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
---------- ----------- ---------- -----------
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Company Contact: Michael L. Elich President and Chief Executive Officer Telephone 360-828-0700
Source: Barrett Business Services, Inc.
Released October 25, 2011