Barrett Business Services, Inc. Announces Second Quarter 2004 Operating Results and Financial Guidance for 3Q04

PORTLAND, Ore., July 28 /PRNewswire-FirstCall/ -- Barrett Business

Services, Inc. (Nasdaq: BBSI) reported today net income of $1,840,000 for the

second quarter ended June 30, 2004, an improvement of $1,673,000 over net

income of $167,000 for the second quarter of 2003. Diluted earnings per share

for the 2004 second quarter was $.30, as compared to diluted earnings per

share of $.03 for the same quarter a year ago.

Net revenues for the second quarter ended June 30, 2004 totaled $47.7

million, an increase of approximately $19.8 million or 71% over the $27.9

million for the same quarter in 2003.

(Unaudited) (Unaudited)

Second Quarter Ended Six Months Ended

June 30, June 30,

Results of Operations 2004 2003 2004 2003

(in thousands, except per share amounts)

Revenues:

Staffing services $30,470 $23,046 $55,524 $43,156

Professional employer service fees 17,234 4,856 32,790 8,143

Total revenues 47,704 27,902 88,314 51,299

Cost of revenues:

Direct payroll costs 22,551 17,079 40,871 31,877

Payroll taxes and benefits 10,649 4,385 22,180 8,190

Workers' compensation 5,644 1,982 9,680 3,407

Total cost of revenues 38,844 23,446 72,731 43,474

Gross margin 8,860 4,456 15,583 7,825

Selling, general and administrative

expenses 5,701 3,869 11,233 7,465

Depreciation and amortization 253 271 495 551

Income (loss) from operations 2,906 316 3,855 (191)

Other income (expense), net 38 (68) 59 (74)

Income (loss) before taxes 2,944 248 3,914 (265)

Provision for (benefit from) income

taxes 1,104 81 1,468 (89)

Net income (loss) $1,840 $167 $2,446 $(176)

Basic earnings (loss) per share $.32 $.03 $.43 $(.03)

Weighted average basic shares

outstanding 5,716 5,708 5,710 5,728

Diluted earnings (loss) per share $.30 $.03 $.40 $(.03)

Weighted average diluted shares

outstanding 6,134 5,726 6,138 5,728

The Company changed its reporting of PEO revenues from a gross basis to a

net basis in 2002. 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 Ended Six Months Ended

($ in thousands) June 30, June 30,

2004 2003 2004 2003

Revenues:

Staffing services $30,470 $23,046 $55,524 $43,156

Professional employer services 97,984 28,342 189,704 48,881

Total revenues 128,454 51,388 245,228 92,037

Cost of revenues:

Direct payroll costs 102,390 40,565 195,757 72,615

Payroll taxes and benefits 10,648 4,385 22,179 8,190

Workers' compensation 6,556 1,982 11,709 3,407

Total cost of revenues 119,594 46,932 229,645 84,212

Gross margin $8,860 $4,456 $15,583 $7,825

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

For the second quarters ended June 30, 2004 and 2003 (in thousands):

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

2004 2003 2004 2003 2004 2003

Revenues:

Staffing services $30,470 $23,046 $-- $-- $30,470 $23,046

Professional

employer services 97,984 28,342 (80,750) (23,486) 17,234 4,856

Total revenues $128,454 $51,388 $(80,750) $(23,486) $47,704 $27,902

Cost of revenues: $119,594 $46,932 $(80,750) $(23,486) $38,844 $23,446

For the six months ended June 30, 2004 and 2003 (in thousands):

Gross Revenue Net Revenue

Reporting Method Reclassification Reporting Method

2004 2003 2004 2003 2004 2003

Revenues:

Staffing services $55,524 $43,156 $-- $-- $55,524 $43,156

Professional

employer

services 189,704 48,881 (156,914) (40,738) 32,790 8,143

Total revenues $245,228 $92,037 $(156,914) $(40,738) $88,314 $51,299

Cost of revenues: $229,645 $84,212 $(156,914) $(40,738) $72,731 $43,474

William W. Sherertz, President and Chief Executive Officer, commented

that: "We are very pleased with our continuing growth in earnings and

revenues, both of which portend a strong second half of the year. During the

second quarter, we achieved strong revenue growth in all of our operating

regions, particularly in California, and we expect these trends to continue in

the foreseeable future."

The following summarizes the unaudited consolidated balance sheets at June

30, 2004 and December 31, 2003.

($ in thousands) June 30, December 31,

2004 2003

Assets

Current assets:

Cash and cash equivalents $5,374 $7,785

Marketable securities 4,337 --

Trade accounts receivable, net 27,952 18,481

Prepaid expenses and other 1,805 958

Deferred income taxes 3,057 2,196

Total current assets 42,525 29,420

Goodwill, net 21,738 18,749

Intangibles, net 35 13

Property, equipment and software, net 4,575 3,367

Restricted marketable securities and workers'

compensation deposits 1,854 1,647

Deferred income taxes 833 1,041

Other assets 412 436

$71,972 $54,673

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt $348 $88

Income taxes payable 1,438 --

Accounts payable 470 727

Accrued payroll, payroll taxes and related

benefits 21,471 13,881

Workers' compensation claims liabilities 6,185 3,886

Safety incentives liabilities 3,787 2,007

Other accrued liabilities 1,166 361

Total current liabilities 34,865 20,950

Long-term debt, net of current portion 1,515 400

Customer deposits 514 455

Long-term workers' compensation claims liabilities 1,020 1,031

Other long-term liabilities -- 45

Deferred gain on sale and leaseback 1,097 1,158

Stockholders' equity 32,961 30,634

$71,972 $54,673

Outlook for Third Quarter 2004

The Company also disclosed today limited financial guidance with respect

to its operating results for the third quarter ending September 30, 2004. The

Company expects gross revenues for the third quarter to range from $135

million to $137 million and anticipates diluted earnings per share to range

from $.33 to $.36 per share for the same period. A reconciliation of

estimated gross revenues to estimated GAAP net revenues for the third quarter

of 2004 is not included because PEO revenues and cost of PEO revenues for the

period are not reasonably estimable.

On July 29, 2004 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 2004 operating results. To participate in the call,

dial (877)356-3717. The call identification number is 8656923. 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 July 29,

2004 at 11:00 a.m. and ending August 6, 2004. To listen to the recording,

dial (800)642-1687 and enter conference identification code 8656923.

BBSI provides 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 2004, 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, 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 availability of funding for working capital purposes, among

others. Other important factors that may affect the Company's future

prospects are described in the Company's 2003 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.

SOURCE Barrett Business Services, Inc.

-0- 07/28/2004

/CONTACT: William W. Sherertz, Chief Executive Officer of Barrett

Business Services, Inc., +1-503-220-0988/

/Web site: http://www.barrettbusiness.com /

(BBSI)

CO: Barrett Business Services, Inc.

ST: Oregon

IN: FIN CPR STW

SU: ERN ERP CCA

JO-HD

-- SFW064 --

5251 07/28/2004 16:01 EDT http://www.prnewswire.com