BBSI Reports First Quarter 2012 Financial Results

Marketwired

VANCOUVER, WA--(Marketwire -04/24/12)- Barrett Business Services, Inc. (BBSI) (BBSI - News), a leading provider of business management solutions, reported financial results for the first quarter ended March 31, 2012.

First Quarter 2012 Financial Highlights vs. Same Year-Ago Quarter

  • Net revenues up 20% to $82.4 million
  • Gross revenues up 31% to $432.1 million
  • Net loss of $2.2 million or $(0.22) per common share, compared to net income of $5.5 million or $0.54 per common share
  • Non-GAAP net loss of $1.9 million or $(0.19) per common share, compared to non-GAAP net loss of $2.0 million or $(0.19) per common share

First Quarter 2012 Financial Results
Net revenues in the first quarter of 2012 increased 20% to $82.4 million, compared to $68.8 million in the first quarter of 2011.

Total non-GAAP gross revenues in the first quarter of 2012 increased 31% to $432.1 million, compared to $331.1 million in the first quarter of 2011 (see "Reconciliation of Non-GAAP Financial Measures" below). The improvement was attributed primarily to the net increase in the Company's Professional Employer Organization (PEO) clients and same-store-sales.

Net loss for the first quarter of 2012 was $2.2 million or $(0.22) per common share, compared to net income of $5.5 million or $0.54 per common share in the same year-ago quarter. The first quarter of 2012 included $460,000 of incremental legal and professional fees associated with the response to requests for a special stockholders meeting. Excluding these fees, non-GAAP net loss for the first quarter of 2012 was $1.9 million or $(0.19) per common share. The first quarter of 2011 included $10.0 million of key man life insurance proceeds received following the passing of the Company's former president and CEO, certain incremental costs associated with the CEO transition and the benefit of a lower annual effective income tax rate. Excluding these items, non-GAAP net loss for the first quarter of 2011 was $2.0 million or $(0.19) per common share (see "Reconciliation of Non-GAAP Financial Measures" below). Additionally, the net loss in both periods is due primarily to the seasonally higher burden of employment taxes during the first quarter of the Company's fiscal year.

On March 31, 2012, the Company's cash, cash equivalents and marketable securities totaled $67.9 million, compared to $81.8 million at December 31, 2011. During the first quarter 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 continues to carry no bank debt.

Management Commentary
"The solid revenue and new client momentum we built throughout 2011 was carried into the first quarter of 2012," said Michael Elich, president and CEO of BBSI. "As we move through 2012, we are confident in our ability to sustain this momentum. We expect our referral networks will enable us to continue to build width within our client base and expand our revenues. Given the depth of our client pipeline and our strong client retention, we plan to continue to invest in our infrastructure and human capital throughout the year. Ultimately, we are making these investments to support a much larger and more mature organization that can better serve our clients. We are confident that this strategy remains well on track."

Second Quarter 2012 Outlook
For the second quarter of 2012, the Company expects gross revenues to range between $453 million and $459 million, compared to $366.9 million for the second quarter of 2011. Diluted income per common share in the second quarter of 2012 is expected to range between $0.43 and $0.46, compared to diluted income per common share of $0.34 in the same year-ago quarter. Diluted income per common share in the second 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 second quarter of 2011 was $0.28. The range of anticipated diluted earnings per common share for the second 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. A reconciliation of expected gross revenues to expected GAAP net revenues for the second 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, April 25, 2012 at 12:00 p.m. Eastern time (00 a.m. Pacific time) to discuss its first 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, April 25, 2012
Time: 12:00 p.m. Eastern time (00 a.m. Pacific time)
Dial-In Number: 1-877-941-2068
International: 1-480-629-9712
Conference ID#: 4530818

The conference call will be broadcast live and available for replay at http://viavid.net/dce.aspx?sid=000095EA 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 May 25, 2012.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 4530818

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)
                                                     First Quarter Ended
(in thousands)                                            March 31,
                                                 ---------------------------
                                                      2012          2011
                                                 ------------- -------------

Revenues:
Staffing services                                $      26,210 $      28,332
Professional employer services                         405,851       302,734
                                                 ============= =============
Total revenues                                         432,061       331,066
                                                 ------------- -------------
Cost of revenues:
Direct payroll costs                                   366,934       282,642
Payroll taxes and benefits                              42,992        31,763
Workers' compensation                                   15,578        11,063
                                                 ------------- -------------
Total cost of revenues                                 425,504       325,468
                                                 ============= =============
Gross margin                                     $       6,557 $       5,598
                                                 ============= =============

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

 

                                           (Unaudited)
                                   Three Months Ended March 31,
                     -------------------------------------------------------
                                                               Net Revenue
                       Gross Revenue                            Reporting
(in thousands)        Reporting Method   Reclassification         Method
                     ----------------- --------------------  ---------------
                       2012     2011      2012       2011      2012    2011
                     -------- -------- ---------  ---------  ------- -------

Revenues:
  Staffing services  $ 26,210 $ 28,332 $       -  $       -  $26,210 $28,332
  Professional
   employer services  405,851  302,734  (349,639)  (262,297)  56,212  40,437
                     -------- -------- ---------  ---------  ------- -------
    Total revenues   $432,061 $331,066 $(349,639) $(262,297) $82,422 $68,769
                     ======== ======== =========  =========  ======= =======
Cost of revenues     $425,504 $325,468 $(349,639) $(262,297) $75,865 $63,171
                     ======== ======== =========  =========  ======= =======

The Company is presenting non-GAAP net income because it believes it is more reflective of its actual operating results. A reconciliation of GAAP net income (loss) to non-GAAP operating performance is provided in the tables below:

 

                                                      (Unaudited)
(in thousands, except per share amounts)          First Quarter Ended
                                                     March 31, 2012
                                            -------------------------------
                                              GAAP    Adjustments  non-GAAP
                                            --------  -----------  --------

Selling, general and administrative
 expenses                                   $  9,762  $      (460) $  9,302
Loss before taxes                             (3,338)                (2,878)
Benefit from income taxes                     (1,125)        (155)     (970)
                                            --------               --------
Net loss                                    $ (2,213)              $ (1,908)
                                            ========               ========
Basic loss per common share                 $  (0.22)              $  (0.19)
                                            ========               ========
Weighted average basic common shares
 outstanding                                   9,875                  9,875
                                            ========               ========
Diluted loss per common share               $  (0.22)              $  (0.19)
                                            ========               ========
Weighted average diluted common shares
 outstanding                                   9,875                  9,875
                                            ========               ========

                                                      (Unaudited)
(in thousands, except per share amounts)          First Quarter Ended
                                                     March 31, 2011
                                            -------------------------------
                                               GAAP   Adjustments  non-GAAP
                                            --------- -----------  --------
Selling, general and administrative
 expenses                                   $   8,827 $      (150) $  8,677
Life insurance proceeds                        10,000     (10,000)        -
Income (loss) before taxes                      6,890                (2,960)
Provision for (benefit from) income taxes       1,344      (2,336)     (992)
                                            ---------              --------
Net income (loss)                           $   5,546              $ (1,968)
                                            =========              ========
Basic income (loss) per common share        $    0.54              $  (0.19)
                                            =========              ========
Weighted average basic common shares
 outstanding                                   10,201                10,201
                                            =========              ========
Diluted income (loss) per common share      $    0.54              $  (0.19)
                                            =========              ========
Weighted average diluted common shares
 outstanding                                   10,248                10,201
                                            =========              ========

About BBSI
BBSI (BBSI - News) 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 second 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, 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)

                                                   March 31,    December 31,
(in thousands)                                        2012          2011
                                                 ------------- -------------
                     Assets
Current assets:
  Cash and cash equivalents                      $      38,217 $      49,571
  Marketable securities                                 15,872        16,878
  Trade accounts receivable, net                        53,175        46,520
  Income taxes receivable                                4,033         4,133
  Prepaid expenses and other                             4,509         5,897
  Deferred income taxes                                  7,458         5,958
                                                 ------------- -------------
    Total current assets                               123,264       128,957
Marketable securities                                   13,829        15,395
Property, equipment and software, net                   15,380        15,007
Restricted marketable securities and workers'
 compensation deposits                                   9,885         9,923
Other assets                                             3,024         3,027
Workers' compensation receivables for insured
 claims                                                  2,720         2,968
Goodwill, net                                           47,820        47,820
                                                 ============= =============
                                                 $     215,922 $     223,097
                                                 ============= =============

      Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                               $       1,982 $       1,639
  Accrued payroll, payroll taxes and related
   benefits                                             68,889        52,340
  Other accrued liabilities                                767           300
  Workers' compensation claims liabilities              18,627        18,718
  Safety incentives liabilities                          6,979         6,321
                                                 ------------- -------------
    Total current liabilities                           97,244        79,318
Long-term workers' compensation claims
 liabilities                                            32,294        30,596
Long-term workers' compensation liabilities for
 insured claims                                          1,873         1,879
Deferred income taxes                                    8,152         8,152
Mandatorily redeemable preferred stock                  34,800             -
Customer deposits and other long-term
 liabilities                                             1,484         1,497
Stockholders' equity                                    40,075       101,655
                                                 ------------- -------------
                                                 $     215,922 $     223,097
                                                 ============= =============



                      Barrett Business Services, Inc.
                   Consolidated Statements of Operations

                                                         (Unaudited)
(in thousands, except per share amounts)             First Quarter Ended
                                                          March 31,
                                                 --------------------------
                                                     2012          2011
                                                 ------------  ------------

Revenues:
  Staffing services                              $     26,210  $     28,332
  Professional employer service fees                   56,212        40,437
                                                 ------------  ------------
    Total revenues                                     82,422        68,769
                                                 ------------  ------------
Cost of revenues:
  Direct payroll costs                                 19,652        21,448
  Payroll taxes and benefits                           42,992        31,763
  Workers' compensation                                13,221         9,960
                                                 ============  ============
    Total cost of revenues                             75,865        63,171
                                                 ============  ============
Gross margin                                            6,557         5,598
Selling, general and administrative expenses            9,762         8,827
Depreciation and amortization                             348           335
                                                 ------------  ------------
Loss from operations                                   (3,553)       (3,564)
Life insurance proceeds                                     -        10,000
Other income, net                                         215           454
                                                 ------------  ------------
(Loss) income before taxes                             (3,338)        6,890
(Benefit from) provision for income taxes              (1,125)        1,344
                                                 ------------  ------------
Net (loss) income                                $     (2,213) $      5,546
                                                 ============  ============
Basic (loss) income per common share             $      (0.22) $       0.54
                                                 ============  ============
Weighted average basic common shares outstanding        9,875        10,201
                                                 ============  ============
Diluted (loss) income per common share           $      (0.22) $       0.54
                                                 ============  ============
Weighted average diluted common shares
 outstanding                                            9,875        10,248
                                                 ============  ============

Contact:
Company
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

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