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BBSI Announces Second Quarter 2006 Operating Results and Financial Guidance for 3Q06

7/26/2006 Print Version

VANCOUVER, Wash.--(BUSINESS WIRE)--July 26, 2006--Barrett Business

Services, Inc. (Nasdaq:BBSI) reported today net income of $4,188,000

for the second quarter ended June 30, 2006, an improvement of

$1,283,000 or 44.2% over net income of $2,905,000 for the second

quarter of 2005. Diluted earnings per share for the 2006 second

quarter were $.36, as compared to diluted earnings per share of $.31

for the same quarter a year ago.

Net revenues for the second quarter ended June 30, 2006 totaled

$64.7 million, an increase of approximately $5.1 million or 8.6% over

the $59.6 million for the same quarter in 2005.

(Unaudited) (Unaudited)

($ in thousands) Second Quarter Ended Six Months Ended

June 30, June 30,

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

Results of Operations 2006 2005 2006 2005

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

Revenues:

Staffing services $ 30,567 $35,637 $ 57,228 $ 64,179

Professional employer

service fees 34,088 23,994 65,712 44,696

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

Total revenues 64,655 59,631 122,940 108,875

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

Cost of revenues:

Direct payroll costs 22,831 26,598 42,682 47,615

Payroll taxes and

benefits 20,437 15,303 43,274 31,000

Workers' compensation 7,198 6,295 13,752 11,701

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

Total cost of revenues 50,466 48,196 99,708 90,316

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

Gross margin 14,189 11,435 23,232 18,559

Selling, general and

administrative expenses 7,882 6,251 15,102 11,721

Depreciation and

amortization 329 217 630 453

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

Income from operations 5,978 4,967 7,500 6,385

Other income, net 670 (205) 1,302 (97)

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

Income before taxes 6,648 4,762 8,802 6,288

Provision for income taxes 2,460 1,857 3,257 2,452

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

Net income $ 4,188 $ 2,905 $ 5,545 $ 3,836

======== ======= ======== ========

Basic earnings per share $ .37 $ .33 $ .50 $ .44

======== ======= ======== ========

Weighted average basic

shares outstanding 11,203 8,717 11,140 8,681

======== ======= ======== ========

Diluted earnings per share $ .36 $ .31 $ .48 $ .41

======== ======= ======== ========

Weighted average diluted

shares outstanding 11,683 9,398 11,672 9,375

======== ======= ======== ========

The Company reports its 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 Six Months Ended

(in thousands) June 30, June 30,

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

2006 2005 2006 2005

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

Revenues:

Staffing services $ 30,567 $ 35,637 $ 57,228 $ 64,179

Professional employer

services 226,845 147,945 435,519 276,496

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

Total revenues 257,412 183,582 492,747 340,675

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

Cost of revenues:

Direct payroll costs 214,247 148,927 410,212 276,324

Payroll taxes and

benefits 20,437 15,303 43,274 31,000

Workers' compensation 8,539 7,917 16,029 14,792

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

Total cost of revenues 243,223 172,147 469,515 322,116

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

Gross margin $ 14,189 $ 11,435 $ 23,232 $ 18,559

======== ======== ======== ========

Gross revenues of $257.4 million for the second quarter ended June

30, 2006 rose 40.2% over the similar period in 2005. For the six

months ended June 30, 2006, gross revenues of $492.7 million increased

44.6% over the comparable period in 2005.

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

follows:

For the second quarters ended June 30, 2006 and 2005 (in thousands):

(Unaudited)

Three Months Ended June 30,

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

(in Gross Revenue Net Revenue

thousands) Reporting Method Reclassification Reporting Method

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

2006 2005 2006 2005 2006 2005

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

Revenues:

Staffing

services $ 30,567 $ 35,637 $ - $ - $30,567 $35,637

Profess-

ional

employer

services 226,845 147,945 (192,757) (123,951) 34,088 23,994

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

Total

revenues $257,412 $183,582 $(192,757) $(123,951) $64,655 $59,631

======== ======== ========= ========= ======= =======

Cost of

revenues: $243,223 $172,147 $(192,757) $(123,951) $50,466 $48,196

======== ======== ========= ========= ======= =======

For the six months ended June 30, 2006 and 2005 (in thousands):

(Unaudited)

Six Months Ended June 30,

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

(in Gross Revenue Net Revenue

thousands) Reporting Method Reclassification Reporting Method

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

2006 2005 2006 2005 2006 2005

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

Revenues:

Staffing

services $ 57,228 $ 64,179 $ - $ - $ 57,228 $ 64,179

Profess-

ional

employer

services 435,519 276,496 (369,807) (231,800) 65,712 44,696

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

Total

revenues $492,747 $340,675 $(369,807) $(231,800) $122,940 $108,875

======= ======== ========= ========= ======== =======

Cost of

revenues: $469,515 $322,116 $(369,807) $(231,800) $ 99,708 $ 90,316

======= ======== ========= ========= ======== =======

William W. Sherertz, President and Chief Executive Officer,

commented that: "The Company continues to effectively execute its

business plan and we look forward to a strong second half of the

year."

The following summarizes the unaudited consolidated balance sheets

at June 30, 2006 and December 31, 2005.

June 30, Dec. 31,

($ in thousands) 2006 2005

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

Assets

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

Current assets:

Cash and cash equivalents $ 57,604 $ 61,361

Marketable securities 3,545 3,548

Trade accounts receivable, net 33,023 26,328

Prepaid expenses and other 4,538 2,514

Deferred income taxes 6,171 5,864

Workers' compensation receivables for insured

claims 242 242

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

Total current assets 105,123 99,857

Marketable securities 401 396

Goodwill, net 26,536 22,516

Intangibles, net 89 5

Property, equipment and software, net 13,633 13,071

Restricted marketable securities and workers'

compensation deposits 2,347 2,041

Deferred income taxes 141 341

Other assets 3,054 1,528

Workers' compensation receivables for insured

claims 4,437 4,546

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

$155,761 $144,301

======== ========

Liabilities and Stockholders' Equity

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

Current liabilities:

Accounts payable $ 1,811 $ 1,366

Accrued payroll, payroll taxes and related

benefits 32,924 28,650

Other accrued liabilities 1,957 360

Workers' compensation claims liabilities 4,796 5,729

Workers' compensation claims liabilities for

insured claims 242 242

Safety incentives liabilities 7,864 7,687

Current portion of long-term debt - 348

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

Total current liabilities 49,594 44,382

Long-term debt, net of current portion - 1,094

Customer deposits 794 663

Long-term workers' compensation claims liabilities 8,179 8,532

Long-term workers' compensation liabilities for

insured claims 2,757 2,866

Deferred gain on sale and leaseback 854 914

Stockholders' equity 93,583 85,850

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

$155,761 $144,301

======== ========

Outlook for Third Quarter 2006

The Company also disclosed today limited financial guidance with

respect to its operating results for the third quarter ending

September 30, 2006. The Company expects gross revenues for the third

quarter of 2006 to range from $273 million to $278 million, an

increase of approximately 30% over the third quarter of 2005, and

anticipates diluted earnings per share for the third quarter of 2006

to range from $.47 to $.49 per share, as compared to $.40 per share

for the same period a year ago. Management expectations for diluted

earnings per share for the third quarter of 2006 equate to increases

over the third quarter of 2005 of approximately 30% in net income and

approximately 20% in diluted earnings per share. The percentage

increase is lower on a per share basis because the dilutive effect of

the late July 2005 follow-on equity offering only applied to

approximately two months of the 2005 third quarter. A reconciliation

of estimated gross revenues to estimated GAAP net revenues for the

third quarter of 2006 is not included because PEO revenues and cost of

PEO revenues for the period are not reasonably estimable.

On July 27, 2006, 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 2006 operating results. To participate

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

3113032. 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 27, 2006, at 12:00

p.m. PT and ending on August 3, 2006. To listen to the recording, dial

800-642-1687 and enter conference identification code 3113032.

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 2006, 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 our

primary markets, collectibility of accounts receivable, and the use of

net proceeds of approximately $33 million and other effects of the

Company's 2005 follow-on equity offering, among others. Other

important factors that may affect the Company's future prospects are

described in the Company's 2005 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, 360-828-0700

SOURCE: Barrett Business Services, Inc.