Barrett Business Services Inc.

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BBSI Reports Fourth Quarter and Full Year 2012 Financial Results

VANCOUVER, WA -- (Marketwire) -- 02/12/13 -- Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Financial Highlights vs. Year-Ago Quarter

  • Net revenues increased 34% to $113.7 million

  • Gross revenues increased 41% to $596.7 million

  • Net income increased to $5.8 million or $0.80 per diluted common share, compared to a net loss of $93,000 or $(0.01) per diluted common share

Fourth Quarter 2012 Financial Results

Net revenues in the fourth quarter of 2012 increased 34% to $113.7 million, compared to $84.7 million in the fourth quarter of 2011.

Total non-GAAP gross revenues in the fourth quarter of 2012 increased 41% to $596.7 million, compared to $423.6 million in the fourth quarter of 2011 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase is due primarily to the continued build in the Company's Professional Employer Organization (PEO) client count and same-store sales growth.

Net income in the fourth quarter of 2012 increased to $5.8 million or $0.80 per diluted common share, compared to a net loss of $93,000 or $(0.01) per diluted common share in the year-ago quarter. The fourth quarter of 2011 included an increase to the workers' compensation reserve of approximately $8.5 million and the benefit of a lower annual effective income tax rate resulting from the non-taxable $10.0 million of key man life insurance proceeds received following the passing of the Company's former president and CEO. Excluding these items, non-GAAP net income in the fourth quarter of 2011 was $4.1 million or $0.41 per diluted common share (see "Reconciliation of Non-GAAP Financial Measures" below).

At December 31, 2012, the Company's cash, cash equivalents and marketable securities totaled $72.4 million, compared to $81.8 million at December 31, 2011. During 2012, the Company repurchased 3.0 million shares of its common stock for $59.7 million, which included the redemption of $34.8 million of preferred shares issued to finance the repurchase. The completion of the repurchase was financed using a combination of cash on hand and availability under a new revolving credit facility provided by its principal bank. At December 31, 2012, total debt was $10.0 million, which included $4.5 million outstanding on the Company's revolving credit line.

Full Year 2012 Financial Results

Net revenues in 2012 increased 28% to $402.7 million, compared to $314.9 million in 2011. Total non-GAAP gross revenues in 2012 increased 36% to $2.1 billion, compared to $1.5 billion in 2011. The increase was primarily attributable to the previously discussed increase in net PEO clients and same-store sales growth.

Net income in 2012 was $13.1 million or $1.67 per diluted common share, compared to net income of $14.3 million or $1.41 per diluted common share in 2011. Excluding $460,000 of incremental legal and professional fees associated with the response to requests for a special stockholders meeting, non-GAAP net income in 2012 was $13.4 million or $1.71 per diluted common share. Net income in 2011 included $10.0 million of key man life insurance proceeds received following the passing of the Company's former president and CEO, a lower annual effective income tax rate resulting primarily from these proceeds and the $8.5 million increase to workers' compensation reserve. Excluding these non-recurring items, non-GAAP net income in 2011 was $9.0 million or $0.89 per diluted share.

Management Commentary

"The fourth quarter was a continuation of the positive trends we experienced in the first three quarters of 2012," said Michael Elich, president and CEO of BBSI. "These include our strong referral channels driving new business, solid organic growth from continuing customers and the overall maturation of our brand. We also continued investing in our operational infrastructure and professional talent, which has played an integral role in supporting our growth and maintaining our greater than 90% client retention rate. We expect these growth drivers to continue as we move through 2013 and remain committed to investing in the business to ultimately support a larger and more mature company."

First Quarter 2013 Outlook

For the first quarter of 2013, the Company expects gross revenues to range between $585 million and $590 million, compared to $432.1 million for the first quarter of 2012. Net loss per common share in the first quarter of 2013 is expected to range between $(0.36) and $(0.40), which includes the effect of the decrease in outstanding shares as a result of the Company's 3.0 million share repurchase, compared to a net loss per common share of $(0.22) in the year-ago quarter. The first quarter of 2012 included $460,000 of incremental legal and professional fees from the previously mentioned 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 Company historically incurs losses in the first quarter due to the higher effective payroll taxes at the start of the new year.

Conference Call

BBSI will host a conference call tomorrow, Wednesday, February 13, 2013 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the fourth quarter and full year ended December 31, 2012. 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, February 13, 2013
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#: 4592162

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=103215 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 through March 13, 2013.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 4592162

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)
                                  Fourth Quarter Ended       Year Ended
(in thousands)                        December 31,          December 31,
                                 --------------------- ---------------------
                                    2012       2011       2012       2011
                                 ---------- ---------- ---------- ----------

Revenues:
  Professional employer services $  562,850 $  392,283 $1,954,207 $1,402,779
  Staffing services                  33,856     31,322    126,648    124,761
                                 ========== ========== ========== ==========
    Total revenues                  596,706    423,605  2,080,855  1,527,540
                                 ---------- ---------- ---------- ----------
Cost of revenues:
  Direct payroll costs              505,507    360,735  1,761,984  1,300,481
  Payroll taxes and benefits         44,485     32,048    169,724    123,017
  Workers' compensation              24,462     22,403     82,433     60,590
                                 ---------- ---------- ---------- ----------
    Total cost of revenues          574,454    415,186  2,014,141  1,484,088
                                 ========== ========== ========== ==========
Gross margin                     $   22,252 $    8,419 $   66,714 $   43,452
                                 ========== ========== ========== ==========

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


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

Revenues:
 Professional
  employer
  services   $  562,850 $  392,283 $  (483,044)$  (338,896)$ 79,806 $ 53,387
 Staffing
  services       33,856     31,322           -           -   33,856   31,322
             ---------- ---------- ----------- ----------- -------- --------
  Total
   revenues  $  596,706 $  423,605 $  (483,044)$  (338,896)$113,662 $ 84,709
             ========== ========== =========== =========== ======== ========
Cost of
 revenues    $  574,454 $  415,186 $  (483,044)$  (338,896)$ 91,410 $ 76,290
             ========== ========== =========== =========== ======== ========


                                       (Unaudited)
                                 Year Ended December 31,
             ---------------------------------------------------------------
                 Gross Revenue                                Net Revenue
(in
 thousands)     Reporting Method       Reclassification     Reporting Method
             --------------------- ----------------------- -----------------
                2012       2011        2012        2011      2012     2011
             ---------- ---------- ----------- ----------- -------- --------

Revenues:
 Professional
  employer
  services   $1,954,207 $1,402,779 $(1,678,203)$(1,212,666)$276,004 $190,113
 Staffing
  services      126,648    124,761           -           -  126,648  124,761
             ---------- ---------- ----------- ----------- -------- --------
  Total
   revenues  $2,080,855 $1,527,540 $(1,678,203)$(1,212,666)$402,652 $314,874
             ========== ========== =========== =========== ======== ========
Cost of
 revenues    $2,014,141 $1,484,088 $(1,678,203)$(1,212,666)$335,938 $271,422
             ========== ========== =========== =========== ======== ========

The Company is presenting non-GAAP net income because it believes it is more reflective of its actual operating results due to the effects of non-recurring items. In the fourth quarter of 2011 the Company recorded an increase to its workers' compensation reserve of approximately $8.5 million as a result of adverse development in the estimate of the ultimate cost of the Company's self-insured workers' compensation claims liabilities. For the full year of 2011, non-recurring items included $10 million of key man life insurance proceeds received following the passing of the Company's former president and CEO and the $8.5 million increase to its workers' compensation reserve. The fourth quarter of 2011 as well as the full year 2011 included the benefit of a lower annual effective income tax rate resulting from the non-taxable key man life insurance proceeds. The full year of 2012 included $460,000 of incremental legal and professional fees associated with the response to requests for a special stockholders meeting. A Reconciliation of GAAP net income to non-GAAP operating performance is provided in the tables below:


                                                  (Unaudited)
                                              Fourth Quarter Ended
(in thousands, except per share
 amounts)                                         December 31,
                                   -----------------------------------------
                                      2012                 2011
                                   --------- -------------------------------
                                      GAAP      GAAP      Adjust    non-GAAP
                                   --------- ---------  ---------  ---------

Cost of revenues                   $  91,410 $  76,290  $  (8,510) $  67,780
Gross margin                          22,252     8,419                16,929
Income (loss) before taxes             8,564    (2,353)                6,157
Provision for (benefit from)
 income taxes                          2,775    (2,260)     4,353      2,093
                                   --------- ---------             ---------
Net income (loss)                  $   5,789 $     (93)            $   4,064
                                   ========= =========             =========
Basic income (loss) per share      $     .83 $    (.01)            $     .41
                                   ========= =========             =========
Weighted average basic shares
 outstanding                           7,014     9,877                 9,877
                                   ========= =========             =========
Diluted income (loss) per share    $     .80 $    (.01)            $     .41
                                   ========= =========             =========
Weighted average diluted shares
 outstanding                           7,244     9,877                 9,935
                                   ========= =========             =========


                              (Unaudited)                (Unaudited)
(in thousands, except
 per share amounts)            Year Ended                 Year Ended
                           December 31, 2012          December 31, 2011
                       ------------------------- ---------------------------
                         GAAP   Adjust  non-GAAP   GAAP    Adjust   non-GAAP
                       -------- ------  -------- -------- --------  --------

Cost of revenues       $335,938         $335,938 $271,422 $ (8,510) $262,912
Gross margin             66,714           66,714   43,452             51,962
Selling, general and
 administrative
 expenses                46,450   (460)   45,990   38,174             38,174
Life insurance
 proceeds                     -                -   10,000  (10,000)        -
Income before taxes      19,459           19,919   15,155             13,665
Provision for income
 taxes                    6,328    155     6,483      837    3,796     4,633
                       --------         -------- --------           --------
Net income             $ 13,131         $ 13,436 $ 14,318           $  9,032
                       ========         ======== ========           ========
Basic income per share $   1.70         $   1.74 $   1.42           $    .90
                       ========         ======== ========           ========
Weighted average basic
 shares outstanding       7,723            7,723   10,083             10,083
                       --------         -------- --------           --------
Diluted income per
 share                 $   1.67         $   1.71 $   1.41           $    .89
                       ========         ======== ========           ========
Weighted average
 diluted shares
 outstanding              7,863            7,863   10,150             10,150
                       ========         ======== ========           ========

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 first quarter of 2013, 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)

                                                  December 31,  December 31,
(in thousands)                                        2012          2011
                                                 ------------- -------------
                     Assets
Current assets:
  Cash and cash equivalents                      $      45,747 $      49,571
  Marketable securities                                 16,748        16,878
  Trade accounts receivable, net                        63,921        46,520
  Income taxes receivable                                    -         4,133
  Prepaid expenses and other                             4,854         5,897
  Deferred income taxes                                  8,148         5,958
                                                 ------------- -------------
    Total current assets                               139,418       128,957
Marketable securities                                    9,899        15,395
Property, equipment and software, net                   18,489        15,007
Restricted marketable securities and workers'
 compensation deposits                                   9,726         9,923
Other assets                                             1,833         3,027
Workers' compensation receivables for insured
 claims                                                  1,676         2,968
Goodwill                                                47,820        47,820
                                                 ------------- -------------
                                                 $     228,861 $     223,097
                                                 ============= =============

      Liabilities and Stockholders' Equity
Current liabilities:
  Line of credit                                 $       4,532 $           -
  Accounts payable                                       1,995         1,639
  Accrued payroll, payroll taxes and related
   benefits                                             69,568        52,340
  Income taxes payable                                     272             -
  Other accrued liabilities                                306           300
  Workers' compensation claims liabilities              24,541        18,718
  Safety incentives liabilities                          9,842         6,321
  Current portion of L/T debt                              220             -
                                                 ------------- -------------
    Total current liabilities                          111,276        79,318
Long-term workers' compensation claims
 liabilities                                            45,266        30,596
Long-term workers' compensation liabilities for
 insured claims                                            757         1,879
Long term debt                                           5,273             -
Deferred income taxes                                   10,607         8,152
Customer deposits and other long-term
 liabilities                                             1,786         1,497
Stockholders' equity                                    53,896       101,655
                                                 ------------- -------------
                                                 $     228,861 $     223,097
                                                 ============= =============


                       Barrett Business Services, Inc.
                    Consolidated Statements of Operations

                                        (Unaudited)          (Unaudited)
(in thousands, except per share        Fourth Quarter
 amounts)                                  Ended              Year Ended
                                        December 31,         December 31,
                                    -------------------  -------------------
                                       2012      2011       2012      2011
                                    --------- ---------  --------- ---------

Revenues:
  Professional employer service
   fees                             $  79,806 $  53,387  $ 276,004 $ 190,113
  Staffing services                    33,856    31,322    126,648   124,761
                                    --------- ---------  --------- ---------
    Total revenues                    113,662    84,709    402,652   314,874
                                    --------- ---------  --------- ---------
Cost of revenues:
  Direct payroll costs                 25,475    23,736     95,128    94,568
  Payroll taxes and benefits           44,485    32,048    169,724   123,017
  Workers' compensation                21,450    20,506     71,086    53,837
                                    --------- ---------  --------- ---------
    Total cost of revenues             91,410    76,290    335,938   271,422
                                    ========= =========  ========= =========
Gross margin                           22,252     8,419     66,714    43,452
Selling, general and administrative
 expenses                              13,393    10,596     46,450    38,174
Depreciation and amortization             400       345      1,477     1,344
                                    --------- ---------  --------- ---------
Income (loss) from operations           8,459    (2,522)    18,787     3,934
Life insurance proceeds                     -         -          -    10,000
Other income, net                         105       169        672     1,221
                                    --------- ---------  --------- ---------
Income (loss) before taxes              8,564    (2,353)    19,459    15,155
Provision for (benefit from) income
 taxes                                  2,775    (2,260)     6,328       837
                                    --------- ---------  --------- ---------
Net income (loss)                   $   5,789 $     (93) $  13,131 $  14,318
                                    ========= =========  ========= =========
Basic income (loss) per common
 share                              $     .83 $    (.01) $    1.70 $    1.42
                                    ========= =========  ========= =========
Weighted average basic common
 shares outstanding                     7,014     9,877      7,723    10,083
                                    ========= =========  ========= =========
Diluted income (loss) per common
 share                              $     .80 $    (.01) $    1.67 $    1.41
                                    ========= =========  ========= =========
Weighted average diluted common
 shares outstanding                     7,244     9,877      7,863    10,150
                                    ========= =========  ========= =========

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

Investor Relations:
Liolios Group, Inc.
Cody Slach
Tel 1-949-574-3860
Email Contact

Source: Barrett Business Services, Inc.

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