respect to its operating results for the third quarter ending September 30, 2011. The Company expects gross revenues for the third quarter of 2011 to range from $392 million to $397 million, as compared to $332.9 million for the third quarter of 2010, and anticipates diluted earnings for the third quarter of 2011 to range from $.46 to $.50 per share, as compared to diluted earnings per share of $.36 for the same period a year ago. The range of anticipated diluted earnings per share for the 2011 third quarter includes a favorable income tax rate benefit related to the effect of a much lower annual effective income tax rate attributable to the $10.0 million life insurance proceeds. Without the effect of the favorable tax rate benefit, the range of diluted earnings per share for the 2011 third quarter is estimated to be $.38 to $.42. A reconciliation of estimated gross revenues to estimated GAAP net revenues for the third quarter of 2011 is not included because PEO revenues and cost of PEO revenues for the period are not reasonably estimable.

Conference Call

BBSI will host a conference call tomorrow, Wednesday, July 27, 2011 at 12:00 p.m. Eastern time (9:00 a.m. Pacific) to discuss its second quarter 2011 results. The Company's President and CEO Michael L. Elich and CFO James D. Miller will host the call, which will be followed by a question and answer period.

Date: Wednesday, July 27, 2011 Time: 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time) Dial-In Number: (877) 214-1511 Conference ID#: 85722000

The conference call will be webcast live and available for replay via the Investor Relations section of the Company's website at www.barrettbusiness.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact Liolios Group at (949) 574-3860.

A replay of the call will be available after 3:00 p.m. Eastern Time on the same day and until Wednesday, August 3.

Toll-free replay number: (855) 859-2056 Replay pin number: 85722000

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles ("GAAP"), the Company is disclosing non-GAAP net income and non-GAAP gross revenues.

Without the effect of a favorable income tax rate benefit related to a much lower annual effective income tax rate resulting from $10.0 million of key man life insurance proceeds realized with respect to William W. Sherertz, the Company's President and Chief Executive Officer, who passed away January 20, 2011, the Company's net income for the 2011 second quarter was approximately $2.9 million or $.28 cents per share. A reconciliation of net income on the basis of generally accepted accounting principles ("GAAP") to the non-GAAP operating performance is as follows:

(Unaudited)

(in thousands, except per share Second Quarter Ended

amounts) June 30, 2011

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

GAAP Adjustments non-GAAP

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

Income before taxes $ 4,345 $ $ 4,345

Provision for income taxes 896 1,461

----------- 565 --------

Net income $ 3,449 $ 2,884

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

Basic income per share $ .34 $ .28

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

Weighted average basic shares

outstanding 10,196 10,196

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

Diluted income per share $ .34 $ .28

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

Weighted average diluted shares

outstanding 10,245 10,245

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

The Company is presenting the non-GAAP net income because it believes it is more reflective of the Company's actual operating results.

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 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,

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

2011 2010 2011 2010

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

As As

Restated Restated

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

Revenues:

Staffing services $ 30,518 $ 31,975 $ 58,850 $ 59,037

Professional employer

services 336,380 265,121 639,114 500,616

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

Total revenues 366,898 297,096 697,964 559,653

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

Cost of revenues:

Direct payroll costs 312,385 252,722 595,027 476,269

Payroll taxes and

benefits 28,886 22,861 60,649 47,489

Workers' compensation 12,346 9,781 23,409 18,798

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

Total cost of revenues 353,617 285,364 679,085 542,556

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

Gross margin $ 13,281 $ 11,732 $ 18,879 $ 17,097

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

Gross revenues of $366.9 million for the second quarter ended June 30, 2011 increased 23.5% over the similar period in 2010.

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

For the second quarters ended June 30, 2011 and 2010:

(Unaudited)

Three Months Ended June 30,

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

Gross Revenue Net Revenue

(in thousands) Reporting Method Reclassification Reporting Method

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

2011 2010 2011 2010 2011 2010

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

As

Restated

---------

Revenues:

Staffing services $ 30,518 $ 31,975 $ -- $ -- $ 30,518 $ 31,975

Professional

employer services 336,380 265,121 (290,885) (229,664) 45,495 35,457

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

Total revenues $ 366,898 $ 297,096 $ (290,885) $ (229,664) $ 76,013 $ 67,432

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

Cost of revenues $ 353,617 $ 285,364 $ (290,885) $ (229,664) $ 62,732 $ 55,700

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

For the six months ended June 30, 2011 and 2010:

(Unaudited)

Six Months Ended June 30,

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

Gross Revenue Net Revenue

(in thousands) Reporting Method Reclassification Reporting Method

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

2011 2010 2011 2010 2011 2010

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

As

Restated

----------

Revenues:

Staffing services $ 58,850 $ 59,037 $ -- $ -- $ 58,850 $ 59,037

Professional

employer services 639,114 500,616 (553,182) (433,961) 85,932 66,655

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

Total revenues $ 697,964 $ 559,653 $ (553,182) $ (433,961) $ 144,782 $ 125,692

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

Cost of revenues $ 679,085 $ 542,556 $ (553,182) $ (433,961) $ 125,903 $ 108,595

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

As described in Note 2 of the Consolidated Financial Statements in Item 15 in the Company's 2010 Annual Report on Form 10-K, the Company restated its financial statements as a result of an error related to legal expenses incurred for the administration of workers' compensation claims by Associated Insurance Company for Excess ("AICE"), the Company's captive insurance subsidiary formed January 1, 2007. The Company also determined to make a conforming change to its accounting method for legal expenses incurred for the administration of workers' compensation claims that arose prior to the formation of AICE. The Company's results of operations for the three and six months ended June 30, 2010 have been restated to reflect these changes.

About BBSI

BBSI (Nasdaq:BBSI) is a leading provider of business management solutions, combining human resource outsourcing and professional management consulting to create a unique operational platform that differentiates it from competitors. The Company's integrated platform is built upon expertise in payroll processing, employee benefits, workers' compensation coverage, risk management and workplace safety programs, and human resource administration. BBSI's partnerships help businesses of all sizes improve the efficiency of their operations. BBSI works with more than 2,000 clients across 25 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including gross revenues and earnings expectations for the third quarter of 2011, 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 retain current customers and attract new customers, future workers' compensation claims experience, the effect of changes in the workers' compensation regulatory environment in one or more of the Company's primary markets, the collectibility of accounts receivable, and the effect of conditions in the global capital markets on the Company's investment portfolio, among others. Other important factors that may affect the Company's future prospects are described in the Company's 2010 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.

             Barrett Business Services, Inc.

Condensed Balance Sheets

(Unaudited)

December

June 30, 31,

(in thousands) 2011 2010

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

Assets

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

Current assets:

Cash and cash equivalents $ 25,472 $ 30,924

Marketable securities 34,707 24,511

Trade accounts receivable,

net 59,738 37,596

Income taxes receivable 2,356 2,356

Prepaid expenses and other 2,426 1,798

Deferred income taxes 5,810 6,101

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

Total current assets 130,509 103,286

Marketable securities 10,007 5,921

Property, equipment and

software, net 14,819 15,037

Restricted marketable

securities and workers'

compensation deposits 9,430 8,811

Other assets 3,100 3,094

Workers' compensation

receivables for insured

claims 3,800 3,915

Goodwill, net 47,820 47,820

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

$ 219,485 $ 187,884

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

Liabilities and Stockholders'

Equity

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

Current liabilities:

Accounts payable $ 694 $ 964

Accrued payroll, payroll

taxes and related benefits 60,355 37,525

Income taxes payable 498 --

Other accrued liabilities 806 442

Workers' compensation claims

liabilities 14,850 14,768

Safety incentives liabilities 5,057 5,024

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

Total current liabilities 82,260 58,723

Long-term workers'

compensation claims

liabilities 23,504 21,847

Long-term workers'

compensation liabilities for

insured claims 2,642 2,686

Deferred income taxes 7,841 7,841

Customer deposits and other

long-term liabilities 1,393 1,422

Stockholders' equity 101,845 95,365

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

$ 219,485 $ 187,884

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

Barrett Business Services, Inc.

Consolidated Statements of Operations

(Unaudited) (Unaudited)

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

share amounts) June 30, June 30,

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

Results of Operations 2011 2010 2011 2010

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

As As

Restated Restated

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

Revenues:

Staffing services $ 30,518 $ 31,975 $ 58,850 $ 59,037

Professional employer

service fees 45,495 35,457 85,932 66,655

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

Total revenues 76,013 67,432 144,782 125,692

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

Cost of revenues:

Direct payroll costs 23,093 24,237 44,541 44,673

Payroll taxes and benefits 28,886 22,861 60,649 47,489

Workers' compensation 10,753 8,602 20,713 16,433

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

Total cost of revenues 62,732 55,700 125,903 108,595

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

Gross margin 13,281 11,732 18,879 17,097

Selling, general and

administrative expenses 8,871 8,407 17,698 16,631

Depreciation and

amortization 331 333 666 710

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

Income (loss) from

operations 4,079 2,992 515 (244)

Life insurance proceeds -- -- 10,000 --

Other income, net 266 380 720 665

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

Income before taxes 4,345 3,372 11,235 421

Provision for (benefit from)

income taxes 896 1,113 2,240 (135)

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

Net income $ 3,449 $ 2,259 $ 8,995 $ 556

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

Basic income per share $ .34 $ .22 $ .88 $ .05

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

Weighted average basic

shares outstanding 10,196 10,446 10,198 10,456

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

Diluted income per share $ .34 $ .22 $ .88 $ .05

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

Weighted average diluted

shares outstanding 10,245 10,485 10,246 10,490

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

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SOURCE: Barrett Business Services, Inc.

CONTACT: Michael L. Elich
President and Chief Executive Officer
Telephone 360-828-0700