10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 17, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2004
Commission File No. 0-21886
BARRETT BUSINESS SERVICES, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0812977
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4724 SW Macadam Avenue
Portland, Oregon 97239
(Address of principal executive offices) (Zip Code)
(503) 220-0988
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
Number of shares of common stock, $.01 par value, outstanding at April 30, 2004
was 5,711,037 shares.
BARRETT BUSINESS SERVICES, INC.
INDEX
Part I - Financial Information Page
----
Item 1.Financial Statements
Balance Sheets - March 31, 2004 and
December 31, 2003................................................3
Statements of Operations - Three Months
Ended March 31, 2004 and 2003....................................4
Statements of Cash Flows - Three Months
Ended March 31, 2004 and 2003....................................5
Notes to Financial Statements....................................6
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................................10
Item 3.Quantitative and Qualitative Disclosure About
Market Risk.....................................................17
Item 4.Controls and Procedures.........................................17
Part II - Other Information
Item 6.Exhibits and Reports on Form 8-K................................18
Signatures ................................................................19
Exhibit Index...............................................................20
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Part I - Financial Information
Item 1. Financial Statements
BARRETT BUSINESS SERVICES, INC.
Balance Sheets
(Unaudited)
(In thousands, except per share amounts)
The accompanying notes are an integral part of these financial statements.
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BARRETT BUSINESS SERVICES, INC.
Statement of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
---------------------
2004 2003
------- -------
Revenues:
Staffing services $25,054 $20,110
Professional employer service fees 15,556 3,287
------- -------
40,610 23,397
------- -------
Cost of revenues:
Direct payroll costs 18,320 14,798
Payroll taxes and benefits 11,531 3,805
Workers' compensation 4,036 1,425
------- -------
33,887 20,028
------- -------
Gross margin 6,723 3,369
Selling, general and administrative expenses 5,532 3,596
Depreciation and amortization 242 280
------- -------
Income (loss) from operations 949 (507)
------- -------
Other (expense) income:
Interest expense (32) (95)
Interest income 21 41
Other, net 32 48
------- -------
21 (6)
------- -------
Income (loss) before provision for income taxes 970 (513)
Provision for (benefit from) income taxes 364 (170)
------- -------
Net income (loss) $ 606 $ (343)
======= =======
Basic earnings (loss) per share $ .11 $ (.06)
======= =======
Weighted average number of basic shares outstanding 5,704 5,748
======= =======
Diluted earnings (loss) per share $ .10 $ (.06)
======= =======
Weighted average number of diluted shares outstanding 6,143 5,748
======= =======
The accompanying notes are an integral part of these financial statements.
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BARRETT BUSINESS SERVICES, INC.
Statement of Cash Flows
(Unaudited)
(In thousands)
The accompanying notes are an integral part of these financial statements.
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BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements
Note 1 - Basis of Presentation of Interim Period Statements:
The accompanying financial statements are unaudited and have been prepared
by Barrett Business Services, Inc. ("Barrett" or the "Company"), pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures typically included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations. In the opinion of management, the financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair statement of the results for the interim periods presented. The
preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from such estimates and
assumptions. The financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's 2003
Annual Report on Form 10-K at pages F1 - F26. The results of operations for an
interim period are not necessarily indicative of the results of operations for a
full year. Certain prior year amounts have been reclassified to conform with the
current year presentation. Such reclassifications had no impact on gross margin,
net income or stockholders' equity.
Barrett, a Maryland corporation, is engaged in providing both staffing and
professional employer services to a diversified group of customers through a
network of branch offices throughout Oregon, Washington, Idaho, California,
Arizona, Maryland, Delaware and North Carolina. Staffing services are engaged by
customers to meet short-term and long-term personnel needs. Professional
employer services ("PEO") are normally used by organizations to satisfy ongoing
human resource management needs and typically involve contracts with a minimum
term of one year, renewable annually, which cover all employees at a particular
work site.
Note 2 - Recent Accounting Pronouncements:
In April 2003, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standard No. 149 ("SFAS 14"),
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities."
SFAS 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities
under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS 149 is generally effective for contracts entered into or modified after
June 30, 2003. Management believes that the adoption of this statement will not
have a material impact on its results of operations or financial position.
In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 requires that an issuer classify a financial instrument that is within its
scope as a liability if that financial instrument embodies an obligation to the
issuer. SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. Management believes that
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BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements (Continued)
Note 2 - Recent Accounting Pronouncements (Continued):
the adoption of this statement will not have a material impact on its results of
operations or financial position.
Note 3 - Acquisition
Effective January 1, 2004, the Company acquired certain assets of Skills
Resource Training Center ("SRTC"), a staffing services company with nine offices
in Central Washington, Eastern Oregon and Southern Idaho. The acquisition
provides the Company with the opportunity to geographically expand and diversify
its business, particularly in the agricultural, food packing and processing
industries. The Company paid $3,000,000 in cash for the assets of SRTC and the
selling shareholders' noncompete agreements and agreed to issue up to 135,731
shares of its common stock ("Earnout Shares"), with the actual number of Earnout
Shares to be issued based upon the level of financial performance achieved by
the SRTC offices during calendar 2004. The transaction resulted in $2,989,000 of
goodwill (including $44,000 for acquisition-related costs), $40,000 of
intangible assets and $15,000 of fixed assets. The Company's income statement
for the quarter ended March 31, 2004 includes SRTC's results of operations since
January 1, 2004.
Note 4 - Basic and Diluted Earnings Per Share:
Basic earnings per share are computed based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share
reflect the potential effects of the exercise of outstanding stock options.
Basic and diluted shares outstanding are summarized as follows:
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BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements (Continued)
Note 4 - Basic and Diluted Earnings Per Share (Continued):
As a result of the net loss reported for the three months ended March 31,
2003, potential common shares of 14,171 have been excluded from the calculation
of diluted loss per share because their effect would be anti-dilutive.
Note 5 - Stock Incentive Plans:
The Company's 2003 Stock Incentive Plan (the "2003 Plan"), which provides
for stock-based awards to Company employees, non-employee directors and outside
consultants or advisors, was approved by shareholders on May 14, 2003. No
options have been issued to outside consultants or advisors. The number of
shares of common stock reserved for issuance under the 2003 Plan is 400,000. No
new grants of stock options may be made under the Company's 1993 Stock Incentive
Plan (the "1993 Plan"). At March 31, 2004, there were option awards covering
409,423 shares outstanding under the 1993 Plan, which, to the extent they are
terminated unexercised, will be carried over to the 2003 Plan as shares
authorized to be issued under the 2003 Plan. Outstanding options under both
plans generally become exercisable in four equal annual installments beginning
one year after the date of grant and expire ten years after the date of grant.
The exercise price of incentive stock options must not be less than the fair
market value of the Company's stock on the date of grant.
The following table summarizes options activity in 2004:
Number
of Options Grant Prices
------- -----------------
Outstanding at December 31, 2003 585,459 $ 1.45 to $17.75
Options granted 39,097 $13.91
Options exercised (10,487) $ 2.80 to $ 5.91
-------
Outstanding at March 31, 2004 614,069 $ 1.45 to $17.75
=======
Exercisable at March 31, 2004 111,357
=======
Available for grant at March 31, 2004 219,820
=======
The options listed in the table generally become exercisable in four equal
annual install-ments beginning one year after the date of grant.
Note 6 - Stock Option Compensation
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock incentive plan. Accordingly, no compensation expense
has been recognized for its stock option grants issued at market price because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of the grant.
If compensation expense for the Company's stock-based compensation plan
had been determined based on the fair market value at the grant date for awards
under the Plan
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BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements (Continued)
Note 6 - Stock Option Compensation (Continued)
consistent with the method of SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and loss per share would have been
adjusted to the pro forma amounts indicated below:
The effects of applying SFAS No. 123 for providing pro forma disclosures
for the periods presented above are not likely to be representative of the
effects on reported net income for future periods because options vest over
several years and additional awards generally are made each year.
-9-
BARRETT BUSINESS SERVICES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth the percentages of total revenues
represented by selected items in the Company's Statements of Operations for the
three months ended March 31, 2004 and 2003.
Percentage of Total Revenues
----------------------
Three Months Ended
March 31,
----------------------
2004 2003
-------- --------
Revenues:
Staffing services 61.7 % 86.0 %
Professional employer service fees 38.3 14.0
-------- --------
100.0 100.0
-------- --------
Cost of revenues:
Direct payroll costs 45.1 63.2
Payroll taxes and benefits 28.4 16.3
Workers' compensation 9.9 6.1
-------- --------
Total cost of revenues 83.4 85.6
-------- --------
Gross margin 16.6 14.4
Selling, general and administrative expenses 13.6 15.4
Depreciation and amortization 0.6 1.2
-------- --------
Income (loss) from operations 2.4 (2.2)
Other (expense) income - -
-------- --------
Pretax income (loss) 2.4 (2.2)
Provision for (benefit from) income taxes 0.9 (0.7)
-------- --------
Net income (loss) 1.5 % (1.5)%
======== ========
The Company changed its reporting of PEO revenues from a gross basis to a
net basis in 2002 because it was determined that the Company was not the primary
obligor for the services provided by employees pursuant to its PEO contracts
with its customers. Gross revenue information, although not in accordance with
GAAP, is presented below 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.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Results of Operations (Continued)
Unaudited
Three Months Ended
March 31,
--------------------
(in thousands) 2004 2003
-------- --------
Revenues:
Staffing services $ 25,054 $ 20,110
Professional employer services 91,720 20,539
-------- --------
Total revenues 116,774 40,649
-------- --------
Cost of revenues:
Direct payroll costs 93,367 32,050
Payroll taxes and benefits 11,531 3,805
Workers' compensation 5,153 1,425
-------- --------
Total cost of revenues 110,051 37,280
-------- --------
Gross margin $ 6,723 $ 3,369
======== ========
A reconciliation of non-GAAP gross PEO revenues to net PEO revenues is as
follows:
-11-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Results of Operations (Continued)
Three months ended March 31, 2004 and 2003
Net income for the first quarter of 2004 was $606,000, an improvement of
$949,000 over a net loss of $343,000 for the first quarter of 2003. The
improvement for the first quarter of 2004 was primarily due to higher gross
margin dollars as a result of significant growth in professional employer
("PEO") services business, partially offset by higher selling, general and
administrative expenses. The diluted income per share for the first quarter of
2004 was $.10.
Revenues for the first quarter of 2004 totaled $40.6 million, an increase
of approximately $17.2 million or 73.5% over the $23.4 million for the first
quarter of 2003. The increase in revenues primarily reflects significant growth
in the Company's PEO service fee revenue, combined with an increase in staffing
services revenue.
PEO service fee revenue increased approximately $12.3 million or 372.7%
primarily due to business opportunities in California available to the Company
as a qualified self-insured employer for workers' compensation coverage. These
business opportunities were a result of adverse market conditions for workers'
compensation insurance.
Staffing services revenue increased approximately $4.9 million or 24.4%
primarily due to improved economic conditions for such services in the majority
of areas in which the Company operates and to the Company's acquisition of SRTC
effective January 1, 2004. Operations of SRTC accounted for slightly more than
half of the increase. Management expects that as overall economic conditions
improve in its market areas, demand for the Company's staffing services will
continue to increase.
Gross margin for the first quarter of 2004 totaled approximately $6.7
million, which represented an increase of $3.4 million or 100.0% over the first
quarter of 2003, primarily due to the 73.5% increase in revenues. The gross
margin percent increased from 14.4% of revenues for the first quarter of 2003 to
16.6% for the first quarter of 2004. The increase in the gross margin percentage
was due to lower direct payroll costs, offset in part by higher payroll taxes
and benefits and higher workers' compensation expense. The decline in direct
payroll costs, as a percentage of revenues, from 63.2% for the first quarter of
2003 to 45.1% for the first quarter of 2004 reflects the current mix of services
to the Company's customer base and the effect of their unique mark-up percent.
The increase in payroll taxes and benefits, as a percentage of revenues, from
16.3% for the first quarter of 2003 to 28.4% for the first quarter of 2004 was
due in part to higher statutory state unemployment tax rates in various states
in which the Company operates as compared to the first quarter of 2003, as well
as to the effect of significant growth in PEO services.
Workers' compensation expense for the first quarter of 2004 totaled $4.0
million, which compares to $1.4 million for the first quarter of 2003. The
increase in workers' compensation expense was generally due to an increased
provision for the future estimated costs of claims resulting from the increase
in business activity.
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BARRETT BUSINESS SERVICES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Results of Operations (Continued)
Three months ended March 31, 2004 and 2003 (continued)
Selling, general and administrative ("SG&A") expenses for the first
quarter of 2004 amounted to approximately $5.5 million, an increase of $1.9
million or 52.8% over the first quarter of 2003. The increase over the first
quarter of 2003 was primarily attributable to increases in branch management
personnel and related expenses as a result of growth in the Company's PEO
business and to a lesser extent, the incremental SG&A expenses associated with
the SRTC acquisition. SG&A expenses, as a percent of net revenues, declined from
15.4% in the first quarter of 2003 to 13.6% in the first quarter of 2004.
Factors Affecting Quarterly Results
The Company has historically experienced significant fluctuations in its
quarterly operating results and expects such fluctuations to continue in the
future. The Company's operating results may fluctuate due to a number of factors
such as seasonality, wage limits on statutory payroll taxes, claims experience
for workers' compensation, demand and competition for the Company's services and
the effect of acquisitions. The Company's revenue levels may fluctuate from
quarter to quarter primarily due to the impact of seasonality on its staffing
services business and on certain of its PEO clients in the agriculture and
forest products-related industries. As a result, the Company may have greater
revenues and net income in the third and fourth quarters of its fiscal year.
Payroll taxes and benefits fluctuate with the level of direct payroll costs, but
tend to represent a smaller percentage of revenues and direct payroll later in
the Company's fiscal year as federal and state statutory wage limits for
unemployment and social security taxes are exceeded by some employees. Workers'
compensation expense varies with both the frequency and severity of workplace
injury claims reported during a quarter and the estimated future costs of such
claims. In addition, adverse loss development of prior period claims during a
subsequent quarter may also contribute to the volatility in the Company's
estimated workers' compensation expense.
Liquidity and Capital Resources
The Company's cash position of $6,062,000 at March 31, 2004, decreased by
$1,723,000 from December 31, 2003, which compares to an increase of $143,000 for
the comparable period in 2003. The decrease in cash at March 31, 2004, as
compared to December 31, 2003, was primarily due to cash used to purchase
marketable securities of $3,907,000 for investment purposes, cash used for the
acquisition of SRTC of $3,044,000, as well as an increase in trade accounts
receivable, offset in part by increases in accrued payroll, payroll taxes and
related benefits and increases in other accrued liabilities and workers'
compensation claim liabilities.
Net cash provided by operating activities for the first quarter of 2004
amounted to $5,471,000, as compared to $2,139,000 of net cash provided by
operating activities for the first quarter of 2003. In the first quarter of
2004, cash flow was provided by net income of $606,000 together with increases
in accrued payroll and related benefits of $8,853,000 and increases in other
accrued liabilities and workers' compensation claims liabilities totaling
$2,585,000, offset in part by an increase of $6,635,000 in trade accounts
receivable.
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BARRETT BUSINESS SERVICES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Liquidity and Capital Resources (Continued)
Net cash used in investing activities totaled $7,128,000 for the first
quarter of 2004, compared to $49,000 for the first quarter of 2003. For the
first quarter of 2004, the principal uses of cash for investing activities were
purchases of marketable securities for investment purposes of $3,907,000, the
acquisition of SRTC and related costs totaling $3,044,000 and $417,000 of net
purchases of restricted marketable securities, offset in part by net proceeds
totaling $338,000 from maturities of restricted marketable securities. The
transactions related to restricted marketable securities were scheduled
maturities and the replacement of such securities held for workers' compensation
surety deposit purposes. The Company presently has no material long-term capital
commitments.
Net cash used in financing activities for the first quarter of 2004, was
$66,000, compared to $1,947,000 for the first quarter of 2003. For the first
quarter of 2004, the principal use of cash for financing activities was for
$88,000 of payments made on long-term debt, offset in part by proceeds from the
exercise of stock options.
The Company's business strategy continues to focus on growth through the
expansion of operations at existing offices, together with the selective
acquisition of additional personnel-related businesses, both in its existing
markets and other strategic geographic markets. The Company periodically
evaluates proposals for various acquisition opportunities, but there can be no
assurance that any additional transactions will be consummated. As disclosed in
Note 3 to the financial statements included in this report, the Company acquired
certain assets of Skills Resource Training Center ("SRTC"), a staffing services
company headquartered in Central Washington, effective January 1, 2004. As
consideration for the acquisition, the Company paid $3,000,000 in cash and
agreed to issue up to 135,731 shares of its common stock, with the actual number
of shares to be issued based upon the level of financial performance achieved by
the SRTC offices during calendar year 2004.
The Company entered into a new Credit Agreement (the "New Credit
Agreement") with its principal bank on March 23, 2004, to be effective March 31,
2004. The New Credit Agreement provides for a revolving credit facility of up to
$6.0 million, which includes a subfeature under the line of credit for standby
letters of credit for not more than $4.0 million. The interest rate on advances,
if any, will be, at the Company's discretion, either (i) equal to the prime rate
or (ii) LIBOR plus 1.50%. The New Credit Agreement expires July 1, 2005.
The New Credit Agreement replaces the Company's prior Amended and Restated
Credit Agreement (the "Prior Agreement") with the same bank, which was amended
three times during fiscal year 2003. The Prior Agreement provided for a
revolving credit facility of up to $8.0 million, which included a subfeature for
standby letters of credit for not more than $5.0 million and a term loan but was
subject to asset-based limits on the amount of available credit. The term loan
was paid in full as of June 30, 2003.
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BARRETT BUSINESS SERVICES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Liquidity and Capital Resources (Continued)
The revolving credit facility is collateralized by the Company's assets,
including, without limitation, its accounts receivable, equipment, intellectual
property and bank deposits, and may be prepaid at any time without penalty.
Pursuant to the New Credit Agreement, the Company is required to maintain
compliance with the following financial covenants: (1) a Current Ratio not less
than 1.10 to 1.0 with "Current Ratio" defined as total current assets divided by
total current liabilities; (2) Tangible Net Worth not less than $8 million,
determined at each fiscal quarter end, with "Tangible Net Worth" defined as the
aggregate of total stockholders' equity plus subordinated debt less any
intangible assets; (3) Total Liabilities divided by Tangible Net Worth not
greater than 5.00 to 1.0, determined at each fiscal quarter end, with "Total
Liabilities" defined as the aggregate of current liabilities and non-current
liabilities, less subordinated debt and the deferred gain on the Company's sale
and leaseback transaction, and with "Tangible Net Worth" as defined above; and
(4) net income after taxes not less than $1.00 on an annual basis, determined as
of each fiscal year end, and pre-tax profit not less than $1.00 on a quarterly
basis, determined as of each fiscal quarter end. The Company was in compliance
with all covenants at March 31, 2004.
Management expects that current liquid assets, the funds anticipated to be
generated from operations, and credit available under the New Credit Agreement
and other potential sources of financing, will be sufficient in the aggregate to
fund the Company's working capital needs for the foreseeable future.
Stock Repurchase Program
During 1999, the Company's board of directors authorized a stock
repurchase program to repurchase common shares from time to time in open market
purchases. Since inception, the board of directors has approved seven increases
in the total number of shares or dollars authorized to be repurchased under the
program. As of May 12, 2004, the repurchase program had remaining authorized
availability of $443,800 for the repurchase of additional shares. The Company
made no share repurchases during the first three months of 2004. Since the
inception of the repurchase program through May 12, 2004, the Company has
repurchased 2,053,555 shares for an aggregate price of $9,187,200. Management
anticipates that the capital necessary to continue this program will be provided
by existing cash balances, cash generated from operations and other available
resources.
Inflation
Inflation generally has not been a significant factor in the Company's
operations during the periods discussed above. The Company has taken into
account the impact of escalating medical and other costs in establishing
reserves for future expenses for self-insured workers' compensation claims.
-15-
BARRETT BUSINESS SERVICES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Forward-Looking Information
Statements in this report which are not historical in nature, including
discussion of economic conditions in the Company's market areas and effect on
revenue growth, the potential for and effect of recent and future acquisitions,
the effect of changes in the Company's mix of services on gross margin, the
adequacy of the Company's workers' compensation reserves and allowance for
doubtful accounts, the effectiveness of the Company's management information
systems, and the availability of financing and working capital to meet the
Company's funding requirements, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company or industry to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors with respect to the Company include difficulties
associated with integrating new customers and clients into the Company's
operations, the successful integration of the operations of Skills Resource
Training Center acquired by the Company on January 1, 2004, economic trends in
the Company's service areas, material deviations from expected 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 carrying values of deferred income tax assets and goodwill, which
may be affected by the Company's future operating results, the availability of
capital or letters of credit necessary to meet state-mandated surety deposit
requirements for maintaining the Company's status as a qualified self-insured
employer for workers' compensation coverage, and the availability of and costs
associated with potential sources of financing. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
-16-
BARRETT BUSINESS SERVICES, INC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk for changes in interest rates
primarily relates to the Company's short-term and long-term debt obligations. As
of March 31, 2004, the Company had interest-bearing debt obligations of
approximately $0.4 million, which bears interest at a fixed rate. Based on the
Company's overall interest exposure at March 31, 2004, a 10 percent change in
market interest rates would not have a material effect on the fair value of the
Company's long-term debt or its results of operations. As of March 31, 2004, the
Company had not entered into any interest rate instruments to reduce its
exposure to interest rate risk.
Item 4. Controls and Procedures
The Registrant carried out an evaluation, under the supervision and with
the participation of the Registrant's management, including the Registrant's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
Registrant's disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities and Exchange Act of 1934. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Registrant's disclosure controls and procedures as of March
31, 2004 were effective in providing a reasonable level of assurance that
information required to be disclosed by the Registrant in reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
There were no changes in the Registrant's internal control over financial
reporting that occurred during the quarter ended March 31, 2004 that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
-17-
BARRETT BUSINESS SERVICES, INC.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed with this Report are listed in the Exhibit Index
following the signature page of this Report.
(b) The following Current Report on Form 8-K was filed by the
Registrant during the quarter ended March 31, 2004:
On January 13, 2004, the Company filed a Current Report on Form 8-K
reporting under Item 5 that the Company had completed its
previously announced acquisition of certain assets of Skills
Resource Training Center.
-18-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BARRETT BUSINESS SERVICES, INC.
(Registrant)
Date: May 14, 2004 /s/ Michael D. Mulholland
---------------------------------
Michael D. Mulholland
Vice President - Finance
(Principal Financial Officer)
-19-
EXHIBIT INDEX
Exhibit
31.1 Certification of the Chief Executive Officer under Rule 13a-14(a).
31.2 Certification of the Chief Financial Officer under Rule 13a-14(a).
32 Certification pursuant to 18 U.S.C. Section 1350.
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