10-K
1
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
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 (I.R.S. Employer
incorporation or organization) Identification No.)
4724 S.W. Macadam Avenue
Portland, Oregon 97201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 220-0988
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant.
$ 68,680,755 at February 28, 1995
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 28, 1995
----- --------------------------------
Common Stock, Par Value $.01 Per Share 6,538,317 Shares
DOCUMENTS INCORPORATED BY REFERENCE
None
INDEX
Page
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . .12
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . .12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . .12
EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . .12
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . .13
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . .13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . .15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . .20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . .39
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . .39
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . .41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . .44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . .45
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . . .46
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
PART I
Item 1. BUSINESS
General
Barrett Business Services, Inc. ("Barrett" or the "Company"), was
incorporated in the state of Maryland in 1965. Barrett provides light
industrial, clerical and technical employees to a wide range of businesses on
both a temporary basis and a longer-term leased basis. The Company believes
it is the largest provider of temporary staffing and staff leasing services in
Oregon, measured by revenue. Services are provided through a network of 15
branch offices, nine of which are located throughout Oregon, two in northern
California, two in Maryland, and two in Washington. The Company also operates
ten smaller recruiting and placement offices in its general market areas which
are managed by a branch office. The Company provides employees to a diverse
set of customers, including forest products and agriculture-based companies,
electronics manufacturers, transportation and shipping enterprises,
professional firms and general contractors. See Item 6 of this report for
information regarding the Company's revenues from temporary staffing and staff
leasing services.
Growth Strategy
Barrett's strategic plan continues to include (1) the further expansion
of its business at existing branch offices primarily through its ongoing
marketing and sales program, (2) acquisition of additional personnel-related
businesses, both in its existing markets and in other strategic geographic
areas and (3) accelerating the growth of professional employer services (staff
leasing) by seeking self-insured employer status for workers' compensation
purposes in additional states.
Recent Acquisitions
The Company purchased certain assets of Personnel Management &
Consulting, Inc. ("PMC") in February 1994. PMC, with unaudited 1993 revenues
of $800,000, had been operating since mid-1992, with offices located in Easton
and Salisbury, Maryland, and Seaford, Delaware.
On March 7, 1994, the Company acquired certain assets of Golden West
Temporary Services ("Golden West") for $4,514,000 paid in cash. Golden West
operated four offices in the San Francisco Bay Area of California with total
audited revenues of $24,533,000 for 1993.
On December 26, 1994, the Company purchased certain assets of Max
Johnson Enterprises, Inc., operating as Construction Workforce, a company
located in Spokane, Washington which specializes in providing highly-skilled
temporary craftsmen to the commercial construction industry. Construction
Workforce had 1994 revenues of approximately $2.4 million. Of the $300,000
purchase price, the Company paid $60,000 in cash and issued 17,142 shares of
its common stock with a then fair market value of $240,000.
On December 29, 1994, the Company purchased for $51,000 in cash certain
assets of Advanced Temporary Systems, Inc., a company engaged in the temporary
staffing business in Kent, Washington.
The Company reviews acquisition opportunities on an ongoing basis.
While growth through acquisition is a major element of the Company's overall
strategic growth plan, there can be no assurance that any additional
acquisitions will be completed in the foreseeable future.
Temporary Staffing Services
GENERAL. Temporary employees enable businesses to meet peak or
extraordinary demands caused by such factors as seasonality, increased
customer demand, vacations, illnesses, parental leave and special projects
without incurring the ongoing expense and administrative responsibilities
associated with recruiting, hiring and retaining additional permanent
employees. The use of temporary staffing services allows businesses to utilize
the "just-in-time" approach to their personnel needs. The "just-in-time"
concept is more commonly recognized in inventory management practices. By
maintaining a core of permanent employees to satisfy minimum requirements and
managing increased demand through greater use of temporary employees,
companies are able to convert a portion of their fixed personnel expense to
variable expense, in addition to reducing costs related to recruiting,
training, payroll, benefits, severance compensation, recordkeeping and other
personnel matters.
THE COMPANY'S TEMPORARY STAFFING SERVICES. The Company provides light
industrial, clerical and technical workers on a temporary basis to a broad
range of businesses, including forest products and agriculture-based
companies, electronics manufacturers, transportation and shipping companies,
professional firms, and construction contractors. Light industrial workers
perform such tasks as operation of machinery, loading and shipping, site
preparation for conventions and other special events, construction-site
cleanup and janitorial services. The light industrial category generated
approximately 51% of the Company's 1994 temporary services revenues. Clerical
workers, which accounted for approximately 11% of 1994 temporary services
revenues, include primarily secretaries, receptionists and office clerks.
Technical personnel include electronic parts assembly workers and designers
and drafters of electronic parts; these workers represented approximately 38%
of the Company's 1994 temporary services revenues.
Temporary assignments may last a day, a week or months, depending upon
the customer's requirements. The customer pays only for actual hours worked
by temporary personnel and may terminate their services at any time. A
significant portion of the temporary services provided by the Company is
project-oriented, requiring one or more employees for a period of time to
perform nonrecurring or periodic assignments.
The Company's temporary services customers range in size from small
local firms to large national companies which use Barrett's services on a
local basis. The Company provided temporary services to more than 5,000
customers during 1994, up from approximately 3,600 customers in 1993. None of
the Company's temporary services customers individually accounted for more
than 5% of its total annual revenues for 1994.
BUSINESS STRATEGY. The Company emphasizes prompt, personalized service
in assigning quality, trained, drug-free personnel at competitive rates to
users of its temporary staffing services. Since 1980, the Company has relied
on internally developed computer databases of employee skills and availability
to match customer needs with available qualified employees. As a local
company operating in selected market areas, Barrett believes it has an
understanding of the unique requirements of its clientele that allows it to
offer a "money-back" guarantee to the customer if it is not satisfied with
Barrett's temporary employees.
Barrett provides training to its branch office managers and sales
personnel to develop and maintain a high level of customer service. The
Company's ongoing training program includes seminars, in-house presentations,
video instruction and role playing. The Company's sales staff is compensated
through a combination of base salary and an incentive sales commission. Sales
commissions are earned by new business development and the retention of
existing customers. Sales commissions may represent one-third to two-thirds
of a salesperson's total compensation. In addition, branch office staff
participate in the Company's profit-sharing program. See "Employees and
Employee Benefits," below.
RECRUITING. The Company utilizes a variety of methods to recruit its
workforce of temporary employees, including among others, newspaper
advertising and marketing brochures distributed at colleges and vocational
schools. In addition, a substantial number of new employees are hired through
referrals by Barrett's existing employees. The Company believes it is easier
to recruit and retain qualified personnel during periods of higher
unemployment and therefore must devote more resources to recruiting new
employees during periods of lower unemployment in its market areas. The
Company may be unable to pass on the full amount of such increased recruiting
and personnel costs in the form of higher prices for temporary services, which
in turn could result in lower profit margins.
The employee application process includes an interview, skills
assessment test, reference verification and drug test. The skills test and
reference verification determine level of ability and an insight into prior
job performance. Following hire and placement, performance is reviewed with
customers to assure their complete satisfaction.
The Company believes that its employee wage and benefit package,
customer base, and opportunities for part-time and flexible scheduling have
contributed significantly to its success in recruiting and retaining quality,
trained, drug-free personnel in numbers sufficient to meet customer demand.
See "Employees and Employee Benefits," below.
SALES AND MARKETING. The Company markets its temporary services
primarily through direct sales presentations by its branch office managers and
trained sales staff and, to a lesser extent, through advertising in various
publications, including local newspapers and the Yellow Pages. Barrett also
benefits from referrals by existing temporary services customers and from the
periodic needs of the Company's staff leasing clients.
Following the development of a preliminary profile of a prospective
customer's needs, a Company salesperson typically schedules a meeting with the
customer's personnel manager to explain Barrett's services. Based on this
information, Barrett develops a market-competitive hourly charge for its
temporary staffing services. The actual cost to the customer for a temporary
employee typically ranges from 135% to 150% of the base wage rate. This
composite rate includes all payroll taxes, employee benefits, workers'
compensation coverage and administrative costs.
The Company believes it has been able to maintain a price advantage due
to the lower costs associated with its self-insured workers' compensation
program when compared to the cost of workers' compensation insurance. The
Company's sales and marketing efforts have generally increased during periods
of economic decline, when demand for temporary services decreases. As a
result of this reduced demand, the higher costs associated with sales and
marketing typically cannot be recovered through price increases, which may
result in lower profitability.
BILLING. The Company prepares weekly customer invoices immediately
following the preparation of each payroll through the centralized payroll and
billing operations at the Company's corporate headquarters. Barrett has not
experienced significant problems in collecting its accounts receivable, which
the Company attributes to customer satisfaction, a thorough analysis of a
customer's credit history prior to agreeing to provide services and the
regular monitoring of account aging by each branch manager.
Professional Employer (Staff Leasing) Services
GENERAL. Many businesses, particularly those with a limited number of
employees, find personnel administration requirements to be unduly complex and
time consuming. These businesses often cannot justify the expense of a full-
time human resources staff. In addition, the escalating costs of health and
workers' compensation insurance in recent years, coupled with the increased
complexity of laws and regulations affecting the workplace, have created a
compelling alternative for small to mid-sized businesses to outsource these
managerial burdens through staff leasing. The increasing trend of outsourcing
numerous business functions enables management to fully devote the
enterprise's resources to its core competencies.
THE COMPANY'S STAFF LEASING SERVICES. In a staff leasing arrangement,
Barrett enters into a contract to become a co-employer of the client company's
existing workforce. Pursuant to this contract, Barrett assumes responsibility
for some or all of the personnel-related matters, including payroll and
payroll taxes, employee benefits, health insurance, workers' compensation
coverage, employee risk management and related administrative
responsibilities. Barrett also hires and fires leased employees, although the
client company remains responsible for day-to-day assignments, supervision and
training and, in most cases, recruiting.
The Company began offering staff leasing services to Oregon customers in
1990 and expanded these services to Maryland and Washington in the first and
third quarters, respectively, of 1994. The number of Barrett's staff leasing
clients increased from approximately 425 at December 31, 1993, to
approximately 520 at year-end 1994. The Company has entered into staff
leasing arrangements with a wide variety of clients, including companies
involved in reforestation, moving and shipping, professional firms,
construction, retail, manufacturing and distribution businesses. Staff
leasing clients are typically small to mid-sized businesses with up to 50
employees. None of the Company's staff leasing clients individually accounted
for more than 5% of its total annual revenues during 1994.
BUSINESS STRATEGY. The Company believes that it has attracted
significant numbers of new staff leasing clients since 1990 by demonstrating
the potential for cost reductions offered by the Company's self-insured
workers' compensation program. Equally important, Barrett also offers a
variety of employee benefits and services, which it can generally provide on a
cost-effective basis due to its substantially larger employee base as compared
to its clients. The employee benefits and human resource management services
offered by the Company include a full range of health, life and disability
insurance, a Section 125 cafeteria plan, a Section 401(k) savings plan, credit
union participation, direct deposit for payroll or preferred payroll checks,
mandatory drug testing, and advisory services related to hiring, employee
evaluations and termination guidelines, among others. The Company believes
these benefits and services are cost effective and reduce employee turnover,
thereby increasing the appeal of staff leasing arrangements to most small to
mid-sized business owners. The overall cost to the client for its leased
employees is typically at or below the cost per employee that the client would
incur if it employed its workforce directly.
The Company's standard staff leasing agreement provides for services
indefinitely, until notice of termination is given by either party. The
agreement permits cancellation by either party upon 35 days' prior written
notice. In addition, the Company may terminate the agreement at any time for
specified reasons, including nonpayment or failure to follow Barrett's
workplace safety program. The agreement also provides for indemnification of
the Company by the client against losses arising out of any default by the
client under the agreement, including failure to comply with any employment-
related, health and safety or immigration laws or regulations.
SALES AND MARKETING. The Company markets its staff leasing services
through its Oregon, Washington and Maryland branches using its branch office
sales staff. Coincident with the Company's self-insured employer status for
workers' compensation purposes in California, the Company will commence its
marketing of staff leasing services in California during the second quarter of
1995. The Company also obtains referrals from existing clients and other
third parties, and places advertisements in the Yellow Pages. Prior to
entering into a staff leasing arrangement, the Company performs an analysis of
the potential client's actual personnel and workers' compensation costs based
on information provided by the customer. Barrett also introduces its
workplace safety program and makes recommendations as to improvements in
procedures and equipment following a safety inspection of the customer's
facilities. Once the client has agreed to implement the Company's safety
program, the Company proposes a leasing arrangement at a price which is
typically at or below the client's current overall personnel costs. Barrett
also offers significant financial incentives to clients to maintain a safe
work environment, thus enabling clients to achieve additional savings.
Barrett strongly advocates that its client companies share these safe-work
incentives with their leased employees.
BILLING. Through centralized operations at the Company's headquarters
in Portland, Oregon, payroll checks are prepared for each staff leasing client
on a frequency consistent with their typical payperiods, weekly or bi-weekly,
and delivered by courier. The Company invoices its clients following the end
of each payroll period. Such invoices are due upon receipt and are generally
paid within five business days. The costs of health insurance coverage and
Barrett's cafeteria plan are passed through to its staff leasing clients based
on the number of participating employees. The Company often requires a
deposit from its staff leasing clients to cover a portion of the anticipated
billing for one payroll period. The Company has had generally favorable
results with collecting accounts receivable, which it attributes to customer
satisfaction, the prompt payment of receivables, its analysis of potential
clients' credit history, and regular monitoring of account aging by each
branch manager.
Self-Insured Workers' Compensation Program
The Company believes that its self-insured workers' compensation program
is an important contributor to its growth in revenue and profitability in
Oregon. Significant elements contributing to the success of the workers'
compensation program include the regulatory climate surrounding workers'
compensation, the Company's workplace safety program and the aggressive claims
management approach taken by the Company and its third-party administrators,
all of which are described in detail below.
ELEMENTS OF WORKERS' COMPENSATION SYSTEM. State law generally mandates
that an employer reimburse its employees for the costs of medical care and
other specified benefits for injuries or illnesses incurred in the course and
scope of employment. The benefits payable for various categories of claims
are determined by state regulation and vary with the severity and nature of
the injury or illness and other specified factors. In return for this
guaranteed protection, workers' compensation is an exclusive remedy and
employees are generally precluded from seeking other damages from their
employer for workplace injuries. Most states require employers to maintain
workers' compensation insurance or otherwise demonstrate financial
responsibility to meet workers' compensation obligations to employees. In
many states, employers who meet certain financial and other requirements are
permitted to self-insure.
SELF-INSURANCE FOR WORKERS' COMPENSATION. In August 1987, the Company
became a self-insured employer for workers' compensation coverage in Oregon.
The Company subsequently obtained self-insured employer status for workers'
compensation in three additional states, Maryland in November 1993, Washington
in July 1994 and Delaware on January 1, 1995. On March 20, 1995, the Company
announced that its application for self-insured employer status for workers'
compensation purposes had been approved by the State of California.
Regulations governing self-insured employers in each state typically require
the employer to maintain surety deposits of cash, government securities or
other financial instruments to cover workers' claims in the event the employer
is unable to pay for such claims.
Upon becoming self-insured, the Company's workers' compensation expense
is tied directly to the incidence and severity of workplace injuries to its
employees. Significant elements contributing to the success of the workers'
compensation program include the regulatory climate surrounding workers'
compensation, the Company's workplace-safety program and the aggressive claims
management approach taken by the Company and its third-party administrators.
Barrett also maintains excess workers' compensation insurance for
individual claims exceeding $350,000 ($300,000 prior to January 1, 1994) in an
unlimited amount (up to $10,000,000 per occurrence for claims through
December 31, 1993) pursuant to annual policies with major insurance companies.
The excess-insurance policies contain standard exclusions from coverage,
including punitive damages, fines or penalties in connection with violation of
any statute or regulation and losses covered by other insurance or indemnity
provisions. The Company maintained workers' compensation insurance in
California through a private insurance carrier and a state program.
WORKPLACE SAFETY PROGRAM. In the late 1980's, the Company identified an
opportunity to market to small and mid-sized Oregon employers its safety
program designed to assist clients in managing workplace injuries and reducing
workers' compensation claims. The Company's program begins with an on-site
safety inspection by one of its risk managers. Barrett then designs a safety
program for the client, including employee and supervisor safety training and
regular meetings between management and employees to discuss safety issues and
precautionary actions. Among other safety measures, the Company encourages
clients to provide on-site first aid care and to make improvements in
workplace procedures and equipment to further reduce the risk of injury. The
Company's third-party administrators for workers' compensation claims also
assists the Company in performing safety inspections of client worksites and
provides technical advice regarding workplace safety measures.
A key factor to the success of the Company's safety program is its
system of financial incentives to reward safe-work practices which result in
reductions in the number and severity of work-related injuries. If the annual
cost of claims is less than agreed upon amounts, the Company pays an annual
cash incentive based on a percentage of the staff leasing client's payroll.
Barrett's business philosophy strongly encourages its client companies to
share these incentives with their employees. Staff leasing clients and their
leased employees are thus provided an economic incentive to maintain a safer
work environment and to reduce the frequency of fraudulent claims for work-
related injuries. During 1993, Barrett implemented a mandatory corporate-wide
pre-employment drug testing program. Results of the program are believed to
include a reduction in the frequency of fraudulent claims and in accidents in
which the use of illegal drugs appears to have been a contributing factor.
CLAIMS MANAGEMENT. The Company also seeks to contain its workers'
compensation costs through an aggressive approach to claims management.
Barrett uses managed-care systems to reduce medical costs and keeps time-loss
costs to a minimum by assigning injured workers, whenever possible, to
temporary assignments which accommodate the worker's physical limitations.
The Company believes that these temporary assignments minimize both time
actually lost from work and covered time-loss costs. Barrett has also engaged
third-party administrators to provide additional claims management expertise.
Typical management procedures include performing thorough and prompt on-site
investigations of claims filed by employees, working with physicians to
encourage efficient medical management of cases, denying questionable claims
and negotiating early settlements to eliminate future case development and
costs.
ELEMENTS OF SELF-INSURANCE COSTS. The costs associated with the
Company's self-insured workers' compensation program include loss and loss
adjustment expense payments with respect to claims made by employees, fees
payable to the Company's third-party administrators, assessments payable to
state workers' compensation regulatory agencies, premiums for excess workers'
compensation insurance and safety incentive payments. Although not directly
related to the size of the Company's payroll, the number of claims and
correlative loss payments may be expected to increase with growth in the total
number of employees. Third-party administrator fees also vary with the number
of claims administered. The state assessments are based on payroll amounts
and increase proportionately with increases in the Company's employee base.
Excess insurance premiums are also based in part on the size of the Company's
payroll. Safety incentives expense may increase as the number of the
Company's staff leasing employees rises, although increases will only occur
for any given client company if such client's claims costs are below agreed
upon amounts.
Workers' Compensation Claims Experience and Reserves
In connection with its workers' compensation self-insurance program, the
Company is liable for loss and loss adjustment expense payments under the
workers' compensation laws of Oregon, Washington, Maryland, and most recently,
Delaware and California. Several months may elapse between the occurrence of
a workers' compensation loss, the reporting of the claim to the Company and
the Company's payment of that claim. The Company recognizes its liability for
the ultimate payment of all incurred claims and claims adjustment expenses by
accruing liabilities which represent estimates of future amounts necessary to
pay claims and related expenses with respect to covered events that have
occurred.
When a claim involving a probable loss is reported, the Company
establishes a case reserve for the estimated amount of its ultimate loss. The
estimate reflects an informed judgment based on established case reserving
practices and the experience and knowledge of Barrett's third-party
administrators regarding the nature and expected value of the claim, as well
as the estimated expense of settling the claim, including legal and other fees
and expenses of administering claims. Additionally, on an aggregate basis,
the Company has established a provision for losses incurred but not reported
and future development in excess of case reserves on existing reported claims
("IBNR").
As part of the case reserving process, historical data is reviewed and
consideration is given to the anticipated effect of various factors, including
known and anticipated legal developments, inflation and economic conditions.
Reserve amounts are necessarily based on management's estimates, and as other
data becomes available, these estimates are revised, which may result in
increases or decreases to existing case reserves. As of December 31, 1994,
the Company's total accrued workers' compensation claims liabilities totaled
$2,522,000, compared to $2,434,000 at year-end 1993. The total number of
self-insured claims reported in 1994 was 1,051, compared to 1,085 for 1993.
Barrett has engaged a nationally-recognized, independent actuary to
periodically review the Company's total workers' compensation claims liability
and reserving practices. Based in part on such review, the Company believes
its total accrued workers' compensation claims liabilities are adequate.
There can, however, be no assurance that the Company's actual future workers'
compensation obligations will not exceed the amount of its accrued
liabilities, with a corresponding negative effect on future earnings, due to
such factors as unanticipated loss development of known claims, an increase in
the number and severity of new claims and a lack of historical claims
experience with new staff leasing clients.
Employees and Employee Benefits
At December 31, 1994, the Company had approximately 11,480 employees,
including approximately 7,100 temporary services employees, approximately
4,200 leased employees and approximately 180 managerial, sales and
administrative employees. The number of employees at any given time can vary
significantly due to business conditions at customer or client companies.
Less than 0.1% of the Company's employees are covered by a collective
bargaining agreement. Each of Barrett's managerial, sales and administrative
employees has entered into a standard form of employment agreement which,
among other things, contains covenants not to engage in certain activities in
competition with the Company for 18 months following termination of employment
and to maintain the confidentiality of certain proprietary information.
Barrett believes its employee relations are good.
Benefits offered to Barrett's temporary employees include group health
insurance, a Section 125 cafeteria plan which permits employees to use pre-tax
earnings to fund various services, including medical, dental and child care,
and a Section 401(k) savings plan pursuant to which employees may begin making
contributions upon reaching 21 years of age and completing 1,000 hours of
service in any consecutive 12-month period. The Company may also make
contributions to the savings plan, which vest over seven years and are subject
to certain legal limits, at the sole discretion of the Company's board of
directors. Leased employees may participate in the Company's benefit plans,
provided that the group health insurance premiums may, at the client's option,
be paid by payroll deduction. Barrett also maintains profit-sharing plans for
its managerial and administrative personnel.
Regulatory and Legislative Issues
The Company is subject to the laws and regulations governing self-
insured employers under the workers' compensation systems in Oregon,
Washington and Maryland and, beginning in 1995, Delaware and California. In
addition, legislation was adopted in Oregon in 1993 requiring a staff leasing
company, such as Barrett, to be licensed by the Workers' Compensation Division
of the Oregon Department of Consumer and Business Services. Temporary
services companies are expressly exempt from the legislation. Staff leasing
companies are also required to ensure that each leasing client provides
adequate training and supervision for its employees to comply with statutory
requirements for workplace safety and to give 30 days' written notice in the
event of a termination of its obligation to provide workers' compensation
coverage for leased employees and other subject employees of a leasing client.
Although compliance with the legislation has caused Barrett to make certain
changes in its staff leasing operations and contracts, which has resulted in
additional financial risk, particularly with respect to those clients who
breach their payment obligations to the Company, Barrett does not anticipate
that compliance with the legislation will have a material impact on its
business operations, financial condition or operating results.
While it is impossible to predict if, when and in what form any health
care reform will be enacted, elements of such reform may have a material
adverse effect on the Company's operations and its self-insured workers'
compensation program.
Competition
The staff leasing and temporary staffing services businesses are
characterized by rapid growth and intense competition. The temporary staffing
services market includes competitors of all sizes, including several, such as
Manpower, Inc., Kelly Services, Inc., The Olsten Corporation, Interim
Services, Inc., and Adia Services, Inc., which are national in scope and have
substantially greater financial and marketing resources than the Company. In
addition to national companies, Barrett competes with numerous regional and
local firms for both customers and employees. The Company estimates that at
least 100 firms provide temporary services in Oregon. There are relatively
few barriers to entry into the temporary services business. The principal
competitive factors in the temporary services industry are price, the ability
to provide qualified workers in a timely manner and the monitoring of job
performance. The Company attributes its growth in temporary services revenues
to the cost-efficiency of its operations, which permits the Company to price
its services competitively, and to its ability through its branch office
network to understand the needs of its customers and fill those needs with
competent personnel.
Although there are believed to be more than 2,200 staff leasing
companies currently operating in the United States, many of these potential
competitors are located in states in which the Company presently does not
operate. Barrett believes that at least 20 staff leasing firms are operating
in Oregon, but that the Company has the largest presence in the State. The
Company may face additional competition in the future from new entrants to the
field, including other temporary services companies, payroll processing
companies and insurance companies. Certain staff leasing companies operating
in areas in which Barrett does not now, but may in the future, offer its
services have greater financial and marketing resources than the Company.
Competition in the staff leasing industry is based largely on price, although
service and quality are also important. Barrett believes that its growth in
staff leasing revenues is attributable to its ability to provide small and
mid-sized companies with the opportunity to provide enhanced benefits to their
employees with a concomitant reduction in the clients' overall personnel
administration and workers' compensation costs. The Company's competitive
advantage may be adversely affected by a substantial increase in the costs of
maintaining its self-insured workers' compensation program or by a general
market decrease in workers' compensation premiums.
Item 2. PROPERTIES
The Company provides temporary staffing services through all 15 of its
branch offices. Staff leasing services are currently offered through each of
Barrett's Oregon, Washington and Maryland locations. The following table
shows the locations of the Company's branch offices and the year in which each
branch was opened or acquired. The Company's Oregon branches accounted for
78% of its total revenues in 1994. The Company also leases space in ten other
locations in its market areas which it uses to recruit and place employees.
Year Opened Year Opened
Oregon Locations or Acquired Other Locations or Acquired
---------------- ----------- --------------- -----------
Portland (Industrial) 1984 Sacramento, California 1988
Portland (Bridgeport) 1988 Santa Clara, California 1994
Bend 1990 Baltimore, Maryland 1951
Medford 1990 Easton, Maryland 1994
Salem 1990 Seattle, Washington 1981
Albany 1991 Spokane, Washington 1994
Eugene 1991
Grants Pass 1991
Portland (Leasing) 1993
In May 1993, Barrett purchased an office building in Portland, Oregon,
with approximately 9,200 square feet of office space, for a total purchase
price of $925,000. The Company's corporate headquarters were relocated to the
new building in June 1993. The building is subject to a mortgage loan with a
principal balance of approximately $658,000 at December 31, 1994.
The Company also owns another office building in Portland, Oregon, in
which its headquarters were previously located. The building is subject to a
mortgage loan with a principal balance at December 31, 1994, of approximately
$281,000 and has approximately 7,000 square feet of office space. Barrett
moved its Portland (Bridgeport) branch office to this building in September
1993.
Barrett leases office space for its other branch offices. At
December 31, 1994, such leases had expiration dates ranging from less than one
year to five years, with total minimum payments through 1999 of approximately
$1,027,000.
Item 3. LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to this
item pending at December 31, 1994, or at the date of this report.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Barrett's executive officers appears in Item 10
of this report.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the
symbol "BBSI." At February 28, 1995, there were 59 stockholders of record and
approximately 1,900 beneficial owners of the Company's common stock. The
Company has not declared or paid any cash dividends since the closing of its
initial public offering of its common stock on June 18, 1993, and has no
present plan to pay any cash dividends in the foreseeable future. The
following table presents the high and low sales prices of the Company's common
stock for each quarterly period since June 18, 1993, as reported by The Nasdaq
Stock Market:
1993 High Low
---- ---- ---
June 18 through June 30 $ 4.75 $ 3.50
Third Quarter 7.125 3.875
Fourth Quarter 8.375 6.75
1994
----
First Quarter $16.00 $ 6.875
Second Quarter(1) 14.75 8.25
Third Quarter 12.25 8.00
Fourth Quarter 16.25 11.00
1995
----
January 1 through February 28 $19.50 $14.50
(1) All per share prices prior to the second quarter of 1994 have been
restated to reflect a 2-for-1 stock split effective May 23, 1994.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's financial statements and the accompanying notes presented in
Item 8 of this report.
Years Ended December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands, except per share data)
Statement of Operations Data:
Revenues:
Temporary services .................. $ 71,148 $ 41,755 $34,681 $31,041 $23,433
Staff leasing services .............. 69,404 58,512 45,444 16,949 3,630
------- ------- ------ ------ ------
Total ............................. 140,552 100,267 80,125 47,990 27,063
------- ------- ------ ------ ------
Cost of revenues:
Direct payroll taxes and benefits ... 105,515 75,171 59,820 35,486 19,774
Payroll taxes and benefits .......... 12,758 9,911 7,826 4,309 2,252
Workers' compensation ............... 5,069 4,591 3,233 1,958 990
Safety incentives ................... 1,103 598 651 270 68
------- ------- ------ ------ ------
Total ............................. 124,445 90,271 71,530 42,023 23,084
------- ------- ------ ------ ------
Gross margin .......................... 16,107 9,996 8,595 5,967 3,979
Selling, general, and administrative
expenses 10,732 6,820 6,339 5,054 3,380
------- ------- ------ ------ ------
Income from operations ................ 5,375 3,176 2,256 913 599
------- ------- ------ ------ ------
Other (expense) income:
Litigation settlement ............... -- -- -- (600) --
Interest expense .................... (106) (86) (77) (175) (223)
Interest income ..................... 224 161 70 58 44
Other, net .......................... 78 133 26 (31) (60)
------- ------- ------ ------ ------
Total ............................. 196 208 19 (748) (239)
------- ------- ------ ------ ------
Income before provision for income taxes 5,571 3,384 2,275 165 360
Provision for income taxes(1) ......... 2,105 437 -- -- --
------- ------- ------ ------ ------
Net income .......................... $ 3,466 $ 2,947 $ 2,275 $ 165 $ 360
======= ======= ====== ====== ======
Net income per share ................ $ .53
=======
Unaudited pro forma data(1):
Net income .......................... $ 2,060 $ 1,385 $ 98 $ 221
======= ====== ====== ======
Net income per share(2) ............. $ .39 $ .35 $ .02 $ .06
======= ====== ====== ======
Weighted average common shares
outstanding(2) ........................ 6,591 5,260 4,000 3,988 3,984
======= ======= ====== ====== ======
As of December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands)
Selected Balance Sheet Data:
Working capital (deficit) ............ $ 4,889 $ 7,017 $ (678) $ (589) $ (142)
Total assets ......................... 24,665 18,425 7,219 5,980 4,355
Long-term debt, net of current portion 980 946 292 446 690
Stockholders' equity ................. 14,455 10,480 1,574 962 1,188
--------------------------------
(1) Effective July 1, 1987, the Company elected to be treated as a corporation subject to taxation under
Subchapter S of the Internal Revenue Code, pursuant to which the net earnings of the Company were
taxed directly to the Company's stockholders rather than to the Company. The Company terminated its
election on April 30, 1993, and recognized a cumulative net deferred tax asset of $505,000. The
amounts shown reflect a pro forma tax provision as if the Company had been a Subchapter C corporation
subject to income taxes for all periods presented.
(2) All share and per share amounts have been restated to reflect the 2-for-1 stock split effective May
23, 1994.
Item 7. 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 years ended December 31, 1994, 1993 and 1992, included in Item 8 of this
report. References to the Notes to Financial Statements appearing below are
to the notes to the Company's financial statements included in Item 8 of this
report.
Percentage of Total Revenues
Years Ended December 31,
1994 1993 1992
Revenues:
Temporary services ....................... 50.6% 41.6% 43.3%
Staff leasing services ................... 49.4 58.4 56.7
----- ----- -----
Total revenues ........................ 100.0 100.0 100.0
----- ----- -----
Cost of revenues:
Direct payroll costs ..................... 75.1 74.9 74.7
Payroll taxes and benefits ............... 9.1 9.9 9.8
Workers' compensation .................... 3.6 4.6 4.0
Safety incentives ........................ .8 .6 .8
----- ----- -----
Total cost of revenues ................ 88.6 90.0 89.3
----- ----- -----
Gross margin ............................... 11.4 10.0 10.7
Selling, general and administrative expenses 7.6 6.8 7.9
----- ----- -----
Income from operations ..................... 3.8 3.2 2.8
Other income (expense) ..................... .2 .2 ---
----- ----- -----
Pretax income .............................. 4.0 3.4 2.8
Provision for income taxes ................. 1.5 .4 ---
----- ----- -----
Net income ................................. 2.5 3.0 2.8
===== ===== =====
Pro forma provision for income taxes ....... 1.3 1.1
Pro forma net income ....................... 2.1 1.7
===== =====
YEARS ENDED DECEMBER 31, 1994 AND 1993
Net income for 1994 amounted to $3,466,000, an increase of $1,406,000 or
68.3% over 1993 pro forma net income of $2,060,000. The increase in 1994 net
income over 1993 was primarily due to substantial increases in revenues and
gross margin. Net income per share for 1994 was $.53 as compared to pro forma
net income per share of $.39 for 1993.
Total 1994 revenues were $140,552,000, which represented an increase of
$40,285,000 or 40.2% over 1993. The increase in revenues over 1993 was due in
part to a 1994 internal growth rate of 18.3%, coupled with two acquisitions
during the 1994 first quarter. Refer to Note 2 of the Notes to Financial
Statements. 1994 revenues from temporary services increased $29,393,000 or
70.4% over 1993, while 1994 staff leasing revenues rose $10,892,000 or 18.6%
over 1993. The disproportionate growth rate of temporary services as compared
to staff leasing services was principally due to the acquisition of Golden
West Temporary Services in March 1994, which provided only temporary staffing
services. It is management's current belief that total revenues for 1995 may
approach $175 million.
The Company believes the growth of its staff leasing services was due in
part to its ability to assume personnel administration functions while
providing employees to clients at an overall cost that is generally less than
the clients would have to pay if they carried such employees on their
payrolls. The Company's services are cost-effective because of (i) the
economies of scale and, in some cases, additional benefits available to it as
an employer handling a significantly larger volume of payroll, payroll taxes
and fringe benefits as compared to the typical staff of up to 50 employees
handled by its staff leasing clients and (ii) the lower cost per employee of
the Company's self-insured workers' compensation program as compared to the
third-party insurance coverage its clients typically would otherwise be
required to carry.
Gross margin for 1994 totaled $16,107,000 or 11.4% of revenues,
representing an increase of $6,111,000 or 61.1% over 1993. The improvement in
gross margin for 1994 of approximately 140 basis points over 1993 was due in
large part to a decrease in workers' compensation expense (expressed as a
percent of revenues) and to a reduction in the Oregon unemployment payroll tax
rate.
Workers' compensation expense includes the cost of self-insurance (which
incorporates among other elements, case reserves for reported claims, reserves
for claims incurred but not reported, loss adjustment expenses, reinsurance
premiums, third-party administrator fees and state assessments) for the
Company's employees in Oregon, Maryland (since November 1993) and Washington
(since July 1994) and third-party insurance for employees in California and
Delaware. Effective January 1, 1995, the Company obtained self-insured
employer status for workers' compensation coverage in Delaware. On March 20,
1995, the Company announced that its application for self-insured employer
status for workers' compensation purposes had been approved by the State of
California.
Workers' compensation and safety incentives expense, expressed as a
percentage of revenues, decreased to 4.4% in 1994 from 5.2% in 1993. This
overall decrease was attributable in part to a reduction in the number of
injury claims and a small increase in claim reserves, in spite of substantial
increases in the number of covered workers, as reflected by the Company's
increased revenues.
Selling, general and administrative expenses (including the provision
for doubtful accounts and the amortization of intangibles) consist of
compensation and other expenses incident to the operation of the Company's
headquarters and branch offices and marketing of its services. These expenses
for 1994 amounted to 7.6% of revenues compared to 6.8% of revenues in 1993.
The increase for 1994 over 1993 was primarily due to (i) the acquisition of
two temporary services businesses in the first quarter of 1994, which have
higher administrative overhead requirements as compared to staff leasing
services and (ii) additional management staff to support increased business
activity, together with higher profit sharing and bonuses based on Company
performance.
YEARS ENDED DECEMBER 31, 1993 AND 1992
Pro forma net income for 1993 totaled $2,060,000, an increase of
$675,000 or 48.7% over 1992 pro forma net income of $1,385,000. Refer to Note
12 of the Notes to Financial Statements regarding the pro forma provision for
income taxes. Pro forma net income per share for 1993 and 1992 were $.39 and
$.35, respectively, which have been restated to reflect the 2-for-1 stock
split effective May 23, 1994.
Total revenues increased $20,142,000 or 25.1% to $100,267,000 for 1993
compared to 1992. The increase in total revenues was attributable to growth
in temporary services revenues and staff leasing services revenues of
$7,074,000 or 20.4% and $13,068,000 or 28.8%, respectively.
Moderate economic growth and uncertainty regarding long-term economic
prospects increased demand for the Company's temporary services during 1993
compared to 1992. The Company attributed its growth in temporary services
revenues to the cost-efficiency of its operations, which permits it to price
its services competitively, and to its ability through its branch office
network to understand the needs of its customers and fill those needs with
competent personnel.
Market conditions were favorable for the Company's staff leasing
services in Oregon during both 1993 and 1992, due to a limited number of
competitors in this industry and the competitive advantage afforded by the
financial incentives offered to the Company's clients for reductions in the
cost of workplace injuries.
Gross margin for 1993 amounted to $9,996,000 or 10.0% of revenues, which
represented an increase of $1,401,000, or 16.3% over 1992. The 1993 gross
margin expressed as a percent of revenues declined 70 basis points from the
1992 rate of 10.7% as a result of higher workers' compensation expense, direct
payroll, payroll taxes and benefits in comparison to 1992.
Payroll costs, payroll taxes and benefits for the Company's temporary
and staff leasing employees increased by $17,436,000 or 25.8% to $85,082,000
in 1993 compared to $67,646,000 in 1992, slightly ahead of the 25.1% growth in
total revenues for the same period. The increase in payroll costs, payroll
taxes and benefits was primarily attributable to an increase in the number of
employees and to higher participation in the Company's fully insured group
health plan. On June 1, 1993, the Company replaced its various regional
vendors of group health insurance with a single national underwriter to take
further advantage of available volume discounts.
Workers' compensation expense increased by $1,358,000 or 42.0% during
1993 compared to 1992, due primarily to increases in the number of temporary
and staff leasing employees in Oregon. Self-insurance expense in Oregon
increased by approximately $1,342,000 in 1993 compared to 1992.
Selling, general and administrative expenses increased 7.6% for 1993
compared to 1992. Of the $481,000 increase, $81,000 was attributable to an
increase in the provision for doubtful accounts arising from the financial
failure of one of the Company's staff leasing customers in September 1993. As
a percentage of total revenues, selling, general and administrative expenses
decreased from 7.9% during 1992, to 6.8% during 1993, due to greater
utilization of existing branch office capacity and the shift of the Company's
business in 1993 toward staff leasing services, which have lower overhead
requirements as compared to temporary services.
The Company was exempt from taxation as a Subchapter S corporation until
its S corporation election was terminated on April 30, 1993. A one-time tax
benefit arising from net cumulative temporary differences in the timing of
reporting certain deductible items for financial statement and income tax
purposes was recognized by the Company as a reduction in its provision for
income taxes for the year ended December 31, 1993 in the amount of $505,000.
The pro forma effective tax rate of 39.1% is the effective tax rate that would
have been recorded if the Company had been a Subchapter C corporation. See
Note 12 of the Notes to Financial Statements.
Seasonal Fluctuations
The Company's revenues historically have been subject to some seasonal
fluctuation, particularly in its temporary services business. Demand for the
Company's temporary employees and certain staff leasing clients decline during
the year-end holiday season and periods of inclement weather.
Correspondingly, demand for temporary services and the operations of some
staff leasing clients, particularly agricultural and forest products-related
companies, increase during the second and third quarters. As staff leasing
revenues increase in comparison to total revenues, the effect of seasonal
fluctuations on the Company's revenues may diminish.
Liquidity and Capital Resources
The Company's net cash position of $2,214,000 at December 31, 1994
increased $1,087,000 from year end 1993. The Company financed its operations
and satisfied its liquidity needs primarily from the sales of short-term
marketable securities and from cash provided by operating activities. The
principal uses of funds during 1994 were (i) to acquire four temporary
services businesses whose total acquisition costs were $5,135,000 (of which
$468,000 was paid in shares of Barrett common stock), (ii) the funding of
increased working capital requirements due to higher accounts receivable as a
result of the acquisitions and (iii) additional workers' compensation surety
deposits required by Oregon and Washington of $696,000 and $345,000,
respectively.
Net cash provided by operating activities for 1994 amounted to
$1,315,000 as compared to $3,415,000 for 1993. For 1994, the cash flow
provided by net income and higher accrued payroll and related benefits was
offset in part by increases in accounts receivable and prepaid expenses. The
increase in 1994 accounts receivable over 1993 was the result of higher sales
levels, the Golden West acquisition and an increase in the number of days'
sales in receivables from 18 days in 1993 to 24 days at December 31, 1994.
The increase in this ratio is primarily attributable to the increased mix of
temporary staffing revenues, which have longer trade terms than the cash terms
for staff leasing clients.
Net cash used by investing activities for 1994 totaled $139,000, which
compares to $8,815,000 for 1993. During 1994, the Company paid $4,737,000 in
cash in connection with four acquisitions and purchased $3,713,000 in
marketable securities. These activities were primarily funded by the sale of
$8,619,000 in marketable securities of which a substantial portion was
originally purchased with proceeds of the Company's June 1993 initial public
offering of common stock. Capital expenditures for 1994 totaled $308,000; the
Company presently has no material long-term capital commitments.
Net cash used by financing activities of $89,000 in 1994 resulted from
payments on long-term debt of $130,000, offset in part by $41,000 generated
from the exercise of incentive stock options. For 1993, net cash provided by
financing activities amounted to $6,515,000 primarily due to proceeds of the
Company's initial public offering and certain long-term mortgage financing on
the Company's corporate office building.
The Company's business strategy continues to be focused on growth
through the expansion of operations at existing offices and the acquisition of
additional personnel-related businesses, both in its existing markets and
other strategic geographic areas. The Company actively explores proposals for
various acquisition opportunities on an ongoing basis, but there can be no
assurance that any additional transactions will be consummated.
The Company has an unsecured $4.0 million revolving credit facility of
which there was no outstanding balance at December 31, 1994. Refer to Note 6
of the Notes to Financial Statements. Management believes that the available
credit facility and other sources of financing, together with anticipated
funds generated from operations, will be sufficient in the aggregate to fund
the Company's working capital needs for the foreseeable future. Management
also anticipates that the surety deposit required by the State of California
in connection with the Company's recently approved application for self-
insured employer status for workers' compensation purposes will be funded from
a combination of cash reserves, letters of credit from the Company's principal
bank, surety bonds from a third-party surety or from other financing sources
or arrangements.
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.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following audited financial statements of Barrett
Business Services, Inc., and related documents are set
forth herein on the pages indicated:
Page
-
---
Report of Independent Accountants ...................................... 21
Balance Sheets at December 31, 1994 and 1993 ........................... 22
Statements of Operations for the years ended
December 31, 1994, 1993, and 1992 .................................... 23
Statements of Stockholders' Equity for the
years ended December 31, 1994, 1993, and 1992 ........................ 24
Statements of Cash Flows for the years ended
December 31, 1994, 1993, and 1992 .................................... 25
Notes to Financial Statements .......................................... 26
Other financial statement schedules are omitted because
they are not applicable or not required.
Report of Independent Accountants
February 6, 1995
To the Stockholders and Board of Directors,
Barrett Business Services, Inc.
In our opinion, the accompanying balance sheets and the related
statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of
Barrett Business Services, Inc. at December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 1994 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Portland, Oregon
Barrett Business Services, Inc.
Balance Sheets
(In thousands)
------------------------------------------------------------------------------
---
December 31,
1994 1993
-------- -------
-
Assets
Current assets:
Cash and cash equivalents $ 2,214 $ 1,127
Marketable securities -- 6,374
Trade accounts receivable, net 9,631 4,954
Prepaid expenses and other 599 145
Deferred tax asset (Note 12) 914 894
------- -------
Total current assets 13,358 13,494
Intangibles, net (Note 3) 4,936 294
Property and equipment, net (Notes 4 and 7) 2,110 1,876
Restricted marketable securities and workers'
compensation deposits (Note 5) 4,196 2,728
Other assets 65 33
------ -------
$24,665 $18,425
======= =======
Liabilities and Stockholders' Equity
Curent liabilities:
Current portion of long-term debt (Notes 7 and 10) $ 31 $ 123
Income taxes payable (Note 12) -- 79
Accounts payable 218 91
Accrued payroll, payroll taxes and related benefits 5,057 3,223
Accrued workers' compensation claim liabilities
(Note 5) 2,358 2,434
Customer safety incentives payable 805 527
------- -------
Total current liabilities 8,469 6,477
Long-term debt, net of current portion (Notes 7
and 10) 908 946
Customer deposits 669 522
Long-term workers' compensation liabilities
(Note 5) 164 --
------- -------
10,210 7,945
------- -------
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, $.01 par value; 20,500 shares
authorized, 6,367 and 3,152 shares issued and
outstanding, respectively (Notes 11 and 13) 64 32
Additional paid-in capital 8,978 8,469
Retained earnings 5,413 1,979
------- -------
14,455 10,480
------- -------
$24,665 $18,425
======= =======
The accompanying notes are an integral part of these financial
statements.
Barrett Business Services, Inc.
Statements of Operations
(In thousands, except per share amounts)
Year ended December 31,
1994 1993 1992
------- ------- -------
Revenues:
Temporary services $71,148 $41,755 $34,681
Staff leasing services 69,404 58,512 45,444
------- ------- -------
140,552 100,267 80,125
------- ------- -------
Cost of revenues:
Direct payroll costs 105,515 75,171 59,820
Payroll taxes and benefits 12,758 9,911 7,826
Workers' compensation (Note 5) 5,069 4,591 3,233
Safety incentives 1,103 598 651
------- ------- -------
124,445 90,271 71,530
------- ------- -------
Gross margin 16,107 9,996 8,595
Selling, general and administrative expenses 10,302 6,450 6,003
Amortization of intangibles (Note 3) 430 370 336
------- ------ ------
Income from operations 5,375 3,176 2,256
------- ------ ------
Other (expense) income:
Interest expense (106) (86) (77)
Interest income 224 161 70
Other, net 78 133 26
------- ------ ------
196 208 19
------- ------ ------
Income before provision for taxes 5,571 3,384 2,275
Provision for income taxes (Note 12) 2,105 437 -
------- ------ ------
Net income $ 3,466 $ 2,947 $ 2,275
======= ======= =======
Net income per share $ .53 $ - $ -
======= ======= =======
Unaudited pro forma information (Note 12):
Income before provision for income taxes $ 3,384 $ 2,275
Pro forma provision for income taxes 1,324 890
------- -------
Pro forma net income $ 2,060 $ 1,385
======= =======
Pro forma net income per share $ .39 $ .35
======= =======
Weighted average number of shares outstanding 6,591 5,260 4,000
======= ======= =======
The accompanying notes are an integral part of these financial statements.
Barrett Business Services, Inc.
Statements of Stockholders' Equity
(In thousands)
Additional
Common stock paid-in Retained
Shares Amount capital earnings Total
------ ------ ------- -------- ------
Balance, December 31, 1991 2,000 $ 20 $ 190 $ 752 $ 962
Net income 2,275 2,275
Distributions to stockholders (1,663) (1,663)
----- ------ ------- -------- ------
Balance, December 31, 1992 2,000 20 190 1,364 1,574
Common stock issued 1,152 12 6,816 6,828
Net income 2,947 2,947
Distributions to stockholders (869) (869)
Reclassification of
retained earnings
on issuance of common stock 2,332 (2,332) -
----- ------ ------ ------- ------
Balance, December 31, 1993 3,152 32 8,469 1,979 10,480
Common stock issued
for acquisitions 29 468 468
Common stock issued
on exercise of
options, net 22 41 41
Net income 3,466 3,466
Reclassification of
retained earnings
for stock split 3,164 32 (32) -
----- ------ ------- ------- ------
Balance, December 31, 1994 6,367 $ 64 $ 8,978 $ 5,413 $14,455
===== ====== ======= ======= =======
The accompanying notes are an integral part of these financial statements.
Barrett Business Services, Inc.
Statements of Cash Flows
(In thousands)
Year ended December 31,
1994 1993 1992
------ ------ ------
Cash flows from operating activities:
Net income $ 3,466 $ 2,947 $ 2,275
Reconciliation of net income
to net cash provided by
operating activities:
Depreciation and amortization 637 530 476
Gain on sales of marketable securities - (112) (14)
Provision for doubtful accounts 136 160 79
Deferred taxes (20) (894) -
Changes in certain assets and liabilities:
Trade accounts receivable (4,813) (969) (701)
Prepaid expenses and other (454) 2 (88)
Income taxes payable (79) 79 -
Accounts payable 127 (135) (25)
Accrued payroll and related benefits 1,834 658 620
Accrued workers' compensation
claim liabilities 88 1,097 462
Customer safety incentives payable 278 (8) 307
Litigation settlement - - (600)
Due to stockholder - (98) -
Customer deposits and other, net 115 158 114
------ ------ ------
Net cash provided by operating activities 1,315 3,415 2,905
------ ------ ------
Cash flows from investing activities:
Payments for acquisitions (4,737) (10) (90)
Purchases of fixed assets (308) (1,280) (201)
Proceeds from sales of marketable securities 8,619 8,413 539
Purchases of marketable securities (3,713) (15,938) (1,421)
------ ------ ------
Net cash used by investing activities (139) (8,815) (1,173)
------ ------ ------
Cash flows from financing activities:
Distributions to stockholders - (869) (1,630)
Proceeds from debt issued - 752 -
Payments on long-term debt (130) (196) (276)
Proceeds from exercise of stock options 41 6,828 -
------ ------ ------
Net cash provided (used)
by financing activities (89) 6,515 (1,906)
------ ------ ------
Net increase (decrease) in cash
and cash equivalents 1,087 1,115 (174)
Cash and cash equivalents, beginning of year 1,127 12 186
------ ------ ------
Cash and cash equivalents, end of year $ 2,214 $ 1,127 $ 12
====== ====== =====
The accompanying notes are an integral part of these financial statements.
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
1. Summary of Operations and Significant Accounting Policies
Nature of Operations
Barrett Business Services, Inc. ("Barrett" or the "Company"), a Maryland
corporation, is engaged in providing temporary staffing and professional
employer (staff leasing) services to a diversified group of customers
through a network of branch offices throughout Oregon, Washington,
northern California, Maryland and Delaware. Approximately 78%, 92% and
92%, respectively, of the Company's revenues during 1994, 1993 and 1992
was attributable to its Oregon operations.
Revenue Recognition
The Company recognizes revenue as the services are rendered by its work
force. Temporary services are engaged by customers to meet short-term
fluctuations in personnel needs. Professional employer (staff leasing)
services are normally used by organizations to satisfy ongoing personnel
needs and typically involve contracts with a minimum term of one year,
renewable annually, which cover all employees at a particular work site.
Cash and Cash Equivalents
The Company considers nonrestricted short-term investments which are
highly liquid, readily convertible into cash and have original
maturities of less than three months to be cash equivalents for purposes
of the statements of cash flows.
Allowance for Doubtful Accounts
The Company had an allowance for doubtful accounts of $62,500 and
$25,000 at December 31, 1994 and 1993, respectively.
Marketable Securities
Marketable securities are stated at cost which approximates fair market
value. At December 31, 1994, marketable securities consisted primarily
of municipal bonds and are expected to be held to maturity, generally
from 17 to 30 years (see Note 5). At December 31, 1993, marketable
securities consisted primarily of municipal tax anticipation notes and
certificates of deposit.
Intangibles
Intangible assets are recorded at cost and are being amortized using the
straight-line method over estimated useful lives which range from 2
years to 15 years.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs are charged to operating expense as incurred, and
expenditures for additions and betterments are capitalized. The cost of
assets sold or otherwise disposed of and the related accumulated
depreciation are eliminated from the accounts, and any resulting gain or
loss is reflected in the statements of operations.
Depreciation of property and equipment is calculated using either
straight-line or accelerated methods over estimated useful lives which
range from 3 years to 31.5 years.
Customer Safety Incentives Payable
Safety incentives are paid annually to staff leasing clients if the cost
of workers' compensation claims is less than agreed upon amounts;
amounts paid are based on a percentage of payroll. The Company accrues
the amounts payable under this program on a monthly basis.
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
1. Summary of Operations and Significant Accounting Policies (Continued)
Income Taxes
Effective July 1, 1987, the Company elected to be treated as an S
Corporation under certain provisions of the Internal Revenue Code. As
such, the income or losses of the Company were attributable to its
stockholders in their individual tax returns. Accordingly, no accrual
or provision for income taxes was made in the Company's financial
statements for the year ended December 31, 1992. Effective April 30,
1993, the Company terminated its S Corporation status. A pro forma
provision for income taxes that would have been recorded if the Company
had been a C Corporation for the years ended December 31, 1993 and 1992
is provided for comparative purposes in the statements of operations.
Customer Deposits
The Company requires deposits from certain staff leasing customers to
cover a portion of its accounts receivable due from such customers in
event of default of payment.
Common Stock Split and Change in Authorized Shares
The Company's stockholders approved a 7,968-for-1 split of its common
stock, an increase in authorized common shares and the authorization of
preferred stock which became effective March 25, 1993. Additionally,
the par value of common stock was changed to $.01 from $10 per share.
Common stock and additional paid-in capital as of December 31, 1991 have
been adjusted to reflect this change. On April 20, 1994, the Company's
board of directors approved a 2-for-1 stock split in the form of a stock
dividend, paid May 23, 1994, to holders of record of its common stock at
the close of business on May 2, 1994 (the "Record Date"), at the rate of
one new share for each share outstanding on the Record Date. All
earnings per share amounts have been adjusted to reflect these
transactions for all periods presented.
A special meeting of stockholders was held on August 10, 1994, pursuant
to which the stockholders approved an amendment to the Company's charter
to increase the number of authorized shares of common stock from
7,500,000 shares to 20,500,000 shares.
Statements of Cash Flows
The Company has recorded the following non-cash transactions:
In September 1992, the Company, for financial reporting purposes,
was deemed to have distributed to its stockholders certain
non-cash assets and liabilities which aggregated a net liability
of $23,000.
During 1992, notes receivable from a stockholder were
extinguished.
During 1994, the Company issued common stock with an aggregate
fair market value of $468,000 in connection with the acquisition
of certain assets of Personnel Management & Consulting, Inc. and
Construction Workforce (see Note 2).
Interest paid during 1994, 1993 and 1992 did not materially differ from
interest expense.
Income taxes paid by the Company in 1994 and 1993 totaled $2,144,800 and
$1,239,600, respectively.
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
---
1. Summary of Operations and Significant Accounting Policies (Continued)
Net Income Per Share
Net income per share for the year ended December 31, 1994 is computed
based on the weighted average number of common stock and common stock
equivalents outstanding during the period. For the years ended
December 31, 1993 and 1992, such pro forma computations were made
without giving effect to securities that would otherwise be considered
to be common stock equivalents, because such securities aggregated less
than 3% of shares outstanding and thus were not considered dilutive.
Outstanding stock options and warrants, net of assumed buy-back, are
considered common stock equivalents.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
1994 presentation. Such reclassifications have no impact on net income
or stockholders' equity.
2. Acquisitions
CDI Corporation-West
In March 1993, the Company acquired a branch office of CDI Corporation-
West in Sacramento, California for $10,000. The acquisition was
recorded under the purchase method of accounting which resulted in
$10,000 of intangible assets.
Personnel Management & Consulting, Inc.
On February 27, 1994, the Company purchased substantially all of the
assets of Personnel Management & Consulting, Inc., a company engaged in
the temporary services business in Maryland and Delaware. Of the
$270,000 purchase price, the Company paid $42,000 in cash and issued
12,000 shares of its common stock with a then-fair market value of
$228,000. The acquisition was accounted for under the purchase method
of accounting which resulted in approximately $241,000 of intangible
assets and $29,000 of fixed assets.
Golden West Temporary Services
On March 7, 1994, the Company purchased certain assets of Golden West
Temporary Services ("Golden West"), a company in the temporary services
business with four offices in northern California. The cash purchase
price of $4,514,000 was paid by liquidating a portion of the Company's
short-term marketable securities. The Company accounted for the
acquisition under the purchase method of accounting which resulted in
approximately $4,425,000 of intangible assets and $89,000 of fixed
assets.
Construction Workforce
On December 26, 1994, the Company purchased certain assets of Max
Johnson Enterprises, Inc., dba Construction Workforce, a company located
in Spokane, Washington which specializes in providing highly skilled
temporary craftsmen to the commercial construction industry. Of the
$300,000 purchase price, the Company paid $60,000 in cash and issued
17,142 shares of its common stock with a then-fair market value of
$240,000. The acquisition was accounted for under the purchase method
of accounting which resulted in $285,000 of intangible assets and
$15,000 of fixed assets.
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
2. Acquisitions (Continued)
Advanced Temporary Systems, Inc.
On December 29, 1994, the Company purchased for $51,000 cash certain
assets of Advanced Temporary Systems, Inc., a company engaged in the
temporary staffing business in Kent, Washington. The Company accounted
for the acquisition under the purchase method of accounting which
resulted in $51,000 of intangible assets.
Pro Forma Results of Operations (Unaudited)
The operating results of each of the above acquisitions are included in
the Company's results of operations from the respective date of
acquisition. The following unaudited pro forma summary presents the
combined results of operations as if the Personnel Management &
Consulting, Inc. and Golden West acquisitions had occurred at the
beginning of 1993, after giving effect to certain adjustments for the
amortization of intangible assets, taxation and cost of capital. The
other acquisitions are not included in the pro forma information as
their effect is not material.
Year ended December 31,
1994 1993
------ ------
(In thousands, except
per share amounts)
Revenue $145,066 $125,514
======== ========
Net income $ 3,545 $ 2,366
======== ========
Net income per share $ .54 $ .45
======== ========
The unaudited pro forma results above have been prepared for comparative
purposes only and do not purport to be indicative of what would have
occurred had the acquisitions been made as of that date or of results
which may occur in the future.
3. Intangibles
Intangibles consist of the following (in thousands):
December 31,
1994 1993
------ ------
Covenants not to compete $ 1,490 $ 1,215
Goodwill 4,870 220
Customer lists 358 211
------- -------
6,718 1,646
Less accumulated amortization 1,782 1,352
------- -------
$ 4,936 $ 294
======= ======
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
4. Property and Equipment
Property and equipment consists of the following (in thousands):
December 31,
1994 1993
------- -------
Office furniture and fixtures $ 1,509 $ 1,092
Building 1,175 1,157
Vehicles 41 36
------- -------
2,725 2,285
Less accumulated depreciation 923 716
------- -------
1,802 1,569
Land 308 307
------- -------
$ 2,110 $ 1,876
======= =======
5. Accrued Workers' Compensation Claim Liabilities
In August 1987 and November 1993, the Company became a self-insured
employer with respect to workers' compensation insurance coverage for
all its employees working or living in Oregon and Maryland,
respectively. The Company also became a self-insured employer for
workers' compensation insurance coverage in the state of Washington
effective July 1, 1994 and in Delaware effective January 1, 1995. The
Company has provided $2,522,000 and $2,434,000 at December 31, 1994 and
1993, respectively, as an estimated liability for unsettled workers'
compensation claims. This estimated liability represents management's
best estimate which includes, in part, an evaluation of information
provided by the Company's third-party administrator and its independent
actuary. Included in the claims liabilities are case reserve estimates
for reported losses, plus additional amounts based on projections for
incurred but not reported claims, allocated loss adjustment expenses and
anticipated increases in case reserve estimates. These estimates are
continually reviewed and adjustments to liabilities are reflected in
current operations as they become known. The Company believes that the
difference between amounts recorded at December 31, 1994 for its
estimated liability and the possible range of costs of settling related
claims is not material to results of operations; nevertheless, it is
reasonably possible that adjustments required in future periods would be
material to results of operations.
The states of Oregon, Maryland and Washington require the Company to
maintain specified investment balances or other financial instruments,
totaling $3,802,000 at December 31, 1994 and $2,761,000 at December 31,
1993, to cover potential claims losses. To partially meet these
requirements at December 31, 1994 and 1993, the Company held a $300,000
surety bond guaranteed by an irrevocable standby letter of credit. The
investments are included in restricted marketable securities and
workers' compensation deposits in the accompanying balance sheets.
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
--
5. Accrued Workers' Compensation Claim Liabilities (Continued)
Liabilities incurred for work-related employee fatalities are recorded
either at an agreed-upon lump-sum settlement amount or the net present
value of future fixed and determinable payments over the actuarially
determined remaining life of the beneficiary, discounted at a rate that
approximates a long-term high quality corporate bond rate. The Company
has obtained excess workers' compensation insurance to limit its self-
insurance exposure to $350,000 per occurrence ($300,000 for claims
before December 31, 1993). The excess insurance provides coverage up to
$10 million per occurrence for claims through December 31, 1993 and
unlimited excess coverage after that date. At December 31, 1994, the
Company has recorded $164,000 for work-related fatalities in long-term
workers' compensation liabilities in the accompanying balance sheet.
The workers' compensation expense in the accompanying statements of
operations consists of $4,254,000, $4,075,000 and $2,780,000 for
self-insurance expense for 1994, 1993 and 1992, respectively. Premiums
in the insured states were $815,000, $516,000 and $453,000 for 1994,
1993 and 1992, respectively.
6. Credit Facility
On August 12, 1993, the Company entered into a loan agreement (the
"Agreement") with a major bank which provides for (a) an unsecured
revolving credit facility for working capital purposes and (b) a term
real estate loan. The Agreement, as amended, expires on May 31, 1995,
and currently permits total borrowings of up to $4,000,000 under the
revolving credit facility. The interest rate on outstanding balances
under the revolving credit facility is at the Federal Funds Rate plus
1.75%. Under the amended loan agreement, the Company is required to
maintain (i) a ratio of total liabilities to tangible net worth of not
more than 2.0 to 1.0, (ii) positive quarterly income before taxes, (iii)
tangible net worth of not less than $6,000,000, (iv) a minimum debt
coverage ratio of 1.20 to 1.00 at the end of each fiscal year, and (v) a
zero outstanding balance against the revolving credit facility for a
minimum of 60 consecutive days during each year. The Company is also
prohibited from pledging any of its assets other than existing mortgages
on its real property. There were no borrowings outstanding under the
revolving credit facility at December 31, 1994 or 1993.
During the years ended December 31, 1994, 1993 and 1992, the maximum
balances outstanding under the revolving credit facility were
$1,500,069, $1,189,000 and $321,617, respectively; the average balances
outstanding were $165,000, $59,000 and $142,000, respectively; and the
weighted average interest rates during the period were 6.9%, 6.6% and
7.0%, respectively. The weighted average interest rate during the
periods was calculated using daily weighted averages.
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
--
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
December 31,
1994 1993
------ ------
Mortgage note payable in monthly installments
of $2,781, including interest at 11% per
annum through 1998, with a principal payment
of $269,174 due in 1998, secured by land and
building $ 281 $ 283
Mortgage note payable in monthly installments
of $6,730, including interest at 8.15% per
annum through 2003, with a principal payment
of $366,633 due in 2003, secured by land and
building 658 683
Unsecured note to former stockholder, with
interest at 12% per annum (Note 10) - 103
------ ------
939 1,069
Less portion due within one year 31 123
------ ------
$ 908 $ 946
====== ======
Maturities on long-term debt are summarized as follows at December 31,
1994 (in thousands):
Year ending
December 31,
------------
1995 $ 31
1996 33
1997 36
1998 307
1999 36
Thereafter 496
-------
$ 939
======
8. Savings Plan
On April 1, 1990, the Company established a 401(k) employee savings plan
for the benefit of its eligible employees. All employees, except those
covered under a co-employer (leasing) contract, 21 years of age or
older, become eligible to participate in the savings plan upon
completion of 1,000 hours of service in any consecutive 12-month period
following the initial date of employment. Employees covered under a co-
employer (leasing) contract are eligible to participate in the savings
plan beginning with their respective dates of employment. The
determination of amounts, if any, of Company contributions to the plan
is subject to the sole discretion of the Company. Participants'
interests in Company contributions to the plan vest over a 7-year
period. Company contributions to the plan were $114,000, $43,574 and
$35,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
9. Commitments
Lease Commitments
The Company leases its branch offices under operating lease agreements
which require minimum annual payments as follows (in thousands):
Year ending
December 31,
------------
1995 $ 384
1996 242
1997 196
1998 114
1999 91
------
Total minimum payments $ 1,027
=======
Rent expense for the years ended December 31, 1994, 1993 and 1992 was
approximately $423,000, $295,000 and $313,000, respectively.
10. Related Party Transactions
During 1994, 1993 and 1992, the Company recorded revenues of $3,261,000,
$2,404,000 and $2,249,000, respectively, and cost of revenues of
$3,112,000, $2,316,000 and $2,116,000, respectively, for providing
services to a company of which a director of the Company is president
and majority stockholder. At December 31, 1994 and 1993, Barrett had
receivables from this company of $140,000 and $117,000, respectively.
During 1994, 1993 and 1992, the Company recorded revenues of $119,000,
$480,000 and $47,000, respectively, and cost of revenues of $110,000,
$475,000 and $45,000, respectively, for providing staff leasing services
to a company owned by Barrett's President and Chief Executive Officer
who is a stockholder of the client company. At December 31, 1993,
Barrett had recorded a receivable of $35,000 from this company.
As further described in Note 7, the Company had a note payable to the
estate of the former majority stockholder, the late mother of a current
stockholder. The Company was also obligated to make annual payments to
the former director and majority stockholder until her death in 1993 in
recognition of her past services and in return for certain
non-competition covenants. The payments were adjusted annually for
increases in the Consumer Price Index for All Items--U.S. National
Average. The Company accounted for this arrangement as a defined
benefit plan. Under the plan, net pension costs were approximately
$40,000 for 1992.
At December 31, 1993, the President and Chief Executive Officer of the
Company, pursuant to the approval of a majority of the disinterested
outside directors, agreed to personally guarantee, at no cost to the
Company, the repayment of a $111,000 receivable from an unrelated,
insolvent customer. The Company will exercise this guarantee at such
time as the Company determines that further collection efforts are
likely to be ineffective, but not later than December 31, 1995.
10. Related Party Transactions (Continued)
A director of the Company is Vice Chairman of the Board of Directors of
the bank that provides the Company's unsecured revolving credit facility
and certain mortgage financing. In addition to providing other banking
services, the bank also serves as the transfer agent for the Company's
common stock. See Notes 6 and 7.
11. Public Stock Offering
In June 1993, the Company completed an initial public offering of
1,000,000 shares of common stock at $7.00 per share. In July 1993, the
underwriters exercised an option to purchase 150,000 additional shares
at $7.00 per share to cover over-allotments. Total net proceeds to the
Company were $6,828,000 after deducting the underwriting discount and
offering expenses.
12. Income Taxes
In conjunction with the Company's public offering, the Company
terminated its S Corporation status effective April 30, 1993.
Accordingly, unaudited pro forma income tax information is presented
below which would have been recorded if the Company had been a C
Corporation during all periods presented, based on tax laws in effect
during those periods, as calculated under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
The provisions for income taxes are as follows (in thousands):
Year ended December 31,
1994 1993 1992
------ ------ ------
(Unaudited pro forma)
Current:
Federal $ 1,750 $ 1,439 $ 674
State 375 284 133
------ ------ ------
2,125 1,723 807
------ ------ ------
Deferred:
Federal (17) (338) 70
State (3) (61) 13
------ ------ ------
(20) (399) 83
------ ------ ------
Total provision $ 2,105 $ 1,324 $ 890
======= ======= =======
Barrett Business Services, Inc.
Notes to Financial Statements
-----------------------------------------------------------------------------
12. Income Taxes (Continued)
The actual provision for income taxes for the first eight months of
operation as a C Corporation (May 1, 1993 to December 31, 1993) is as
follows (in thousands):
Current:
Federal $ 1,110
State 221
-------
1,331
-------
Deferred:
Federal (327)
State (62)
-------
(389)
-------
Provision before cumulative
deferred tax asset 942
Cumulative deferred tax asset (505)
-------
$ 437
=======
The provision for income taxes for the year ended December 31, 1993 is
partially offset by recognition of a cumulative net deferred tax asset
of $505,000 associated with the termination of the Company's S
Corporation status on April 30, 1993, in accordance with SFAS 109.
Deferred tax assets (liabilities) are comprised of the following
components (in thousands):
December 31,
1994 1993
------ ------
Accrued workers' compensation claim liabilities $ 982 $ 949
Allowance for doubtful accounts 25 10
Tax depreciation in excess of book depreciation (93) (65)
------ ------
$ 914 $ 894
====== ======
Barrett Business Services, Inc.
Notes to Financial Statements
-----------------------------------------------------------------------------
12. Income Taxes (Continued)
The effective tax rate differed from the U.S. statutory federal tax rate
due to the following:
Year ended December 31,
1994 1993 1992
------ ------ ------
(Unaudited pro forma)
Statutory federal tax rate 34.0% 34.0% 34.0%
State taxes, net of federal benefit 4.4 4.3 4.1
Goodwill amortization .2 .5 .7
Federal tax-exempt interest income (1.1) -- --
Other, net .3 .3 .3
------ ------ ------
37.8% 39.1% 39.1%
====== ====== ======
Upon termination of the Company's S Corporation status in 1993, cash
distributions totaling $330,000, which represented the estimated tax
liabilities of stockholders on S Corporation earnings from January 1,
1993 through April 30, 1993, were paid to the stockholders from the
undistributed S Corporation retained earnings.
13. Stockholders' Equity
As of March 1, 1993, the Company adopted the 1993 Stock Incentive Plan
(the "Plan") which provides for stock-based awards to the Company's
employees, non-employee directors and outside consultants or advisers.
As of April 20, 1994, the Company increased the number of shares of
common stock reserved for issuance under the Plan from 500,000 to
800,000. An award of 4,000 restricted shares granted under the Plan in
1993 became fully vested in 1994. The following table summarizes option
activity under the Plan:
Options Range of prices
--------- -----------------
Outstanding at March 1, 1993 -
Options granted 166,500 $ 3.50 to $ 4.69
Options exercised -
Options cancelled or expired (6,000)
-------
Outstanding at December 31, 1993 160,500
Options granted 233,500 $ 9.50 to $ 13.56
Options exercised (22,175) $ 3.50
Options cancelled or expired (65,250)
--------
Outstanding at December 31, 1994 306,575
========
Exercisable at December 31, 1994 10,450
========
Available for grant at
December 31, 1994 467,250
========
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
13. Stockholders' Equity (Continued)
The options listed in the table generally become exercisable in four
equal annual installments beginning one year after the date of grant.
The number of options and the price per share have been restated to
reflect the 2-for-1 stock split effective May 23, 1994.
In connection with the initial public offering, the Company issued
200,000 warrants to its underwriters and related parties for the
purchase of shares of the Company's common stock exercisable in whole at
any time or in part from time to time commencing June 11, 1994 at $4.20
per share, after giving effect for the 2-for-1 stock split. A total of
110,000 warrants were exercised in January 1995 for proceeds of
$462,000.
14. Quarterly Financial Information (Unaudited) (In thousands, except per
share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
Year ended December 31, 1992:
Revenues $ 17,000 $ 20,333 $ 22,597 $ 20,195
Cost of revenues 15,123 18,101 20,197 18,109
Pro forma net income 253 408 435 289
Pro forma net income
per share .07 .10 .11 .07
Year ended December 31, 1993:
Revenues $ 20,535 $ 25,386 $ 28,076 $ 26,270
Cost of revenues 18,501 22,931 25,147 23,692
Pro forma net income 389 488
Pro forma net income
per share .09 .11
Net income 702 481
Net income per share .11 .08
Year ended December 31, 1994:
Revenues $ 27,067 $ 35,136 $ 41,149 $ 37,200
Cost of revenues 24,096 31,217 36,107 33,025
Net income 608 765 1,235 858
Net income per share .09 .12 .19 .13
Barrett Business Services, Inc.
Notes to Financial Statements
------------------------------------------------------------------------------
15. Market Information (Unaudited)
The Company's common stock trades on The Nasdaq Stock Market under the
symbol "BBSI." The following table sets forth the high and low prices
of the stock for each quarter since the June 1993 initial public
offering:
1993
High Low
------ ------
June 1993 $ 4.75 $ 3.50
Third quarter 7.13 3.88
Fourth quarter 8.38 6.75
1994
High Low
------ ------
First quarter $ 16.00 $ 6.88
Second quarter(1) 14.75 8.25
Third quarter 12.25 8.00
Fourth quarter 16.25 11.00
(1) All share prices prior to the second quarter of 1994 have been
adjusted to reflect a 2-for-1 stock split effective May 23, 1994.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table identifies, as of February 28, 1995, each director
and executive officer of the Company. Directors serve until the next annual
meeting of shareholders, or until their successors are elected and qualified.
Executive officers serve at the discretion of the Board of Directors.
Principal Positions and Director Officer
Name Age Business Experience since since
------------------------------------------------------------------------------
William W. Sherertz 49 President; Chief Executive 1980 1980
Officer; Acting Chairman of
the Board of Directors
Robert R. Ames 54 Director; Vice Chairman of 1993
First Interstate Bank of
Oregon, N.A.
Jeffrey L. Beaudoin 40 Director; President of 1993
Rose City Moving and
Storage Co.
Stephen A. Gregg 50 Director; Private investor 1995
and health care consultant
Anthony Meeker 55 Director; Vice President of 1993
Spears Benzak Salomon &
Farrell
Stanley G. Renecker 40 Director; Vice President- 1993
Acquisitions of The Campbell
Group
Michael D. Mulholland 43 Vice President-Finance 1994
and Secretary; Chief
Financial Officer
Christopher J.
McLaughlin 39 Vice President-Operations 1994
Peter J. Schenk 36 Vice President-Marketing 1993
and Sales
James D. Miller 31 Controller; Principal 1994
Accounting Officer
William W. Sherertz has acted as Chief Executive Officer of the Company
since 1980. He has also been a director of the Company since 1980, and was
appointed President of the Company in March 1993. Mr. Sherertz also serves as
Acting Chairman of the Board of Directors.
Robert R. Ames has served as a director of the Company since 1993. He
is currently the Vice Chairman of the Board of Directors of First Interstate
Bank of Oregon, N.A. From 1983 to 1991, Mr. Ames served as President of the
Bank.
Jeffrey L. Beaudoin has served as a director of the Company since 1993.
He is presently the President and a director of Rose City Moving and Storage
Co., of Portland, Oregon, a staff leasing client of the Company.
Stephen A. Gregg was elected to the Company's Board of Directors in
February 1995. He is currently a private investor and health care consultant.
From 1985 to 1994, Mr. Gregg was Chairman and Chief Executive Officer of The
Ethix Corporation, a national provider of health care programs headquartered
in Portland, Oregon.
Anthony Meeker has served as a director of the Company since 1993. He
has been a Vice President with Spears Benzak Soloman & Farrell, Portland,
Oregon, an investment research firm, since 1993. From 1987 to 1993, Mr.
Meeker was Treasurer of the State of Oregon. He has also been President and
Chief Executive Officer and a director of Meeker Seed & Grain Co. since 1975.
Stanley G. Renecker has been a director of the Company since 1993. Mr.
Renecker, a lawyer, is currently Vice President-Acquisitions of The Campbell
Group, a timberland management firm, where he has been employed since 1989.
Michael D. Mulholland joined the Company in August 1994 as Vice
President-Finance and Secretary. From 1988 to 1994, Mr. Mulholland was
employed by Sprouse-Reitz Stores Inc., a former Nasdaq-listed retail company,
serving as its Executive Vice President, Chief Financial Officer and
Secretary. In November 1991, Sprouse-Reitz filed a voluntary petition under
Chapter 11 of the U.S. Bankruptcy Code. Its plan of reorganization was
confirmed by the Bankruptcy Court in June 1992. Subsequently, Mr. Mulholland
was appointed to the additional position of Acting Chief Executive Officer
prior to Sprouse's filing of a voluntary petition in connection with a
prepackaged liquidating Chapter 11 in November 1993.
Christopher J. McLaughlin joined the Company in May 1993 and was
appointed Corporate Operations Manager in December 1993. Mr. McLaughlin is
currently Vice President - Operations, a position held since July 1994. Prior
to joining the Company, Mr. McLaughlin owned and operated an organizational
development consulting firm.
Peter J. Schenk joined the Company as director of operations and
marketing in December 1991. He was appointed Vice President--Operations and
Marketing in March 1993 and in July 1994 became Vice President - Marketing and
Sales. From 1986 to 1991, Mr. Schenk was Vice President--Marketing for
American Consulting Services, a provider of marketing consulting services to
media companies.
James D. Miller joined the Company in January 1994 as Controller. From
1991 to 1994, he was the Corporate Accounting Manager for Christensen Motor
Yacht Corporation. Mr. Miller, a certified public accountant, was employed by
Price Waterhouse from 1987 to 1991.
Section 16 of the Securities Exchange Act of 1934 ("Section 16")
requires that reports of beneficial ownership of Barrett common stock and
changes in such ownership be filed with the Securities and Exchange Commission
("SEC") by Section 16 "reporting persons," including directors, executive
officers, and certain holders of more than 10% of the outstanding common stock
or trusts of which reporting persons are trustees. To the Company's
knowledge, all Section 16 reporting requirements applicable to known reporting
persons were complied with during 1994, except that Jack D. Williamson, Jr.,
who was an executive officer of the Company until August 1994, failed to file
reports reflecting his exercise of a stock option and sale of the shares of
common stock received upon such exercise in July 1994, and the termination of
nonvested stock options in August 1994.
Item 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth for the years
indicated the compensation awarded or paid to, or earned by, the Company's
chief executive officer and the Company's other executive officers whose
salary level and bonus in 1994 exceeded $100,000:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Underlying
Name and Principal Salary Bonus Options(2)
Position Year ($) ($) (#)
------------------ ------ -------- ------- ------------
William W. Sherertz 1994 $144,000 -- 77,000
President and 1993 144,000 -- 70,000
Chief Executive Officer 1992 138,000 -- --
Michael D. Mulholland
Vice President-Finance 1994 42,486(1) -- 20,000
and Secretary; Chief 1993 -- -- --
Financial Officer 1992 -- -- --
Christopher J. McLaughlin 1994(3) 79,583 $39,300 20,000
Vice President-Operations 1993 -- -- --
1992 -- -- --
-------------------
(1) Mr. Mulholland's current salary level of $115,000 became effective with
his date of employment, August 17, 1994.
(2) Option grants do not include stock appreciation rights ("SARs").
(3) Mr. McLaughlin became an executive officer during 1994; the amounts
shown are for the full fiscal year.
Stock Option Data
The following table provides information as to options to purchase
Barrett common stock granted to Messrs. Sherertz, Mulholland and McLaughlin
during 1994.
Option Grants in Last Fiscal Year
Individual Grants
--------------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise Grant Date
Granted(1) Employees in Price Expiration Present
Name # Fiscal Year ($/Share) Date Value ($)(3)
------ ----------- ------------ --------- ---------- ----------
William W. Sherertz 70,000 29.1% $ 9.50 2/18/2004 $455,000
7,000(2) 2.9% 8.75 8/10/2004 46,900
Michael D. Mulholland 20,000 8.3% 10.75 8/17/2004 166,000
Christopher J.
McLaughlin 20,000 8.3% 9.50 2/18/2004 130,000
(1) Options become exercisable cumulatively in four equal annual
installments beginning one year after the date of grant; provided that
the option will become exercisable in full upon the officer's death,
disability or retirement, or in the event of a change in control of the
Company. A change in control is defined in the option agreements to
include (i) any occurrence which would be required to be reported as
such by the proxy disclosure rules of the Securities and Exchange
Commission, (ii) the acquisition by a person or group (other than the
Company or one of its employee benefit plans) of 30% or more of the
combined voting power of its voting securities, (iii) with certain
exceptions, the existing directors' ceasing to constitute a majority of
the Board of Directors, (iv) certain transactions involving the merger,
or sale or transfer of a majority of the assets, of the Company, or (v)
approval by the stockholders of a plan of liquidation or dissolution of
the Company. The options include a feature which entitles an optionee
who tenders previously-acquired shares of common stock to pay all or
part of the exercise price of the option, to receive a replacement
option (a "reload option") to purchase a number of shares equal to the
number of shares tendered at an exercise price equal to the fair market
value of the common stock on the date of exercise. No SARs were granted
to Messrs. Sherertz, Mulholland or McLaughlin during 1994.
(2) Reload option as described in footnote (1) above.
(3) The values shown have been calculated based on the Black-Scholes option
pricing model and do not reflect the effect of restrictions on
transferability or vesting. The values were calculated based on the
following assumptions: (i) expectations regarding volatility of 50.3%
were based on monthly stock price data during the past 10 years for
companies deemed to be comparable; (ii) the risk-free rate of return was
assumed to be the Treasury Bond rate whose maturity corresponds to the
maturity of the option granted; and (iii) no dividends on the Barrett
common stock will be paid during the option term. The values which may
ultimately be realized will depend on the market value of the common
stock during the periods during which the options are exercisable, which
may vary significantly from the assumptions underlying the Black-Scholes
model.
Information concerning each exercise of stock options and the
fiscal year-end value of unexercised options held by Messrs. Sherertz,
Mulholland and McLaughlin as of December 31, 1994 is summarized in the table
below.
Aggregated Option Exercises in Last Fiscal Year
-----------------------------------------------
and Fiscal Year-End Option Values (1)
-------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired on Value Fiscal Year-End Fiscal Year-End(2)
---------------------------- ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------ ------------ ------------ ----------- ------------- ----------- -------------
William W. Sherertz 17,500 $91,875 -- 129,500 -- $903,000
Michael D. Mulholland -- -- -- 20,000 -- 65,000
Christopher J. McLaughlin -- -- 1,000 23,000 $10,500 121,500
(1) Messrs. Sherertz, Mulholland and McLaughlin did not exercise any SARs during 1994 and did not hold any SARs at
December 31, 1994.
(2) The values shown have been calculated based on the difference between $14.00, which was the closing sale price of
Barrett common stock reported on The Nasdaq Stock Market on December 31, 1994, and the per share exercise price of
unexercised options.
Directors' Compensation
Under the standard arrangement in effect at the end of 1994,
directors (other than directors who are full-time employees of the Company,
who do not receive directors' fees) are entitled to receive a fee of $500 for
each Board meeting attended and each meeting of a committee of the Board
attended other than a committee meeting held on the same day as a Board
meeting.
In June 1993, concurrently with the closing of the Company's
initial public offering, each person who was then a non-employee director of
the Company received a nonqualified option, as adjusted for the May 1994 two-
for-one stock split, to purchase 3,000 shares of the Company's common stock at
an exercise price of $3.50. Also, a nonqualified option for 500 shares of
common stock is granted automatically to each non-employee director whose term
begins on or continues after the date of each annual meeting of stockholders
at an exercise price equal to the fair market value of the common stock on the
date of the meeting. Accordingly, on April 20, 1994, Messrs. Ames, Beaudoin,
Meeker and Renecker each received an option, adjusted for the stock split, for
1,000 shares at an exercise price of $13.56 per share.
Payment of the exercise price of options granted to non-employee
directors may be in cash or in previously-acquired shares of Barrett common
stock. Each option includes a reload option feature to the extent that
previously-acquired shares are used to pay the exercise price. Non-employee
director options (other than reload options) become exercisable in four equal
annual installments beginning one year after the date of grant. Reload
options become exercisable six months following the date of grant. All
options granted to a non-employee director will be exercisable in full upon
the director's death, disability or retirement, or in the event of a change in
control of the Company. The option term will expire three months following
the date upon which the holder ceases to be a director other than by reason of
death, disability or retirement; in the event of death or disability, the
option will expire one year thereafter, while non-employee director options
will expire five years after retirement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table gives certain information regarding the beneficial
ownership of Barrett common stock as of February 28, 1995, by each director,
by each executive officer named in Item 11 above, and by all directors and
executive officers of the Company as a group. In addition, it gives
information about each person or group known to the Company to own
beneficially more than 5% of the outstanding shares of its common stock.
Information as to beneficial stock ownership is based on data furnished by the
persons concerning whom such information is given. Unless otherwise
indicated, all shares listed as beneficially owned are held with sole voting
and dispositive power.
Name and Amount and Percent
Address of Nature of of
Beneficial Owner Beneficial Ownership Class
---------------- -------------------- --------
Robert R. Ames 1,000(1) *
Jeffrey L. Beaudoin 5,900(1)(2) *
Stephen A. Gregg 1,000 *
Christopher J. McLaughlin 8,400(1) *
Anthony Meeker 1,000(1) *
Michael D. Mulholland -- --
Stanley G. Renecker 1,000(1) *
Nancy B. Sherertz 1,700,000 26.0%
6513 Diamond Hall Road
Easton, Maryland 21601
William W. Sherertz 1,935,000(1) 29.5%
4724 S.W. Macadam Avenue
Portland, Oregon 97201
Capital Consultants, Inc. 360,180(3) 5.5%
2300 S.W. First Avenue
Portland, Oregon 97201
Wasatch Advisors, Inc. 661,451(3) 10.1%
68 South Main Street, Suite 400
Salt Lake City, Utah 84101
All directors and executive 1,959,300(1) 29.8%
officers as a group (10 persons)
----------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Includes options to purchase Barrett common stock which are presently
exercisable as follows: Mr. Ames, 1,000 shares; Mr. Beaudoin, 1,000
shares; Mr. McLaughlin, 6,000 shares; Mr. Meeker, 1,000 shares; Mr.
Renecker, 1,000 shares; Mr. Sherertz, 24,500 shares; and all directors
and executive officers as a group, 39,700 shares.
(2) Includes 400 shares owned by Mr. Beaudoin's wife as to which he shares
voting and dispositive powers.
(3) A registered investment advisor who has filed a report of beneficial
ownership on Schedule 13G reporting sole voting and dispositive power as
to the indicated shares.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has provided staff leasing services to Oregon Lumber
Products, a sawmill company owned by William W. Sherertz, President and Chief
Executive Officer of the Company, since September 1992. During 1994, the
Company recorded revenues of $119,000 and cost of revenues of $110,000 in
connection with these services. Oregon Lumber Products ceased operating
during 1994 and as a result, there was no outstanding account receivable due
at December 31, 1994.
The Company's indebtedness to the estate of Nancy R. Barrett
throughout 1993 in the amount of $103,311 pursuant to a promissory note
bearing interest at 12% per annum and payable upon demand was paid in full
during the first quarter of 1994. Mrs. Barrett is the late mother of Nancy B.
Sherertz, who owns 26.0% of the outstanding common stock of the Company, and
the late mother-in-law of William W. Sherertz. The promissory note was
executed in 1986 in connection with the redemption of Barrett common stock
held by Mrs. Barrett.
William W. Sherertz agreed, at December 31, 1993, to personally
guarantee, at no cost to the Company and pursuant to the approval of a
majority of the disinterested outside directors, the repayment of a $111,000
account receivable from an unrelated, insolvent customer. The guarantee may
be exercised by the Company at such time as the Company determines that
further collection efforts with respect to the customer are likely to be
ineffective, but not later than December 31, 1995.
Robert R. Ames, a director of the Company, is Vice Chairman of the
board of directors of First Interstate Bank of Oregon, N.A., which has
provided an unsecured revolving credit facility in the amount of $4,000,000
and mortgage financing totaling approximately $658,000 to the Company.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of the board of
directors of the Company during 1994 were Jeffrey L. Beaudoin and Anthony
Meeker. During 1994, the Company provided services to Rose City Moving &
Storage Co., of which Mr. Beaudoin, a Barrett director and a member of its
compensation committee, is President and a majority stockholder. Barrett
recorded revenues and cost of revenues related to such services of $3,261,000
and $3,112,000, respectively. At December 31, 1994, the Company's assets
included trade accounts receivable totaling $140,000 with respect to the above
services; the highest amount of such receivables outstanding at any time
during 1994 was $246,000 as of June 30, 1994.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2.
The financial statements listed in the index set forth in
Item 8 of this report are filed as part of this report.
(b) 3.
Exhibits are listed in the Exhibit Index beginning on page
49 of this report. Each management contract or compensatory plan
or arrangement required to be filed as an exhibit to this report
is listed under Item 10, "Executive Compensation Plans and
Arrangements and Other Management Contracts," in the Exhibit
Index.
(c) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by the Registrant
during the quarter ended December 31, 1994.
Subsequent to the end of the year, the Company filed a
Current Report on Form 8-K dated March 20, 1995, to report that
the Company had obtained self-insured employer status for workers'
compensation purposes in the state of California and that the
Company will incur a pre-tax charge of $350,000 for workers'
compensation expense in the first quarter of 1995 in connection
with a serious work-related injury sustained by an employee.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 28, 1995 By: William W. Sherertz
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of March, 1995.
Principal Executive Officer and Director:
William W. Sherertz President and Chief Executive Officer
and Director
Principal Financial Officer:
Michael D. Mulholland Vice President-Finance and
Secretary
Principal Accounting Officer:
James D. Miller Controller
Other Directors:
Robert R. Ames Director
Jeffrey L. Beaudoin Director
Stephen A. Gregg Director
Anthony Meeker Director
Stanley G. Renecker Director
EXHIBIT INDEX
Exhibits
3.1 Charter of the registrant, as amended. Incorporated by reference to
Exhibit 3 to the registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
3.2 Bylaws of the registrant, as amended.
4.1 Loan Agreement between the registrant and First Interstate Bank of
Oregon, N.A., dated August 12, 1993 ("Loan Agreement"). Incorporated by
reference to Exhibit 10 to the registrant's Quarterly Report on Form 10-
Q for the quarter ended September 30, 1993.
4.2 First Amendment to Loan Agreement dated March 29, 1994. Incorporated by
reference to Exhibit 4 to the registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994.
4.3 Second Amendment to Loan Agreement dated May 31, 1994, together with
Optional Advance Note dated May 31, 1994. Incorporated by reference to
Exhibit 4 to the registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
4.4 Third Amendment to Loan Agreement dated January 3, 1995, together with
Optional Advance Note dated January 3, 1995.
The registrant has incurred other long-term indebtedness as to which the
amount involved is less than 10 percent of the registrant's total
assets. The registrant agrees to furnish copies of the instruments
relating to such indebtedness to the Commission upon request.
10 Executive Compensation Plans and Arrangements and Other Management
Contracts.
10.1 1993 Stock Incentive Plan of the registrant as amended March 8, 1994.
Incorporated by reference to Exhibit 10.1 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
10.2 Form of Indemnification Agreement with each director of the registrant.
Incorporated by reference to Exhibit 10.8 to the registrant's
Registration Statement on Form S-1 (No.33-61804).
11 Statement of Calculation of Average Common Shares Outstanding.
23 Consent of Price Waterhouse LLP, independent accountants.
27 Financial Data Schedule.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
EX-3.2
2
BYLAWS
EXHIBIT 3.2
BYLAWS OF BARRETT BUSINESS SERVICES, INC.
ARTICLE I. STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders
shall be held at 10:00 a.m., on the third Thursday in May of each year
commencing in 1995, or at such other time and date in May of each year as the
board of directors may establish, for the purpose of electing directors and
for the transaction of such other business as may come before the meeting.
Section 2. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, may be called by the president or
by the board of directors, and shall be called by the secretary upon written
request by stockholders entitled to cast 25 percent of all votes entitled to
be cast at the meeting stating the purpose of the meeting and the matters
proposed to be acted upon at the meeting and upon payment by such stockholders
to the corporation of the costs of the notice of the meeting. Notwithstanding
the foregoing, a special meeting need not be called by the secretary to
consider any matter which is substantially the same as a matter voted on at
any special meeting of the stockholders held during the preceding 12 months
unless requested by stockholders entitled to cast a majority of all votes
entitled to be cast at the meeting.
Section 3. Place of Meeting. The place of meeting for all annual
and special meetings of the stockholders shall be such place within the United
States as shall be determined by the board of directors. In the absence of
any such determination, all meetings of stockholders shall be held at the
principal office of the corporation in the state of Oregon.
Section 4. Notice of Meeting; Waiver. Written or printed notice
stating the place, day, and hour of the meeting and, in case of a special
meeting or if otherwise required by law, the purpose or purposes for which the
meeting is called, shall be given by the secretary not earlier than 90 nor
less than 10 days before the date of the meeting, either personally or by
mail, to each stockholder of record entitled to vote at or to receive notice
of such meeting. If given personally, such notice shall be effective when
delivered to the stockholder or when left at the stockholder's residence or
usual place of business. If given by mail, such notice shall be effective
when deposited in the United States mail, addressed to the stockholder at his
or her address as shown in the corporation's current record of stockholders,
with postage thereon prepaid. A stockholder entitled to notice of a meeting
waives such notice if he or she is present at the meeting in person or by
proxy. A written waiver of notice of a meeting signed by a stockholder
entitled to such notice, whether before or after the time stated therein,
which is filed with the records of stockholders meetings, shall be equivalent
to the giving of such notice. A meeting of stockholders convened on the date
for which it was called may be adjourned from time to time without further
notice to a date not more than 120 days after the original record date for the
meeting.
Section 5. Quorum; Manner of Acting. The presence in person or by
proxy of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting shall constitute a quorum. If a quorum is present, a
majority of all the votes cast at the meeting is sufficient to approve any
matter which properly comes before the meeting unless the vote of a greater
proportion of all the votes cast or voting by classes is required by the
Maryland General Corporation Law or the charter.
Section 6. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stockholder or by his
or her duly authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after 11 months from the date of its execution unless otherwise
expressly provided in the proxy.
Section 7. Voting of Shares. Each outstanding share of the
corporation's common stock shall be entitled to one vote upon each matter
submitted to a vote at a meeting of the stockholders except that shares owned,
directly or indirectly, by another corporation in which the corporation owns,
directly or indirectly, shares entitled to cast a majority of all the votes
entitled to be cast by all shares of such other corporation shall not be voted
at any meeting or counted in determining the total number of outstanding
shares at any given time.
Section 8. Acceptance of Votes. If the name signed on a vote,
consent, waiver, or proxy appointment corresponds to the name of a
stockholder, the corporation shall be entitled to accept the vote, consent,
waiver, or proxy appointment and give it effect as the act of the stockholder.
If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its stockholder, the corporation shall
nevertheless be entitled to accept the vote, consent, waiver, or proxy
appointment and give it effect as the act of the stockholder if:
a. The stockholder is a corporation, and the name signed
purports to be that of the president, a vice-president, or a proxy
appointed by either of them or by another person appointed under a
bylaw or resolution of the board of directors of such stockholder, a
certified copy of which is presented to the corporation.
b. The stockholder is an entity, other than a corporation,
and the name signed purports to be that of an officer or agent of
the entity.
c. The name signed purports to be that of an administrator,
executor, guardian, or conservator representing the stockholder.
d. The name signed purports to be that of a receiver or
trustee in bankruptcy of the stockholder.
e. The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the stockholder.
f. Two or more persons are the stockholder whether as
fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, and the name signed
purports to be the name of at least one of the co-owners.
The corporation shall be entitled to reject a vote, consent,
waiver, or proxy if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the stockholder.
Section 9. Action Without Meeting. Any action required or
permitted by the Maryland General Corporation Law to be taken at a meeting of
the stockholders may be taken without a meeting if there are filed with the
records of stockholders meetings a consent in writing which sets forth the
action so taken signed by each stockholder entitled to vote on the matter and
a written waiver of any right to dissent signed by each stockholder entitled
to notice of the meeting but not entitled to vote at the meeting.
ARTICLE II. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed under the direction of its board of directors.
Section 2. Number, Tenure, and Qualifications. The board of
directors shall consist of not more than nine persons and not less than three
persons, the exact number within such specified limits to be fixed from time
to time by resolution of a majority of the entire board, provided that so long
as there are less than three stockholders the number of directors may be fixed
at less than three but not less than the number of stockholders. Each
director shall hold office until the next annual meeting of the stockholders
and until his or her successor shall have been elected and qualified unless
sooner removed from office as hereinafter provided. Directors need not be
residents of the state of Maryland or stockholders of the corporation.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
after, and at the same place as, the annual meeting of stockholders. The
board of directors may provide by resolution the time and place, either within
or without the state of Maryland, for the holding of additional regular
meetings without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or without the state of
Maryland, as the place for holding any special meeting of the board of
directors called by them.
Section 5. Notice; Waiver. Notice of the date, time, and place of
any special meeting shall be given at least 36 hours previously thereto by
written notice delivered personally or given by facsimile transmission,
teletype, or other form of wire communication, or by mail or private carrier,
to each director at his or her business address. Such notice shall be deemed
effective at the earliest of the following: (a) when received, (b) three days
after its deposit in the United States mail, as evidenced by the postmark, if
mailed postpaid and correctly addressed, and (c) on the date shown on the
return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the director. A
director's attendance at, or participation in, a meeting shall constitute a
waiver of notice of such meeting, except where a director at the beginning of
the meeting, or promptly upon the director's arrival, objects to holding of
the meeting or the transacting of business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. A written
waiver of notice of a meeting signed by a director entitled to such notice,
whether before or after the time stated therein, which specifies the meeting
for which notice is waived and which is filed with the records of the meeting
shall be equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. Quorum. A majority of the number of directors fixed
from time to time pursuant to Section 2 of this Article II shall constitute a
quorum for the transaction of business at any meeting of the board of
directors, but, if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
Section 7. Manner of Acting. The action of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the board of directors.
Section 8. Vacancies. Any vacancy occurring in the board of
directors, except a vacancy resulting from an increase in the number of
directors, may be filled by the affirmative vote of a majority of the
remaining directors, whether or not sufficient to constitute a quorum. A
vacancy resulting from an increase in the number of directors may be filled by
the affirmative vote of a majority of the entire board of directors.
Section 9. Presumption of Assent. A director who is present at a
meeting of the board of directors when corporate action is taken shall be
presumed to have assented to the action taken unless the director announces
his or her dissent at the meeting and (a) the director's dissent is entered in
the minutes of the meeting; or (b) the director files his or her written
dissent with the secretary of the meeting before its adjournment; or (c) the
director forwards his or her written dissent within 24 hours after the meeting
is adjourned, by registered or certified mail, to the secretary of the meeting
or of the corporation. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 10. Removal of Directors. All or any number of the
directors may be removed by the stockholders with or without cause at a
meeting expressly called for that purpose by the affirmative vote of a
majority of all votes entitled to be cast for the election of directors. The
notice of such meeting shall state that the purpose or one of the purposes of
the meeting is the removal of the director or directors.
Section 11. Compensation. By resolution of the board of
directors, each director may be paid an annual fee as director and, in
addition thereto, a fixed sum for attendance at each meeting of the board of
directors and executive committee or other committees and his expenses, if
any, of attendance at any such meeting. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 12. Action Without Meeting. Any action required or
permitted by the Maryland General Corporation Law to be taken at a meeting of
the board of directors may be taken without a meeting if a consent in writing
which sets forth the action so taken is signed by each member of the board of
directors and filed with the minutes of proceedings of the board of directors.
Section 13. Meetings By Telephone. Meetings of the board of
directors may be held by means of conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time, and such participation shall constitute presence
in person at the meeting.
Section 14. Chairman and Vice Chairman. The board of directors
shall appoint from among its members a chairman and a vice chairman who shall
serve at the pleasure of the board of directors. The chairman, or in his
absence the vice chairman, shall preside at the meetings of the board of
directors.
ARTICLE III.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors may appoint from
among its members an executive committee to consist of a chairman and one or
more other directors. The appointment of such committee, the delegation of
authority to it or action by it under that authority shall not constitute of
itself compliance by any director not a member of the committee with the
standard provided in the Maryland General Corporation Law for the performance
of duties by directors.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee and except
also that neither the executive committee nor any other committee of the board
of directors appointed pursuant to Section 9 of this Article III shall have
the authority to (a) declare dividends or distributions on stock; (b) fix the
terms of stock subject to classification or reclassification or the terms on
which any stock may be issued except according to a general formula or method
specified by the board of directors by resolution or by adoption of a stock
option or other plan; (c) recommend to the stockholders any action which
requires stockholder approval; (d) amend the bylaws; or (e) approve a merger
or share exchange which does not require stockholder approval.
Section 3. Tenure. Each member of the executive committee shall
hold office until the next regular annual meeting of the board of directors
following his or her appointment and until his or her successor is appointed
as a member of the executive committee.
Section 4. Meetings; Notice; Waiver. Regular meetings of the
executive committee or any other committee of the board of directors appointed
pursuant to Section 9 of this Article III may be held without notice at such
times and places as the committee may fix from time to time by resolution.
Special meetings of the executive committee or any such other committee may be
called by any member thereof upon not less than 24 hours' notice stating the
place, date and hour of the meeting. The provisions of Section 5 of Article
II shall apply to the method for giving notice of special meetings of the
executive committee or any such other committee and to the waiver of notice of
any such meetings. The notice of a meeting of the executive committee or any
such other committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum; Manner of Acting. A majority of the members of
the executive committee or any such other committee shall constitute a quorum
for the transaction of business at any meeting thereof, and the act of a
majority of the members present at a meeting at which a quorum is present
shall be the act of the committee.
Section 6. Vacancies. Any vacancy in the executive committee or
any such other committee may be filled by the board of directors.
Section 7. Resignations and Removal. Any member of the executive
committee or any such other committee may be removed at any time with or
without cause by the board of directors. Any member of the executive
committee or any such other committee may resign as a member of the committee
at any time by giving written notice to the chairman of the board or secretary
of the corporation, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 8. Procedure. The chairman of the executive committee
shall be the presiding officer of the executive committee. The executive
committee and any such other committee shall fix its own rules of procedure
which shall not be inconsistent with these bylaws. The committee shall keep
regular minutes of its proceedings and report the same to the board of
directors for its information at the meeting thereof held next after the
proceedings shall have been taken.
Section 9. Appointment of Other Committees of the Board of
Directors. The board of directors may from time to time create any other
committee or committees of the board of directors and appoint members of the
board of directors to serve thereon. Each member of any such committee shall
hold office until the next regular annual meeting of the board of directors
following his or her appointment and until his or her successor is appointed
as a member of such committee. Each committee shall have two or more members
and, to the extent specified by the board of directors, may exercise the
powers of the board subject to the limitations set forth in Section 2 of this
Article III.
Section 10. Action Without a Meeting. Any action that may be
taken by the executive committee or any such other committee at a meeting may
be taken without a meeting if a consent in writing which sets forth the action
so taken is signed by each member of the committee and filed with the minutes
of proceedings of the committee.
Section 11. Meetings By Telephone. Meetings of any committee of
the board of directors may be held by means of conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time, and such participation shall constitute presence
in person at the meeting.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be elected by the
board of directors. The board of directors may elect one or more vice
presidents (the number thereof to be determined by the board of directors) and
such other officers and assistant officers as may be deemed necessary.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually at the first meeting of the board of
directors held after each annual meeting of the stockholders. A person may
hold more than one office but may not serve concurrently as both president and
vice president of the corporation. Each officer shall hold office until his
or her successor shall have been duly elected, or until his or her death, or
until he or she shall resign or shall have been removed in the manner
hereinafter provided.
Section 3. Removal. The board of directors may remove any officer
at any time. The election of an officer shall not of itself create contract
rights, and the resignation or removal of an officer shall not affect the
contract rights, if any, of the corporation or the officer.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the board of directors for
the unexpired portion of the term.
Section 5. President. The president shall be the chief executive
officer of the corporation and, subject to the control of the board of
directors, shall in general supervise and control all the business and affairs
of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence of the chairman or vice chairman, at all
meetings of the board of directors. He or she may sign, with the secretary or
any other proper officer of the corporation thereunto authorized by the board
of directors, certificates for shares of stock of the corporation and any
deeds, mortgages, bonds, contracts, or other instruments which the board of
directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors, or
by these bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed; and in general he or she
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the board of directors from time to time.
Section 6. Vice Presidents. In the absence of the president, or
in the event of his or her death, inability, or refusal to act, the vice
president (or, in the event there be more than one vice president, the vice
presidents in the order designated at the time of their election, or, in the
absence of any designation, then in the order of their election) shall perform
the duties of the president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. Any vice
president may sign, with the secretary or an assistant secretary, certificates
for shares of stock of the corporation; and shall perform such other duties as
from time to time may be assigned to him or her by the president or by the
board of directors.
Section 7. Secretary. The secretary shall (a) keep the minutes of
the stockholders' and of the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by law; (c) be
custodian of the corporate records and responsible for the authentication of
such records; (d) keep or cause to be kept a register of the post office
address of each stockholder which shall be furnished to the secretary by such
stockholder; (e) sign, with the president or a vice president, certificates
for shares of stock of the corporation, the issuance of which shall have been
authorized by the board of directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to him or her by the president or by the board of directors.
Section 8. Treasurer. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the board of directors shall
determine. He or she shall (a) have charge and custody of and be responsible
for all funds and securities of the corporation, receive and give receipts
for moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as shall be selected in accordance with the
provisions of Article V of these bylaws; and (b) in general perform all the
duties incident to the office of treasurer and such other duties as from time
to time may be assigned to him or her by the president or by the board of
directors.
Section 9. Assistant Secretaries and Assistant Treasurers. The
assistant secretaries, when authorized by the board of directors, may sign,
with the president or a vice president, certificates for shares of stock of
the corporation, the issuance of which shall have been authorized by the board
of directors. The assistant treasurers shall, respectively, if required by
the board of directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the board of directors shall determine.
The assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the board of directors.
Section 10. Salaries. The salaries of the officers shall be fixed
from time to time by the board of directors and no officer shall be prevented
from receiving such salary by reason of the fact that he or she is also a
director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation;
and such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the board of directors. Such authority
may be general or confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts, or other
orders for the payment of money, notes, or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents, of the corporation and in such manner as shall from
time to time be determined by resolution of the board of directors.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies, or other depositaries as selected by the
officer or officers authorized by the board of directors to make such
selection.
ARTICLE VI. CERTIFICATES FOR SHARES
AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing
shares of stock of the corporation shall be in such form as shall be
determined by the board of directors. Such certificates shall be signed
manually by the president or a vice president and by the secretary or an
assistant secretary and may be sealed with the corporate seal or a facsimile
thereof. The signatures of such officers on a certificate may be facsimiles
if the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the corporation itself or an employee of the
corporation. All certificates for shares or stock shall be consecutively
numbered or otherwise identified. The name and address of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation for transfer shall be canceled
and no new certificates shall be issued until the former certificate for a
like number of shares shall have been surrendered and canceled, except that in
case of a lost, stolen, destroyed, or mutilated certificate a new certificate
may be issued therefor on such terms and indemnity to the corporation as the
board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of stock of the
corporation shall be made only on the stock transfer books of the corporation
by the holder of record thereof or by his or her legal representative, who
shall furnish proper evidence of authority to transfer, or by his or her
attorney thereunto authorized by power of attorney duly executed and filed
with the secretary of the corporation, and on surrender for cancellation of
the certificate for such shares. The person in whose name shares of stock
stand on the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
ARTICLE VII. AMENDMENTS
The bylaws may be adopted, altered, or repealed solely by the board
of directors.
EX-4.4
3
THIRD AMENDMENT TO LOAN AGREEMENT
EXHIBIT 4.4
THIRD AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT, made and entered into as of the
3rd day of January, 1995, by and between FIRST INTERSTATE BANK OF OREGON, N.A.
(hereinafter referred to as "Bank"), and BARRETT BUSINESS SERVICES, INC.
(hereinafter referred to as "Borrower").
RECITALS:
The parties entered into a loan agreement dated as of August 12,
1993 (as amended from time to time the "Agreement"), and the parties now
desire to amend the Agreement as hereinafter provided. Capitalized terms not
otherwise defined herein shall have the meanings assigned to them in the
Agreement.
NOW, THEREFORE, the parties mutually agree as follows:
1. The attached Exhibit A which is by this reference incorporated
herein shall replace the current Exhibit A, and Exhibit B shall remain the
same.
2. Except as herein amended, each and all of the terms and
provisions of the Agreement shall be and remain in full force and effect
during the term thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
to the Agreement, in duplicate, as of the date first hereinabove written.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
THE 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 THE BANK TO BE ENFORCEABLE.
Borrower hereby acknowledges receipt of a copy of this Amendment.
BARRETT BUSINESS SERVICES, INC. FIRST INTERSTATE BANK OF
OREGON, N.A.
By: MICHAEL D. MULHOLLAND By: LARRY C. ELLIS
Title: Vice President-Finance Title: Vice President
January 3, 1995
OPTIONAL ADVANCE NOTE
On May 31, 1995, the undersigned promises to pay in lawful money of
the United States of America, to the order of FIRST INTERSTATE BANK OF OREGON,
N.A. ("Bank"), at its Oregon Corporate Division ("OCD"), 1300 S.W. Fifth
Avenue, Post Office Box 3131, Portland, Oregon 97208, the principal sum of
Four Million and No/100 Dollars ($4,000,000.00), or so much thereof as shall
have been advanced by Bank to Undersigned and not repaid, together with
interest thereon from the date of such advance.
This Note is given to avoid the execution by undersigned of an
individual note for each advance by Bank to undersigned. In consideration
thereof, undersigned agrees that Bank's record entries of transactions
pursuant to this Note, together with Bank's written advice of charges, shall
be conclusive evidence of borrowings, charges, and payments made pursuant
hereto.
Interest shall accrue on the daily outstanding principal owing
hereon at the per annum rate of one and three-quarter percent (1.75%) above
the Federal Funds Rate so long as undersigned is on the Bank's corporate cash
management system; otherwise interest on the daily outstanding principal owing
hereon shall accrue at the per annum rate of Bank's Prime Rate of interest in
effect from time to time. "Federal Funds Rate" means, for any day, the
interest rate per annum representing the offering rate for overnight federal
funds as determined by Bank at the time of request. Bank's Prime Rate refers
to Bank's publicly announced prime rate which is a base rate used to price
some loans. It may not be the lowest rate at which Bank makes any loan. Each
change in said rate is to become effective on the effective date of each
change announced by Bank. Interest shall be computed on the basis of a 365-
day year or 366-day year, as applicable, and actual days elapsed.
Interest shall be payable on the last business day of each month,
beginning February 1, 1995, based on the daily outstanding unpaid principal
balances during the preceding month. The unpaid balance of this obligation at
any time shall be the aggregate amount advanced hereunder, plus accrued
interest, less the amount of payments made hereon by or for the undersigned.
Advances hereunder may also be made by Bank at the oral or written
request of William W. Sherertz, Jr. or Michael D. Mulholland, who are each
authorized to request advances until written notice of the revocation of such
authority is received by Bank at its OCD. Any such advances or advances made
by Bank in the good faith belief that William W. Sherertz, Jr. or Michael D.
Mulholland made such request, shall be conclusively presumed to have been made
to or for the benefit of undersigned when such amounts are deposited to the
credit of account number 003 0181390 of undersigned at Bank's Head Office
Branch ("Branch"), regardless of the fact that persons other than those
authorized hereunder may have authority to draw against such account or may
have made such requests.
Payment of interest hereunder shall be made when due. Bank is
hereby authorized to charge undersigned's account number 003 0181390 for the
amount of interest due on the due dates. Repayments of principal shall be
made by charging undersigned's account number 003 0181390 at the oral or
written request of William W. Sherertz, Jr. or Michael D. Mulholland. Bank
shall send undersigned an advice of any such charges when made.
All communications, instructions or directions by telephone or
otherwise to Bank are to be directed to Bank's OCD.
Upon the occurrence of an Event of Default (as defined in the Loan
Agreement), then, at the option of the holder of this Note, without prior
notice, the entire indebtedness represented hereby shall immediately become
due and payable. Failure or delay of the holder to exercise this option shall
not constitute a waiver of the right to exercise the same in the event of
subsequent default, or in the event of continuance of any existing default
after demand for the performance of the terms hereof.
Undersigned shall pay upon demand any and all expenses, including
reasonable attorney fees, incurred or paid by the holder of this Note without
suit or action in attempting to collect funds due under this Note. In any
suit or action instituted for the collection of any sums due hereunder, the
prevailing party shall be entitled to recover such sum as the court may
adjudge reasonable for its attorney fees, both in the trial court and any
appellate court.
This Note is subject to the terms and conditions of that certain
loan agreement dated August 12, 1993, between the undersigned and Bank, as
amended from time to time ("Loan Agreement").
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
THE 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 THE BANK TO BE ENFORCEABLE.
UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THIS NOTE.
BARRETT BUSINESS SERVICES, INC.
By: MICHAEL D. MULHOLLAND
Title: Vice President-Finance
EX-11
4
STATEMENT OF CALCULATION OF AVERAGE COMMON
SHARES OUTSTANDING
EXHIBIT 11
BARRETT BUSINESS SERVICES, INC.
STATEMENT OF CALCULATION OF AVERAGE
COMMON SHARES OUTSTANDING
Three Months
Ended Year Ended
Dec. 31, 1994 Dec. 31, 1994
------------- -------------
Primary Earnings Per Share
Weighted average number of shares 6,349,861 6,333,378
Stock option plan shares to be issued at
prices ranging from $3.500 to
$13.563 per share 311,830 320,013
Warrant issues at a price of
$4.20 per share 200,000 200,000
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 (236,156) (262,133)
--------- ---------
Total Primary Shares 6,625,535 6,591,259
========= =========
Fully Diluted Earnings Per Share:
Weighted average number of shares 6,349,861 6,333,378
Stock option plan shares to be
issued at prices of ranging from
$3.500 to $13.563 per share 311,830 320,013
Warrant issues at a price of
$4.20 per share 200,000 200,000
Less: Assumed purchase at the higher
of ending or 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 (230,251) (219,256)
--------- ---------
Total Diluted Shares 6,631,440 6,634,135
========= =========
EX-23
5
CONSENT OF INDEPENDENT ACCOUNTANTS
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-71792, 33-55117 and 33-52871) of Barrett
Business Services, Inc. of our report dated February 6, 1995 appearing on
page 21 of this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Portland, Oregon
March 29, 1995
EX-27
6
FDS FOR 1994 10-K
5