Form: 8-K

Current report filing

July 27, 2006

Documents

Exhibit 99.1

NEWS RELEASE

For Immediate Release      Contact: William W. Sherertz
President and
Chief Executive Officer

Telephone:
(360) 828-0700

BBSI
ANNOUNCES SECOND QUARTER 2006 OPERATING RESULTS AND
FINANCIAL GUIDANCE FOR 3Q06

        VANCOUVER, WASHINGTON, July 26, 2006 — Barrett Business Services, Inc. (Nasdaq: BBSI) reported today net income of $4,188,000 for the second quarter ended June 30, 2006, an improvement of $1,283,000 or 44.2% over net income of $2,905,000 for the second quarter of 2005. Diluted earnings per share for the 2006 second quarter were $.36, as compared to diluted earnings per share of $.31 for the same quarter a year ago.

Net revenues for the second quarter ended June 30, 2006 totaled $64.7 million, an increase of approximately $5.1 million or 8.6% over the $59.6 million for the same quarter in 2005.

($ in thousands) (Unaudited)
Second Quarter Ended
June 30,
 (Unaudited)
Six Months Ended
June 30,
Results of Operations
 2006
 2005
 2006
 2005
Revenues:                    
    Staffing services     $ 30,567   $ 35,637   $ 57,228   $ 64,179  
    Professional employer service fees       34,088     23,994     65,712     44,696  
      Total revenues       64,655     59,631     122,940     108,875  
Cost of revenues:    
    Direct payroll costs       22,831     26,598     42,682     47,615  
    Payroll taxes and benefits       20,437     15,303     43,274     31,000  
    Workers' compensation       7,198     6,295     13,752     11,701  
      Total cost of revenues       50,466     48,196     99,708     90,316  
Gross margin       14,189     11,435     23,232     18,559  
Selling, general and administrative    
    expenses       7,882     6,251     15,102     11,721  
Depreciation and amortization       329     217     630     453  
Income from operations       5,978     4,967     7,500     6,385  
Other income, net       670     (205 )   1,302     (97 )
Income before taxes       6,648     4,762     8,802     6,288  
Provision for income taxes       2,460     1,857     3,257     2,452  
Net income     $ 4,188   $ 2,905   $ 5,545   $ 3,836  
Basic earnings per share     $ .37   $ .33   $ .50   $ .44  
Weighted average basic shares    
    outstanding       11,203     8,717     11,140     8,681  
Diluted earnings per share     $ .36   $ .31   $ .48   $ .41  
Weighted average diluted shares    
    outstanding       11,683     9,398     11,672     9,375  

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Barrett Business Services, Inc.
News Release – Second Quarter 2006
July 26, 2006

        The Company reports its 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.

(in thousands) (Unaudited)
Second Quarter
June 30,
 (Unaudited)
Six Months Ended
June 30,
2006
 2005
 2006
 2005
Revenues:                    
    Staffing services     $ 30,567   $ 35,637   $ 57,228   $ 64,179  
    Professional employer services       226,845     147,945     435,519     276,496  
      Total revenues       257,412     183,582     492,747     340,675  
Cost of revenues:    
    Direct payroll costs       214,247     148,927     410,212     276,324  
    Payroll taxes and benefits       20,437     15,303     43,274     31,000  
    Workers' compensation       8,539     7,917     16,029     14,792  
      Total cost of revenues       243,223     172,147     469,515     322,116  
Gross margin     $ 14,189   $ 11,435   $ 23,232   $ 18,559  

        Gross revenues of $257.4 million for the second quarter ended June 30, 2006 rose 40.2% over the similar period in 2005. For the six months ended June 30, 2006, gross revenues of $492.7 million increased 44.6% over the comparable period in 2005.

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

For the second quarters ended June 30, 2006 and 2005 (in thousands):

(Unaudited)
Three Months Ended June 30,
(in thousands) Gross Revenue
Reporting Method
 Reclassification
 Net Revenue
Reporting Method
2006
 2005
 2006
 2005
 2006
 2005
Revenues:                            
    Staffing services     $ 30,567   $ 35,637   $ —   $ —   $ 30,567   $ 35,637  
    Professional    
      employer    
        services       226,845     147,945     (192,757 )   (123,951 )   34,088     23,994  
      Total revenues     $ 257,412   $ 183,582   $ (192,757 ) $ (123,951 ) $ 64,655   $ 59,631  
Cost of revenues:     $ 243,223   $ 172,147   $ (192,757 ) $ (123,951 ) $ 50,466   $ 48,196  

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Barrett Business Services, Inc.
News Release – Second Quarter 2006
July 26, 2006

For the six months ended June 30, 2006 and 2005 (in thousands):

(Unaudited)
Six Months Ended June 30,
(in thousands) Gross Revenue
Reporting Method
 Reclassification
 Net Revenue
Reporting Method
2006
 2005
 2006
 2005
 2006
 2005
Revenues:                            
    Staffing services     $ 57,228   $ 64,179   $ —   $ —   $ 57,228   $ 64,179  
    Professional    
      employer    
        services       435,519     276,496     (369,807 )   (231,800 )   65,712     44,696  
      Total revenues     $ 492,747   $ 340,675   $ (369,807 ) $ (231,800 ) $ 122,940   $ 108,875  
Cost of revenues:     $ 469,515   $ 322,116   $ (369,807 ) $ (231,800 ) $ 99,708   $ 90,316  

        William W. Sherertz, President and Chief Executive Officer, commented that: “The Company continues to effectively execute its business plan and we look forward to a strong second half of the year.”

        The following summarizes the unaudited consolidated balance sheets at June 30, 2006 and December 31, 2005.





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Barrett Business Services, Inc.
News Release – Second Quarter 2006
July 26, 2006


($ in thousands) June 30,
2006
 December 31,
2005
Assets            
Current assets:    
    Cash and cash equivalents     $ 57,604   $ 61,361  
    Marketable securities       3,545     3,548  
    Trade accounts receivable, net       33,023     26,328  
    Prepaid expenses and other       4,538     2,514  
    Deferred income taxes       6,171     5,864  
    Workers' compensation receivables for insured claims       242     242  
      Total current assets       105,123     99,857  
Marketable securities       401     396  
Goodwill, net       26,536     22,516  
Intangibles, net       89     5  
Property, equipment and software, net       13,633     13,071  
Restricted marketable securities and workers'    
    compensation deposits       2,347     2,041  
Deferred income taxes       141     341  
Other assets       3,054     1,528  
Workers' compensation receivables for insured claims       4,437     4,546  
      $ 155,761   $ 144,301  
Liabilities and Stockholders' Equity    
Current liabilities:    
    Accounts payable     $ 1,811   $ 1,366  
    Accrued payroll, payroll taxes and related benefits       32,924     28,650  
    Other accrued liabilities       1,957     360  
    Workers' compensation claims liabilities       4,796     5,729  
    Workers' compensation claims liabilities for insured claims       242     242  
    Safety incentives liabilities       7,864     7,687  
    Current portion of long-term debt       —     348  
      Total current liabilities       49,594     44,382  
Long-term debt, net of current portion       —     1,094  
Customer deposits       794     663  
Long-term workers' compensation claims liabilities       8,179     8,532  
Long-term workers' compensation liabilities for insured claims       2,757     2,866  
Deferred gain on sale and leaseback       854     914  
Stockholders' equity       93,583     85,850  
      $ 155,761   $ 144,301  

Outlook for Third Quarter 2006

        The Company also disclosed today limited financial guidance with respect to its operating results for the third quarter ending September 30, 2006. The Company expects gross revenues for the third quarter of 2006 to range from $273 million to $278 million, an increase of approximately 30% over the third quarter of 2005, and anticipates diluted earnings per share for the third quarter of 2006 to range from $.47 to $.49 per share, as compared to $.40 per share for the same period a year ago. Management expectations for diluted earnings per share for the third quarter of 2006 equate to increases over the third quarter of 2005 of approximately 30% in

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Barrett Business Services, Inc.
News Release – Second Quarter 2006
July 26, 2006

net income and approximately 20% in diluted earnings per share. The percentage increase is lower on a per share basis because the dilutive effect of the late July 2005 follow-on equity offering only applied to approximately two months of the 2005 third quarter. A reconciliation of estimated gross revenues to estimated GAAP net revenues for the third quarter of 2006 is not included because PEO revenues and cost of PEO revenues for the period are not reasonably estimable.

        On July 27, 2006 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 2006 operating results. To participate in the call, dial (877) 356-3717. The call identification number is 3113032. 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 27, 2006 at 12:00 p.m. PT and ending on August 3, 2006. To listen to the recording, dial (800) 642-1687 and enter conference identification code 3113032.

        BBSI provides a comprehensive range of 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 2006, 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 our primary markets, collectibility of accounts receivable, and the use of net proceeds of approximately $33 million and other effects of the Company’s 2005 follow-on equity offering, among others. Other important factors that may affect the Company’s future prospects are described in the Company’s 2005 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.

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