News

Barrett Business Services, Inc. Announces Third Quarter 2004 Operating Results and Financial Guidance for 4Q04

10/27/2004 Print Version

PORTLAND, Ore., Oct. 27 /PRNewswire-FirstCall/ -- Barrett Business

Services, Inc. (Nasdaq: BBSI) reported today net income of $2,448,000 for the

third quarter ended September 30, 2004, an improvement of $1,505,000 over net

income of $943,000 for the third quarter of 2003. Diluted earnings per share

for the 2004 third quarter was $.40, as compared to diluted earnings per share

of $.16 for the same quarter a year ago.

Net revenues for the third quarter ended September 30, 2004 totaled $54.7

million, an increase of approximately $19.9 million or 57.2% over the $34.8

million for the same quarter in 2003.

(Unaudited) (Unaudited)

Results of Operations Third Quarter Ended Nine Months Ended

(in thousands, except per September 30, September 30,

share amounts) 2004 2003 2004 2003

Revenues:

Staffing services $35,673 $26,727 $91,197 $69,883

Professional employer

service fees 19,006 8,046 51,796 16,189

Total revenues 54,679 34,773 142,993 86,072

Cost of revenues:

Direct payroll costs 26,436 19,740 67,307 51,617

Payroll taxes and benefits 11,376 6,181 33,556 14,371

Workers' compensation 6,094 2,622 15,774 6,029

Total cost of revenues 43,906 28,543 116,637 72,017

Gross margin 10,773 6,230 26,356 14,055

Selling, general and

administrative expenses 6,404 4,461 17,637 11,926

Depreciation and amortization 257 256 752 807

Income from operations 4,112 1,513 7,967 1,322

Other income (expense), net 73 (62) 132 (136)

Income before taxes 4,185 1,451 8,099 1,186

Provision for income taxes 1,737 508 3,205 419

Net income $2,448 $943 $4,894 $767

Basic earnings per share $.43 $.17 $.86 $.13

Weighted average basic shares

outstanding 5,739 5,645 5,720 5,700

Diluted earnings per share $.40 $.16 $.80 $.13

Weighted average diluted shares

outstanding 6,144 5,927 6,140 5,805

The Company changed its reporting of PEO revenues from a gross basis to a

net basis in 2002. 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)

Third Quarter Ended Nine Months Ended

($ in thousands) September 30, September 30,

2004 2003 2004 2003

Revenues:

Staffing services $35,673 $26,727 $91,197 $69,883

Professional employer

services 109,435 46,886 299,139 95,767

Total revenues 145,108 73,613 390,336 165,650

Cost of revenues:

Direct payroll costs 115,580 57,977 311,337 130,592

Payroll taxes and benefits 11,376 6,181 33,555 14,371

Workers' compensation 7,379 3,225 19,088 6,632

Total cost of revenues 134,335 67,383 363,980 151,595

Gross margin $ 10,773 $6,230 $ 26,356 $ 14,055

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

For the third quarters ended September 30, 2004 and 2003 (in thousands):

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

2004 2003 2004 2003 2004 2003

Revenues:

Staffing

services $35,673 $26,727 $-- $-- $35,673 $26,727

Professional

employer

services 109,435 46,886 (90,429) (38,840) 19,006 8,046

Total

revenues $145,108 $73,613 $(90,429) $(38,840) $54,679 $34,773

Cost of

revenues: $134,335 $67,383 $(90,429) $(38,840) $43,906 $28,543

For the nine months ended September 30, 2004 and 2003 (in thousands):

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

2004 2003 2004 2003 2004 2003

Revenues:

Staffing

services $91,197 $69,883 $-- $-- $91,197 $69,883

Professional

employer

services 299,139 95,767 (247,343) (79,578) 51,796 16,189

Total

revenues $390,336 $165,650 $(247,343) $(79,578) $142,993 $86,072

Cost of

revenues: $363,980 $151,595 $(247,343) $(79,578) $116,637 $72,017

William W. Sherertz, President and Chief Executive Officer, commented

that: "We are very pleased with the continued momentum of our earnings and

revenue growth, as well as the strengthening of our balance sheet. Our third

quarter represents the eighth consecutive quarter in which our operating

results improved over the comparable period."

The following summarizes the unaudited consolidated balance sheets at

September 30, 2004 and December 31, 2003.

($ in thousands) September 30, December 31,

2004 2003

Assets

Current assets:

Cash and cash equivalents $10,009 $7,785

Marketable securities 4,503 --

Trade accounts receivable, net 30,523 18,481

Prepaid expenses and other 1,243 958

Deferred income taxes 5,168 2,196

Total current assets 51,446 29,420

Goodwill, net 21,738 18,749

Intangibles, net 30 13

Property, equipment and software, net 4,439 3,367

Restricted marketable securities and workers'

compensation deposits 1,775 1,647

Deferred income taxes 758 1,041

Other assets 399 436

$80,585 $54,673

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt $348 $88

Income taxes payable 2,685 --

Accounts payable 430 727

Accrued payroll, payroll taxes and related

benefits 23,829 13,881

Workers' compensation claims liabilities 4,977 3,886

Safety incentives liabilities 4,534 2,007

Other accrued liabilities 606 361

Total current liabilities 37,409 20,950

Long-term debt, net of current portion 1,478 400

Customer deposits 501 455

Long-term workers' compensation claims

liabilities 4,576 1,031

Other long-term liabilities -- 45

Deferred gain on sale and leaseback 1,067 1,158

Stockholders' equity 35,554 30,634

$80,585 $54,673

OUTLOOK FOR FOURTH QUARTER 2004

The Company also disclosed today limited financial guidance with respect

to its operating results for the fourth quarter ending December 31, 2004. The

Company expects gross revenues for the fourth quarter to range from $144

million to $146 million and anticipates diluted earnings per share to range

from $.35 to $.38 per share for the same period. A reconciliation of

estimated gross revenues to estimated GAAP net revenues for the fourth quarter

of 2004 is not included because PEO revenues and cost of PEO revenues for the

period are not reasonably estimable.

On October 28, 2004 at 9:00 a.m. Pacific Time, William W. Sherertz and

Michael D. Mulholland will host an investor telephone conference call to

discuss third quarter 2004 operating results. To participate in the call,

dial (877)356-3717. The call identification number is 1430173. 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 October

28, 2004 at 11:00 a.m. and ending November 4, 2004. To listen to the

recording, dial (800) 642-1687 and enter conference identification code

1430173.

BBSI provides human resource management solutions to large and small

companies throughout many regions of the United States.

Statements in this release about future events or performance, including

earnings expectations for the fourth quarter of 2004, 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, future workers' compensation claims

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

environment in one or more of our primary markets, collectibility of accounts

receivable, and availability of funding for working capital purposes, among

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

prospects are described in the Company's 2003 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.

SOURCE Barrett Business Services, Inc.

10/27/2004

CONTACT: William W. Sherertz, Chief Executive Officer of Barrett

Business Services, Inc., +1-503-220-0988

Web site: http://www.barrettbusiness.com

(BBSI)

10/27/2004 16:02 EDT http://www.prnewswire.com