BBSI Reports Second Quarter 2012 Financial Results

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

Marketwired

VANCOUVER, WA--(Marketwire -07/24/12)- Barrett Business Services, Inc. (BBSI) (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 (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:
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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