BBSI Reports Third Quarter 2011 Financial Results

VANCOUVER, WA -- (MARKET WIRE) -- 10/25/11 -- Barrett Business Services, Inc. (BBSI) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the third quarter ended September 30, 2011.

Q3 2011 Financial Highlights vs. Year-Ago Quarter

  • Net revenues up 16% to $85.4 million
  • Gross revenues up 22% to $406.0 million
  • Net income increased 48% to $5.4 million or $0.54 per diluted share

Third Quarter 2011 Financial Results

Net revenues for the third quarter ended September 30, 2011 increased 16% to $85.4 million, compared to $73.9 million for the same quarter in 2010.

Total non-GAAP gross revenues in the third quarter of 2011 increased 22% to $406.0 million, compared to $332.9 million in the same quarter of 2010 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was primarily attributable to the continued build in the Company's net PEO client count and to an increase in same-store sales growth.

Net income in the third quarter increased 48% to $5.4 million or $0.54 per diluted share, compared to net income of $3.7 million or $0.36 per diluted share for the same quarter a year ago. Excluding the benefit of a lower annual effective income tax rate resulting from $10 million in key man life insurance proceeds realized from the passing of the Company's former President and CEO, and to a California state income tax refund related to tax years 2003-2006, net income in the third quarter of 2011 was $4.2 million or $0.42 per diluted share.

At September 30, 2011, the Company's cash, cash equivalents and marketable securities totaled $77.9 million compared to $61.4 million at December 31, 2010. The Company continues to carry no bank debt.

Management Commentary

"Our third quarter sales growth was driven by the continued addition of PEO clients combined with stability within our existing client base," said Michael Elich, President and CEO of BBSI. "Our clients originate from strong referral networks that continue to lay the foundation in building client width. This helped drive one of the most profitable quarters in our Company's history."

Fourth Quarter 2011 Outlook

For the fourth quarter ending December 31, 2011, the Company expects gross revenues to range from $405 million to $410 million, as compared to $344.2 million for the fourth quarter of 2010. Diluted earnings per share is expected to range from $0.45 to $0.49 per share compared to $0.30 for the same quarter a year ago. The range of anticipated diluted earnings per share for the fourth quarter of 2011 includes a favorable income tax rate benefit related to the effect of a much lower annual effective income tax rate attributable to the $10.0 million life insurance proceeds. Without the effect of the favorable tax rate benefit, the range of diluted earnings per share for the fourth quarter of 2011 is expected to be $0.37 to $0.41. A reconciliation of expected gross revenues to expected GAAP net revenues for the fourth quarter of 2011 is not included because PEO revenues and cost of PEO revenues for the period cannot be reasonably estimated.

Conference Call

BBSI will host a conference call tomorrow, Wednesday, October 26, 2011 at 12:00 p.m. Eastern time (9:00 a.m. Pacific) to discuss its third quarter 2011 results. The Company's President and CEO Michael L. Elich and CFO James D. Miller will host the call, which will be followed by a question and answer period.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at (949) 574-3860.

Date: Wednesday, October 26, 2011
Time: 12:00 p.m. Eastern Time
Dial-In Number: (877) 214-1511
Conference ID#: 16006272

The conference call will be webcast live and available for replay via the Investor Relations section of the Company's website at www.barrettbusiness.com.

A replay of the call will be available after 3:00 p.m. Eastern Time on the same day and until Wednesday, November 2, 2011.

Toll-free replay number: (855) 859-2056
Replay pin number: 16006272

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles ("GAAP"), the Company is disclosing non-GAAP net income and non-GAAP gross revenues. Without the effect of a favorable income tax rate benefit related to a much lower annual effective income tax rate resulting from $10.0 million of key man life insurance proceeds realized with respect to William W. Sherertz, the Company's former President and Chief Executive Officer, who passed away January 20, 2011, and to a California state income tax refund related to tax years 2003-2006, the Company's net income for the 2011 third quarter was approximately $4.2 million or $.42 cents per share. A reconciliation of net income on the basis of generally accepted accounting principles ("GAAP") to the non-GAAP operating performance is provided in the table below:



(in thousands, except per share                  (Unaudited)
 amounts)                                    Third Quarter Ended
                                             September 30, 2011
                                --------------------------------------------
                                     GAAP       Adjustments      non-GAAP
                                --------------  -----------  ---------------

Income before taxes             $        6,272  $            $         6,272
Provision for income taxes                 858        1,213            2,071
                                --------------               ---------------
Net income                      $        5,414               $         4,201
                                --------------               ---------------
Basic income per share          $          .54               $           .42
                                --------------               ---------------
Weighted average basic shares
 outstanding                            10,060                        10,060
                                --------------               ---------------
Diluted income per share        $          .54               $           .42
                                --------------               ---------------
Weighted average diluted shares
 outstanding                            10,100                        10,100
                                --------------               ---------------

The Company is presenting the non-GAAP net income because it believes it is more reflective of the Company's actual operating results.

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 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,
                          ------------------------  ------------------------
                              2011         2010         2011         2010
                          -----------  -----------  -----------  -----------
                                       As Restated               As Restated
                                       -----------               -----------
Revenues:
  Staffing services       $    34,589  $    33,954  $    93,439  $    92,991
  Professional employer
   services                   371,382      298,941    1,010,496      799,557
                          -----------  -----------  -----------  -----------
    Total revenues            405,971      332,895    1,103,935      892,548
                          -----------  -----------  -----------  -----------
Cost of revenues:
  Direct payroll costs        344,719      283,421      939,746      759,690
  Payroll taxes and
   benefits                    30,321       24,501       90,970       71,990
  Workers' compensation        14,778       10,929       38,187       29,727
                          -----------  -----------  -----------  -----------
    Total cost of
     revenues                 389,818      318,851    1,068,903      861,407
                          -----------  -----------  -----------  -----------
Gross margin              $    16,153  $    14,044  $    35,032  $    31,141
                          -----------  -----------  -----------  -----------

Gross revenues of $406.0 million for the third quarter ended September 30, 2011 increased 22% over the similar period in 2010.

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

For the third quarters ended September 30, 2011 and 2010:


                                         (Unaudited)
                               Three Months Ended September 30,
                 -----------------------------------------------------------
                    Gross Revenue                             Net Revenue
(in thousands)     Reporting Method    Reclassification     Reporting Method
                 ------------------- --------------------  -----------------
                    2011      2010      2011       2010      2011     2010
                 ---------- -------- ---------  ---------  -------- --------
                                                                        As
                                                                    Restated
                                                                    --------
Revenues:
  Staffing
   services      $   34,589 $ 33,954 $       -  $       -  $ 34,589 $ 33,954
  Professional
   employer
   services         371,382  298,941  (320,587)  (259,019)   50,795   39,922
                 ---------- -------- ---------  ---------  -------- --------
    Total
     revenues    $  405,971 $332,895 $(320,587) $(259,019) $ 85,384 $ 73,876
                 ---------- -------- ---------  ---------  -------- --------
Cost of revenues $  389,818 $318,851 $(320,587) $(259,019) $ 69,231 $ 59,832
                 ---------- -------- ---------  ---------  -------- --------

For the nine months ended September 30, 2011 and 2010:


                                         (Unaudited)
                               Nine Months Ended September 30,
                 -----------------------------------------------------------
                    Gross Revenue                             Net Revenue
(in thousands)     Reporting Method    Reclassification     Reporting Method
                 ------------------- --------------------  -----------------
                    2011      2010      2011       2010      2011     2010
                 ---------- -------- ---------  ---------  -------- --------
                                                                       As
                                                                    Restated
                                                                    --------
Revenues:
  Staffing
   services      $   93,439 $ 92,991 $       -  $       -  $ 93,439 $ 92,991
  Professional
   employer
   services       1,010,496  799,557  (873,769)  (692,980)  136,727  106,577
                 ---------- -------- ---------  ---------  -------- --------
    Total
     revenues    $1,103,935 $892,548 $(873,769) $(692,980) $230,166 $199,568
                 ---------- -------- ---------  ---------  -------- --------
Cost of revenues $1,068,903 $861,407 $(873,769) $(692,980) $195,134 $168,427
                 ---------- -------- ---------  ---------  -------- --------

As described in Note 2 of the Consolidated Financial Statements in Item 15 in the Company's 2010 Annual Report on Form 10-K, the Company restated its financial statements as a result of an error related to legal expenses incurred for the administration of workers' compensation claims by Associated Insurance Company for Excess ("AICE"), the Company's captive insurance subsidiary formed January 1, 2007. The Company also determined to make a conforming change to its accounting method for legal expenses incurred for the administration of workers' compensation claims that arose prior to the formation of AICE. The Company's results of operations for the three and nine months ended September 30, 2010 have been restated to reflect these changes.

About BBSI

BBSI (NASDAQ: BBSI) is a leading provider of business management solutions, combining human resource outsourcing and professional management consulting to create a unique operational platform that differentiates it from competitors. The Company's integrated platform is built upon expertise in payroll processing, employee benefits, workers' compensation coverage, risk management and workplace safety programs, and human resource administration. BBSI's partnerships help businesses of all sizes improve the efficiency of their operations. BBSI works with more than 3,000 clients across all lines of business in 25 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including gross revenues and earnings expectations for the fourth quarter of 2011, 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 retain current customers and attract new customers, future workers' compensation claims experience, the effect of changes in the workers' compensation regulatory environment in one or more of the Company's primary markets, the collectibility of accounts receivable, and the effect of conditions in the global capital markets on the Company's investment portfolio, among others. Other important factors that may affect the Company's future prospects are described in the Company's 2010 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.


                       Barrett Business Services, Inc.
                          Condensed Balance Sheets
                                 (Unaudited)

                                                September 30,   December 31,
(in thousands)                                       2011           2010
                                                -------------  -------------
                     Assets
Current assets:
  Cash and cash equivalents                     $      42,217  $      30,924
  Marketable securities                                25,938         24,511
  Trade accounts receivable, net                       50,870         37,596
  Income taxes receivable                               2,356          2,356
  Prepaid expenses and other                            1,808          1,798
  Deferred income taxes                                 5,873          6,101
                                                -------------  -------------
    Total current assets                              129,062        103,286
Marketable securities                                   9,749          5,921
Property, equipment and software, net                  14,878         15,037
Restricted marketable securities and workers'
 compensation deposits                                  9,745          8,811
Other assets                                            3,103          3,094
Workers' compensation receivables for insured
 claims                                                 3,740          3,915
Goodwill, net                                          47,820         47,820
                                                -------------  -------------
                                                $     218,097  $     187,884
                                                -------------  -------------

      Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                              $       1,306  $         964
  Accrued payroll, payroll taxes and related
   benefits                                            52,689         37,525
  Income taxes payable                                  1,517              -
  Other accrued liabilities                               602            442
  Workers' compensation claims liabilities             15,599         14,768
  Safety incentives liabilities                         5,860          5,024
                                                -------------  -------------
    Total current liabilities                          77,573         58,723
Long-term workers' compensation claims
 liabilities                                           25,100         21,847
Long-term workers' compensation liabilities for
 insured claims                                         2,636          2,686
Deferred income taxes                                   7,841          7,841
Customer deposits and other long-term
 liabilities                                            1,459          1,422
Stockholders' equity                                  103,488         95,365
                                                -------------  -------------
                                                $     218,097  $     187,884
                                                -------------  -------------



                       Barrett Business Services, Inc.
                    Consolidated Statements of Operations

(in thousands, except per         (Unaudited)              (Unaudited)
 share amounts)               Third Quarter Ended       Nine Months Ended
                                 September 30,            September 30,
                            -----------------------  -----------------------
   Results of Operations       2011         2010        2011         2010
                            ----------  -----------  ----------  -----------
                                        As Restated              As Restated
                                        -----------              -----------
Revenues:
  Staffing services         $   34,589  $    33,954  $   93,439  $    92,991
  Professional employer
   service fees                 50,795       39,922     136,727      106,577
                            ----------  -----------  ----------  -----------
    Total revenues              85,384       73,876     230,166      199,568
                            ----------  -----------  ----------  -----------
Cost of revenues:
  Direct payroll costs          26,292       25,846      70,833       70,519
  Payroll taxes and
   benefits                     30,321       24,501      90,970       71,990
  Workers' compensation         12,618        9,485      33,331       25,918
                            ----------  -----------  ----------  -----------
    Total cost of revenues      69,231       59,832     195,134      168,427
                            ----------  -----------  ----------  -----------
Gross margin                    16,153       14,044      35,032       31,141
Selling, general and
 administrative expenses         9,879        9,156      27,577       25,787
Depreciation and
 amortization                      334          341       1,000        1,051
                            ----------  -----------  ----------  -----------
Income from operations           5,940        4,547       6,455        4,303
Life insurance proceeds              -            -      10,000            -
Other income, net                  332          588       1,052        1,253
                            ----------  -----------  ----------  -----------
Income before taxes              6,272        5,135      17,507        5,556
Provision for income taxes         858        1,466       3,098        1,331
                            ----------  -----------  ----------  -----------
Net income                  $    5,414  $     3,669  $   14,409  $     4,225
                            ----------  -----------  ----------  -----------
Basic income per share      $      .54  $       .36  $     1.42  $       .41
                            ----------  -----------  ----------  -----------
Weighted average basic
 shares outstanding             10,060       10,217      10,152       10,376
                            ----------  -----------  ----------  -----------
Diluted income per share    $      .54  $       .36  $     1.41  $       .41
                            ----------  -----------  ----------  -----------
Weighted average diluted
 shares outstanding             10,100       10,251      10,198       10,410
                            ----------  -----------  ----------  -----------


Add to Digg Bookmark with del.icio.us Add to Newsvine

Company Contact:
Michael L. Elich
President and Chief Executive Officer
Telephone 360-828-0700

Source: Barrett Business Services, Inc.