News

BBSI Announces Fourth Quarter 2006 Operating Results, Financial Guidance for 1Q07 and Conference Call

2/8/2007 Print Version

VANCOUVER, Wash.--(BUSINESS WIRE)--Feb. 8, 2007--Barrett Business

Services, Inc. (Nasdaq: BBSI) reported today net income of $5.2

million for the fourth quarter ended December 31, 2006, an improvement

of $915,000 or 21.2% over net income of $4.3 million for the fourth

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

quarter were $.45, as compared to diluted earnings per share of $.37

for the same quarter a year ago.

Net revenues for the fourth quarter ended December 31, 2006

totaled $66.8 million, an increase of approximately $8.8 million or

15.2% over the $58.0 million for the same quarter in 2005.

(Unaudited) (Unaudited)

($ in thousands, except per Fourth Quarter Year

share amounts) Ended Ended

December 31, December 31,

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

Results of Operations 2006 2005 2006 2005

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

Revenues:

Staffing services $32,766 $29,251 $123,500 $130,098

Professional employer service

fees 34,055 28,712 135,684 101,291

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

Total revenues 66,821 57,963 259,184 231,389

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

Cost of revenues:

Direct payroll costs 24,849 21,864 92,676 97,006

Payroll taxes and benefits 20,079 16,238 83,756 63,889

Workers' compensation 6,240 6,302 27,199 24,667

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

Total cost of revenues 51,168 44,404 203,631 185,562

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

Gross margin 15,653 13,559 55,553 45,827

Selling, general and

administrative

expenses 8,140 7,043 31,604 25,670

Depreciation and amortization 341 282 1,306 974

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

Income from operations 7,172 6,234 22,643 19,183

Other income, net 812 519 2,847 747

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

Income before taxes 7,984 6,753 25,490 19,930

Provision for income taxes 2,755 2,439 9,154 7,440

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

Net income $ 5,229 $ 4,314 $ 16,336 $ 12,490

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

Basic earnings per share $ .46 $ .39 $ 1.46 $ 1.29

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

Weighted average basic shares

outstanding 11,251 11,018 11,194 9,647

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

Diluted earnings per share $ .45 $ .37 $ 1.40 $ 1.21

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

Weighted average diluted shares

outstanding 11,680 11,739 11,671 10,343

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

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)

Fourth Quarter Year Ended

(in thousands) December 31, December 31,

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

2006 2005 2006 2005

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

Revenues:

Staffing services $ 32,766 $ 29,251 $ 123,500 $130,098

Professional employer

services 241,065 183,843 916,898 635,743

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

Total revenues 273,831 213,094 1,040,398 765,841

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

Cost of revenues:

Direct payroll costs 230,555 175,924 869,410 625,242

Payroll taxes and benefits 20,079 16,237 83,756 63,888

Workers' compensation 7,544 7,374 31,679 30,884

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

Total cost of revenues 258,178 199,535 984,845 720,014

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

Gross margin $ 15,653 $ 13,559 $ 55,553 $ 45,827

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

Gross revenues of $273.8 million for the fourth quarter ended

December 31, 2006 rose 28.5% over the similar period in 2005. For the

year ended December 31, 2006, gross revenues of $1.04 billion

increased 35.9% over 2005.

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

follows:

For the fourth quarters ended December 31, 2006 and 2005 (in

thousands):

(Unaudited)

Three Months Ended December 31,

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

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

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

2006 2005 2006 2005 2006 2005

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

Revenues:

Staffing

services $ 32,766 $ 29,251 $ - $ - $32,766 $29,251

Professional

employer

services 241,065 183,843 (207,010) (155,131) 34,055 28,712

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

Total

revenues $273,831 $213,094 $(207,010) $(155,131)$66,821 $57,963

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

Cost of

revenues: $258,178 $199,535 $(207,010) $(155,131)$51,168 $44,404

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

    For the years ended December 31, 2006 and 2005 (in thousands):

(Unaudited)

Year Ended December 31,

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

Gross Revenue Net Revenue

Reporting Reclassification Reporting

Method Method

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

2006 2005 2006 2005 2006 2005

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

Revenues:

Staffing

services $ 123,500 $130,098 $ - $ - $123,500 $130,098

Pro-

fessional

employer

services 916,898 635,743 (781,214) (534,452) 135,684 101,291

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

Total

revenues$1,040,398 $765,841 $(781,214)$(534,452)$259,184 $231,389

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

Cost

of

revenues: $ 984,845 $720,014 $(781,214)$(534,452)$203,631 $185,562

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

William W. Sherertz, President and Chief Executive Officer,

commented: "We are pleased with another strong quarter and surpassing

the $1 billion milestone in gross revenues for 2006."

The following summarizes the unaudited consolidated balance sheets

at December 31, 2006 and December 31, 2005.

December December

31, 31,

(in thousands) 2006 2005

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

Assets

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

Current assets:

Cash and cash equivalents $ 69,874 $ 61,361

Marketable securities 3,159 3,548

Trade accounts receivable, net 31,328 26,328

Prepaid expenses and other 1,940 2,514

Deferred income taxes 4,699 5,864

Workers' compensation receivables for insured

claims 225 242

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

Total current assets 111,225 99,857

Marketable securities 406 396

Goodwill, net 27,536 22,516

Intangibles, net 75 5

Property, equipment and software, net 13,502 13,071

Restricted marketable securities and workers'

compensation deposits 2,616 2,041

Deferred income taxes - 341

Other assets 2,143 1,528

Workers' compensation receivables for insured

claims 4,678 4,546

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

$162,181 $144,301

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

Liabilities and Stockholders' Equity

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

Current liabilities:

Accounts payable $ 1,545 $ 1,366

Accrued payroll, payroll taxes and related

benefits 33,372 28,650

Other accrued liabilities 516 360

Workers' compensation claims liabilities 3,843 5,729

Workers' compensation claims liabilities for

insured claims 225 242

Safety incentives liabilities 7,519 7,687

Current portion of long-term debt - 348

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

Total current liabilities 47,020 44,382

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

Customer deposits 817 663

Long-term workers' compensation claims liabilities 5,295 8,532

Long-term workers' compensation liabilities for

insured claims 3,011 2,866

Deferred income taxes 1,545 -

Deferred gain on sale and leaseback 793 914

Stockholders' equity 103,700 85,850

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

$162,181 $144,301

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

Outlook for First Quarter 2007

The Company also disclosed today limited financial guidance with

respect to its operating results for the first quarter ending March

31, 2007. The Company expects gross revenues for the first quarter of

2007 to range from $260 million to $265 million, an increase of

approximately 12% over the first quarter of 2006, and anticipates

diluted earnings per share for the first quarter of 2007 to range from

$.13 to $.15 per share, an increase of approximately 17% over the $.12

per share for the same period a year ago. A reconciliation of

estimated gross revenues to estimated GAAP net revenues for the first

quarter of 2007 is not included because PEO revenues and cost of PEO

revenues for the period are not reasonably estimable.

The company also announced that it has incorporated a wholly-owned

fully licensed captive insurance company, effective January 1, 2007,

which will participate in providing BBSI with excess workers'

compensation and other insurance coverages. Management expects the

captive will provide opportunities to participate in more competitive

and cost effective insurance markets and provide additional

flexibility in risk management.

Conference Call

On February 9, 2007 at 9:00 a.m. Pacific Time, William W. Sherertz

and Michael D. Mulholland will host an investor telephone conference

call to discuss fourth quarter 2006 operating results. To participate

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

8622054. 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 Friday, February 9, 2007 at 12:00

p.m. PT and ending on February 16, 2007. To listen to the recording,

dial (800) 642-1687 and enter conference identification code 8622054.

Statements in this release about future events or performance,

including earnings expectations for the first quarter of 2007, 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 its

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

$73 million in cash and marketable securities, 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.

President and Chief Executive Officer

William W. Sherertz, 360-828-0700

SOURCE: Barrett Business Services, Inc.