News

BBSI Announces Second Quarter 2005 Operating Results and Financial Guidance for 3Q05

8/3/2005 Print Version

PORTLAND, Ore.--(BUSINESS WIRE)--Aug. 3, 2005--Barrett Business

Services, Inc. (Nasdaq:BBSI) reported today net income of $2,905,000

for the second quarter ended June 30, 2005, an improvement of

$1,065,000 or 57.9% over net income of $1,840,000 for the second

quarter of 2004. Diluted earnings per share for the 2005 second

quarter were $.31, as compared to diluted earnings per share of $.20

for the same quarter a year ago, which have been adjusted for a

3-for-2 stock split effected on May 19, 2005.

Net revenues for the second quarter ended June 30, 2005 totaled

$59.6 million, an increase of approximately $11.9 million or 24.9%

over the $47.7 million for the same quarter in 2004.

(Unaudited) (Unaudited)

($ in thousands) Second Quarter Six Months

Ended Ended

June 30, June 30,

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

Results of Operations 2005 2004 2005 2004

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

Revenues:

Staffing services $ 35,637 $ 30,470 $ 64,179 $ 55,524

Professional employer service

fees 23,994 17,234 44,696 32,790

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

Total revenues 59,631 47,704 108,875 88,314

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

Cost of revenues:

Direct payroll costs 26,598 22,551 47,615 40,871

Payroll taxes and benefits 15,303 10,649 31,000 22,180

Workers' compensation 6,295 5,978 11,701 10,332

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

Total cost of revenues 48,196 39,178 90,316 73,383

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

Gross margin 11,435 8,526 18,559 14,931

Selling, general and

administrative

expenses 6,251 5,367 11,721 10,581

Depreciation and amortization 217 253 453 495

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

Income from operations 4,967 2,906 6,385 3,855

Other (expense) income, net (205) 38 (97) 59

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

Income before taxes 4,762 2,944 6,288 3,914

Provision for income taxes 1,857 1,104 2,452 1,468

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

Net income $ 2,905 $ 1,840 $ 3,836 $ 2,446

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

Basic earnings per share $ .33 $ .21 $ .44 $ .29

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

Weighted average basic shares

outstanding 8,717 8,573 8,681 8,565

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

Diluted earnings per share $ .31 $ .20 $ .41 $ .26

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

Weighted average diluted shares

outstanding 9,398 9,279 9,375 9,286

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

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"), are 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 Six Months Ended

(in thousands) June 30, June 30,

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

2005 2004 2005 2004

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

Revenues:

Staffing services $ 35,637 $ 30,470 $ 64,179 $ 55,524

Professional employer

services 147,945 97,984 276,496 189,704

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

Total revenues 183,582 128,454 340,675 245,228

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

Cost of revenues:

Direct payroll costs 148,927 102,390 276,324 195,757

Payroll taxes and benefits 15,303 10,648 31,000 22,179

Workers' compensation 7,917 6,890 14,792 12,361

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

Total cost of revenues 172,147 119,928 322,116 230,297

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

Gross margin $ 11,435 $ 8,526 $ 18,559 $ 14,931

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

Gross revenues of $183.6 million for the second quarter ended June

30, 2005 rose 42.9% over the similar period in 2004. For the six

months ended June 30, 2005, gross revenues of $340.7 million increased

38.9% over the comparable period in 2004.

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

follows:

For the second quarters ended June 30, 2005 and 2004 (in

thousands):

(Unaudited)

Three Months Ended June 30,

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

(in Gross Revenue Net Revenue

thousands) Reporting Method Reclassification Reporting Method

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

2005 2004 2005 2004 2005 2004

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

Revenues:

Staffing

services $ 35,637 $ 30,470 $ - $ - $35,637 $30,470

Professional

employer

services 147,945 97,984 (123,951) (80,750) 23,994 17,234

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

Total

revenues $183,582 $128,454 $(123,951) $(80,750) $59,631 $47,704

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

Cost of

revenues: $172,147 $119,928 $(123,951) $(80,750) $48,196 $39,178

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

    For the six months ended June 30, 2005 and 2004 (in thousands):

(Unaudited)

Six Months Ended June 30,

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

(in Gross Revenue Net Revenue

thousands) Reporting Method Reclassification Reporting Method

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

2005 2004 2005 2004 2005 2004

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

Revenues:

Staffing

services $ 64,179 $ 55,524 $ - $ - $ 64,179 $55,524

Pro-

fessional

employer

services 276,496 189,704 (231,800) (156,914) 44,696 32,790

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

Total

revenues $340,675 $245,228 $(231,800) $(156,914) $108,875 $88,314

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

Cost of

revenues: $322,116 $230,297 $(231,800) $(156,914) $ 90,316 $73,383

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

William W. Sherertz, President and Chief Executive Officer,

commented that: "We had a great quarter and our business continues to

grow. Our management team is proud that we were recently named the

number one company in The Seattle Times's Northwest Top 100, as well

as of our recent inclusion in the new Russell Microcap Index."

The following summarizes the unaudited consolidated balance sheets

at June 30, 2005 and December 31, 2004.

June 30, December 31,

($ in thousands) 2005 2004

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

Assets

------

Current assets:

Cash and cash equivalents $ 21,662 $ 12,153

Marketable securities 5,568 4,630

Trade accounts receivable, net 36,420 23,840

Prepaid expenses and other 2,074 1,364

Deferred income taxes 5,588 4,100

Workers' compensation receivables for insured

claims 213 213

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

Total current assets 71,525 46,300

Goodwill, net 22,516 22,516

Intangibles, net 16 25

Property, equipment and software, net 4,161 4,301

Restricted marketable securities and workers'

compensation deposits 2,060 1,702

Unrestricted marketable securities 391 -

Deferred income taxes 336 582

Other assets 405 401

Workers' compensation receivables for insured

claims 4,019 4,158

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

$ 105,429 $ 79,985

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

Liabilities and Stockholders' Equity

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

Current liabilities:

Current portion of long-term debt $ 348 $ 348

Income taxes payable 1,264 -

Accounts payable 585 994

Accrued payroll, payroll taxes and related

benefits 32,200 17,427

Workers' compensation claims liabilities 5,648 4,946

Workers' compensation claims liabilities for

insured claims 213 213

Safety incentives liabilities 6,758 4,807

Other accrued liabilities 1,255 414

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

Total current liabilities 48,271 29,149

Long-term debt, net of current portion 1,168 1,441

Customer deposits 670 608

Long-term workers' compensation claims

liabilities 6,712 4,840

Long-term workers' compensation liabilities for

insured claims 4,019 4,158

Deferred gain on sale and leaseback 976 1,036

Stockholders' equity 43,613 38,753

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

$ 105,429 $ 79,985

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

Outlook for Third Quarter 2005

The Company also disclosed today limited financial guidance with

respect to its operating results for the third quarter ending

September 30, 2005. The Company expects gross revenues for the third

quarter of 2005 to range from $198 million to $201 million, an

increase of approximately 38% over the third quarter of 2004, and

anticipates diluted earnings per share for the third quarter of 2005,

including the approximate effect of its recent follow-on equity

offering, to range from $.35 to $.37 per share, an increase of

approximately 33% over $.27 per share for the same period a year ago,

on a split-adjusted basis. Excluding the approximate effect of its

recent follow-on equity offering, anticipated diluted earnings per

share for the third quarter of 2005 would range from $.40 to $.42 per

share, an increase of approximately 52% over $.27 per share for the

same period last year, on a split-adjusted basis. Calculation of the

approximate effect of the Company's recent follow-on equity offering

is based on the issuance of 1,864,000 shares of common stock on August

2, 2005, as well as the issuance of an additional 320,850 shares

assuming exercise of the underwriters' over-allotment option prior to

its expiration on August 26, 2005. A reconciliation of estimated gross

revenues to estimated GAAP net revenues for the third quarter of 2005

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

period are not reasonably estimable.

On August 4, 2005 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 2005 operating results. To participate

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

8219159. 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 August 4, 2005 at 11:00 a.m. and

ending on August 11, 2005. To listen to the recording, dial

800-642-1687 and enter conference identification code 8219159.

BBSI provides a comprehensive range of 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 third quarter of 2005, 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 the effect of our recent

follow-on equity offering, among others. Other important factors that

may affect the Company's future prospects are described in the

Company's 2004 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.

CONTACT: Barrett Business Services, Inc.

William W. Sherertz, 503-220-0988

SOURCE: Barrett Business Services, Inc.