UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 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 reports), 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 July 30, 1999
was 7,576,898 shares.
<PAGE>
BARRETT BUSINESS SERVICES, INC.
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1999 and
December 31, 1998.................................3
Statements of Operations - Three Months
Ended June 30, 1999 and 1998......................4
Statements of Operations - Six Months
Ended June 30, 1999 and 1998......................5
Statements of Cash Flows - Six Months
Ended June 30, 1999 and 1998......................6
Notes to Financial Statements.....................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................11
Item 3. Quantitative and Qualitative Disclosure
About Market Risk................................18
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security
Holders..........................................19
Item 6. Exhibits and Reports on Form 8-K.................20
Signatures .................................................21
Exhibit Index .................................................22
2
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PART I - Financial Information
Item 1. Financial Statements
BARRETT BUSINESS SERVICES, INC.
Balance Sheets
(Unaudited)
(In thousands, except par value)
June 30, December 31,
1999 1998
-------- ------------
Assets
Current assets:
Cash and cash equivalents $ 945 $ 4,029
Trade accounts receivable, net 30,145 21,907
Prepaid expenses and other 1,694 1,103
Deferred tax assets (Note 3) 1,761 1,857
------ ------
Total current assets 34,545 28,896
Intangibles, net 23,116 11,508
Property and equipment, net 6,132 5,184
Restricted marketable securities
and workers' compensation deposits 6,364 6,004
Deferred tax assets (Note 3) 716 552
Other assets 1,076 626
------ ------
$71,949 $52,770
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 1,105 $ -
Current portion of long-term debt 2,782 61
Line of credit payable 2,541 -
Income taxes payable (Note 3) - 438
Accounts payable 1,706 948
Accrued payroll, payroll taxes
and related benefits 15,744 9,246
Accrued workers' compensation claims
liabilities 2,769 3,244
Customer safety incentives payable 1,112 1,173
Other accrued liabilities 447 514
------ ------
Total current liabilities 28,206 15,624
Long-term debt, net of current portion 5,632 503
Customer deposits 798 829
Long-term workers' compensation liabilities 706 714
Other long-term liabilities 1,691 1,398
------ ------
37,033 19,068
------ ------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 20,500
shares authorized, 7,581 and 7,676
shares issued and outstanding,
respectively 76 77
Additional paid-in capital 10,668 11,409
Retained earnings 24,172 22,216
------ ------
34,916 33,702
------ ------
$71,949 $52,770
====== ======
The accompanying notes are an integral part of these financial statements.
3
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BARRETT BUSINESS SERVICES, INC.
Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
June 30,
-------------------
1999 1998
------ ------
Revenues:
Staffing services $46,185 $42,786
Professional employer services 38,522 33,865
------ ------
84,707 76,651
------ ------
Cost of revenues:
Direct payroll costs 65,575 59,348
Payroll taxes and benefits 7,142 6,629
Workers' compensation 2,445 2,211
Safety incentives 403 336
------ ------
75,565 68,524
------ ------
Gross margin 9,142 8,127
Selling, general and administrative expenses 6,551 6,035
Merger expenses - 750
Amortization of intangibles 434 329
------ ------
Income from operations 2,157 1,013
Other income (expense):
Interest expense (105) (60)
Interest income 89 100
Other, net 1 1
------ ------
(15) 41
------ ------
Income before provision for income taxes 2,142 1,054
Provision for income taxes (Note 3) 926 454
------ ------
Net income $ 1,216 $ 600
====== ======
Basic earnings per share $ .16 $ .08
====== ======
Weighted average number of basic
shares outstanding 7,581 7,666
====== ======
Diluted earnings per share $ .16 $ .08
====== ======
Weighted average number of diluted
shares outstanding 7,624 7,722
====== ======
The accompanying notes are an integral part of these financial statements.
4
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BARRETT BUSINESS SERVICES, INC.
Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Six Months Ended
June 30,
------------------
1999 1998
------- -------
Revenues:
Staffing services $ 83,414 $ 83,090
Professional employer services 72,308 62,802
------- -------
155,722 145,892
------- -------
Cost of revenues:
Direct payroll costs 120,738 113,015
Payroll taxes and benefits 13,393 13,069
Workers' compensation 4,414 4,207
Safety incentives 720 700
------- -------
139,265 130,991
------- -------
Gross margin 16,457 14,901
Selling, general and administrative expenses 12,261 11,851
Merger expenses - 750
Amortization of intangibles 808 682
------- -------
Income from operations 3,388 1,618
Other income (expense):
Interest expense (129) (117)
Interest income 184 225
Other, net 2 2
------- -------
57 110
------- -------
Income before provision for income taxes 3,445 1,728
Provision for income taxes (Note 3) 1,489 741
------- -------
Net income $ 1,956 $ 987
======= =======
Basic earnings per share $ .26 $ .13
======= =======
Weighted average number of basic
shares outstanding 7,624 7,652
======= =======
Diluted earnings per share $ .26 $ .13
======= =======
Weighted average number of diluted
shares outstanding 7,666 7,707
======= =======
The accompanying notes are an integral part of these financial statements.
5
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BARRETT BUSINESS SERVICES, INC.
Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
----------------
1999 1998
------ ------
Cash flows from operating activities:
Net income $ 1,956 $ 987
Reconciliation of net income to cash
from operations:
Depreciation and amortization 1,093 905
Changes in certain assets and liabilities, net
of assets acquired and liabilities assumed:
Trade accounts receivable, net (5,497) (2,895)
Prepaid expenses and other (532) (577)
Deferred tax assets 40 (195)
Accounts payable 611 (448)
Accrued payroll, payroll taxes and
related benefits 6,337 1,579
Accrued workers' compensation claims
liabilities (475) 120
Customer safety incentives payable (61) 52
Income taxes payable (438) 48
Other accrued liabilities (271) 407
Customer deposits and long-term workers'
compensation liabilities and other assets (467) (126)
Other long-term liabilities 293 90
------ ------
Net cash provided by (used in) operating
activities 2,589 (53)
------ ------
Cash flows from investing activities:
Cash paid for acquisitions, including
other direct costs (Note 2) (13,982) (680)
Purchases of fixed assets, net of amounts
purchased in acquisitions (820) (616)
Proceeds from maturities of marketable
securities 1,679 3,766
Purchases of marketable securities (2,018) (3,528)
------ ------
Net cash used in investing activities (15,141) (1,058)
------ ------
Cash flows from financing activities:
Payment of credit-line assumed in
acquisition (1,113) -
Payment of note payable assumed in
acquisition (55) -
Net proceeds from (payments on)
credit-line borrowings 2,541 (635)
Proceeds from issuance of note payable 1,105 -
Proceeds from issuance of long-term debt 8,000 -
Payments on long-term debt (268) (266)
Payment to dissenting shareholder - (519)
Payment to shareholder (57) -
Repurchase of common stock (700) -
Proceeds from exercise of stock options
and warrants 15 168
------ ------
Net cash provided by (used in) financing
activities 9,468 (1,252)
------ ------
Net decrease in cash and cash equivalents (3,084) (2,363)
Cash and cash equivalents, beginning of period 4,029 3,439
------ ------
Cash and cash equivalents, end of period $ 945 $ 1,076
====== ======
Supplemental schedule of noncash activities:
Acquisition of other businesses:
Cost of acquisitions in excess of fair
market value of net assets acquired $12,416 $ 670
Tangible assets acquired 3,364 10
Liabilities assumed 1,798 -
The accompanying notes are an integral part of these financial statements.
6
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BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements
NOTE 1 - BASIS OF PRESENTATION OF INTERIM PERIOD STATEMENTS:
The accompanying financial statements are unaudited and have been prepared
by Barrett Business Services, Inc. (the "Company") 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 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
7
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liabilities and, to date, the recognition of an additional $2,251,000 of
intangible assets, which includes $51,000 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
$1,125,000 in cash for the assets of TPM, of which $240,000 was deferred for six
months from the date of acquisition. The Company also paid $75,000 for
noncompete agreements. Tam'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.
Effective May 31, 1999, the Company acquired certain assets of Temporary
Skills Unlimited, Inc., dba TSU Staffing ("TSU"), a staffing services company
with nine branch offices in northern California. The Company paid $10,422,000 in
cash for certain assets of TSU, of which $864,500 was deferred for one year from
the date of acquisition. The Company also paid $100,000 for noncompete
agreements. TSU's revenues for the year ended December 27, 1998 were
approximately $25.0 million (audited). The transaction was accounted for under
the purchase method of accounting, which resulted in $8,582,000 of intangible
assets, including $144,000 for acquisition-related costs, $1,797,000 of accounts
receivable and $287,000 of fixed assets.
8
<PAGE>
NOTE 3 - PROVISION FOR INCOME TAXES:
Deferred tax assets (liabilities) are comprised of the following components
(in thousands):
June 30, 1999 December 31, 1998
------------- -----------------
Current:
Accrued workers' compensation claims
liabilities $1,047 $1,232
Allowance for doubtful accounts 72 102
Safety incentives 439 310
Other accruals 203 213
----- -----
$1,761 $1,857
===== =====
Noncurrent:
Tax depreciation in excess of book
depreciation $ (75) $ (101)
Accrued workers' compensation claims
liabilities 275 278
Book amortization of intangibles in
excess of tax amortization 341 289
Deferred compensation 44 62
NOL carryforward 100 -
Other 31 24
----- -----
$ 716 $ 552
===== =====
The provision for income taxes for the six months ended June 30, 1999 and
1998, is as follows (in thousands):
Six Months Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
Current:
Federal $1,224 $ 765
State 333 171
----- -----
1,557 936
----- -----
Deferred:
Federal (54) (172)
State (14) (23)
----- -----
(68) (195)
----- -----
Provision for income taxes $1,489 $ 741
===== =====
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.
9
<PAGE>
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 174,370 $ 2.80 to $8.94
Options exercised (4,750) $ 3.50
Options canceled or expired (8,224)
Outstanding at June 30, 1999 946,691 $ 2.80 to $18.00
=======
Exercisable at June 30, 1999 463,927
=======
Available for grant at
June 30, 1999 140,184
=======
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 exercisable upon grant. The
amount of the grantee's deferred compensation (discount from fair market value)
is subject to market risk. During the second quarter of 1999, the Company
awarded deferred compensation stock options for 10,126 shares at an exercise
price of $2.80 per share.
10
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
The following table sets forth the percentages of total revenues
represented by selected items in the Company's Statements of Operations for the
three and six-month periods ended June 30, 1999 and 1998.
Percentage of Total Revenues
------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1999 1998 1999 1998
----- ----- ----- -----
Revenues:
Staffing services 54.5% 55.8% 53.6% 57.0%
Professional employer
services 45.5 44.2 46.4 43.0
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of revenues:
Direct payroll costs 77.4 77.4 77.5 77.4
Payroll taxes and benefits 8.4 8.7 8.6 9.0
Workers' compensation 2.9 2.9 2.8 2.9
Safety incentives 0.5 0.4 0.5 0.5
----- ----- ----- -----
Total cost of revenues 89.2 89.4 89.4 89.8
----- ----- ----- -----
Gross margin 10.8 10.6 10.6 10.2
Selling, general and
administrative expenses 7.7 7.9 7.9 8.1
Merger expenses - 1.0 - 0.5
Amortization of intangibles 0.5 0.4 0.5 0.5
----- ----- ----- -----
Income from operations 2.6 1.3 2.2 1.1
Other income (expense) - 0.1 - 0.1
----- ----- ----- -----
Pretax income 2.6 1.4 2.2 1.2
Provision for income taxes 1.1 0.6 0.9 0.5
----- ----- ----- -----
Net income 1.5% 0.8% 1.3% 0.7%
===== ===== ===== =====
Three months ended June 30, 1999 and 1998
Net income for the second quarter of 1999 was $1,216,000, an increase of
$616,000 or 102.7% over the second quarter of 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, as a percentage of
revenues. Additionally, the 1998 second quarter included $750,000 of merger
expenses related to the Company's June 1998 pooling-of-interests merger with
Western Industrial Management, Inc. Basic and diluted earnings per share for the
second quarter of 1999 were
11
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$.16 as compared to $.08 for both basic and diluted earnings per share for the
second quarter of 1998.
Revenues for the second quarter of 1999 totaled approximately $84.7
million, an increase of approximately $8.0 million or 10.5% over the second
quarter of 1998. The quarter-over-quarter internal growth rate of revenues was
1.4%. The percentage increase in total revenues exceeded the internal growth
rate of revenues primarily due to the TSS acquisition effective January 1, 1999,
the TPM acquisition effective February 15, 1999 and the TSU acquisition
effective May 31, 1999.
Professional employer (PEO) services revenue increased approximately $4.7
million or 13.8% and staffing services revenue increased $3.4 million or 7.9%,
which resulted in an increase in the share of PEO services from 44.2% of total
revenues for the second quarter of 1998 to 45.5% for the second quarter of 1999.
The share of staffing services had a corresponding decrease from 55.8% of total
revenues for the second quarter of 1998 to 54.5% for the second quarter of 1999.
Gross margin for the second quarter of 1999 totaled approximately $9.1
million, which represented an increase of $1.0 million or 12.5% over the second
quarter of 1998. The gross margin percent increased from 10.6% of revenues for
the second quarter of 1998 to 10.8% for the second quarter of 1999. The increase
in the gross margin percentage was due to lower payroll taxes and benefits,
offset in part by slightly higher safety incentives. The decrease in payroll
taxes and benefits for the second 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 second quarter of 1999 totaled
$2,445,000 or 2.9% of revenues, which is comparable to the $2,211,000 or 2.9% of
revenues for the second quarter of 1998.
Selling, general and administrative ("SG&A") expenses for the second
quarter of 1999 amounted to approximately $6.6 million, an increase of $516,000
or 8.6% over the second quarter of 1998. SG&A expenses, expressed as a
percentage of revenues, decreased from 7.9% for the second quarter of 1998 to
7.7% for the second quarter of 1999. The increase in total SG&A dollars was
primarily due to increased profit sharing and related taxes, management payroll
and rent expense in connection with the additional branch offices acquired in
the TSS, TPM and TSU acquisitions.
Amortization of intangibles totaled $434,000 or 0.5% of revenues for the
second quarter of 1999, which compares to $329,000
12
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or 0.4% of revenues for the second quarter of 1998. The increased amortization
expense was primarily due to the amortization of intangibles recognized in the
TSS, TPM and TSU acquisitions, which were consummated in the first half of 1999.
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.
Six Months Ended June 30, 1999 and 1998
Net income for the six months ended June 30, 1999 was $1,956,000, an
increase of $969,000 or 98.2% over the same period in 1998. The increase in net
income 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, as a percentage of
revenues. Additionally, the 1998 six-month period included $750,000 of merger
expenses related to the Company's June 1998 pooling-of-interests merger with
WIMI. Basic and diluted earnings per share for the six-month period of 1999 were
$.26 as compared to $.13 for both basic and diluted earnings per share for the
similar period of 1998.
Revenues for the six months ended June 30, 1999 totaled approximately
$155.7 million, an increase of approximately $9.8 million or 6.7% over the
similar period of 1998. The increase in total revenues was primarily due to the
TSS, TPM and TSU acquisitions, which were consummated in 1999.
Gross margin for the six months ended June 30, 1999 totaled approximately
$16.5 million, which represented an increase of $1.6
13
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million or 10.4% over the similar period of 1998. The gross margin percent
increased from 10.2% of revenues for the six-month period of 1998 to 10.6% for
the same period of 1999. The increase in the gross margin percentage was due to
lower payroll taxes and benefits and slightly lower workers' compensation,
offset in part by slightly higher direct payroll costs. The decrease in payroll
taxes and benefits for the six-month period of 1999 was primarily attributable
to lower state unemployment tax rates in various states in which the Company
does business.
Selling, general and administrative ("SG&A") expenses for the six months
ended June 30, 1999 amounted to approximately $12.3 million, an increase of
$410,000 or 3.5% over the similar period of 1998. SG&A expenses, expressed as a
percentage of revenues, decreased from 8.1% for the six-month period of 1998 to
7.9% for the same period of 1999. The increase in total SG&A dollars was
primarily due to increased profit sharing and related taxes, management payroll
and rent expense in connection with the additional branch offices acquired in
the TSS, TPM and TSU acquisitions.
Amortization of intangibles totaled $808,000 or 0.5% of revenues for the
six months ended June 30, 1999, which compares to $682,000 or 0.5% of revenues
for the same period of 1998. The increased amortization expense was primarily
due to the amortization of intangibles recognized in the 1999 acquisitions of
TSS, TPM and TSU.
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 expense 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 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
14
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varies with both the frequency and severity of workplace injury claims reported
during a quarter or subsequent quarters.
Liquidity and Capital Resources
- -------------------------------
The Company's cash position of $945,000 at June 30, 1999 decreased by
$3,084,000 from December 31, 1998. The decrease in cash at June 30, 1999 was
primarily due to cash used in connection with three acquisitions made since
January 1, 1999 and open-market share repurchase activity, offset in part by
proceeds from operating activities, the Company's bank term loan and borrowings
on its credit line.
Net cash provided by operating activities for the six months ended June
30, 1999 amounted to $2,589,000 as compared to net cash used in operating
activities of $53,000 for the comparable 1998 period. For the 1999 period, cash
flow was primarily generated by net income coupled with an increase of
$6,337,000 in accrued payroll and benefits, offset in part by an increase in
accounts receivable of $5,497,000.
Net cash used in investing activities totaled $15,141,000 for the
six-month period ended June 30, 1999, as compared to $1,058,000 for the similar
1998 period. For the 1999 period, cash used in investing activities was
primarily for the acquisitions of TSS, TPM and TSU. The Company presently has no
material long-term capital commitments.
Net cash provided by financing activities for the six months ended June
30, 1999 amounted to $9,468,000, which compares to $1,252,000 of net cash used
in financing activities for the same period in 1998. For the 1999 period, the
primary source of cash provided by financing activities was an $8,000,000 term
loan obtained from the Company's principal bank and $2,541,000 of net borrowings
on the Company's credit line. The term loan was obtained to provide financing
for the TSU acquisition.
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. As disclosed in Note 2
herein, on February 15, 1999, the
15
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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 is being deferred for six months from the date of acquisition.
Also as disclosed in Note 2 herein, on May 31, 1999, the Company purchased
certain assets of Temporary Skills Unlimited, Inc., dba TSU Staffing, a staffing
services company headquartered in northern California, for $10,522,000 in cash,
of which $864,500 is being deferred for one year from the date of acquisition.
Effective May 31, 1999, management renewed the Company's credit
arrangement with its principal bank on terms and conditions which were generally
more favorable than the prior agreement. The amended agreement provided for an
increase in the unsecured revolving credit facility from $7.65 million to $12.0
million. This facility, which expires May 31, 2000, includes a subfeature for
previously existing standby letters of credit in connection with certain
workers' compensation surety arrangements, as to which approximately $1.9
million was outstanding as of June 30, 1999. In addition, the Company obtained a
three-year term loan in the amount of $8.0 million bearing interest at LIBOR
plus 135 basis points to provide financing for the acquisition of TSU. Terms and
conditions of the term loan include certain restrictive quarterly financial
covenants relating to the Company's working capital, earnings before interest,
taxes, depreciation and amortization ("EBITDA"), and ratio of funded debt to
EBITDA; the Company was in compliance with such covenants at June 30, 1999.
Management expects that the funds anticipated to be generated from operations,
together with the credit facility and other potential sources of financing, 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 six-month period ended June 30, 1999, the
Company repurchased 103,200 shares at an aggregate price of $700,000. 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.
16
<PAGE>
Year 2000 Readiness
The Company has developed a Year 2000 ("Y2K") 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 during the fourth quarter of
1999 and is expected to alleviate the Y2K issue for the mission-critical
application of payroll processing. The Company has incurred capital expenditures
of $2.6 million through June 30, 1999, for this project and expects to incur
another $0.4 million prior to completion. The Company's financial reporting
systems are currently Y2K compliant. The mission-critical branch-level legacy
system is also Y2K compliant, which was achieved through minor reprogramming by
internal staff at no incremental cost to the Company.
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 middle of the fourth quarter of 1999.
The Company's assessment of the risks associated with non-mission critical
systems has been completed and remediation activities have commenced. Management
expects the costs to remediate these systems to be minimal. Management has not
yet identified any reasonably likely worst case scenarios or determined the
extent of contingency planning that may be required. As part of its assessment,
the Company is relying on assurances from key vendors that their products and
services will be Y2K compliant. To date, no significant compliance issues have
been identified with third parties.
17
<PAGE>
The risks associated with the Y2K 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 Y2K
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 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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company's exposure to market risk for changes in interest rates
primarily relates to the Company's short-term and long-term
18
<PAGE>
debt obligations. As of June 30, 1999, the Company had interest-bearing debt
obligations of approximately $13.1 million, of which approximately $10.3 million
bear interest at a variable rate and approximately $2.8 million at a fixed rate
of interest. The variable rate debt is comprised of approximately $2.5 million
outstanding under an unsecured revolving credit facility, which bears interest
at the federal funds rate plus 125 basis points. The Company also has an
unsecured three-year term note with its principal bank, which bears interest at
LIBOR plus 135 basis points. Based on the Company's overall interest exposure at
June 30, 1999, a 10 percent change in market interest rates would not have a
material effect on the fair value of the Company's long-term debt or its results
of operations. As of June 30, 1999, the Company had not entered into any
interest rate instruments to reduce its exposure to interest rate risk.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1999 annual meeting of stockholders on May 12, 1999.
The following directors were elected at the annual meeting:
ABSTENTIONS AND
FOR WITHHELD BROKER NON-VOTES
--- -------- ----------------
Robert R. Ames 7,406,118 6,210
Herbert L. Hochberg 7,357,518 54,810
Anthony Meeker 7,357,618 54,710
Stanley G. Renecker 7,400,618 11,710
Nancy B. Sherertz 7,400,718 11,610
William W. Sherertz 7,401,718 10,610
The other matter presented for action at the annual meeting was approved
by the following vote:
ABSTENTIONS AND
FOR AGAINST BROKER NON-VOTES
--- ------- ----------------
Approval of the 7,408,118 2,600 1,610
appointment of Price-
waterhouseCoopers LLP as
independent accountants
19
<PAGE>
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) Reports on Form 8-K
On June 14, 1999, the Company filed a Current Report on Form 8-K
dated May 31, 1999, to report that the Company had purchased certain
assets of Temporary Skills Unlimited, Inc., dba TSU Staffing. The
all-cash transaction provided for total consideration of $10,522,000
for certain assets, including certain accounts receivable of
$1,797,000. The Company paid TSU $9,657,000 in cash and issued a
one-year note for $864,500. TSU provides staffing services through
nine branch offices in northern California and had 1998 revenues of
approximately $25.0 million.
20
<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: August 13, 1999 By: /s/ Michael D. Mulholland
Michael D. Mulholland
Vice President-Finance
(Principal Financial Officer)
21
<PAGE>
EXHIBIT INDEX
EXHIBIT
- -------
4.1 Loan agreement between the Registrant and Wells Fargo Bank, N.A. dated
May 31, 1999.
11 Statement of Calculation of Average
Common Shares Outstanding
27 Financial Data Schedule
22
May 31, 1999
BARRETT BUSINESS SERVICES, INC.
4724 SW Macadam Avenue
Portland, OR 97201
Gentlemen:
This letter amendment (this "Amendment") is to confirm the changes
agreed upon between Wells Fargo Bank, National Association ("Bank") and Barrett
Business Services, Inc. ("Borrower") to the terms and conditions of that certain
letter agreement between Bank and Borrower dated as of May 31, 1998, as amended
from time to time (the "Agreement"). For valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree
that the Agreement shall be amended as follows to reflect said changes.
1. The Agreement is hereby amended (a) by deleting "May 31, 1999" as
the last day on which Bank will make advances under the Line of Credit, and by
substituting for said date "May 31, 2000," and (b) by deleting "Seven Million
Six Hundred Fifty Thousand Dollars ($7,650,000.00)" as the maximum principal
amount available under Line of Credit, and by substituting for said amount
"Twelve Million Dollars ($12,000,000.00)," with such changes to be effective
upon the execution and delivery to Bank of a promissory note substantially in
the form of Exhibit A attached hereto (which promissory note shall replace and
be deemed the Line of Credit Note defined in and made pursuant to the Agreement)
and all other contracts, instruments and documents required by Bank to evidence
such change.
2. The following is hereby added to the Agreement as Paragraph 3.:
"3. A term loan in the principal amount of Eight
Million Dollars ($8,000,000.00) ("Term Loan A"), the proceeds
of which shall be used for acquisition of other business
operations. Bank's commitment to grant the Term Loan A shall
terminate on June 30, 1999."
3. Paragraph I.1. (b) of the Agreement is hereby amended by deleting
"Seven Million Six Hundred Fifty Thousand Dollars ($7,650,000.00)" as the
aggregate undrawn amount of all
<PAGE>
Barrett Business Services, Inc.
May 31, 1999
Page 2
outstanding Letters of Credit, and by substituting for said amount "Five Million
Dollars ($5,000,000.00)."
4. Paragraph I.3. is hereby renumbered to paragraph I.4.
5. The following is hereby added to the Agreement as Paragraph I.3:
"3. TERM LOAN A:
(a) Term Note A. Borrower's obligation to repay the Term Loan A shall
be evidenced by a promissory note substantially in the form of Exhibit C
attached hereto ("Term Note A"), all terms of which are incorporated herein by
this reference.
(b) Repayment. The principal amount of the Term Loan A shall be repaid
in accordance with the provisions of the Term Note A.
(c) Prepayment. Borrower may prepay principal on the Term Loan A solely
in accordance with the provisions of the Term Note A."
6. Paragraph II.1. is hereby deleted in its entirety, and the following
substituted therefor:
"1. Interest. The outstanding principal balance of
the Line of Credit, Term Loan and Term Loan A shall bear
interest at the rates of interest set forth in the Line of
Credit Note, Term Note and Term Note A.
(a) Computation and Payment. Interest on the Line of
Credit and the Term Loan A shall be computed on the basis of a
360-day year, actual days elapsed. Interest on the Term Loan
shall be computed on the basis of a 366-day year, actual days
elapsed. Interest shall be payable at the times and place set
forth in the Line of Credit Note, Term Note and Term Note A."
7. Paragraph II.2. is hereby deleted in its entirety, and the following
substituted therefor:
"2. Unused Commitment Fee. Borrower shall pay to Bank
a fee equal to one hundred fifteen hundredths percent (0.150%)
per annum (computed on the basis of a 360-day year,
<PAGE>
Barrett Business Services, Inc.
May 31, 1999
Page 3
actual days elapsed) on the average daily unused amount of the
Line of Credit, which fee shall be calculated on a quarterly
basis by Bank and shall be due and payable by Borrower in
arrears on the last day of each March, June, September and
December."
8. Paragraph V.8. is hereby deleted in its entirety, and the following
substituted therefor:
"8. Financial Condition. Maintain Borrower's
financial condition as follows using generally accepted
accounting principles consistently applied and used
consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Working Capital as of end of each fiscal quarter
not less than $5,500,000 at 6/30/99, $6,500,000 at 9/30/99,
$7,500,000 at 12/31/99 and 3/31/00 and $8,000,000 at 6/30/00
and thereafter, with "Working Capital" defined as total
current assets minus total current liabilities.
(b) EBITDA not less than $8,000,000.00 as of each
fiscal quarter end, on a trailing four-quarters basis
including the current quarter then ended, with "EBITDA"
defined as net profit before tax plus interest expense (net of
capitalized interest expense), depreciation expense and
amortization expense.
(c) Funded Debt to EBITDA Ratio as of the end of each
fiscal quarter not more than 2.25 to 1.0, with "Funded Debt"
defined as all borrowed funds plus the amount of all
capitalized lease obligations of Borrower.
9. Paragraph V.9. is hereby deleted in its entirety, and the following
substituted therefor:
"9. Merger, Consolidation, Transfer of Assets. Not
merge into or consolidate with any other entity; nor make any
substantial change in the nature of Borrower's business as
conducted as of the date hereof; nor acquire all or
substantially all of the assets of any other entity in any
transaction
<PAGE>
Barrett Business Services, Inc.
May 31, 1999
Page 4
involving a purchase price of $20,000,000.00 or more without
the prior written approval of Bank, which approval shall not
be unreasonably withheld; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material portion
of Borrower's assets, except in the ordinary course of its
business."
10. Paragraph V.12. is hereby deleted in its entirety, and the
following substituted therefor:
"12. Pledge of Assets. Not mortgage, pledge, grant or
permit to exist a security interest in, or lien upon, all or
any portion of Borrower's assets now owned or hereafter
acquired, except any of the foregoing in favor of Bank or
which are existing as of, and disclosed to Bank in writing
prior to, the date hereof, and except security interests for
the purchase or lease of assets up to an aggregate principal
amount of $25,000.00."
11. The following is hereby added to the Agreement as Paragraph V.14.:
"14. Other Indebtedness. Not create, incur, assume or
permit to exist any indebtedness or liabilities resulting from
borrowings, loans or advances, whether secured or unsecured,
matured or unmatured, liquidated or unliquidated, joint or
several, except (a) the liabilities of Borrower to Bank, (b)
any other liabilities of Borrower existing as of, and
disclosed to Bank prior to, the date hereof, and (c) the
unsecured liabilities of Borrower to sellers of companies
acquired by Borrower, the total of which shall not exceed
$3,500,000.00 at any point in time, without prior Bank
approval."
12. Borrower shall pay to Bank a non-refundable loan fee for the Term
Loan A equal to $10,000.00, which fee shall be due and payable in full upon the
execution of the documents.
13. Except as specifically provided herein, all terms and conditions of
the Agreement remain in full force and effect, without waiver or modification.
All terms defined in the
<PAGE>
Barrett Business Services, Inc.
May 31, 1999
Page 5
Agreement shall have the same meaning when used herein. This Amendment and the
Agreement shall be read together, as one document.
14. Borrower hereby remakes all representations and warranties
contained in the Agreement and reaffirms all covenants set forth therein.
Borrower further certifies that as of the date of Borrower's acknowledgment set
forth below there exists no default or defined event of default under the
Agreement or any promissory note or other contract, instrument or document
executed in connection therewith, nor any condition, act or event which with the
giving of notice or the passage of time or both would constitute such a default
or defined event of default.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
Your acknowledgment of this Amendment shall constitute acceptance of
the foregoing terms and conditions.
Sincerely,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Julie Wilson
Julie Wilson
Vice President
Acknowledged and accepted as of 6-1-99:
BARRETT BUSINESS SERVICES, INC.
By: /s/ Michael D. Mulholland
Title: Vice President - Finance
<PAGE>
Portland RCBO
1300 S.W. Fifth Ave. T-13
Portland, OR 97201
May 31, 1998
Barrett Business Services, Inc.
4724 SW Macadam Avenue
Portland, OR 97201
Dear Sir:
This letter is to confirm that Wells Fargo Bank, National Association
("Bank"), subject to all terms and conditions contained herein, has agreed to
make available to Barrett Business Services, Inc. ("Borrower") the following
described credit accommodations (each, a "Credit" and collectively, the
"Credits"):
1. A revolving line of credit under which Bank will make advances to
Borrower from time to time up to and including May 31, 1999, not to exceed at
any time the maximum principal amount of Five Million Six Hundred Fifty Thousand
Dollars ($5,650,000.00) ("Line of Credit"), the proceeds of which shall be used
for working capital requirements.
2. A term loan in the original principal amount of Six Hundred
Ninety-three Thousand Seven Hundred Fifty Dollars ($693,750.00) ("Term Loan"),
on which the outstanding principal balance as of the date hereof is $550,985.16.
Subject to the terms and conditions of this letter, Bank hereby confirms that
the Term Loan remains in full force and effect.
I. CREDIT TERMS:
1. LINE OF CREDIT:
(a) Line of Credit Note. Borrower's obligation to repay advances under
the Line of Credit shall be evidenced by a promissory note substantially in the
form of Exhibit A attached hereto ("Line of Credit Note"), all terms of which
are incorporated herein by this reference.
(b) Letter of Credit Subfeature. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to issue standby
letters of credit for the account of
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 2
Borrower (each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however, that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and provided further, that
the aggregate undrawn amount of all outstanding Letters of Credit shall not at
any time exceed Five Million Six Hundred Fifty Thousand Dollars ($5,650,000.00).
Each Letter of Credit shall be issued for a term not to exceed 365 days, as
designated by Borrower; provided however, that no Letter of Credit shall have an
expiration date more than ninety (90) days beyond the maturity date of the Line
of Credit. The undrawn amount of all Letters of Credit shall be reserved under
the Line of Credit and shall not be available for borrowings thereunder. Each
Letter of Credit shall be subject to the additional terms and conditions of the
Letter of Credit Agreement and related documents, if any, required by Bank in
connection with the issuance thereof. Each draft paid by Bank under a Letter of
Credit shall be deemed an advance under the Line of Credit and shall be repaid
by Borrower in accordance with the terms and conditions of this letter
applicable to such advances; provided however, that if advances under the Line
of Credit are not available, for any reason, at the time any draft is paid by
Bank, then Borrower shall immediately pay to Bank the full amount of such draft,
together with interest thereon from the date such amount is paid by Bank to the
date such amount is fully repaid by Borrower, at the rate of interest applicable
to advances under the Line of Credit. In such event Borrower agrees that Bank,
in its sole discretion, may debit any demand deposit account maintained by
Borrower with Bank for the amount of any such draft.
(c) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above. Notwithstanding the foregoing, Borrower shall maintain a zero balance on
advances under the Line of Credit for a period of at least 30 consecutive days
during each fiscal year.
2. TERM LOAN:
(a) Term Note. Borrower's obligation to repay the Term Loan is
evidenced by a promissory note substantially in the form of Exhibit B attached
hereto ("Term Note"), all terms of which are incorporated herein by this
reference. Any reference in the
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 3
Term Note to any prior loan agreement between Bank and Borrower shall be deemed
a reference to this letter.
(b) Repayment. The principal and interest on the Term Loan shall
continue to be repaid in accordance with the provisions of the Term Note.
(c) Prepayment. Borrower may prepay principal on the Term Loan solely
in accordance with the provisions of the Term Note.
3. COLLATERAL:
As security for all indebtedness of Borrower to Bank under the Term
Loan, Borrower hereby grants to Bank a lien of not less than first priority on
that certain real property located at 4724 SW Macadam Avenue, Portland, OR.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds of trust and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
appraisals, audits and title insurance.
II. INTEREST/FEES:
1. Interest. The outstanding principal balance of the Line of Credit
and the Term Loan shall bear interest at the rates of interest set forth in the
Line of Credit Note and the Term Note.
a. Computation and Payment. Interest on the Line of Credit shall be
computed on the basis of a 360-day year, actual days elapsed. Interest on the
Term Loan shall be computed on the basis of a 366-day year, actual days elapsed.
Interest shall be payable at the times and place set forth in the Line of Credit
Note and the Term Note.
2. Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one-eighth percent (0.125%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 4
payable by Borrower in arrears on the last day of each March, June, September
and December.
3. Letter of Credit Fees. Borrower shall pay to Bank fees upon the
issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity, but at any event not more than 90 basis points.
4. Collection of Payments. Borrower authorizes Bank to collect all
principal, interest and fees due under each Credit by charging Borrower's demand
deposit account number 4159-583848 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
III. REPRESENTATIONS AND WARRANTIES:
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this letter
and shall continue in full force and effect until the full and final payment,
and satisfaction and discharge, of all obligations of Borrower to Bank subject
to this letter.
1. Legal Status. Borrower is a corporation, duly organized and existing
and in good standing under the laws of the state of Maryland, and is qualified
or licensed to do business in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
2. Authorization and Validity. This letter, the Line of Credit Note,
the Term Note, and each other document, contract or instrument deemed necessary
by Bank to evidence any extension of credit to Borrower pursuant to the terms
and conditions hereof, or now or at any time hereafter required by or delivered
to Bank in connection with this letter (collectively, the "Loan Documents") have
been duly authorized, and upon their execution and delivery in accordance with
the provisions hereof will constitute legal, valid and binding agreements and
obligations of
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 5
Borrower or the party which executes the same, enforceable in accordance with
their respective terms.
3. No Violation. The execution, delivery and performance by Borrower of
each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in a breach of or constitute a default under any
contract, obligation, indenture or other instrument to which Borrower is a party
or by which Borrower may be bound.
4. Litigation. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.
5. Correctness of Financial Statement. The financial statement of
Borrower dated March 31, 1998, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
condition or operation of Borrower, nor has Borrower mortgaged, pledged, granted
a security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
6. Income Tax Returns. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
7. No Subordination. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this letter to any other obligation of Borrower.
8. Permits, Franchises. Borrower possesses, and will hereafter possess,
all permits, consents, approvals, franchises and licenses required and all
rights to trademarks, trade names,
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 6
patents and fictitious names, if any, necessary to enable it to conduct the
business in which it is now engaged in compliance with applicable law.
9. ERISA. To the best of Borrower's knowledge, Borrower is in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended or recodified from
time to time ("ERISA"); Borrower has not violated any provision of any defined
employee pension benefit plan (as defined in ERISA) maintained or contributed to
by Borrower (each, a "Plan"); no Reportable Event, as defined in ERISA, has
occurred and is continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA with respect to
each Plan; and each Plan will be able to fulfill its benefit obligations as they
come due in accordance with the Plan documents and under generally accepted
accounting principles.
10. Other Obligations. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
11. Environmental Matters. Except as disclosed by Borrower to Bank in
writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
12. Real Property Collateral. Except as disclosed by Borrower to Bank
in writing prior to the date hereof, with respect to any real property
collateral required hereby:
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 7
(a) All taxes, governmental assessments, insurance premiums, and water,
sewer and municipal charges, and rents (if any) which previously became due and
owing in respect thereof have been paid as of the date hereof.
(b) There are no construction or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to any such lien) which affect all or any interest in any
such real property and which are or may be prior to or equal to the lien thereon
in favor of Bank.
(c) None of the improvements which were included for purpose of
determining the appraised value of any such real property lies outside of the
boundaries and/or building restriction lines thereof, and no improvements on
adjoining properties materially encroach upon any such real property.
(d) There is no pending, or to the best of Borrower's knowledge
threatened, proceeding for the total or partial condemnation of all or any
portion of any such real property, and all such real property is in good repair
and free and clear of any damage that would materially and adversely affect the
value thereof as security and/or the intended use thereof.
IV. CONDITIONS:
1. Conditions of Initial Extension of Credit. The obligation of Bank to
grant any of the Credits is subject to fulfillment to Bank's satisfaction of all
of the following conditions:
(a) Documentation. Bank shall have received each of the Loan Documents,
duly executed and in form and substance satisfactory to Bank.
(b) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
(c) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank, including without
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 8
limitation, policies of fire and extended coverage insurance covering all real
property collateral required hereby, with replacement cost and mortgagee loss
payable endorsements, and such policies of insurance against specific hazards
affecting any such real property as may be required by governmental regulation
or Bank.
(d) Appraisals. Bank shall have obtained, at Borrower's cost, an
appraisal of all real property collateral required hereby, and all improvements
thereon, issued by an appraiser acceptable to Bank and in form, substance and
reflecting values satisfactory to Bank, in its discretion.
(e) Title Insurance. Bank shall have received an ALTA Policy of Title
Insurance, with such endorsements as Bank may require, issued by a company and
in form and substance satisfactory to Bank, in such amount as Bank shall
require, insuring Bank's lien on the real property collateral required hereby to
be of first priority, subject only to such exceptions as Bank shall approve in
its discretion, with all costs thereof to be paid by Borrower.
2. Conditions of Each Extension of Credit. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank's satisfaction of each of the following conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this letter and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
default hereunder, and no condition, event or act which with the giving of
notice or the passage of time or both would constitute such a default, shall
have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
V. COVENANTS:
Borrower covenants that so long Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 9
Borrower to Bank under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto, Borrower shall,
unless Bank otherwise consents in writing:
1. Punctual Payment. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein.
2. Accounting Records. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same and inspect the
properties of Borrower.
3. Financial Statements. Provide to Bank all of the following, in form
and detail satisfactory to Bank:
(a) not later than 95 days after and as of the end of each fiscal year,
an audited financial statement of Borrower, prepared by an independent certified
public accountant acceptable to Bank, to include balance sheet, income
statement, statement of cash flow, and source and application of funds
statement, and a copy of Borrower's Form 10-K report filed with the Securities
and Exchange Commission;
(b) not later than 50 days after and as of the end of each fiscal
quarter, a copy of Borrower's Form 10-Q report filed with the Securities and
Exchange Commission;
(c) from time to time such other information as Bank may reasonably
request, including without limitation, copies of rent rolls and other
information with respect to any real property collateral required hereby.
4. Compliance. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of a governmental agency applicable to Borrower and/or its business.
5. Insurance. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 10
similar to that of Borrower, including but not limited to fire, extended
coverage, public liability, flood, property damage and workers' compensation,
with all such insurance carried with companies and in amounts satisfactory to
Bank, and deliver to Bank from time to time at Bank's request schedules setting
forth all insurance then in effect.
6. Facilities. Keep all properties useful or necessary to Borrower's
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.
7. Taxes and Other Liabilities. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
8. Financial Condition. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):
Total Liabilities divided by Net Worth not at any time greater than 1.5
to 1.0, with "Total Liabilities" defined as the aggregate of current liabilities
and non-current liabilities, and with "Net Worth" defined as the aggregate of
assets minus liabilities.
9. Merger, Consolidation, Transfer of Assets. Not merge into or
consolidate with any other entity; nor make any substantial change in the nature
of Borrower's business as conducted as of the date hereof; nor acquire all or
substantially all of the assets of any other entity in any transaction involving
$20,000,000.00 or more without the prior written approval of Bank, which
approval shall not be unreasonably withheld; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
10. Guaranties. Not guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 11
instruments for deposit or collection in the ordinary course of business),
accommodation endorser or otherwise for, nor pledge or hypothecate any assets of
Borrower as security for, any liabilities or obligations of any other person or
entity, except any of the foregoing in favor of Bank.
11. Loans, Advances, Investments. Not make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Bank prior to, the date hereof, or any loans or advances or
investments made in the normal course, such as short term advances to employees
or investments of excess cash.
12. Pledge of Accounts. Borrower shall give Bank at least fifteen (15)
days prior notice of any intent by Borrower to pledge, grant or permit to exist
a security interest in, or lien upon, any of its accounts, general intangibles
that constitute payment of rights, and other rights to payment, (the foregoing,
together with the proceeds thereof being, collectively, "Receivables
Collateral") in favor of any party other than Bank (an "Other Lender"). Borrower
agrees that in such event, Borrower shall grant to Bank a security interest and
lien in the Receivables Collateral to secure all of Borrower's obligations to
Bank under the Line of Credit, and Bank and any such Other Lender's rights and
interests in and to the Receivables Collateral shall be of equal priority, with
each of Bank and such Other Lender to share the Receivables Collateral on a
pro-rata basis, based on the maximum principal amount of, respectively the loan
from the Other Lender and the maximum principal amount of the Line of Credit.
Further, in such event, borrower agrees to execute, and any such pledge of
receivables collateral to an Other Lender would be made subject to the execution
by such other lender of, appropriate documents to effectuate the foregoing.
13. Year 2000 Compliance. Perform all acts reasonably necessary to
ensure that (a) Borrower and any business in which Borrower holds a substantial
interest, and (b) all customers, suppliers and vendors that are material to
Borrower's business, become Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all of Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems. As
used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 12
shall, immediately upon request, provide to Bank such certifications or other
evidence of Borrower's compliance with the terms hereof as Bank may from time to
time require.
VI. DEFAULT, REMEDIES:
1. Default, Remedies. Upon the violation of any term or condition of
any of the Loan Documents, or upon the occurrence of any default or defined
event of default under any of the Loan Documents: (a) all indebtedness of
Borrower under each of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Bank's option and without notice become immediately
due and payable without presentment, demand, protest or notice of dishonor, all
of which are expressly waived by Borrower; (b) the obligation, if any, of Bank
to extend any further credit under any of the Loan Documents shall immediately
cease and terminate; and (c) Bank shall have all rights, powers and remedies
available under each of the Loan Documents, or accorded by law, including
without limitation the right to resort to any or all security for any of the
Credits and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law. All rights, powers and remedies of Bank may be
exercised at any time by Bank and from time to time after the occurrence of any
such breach or default, are cumulative and not exclusive, and shall be in
addition to any other rights, powers or remedies provided by law or equity.
2. No Waiver. No delay, failure or discontinuance of Bank in exercising
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any breach of or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.
VII. MISCELLANEOUS:
1. Notices. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
letter must be in writing delivered to each party at its address first set forth
above, or to such other address as any party may designate by written notice to
all other parties. Each such notice, request and demand shall be deemed
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 13
given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if
sent by mail, upon the earlier of the date of receipt or three (3) days after
deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by
telecopy, upon receipt.
2. Costs, Expenses and Attorneys' Fees. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
letter and the other Loan Documents, Bank's continued administration hereof and
thereof, and the preparation of amendments and waivers hereto and thereto, (b)
the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, whether incurred at the
trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any other person or entity.
3. Successors, Assignment. This letter shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interest hereunder without Bank's prior written consent.
Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank's rights and
benefits under each of the Loan Documents. In connection therewith Bank may
disclose all documents and information which Bank now has or hereafter may
acquire relating to any of the Credits, Borrower or its business, or any
collateral required hereunder.
4. Entire Agreement; Amendment. This letter and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to the Credits and supersede all prior negotiations, communications, discussions
and correspondence concerning the subject matter hereof. This letter may be
amended or modified only in writing signed by each party hereto.
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 14
5. No Third Party Beneficiaries. This letter is made and entered into
for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this letter or any other of the Loan Documents to which it is
not a party.
6. Severability of Provisions. If any provision of this letter shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
letter.
7. Governing Law. This letter shall be governed by and construed in
accordance with the laws of the State of Oregon.
8. Arbitration.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this letter. A "Dispute" shall mean any action, dispute, claim
or controversy of any kind, whether in contract or tort, statutory or common
law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Oregon selected
by the AAA or other administrator. If there is any inconsistency between the
terms hereof and any
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 15
such rules, the terms and procedures set forth herein shall control. All
statutes of limitation applicable to any Dispute shall apply to any arbitration
proceeding. All discovery activities shall be expressly limited to matters
directly relevant to the Dispute being arbitrated. Judgment upon any award
rendered in an arbitration may be entered in any court having jurisdiction;
provided however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
ss.91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the Oregon State Bar or retired judges of the state or federal
judiciary of Oregon, with expertise in the substantive law applicable to the
subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by
summary rulings in response to motions filed prior to the final arbitration
hearing. Arbitrators (i) shall resolve all Disputes in accordance with the
substantive law of the state of Oregon, (ii) may grant any remedy or relief that
a court of the state of Oregon could order or grant within the scope hereof and
such ancillary relief as is necessary to make effective any award, and (iii)
shall have the power to award recovery of all costs and fees, to impose
sanctions and to take such other actions as they deem necessary to the same
extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Oregon Rules of Civil Procedure or other applicable law. Any Dispute in which
the amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 16
(e) Judicial Review. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Oregon, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Oregon. Judgment confirming an award in such a proceeding may be entered only if
a court determines the award is supported by substantial evidence and not based
on legal error under the substantive law of the state of Oregon.
(f) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
<PAGE>
Barrett Business Services, Inc.
May 31, 1998
Page 17
Your acknowledgment of this letter shall constitute acceptance of the
foregoing terms and conditions. Bank's commitment to extend any credit to
Borrower pursuant to the terms of this letter shall terminate on June 19, 1998,
unless this letter is acknowledged by Borrower and returned to Bank on or before
that date.
Sincerely,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:/s/ Marlene Roberts
Marlene Roberts
Vice President
Acknowledged and accepted as of 6-1-98:
BARRETT BUSINESS SERVICES, INC.
By: /s/ Michael D. Mulholland
Title: Vice President-Finance
EXHIBIT 11
BARRETT BUSINESS SERVICES, INC.
STATEMENT OF CALCULATION OF BASIC
AND DILUTED COMMON SHARES OUTSTANDING
Three Months
Ended
June 30, 1999
-------------
Weighted average number of basic shares outstanding 7,581,162
Stock option plan shares to be issued at prices
ranging from $2.80 to $18.00 per share 888,819
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 (845,705)
---------
Weighted average number of diluted shares outstanding 7,624,276
=========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's balance sheet and related statements of operations for the period
ended June 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 950
<SECURITIES> 0
<RECEIVABLES> 30,145
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,545
<PP&E> 6,132
<DEPRECIATION> 0
<TOTAL-ASSETS> 71,949
<CURRENT-LIABILITIES> 28,206
<BONDS> 5,632
0
0
<COMMON> 76
<OTHER-SE> 34,840
<TOTAL-LIABILITY-AND-EQUITY> 71,949
<SALES> 0
<TOTAL-REVENUES> 155,722
<CGS> 0
<TOTAL-COSTS> 139,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 3,445
<INCOME-TAX> 1,489
<INCOME-CONTINUING> 1,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,956
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.26
</TABLE>
