UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
Commission File No. 0-21886
BARRETT BUSINESS SERVICES, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0812977
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4724 SW Macadam Avenue
Portland, Oregon 97201
(Address of principal executive offices) (Zip Code)
(503) 220-0988
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Number of shares of Common Stock, $.01 par value, outstanding at April 30, 1999
was 7,573,289 shares.
<PAGE>
BARRETT BUSINESS SERVICES, INC.
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1999 and
December 31, 1998...........................................3
Statements of Operations - Three Months
Ended March 31, 1999 and 1998...............................4
Statements of Cash Flows - Three Months
Ended March 31, 1999 and 1998...............................5
Notes to Financial Statements...............................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................................10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K...........................18
Signatures ...........................................................19
Exhibit Index ...........................................................20
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<PAGE>
PART I - Financial Information
Item 1. Financial Statements
BARRETT BUSINESS SERVICES, INC.
Balance Sheets
(Unaudited)
(In thousands, except par value)
March 31, December 31,
1999 1998
--------- ----------
Assets
Current assets:
Cash and cash equivalents $ 1,713 $ 4,029
Trade accounts receivable, net 23,579 21,907
Prepaid expenses and other 1,627 1,103
Deferred tax assets (Note 3) 1,841 1,857
------ -----
Total current assets 28,760 28,896
Intangibles, net 14,968 11,508
Property and equipment, net 5,532 5,184
Restricted marketable securities and
workers' compensation deposits 6,184 6,004
Deferred tax assets (Note 3) 697 552
Other assets 964 626
------ ------
$57,105 $52,770
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Note payable $ 240 $ -
Current portion of long-term debt 115 61
Income taxes payable (Note 3) 488 438
Accounts payable 1,156 948
Accrued payroll, payroll taxes and
related benefits 13,249 9,246
Accrued workers' compensation claim
liabilities 2,903 3,244
Customer safety incentives payable 1,113 1,173
Other accrued liabilities 361 514
------ ------
Total current liabilities 19,625 15,624
Long-term debt, net of current portion 541 503
Customer deposits 805 829
Long-term workers' compensation liabilities 710 714
Other long-term liabilities 1,579 1,398
------ ------
23,260 19,068
------ ------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 20,500 shares
authorized, 7,596 and 7,676 shares issued
and outstanding, respectively 76 77
Additional paid-in capital 10,813 11,409
Retained earnings 22,956 22,216
------ ------
33,845 33,702
------ ------
$57,105 $52,770
====== ======
The accompanying notes are an integral part of these financial
statements.
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BARRETT BUSINESS SERVICES, INC.
Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Revenues:
Staffing services $ 37,229 $ 40,304
Professional employer services 33,786 28,937
------ ------
71,015 69,241
------ ------
Cost of revenues:
Direct payroll costs 55,163 53,667
Payroll taxes and benefits 6,251 6,440
Workers' compensation 1,969 1,996
Safety incentives 317 364
------ ------
63,700 62,467
------ ------
Gross margin 7,315 6,774
Selling, general and administrative
expenses 5,710 5,816
Amortization of intangibles 374 353
------ -----
Income from operations 1,231 605
Other income (expense):
Interest expense (24) (57)
Interest income 95 125
Other, net 1 1
------ -----
72 69
------ -----
Income before provision for income taxes 1,303 674
Provision for income taxes (Note 3) 563 287
------ -----
Net income $ 740 $ 387
====== ======
Basic earnings per share $ .10 $ .05
====== ======
Weighted average number of basic
shares outstanding 7,666 7,639
====== ======
Diluted earnings per share $ .10 $ .05
====== ======
Weighted average number of diluted
shares outstanding 7,707 7,693
====== ======
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
BARRETT BUSINESS SERVICES, INC.
Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended
March 31,
-----------------
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 740 $ 387
Reconciliation of net income to cash from operations:
Depreciation and amortization 511 467
Changes in certain assets and liabilities,
net of acquisitions:
Trade accounts receivable, net (728) (1,164)
Prepaid expenses and other (465) (524)
Deferred tax assets (21) (76)
Accounts payable 61 12
Accrued payroll, payroll taxes and related
benefits 3,842 1,176
Accrued workers' compensation claims
liabilities (341) (46)
Customer safety incentives payable (60) (3)
Income taxes payable 50 119
Other accrued liabilities (357) 64
Customer deposits and long-term workers'
compensation liabilities and other assets (344) (160)
Other long-term liabilities 181 82
------ -----
Net cash provided by operating activities 3,069 334
----- -----
Cash flows from investing activities:
Cash paid for acquisitions, including other
direct costs (3,316) -
Purchases of fixed assets, net of amounts
purchased in acquisitions (359) (349)
Proceeds from maturities of marketable securities 364 2,839
Purchases of marketable securities, net of amounts
acquired in acquisitions (523) (2,757)
------ ------
Net cash used in investing activities (3,834) (267)
------ ------
Cash flows from financing activities:
Payment of credit line assumed in acquisition (1,113) -
Payment of note payable assumed in acquisition (55) -
Net payments on credit-line borrowings - (116)
Proceeds from issuance of note payable 240 -
Proceeds from issuance of long-term debt - 62
Payments on long-term debt (26) (22)
Repurchase of common stock (554) -
Payment to shareholder (57) -
Proceeds from exercise of stock
options and warrants 14 25
------ -----
Net cash used in financing activities (1,551) (51)
------ -----
Net (decrease) increase in cash and cash equivalents (2,316) 16
Cash and cash equivalents, beginning of period 4,029 3,439
------ ------
Cash and cash equivalents, end of period $ 1,713 $ 3,455
====== ======
Supplemental schedule of noncash activities:
Acquisition of other businesses:
Cost of acquisitions in excess of fair market
value of net assets acquired $ 3,834 $ -
Tangible assets acquired 1,280 -
Liabilities issued or assumed 1,798 -
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements
NOTE 1 - BASIS OF PRESENTATION OF INTERIM PERIOD STATEMENTS:
On June 29, 1998, Barrett Business Services, Inc. (the "Company")
completed its merger with Western Industrial Management, Inc., and with a
related company, Catch 55, Inc., (together, "WIMI"). The transaction was
accounted for as a pooling-of-interests pursuant to Accounting Principles Board
Opinion No. 16 and, accordingly, the Company's financial statements have been
restated for all prior periods to give effect to the merger. The accompanying
financial statements are unaudited and have been prepared by management pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures typically included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results for
the interim periods presented. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from such estimates
and assumptions. The financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's 1998
Annual Report on Form 10-K at pages F1-F22. The results of operations for an
interim period are not necessarily indicative of the results of operations for a
full year.
Certain prior year amounts have been reclassified to conform with the
1999 presentation. Such reclassifications had no impact on gross margin, net
income or stockholders' equity.
NOTE 2 - ACQUISITIONS:
Effective January 1, 1999, the Company acquired all of the outstanding
common stock of Temporary Staffing Systems, Inc. ("TSS"), a staffing services
company with eight branch offices in North Carolina and one in South Carolina.
The Company paid $2,000,000 in cash and issued a note payable for $950,000 due
January 31, 2000, payment of which is contingent upon a minimum equity
requirement for 1998 and certain financial performance criteria for 1999. The
Company also paid $50,000 in cash for a noncompete agreement with the selling
shareholder. TSS's revenues for the fiscal year ended March 29, 1998 were
approximately $12.9 million (audited). The transaction, subject to the
resolution of
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the above contingencies, has been accounted for under the purchase method of
accounting. The effect of this transaction resulted in the recording of
$1,255,000 of tangible assets, $393,000 of existing intangible assets, the
assumption of $1,798,000 of liabilities and, to date, the recognition of an
additional $2,251,000 of intangible assets, which includes $60,000 for
acquisition-related costs.
Effective February 15, 1999, the Company acquired certain assets of TPM
Staffing Services, Inc. ("TPM"), a staffing services company with three offices
in southern California - Lake Forest, Santa Ana and Anaheim. The Company paid
$1,200,000 in cash for the assets of TPM and the selling shareholder's
noncompete agreement, of which $240,000 will be deferred for six months. TPM's
revenues for the year ended December 31, 1998 were approximately $5.7 million
(unaudited). The transaction was accounted for under the purchase method of
accounting, which resulted in $1,190,000 of intangible assets, including $15,000
for acquisition-related costs, and $25,000 of fixed assets.
NOTE 3 - PROVISION FOR INCOME TAXES:
Deferred tax assets (liabilities) are comprised of the following
components (in thousands):
March 31, 1999 December 31, 1998
-------------- -----------------
Current:
Accrued workers' compensation claims
liabilities $1,100 $1,232
Allowance for doubtful accounts 86 102
Safety incentives 440 310
Other accruals 215 213
----- -----
$1,841 $1,857
===== =====
Noncurrent:
Tax depreciation in excess of book
depreciation (95) $ (101)
Accrued workers' compensation claims
liabilities 276 278
Book amortization of intangibles in excess
of tax amortization 318 289
Deferred compensation 62 62
NOL carryforward 108 -
Other 28 24
---- ----
$ 697 $ 552
==== ====
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<PAGE>
The provision for income taxes for the three months ended March 31,
1999 and 1998, is as follows (in thousands):
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
Current:
Federal $ 542 $ 293
State 150 70
---- ----
692 363
---- ----
Deferred:
Federal (103) (67)
State (26) (9)
---- ----
(129) (76)
---- ----
Provision for income taxes $ 563 $ 287
==== ====
NOTE 4 - STOCK INCENTIVE PLAN:
In 1993, the Company adopted a stock incentive plan (the "Plan") which
provides for stock-based awards to the Company's employees, directors and
outside consultants or advisers. The number of shares of common stock reserved
for issuance under the Plan is 1,300,000.
The following table summarizes options granted under the Plan in 1999:
Outstanding at December 31, 1998 785,295 $ 3.39 to $18.00
Options granted 134,144 $ 3.57 to $8.94
Options exercised (4,000) $ 3.50
Options canceled or expired -
-------
Outstanding at March 31, 1999 915,439 $ 3.39 to $18.00
=======
Exercisable at March 31, 1999 404,120
=======
Available for grant at
March 31, 1999 172,186
=======
The options listed in the table generally become exercisable in four
equal annual installments beginning one year after the date of grant.
Certain of the Company's zone and branch management employees had
previously elected to receive a portion of their quarterly cash bonus in the
form of nonqualified deferred compensation stock options. Such options are
awarded at a sixty percent discount from the then-fair market value of the
Company's stock and are fully vested and immediately exerciseable upon grant.
The amount of the
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grantee's deferred compensation (discount from fair market value) is subject to
market risk. During the first quarter of 1999, the Company awarded deferred
compensation stock options for 11,473 shares at an exercise price of $3.575 per
share.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
As more fully described above in Note 1 to the Company's financial
statements, the financial statements have been restated for all prior periods to
give effect to the merger with WIMI. The following table sets forth the
percentages of total revenues represented by selected items in the Company's
Statements of Operations for the three months ended March 31, 1999 and 1998.
Percentage of
Total Revenues
Three Months Ended
March 31,
------------------
1999 1998
------ ------
Revenues:
Staffing services 52.4% 58.2%
Professional employer services 47.6 41.8
----- -----
Total revenues 100.0 100.0
----- -----
Cost of revenues:
Direct payroll costs 77.7 77.5
Payroll taxes and benefits 8.8 9.3
Workers' compensation 2.8 2.9
Safety incentives 0.4 0.5
----- -----
Total cost of revenues 89.7 90.2
----- -----
Gross margin 10.3 9.8
Selling, general and administrative
expenses 8.1 8.4
Amortization of intangibles 0.5 0.5
----- -----
Income from operations 1.7 0.9
Other income (expense) 0.1 0.1
----- -----
Pretax income 1.8 1.0
Provision for income taxes 0.8 0.4
----- -----
Net income 1.0% 0.6%
===== =====
Three months ended March 31, 1999 and 1998
Net income for the first quarter of 1999 was $740,000, an increase of
$353,000, or 91.2% over the same period in 1998. The increase in net income for
1999 was attributable to a higher gross margin percent owing primarily to lower
payroll taxes and benefits, expressed as a percentage of revenues, coupled with
lower selling, general and administrative expenses both in terms of a percentage
of revenues and total dollars. Basic and diluted earnings per share for the
first quarter of 1999 were $.10, as compared to $.05
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<PAGE>
for both basic and diluted earnings per share for the first quarter of 1998.
Revenues for the first quarter of 1999 totaled approximately $71.0
million, an increase of approximately $1.8 million or 2.6% over the first
quarter of 1998. The quarter-over-quarter internal growth rate of revenues was a
decline of 1.9%. The percentage increase in total revenues exceeded the internal
growth rate of revenues primarily due to the BOLT Staffing acquisition effective
April 13, 1998, the TSS acquisition effective January 1, 1999 and the TPM
acquisition effective February 15, 1999.
Professional employer (PEO) services revenue increased approximately
$4.9 million or 16.8%, while staffing services revenue decreased approximately
$3.1 million or 7.6%, which resulted in an increase in the share of professional
employer (PEO) services from 41.8% of total revenues for the first quarter of
1998 to 47.6% for the first quarter of 1999. The share of staffing services had
a corresponding decrease from 58.2% of total revenues for the first quarter of
1998 to 52.4% for the first quarter of 1999.
The decrease in staffing services revenue for the first quarter of 1999
compared to the 1998 first quarter was primarily attributable to a moderation in
the demand for the Company's services by a limited number of large contract
staffing customers that were affected by various economic conditions.
Gross margin for the first quarter of 1999 totaled approximately $7.3
million, which represented an increase of $541,000 or 8.0% over the first
quarter of 1998. The gross margin percent increased from 9.8% of revenues for
the first quarter of 1998 to 10.3% for the first quarter of 1999. The increase
in the gross margin percentage was due to lower payroll taxes and benefits,
combined with slightly lower workers' compensation expense and safety
incentives, offset in part by slightly higher direct payroll costs. The decrease
in payroll taxes and benefits, both in terms of total dollars and as a
percentage of revenues for the first quarter of 1999, was primarily attributable
to lower state unemployment tax rates in various states in which the Company
does business.
Workers' compensation expense for the first quarter of 1999 totaled
$1,969,000 or 2.8% of revenues, which compares to $1,996,000 or 2.9% of revenues
for the same period in 1998. The small decrease in workers' compensation expense
for the 1999 first
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<PAGE>
quarter was generally attributable to a lower incidence of injuries in 1999
compared to the same period in 1998.
Selling, general and administrative ("SG&A") expenses for the 1999
first quarter amounted to approximately $5.7 million, a decrease of $106,000 or
1.8% from the comparable period in 1998. SG&A expenses, expressed as a
percentage of revenues, decreased from 8.4% for the first quarter of 1998 to
8.1% for the first quarter of 1999. The small decrease in total dollars from
1998 was primarily attributable to lower branch profit sharing and related
taxes. During the first quarter of 1998, management implemented specific
performance criteria for all branches to align operating expenses more closely
with growth in gross margin dollars rather than growth in revenues. Total SG&A
expenses for the first quarter of 1999 represented the third consecutive quarter
of reduced expenses from the preceding quarter, and the lowest total since the
second quarter of 1997.
Amortization of intangibles totaled $374,000 or .5% of revenues for the
first quarter of 1999, which compares to $353,000 or .5% of revenues for the
same period in 1998. The increased amortization expense was primarily due to
amortization from the BOLT Staffing, TSS and TPM acquisitions which were
consummated after March 1998.
The Company offers various qualified employee benefit plans to its
employees, including its worksite employees. These qualified employee benefit
plans include a savings plan (the "401(k) plan") under Section 401(k) of the
Internal Revenue Code (the "Code"), a cafeteria plan under Code Section 125, a
group health plan, a group life insurance plan, a group disability insurance
plan and an employee assistance plan. Generally, qualified employee benefit
plans are subject to provisions of both the Code and the Employee Retirement
Income Security Act ("ERISA"). In order to qualify for favorable tax treatment
under the Code, qualified plans must be established and maintained by an
employer for the exclusive benefit of its employees. In the event the tax exempt
status of the Company's benefit plans were to be discontinued and the benefit
plans were to be disqualified, such actions could have a material adverse effect
on the Company's business, financial condition and results of operations.
Reference is made to pages 19-20 of the Company's 1998 Annual Report on Form
10-K for a more detailed discussion of this issue.
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<PAGE>
Fluctuations in Quarterly Operating Results
The Company has historically experienced significant fluctuations in
its quarterly operating results and expects such fluctuations to continue in the
future. The Company's operating results may fluctuate due to a number of factors
such as seasonality, wage limits on payroll taxes, claims experience for
workers' compensation, demand and competition for the Company's services, and
the effect of acquisitions. The Company's revenue levels fluctuate from quarter
to quarter primarily due to the impact of seasonality in its staffing services
business and on certain of its PEO clients in the agriculture and forest
products related industries. As a result, the Company may have greater revenues
and net income in the third and fourth quarters of its fiscal year. Payroll
taxes and benefits fluctuate with the level of direct payroll costs but may tend
to represent a smaller percentage of revenues later in the Company's fiscal year
as federal and state statutory wage limits for unemployment and social security
taxes are exceeded by some employees. Workers' compensation expense varies with
both the frequency and severity of workplace injury claims reported during a
quarter, as well as adverse loss development of prior period claims during the
current or subsequent quarters.
Liquidity and Capital Resources
The Company's cash position of $1,713,000 at March 31, 1999 decreased
by $2,316,000 from December 31, 1998, which compares to an increase of $16,000
for the comparable period in 1998. The decrease in cash at March 31, 1999 as
compared to December 31, 1998, was primarily attributable to cash used in
connection with two acquisitions and the repayment of credit-line borrowings
assumed in the TSS acquisition, partially offset by cash provided by operating
activities.
Net cash provided by operating activities for the three months ended
March 31, 1999 amounted to $3,069,000, as compared to $334,000 for the
comparable 1998 period. For the 1999 period, cash flow generated by net income,
together with an increase of $3,842,000 in accrued payroll and benefits, was
offset in part by a $728,000 increase in trade accounts receivable.
Net cash used in investing activities totaled $3,834,000 for the three
months ended March 31, 1999, as compared to $267,000 for the similar 1998
period. For the 1999 period, the principal use of cash for investing activities
was for the acquisitions of TSS and TPM. The Company presently has no material
long-term capital commitments.
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<PAGE>
Net cash used in financing activities for the three-month period ended
March 31, 1999 was $1,551,000, which compared to $51,000 net cash used in
financing activities for the similar 1998 period. For the 1999 period, the
principal use of cash for financing activities was for repayment of the
credit-line assumed in the TSS acquisition, coupled with cash used for
repurchasing common stock of the Company.
The Company's business strategy continues to focus on growth through
the acquisition of additional personnel-related businesses, both in its existing
markets and other strategic geographic areas, together with the expansion of
operations at existing offices. As disclosed in Note 2 to the financial
statements included herein, the Company acquired all of the outstanding common
stock of Temporary Staffing Systems, Inc., a staffing services company
headquartered in North Carolina, effective January 1, 1999, for $2,050,000 in
cash and issued a contingent note payable for $950,000. Also as disclosed in
Note 2 herein, on February 15, 1999, the Company purchased certain assets of TPM
Staffing Services, Inc., a staffing services company located in southern
California, for $1,200,000 in cash, of which $240,000 will be deferred fo`r six
months. The Company actively explores proposals for various acquisition
opportunities on an ongoing basis, but there can be no assurance that any
additional transactions will be consummated.
The Company negotiated an amendment to its loan agreement with its
principal bank, effective February 8, 1999, to increase the revolving credit
facility by $2.0 million, from $5.65 million to $7.65 million. This facility,
which expires May 31, 1999, includes a subfeature for letters of credit, as to
which approximately $1.9 million was outstanding as of March 31, 1999. There was
no outstanding balance on the revolving credit facility at March 31, 1999. As
such, the Company had approximately $5.7 million of unused availability on its
line of credit on March 31, 1999. Management expects that the renewal of such
credit facility will be in an amount and on such terms and conditions as will be
not less favorable than the current credit arrangement. Management believes that
the credit facility and other potential sources of financing, together with
anticipated funds generated from operations, will be sufficient in the aggregate
to fund the Company's working capital needs for the foreseeable future.
On February 26, 1999, the Company's board of directors authorized a
stock repurchase program to purchase up to 250,000 common shares from time to
time in open market purchases. During the first quarter of 1999, the Company
repurchased 80,500 shares at
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<PAGE>
an aggregate price of $554,000. Management anticipates that the capital
necessary to execute this program will be provided by existing cash balances.
Inflation
Inflation generally has not been a significant factor in the Company's
operations during the periods discussed above. The Company has taken into
account the impact of escalating medical and other costs in establishing
reserves for future expenses for self-insured workers' compensation claims.
Year 2000 Readiness
The Company has developed a Year 2000 plan to ensure its internal
operational readiness, as well as compliance by the Company's key vendors.
Management's plan is focused on evaluating the readiness of the Company's
mission critical applications software, operating systems software, hardware,
communications, third-party interfaces, facilities (typically non-information
technology systems) and key vendors. This evaluation process involves four
phases: (1) identification of risks, (2) assessment of risks, (3) development of
remediation and contingency plans, and (4) testing and implementation.
As the Company has previously reported, management initiated a project
in mid-1997 to convert its information systems to new technologies which are
expected to enable the Company to more effectively accommodate its anticipated
growth. This upgrade is anticipated to be completed in mid-1999 and is expected
to alleviate the Year 2000 issue for such mission-critical applications as
payroll processing and financial reporting systems. The Company has incurred
capital expenditures of $2.3 million through March 31, 1999, for this project
and expects to incur another $0.4 million prior to completion. The remaining
mission-critical application is a branch-level legacy system which is expected
to require only minor reprogramming by the Company's internal staff during the
first half of 1999 at no incremental cost to the Company.
Mission-critical applications are currently in a remediation or testing
phase. Management is currently uncertain as to the need for contingency plans
for the Company's mission-critical applications, as it expects these systems to
be fully operational by the third quarter of 1999.
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<PAGE>
The Company's assessment of the risks associated with non-mission
critical systems is incomplete but ongoing, and as such, management cannot
predict whether significant problems will be identified, and if so, the costs to
remediate such problems. In addition, management has not yet identified any
reasonably likely worst case scenarios or determined the extent of contingency
planning that may be required. Costs identified to date, however, have not been
material. As part of its assessment, the Company is relying on assurances from
key vendors that their products and services will be Year 2000 compliant.
The risks associated with the Year 2000 problem are pervasive and
complex, can be difficult to identify and to address, and can result in material
adverse consequences to the Company. Even if the Company, in a timely manner,
completes all of its assessments, identifies and tests remediation plans
believed to be adequate, and develops contingency plans believed to be adequate,
some problems may not be identified or corrected in time to prevent material
adverse consequences to the Company. Also, the Company's business may be
adversely affected by events outside its control, such as disruptions to
services provided by utilities, banks or transportation or telecommunications
networks.
Forward-Looking Information
Statements in this report which are not historical in nature, including
discussion of economic conditions in the Company's market areas, the potential
for and effect of future acquisitions, the effect of changes in the Company's
mix of services on gross margin, the adequacy of the Company's workers'
compensation reserves and allowance for doubtful accounts, the tax-qualified
status of the Company's 401(k) savings plan, the timely resolution of the Year
2000 issue by the Company and its customers and vendors, and the availability of
financing and working capital to meet the Company's funding requirements, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors with
respect to the Company include difficulties associated with integrating acquired
businesses and clients into the Company's operations, economic trends in the
Company's service areas, uncertainties regarding government regulation of PEOs,
including the possible adoption by the IRS of an unfavorable position as to the
tax-qualified status of employee
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<PAGE>
benefit plans maintained by PEOs, future workers' compensation claims
experience, and the availability of and costs associated with potential sources
of financing. The Company disclaims any obligation to update any such factors or
to publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
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<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed herewith are listed in the Exhibit Index following
the signature page of this report.
(b) No Current Reports on Form 8-K were filed by the Registrant during the
quarter ended March 31, 1999.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BARRETT BUSINESS SERVICES, INC.
(Registrant)
Date: May 13, 1999 By: /s/Michael D. Mulholland
------------------------
Michael D. Mulholland
Vice President-Finance
(Principal Financial Officer)
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<PAGE>
EXHIBIT INDEX
Exhibit
11 Statement of Calculation of Basic and Diluted Shares Outstanding
27 Financial Data Schedule
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BARRETT BUSINESS SERVICES, INC.
STATEMENT OF CALCULATION OF BASIC
AND DILUTED COMMON SHARES OUTSTANDING
<TABLE>
Three Months
Ended
March 31, 1999
--------------
<S> <C>
Weighted average number of basic shares outstanding 7,665,535
Stock option plan shares to be issued at prices
ranging from $3.39 to $18.00 per share 869,789
Less: Assumed purchase at average market price during
the period using proceeds received upon exercise
of options and purchase of stock, and using tax
benefits of compensation due to premature
dispositions (828,353)
---------
Weighted average number of diluted shares outstanding 7,706,971
=========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's balance sheet and related statement of operations for the period ended
March 31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,713
<SECURITIES> 0
<RECEIVABLES> 23,579
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,760
<PP&E> 5,532
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,105
<CURRENT-LIABILITIES> 19,625
<BONDS> 541
0
0
<COMMON> 76
<OTHER-SE> 33,769
<TOTAL-LIABILITY-AND-EQUITY> 57,105
<SALES> 0
<TOTAL-REVENUES> 71,015
<CGS> 0
<TOTAL-COSTS> 63,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 1,303
<INCOME-TAX> 563
<INCOME-CONTINUING> 740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 740
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
