BBSI Announces Second Quarter 2007 Operating Results, Financial Guidance for 3Q07 and Conference Call

VANCOUVER, Wash.--(BUSINESS WIRE)--

Barrett Business Services, Inc. (Nasdaq:BBSI) reported today net income of $4.9 million for the second quarter ended June 30, 2007, an improvement of $693,000 or 16.5% over net income of $4,188,000 for the second quarter of 2006. Diluted earnings per share for the 2007 second quarter were $.42, as compared to diluted earnings per share of $.36 for the same quarter a year ago.

Net revenues for the second quarter ended June 30, 2007 totaled $63.9 million, a decrease of approximately $769,000 or 1.2% from the $64.7 million for the same quarter in 2006.

                                  (Unaudited)          (Unaudited)
($ in thousands, except per   Second Quarter Ended   Six Months Ended
 share amounts)
                                    June 30,             June 30,
                              --------------------  ------------------
    Results of Operations           2007    2006       2007     2006
----------------------------- ----------- --------  --------- --------
Revenues:
 Staffing services                $29,747 $ 30,567   $ 57,762 $ 57,228
 Professional employer
  service fees                     34,139   34,088     66,712   65,712
                              ----------- --------  --------- --------
  Total revenues                   63,886   64,655    124,474  122,940
                              ----------- --------  --------- --------
Cost of revenues:
 Direct payroll costs              22,416   22,831     43,558   42,682
 Payroll taxes and benefits        20,542   20,437     44,453   43,274
 Workers' compensation              5,964    7,198     11,808   13,752
                              ----------- --------  --------- --------
  Total cost of revenues           48,922   50,466     99,819   99,708
                              ----------- --------  --------- --------
Gross margin                       14,964   14,189     24,655   23,232
Selling, general and
 administrative
 expenses                           7,727    7,882     15,115   15,102
Depreciation and amortization         316      329        665      630
                              ----------- --------  --------- --------
Income from operations              6,921    5,978      8,875    7,500
Other income, net                     790      670      1,575    1,302
                              ----------- --------  --------- --------
Income before taxes                 7,711    6,648     10,450    8,802
Provision for income taxes          2,830    2,460      3,841    3,257
                              ----------- --------  --------- --------
Net income                        $ 4,881 $  4,188   $  6,609 $  5,545
                              ----------- --------  --------- --------
Basic earnings per share          $   .43 $    .37   $    .58 $    .50
                              ----------- --------  --------- --------
Weighted average basic shares
 outstanding                       11,263   11,203     11,259   11,140
                              ----------- --------  --------- --------
Diluted earnings per share        $   .42 $    .36   $    .57 $    .48
                              ----------- --------  --------- --------
Weighted average diluted
 shares
 outstanding                       11,690   11,683     11,686   11,672
                              ----------- --------  --------- --------

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)
                             Second Quarter Ended   Six Months Ended
(in thousands)                     June 30,             June 30,
                             -------------------- --------------------
                                  2007     2006        2007     2006
                             ----------- -------- ----------- --------
Revenues:
 Staffing services              $ 29,747 $ 30,567    $ 57,762 $ 57,228
 Professional employer
  services                       237,957  226,845     467,470  435,519
                             ----------- -------- ----------- --------
  Total revenues                 267,704  257,412     525,232  492,747
                             ----------- -------- ----------- --------
Cost of revenues:
 Direct payroll costs            224,605  214,247     441,233  410,212
 Payroll taxes and benefits       20,542   20,437      44,453   43,274
 Workers' compensation             7,593    8,539      14,891   16,029
                             ----------- -------- ----------- --------
  Total cost of revenues         252,740  243,223     500,577  469,515
                             ----------- -------- ----------- --------
Gross margin                    $ 14,964 $ 14,189    $ 24,655 $ 23,232
                             ----------- -------- ----------- --------

Gross revenues of $267.7 million for the second quarter ended June 30, 2007 rose 4.0% over the similar period in 2006. For the first six months of 2007, gross revenues of $525.2 million increased 6.6% over the comparable 2006 period.

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

For the second quarters ended June 30, 2007 and 2006:

                                     (Unaudited)
                             Three Months Ended June 30,
               -------------------------------------------------------
                 Gross Revenue                           Net Revenue
 (in           Reporting Method    Reclassification      Reporting
  thousands)                                                Method
               ----------------- --------------------- ---------------
                 2007     2006      2007       2006      2007    2006
               -------- -------- ---------- ---------- ------- -------
 Revenues:
  Staffing
   services    $ 29,747 $ 30,567 $       -  $       -  $29,747 $30,567
  Professional
  employer
   services     237,957  226,845  (203,818)  (192,757)  34,139  34,088
               -------- -------- ---------- ---------- ------- -------
   Total
    revenues   $267,704 $257,412 $(203,818) $(192,757) $63,886 $64,655
               -------- -------- ---------- ---------- ------- -------
 Cost of
  revenues     $252,740 $243,223 $(203,818) $(192,757) $48,922 $50,466
               -------- -------- ---------- ---------- ------- -------

For the six months ended June 30, 2007 and 2006:

                                    (Unaudited)
                             Six Months Ended June 30,
             ---------------------------------------------------------
               Gross Revenue                            Net Revenue
(in          Reporting Method    Reclassification    Reporting Method
 thousands)
             ----------------- --------------------- -----------------
               2007     2006      2007       2006      2007     2006
             -------- -------- ---------- ---------- -------- --------
Revenues:
 Staffing
  services   $ 57,762 $ 57,228 $       -  $       -  $ 57,762 $ 57,228
 Professional
 employer
  services    467,470  435,519  (400,758)  (369,807)   66,712   65,712
             -------- -------- ---------- ---------- -------- --------
  Total
   revenues  $525,232 $492,747 $(400,758) $(369,807) $124,474 $122,940
             -------- -------- ---------- ---------- -------- --------
Cost of
 revenues    $500,577 $469,515 $(400,758) $(369,807) $ 99,819 $ 99,708
             -------- -------- ---------- ---------- -------- --------

William W. Sherertz, President and Chief Executive Officer, commented: "We are pleased with our record second quarter earnings and anticipate a stronger performance in the third quarter."

The following summarizes the unaudited consolidated balance sheets at June 30, 2007 and December 31, 2006.

                                                  June 30,   Dec. 31,
(in thousands)                                      2007       2006
                                                  ---------  ---------
                    Assets
-----------------------------------------------
Current assets:
 Cash and cash equivalents                         $ 71,025   $ 69,874
 Marketable securities                                3,625      3,159
 Trade accounts receivable, net                      36,906     31,328
 Prepaid expenses and other                           2,109      1,940
 Deferred income taxes                                4,182      4,699
 Workers' compensation receivables for insured
  claims                                                225        225
                                                  ---------  ---------
  Total current assets                              118,072    111,225
Marketable securities                                   411        406
Goodwill, net                                        28,036     27,536
Intangibles, net                                         62         75
Property, equipment and software, net                13,279     13,502
Restricted marketable securities and workers'
 compensation deposits                                2,656      2,616
Other assets                                          1,893      2,143
Workers' compensation receivables for insured
 claims                                               4,295      4,678
                                                  ---------  ---------
                                                   $168,704   $162,181
                                                  ---------  ---------

      Liabilities and Stockholders' Equity
--------------------------------------------------
Current liabilities:
 Accounts payable                                  $  1,327   $  1,545
 Accrued payroll, payroll taxes and related
  benefits                                           34,788     33,372
 Income taxes payable                                   847          -
 Other accrued liabilities                              937        516
 Workers' compensation claims liabilities             3,253      3,843
 Workers' compensation claims liabilities for
  insured claims                                        225        225
 Safety incentives liabilities                        7,815      7,519
                                                  ---------  ---------
  Total current liabilities                          49,192     47,020
Customer deposits                                       689        817
Long-term workers' compensation claims
 liabilities                                          3,976      5,295
Long-term workers' compensation liabilities for
 insured claims                                       2,931      3,011
Deferred income taxes                                 2,449      1,545
Deferred gain on sale and leaseback                     732        793
Stockholders' equity                                108,735    103,700
                                                  ---------  ---------
                                                   $168,704   $162,181
                                                  ---------  ---------

Outlook for Third Quarter 2007

The Company also disclosed today limited financial guidance with respect to its operating results for the third quarter ending September 30, 2007. The Company expects gross revenues for the third quarter of 2007 to range from $296 million to $302 million, an increase of approximately 9.2% over the third quarter of 2006, and anticipates diluted earnings per share for the third quarter of 2007 to range from $.56 to $.59 per share, an increase of approximately 19.8% over the $.48 per share for the same period a year ago. These projected operating results include the effect of the July 2, 2007 acquisition of Strategic Staffing, Inc. A reconciliation of estimated gross revenues to estimated GAAP net revenues for the third quarter of 2007 is not included because PEO revenues and cost of PEO revenues for the period are not reasonably estimable.

Conference Call

On July 26 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 2007 operating results. To participate in the call, dial (877) 356-3717. The call identification number is 7359648. 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 Thursday, July 26, 2007 at 12:00 p.m. PT and ending on August 2, 2007. To listen to the recording, dial (800) 642-1687 and enter conference identification code 7359648.

Statements in this release about future events or performance, including earnings expectations for the third 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 and the collectibility of accounts receivable, among others. Other important factors that may affect the Company's future prospects are described in the Company's 2006 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.

Source: Barrett Business Services, Inc.