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| 8-K - CURRENT REPORT - BARRETT BUSINESS SERVICES INC | v229876_8k.htm |
For Immediate Release
BBSI ANNOUNCES SECOND QUARTER 2011 OPERATING RESULTS,
FINANCIAL GUIDANCE FOR 3Q11 AND CONFERENCE CALL
VANCOUVER, Washington, July 26, 2011 – Barrett Business Services, Inc. (BBSI) (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the second quarter ended June 30, 2011.
Second Quarter 2011 Financial Results
Net revenues for the second quarter ended June 30, 2011 totaled $76.0 million, an increase of approximately $8.6 million or 12.8% over the $67.4 million for the same quarter in 2010.
Total non-GAAP gross revenues in the second quarter of 2011 increased 23.5% to $366.9 million over the $297.1 million in the same quarter of 2010 (see “Reconciliation of Non-GAAP Financial Measures” below).
Net income totaled $3.4 million for the second quarter ended June 30, 2011 compared to net income of $2.3 million for the second quarter of 2010. Diluted earnings per share for the 2011 second quarter were $.34, as compared to $.22 for the same quarter a year ago.
Net income without the benefit of a favorable tax rate for the second quarter of 2011 was $2.9 million or $.28 per diluted share.
Management Commentary
“The second quarter’s results from operations were driven by a continued build in our net client count. Although we did not see a significant increase in hours worked or hiring from existing clients, we do continue to see a strong build of new clients as well as stability within our existing clients,” said Michael L. Elich, President and CEO of BBSI. “We continue to make investments in infrastructure to support growth while looking to existing systems for improvement in efficiencies within operations and to support existing pipelines of new business opportunities,” Elich continued.
Third Quarter 2011 Outlook
The Company disclosed today limited financial guidance with respect to its operating results for the third quarter ending September 30, 2011. The Company expects gross revenues for the third quarter of 2011 to range from $392 million to $397 million, as compared to $332.9 million for the third quarter of 2010, and anticipates diluted earnings for the third quarter of 2011 to range from $.46 to $.50 per share, as compared to diluted earnings per share of $.36 for the same period a year ago. The range of anticipated diluted earnings per share for the 2011 third quarter includes a favorable income tax rate benefit related to the effect of a much lower annual effective income tax rate attributable to the $10.0 million life insurance proceeds. Without the effect of the favorable tax rate benefit, the range of diluted earnings per share for the 2011 third quarter is estimated to be $.38 to $.42. A reconciliation of estimated gross revenues to estimated GAAP net revenues for the third quarter of 2011 is not included because PEO revenues and cost of PEO revenues for the period are not reasonably estimable.
- 1 -
Barrett Business Services, Inc.
News Release – Second Quarter 2011
July 26, 2011
Conference Call
BBSI will host a conference call tomorrow, Wednesday, July 27, 2011 at 12:00 p.m. Eastern time (9:00 a.m. Pacific) to discuss its second quarter 2011 results. The Company’s President and CEO Michael L. Elich and CFO James D. Miller will host the call, which will be followed by a question and answer period.
Date: Wednesday, July 27, 2011
Time: 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time)
Dial-In Number: (877) 214-1511
Conference ID#: 85722000
The conference call will be webcast live and available for replay via the Investor Relations section of the Company's website at www.barrettbusiness.com.
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact Liolios Group at
(949) 574-3860.
A replay of the call will be available after 3:00 p.m. Eastern Time on the same day and until Wednesday, August 3.
Toll-free replay number: (855) 859-2056
Replay pin number: 85722000
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 net income and non-GAAP gross revenues.
Without the effect of a favorable income tax rate benefit related to a much lower annual effective income tax rate resulting from $10.0 million of key man life insurance proceeds realized with respect to William W. Sherertz, the Company’s President and Chief Executive Officer, who passed away January 20, 2011, the Company’s net income for the 2011 second quarter was approximately $2.9 million or $.28 cents per share. A reconciliation of net income on the basis of generally accepted accounting principles (“GAAP”) to the non-GAAP operating performance is as follows:
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Barrett Business Services, Inc.
News Release – Second Quarter 2011
July 26, 2011
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(Unaudited)
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||||||||||||
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(in thousands, except per share amounts)
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Second Quarter Ended
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|||||||||||
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June 30, 2011
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||||||||||||
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GAAP
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Adjustments
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non-GAAP
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||||||||||
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Income before taxes
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$ | 4,345 | $ | $ | 4,345 | |||||||
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Provision for income taxes
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896 | 565 | 1,461 | |||||||||
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Net income
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$ | 3,449 | $ | 2,884 | ||||||||
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Basic income per share
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$ | .34 | $ | .28 | ||||||||
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Weighted average basic shares outstanding
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10,196 | 10,196 | ||||||||||
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Diluted income per share
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$ | .34 | $ | .28 | ||||||||
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Weighted average diluted shares outstanding
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10,245 | 10,245 | ||||||||||
The Company is presenting the non-GAAP net income because it believes it is more reflective of the Company’s actual operating results.
The Company reports its Professional Employer Organization services (“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.
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(Unaudited)
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(Unaudited)
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Second Quarter Ended
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Six Months Ended
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(in thousands)
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June 30,
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June 30,
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2011
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2010
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2011
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2010
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As Restated
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As Restated
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|||||||||||||||
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Revenues:
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Staffing services
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$ | 30,518 | $ | 31,975 | $ | 58,850 | $ | 59,037 | ||||||||
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Professional employer services
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336,380 | 265,121 | 639,114 | 500,616 | ||||||||||||
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Total revenues
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366,898 | 297,096 | 697,964 | 559,653 | ||||||||||||
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Cost of revenues:
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||||||||||||||||
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Direct payroll costs
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312,385 | 252,722 | 595,027 | 476,269 | ||||||||||||
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Payroll taxes and benefits
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28,886 | 22,861 | 60,649 | 47,489 | ||||||||||||
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Workers' compensation
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12,346 | 9,781 | 23,409 | 18,798 | ||||||||||||
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Total cost of revenues
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353,617 | 285,364 | 679,085 | 542,556 | ||||||||||||
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Gross margin
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$ | 13,281 | $ | 11,732 | $ | 18,879 | $ | 17,097 | ||||||||
- 3 -
Barrett Business Services, Inc.
News Release – Second Quarter 2011
July 26, 2011
Gross revenues of $366.9 million for the second quarter ended June 30, 2011 increased 23.5% over the similar period in 2010.
A reconciliation of non-GAAP gross revenues to net revenues is as follows:
For the second quarters ended June 30, 2011 and 2010:
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(Unaudited)
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Three Months Ended June 30,
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Gross Revenue
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Net Revenue
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(in thousands)
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Reporting Method
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Reclassification
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Reporting Method
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2011
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2010
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2011
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2010
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2011
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2010
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As Restated
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Revenues:
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Staffing services
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$ | 30,518 | $ | 31,975 | $ | - | $ | - | $ | 30,518 | $ | 31,975 | ||||||||||||
| 336,380 | 265,121 | (290,885 | ) | (229,664 | ) | 45,495 | 35,457 | |||||||||||||||||
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Total revenues
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$ | 366,898 | $ | 297,096 | $ | (290,885 | ) | $ | (229,664 | ) | $ | 76,013 | $ | 67,432 | ||||||||||
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Cost of revenues
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$ | 353,617 | $ | 285,364 | $ | (290,885 | ) | $ | (229,664 | ) | $ | 62,732 | $ | 55,700 | ||||||||||
For the six months ended June 30, 2011 and 2010:
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(Unaudited)
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||||||||||||||||||||||||
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Six Months Ended June 30,
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Gross Revenue
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Net Revenue
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(in thousands)
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Reporting Method
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Reclassification
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Reporting Method
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|||||||||||||||||||||
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2011
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2010
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2011
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2010
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2011
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2010
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As Restated
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Revenues:
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Staffing services
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$ | 58,850 | $ | 59,037 | $ | - | $ | - | $ | 58,850 | $ | 59,037 | ||||||||||||
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Professional employer services
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639,114 | 500,616 | (553,182 | ) | (433,961 | ) | 85,932 | 66,655 | ||||||||||||||||
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Total revenues
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$ | 697,964 | $ | 559,653 | $ | (553,182 | ) | $ | (433,961 | ) | $ | 144,782 | $ | 125,692 | ||||||||||
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Cost of revenues
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$ | 679,085 | $ | 542,556 | $ | (553,182 | ) | $ | (433,961 | ) | $ | 125,903 | $ | 108,595 | ||||||||||
As described in Note 2 of the Consolidated Financial Statements in Item 15 in the Company’s 2010 Annual Report on Form 10-K, the Company restated its financial statements as a result of an error related to legal expenses incurred for the administration of workers’ compensation claims by Associated Insurance Company for Excess (“AICE”), the Company’s captive insurance subsidiary formed January 1, 2007. The Company also determined to make a conforming change to its accounting method for legal expenses incurred for the administration of workers’ compensation claims that arose prior to the formation of AICE. The Company’s results of operations for the three and six months ended June 30, 2010 have been restated to reflect these changes.
- 4 -
Barrett Business Services, Inc.
News Release – Second Quarter 2011
July 26, 2011
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 2,000 clients across 25 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 2011, 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 customers and attract new customers, 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 collectibility 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 2010 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 may be 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.
Company Contact:
Michael L. Elich
President and Chief Executive Officer
Telephone 360-828-0700
- 5 -
Barrett Business Services, Inc.
News Release – Second Quarter 2011
July 26, 2011
Barrett Business Services, Inc.
Condensed Balance Sheets
(Unaudited)
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June 30,
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December 31,
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(in thousands)
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2011
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2010
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||||||
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 25,472 | $ | 30,924 | ||||
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Marketable securities
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34,707 | 24,511 | ||||||
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Trade accounts receivable, net
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59,738 | 37,596 | ||||||
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Income taxes receivable
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2,356 | 2,356 | ||||||
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Prepaid expenses and other
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2,426 | 1,798 | ||||||
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Deferred income taxes
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5,810 | 6,101 | ||||||
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Total current assets
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130,509 | 103,286 | ||||||
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Marketable securities
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10,007 | 5,921 | ||||||
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Property, equipment and software, net
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14,819 | 15,037 | ||||||
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Restricted marketable securities and workers' compensation deposits
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9,430 | 8,811 | ||||||
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Other assets
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3,100 | 3,094 | ||||||
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Workers' compensation receivables for insured claims
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3,800 | 3,915 | ||||||
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Goodwill, net
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47,820 | 47,820 | ||||||
| $ | 219,485 | $ | 187,884 | |||||
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Liabilities and Stockholders' Equity
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Current liabilities:
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Accounts payable
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$ | 694 | $ | 964 | ||||
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Accrued payroll, payroll taxes and related benefits
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60,355 | 37,525 | ||||||
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Income taxes payable
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498 | - | ||||||
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Other accrued liabilities
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806 | 442 | ||||||
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Workers' compensation claims liabilities
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14,850 | 14,768 | ||||||
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Safety incentives liabilities
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5,057 | 5,024 | ||||||
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Total current liabilities
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82,260 | 58,723 | ||||||
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Long-term workers' compensation claims liabilities
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23,504 | 21,847 | ||||||
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Long-term workers' compensation liabilities for insured claims
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2,642 | 2,686 | ||||||
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Deferred income taxes
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7,841 | 7,841 | ||||||
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Customer deposits and other long-term liabilities
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1,393 | 1,422 | ||||||
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Stockholders' equity
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101,845 | 95,365 | ||||||
| $ | 219,485 | $ | 187,884 | |||||
- 6 -
Barrett Business Services, Inc.
News Release – Second Quarter 2011
July 26, 2011
Barrett Business Services, Inc.
Consolidated Statements of Operations
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|
(Unaudited)
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(Unaudited)
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||||||||||||||
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(in thousands, except per share amounts)
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Second Quarter Ended
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Six Months Ended
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||||||||||||||
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June 30,
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June 30,
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Results of Operations
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2011
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2010
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2011
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2010
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As Restated
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As Restated
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|||||||||||||||
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Revenues:
|
||||||||||||||||
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Staffing services
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$ | 30,518 | $ | 31,975 | $ | 58,850 | $ | 59,037 | ||||||||
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Professional employer service fees
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45,495 | 35,457 | 85,932 | 66,655 | ||||||||||||
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Total revenues
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76,013 | 67,432 | 144,782 | 125,692 | ||||||||||||
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Cost of revenues:
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||||||||||||||||
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Direct payroll costs
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23,093 | 24,237 | 44,541 | 44,673 | ||||||||||||
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Payroll taxes and benefits
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28,886 | 22,861 | 60,649 | 47,489 | ||||||||||||
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Workers' compensation
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10,753 | 8,602 | 20,713 | 16,433 | ||||||||||||
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Total cost of revenues
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62,732 | 55,700 | 125,903 | 108,595 | ||||||||||||
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Gross margin
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13,281 | 11,732 | 18,879 | 17,097 | ||||||||||||
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Selling, general and administrative expenses
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8,871 | 8,407 | 17,698 | 16,631 | ||||||||||||
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Depreciation and amortization
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331 | 333 | 666 | 710 | ||||||||||||
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Income (loss) from operations
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4,079 | 2,992 | 515 | (244 | ) | |||||||||||
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Life insurance proceeds
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- | - | 10,000 | - | ||||||||||||
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Other income, net
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266 | 380 | 720 | 665 | ||||||||||||
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Income before taxes
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4,345 | 3,372 | 11,235 | 421 | ||||||||||||
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Provision for (benefit from) income taxes
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896 | 1,113 | 2,240 | (135 | ) | |||||||||||
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Net income
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$ | 3,449 | $ | 2,259 | $ | 8,995 | $ | 556 | ||||||||
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Basic income per share
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$ | .34 | $ | .22 | $ | .88 | $ | .05 | ||||||||
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Weighted average basic shares outstanding
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10,196 | 10,446 | 10,198 | 10,456 | ||||||||||||
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Diluted income per share
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$ | .34 | $ | .22 | $ | .88 | $ | .05 | ||||||||
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Weighted average diluted shares outstanding
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10,245 | 10,485 | 10,246 | 10,490 | ||||||||||||
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