Barrett Business Services Inc.

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BBSI Reports Third Quarter 2013 Financial Results

VANCOUVER, WA -- (Marketwired) -- 10/29/13 -- Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Financial Highlights vs. Year-Ago Quarter

  • Net revenues up 33% to $148.0 million
  • Gross revenues up 37% to $764.1 million
  • Net income increased 55% to $9.0 million
  • Diluted earnings per share increased 49% to $1.21

Third Quarter 2013 Financial Results

Net revenues in the third quarter of 2013 increased 33% to $148.0 million compared to $111.1 million in the third quarter of 2012. The increase was due primarily to the continued build in the Company's co-employed client count and same-store sales growth.

Total non-GAAP gross revenues in the third quarter of 2013 increased 37% to $764.1 million compared to $558.0 million in the third quarter of 2012 (see "Reconciliation of Non-GAAP Financial Measures" below).

Net income in the third quarter of 2013 increased 55% to $9.0 million compared to net income of $5.8 million in the year-ago quarter. Diluted earnings per share in the third quarter of 2013 increased 49% to $1.21 compared to $0.81 per diluted share in the year-ago quarter.

At September 30, 2013, the Company's cash, cash equivalents and marketable securities totaled $48.0 million, compared to $72.4 million at December 31, 2012. During the second quarter of 2013, the Company posted $63.9 million in restricted certificates of deposit to collateralize a letter of credit issued to satisfy a surety requirement for its self-insured workers' compensation program in the state of California. At September 30, 2013, the Company had no outstanding borrowings on its revolving credit facility.

Management Commentary

"During the third quarter, gross revenues grew by more than 30% for the seventh consecutive quarter and were the highest in the company's history by nearly $90 million," said Michael Elich, president and CEO of BBSI. "We continue to mature BBSI's brand in the marketplace complemented by our strong referral channels helping to drive new business as well as healthy organic growth from our existing client base. Our three-tier partnership platform and operational focus also continues to drive an industry-leading 90+% retention rate. While we are pleased with the quarter's strong results, it is important to note that we continue to reinvest in our company to ultimately support a much larger and more mature organization."

Fourth Quarter 2013 Outlook

For the fourth quarter of 2013, the Company expects gross revenues to increase at least 30% to between $780 million and $790 million compared to $596.7 million in the fourth quarter of 2012. Diluted income per common share in the fourth quarter of 2013 is expected to increase at least 43% to between $1.15 and $1.20 compared to $0.80 in the fourth quarter of 2012.

Conference Call

BBSI will host a conference call tomorrow, Wednesday, October 30, 2013 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) to discuss its financial results for the third quarter ended September 30, 2013. The Company's president and CEO Michael Elich and CFO James Miller will host the call, followed by a question and answer period.

Date: Wednesday, October 30, 2013
Time: 12:00 p.m. Eastern time (9:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-941-8416
International dial-in number: 1-480-629-9808
Conference ID: 4644742

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.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=106326 and via BBSI's 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 November 30, 2013.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4644742

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.

The Company reports its Professional Employer Service revenues on a net basis because it is not the primary obligor for the services provided by the Company's co-employed 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)
                                  Third Quarter Ended    Nine Months Ended
(in thousands)                       September 30,         September 30,
                                 --------------------- ---------------------
                                    2013       2012       2013       2012
                                 ---------- ---------- ---------- ----------

Revenues:
  Professional employer services $  722,387 $  521,836 $1,923,533 $1,391,357
  Staffing services                  41,727     36,195    106,764     92,793
                                 ========== ========== ========== ==========
    Total revenues                  764,114    558,031  2,030,297  1,484,150
                                 ---------- ---------- ---------- ----------
Cost of revenues:
  Direct payroll costs              643,482    470,950  1,711,020  1,256,477
  Payroll taxes and benefits         57,977     42,915    170,583    125,239
  Workers' compensation              32,469     22,602     86,471     57,972
                                 ---------- ---------- ---------- ----------
    Total cost of revenues          733,928    536,467  1,968,074  1,439,688
                                 ========== ========== ========== ==========
Gross margin                     $   30,186 $   21,564 $   62,223 $   44,462
                                 ========== ========== ========== ==========


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


                                         (Unaudited)
                               Three Months Ended September 30,
                 -----------------------------------------------------------
                    Gross Revenue                             Net Revenue
(in thousands)     Reporting Method    Reclassification     Reporting Method
                 ------------------- --------------------  -----------------
                   2013      2012       2013       2012      2013     2012
                 -------- ---------- ---------  ---------  -------- --------
Revenues:
  Professional
   employer
   services      $722,387 $  521,836 $(616,143) $(446,962) $106,244 $ 74,874
  Staffing
   services        41,727     36,195         -          -    41,727   36,195
                 -------- ---------- ---------  ---------  -------- --------
    Total
     revenues    $764,114 $  558,031 $(616,143) $(446,962) $147,971 $111,069
                 ======== ========== =========  =========  ======== ========
Cost of revenues $733,928 $  536,467 $(616,143) $(446,962) $117,785 $ 89,505
                 ======== ========== =========  =========  ======== ========

                                      (Unaudited)
                            Nine Months Ended September 30,
           -----------------------------------------------------------------
(in            Gross Revenue                                  Net Revenue
 thousands)  Reporting Method       Reclassification       Reporting Method
           --------------------- ------------------------  -----------------
              2013       2012        2013         2012       2013     2012
           ---------- ---------- -----------  -----------  -------- --------
Revenues:
 Professional
  employer
  services $1,923,533 $1,391,357 $(1,641,977) $(1,195,159) $281,556 $196,198
 Staffing
  services    106,764     92,793           -            -   106,764   92,793
           ---------- ---------- -----------  -----------  -------- --------
  Total
  revenues $2,030,297 $1,484,150 $(1,641,977) $(1,195,159) $388,320 $288,991
           ========== ========== ===========  ===========  ======== ========
Cost of
 revenues  $1,968,074 $1,439,688 $(1,641,977) $(1,195,159) $326,097 $244,529
           ========== ========== ===========  ===========  ======== ========

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. The Company 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 fourth 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 2012 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)

                                               September 30,   December 31,
(in thousands)                                     2013            2012
                                              --------------  --------------
                    Assets
Current assets:
  Cash and cash equivalents                   $       34,978  $       45,747
  Marketable securities                                7,108          16,748
  Trade accounts receivable, net                      98,717          63,921
  Income taxes receivable                              2,307               -
  Prepaid expenses and other                           1,444           4,854
  Restricted certificates of deposit                  63,944               -
  Deferred income taxes                                8,172           8,148
                                              --------------  --------------
    Total current assets                             216,670         139,418
Marketable securities                                  5,876           9,899
Property, equipment and software, net                 20,383          18,489
Restricted marketable securities and workers'
 compensation deposits                                10,472           9,726
Other assets                                           3,132           3,509
Goodwill                                              47,820          47,820
                                              --------------  --------------
                                              $      304,353  $      228,861
                                              ==============  ==============

     Liabilities and Stockholders' Equity
Current liabilities:
  Current portion of long-term debt           $          220  $          220
  Line of credit                                           -           4,532
  Accounts payable                                     2,721           1,995
  Accrued payroll, payroll taxes and related
   benefits                                          107,060          69,568
  Income taxes payable                                     -             272
  Other accrued liabilities                              953             306
  Workers' compensation claims liabilities            32,068          24,541
  Safety incentives liabilities                       11,947           9,842
                                              --------------  --------------
    Total current liabilities                        154,969         111,276
Long-term workers' compensation claims
 liabilities                                          63,912          46,023
Long term debt                                         5,108           5,273
Deferred income taxes                                 10,607          10,607
Customer deposits and other long-term
 liabilities                                           1,789           1,786
Stockholders' equity                                  67,968          53,896
                                              --------------  --------------
                                              $      304,353  $      228,861
                                              ==============  ==============



                       Barrett Business Services, Inc.
                    Consolidated Statements of Operations

(in thousands, except per share       (Unaudited)           (Unaudited)
 amounts)                         Third Quarter Ended    Nine Months Ended,
                                     September 30,         September 30,
                                 --------------------- ---------------------
                                    2013       2012       2013       2012
                                 ---------- ---------- ---------- ----------
Revenues:
  Professional employer service
   fees                          $  106,244 $   74,874 $  281,556 $  196,198
  Staffing services                  41,727     36,195    106,764     92,793
                                 ---------- ---------- ---------- ----------
    Total revenues                  147,971    111,069    388,320    288,991
                                 ---------- ---------- ---------- ----------
Cost of revenues:
  Direct payroll costs               31,585     27,158     80,492     69,653
  Payroll taxes and benefits         57,977     42,915    170,583    125,239
  Workers' compensation              28,223     19,432     75,022     49,637
                                 ---------- ---------- ---------- ----------
    Total cost of revenues          117,785     89,505    326,097    244,529
                                 ---------- ---------- ---------- ----------
Gross margin                         30,186     21,564     62,223     44,462
Selling, general and
 administrative expenses             16,808     12,745     43,113     33,058
Depreciation and amortization           521        372      1,487      1,076
                                 ---------- ---------- ---------- ----------
Income from operations               12,857      8,447     17,623     10,328
Other income, net                       109        156        306        568
                                 ---------- ---------- ---------- ----------
Income before taxes                  12,966      8,603     17,929     10,896
Provision for income taxes            3,972      2,791      5,598      3,554
                                 ---------- ---------- ---------- ----------
Net income                       $    8,994 $    5,812 $   12,331 $    7,342
                                 ========== ========== ========== ==========
Basic income per common share    $     1.26 $     0.83 $     1.74 $     0.92
                                 ========== ========== ========== ==========
Weighted average basic common
 shares outstanding                   7,150      7,007      7,085      7,959
                                 ========== ========== ========== ==========
Diluted income per common share  $     1.21 $     0.81 $     1.67 $     0.91
                                 ========== ========== ========== ==========
Weighted average diluted common
 shares outstanding                   7,425      7,184      7,371      8,069
                                 ========== ========== ========== ==========

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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

Source: Barrett Business Services, Inc.

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