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BBSI Announces Third Quarter 2006 Operating Results, Financial Guidance for 4Q06 and Investment Conference Presentation

10/25/2006 Print Version

VANCOUVER, Wash.--(BUSINESS WIRE)--Oct. 25, 2006--Barrett Business

Services, Inc. (NASDAQ:BBSI) reported today net income of $5,562,000

for the third quarter ended September 30, 2006, an improvement of

$1,222,000 or 28.2% over net income of $4,340,000 for the third

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

were $.48, as compared to diluted earnings per share of $.40 for the

same quarter a year ago.

Net revenues for the third quarter ended September 30, 2006

totaled $69.4 million, an increase of approximately $4.8 million or

7.4% over the $64.6 million for the same quarter in 2005.

(Unaudited) (Unaudited)

($ in thousands, except per

share amounts) Third Quarter Ended Nine Months Ended

September 30, September 30,

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

Results of Operations 2006 2005 2006 2005

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

Revenues:

Staffing services $33,506 $36,668 $90,734 $100,847

Professional employer

service fees 35,917 27,883 101,629 72,579

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

Total revenues 69,423 64,551 192,363 173,426

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

Cost of revenues:

Direct payroll costs 25,145 27,527 67,827 75,142

Payroll taxes and benefits 20,403 16,651 63,677 47,651

Workers' compensation 7,207 6,664 20,959 18,365

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

Total cost of revenues 52,755 50,842 152,463 141,158

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

Gross margin 16,668 13,709 39,900 32,268

Selling, general and

administrative

expenses 8,362 6,906 23,464 18,627

Depreciation and

amortization 335 239 965 692

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

Income from operations 7,971 6,564 15,471 12,949

Other income, net 733 325 2,035 228

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

Income before taxes 8,704 6,889 17,506 13,177

Provision for income taxes 3,142 2,549 6,399 5,001

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

Net income $5,562 $4,340 $11,107 $8,176

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

Basic earnings per share $.49 $.43 $.99 $.89

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

Weighted average basic

shares outstanding 11,247 10,209 11,176 9,190

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

Diluted earnings per share $.48 $.40 $.95 $.83

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

Weighted average diluted

shares outstanding 11,659 10,884 11,668 9,878

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

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)

Third Quarter Nine Months Ended

(in thousands) September 30, September 30,

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

2006 2005 2006 2005

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

Revenues:

Staffing services $33,506 $36,668 $90,734 $100,847

Professional employer

services 240,314 175,404 675,833 451,900

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

Total revenues 273,820 212,072 766,567 552,747

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

Cost of revenues:

Direct payroll costs 228,643 172,994 638,855 449,318

Payroll taxes and benefits 20,403 16,651 63,677 47,651

Workers' compensation 8,106 8,718 24,135 23,510

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

Total cost of revenues 257,152 198,363 726,667 520,479

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

Gross margin $16,668 $13,709 $39,900 $32,268

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

Gross revenues of $273.8 million for the third quarter ended

September 30, 2006 rose 29.1% over the similar period in 2005. For the

nine months ended September 30, 2006, gross revenues of $766.6 million

increased 38.7% over the comparable period in 2005.

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

follows:

For the third quarters ended September 30, 2006 and 2005 (in

thousands):

(Unaudited)

Three Months Ended September 30,

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

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

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

2006 2005 2006 2005 2006 2005

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

Revenues:

Staffing

services $33,506 $36,668 $- $- $33,506 $36,668

Professional

employer

services 240,314 175,404 (204,397) (147,521) 35,917 27,883

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

Total

revenues $273,820 $212,072 $(204,397) $(147,521) $69,423 $64,551

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

Cost of

revenues: $257,152 $198,363 $(204,397) $(147,521) $52,755 $50,842

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

For the nine months ended September 30, 2006 and 2005 (in

thousands):

(Unaudited)

Nine Months Ended September 30,

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

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

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

2006 2005 2006 2005 2006 2005

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

Revenues:

Staffing

services $90,734 $100,847 $- $- $90,734 $100,847

Professional

employer

services 675,833 451,900 (574,204) (379,321) 101,629 72,579

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

Total

revenues $766,567 $552,747 $(574,204) $(379,321) $192,363 $173,426

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

Cost of

revenues: $726,667 $520,479 $(574,204) $(379,321) $152,463 $141,158

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

William W. Sherertz, President and Chief Executive Officer,

commented: "We are very pleased about achieving record levels for both

earnings and revenues during the third quarter, which bode well for a

strong 2007."

The following summarizes the unaudited consolidated balance sheets

at September 30, 2006 and December 31, 2005.

September December

30, 31,

(in thousands) 2006 2005

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

Assets

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

Current assets:

Cash and cash equivalents $60,083 $61,361

Marketable securities 2,291 3,548

Trade accounts receivable, net 35,265 26,328

Prepaid expenses and other 3,106 2,514

Deferred income taxes 6,153 5,864

Workers' compensation receivables for insured

claims 242 242

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

Total current assets 107,140 99,857

Marketable securities 404 396

Goodwill, net 26,536 22,516

Intangibles, net 82 5

Property, equipment and software, net 13,587 13,071

Restricted marketable securities and workers'

compensation deposits 2,492 2,041

Deferred income taxes 141 341

Other assets 3,041 1,528

Workers' compensation receivables for insured

claims 4,389 4,546

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

$157,812 $144,301

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

Liabilities and Stockholders' Equity

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

Current liabilities:

Accounts payable $1,323 $1,366

Accrued payroll, payroll taxes and related

benefits 31,910 28,650

Other accrued liabilities 908 360

Workers' compensation claims liabilities 4,575 5,729

Workers' compensation claims liabilities for

insured claims 242 242

Safety incentives liabilities 7,534 7,687

Current portion of long-term debt - 348

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

Total current liabilities 46,492 44,382

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

Customer deposits 783 663

Long-term workers' compensation claims liabilities 7,791 8,532

Long-term workers' compensation liabilities for

insured claims 2,709 2,866

Deferred gain on sale and leaseback 823 914

Stockholders' equity 99,214 85,850

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

$157,812 $144,301

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

Outlook for Fourth Quarter 2006

The Company also disclosed today limited financial guidance with

respect to its operating results for the fourth quarter ending

December 31, 2006. The Company expects gross revenues for the fourth

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

increase of approximately 29% over the fourth quarter of 2005, and

anticipates diluted earnings per share for the fourth quarter of 2006

to range from $.43 to $.46 per share, an increase of approximately 20%

over the $.37 per share for the same period a year ago. A

reconciliation of estimated gross revenues to estimated GAAP net

revenues for the fourth quarter of 2006 is not included because PEO

revenues and cost of PEO revenues for the period are not reasonably

estimable.

Conference Call

On October 26, 2006 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 2006 operating results. To participate

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

8556697. The conference call will also be webcast live at

ww.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, October 26, 2006 at 12:00

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

dial (800) 642-1687 and enter conference identification code 8556697.

Investment Conference Presentation

William Sherertz will speak to the investment community at the

SunTrust Robinson Humphrey Business Services Conference to be held

Thursday, November 9, 2006 in New York City at the LeParker Meridien

Hotel.

Statements in this release about future events or performance,

including earnings expectations for the fourth 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.

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, 360-828-0700

SOURCE: Barrett Business Services, Inc.