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Barrett Business Services, Inc. has reported its financial results for the fourth quarter

Barrett Business Services, Inc. has reported its financial results for the fourth quarter and full year ended December 31, 2011.

Q4 2011 Financial Highlights

--  Net revenues up 15% to $84.7 million versus Q4 2010

--  Gross revenues up 23% to $423.6 million versus Q4 2010

--  Net loss of $93,000 or $(0.01) per share, including $8.5 million

   increase to workers' compensation reserve, compared to net income of

   $3.1 million or $0.31 per share in Q4 2010

--  Non-GAAP net income of $4.1 million or $0.41 per share, excluding $8.5

   million increase to workers' compensation reserve

Fourth Quarter 2011 Financial Results Net revenues in the fourth quarter of 2011 increased 15% to $84.7 million, compared to $73.6 million in the fourth quarter of 2010.

Total non-GAAP gross revenues in the fourth quarter of 2011 increased 23% to $423.6 million, compared to $344.2 million in the same quarter of 2010 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was primarily attributable to the continued build in the company's net Professional Employer Organization (PEO) client count and to a small increase in same-store sales growth.

The company recorded an increase to its workers' compensation reserve of approximately $8.5 million in the fourth quarter of 2011 as a result of adverse development in the estimate of the ultimate cost of the company's self-insured workers' compensation claims liabilities primarily related to years 2005 to 2009 claims. The root cause was the prolonged recession and the slowdown in claim closure rates coupled with higher legal expenses of these older claims which have led to higher expected costs. With assistance from its independent actuary, management performed an in-depth analysis and has determined that due to significant claim development in prior year claims, particularly in the fourth quarter of 2011, an increase in the workers' compensation reserve was necessary.

Net loss for the fourth quarter was $93,000 or $(0.01) per share, compared to net income of $3.1 million or $0.31 per share in the year-ago quarter, due to the $8.5 million increase to the workers' compensation reserve as previously discussed. Excluding this, as well as the benefit of a lower annual effective income tax rate resulting primarily from $10 million in key man life insurance proceeds received following the passing of the company's former president and CEO, non-GAAP net income in the fourth quarter of 2011 was $4.1 million or $0.41 per share (see "Reconciliation of Non-GAAP Financial Measures" below).

At December 31, 2011, the company's cash, cash equivalents and marketable securities totaled $81.8 million, compared to $61.4 million at December 31, 2010. The company continues to carry no bank debt.

Full Year 2011 Financial Results Net revenues in 2011 increased 15% to $314.9 million, compared to $273.1 million in 2010.

Total non-GAAP gross revenues in 2011 increased 24% to $1.5 billion, compared to $1.2 billion in 2010 (see "Reconciliation of Non-GAAP Financial Measures" below). The increase was primarily attributable to the increase in net PEO clients and same-store sales growth as previously discussed.

Net income in 2011 was $14.3 million or $1.42 per share, compared to net income of $7.4 million or $0.72 per share in 2010. Excluding the $8.5 million increase to the workers' compensation reserve, as well as the benefit from the $10 million key man life insurance proceeds and a lower annual effective income tax rate resulting primarily from key man life insurance proceeds, non-GAAP net income in 2011 was $9.0 million or $0.89 per share (see "Reconciliation of Non-GAAP Financial Measures" below).

Management Commentary "The 23% increase in 2011 fourth quarter gross revenues is our eighth consecutive quarter of double-digit growth and ends one of the most profitable years in our company's history," said Michael Elich, president and CEO of BBSI. "This growth originates from BBSI's strong referral networks driving continued PEO growth and our high-touch operational model producing industry-leading client retention.

"The workers' comp charge we recorded in the quarter stems from our self-insurance program for our client workers' compensation claims. Recent history driven by the prolonged recession has indicated that open claims in prior years are continuing to remain open longer and are more expensive compared to previous historical experience. However, we believe this quarter's adjustment strengthens our balance sheet as we turn our attention toward driving further shareholder value.

"As we move through 2012, we will continue to focus on our clients, make investments in our infrastructure and prudently manage our resources. We are confident the momentum in our business will continue as we see an increasing amount of our clients beginning to make forward-looking decisions when it comes to growing their business."

First Quarter 2012 Outlook

For the first quarter ending March 31, 2012, the company expects gross revenues to range between $417 million to $423 million, compared to $331.1 million for the first quarter of 2011. Excluding the potential aggregate costs associated with evaluating and appropriately responding to requests made by a group formed by Kimberly J. Jacobsen Sheretz that the company hold a special meeting of stockholders and the costs of holding such meeting, if any, diluted loss per share is expected to range between $0.18 to $0.21 per share, compared to diluted earnings per share of $0.54 for the same quarter a year ago. The diluted earnings per share for the first quarter of 2011 included $10.0 million of key man life insurance proceeds and a favorable income tax rate benefit related to the effect of a much lower annual effective income tax rate attributable to the life insurance proceeds. Without the effect of the life insurance proceeds and the favorable tax rate benefit, the company experienced a net loss of $0.20 per share in the first quarter of 2011. A reconciliation of expected gross revenues to expected GAAP net revenues for the first quarter of 2012 is not included because PEO revenues and cost of PEO revenues for the period cannot be reasonably estimated. 

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