SOURCE: Barrett Business Services, Inc.

Barrett Business Services, Inc.

July 24, 2012 16:05 ET

BBSI Reports Second Quarter 2012 Financial Results

35% Increase in Gross Revenues Drives Diluted Earnings per Share of $0.53

VANCOUVER, WA--(Marketwire - Jul 24, 2012) - Barrett Business Services, Inc. (BBSI) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2012.

Second Quarter 2012 Financial Highlights vs. Year-Ago Quarter

  • Net revenues increased 26% to $95.5 million
  • Gross revenues increased 35% to $494.1 million
  • Net income of $3.7 million or $0.53 per diluted common share, compared to net income of $3.4 million or $0.34 per diluted common share

Second Quarter 2012 Financial Results

Net revenues in the second quarter of 2012 increased 26% to $95.5 million, compared to $76.0 million in the second quarter of 2011.

Total non-GAAP gross revenues in the second quarter of 2012 increased 35% to $494.1 million, compared to $366.9 million in the second quarter of 2011 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was attributed primarily to the continued build in the Company's Professional Employer Organization (PEO) client count and same-store-sales growth.

Net income in the second quarter of 2012 was $3.7 million or $0.53 per diluted common share, compared to net income of $3.4 million or $0.34 per diluted common share in the year-ago quarter. The second quarter of 2011 included the benefit of a lower annual effective income tax rate resulting from the non-taxable $10 million of key man life insurance proceeds received following the passing of the Company's former president and CEO. Excluding the tax rate benefit, non-GAAP net income for the second quarter of 2011 was $2.9 million or $0.28 per diluted common share (see "Reconciliation of Non-GAAP Financial Measures" below).

On June 30, 2012, the Company's cash, cash equivalents and marketable securities totaled $68.0 million, compared to $81.8 million at December 31, 2011. In March of 2012, BBSI completed the repurchase of 2.5 million common shares from the Estate of William W. Sherertz, which represents all the common shares held by the estate of the Company's former president and CEO, as well as 500,000 common shares from Nancy Sherertz, for a combination of $24.9 million in cash and $34.8 million of nonconvertible, non-voting, redeemable preferred stock for an aggregate purchase price of approximately $59.7 million or $20.00 per common share. The Company anticipates borrowing funds through a bank line of credit to redeem the preferred shares during the third quarter of 2012.

Management Commentary

"The 35% increase in gross revenues represents our tenth consecutive quarter of year-over-year double-digit sales growth and an all-time record level of quarterly gross revenue," said Michael Elich, president and CEO of BBSI. "The results of another record quarter are attributed to the return we are realizing from our investment back into the organization, which is supporting continued pipeline growth and rewarding execution in the field. While we continue to mature our product offering, organizational culture and brand offering to our client base, we are seeing continued strength in our pipeline of new client additions while also maintaining very strong client retention."

Third Quarter 2012 Outlook

For the third quarter of 2012, the Company expects gross revenues to range between $525 million and $530 million, compared to $406.0 million for the third quarter of 2011. Diluted income per common share in the third quarter of 2012 is expected to range between $0.70 and $0.73, compared to diluted income per common share of $0.54 in the year-ago quarter. Diluted income per common share in the third quarter of 2011 included a favorable income tax rate benefit related to the effect of a much lower annual effective income tax rate attributable to the life insurance proceeds as previously discussed. Without this benefit, diluted income per common share in the third quarter of 2011 was $0.42.

The range of anticipated diluted earnings per common share for the third quarter of 2012 excludes an accrual of a dividend on the redeemable preferred stock as the Company currently plans to redeem the preferred stock in full before September 28, 2012, in which event, no dividend would be payable. As discussed above, the Company anticipates redeeming the preferred shares using a bank line of credit. A reconciliation of expected gross revenues to expected GAAP net revenues for the third quarter of 2012 is not included because PEO revenues and the cost of PEO revenues for the period cannot be reasonably estimated.

Conference Call

BBSI will host a conference call tomorrow, Wednesday, July 25, 2012 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its second quarter 2012 results. The Company's president and CEO Michael Elich and CFO James Miller will host the call, followed by a question and answer period.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

Date: Wednesday, July 25, 2012
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Dial-In Number: 1-877-941-4774
International: 1-480-629-9760
Conference ID#: 4551898

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=101055 and via the investor relations section of the Company's website at www.barrettbusiness.com.

A replay of the call will be available after 3:00 p.m. Eastern time on the same day and until August 25, 2012.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 4551898

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles ("GAAP"), the Company is disclosing non-GAAP gross revenues and non-GAAP net income.

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 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,
    2012   2011   2012   2011
                         
Revenues:                        
  Staffing services   $ 30,387   $ 30,518   $ 56,598   $ 58,850
  Professional employer services     463,671     336,380     869,521     639,114
    Total revenues     494,058     366,898     926,119     697,964
Cost of revenues:                        
  Direct payroll costs     418,594     312,385     785,527     595,027
  Payroll taxes and benefits     39,332     28,886     82,324     60,649
  Workers' compensation     19,791     12,346     35,370     23,409
    Total cost of revenues     477,717     353,617     903,221     679,085
Gross margin   $ 16,341   $ 13,281   $ 22,898   $ 18,879
                         
                         
                         

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

     
    (Unaudited)
    Three Months Ended June 30,
    Gross Revenue         Net Revenue
(in thousands)   Reporting Method   Reclassification     Reporting Method
    2012   2011   2012     2011     2012   2011
                                         
Revenues:                                        
  Staffing services   $ 30,387   $ 30,518   $ -     $ -     $ 30,387   $ 30,518
  Professional employer services     463,671     336,380     (398,558 )     (290,885 )     65,113     45,495
    Total revenues   $ 494,058   $ 366,898   $ (398,558 )   $ (290,885 )   $ 95,500   $ 76,013
Cost of revenues   $ 477,717   $ 353,617   $ (398,558 )   $ (290,885 )   $ 79,159   $ 62,732
                                         
                                         
     (Unaudited)
     Six Months Ended June 30,
     Gross Revenue            Net Revenue
(in thousands)    Reporting Method    Reclassification      Reporting Method
     2012    2011    2012      2011      2012    2011
                                         
Revenues:                                        
  Staffing services   $ 56,598   $ 58,850   $ -     $ -     $ 56,598   $ 58,850
  Professional employer services     869,521     639,114     (748,197 )     (553,182 )     121,324     85,932
    Total revenues   $ 926,119   $ 697,964   $ (748,197 )   $ (553,182 )   $ 177,922   $ 144,782
Cost of revenues   $ 903,221   $ 679,085   $ (748,197 )   $ (553,182 )   $ 155,024   $ 125,903
                                         
                                         
                                         

The Company is presenting non-GAAP net income because it believes it is more reflective of its actual operating results due to the non-recurring nature of the life insurance proceeds. A reconciliation of GAAP net income to non-GAAP operating performance is provided in the table below:

                 
    (Unaudited)
(in thousands, except per share    Second Quarter Ended
amounts)   June 30,
    2012   2011
    GAAP   GAAP   Adjustments   non-GAAP
                         
Income before taxes   $ 5,631   $ 4,345   $ -   $ 4,345
Provision for income taxes     1,888     896     565     1,461
Net income   $ 3,743   $ 3,449         $ 2,884
Basic income per share   $ .54   $ .34         $ .28
Weighted average basic shares outstanding     6,995     10,196           10,196
Diluted income per share   $ .53   $ .34         $ .28
Weighted average diluted shares outstanding     7,078     10,245           10,245
                         
                         
                         

About BBSI

BBSI (NASDAQ: BBSI) is a leading provider of business management solutions, combining human resource outsourcing and professional management consulting to create a unique operational platform that differentiates it from competitors. The Company's integrated platform is built upon expertise in payroll processing, employee benefits, workers' compensation coverage, risk management and workplace safety programs, and human resource administration. BBSI's partnerships help businesses of all sizes improve the efficiency of their operations. BBSI works with more than 3,000 clients across all lines of business in 23 states. For more information, please visit www.barrettbusiness.com.

Forward-Looking Statements

Statements in this release about future events or performance, including gross revenues and earnings expectations for the third quarter of 2012, 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 retain current clients and attract new clients, the availability of financing or other sources of capital, including the impact of such availability on the Company's plans to redeem its preferred stock, 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 collectability of accounts receivable, and the effect of conditions in the global capital markets on the Company's investment portfolio, among others. Other important factors that may affect the Company's future prospects are described in the Company's 2011 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 are 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.

 
Barrett Business Services, Inc.
Condensed Balance Sheets
(Unaudited)
         
    June 30,   December 31,
(in thousands)   2012   2011
Assets            
Current assets:            
  Cash and cash equivalents   $ 36,358   $ 49,571
  Marketable securities     14,240     16,878
  Trade accounts receivable, net     63,433     46,520
  Income taxes receivable     3,432     4,133
  Prepaid expenses and other     2,914     5,897
  Deferred income taxes     5,931     5,958
    Total current assets     126,308     128,957
Marketable securities     17,439     15,395
Property, equipment and software, net     15,832     15,007
Restricted marketable securities and workers' compensation deposits     9,932     9,923
Other assets     3,035     3,027
Workers' compensation receivables for insured claims     1,601     2,968
Goodwill, net     47,820     47,820
    $ 221,967   $ 223,097
             
Liabilities and Stockholders' Equity            
Current liabilities:            
  Accounts payable   $ 1,913   $ 1,639
  Accrued payroll, payroll taxes and related benefits     68,385     52,340
  Income taxes payable     193     -
  Other accrued liabilities     350     300
  Workers' compensation claims liabilities     19,670     18,718
  Safety incentives liabilities     7,541     6,321
    Total current liabilities     98,052     79,318
Long-term workers' compensation claims liabilities     35,231     30,596
Long-term workers' compensation liabilities for insured claims     864     1,879
Deferred income taxes     8,152     8,152
Mandatorily redeemable preferred stock     34,800     -
Customer deposits and other long-term liabilities     1,502     1,497
Stockholders' equity     43,366     101,655
    $ 221,967   $ 223,097
             
             
             
 
Barrett Business Services, Inc.
Consolidated Statements of Operations
 
         
(in thousands, except per share    (Unaudited)   (Unaudited)
amounts)   Second Quarter Ended   Six Months Ended
    June 30,   June 30,
    2012   2011   2012   2011
                         
Revenues:                        
  Staffing services   $ 30,387   $ 30,518   $ 56,598   $ 58,850
  Professional employer service fees     65,113     45,495     121,324     85,932
    Total revenues     95,500     76,013     177,922     144,782
Cost of revenues:                        
  Direct payroll costs     22,843     23,093     42,495     44,541
  Payroll taxes and benefits     39,332     28,886     82,324     60,649
  Workers' compensation     16,984     10,753     30,205     20,713
    Total cost of revenues     79,159     62,732     155,024     125,903
Gross margin     16,341     13,281     22,898     18,879
Selling, general and administrative expenses     10,549     8,871     20,313     17,698
Depreciation and amortization     357     331     704     666
Income from operations     5,435     4,079     1,881     515
Life insurance proceeds     -     -     -     10,000
Other income, net     196     266     412     720
Income before taxes     5,631     4,345     2,293     11,235
Provision for income taxes     1,888     896     763     2,240
Net income   $ 3,743   $ 3,449   $ 1,530   $ 8,995
Basic income per common share   $ .54   $ .34   $ .18   $ .88
Weighted average basic common shares outstanding     6,995     10,196     8,435     10,198
Diluted income per common share   $ .53   $ .34   $ .18   $ .88
Weighted average diluted common shares outstanding     7,078     10,245     8,511     10,246
                         

Contact Information

  • Company Contact:

    Michael L. Elich
    President and CEO
    Tel 1-360-828-0700

    Investor Relations:

    Liolios Group, Inc.
    Scott Liolios or Cody Slach
    Tel 1-949-574-3860
    Email Contact