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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From           to          

Commission File Number 0-21886

 

BARRETT BUSINESS SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

52-0812977

(State or other jurisdiction of
Incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

 

8100 NE Parkway Drive, Suite 200

 

 

Vancouver, Washington

 

98662

(Address of principal executive offices)

 

(Zip Code)

(360) 828-0700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.01 Per Share

BBSI

The NASDAQ Stock Market LLC

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       No    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No  

As of October 21, 2020, 7,646,324 shares of the registrant’s common stock ($0.01 par value) were outstanding.

 


 

BARRETT BUSINESS SERVICES, INC.

INDEX TO FORM 10-Q

 

Part I - Financial Information (Unaudited)

 

 

 

 

 

 

Page

Item 1.

 

Unaudited Interim Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets - September 30, 2020 and December 31, 2019

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2020

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2019

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2020 and 2019

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

28

 

 

 

 

 

Part II - Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

29

 

 

 

 

 

Item 1A.

 

Risk Factors

 

29

 

 

 

 

 

Item 6.

 

Exhibits

 

31

 

 

 

 

 

Signature

 

32

 

 

 

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

Unaudited Interim Condensed Consolidated Financial Statements

Barrett Business Services, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In Thousands, Except Par Value)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,193

 

 

$

44,570

 

Investments

 

 

86,679

 

 

 

82,590

 

Trade accounts receivable, net

 

 

212,362

 

 

 

163,561

 

Income taxes receivable

 

 

1,740

 

 

 

1,335

 

Prepaid expenses and other

 

 

13,883

 

 

 

14,919

 

Restricted cash and investments

 

 

90,608

 

 

 

116,873

 

Total current assets

 

 

466,465

 

 

 

423,848

 

Property, equipment and software, net

 

 

35,148

 

 

 

31,724

 

Operating lease right-of-use assets

 

 

23,730

 

 

 

23,805

 

Restricted cash and investments

 

 

245,035

 

 

 

327,326

 

Goodwill

 

 

47,820

 

 

 

47,820

 

Other assets

 

 

5,081

 

 

 

3,618

 

Deferred income taxes

 

 

 

 

 

2,788

 

 

 

$

823,279

 

 

$

860,929

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

221

 

 

$

221

 

Accounts payable

 

 

6,447

 

 

 

5,993

 

Accrued payroll, payroll taxes and related benefits

 

 

205,476

 

 

 

174,168

 

Current operating lease liabilities

 

 

7,303

 

 

 

6,671

 

Other accrued liabilities

 

 

6,603

 

 

 

8,846

 

Workers' compensation claims liabilities

 

 

96,583

 

 

 

118,273

 

Safety incentives liability

 

 

23,354

 

 

 

27,950

 

Total current liabilities

 

 

345,987

 

 

 

342,122

 

Long-term workers' compensation claims liabilities

 

 

250,765

 

 

 

320,713

 

Long-term debt

 

 

3,565

 

 

 

3,730

 

Deferred income taxes

 

 

2,947

 

 

 

 

Long-term operating lease liabilities

 

 

17,355

 

 

 

17,883

 

Customer deposits and other long-term liabilities

 

 

5,348

 

 

 

4,682

 

Total liabilities

 

 

625,967

 

 

 

689,130

 

Commitments and contingencies (Notes 4 and 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $.01 par value; 20,500 shares authorized, 7,646

   and 7,514 shares issued and outstanding

 

 

76

 

 

 

75

 

Additional paid-in capital

 

 

23,938

 

 

 

20,227

 

Accumulated other comprehensive income

 

 

7,649

 

 

 

2,819

 

Retained earnings

 

 

165,649

 

 

 

148,678

 

Total stockholders' equity

 

 

197,312

 

 

 

171,799

 

 

 

$

823,279

 

 

$

860,929

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In Thousands, Except Per Share Amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional employer service fees

 

$

199,082

 

 

$

214,156

 

 

$

573,162

 

 

$

607,840

 

Staffing services

 

 

28,431

 

 

 

33,806

 

 

 

74,486

 

 

 

89,319

 

Total revenues

 

 

227,513

 

 

 

247,962

 

 

 

647,648

 

 

 

697,159

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct payroll costs

 

 

21,452

 

 

 

25,464

 

 

 

56,325

 

 

 

67,298

 

Payroll taxes and benefits

 

 

100,142

 

 

 

104,847

 

 

 

313,275

 

 

 

321,341

 

Workers' compensation

 

 

46,685

 

 

 

46,887

 

 

 

146,120

 

 

 

154,290

 

Total cost of revenues

 

 

168,279

 

 

 

177,198

 

 

 

515,720

 

 

 

542,929

 

Gross margin

 

 

59,234

 

 

 

70,764

 

 

 

131,928

 

 

 

154,230

 

Selling, general and administrative expenses

 

 

35,587

 

 

 

41,352

 

 

 

100,957

 

 

 

113,517

 

Depreciation and amortization

 

 

1,341

 

 

 

970

 

 

 

3,512

 

 

 

2,909

 

Income from operations

 

 

22,306

 

 

 

28,442

 

 

 

27,459

 

 

 

37,804

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income, net

 

 

1,664

 

 

 

2,882

 

 

 

6,431

 

 

 

9,286

 

Interest expense

 

 

(366

)

 

 

(394

)

 

 

(907

)

 

 

(1,352

)

Other, net

 

 

(4

)

 

 

 

 

 

169

 

 

 

12

 

Other income, net

 

 

1,294

 

 

 

2,488

 

 

 

5,693

 

 

 

7,946

 

Income before income taxes

 

 

23,600

 

 

 

30,930

 

 

 

33,152

 

 

 

45,750

 

Provision for income taxes

 

 

5,089

 

 

 

5,959

 

 

 

6,538

 

 

 

9,172

 

Net income

 

$

18,511

 

 

$

24,971

 

 

$

26,614

 

 

$

36,578

 

Basic income per common share

 

$

2.42

 

 

$

3.34

 

 

$

3.51

 

 

$

4.92

 

Weighted average number of basic common shares

     outstanding

 

 

7,639

 

 

 

7,483

 

 

 

7,572

 

 

 

7,433

 

Diluted income per common share

 

$

2.40

 

 

$

3.24

 

 

$

3.46

 

 

$

4.76

 

Weighted average number of diluted common

     shares outstanding

 

 

7,709

 

 

 

7,711

 

 

 

7,688

 

 

 

7,686

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

4


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In Thousands)

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Net income

 

$

18,511

 

 

$

24,971

 

Unrealized gains on investments, net of tax of $263 and $376 in 2020

   and 2019, respectively

 

 

688

 

 

 

987

 

Comprehensive income

 

$

19,199

 

 

$

25,958

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Net income

 

$

26,614

 

 

$

36,578

 

Unrealized gains on investments, net of tax of $1,847 and $2,935 in 2020

   and 2019, respectively

 

 

4,830

 

 

 

7,687

 

Comprehensive income

 

$

31,444

 

 

$

44,265

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2020

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Income

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Earnings

 

 

Total

 

Balance, December 31, 2019

 

7,514

 

 

$

75

 

 

$

20,227

 

 

$

2,819

 

 

$

148,678

 

 

$

171,799

 

Common stock issued on exercise of options,

   purchase of ESPP shares and vesting of

   restricted stock units and performance awards

 

56

 

 

 

1

 

 

 

903

 

 

 

 

 

 

 

 

 

904

 

Common stock repurchased on vesting of

   restricted stock units and performance

   awards

 

(6

)

 

 

 

 

 

(378

)

 

 

 

 

 

 

 

 

(378

)

Share-based compensation expense

 

 

 

 

 

 

 

342

 

 

 

 

 

 

 

 

 

342

 

Company repurchase of common stock

 

(59

)

 

 

(1

)

 

 

(169

)

 

 

 

 

 

(2,817

)

 

 

(2,987

)

Cash dividends on common stock ($0.30 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,262

)

 

 

(2,262

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(2,735

)

 

 

 

 

 

(2,735

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,407

)

 

 

(3,407

)

Balance, March 31, 2020

 

7,505

 

 

$

75

 

 

$

20,925

 

 

$

84

 

 

$

140,192

 

 

$

161,276

 

Common stock issued on exercise of options

   and vesting of restricted stock units

 

96

 

 

 

1

 

 

 

1,809

 

 

 

 

 

 

 

 

 

1,810

 

Common stock repurchased on vesting of

   restricted stock units

 

(3

)

 

 

 

 

 

(110

)

 

 

 

 

 

 

 

 

(110

)

Share-based compensation expense

 

 

 

 

 

 

 

797

 

 

 

 

 

 

 

 

 

797

 

Cash dividends on common stock ($0.30 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,272

)

 

 

(2,272

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

6,877

 

 

 

 

 

 

6,877

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

11,510

 

 

 

11,510

 

Balance, June 30, 2020

 

7,598

 

 

$

76

 

 

$

23,421

 

 

$

6,961

 

 

$

149,430

 

 

$

179,888

 

Common stock issued on exercise of options,

   purchase of ESPP shares and vesting of

   restricted stock units

 

66

 

 

 

 

 

 

300

 

 

 

 

 

 

 

 

 

300

 

Common stock repurchased on vesting of

   restricted stock units

 

(18

)

 

 

 

 

 

(928

)

 

 

 

 

 

 

 

 

(928

)

Share-based compensation expense

 

 

 

 

 

 

 

1,145

 

 

 

 

 

 

 

 

 

1,145

 

Cash dividends on common stock ($0.30 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,292

)

 

 

(2,292

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

688

 

 

 

 

 

 

688

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

18,511

 

 

 

18,511

 

Balance, September 30, 2020

 

7,646

 

 

$

76

 

 

$

23,938

 

 

$

7,649

 

 

$

165,649

 

 

$

197,312

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2019

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Income

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Earnings

 

 

Total

 

Balance, December 31, 2018

 

7,395

 

 

$

74

 

 

$

15,437

 

 

$

(5,068

)

 

$

108,594

 

 

$

119,037

 

Common stock issued on exercise of options

   and vesting of restricted stock units and

   performance awards

 

17

 

 

 

 

 

 

122

 

 

 

 

 

 

 

 

 

122

 

Common stock repurchased on vesting of

   restricted stock units and performance

   awards

 

(2

)

 

 

 

 

 

(178

)

 

 

 

 

 

 

 

 

(178

)

Share-based compensation expense

 

 

 

 

 

 

 

1,387

 

 

 

 

 

 

 

 

 

1,387

 

Cash dividends on common stock ($0.25 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,852

)

 

 

(1,852

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

3,657

 

 

 

 

 

 

3,657

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,300

)

 

 

(2,300

)

Balance, March 31, 2019