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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From           to          

Commission File Number 0-21886

 

BARRETT BUSINESS SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

52-0812977

(State or other jurisdiction of
Incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

 

8100 NE Parkway Drive, Suite 200

 

 

Vancouver, Washington

 

98662

(Address of principal executive offices)

 

(Zip Code)

(360) 828-0700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.01 Per Share

BBSI

The NASDAQ Stock Market LLC

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       No    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No  

As of July 22, 2020, 7,635,723 shares of the registrant’s common stock ($0.01 par value) were outstanding.

 


 

BARRETT BUSINESS SERVICES, INC.

INDEX TO FORM 10-Q

 

Part I - Financial Information (Unaudited)

 

 

 

 

 

 

Page

Item 1.

 

Unaudited Interim Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets - June 30, 2020 and December 31, 2019

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Six Months Ended June 30, 2020

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Six Months Ended June 30, 2019

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2020 and 2019

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

28

 

 

 

 

 

Part II - Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

29

 

 

 

 

 

Item 1A.

 

Risk Factors

 

29

 

 

 

 

 

Item 6.

 

Exhibits

 

31

 

 

 

 

 

Signature

 

32

 

 

 

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

Unaudited Interim Condensed Consolidated Financial Statements

Barrett Business Services, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In Thousands, Except Par Value)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,210

 

 

$

44,570

 

Investments

 

 

67,473

 

 

 

82,590

 

Trade accounts receivable, net

 

 

188,383

 

 

 

163,561

 

Income taxes receivable

 

 

3,506

 

 

 

1,335

 

Prepaid expenses and other

 

 

17,377

 

 

 

14,919

 

Restricted cash and investments

 

 

82,567

 

 

 

116,873

 

Total current assets

 

 

421,516

 

 

 

423,848

 

Property, equipment and software, net

 

 

35,278

 

 

 

31,724

 

Operating lease right-of-use assets

 

 

24,985

 

 

 

23,805

 

Restricted cash and investments

 

 

239,032

 

 

 

327,326

 

Goodwill

 

 

47,820

 

 

 

47,820

 

Other assets

 

 

3,707

 

 

 

3,618

 

Deferred income taxes

 

 

 

 

 

2,788

 

 

 

$

772,338

 

 

$

860,929

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

221

 

 

$

221

 

Accounts payable

 

 

4,951

 

 

 

5,993

 

Accrued payroll, payroll taxes and related benefits

 

 

181,406

 

 

 

174,168

 

Current operating lease liabilities

 

 

7,244

 

 

 

6,671

 

Other accrued liabilities

 

 

6,553

 

 

 

8,846

 

Workers' compensation claims liabilities

 

 

89,868

 

 

 

118,273

 

Safety incentives liability

 

 

25,767

 

 

 

27,950

 

Total current liabilities

 

 

316,010

 

 

 

342,122

 

Long-term workers' compensation claims liabilities

 

 

246,636

 

 

 

320,713

 

Long-term debt

 

 

3,620

 

 

 

3,730

 

Deferred income taxes

 

 

2,685

 

 

 

 

Long-term operating lease liabilities

 

 

18,630

 

 

 

17,883

 

Customer deposits and other long-term liabilities

 

 

4,869

 

 

 

4,682

 

Total liabilities

 

 

592,450

 

 

 

689,130

 

Commitments and contingencies (Notes 4 and 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $.01 par value; 20,500 shares authorized, 7,598

   and 7,514 shares issued and outstanding

 

 

76

 

 

 

75

 

Additional paid-in capital

 

 

23,421

 

 

 

20,227

 

Accumulated other comprehensive income

 

 

6,961

 

 

 

2,819

 

Retained earnings

 

 

149,430

 

 

 

148,678

 

Total stockholders' equity

 

 

179,888

 

 

 

171,799

 

 

 

$

772,338

 

 

$

860,929

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In Thousands, Except Per Share Amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional employer service fees

 

$

180,488

 

 

$

203,157

 

 

$

374,080

 

 

$

393,684

 

Staffing services

 

 

20,543

 

 

 

27,825

 

 

 

46,055

 

 

 

55,513

 

Total revenues

 

 

201,031

 

 

 

230,982

 

 

 

420,135

 

 

 

449,197

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct payroll costs

 

 

15,796

 

 

 

20,992

 

 

 

34,873

 

 

 

41,834

 

Payroll taxes and benefits

 

 

93,671

 

 

 

101,697

 

 

 

213,133

 

 

 

216,494

 

Workers' compensation

 

 

44,921

 

 

 

53,174

 

 

 

99,435

 

 

 

107,403

 

Total cost of revenues

 

 

154,388

 

 

 

175,863

 

 

 

347,441

 

 

 

365,731

 

Gross margin

 

 

46,643

 

 

 

55,119

 

 

 

72,694

 

 

 

83,466

 

Selling, general and administrative expenses

 

 

33,255

 

 

 

39,005

 

 

 

65,370

 

 

 

72,165

 

Depreciation and amortization

 

 

1,171

 

 

 

970

 

 

 

2,171

 

 

 

1,939

 

Income from operations

 

 

12,217

 

 

 

15,144

 

 

 

5,153

 

 

 

9,362

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income, net

 

 

1,800

 

 

 

3,332

 

 

 

4,767

 

 

 

6,404

 

Interest expense

 

 

(306

)

 

 

(481

)

 

 

(541

)

 

 

(958

)

Other, net

 

 

172

 

 

 

 

 

 

173

 

 

 

12

 

Other income, net

 

 

1,666

 

 

 

2,851

 

 

 

4,399

 

 

 

5,458

 

Income before income taxes

 

 

13,883

 

 

 

17,995

 

 

 

9,552

 

 

 

14,820

 

Provision for income taxes

 

 

2,373

 

 

 

4,088

 

 

 

1,449

 

 

 

3,213

 

Net income

 

$

11,510

 

 

$

13,907

 

 

$

8,103

 

 

$

11,607

 

Basic income per common share

 

$

1.52

 

 

$

1.88

 

 

$

1.07

 

 

$

1.57

 

Weighted average number of basic common shares

     outstanding

 

 

7,557

 

 

 

7,410

 

 

 

7,539

 

 

 

7,408

 

Diluted income per common share

 

$

1.51

 

 

$

1.81

 

 

$

1.06

 

 

$

1.51

 

Weighted average number of diluted common

     shares outstanding

 

 

7,647

 

 

 

7,692

 

 

 

7,678

 

 

 

7,674

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

4


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In Thousands)

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Net income

 

$

11,510

 

 

$

13,907

 

Unrealized gains on investments, net of tax of $2,630 and $1,164 in 2020

   and 2019, respectively

 

 

6,877

 

 

 

3,043

 

Comprehensive income

 

$

18,387

 

 

$

16,950

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Net income

 

$

8,103

 

 

$

11,607

 

Unrealized gains on investments, net of tax of $1,584 and $2,561 in 2020

   and 2019, respectively

 

 

4,142

 

 

 

6,700

 

Comprehensive income

 

$

12,245

 

 

$

18,307

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 30, 2020

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Income

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Earnings

 

 

Total

 

Balance, December 31, 2019

 

7,514

 

 

$

75

 

 

$

20,227

 

 

$

2,819

 

 

$

148,678

 

 

$

171,799

 

Common stock issued on exercise of options,

   purchase of ESPP shares and vesting of

   restricted stock units and performance awards

 

56

 

 

 

1

 

 

 

903

 

 

 

 

 

 

 

 

 

904

 

Common stock repurchased on vesting of

   restricted stock units and performance

   awards

 

(6

)

 

 

 

 

 

(378

)

 

 

 

 

 

 

 

 

(378

)

Share-based compensation expense

 

 

 

 

 

 

 

342

 

 

 

 

 

 

 

 

 

342

 

Company repurchase of common stock

 

(59

)

 

 

(1

)

 

 

(169

)

 

 

 

 

 

(2,817

)

 

 

(2,987

)

Cash dividends on common stock ($0.30 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,262

)

 

 

(2,262

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(2,735

)

 

 

 

 

 

(2,735

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,407

)

 

 

(3,407

)

Balance, March 31, 2020

 

7,505

 

 

$

75

 

 

$

20,925

 

 

$

84

 

 

$

140,192

 

 

$

161,276

 

Common stock issued on exercise of options

   and vesting of restricted stock units

 

96

 

 

 

1

 

 

 

1,809

 

 

 

 

 

 

 

 

 

1,810

 

Common stock repurchased on vesting of

   restricted stock units

 

(3

)

 

 

 

 

 

(110

)

 

 

 

 

 

 

 

 

(110

)

Share-based compensation expense

 

 

 

 

 

 

 

797

 

 

 

 

 

 

 

 

 

797

 

Cash dividends on common stock ($0.30 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,272

)

 

 

(2,272

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

6,877

 

 

 

 

 

 

6,877

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

11,510

 

 

 

11,510

 

Balance, June 30, 2020

 

7,598

 

 

$

76

 

 

$

23,421

 

 

$

6,961

 

 

$

149,430

 

 

$

179,888

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 30, 2019

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Income

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Earnings

 

 

Total

 

Balance, December 31, 2018

 

7,395

 

 

$

74

 

 

$

15,437

 

 

$

(5,068

)

 

$

108,594

 

 

$

119,037

 

Common stock issued on exercise of options

   and vesting of restricted stock units and

   performance awards

 

17

 

 

 

 

 

 

122

 

 

 

 

 

 

 

 

 

122

 

Common stock repurchased on vesting of

   restricted stock units and performance

   awards

 

(2

)

 

 

 

 

 

(178

)

 

 

 

 

 

 

 

 

(178

)

Share-based compensation expense

 

 

 

 

 

 

 

1,387

 

 

 

 

 

 

 

 

 

1,387

 

Cash dividends on common stock ($0.25 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,852

)

 

 

(1,852

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

3,657

 

 

 

 

 

 

3,657

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,300

)

 

 

(2,300

)

Balance, March 31, 2019

 

7,410

 

 

$

74

 

 

$

16,768

 

 

$

(1,411

)

 

$

104,442

 

 

$

119,873

 

Common stock issued on exercise of options

   and vesting of restricted stock units

 

4

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

56

 

Share-based compensation expense

 

 

 

 

 

 

 

2,441

 

 

 

 

 

 

 

 

 

2,441

 

Cash dividends on common stock ($0.25 per

   share)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,853

)

 

 

(1,853

)

Unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

3,043

 

 

 

 

 

 

3,043

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

13,907

 

 

 

13,907

 

Balance, June 30, 2019

 

7,414

 

 

$

74

 

 

$

19,265

 

 

$

1,632

 

 

$

116,496

 

 

$

137,467

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


 

Barrett Business Services, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities: