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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year ended December 31, 1993Commission File Number 0-21886
BARRETT BUSINESS SERVICES, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0812977
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
4724 S.W. Macadam Avenue 97201
Portland, Oregon (Zip Code)
(Address of principal
executive offices)
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. X
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
$22,284,768 at February 25, 1994
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 25, 1994
Common Stock, Par Value $.01 Per Share 3,164,000 Shares
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference
and the Part of the Form 10-K into which the document is incorporated:
Portions of the registrant's definitive proxy statement for its 1994
annual meeting of stockholders are incorporated by reference into Part
III of Form 10-K.
INDEX
PART I Page
Item 1. BUSINESS 3
Item 2. PROPERTIES 11
Item 3. LEGAL PROCEEDINGS 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
EXECUTIVE OFFICERS OF THE REGISTRANT 12
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 12
Item 6. SELECTED FINANCIAL DATA 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 53
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 53
(See Part I for Executive Officers of the Registrant)
Item 11. EXECUTIVE COMPENSATION 53
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 53
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 53
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 53
SIGNATURES 54
EXHIBIT INDEX 55
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 branch network of 14 offices, nine located throughout
the western half of Oregon, two in northern California, two in Maryland,
and one in Seattle, Washington. 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.
Recent Acquisitions
In March 1993, the Company acquired a branch office of CDI
Corporation-West in Sacramento, California, with annual revenues of
approximately $300,000. The acquired temporary services operations were
combined with the Company's existing Sacramento office.
The Company completed the purchase of the assets of Personnel
Management & Consulting, Inc. ("PMC"), with unaudited revenues of
$800,000 for the year ended December 31, 1993, in February 1994. PMC,
which had been operating since mid-1992, had offices located in each of
Easton and Salisbury, Maryland, and Seaford, Delaware.
On March 7, 1994, the acquisition of the assets of Golden West
Temporary Services, operating through four offices in the San Francisco
Bay Area of California, was consummated by the Company. The acquired
assets included office equipment and leases, customer and employee
lists, and trade names, logos and goodwill. The acquired operations had
total revenues of $24,533,000 for the year ended December 31, 1993. The
purchase price of $4,514,000 was paid in cash from working capital and
was determined by arm's-length negotiation between the parties.
Barrett's growth strategy includes expanding operations at existing
offices, primarily through its ongoing marketing and sales program, as
well as acquiring additional personnel-related businesses, both in its
existing markets and in other geographic areas. The Company reviews
acquisition opportunities on an ongoing basis, but there is no assurance
that any additional acquisitions will be completed in the foreseeable
future.
Temporary Services
General. Temporary employees permit businesses to meet peak or
extraordinary demands caused by such factors as seasonal increases,
vacations, illnesses, special projects and marketing promotions without
incurring the ongoing expense and administrative responsibilities
associated with recruiting, hiring and retaining additional permanent
employees. The use of temporary services permits businesses to apply to
their personnel requirements the "just-in-time" approach adopted by many
manufacturers in recent years to manage raw materials inventories. By
maintaining a core of permanent employees to meet 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 and to lower the amounts they are
required to spend overall on recruiting and training efforts, severance
compensation, recordkeeping, payroll and other personnel management
functions.
The Company's Temporary 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, and generated
approximately 73% of the Company's 1993 temporary services revenues.
Clerical workers, who accounted for approximately 19% of 1993 temporary
services revenues, include secretaries, receptionists, typists and
clerks. Technical personnel include electronic parts assembly workers,
engineers in a variety of fields, including aerospace, chemicals,
electronics and general industry, and designers and drafters of
electronic parts; these workers represented approximately 8% of the
Company's 1993 temporary services revenues.
Temporary assignments may last a day, a week or months, depending
upon the client's requirements. The client 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 accomplish a nonrecurring or periodic task, such as
converting to a new data processing system or taking a physical
inventory.
The Company's temporary services customers range in size from small
local firms to large national companies using the Company's services on
a local basis. The Company provided temporary services to more than
3,600 clients during 1993, up from approximately 2,800 clients in 1992.
None of the Company's temporary services clients individually accounted
for more than 5% of its total annual revenues during 1993.
Business Strategy. The Company emphasizes prompt, personalized
service in assigning quality, trained personnel at competitive rates to
users of its temporary 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 has an
understanding of the unique factors affecting its clientele that enables
it to personalize its response to its customers' needs.
Barrett provides extensive training to its branch office managers
and other sales personnel to develop and maintain a high level of
service and professionalism. Its ongoing training program includes in-
house presentations, outside seminars, video instruction and role
playing. Both the successful solicitation of new customers and the
retention of existing accounts are rewarded through a commission
structure. Sales commissions represent between one-third and two-thirds
of a salesperson's compensation. In addition, branch office staff
participate in the Company's profit-sharing program. See "Employees and
Employee Benefits," below.
Recruiting. The Company employs a variety of methods to recruit
its workforce of temporary employees, including newspaper advertising
and flyers 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 has generally found it easier
to recruit and retain qualified personnel during periods of higher
unemployment and must devote more resources to locating new employees
during upturns in the economies 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,
resulting in lower gross profit margins.
Each employee applicant undergoes an interview, skills assessment
and reference verification process to determine level of ability and
past job performance. Following hire and placement, performance is
reviewed with clients to assure customer satisfaction and quality
control. Barrett provides its customers with an unconditional guarantee
of performance; if a client is dissatisfied for any reason, no payment
is required.
The Company believes that its 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 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 personal sales presentations by its branch office
managers and trained sales force and, to a lesser extent, through
advertising in various publications, including local newspapers and the
Yellow Pages. The Company also benefits from referrals by existing
clients; staff leasing clients frequently use Barrett's temporary
services as well.
Following development of a preliminary profile of a prospective
client's needs, the Company schedules a meeting with the client's
personnel manager to explain the Company's services. Based on this
information, Barrett develops an hourly charge for its temporary
services which is designed to be competitive in relation to the
marketplace. The actual cost to the client of an employee typically
ranges from 135% to 150% of salary, including employment taxes, employee
benefits and insurance 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 coverage.
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, with the result that gross margins decline.
Billing. The Company prepares weekly customer invoices immediately
following each payroll period through the centralized payroll and
billing operations at its corporate headquarters. Barrett has not
experienced significant problems in collecting accounts to date, which
it attributes to client satisfaction with its services, its analysis of
potential clients' credit history prior to agreeing to provide services,
and regular monitoring of accounts.
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 encouraged these small to mid-sized
businesses to consider staff leasing.
The Company's Staff Leasing Services. In a staff leasing
arrangement, the Company hires, as its own employees, workers who were
previously employed directly by the client and then leases these
employees to the client. The Company assumes responsibility for
handling some or all personnel-related matters, including payroll and
payroll taxes, employee benefits, health and workers' compensation
insurance coverage and related administrative paperwork. The Company
also hires and fires leased employees, although the client 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 its worker leasing program to Maryland
in the first quarter of 1994. The number of Barrett's staff leasing
clients increased from approximately 300 at December 31, 1992, to
approximately 425 at year-end 1993. The Company has entered into staff
leasing arrangements with a wide variety of clients, including
reforestation companies, moving and shipping companies and professional
firms. 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 1993.
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. Barrett also offers a
variety of employee benefits, which it can generally provide on a cost-
effective basis due to its large size relative to its clients. The
Company believes these benefits reduce employee turnover and increase
the appeal of staff leasing arrangements to most clients. 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 lease agreement provides for a minimum one-
year term, with successive one-year renewals unless notice of
termination is given by either party. The agreement permits
cancellation by either party upon 60 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 and Maryland branches using its branch
office sales staff. 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 prior overall personnel costs per employee. Barrett also
offers significant financial incentives to clients to maintain a safer
work environment, thus enabling clients to achieve additional savings.
Typically, clients share these incentives with their leased employees.
Billing. Through centralized operations at the Company's
headquarters in Portland, Oregon, weekly payroll checks are prepared for
each staff leasing client 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 to date, which it
attributes to the prompt turnover of receivables, its analysis of
potential clients' credit history, and regular monitoring of accounts.
Self-Insured Workers' Compensation Program
The Company believes that its self-insured workers' compensation
program has been key 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 barred
from seeking other damages from their employer for workplace injuries.
Most states require employers to maintain workers' compensation
insurance coverage 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 and
November 1993, the Company became a self-insured employer for workers'
compensation coverage in Oregon and Maryland, respectively. The
regulations governing self-insured employers in each state require the
Company to maintain deposits of cash, government securities or other
financial instruments to cover potential claims losses.
Barrett also maintains excess workers' compensation insurance
coverage for 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 an annual policy. The
excess insurance policy contains 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 maintains workers'
compensation insurance coverage through state programs in California and
Washington and, to a limited extent, through independent insurance
carriers in Washington. The Company is presently pursuing applications
to become a self-insured employer in California and Washington.
Workplace Safety Program. In the late 1980's, the Company saw an
opportunity to package and 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, which was expanded to Maryland in 1993, 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 precautions. 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 reduce the
risk of injury. The Company's third-party administrators for workers'
compensation claims also assist the Company in performing safety
inspections of client worksites and provide 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 reductions in the number and
severity of work-related injuries. If the cost of claims is less than
agreed upon amounts, the Company pays an annual amount based on a
percentage of the staff leasing client's payroll. Clients typically
share these incentives with their leased employees. Staff leasing
clients and leased employees are thus given an economic incentive to
cooperate in maintaining a safer work environment and reducing the
frequency of fraudulent claims.
During 1993, Barrett implemented a corporate-wide mandatory 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
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 doctors to encourage
efficient medical management of cases, denying questionable claims, and
negotiating early settlements to cut off future case development and
costs.
In July 1993, the Company acted to decentralize responsibility for
safety and claims management to its branch offices in Oregon and
Maryland. This operational change effectively tripled the total
personnel resources dedicated to injury prevention and claims expense
control, enabling the Company to conduct more effective on-site safety
training and more thorough and timely investigation of claims.
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 coverage, and safety
incentive payments. Although not directly tied to the size of the
Company's payroll, the number of claims and related loss payments may be
expected to increase with growth in the total number of employees.
Third-party administration 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 amount 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 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 and Maryland.
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 reflects its liability for
the ultimate payment of all incurred claims and claims adjustment
expenses by establishing loss and allocated loss adjustment expense
reserves, which are balance sheet liabilities representing estimates of
future amounts needed 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
and allocated loss adjustment expense payments. The estimate reflects
an informed judgment based on established reserving practices and the
experience and knowledge of Barrett's third-party administrators
regarding the nature and value of the claim, as well as the estimated
expense of settling the claim, including legal and other fees and
expenses of administering claims ("allocated loss adjustment expenses").
The reserves also provide for losses incurred but not reported ("IBNR"),
as well as future development in excess of case reserves on losses
reported to the Company (together, "IBNR reserves").
As part of the reserving process, historical data are reviewed, and
consideration is given to the anticipated effect of various factors,
including known and anticipated legal developments, changes in social
attitudes, inflation and economic conditions. Reserve amounts are
necessarily based on management's estimates, and as other data become
available and are reviewed these estimates and judgments are revised,
resulting in increases or decreases to existing reserves. As of
December 31, 1993, the Company's loss reserves totaled $2,434,000,
compared to $1,337,000 at year-end 1992. The total number of self-
insured claims reported in 1993 was 1,085, compared to 979 for 1992.
Barrett has engaged a nationally-recognized, independent actuarial firm
to review the Company's reserves periodically. Based in part on such
review, the Company believes its total loss reserves at December 31,
1993, make adequate provision for its workers' compensation loss and
allocated loss adjustment expense obligations at such date. There can,
however, be no assurance that the Company's actual future workers'
compensation obligations will not exceed the amount of its reserves,
with a corresponding negative impact 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, 1993, the Company had approximately
7,615 employees, including approximately 3,900 temporary services
employees, 3,600 leased employees and 115 managerial, sales and
administrative employees. The number of employees at any given time can
vary significantly due to special project requests, seasonality and
other factors. None 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 keep the Company's
customer lists and other proprietary information confidential. Barrett
believes its employee relations are good.
Benefits offered to Barrett's temporary employees include group
health insurance, a cafeteria plan permitting employees to use pre-tax
dollars to obtain various services, including medical, dental and child
care, and a 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 bonus plans for its managerial and
administrative personnel.
Regulatory and Legislative Issues
The Company is subject to the laws and regulations governing self-
insurers under the workers' compensation systems in Oregon and Maryland.
In addition, legislation was adopted in Oregon in 1993 which requires a
worker 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. Worker leasing companies are required to notify the
Workers' Compensation Division if they provide workers' compensation
coverage for their leased employees, and an insurer providing such
coverage is required to use the experience of the client for the purpose
of assigning an experience rating to the worker leasing company. Worker
leasing companies are also required to assure that each leasing client
provides adequate training and supervision for its workers in compliance
with statutory requirements for workplace safety and to give 30 days'
written notice of 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 client contracts and has subjected it to additional financial risk
with respect to workers' compensation expense, particularly with respect
to leasing 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.
Federal legislative proposals for national health care reform
include provisions extending mandatory health insurance benefits to
virtually all classes of employees. In addition, workers' compensation
coverage may be included in the reform package ultimately adopted.
While it is impossible to predict if, when and in what form 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 services businesses are
characterized by rapid growth and intense competition. The temporary
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 local and regional firms for both customers and personnel.
The Company estimates that approximately 50 firms provide temporary
services in Oregon. There are relatively limited 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 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.
Although there are believed to be more than 1,300 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 approximately 13
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 the Company 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 while
typically reducing 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 decrease
in workers' compensation premiums due to reform efforts or workplace
safety improvements.
Item 2. PROPERTIES
The Company provides temporary services through all 14 of its
branch offices. Staff leasing services are currently offered through
each of Barrett's Oregon 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 approximately 90% of its total revenues in 1993. The
Company also leases space in nine other locations in its market areas
which it uses to recruit 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
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
$683,000 at December 31, 1993.
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,
1993, of approximately $283,000 due in full in November 1998 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 the office space housing its other branch offices.
At December 31, 1993, such leases had expiration dates ranging from less
than one year to six years, with total minimum payments through 1998 of
approximately $578,000.
Item 3. LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to
this item pending at December 31, 1993, 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 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company are elected annually and serve at the
discretion of the Company's board of directors. There are no family
relationships among the Company's executive officers and directors. At
February 25, 1994, the executive officers of Barrett were as follows:
William W. Sherertz, age 48, has acted as chief executive officer
of the Company since 1980. He has also been a director of the Company
since 1980, and was elected President of the Company in March 1993.
Jack D. Williamson, Jr., age 39, was elected Vice President--
Finance, Treasurer, Secretary and a director of the Company in March
1993. He had previously been controller of the Company since 1986.
Peter J. Schenk, age 35, joined the Company as director of
operations and marketing in December 1991. He was elected Vice
President--Operations and Marketing in March 1993. From 1986 to 1991,
Mr. Schenk was Vice President--Marketing for American Consulting
Services, a provider of marketing consulting services to media
companies.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded over-the-counter in the
National Market System under the (NASDAQ) symbol BBSI. At February 25,
1994, there were 38 stockholders of record 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 do so 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 NASDAQ:
1993
High Low
June 18 through June 30 $ 9.50 $ 7.00
Third Quarter 14.25 7.75
Fourth Quarter 16.75 13.50
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.
Fiscal Six
Year Months
Ended Ended
June 30, Dec. 31, Years Ended December 31,
1989 1989 1990 1991 1992 1993
(In thousands, except per share data)
Statement of Operations
Data:
Revenues:
Temporary services . . $20,829 $11,941 $23,433 $31,041 $34,681 $41,755
Staff leasing services --- --- 3,630 16,949 45,444 58,512
Total . . . . . . . 20,829 11,941 27,063 47,990 80,125 100,267
Cost of revenues:
Direct payroll costs . 15,502 8,890 19,774 35,486 59,820 75,171
Payroll taxes and
benefits . . . . . . . . 1,780 1,002 2,252 4,309 7,826 9,911
Workers' compensation 602 290 990 1,958 3,233 4,591
Safety incentives . . --- --- 68 270 651 598
Total . . . . . . . 17,884 10,182 23,084 42,023 71,530 90,271
Gross margin . . . . . . 2,945 1,759 3,979 5,967 8,595 9,996
Selling, general, and
administrative expenses . 2,456 1,366 3,380 5,054 6,339 6,820
Income from operations . 489 393 599 913 2,256 3,176
Other (expense) income:
Litigation settlement --- --- --- (600) --- ---
Interest expense . . . (150) (115) (223) (175) (77) (86)
Interest income . . . 29 14 44 58 70 161
Other, net . . . . . . (32) 7 (60) (31) 26 133
Total . . . . . . . (153) (94) (239) (748) 19 208
Income before provision for
income taxes . . . . . . $ 336 $ 299 $ 360 $ 165 $2,275 $3,384
Unaudited pro forma
data:
Net income . . . . . . $ 152 $ 180 $ 221 $ 98 $ 1,385 $ 2,060
Net income per share . $ .08 $ .09 $ .11 $ .05 $ .69 $ .78
Weighted average common
shares outstanding . . . 1,992 1,992 1,992 1,994 2,000 2,630
As of December 31,
1989 1990 1991 1992 1993
(In thousands)
Selected Balance Sheet
Data:
Working capital (deficit) $ 332 $ (142) $ (589) $ (678) $7,017
Total assets . . . . . . 3,787 4,355 5,980 7,219 18,425
Long-term debt, net of
current portion . . . . . 770 690 446 292 946
Stockholders' equity . . 1,060 1,188 962 1,574 10,480
_____________________________
Effective January 1, 1990, the Company changed its fiscal year-end from June 30 to
December 31, requiring presentation of financial information for the six-month period
ended December 31, 1989.
The results of each of six companies acquired by the Company between January 1, 1990 and
March 31, 1993, have been included since the respective date of its purchase.
Effective July 1, 1987, the Company elected to be treated as a corporation subject to
taxation under Subchapter S of the 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. Accordingly, the Company was not subject to federal (and
some state) corporate income taxation during the periods shown above until May 1, 1993.
The amounts shown reflect a pro forma tax provision. For the year ended December 31,
1993, the provision for income taxes was $437,000, net income was $2,947,000, and net
income per share was $1.12.
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 Statement of Operations for
the years ended December 31, 1993, 1992 and 1991, 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,
1993 1992 1991
Temporary services revenues. . . . . . . . 41.6% 43.3% 64.7%
Staff leasing services revenues. . . . . . 58.4 56.7 35.3
Direct payroll costs . . . . . . . . . . . 74.9 74.7 73.9
Payroll taxes and benefits . . . . . . . . 9.9 9.8 9.0
Workers' compensation. . . . . . . . . . . 4.6 4.0 4.1
Safety incentives. . . . . . . . . . . . . .6 .8 .6
Gross margin . . . . . . . . . . . . . . . 10.0 10.7 12.4
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 6.8 7.9 10.5
Income from operations . . . . . . . . . . 3.2 2.8 1.9
Other income (expense) . . . . . . . . . . .2 --- (1.6)
Pretax income. . . . . . . . . . . . . . . 3.4 2.8 .3
Pro forma provision for income taxes . . . 1.3 1.1 .1
Pro forma net income . . . . . . . . . . . 2.1 1.7 .2
Years Ended December 31, 1993 and 1992
Temporary and Staff Leasing Services Revenues. Total revenues
increased $20,142,000 (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 (20.4%) and
$13,068,000 (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 attributes 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.
During the first quarter of 1994 the Company expanded its operations
through acquisition of two temporary services businesses. The acquired
companies had total revenues of approximately $25,000,000 during 1993,
through seven branch offices. See "Liquidity and Capital Resources" below.
Market conditions remained favorable for the Company's staff leasing
services in Oregon during 1993, 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.
The Company believes the growth of its staff leasing services is 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 in Oregon and
Maryland as compared to the third-party insurance coverage its clients
typically would otherwise be required to carry. See "Workers Compensation
Expense" below.
Payroll Costs, Payroll Taxes and Benefits. Payroll costs, payroll
taxes and benefits for the Company's temporary and staff leasing employees
increased by $17,436,000 (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
is 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. The Company believes the number of employees
participating in its group health plan will continue to rise for the
foreseeable future; however, the resulting increase in the Company's benefits
costs is expected to be offset by decreases in the statutory payroll tax
rates for the Company during 1994.
Workers' Compensation Expense. The Company has been a self-insured
employer for workers' compensation coverage in Oregon since August 1987 and
became self-insured in Maryland in November 1993. Workers' compensation
expense currently includes the costs of self-insurance for the Company's
employees in Oregon and Maryland, and third-party insurance coverage for such
employees in California and Washington. Self-insurance expenses include case
reserves for reported claims, reserves for claims incurred but not reported,
loss adjustment expenses, third-party administrator fees, reinsurance
premiums, and assessments paid to the States of Oregon and Maryland.
Workers' compensation expense increased by $1,358,000 (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.
During the third quarter of 1993, the Company submitted applications
for self-insurance of its workers' compensation costs for its operations in
California and Washington. In January 1994, the Company's application in
California was denied. The Department of Industrial Relations of the State
of California ("Department of Industrial Relations") cited as reasons for the
denial concerns regarding the Company's financial strength (based on its 1992
audited financial statements) and the effectiveness of its injury and illness
prevention program. The Company believes that its audited financial
statements at December 31, 1993 will satisfy the Department of Industrial
Relations' financial requirements. The Company also plans to submit
additional information demonstrating its ability to implement effective
injury and illness prevention programs, based on its workplace safety program
in Oregon. Accordingly, the Company plans to submit an amended application
to the Department of Industrial Relations during the second quarter of 1994.
However, there can be no assurance that self-insured status will be granted
on terms which are financially feasible to the Company. The State of
Washington is scheduled to review the Company's application for workers'
compensation self-insurance during the second quarter of 1994.
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.
Selling, General and Administrative Expenses. 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 increased 7.6% for 1993
compared to 1992. Of the $481,000 increase, $81,000 is attributable to an
increase in the provision for doubtful accounts arising from to the 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 toward staff leasing services, which have lower overhead
requirements as compared to temporary services.
Provision and Pro Forma Provision for Income Taxes. The Company
was exempt from taxation as an 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 C corporation for the periods
presented. See Note 13 of the Notes to Financial Statements.
Years Ended December 31, 1992 and 1991
Temporary and Staff Leasing Services Revenues. Total revenues
increased $32,135,000 (67.0%) to $80,125,000 for 1992, compared to 1991. The
increase in total revenues was attributable to growth in temporary services
revenues and staff leasing services revenues of $3,640,000 (11.7%) and
$28,495,000 (168.1%), respectively. Staff leasing revenue growth was due
primarily to higher volume associated with an increase in the number of staff
leasing clients. Approximately one-third of the increase in clients resulted
from the acquisition of Employee Leasing of Oregon, Inc. ("ELO"), in
December 1991 and American Staff Management, Inc. ("ASM"), in March 1992,
with annual aggregate revenues of approximately $9,000,000. See Note 2 of
the Notes to Financial Statements for unaudited pro forma information on the
acquisitions.
Payroll Costs, Payroll Taxes and Benefits. Payroll costs, payroll
taxes and benefits for the Company's staff leasing and temporary services
employees increased by $27,851,000, or 70.0%, to $67,646,000 in 1992 compared
to 1991, slightly in excess of the 67.0% growth in total revenues for the
same period. The increase in payroll cost, payroll taxes and benefits is
primarily attributable to an increase in the number of employees. As
a percentage of revenue, such costs increased from 82.9% in 1991 to 84.5% in
1992 due to the growth in staff leasing services revenues as a percentage of
total revenues.
Workers' Compensation Expense. Workers' compensation expense increased
by $1,275,000, or 65.1%, in 1992 compared to 1991 due primarily to an
increase in the number of temporary and staff leasing employees.
Self-insurance expense in Oregon increased by 68.3% in 1992 compared to 1991,
while premium expense relating to the Company's operations in California,
Maryland and Washington increased by 48.0% from 1991 to 1992.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including the provision for doubtful accounts and
the amortization of intangibles) increased by $1,285,000 (25.4%) to
$6,339,000 in 1992 compared to 1991, due primarily to an increase in the
number of headquarters and branch employees needed to manage the Company's
revenue growth. As a percentage of total revenues, selling, general and
administrative expenses decreased from 10.5% in 1991 to 7.9% in 1992, due
primarily to the shift of the Company's business toward staff leasing
services.
Other Income (Expense). The Company had other income of $19,000 in
1992 as compared to other expense of $748,000 in 1991, due primarily to
material litigation costs incurred in 1991 and to a 56.0% decline in interest
expense in 1992 compared to 1991 as a result of lower average borrowings
outstanding and a lower interest rate environment.
Pro Forma Provision for Income Taxes. The pro forma effective tax
rates would have been 40.6% in 1991 and 39.1% in 1992. The lower tax rate in
1992 was due primarily to a lesser amount of goodwill amortization, which is
not tax deductible, compared to 1991.
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 its payroll requirements (and associated
mark-ups) for certain of its staff leasing clients decline during the
year-end holiday season and periods of bad weather. Correspondingly, demand
for temporary services and the operations of some staff leasing clients,
particularly agricultural and forest products-based companies, increase
during the second and third quarters. Over the past three years, staff
leasing revenues represented an increasing share of total revenues,
diminishing the effect of seasonal fluctuations as staff leasing clients are
engaged in a wide range of industries with varying seasonal demands.
Liquidity and Capital Resources
The Company has financed its operations and met its liquidity needs
primarily from cash flow from operations of $2,905,000 and $3,415,000 during
1992 and 1993, respectively. The principal uses of funds during 1993 were
(i) additional workers' compensation surety deposits required by the States
of Oregon and Maryland of $826,000 and $600,000, respectively, (ii) cash
distributions to shareholders prior to termination of the Company's S
corporation status of $869,000, and (iii) purchase of an office building in
May 1993. The building purchase price of $925,000 was funded in part, on an
interim basis, by drawing on the Company's working capital line of credit,
which was replaced by permanent long-term mortgage financing in the amount of
$693,750 in August 1993.
Capital expenditures for incidental purposes were approximately
$200,000 in 1992 and $360,000 in 1993 and are expected to total approximately
$500,000 for 1994. In addition, the Company hopes to expand its self-insured
workers' compensation and staff leasing program to California and Washington
during the second quarter of 1994. If self-insured status is obtained, the
required surety deposits for the two states are expected to total at least
$2,500,000 to be paid from cash or from other funding sources, potentially
including letters of credit from the Company's lender and surety bonds from
providers of third-party insurance. The Company also has long-term
commitments under non-cancelable operating leases which expire at various
times through 1999. See Note 9 of the Notes to Financial Statements.
The Company has an unsecured bank line of credit for a maximum amount
of $2,000,000, expiring subject to renewal on May 31, 1994. Outstanding
balances against the line of credit accrue interest at the bank's prime rate.
The highest borrowing against the line during 1992 and 1993 was $321,617 and
$1,189,000, respectively. The average balance outstanding against the line
for the year ended December 31, 1992 was $142,000, compared to $59,000 during
1993. There was a zero balance outstanding under the credit line at
December 31, 1992 and 1993. See Note 6 of the Notes to Financial Statements.
On June 18, 1993, the Company completed its underwritten initial public
offering of 1,000,000 shares of its common stock at a public offering price
of $7.00 per share. In July 1993, the underwriters exercised an option to
purchase 150,000 additional shares of common stock on the same terms to cover
over-allotments. Total net proceeds to the Company were $6,828,000 after
deducting underwriting discounts of $644,000 and other expenses incurred in
connection with the offering of $570,000.
In February 1994, the Company acquired the assets of Personnel
Management & Consulting, Inc. ("PMC"), a Maryland corporation, for $270,000,
of which $42,000 was paid in cash and $228,000 was paid in the form of 12,000
shares of common stock of the Company. PMC had unaudited revenues of
approximately $800,000 for the year ended December 31, 1993, primarily from
sales of temporary services provided through three branch offices, one in
each of Salisbury and Easton, Maryland; and in Seaford, Delaware.
In March 1994, the Company acquired the assets of Golden West Temporary
Services ("Golden West"), a California corporation, for $4,514,000 in cash
from working capital. Golden West had total revenues of $24,533,000 for the
year ended December 31, 1993, from the sales of temporary services provided
through four branch offices, one in each of San Jose, Santa Clara, Mountain
View and Fremont, California.
A key part of the Company's business strategy is continued growth
through the expansion of operations at existing offices and the acquisition
of additional personnel-related businesses, both in its existing markets and
in other 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
believes that the unused net proceeds of its stock offering, available credit
lines and other sources of financing, and anticipated funds to be generated
from operations will be sufficient in the aggregate to provide funds for
expansion and its working capital needs for the foreseeable future.
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 in
Oregon and Maryland.
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 20
Balance Sheet at December 31, 1992 and 1993 21
Statement of Operations for the years ended
December 31, 1991, 1992, and 1993 22
Statement of Stockholders' Equity for the
years ended December 31, 1991, 1992, and 1993 23
Statement of Cash Flows for the years ended
December 31, 1991, 1992, and 1993 24
Notes to Financial Statements 25
(b) The following financial statement schedule and report thereon are
set forth herein on the pages indicated:
Report of Independent Accountants on Financial Statement
Schedule
Schedule I - Marketable Securities - Other Investments 39
Other financial statement schedules are omitted because
they are not applicable or not required.
(c) The following pro forma financial information as of
December 31, 1993, is set forth herein on the pages indicated:
Barrett Business Services, Inc.:
Pro Forma Balance Sheet at
December 31, 1993 40
Pro Forma Statement of
Operations for the year
ended December 31, 1993 41
Notes to Pro Forma Financial Statements 42
(d) The following audited financial statements of Golden West Temporary
Services and related documents are set forth herein on the pages
indicated:
Independent Accountants' Report 43
Balance Sheets at December 31,
1993 and 1992 44
Statements of Income for the
years ended December 31,
1993 and 1992 46
Statements of Changes in
Stockholders' Equity for the
years ended December 31,
1993 and 1992 47
Statements of Cash Flows for
the years ended December 31,
1993 and 1992 48
Notes to Financial Statements 50
Report of Independent Accountants
February 7, 1994
To the Stockholders and Board of Directors,
Barrett Business Services, Inc.
In our opinion, the accompanying balance sheet 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, 1992 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993, 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 audits 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
Portland, Oregon
Barrett Business Services, Inc.
Balance Sheet
(In thousands, except per share amounts)
December 31,
1992 1993
Assets
Current assets:
Cash and cash equivalents $ 12 $ 1,127
Marketable securities -- 6,374
Trade accounts receivable, net 4,145 4,954
Prepaid expenses and other 147 145
Deferred tax asset (Note 13) -- 894
Total current assets 4,304 13,494
Intangibles, net (Note 3) 654 294
Property and equipment, net (Notes 4 and 7) 752 1,876
Restricted marketable securities and workers'
compensation deposits (Note 5) 1,469 2,728
Other assets 40 33
$7,219 $18,425
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt (Notes 7 and 11)$221 $123
Income taxes payable (Note 13) -- 79
Due to stockholder (Note 2) 98 --
Accounts payable 226 91
Accrued payroll and related benefits 2,565 3,223
Accrued workers' compensation claim liabilities
(Note 5) 1,337 2,434
Customer safety incentives payable 535 527
Total current liabilities 4,982 6,477
Long-term debt, net of current portion (Notes 7 and 11)292 946
Customer deposits 371 522
5,645 7,945
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, $.01 par value; 7,500 shares
authorized, 3,152 shares issued and
outstanding (Notes 12 and 14) 20 32
Additional paid-in capital 190 8,469
Retained earnings 1,364 1,979
1,574 10,480
$7,219 $18,425
The accompanying notes are an integral part of this financial statement.
Barrett Business Services, Inc.
Statement of Operations
(In thousands, except per share amounts)
Years Ended December 31,
199119921993
Revenues:
Temporary services$31,041$34,681$41,755
Staff leasing services16,94945,444 58,512
47,990 80,125 100,267
Cost of revenues:
Direct payroll costs 35,486 59,820 75,171
Payroll taxes and benefits 4,309 7,826 9,911
Workers' compensation (Note 5) 1,958 3,233 4,591
Safety incentives 270 651 598
42,023 71,530 90,271
Gross margin 5,967 8,595 9,996
Selling, general and administrative
expenses 4,708 5,924 6,290
Provision for doubtful accounts 111 79 160
Amortization of intangibles (Note 3) 235 336 370
Income from operations 913 2,256 3,176
Other (expense) income:
Litigation settlement (Note 10) (600)-- --
Interest expense (175) (77) (86)
Interest income 58 70 161
Other, net (31) 26 133
(748) 19 208
Income before provision for income taxes 165 2,275 3,384
Provision for income taxes (Note 13) -- -- 437
Net income $ 165 $ 2,275 $2,947
Unaudited pro forma information (Note 13):
Income before provision for income taxes$ 165$ 2,275 $3,384
Provision for income taxes 67 890 1,324
Net income $ 98 $ 1,385 $2,060
Net income per share $ .05 $ .69 $ .78
Weighted average number of shares 1,994 2,000 2,630
The accompanying notes are an integral part of this financial statement.
Barrett Business Services, Inc.
Statement of Stockholders' Equity
(In thousands)
Additional
Common stock paid-in Retained
Shares Amount capital earnings Total
Balance, December 31, 1990 $ 1,992 $20 $ 182 $ 986 $1,188
Common stock issued 8 -- 8 -- 8
Net income -- -- -- 165
165
Distributions to stockholders -- -- -- (399) (399)
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
The accompanying notes are an integral part of this financial statement.
Barrett Business Services, Inc.
Statement of Cash Flows
(In thousands)
Years Ended December 31,
1991 1992 1993
Cash flows from operating activities:
Net income $ 165 $ 2,275 $ 2,947
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 429 476 530
Loss (gain) on sales of marketable securities 6 (14) (112)
Provision for doubtful accounts 111 79 160
Deferred taxes -- -- (894)
Changes in certain assets and liabilities:
Trade accounts receivable (1,507) (701) (969)
Prepaid expenses and other (10) (88) 2
Accounts payable 186 (25) (135)
Accrued payroll and related benefits 992 620 658
Accrued workers' compensation claim liabilities 643 462 1,097
Customer safety incentives payable 159 307 (8)
Litigation settlement 600 (600) --
Due to stockholder -- -- (98)
Income taxes payable -- -- 79
Customer deposits and other, net 288 114 158
Net cash provided by operating activities 2,062 2,905 3,415
Cash flows from investing activities:
Increase in intangibles through acquisitions (372) (90) (10)
Purchases of fixed assets (205) (201) (1,287)
Proceeds from sales of marketable securities 104 539 8,413
Proceeds from sales of fixed assets -- -- 7
Purchases of marketable securities (106) (1,421) (15,938)
Net cash used by investing activities (579) (1,173) (8,815)
Cash flows from financing activities:
Distributions to stockholders (399) (1,630) (869)
Net decrease in bank line of credit (438) -- --
Proceeds from debt issued 150 -- 752
Payments on long-term debt (635) (276) (196)
Proceeds from issuance of common stock 8 -- 6,828
Net cash provided (used) by financing activities(1,314) (1,906) 6,515
Net increase (decrease) in cash and cash equivalents169 (174) 1,115
Cash and cash equivalents, beginning of period 17 186 12
Cash and cash equivalents, end of period $ 186 $ 12 $1,127
The accompanying notes are an integral part of this financial statement.
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 staff leasing
services to a diversified group of customers through a network of branch
offices throughout western Oregon and in Seattle, Washington; Sacramento;
California; and Baltimore, Maryland. Approximately 92% of the Company's
revenue during 1992 and 1993 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. Staff leasing services are normally used
by organizations to satisfy ongoing personnel needs and generally involve
contracts, with a minimum term of one year renewable annually, covering all
employees at a particular work site.
Allowance for Doubtful Accounts
The Company had an allowance for doubtful accounts of $30,000 and $25,000
at December 31, 1992 and 1993, respectively.
Marketable Securities
Marketable securities are stated at cost, which approximates fair market
value. At December 31, 1992 and 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 their estimated useful lives ranging from three
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 betterment 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 Statement of Operations.
Depreciation of property and equipment is calculated using either
straight-line or accelerated methods over estimated useful lives ranging
from three 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 provisions of the Internal Revenue Code. As such,
federal and state income tax regulations provide that 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 is made
in the Company's financial statements for the years ended December 31, 1991
and 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 all periods
presented is provided for comparative purposes in the Statement 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 case of
default.
Cash and Cash Equivalents
The Company considers nonrestricted short-term investments which are highly
liquid, are readily convertible into cash and have original maturities less
than three months to be cash equivalents for purposes of the Statement of
Cash Flows.
Statement of Cash Flows
The Company has recorded the following non-cash transactions:
In September 1992, the Company, for financial reporting purposes, is
deemed to have distributed to its stockholders certain non-cash assets
and liabilities which aggregated a net liability of $23,000. See Note 2.
During 1992, notes receivable from a stockholder were extinguished. See
Note 11.
Interest paid during 1991, 1992 and 1993 did not differ materially from
interest expense.
Income taxes paid by the Company since termination of its S Corporation
status totalled $1,239,600.
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. All share and
earnings per share amounts have been adjusted to reflect this transaction
for all periods presented. Additionally, the par value of common stock was
changed to $.01 from $10 per share. Common stock and additional paid-in
capital have been adjusted to reflect this change.
Pro Forma Net Income Per Share
Net income per share is computed based on the weighted average number of
common shares outstanding during the period without giving effect to
securities that would otherwise be considered to be common stock
equivalents, because such securities aggregate less than 3% of shares
outstanding and thus are not considered dilutive.
Barrett Business Services, Inc.
Notes to Financial Statements
1. Summary of Operations and Significant Accounting Policies (Continued)
Reclassifications
Certain prior year amounts have been reclassified to conform with 1993
presentation. Such reclassifications had no impact on net income or
stockholders' equity.
2. Acquisitions
Oregon Temporary Services
In January 1991, a company owned by the chief executive officer of the
Company purchased Oregon Temporary Services, Inc. (OTS), a company engaged
in the temporary services business. Of the $300,000 purchase price,
$150,000 was financed through a distribution from the Company to the then
sole stockholder, who is the chief executive officer's spouse, and the
remaining $150,000 was payable under a note. Following the acquisition, OTS
purchased employee services from Barrett and sold these services to
third-party customers.
In November 1991, Barrett began directly servicing certain customers of OTS.
By September 1992, all of the OTS customers were serviced by Barrett and,
therefore, OTS has recognized no further revenues related to the temporary
services business since that time. In September 1992, the Company, for
financial reporting purposes, is deemed to have distributed to its
stockholders cash of $438,800 and other assets and liabilities which
aggregated a net liability of $23,000. Additionally, the Company incurred a
note payable to the stockholders of $98,500 for the purchase of certain
fixed assets related to OTS which had a net book value of $71,400. The
difference between the note payable and the net book value of such assets of
$27,100 was recorded as a distribution to the stockholders. Subsequent to
relinquishing the OTS customers to Barrett, the stockholders invested the
remaining net assets of OTS in another business not in the temporary
services industry. See Note 1-- Statement of Cash Flows.
Because of the relationship between Barrett and OTS and because Barrett
assumed the OTS customers gradually over the period from November 1991
through September 1992 at no cost, the accompanying financial statements as
of and for the years ended December 31, 1991 and 1992 present the accounts
of Barrett and the temporary services business of OTS as if the Company had
purchased OTS in January 1991. As legal entities, OTS and Barrett were not
combined; however, due to the common ownership and commingled operations of
the two entities, combination for financial statement purposes properly
presents the results of operations, cash flows and financial position of the
Company. Transactions between Barrett and OTS from February 1991 through
September 1992 have been eliminated.
Employee Leasing of Oregon
In November and December 1991, the Company acquired substantially all of the
staff leasing customers of Employee Leasing of Oregon, Inc. (ELO). The
Company recorded $95,000 as intangible assets and expensed approximately
Barrett Business Services, Inc.
Notes to Financial Statements
$155,000 paid to the five ELO stockholders for services rendered in
transition and delivery of the staff leasing customers to Barrett.
Nancy Horn Personnel Agency
On January 1, 1992, the Company purchased substantially all of the assets of
Nancy Horn Personnel Agency (NHPA), a business engaged in the temporary
services business. The Company paid cash for NHPA and accounted for the
acquisition using the purchase method of accounting. The purchase price of
$65,000 was recorded as intangible assets at the date of acquisition.
American Staff Management
In March 1992, the Company paid the stockholder of American Staff
Management, Inc. (ASM) $25,000 for ASM's customer list. The Company
recorded the purchase price as intangible assets.
CDI Corporation-West
In March 1993, the Company acquired a branch office of CDI Corporation-West
in Sacramento, California for $10,000. The purchase was recorded as
intangible assets under the purchase method of accounting.
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 its acquisition.
The following unaudited pro forma summary presents the combined results of
operations as if the ELO, NHPA and ASM acquisitions had occurred at the
beginning of 1991, after giving effect to certain adjustments for the
amortization of intangible assets, taxation and cost of capital.
Barrett Business Services, Inc.
Notes to Financial Statements
Years ended December 31,
1991 1992
(Unaudited)
(In thousands, except per
share amounts)
Revenue $52,812 $80,730
Net income $76 $1,385
Net income per share $.04 $.69
The 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,
1992 1993
Covenants not to compete $1,215 $1,215
Goodwill 220 220
Customer lists 201 211
1,636 1,646
Less accumulated amortization 982 1,352
$ 654 $ 294
Barrett Business Services, Inc.
Notes to Financial Statements
4. Property and Equipment
Property and equipment consists of the following (in thousands):
December 31,
1992 1993
Office furniture and fixtures $ 840 $1,092
Building 394 1,157
Automobiles 48 36
1,282 2,285
Less accumulated depreciation 567 716
715 1,569
Land 37 307
$ 752 $1,876
Substantially all of the Company's fixed assets serve as security for
long-term debt (see Note 7).
5. Accrued Workers' Compensation Claim Liabilities
During August 1987 and November 1993, the Company became self-insured with
respect to workers' compensation claims for all its employees working or
living in Oregon and Maryland, respectively. The Company has provided
$1,337,000 and $2,434,000 at December 31, 1992 and December 31, 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, 1993 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 Company has
obtained excess workers' compensation insurance to limit its self-insurance
liability to $300,000 per occurrence ($350,000 for claims after December 31,
1993). The excess insurance provides coverage up to $10 million per
occurrence for claims through December 31, 1993 and unlimited excess
coverage for claims after that date.
Barrett Business Services, Inc.
Notes to Financial Statements
The States of Oregon and Maryland require the Company to maintain specified
investment balances or other financial instruments, which aggregated
$1,300,000 at December 31, 1992 and $2,761,000 at December 31, 1993 to cover
potential claims losses. To partially meet this requirement at December 31,
1993, the Company holds 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 Sheet.
5. Accrued Workers' Compensation Claim Liabilities (Continued)
The workers' compensation expense in the accompanying Statement of
Operations consists of $1,652,000, $2,780,000 and $4,071,000 for
self-insurance expense in Oregon in 1991, 1992 and 1993, respectively, and
$4,000 for Maryland in 1993. Premiums in the insured states were $306,000,
$453,000 and $516,000 for 1991, 1992 and 1993, respectively.
6. Bank Line of Credit
On August 12, 1993, the Company entered into a new bank line of credit which
expires on May 31, 1994. Pursuant to the amended loan agreement, the line
of credit permits total borrowings of up to $2,000,000. The interest rate
on outstanding balances is at the prime rate. The new line of credit is
unsecured. 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 1.25 to 1.0, (ii) positive quarterly income before taxes, (iii)
tangible net worth of at least $7,120,000, and (iv) a zero outstanding
balance against the line 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 line of credit at December 31, 1992 or 1993.
During the years ended December 31, 1991, 1992 and 1993, the maximum
balances outstanding under the line of credit were $1,248,362, $321,617 and
$1,189,000, respectively, the average balance outstanding was $768,000,
$142,000 and $59,000, respectively, and the weighted average interest rate
during the period was 9.8%, 7.0% and 6.6%, respectively. The weighted
average interest rate during the period is 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,
1992 1993
Note payable to bank in monthly
installments of $13,889, plus
interest at prime plus 1.5%
through 1993. Secured by all
assets, except real property, of
the Company. $124 $ --
Mortgage note payable in monthly
installments of $2,781, including
interest at 11%, through 1998, with
a principal payment of $269,174 due
in 1998. Secured by land and
building. 286 283
Mortgage note payable in monthly
installments of $6,730, including
interest at 8.15%, through 2003,
with a principal payment of
$366,633 due in 2003. Secured by
land and building. -- 683
Note to former majority
stockholder. Interest at 12%
payable monthly. Unsecured. See
Note 11. 103 103
513 1,069
Less portion due within one year (221) (123)
$292 $ 946
Maturities on long-term debt are summarized as follows at
December 31, 1993 (in thousands):
Year ending
December 31,
1994 $ 123
1995 39
1996 33
1997 36
1998 307
Thereafter 531
$ 1,069
/TABLE
Barrett Business Services, Inc.
Notes to Financial Statements
8. Savings Plan
On April 1, 1990, the Company established a 401(k) employee savings plan for
the benefit of its eligible employees. Each employee, twenty-one years of
age or older, becomes eligible to participate in the savings plan upon
completion of 1,000 hours of service in any consecutive twelve-month period
following the initial date 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 seven-year period. Company contributions to the plan were
$17,800, $35,000 and $43,574 for the years ended December 31, 1991, 1992
and 1993, 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,
1994 $ 249
1995 181
1996 64
1997 41
1998 43
Thereafter 44
Total minimum payments $ 622
Rent expense for the years ended December 31, 1991, 1992 and 1993 was
approximately $271,000, $313,000 and $295,000, respectively.
10. Litigation Settlement
During 1991, the Company became a defendant in a lawsuit. The plaintiffs
claimed that the termination of their employment by the Company was
unlawful. On May 15, 1992, the Company settled the lawsuit for $600,000.
Accordingly, a provision for the settlement of $600,000 was made in the
accompanying financial statements for the year ended December 31, 1991.
Barrett Business Services, Inc.
Notes to Financial Statements
11. Related Party Transactions
During 1991, 1992 and 1993, the Company recorded revenues of $1,940,000,
$2,249,000 and $2,404,000, respectively, and cost of revenues of $1,724,000,
$2,116,000 and $2,316,000, respectively, for providing services to a company
of which a director of the Company is president and majority stockholder.
At December 31, 1992 and 1993, Barrett had receivables from this company of
$84,000 and $117,000, respectively.
During 1992 and 1993, the Company recorded revenues of $47,000 and $480,000,
respectively, and cost of revenues of $45,000 and $475,000, respectively,
for providing staff leasing services to a company owned by the chief
executive officer, a stockholder. At December 31, 1992 and 1993, Barrett
had recorded a receivable from this company of $114,000 and $35,000,
respectively.
As further described in Note 7, the Company has a note payable to the estate
of the former majority stockholder, who was the late mother of a current
stockholder. The Company was 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 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 each of 1991 and 1992.
At December 31, 1993, the 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.
A director of the Company is Vice Chairman of the board of directors of the
bank that provides the Company's unsecured working capital line of credit
and certain mortgage financing. In addition to other banking business, the
bank is the Transfer Agent for the Company's common stock. See Notes 6 and
7.
12. 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.
Barrett Business Services, Inc.
Notes to Financial Statements
13. 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 unaudited pro forma provisions for income taxes are as follows (in
thousands):
Years Ended December 31,
1991 1992 1993
Current:
Federal $507 $674 $1,439
State 95 133 284
602 807 1,723
Deferred:
Federal (452) 70 (338)
State (83) 13 (61)
(535) 83 (399)
Total provision $67 $890 $1,324
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
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.
Barrett Business Services, Inc.
Notes to Financial Statements
13. Income Taxes (Continued)
Deferred tax assets (liabilities) are comprised of the following components
(in thousands):
December 31,
1992 1993
(Unaudited)
(Pro Forma)
Accrued workers' compensation claim liabilities $509 $949
Allowance for doubtful accounts 11 10
Tax depreciation in excess of book depreciation (53) (65)
Capital loss carryforward 28 ---
$495 894
The pro forma effective tax rate would differ from the U.S. statutory federal
tax rate due to the following:
Years Ended December 31,
1991 1992 1993
Statutory federal tax rate 34.0 % 34.0 % 34.0 %
State taxes, net of federal benefit 4.1 4.1 4.3
Goodwill amortization 6.9 .7 .5
Jobs credit (5.3) --- ---
Other, net .9 .3 .3
40.6 % 39.1 % 39.1 %
Upon termination of the Company's S Corporation status, cash distributions
totaling $330,000, representing 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. In total, since December 31, 1992, the Company has paid
stockholder distributions of $869,000. The remaining undistributed
S Corporation retained earnings have been reclassified as additional paid-in
capital.
Barrett Business Services, Inc.
Notes to Financial Statements
14. Stock Incentive Plan
As of March 1, 1993, the Company adopted a stock incentive plan (the Plan)
which provides for stock-based awards to the Company's employees,
non-employee directors and outside consultants or advisers. The Company has
reserved 250,000 shares of common stock for issuance under the Plan. An
award of 2,000 restricted shares was granted under the Plan in June 1993.
The following table summarizes options granted under the Plan during 1993:
Options Range of Prices
Outstanding at March 1, 1993 --
Options granted 83,250 $7.00 to 9.375
Options exercised --
Options cancelled or expired (3,000)
Outstanding at December 31, 1993 80,250
Available for grant at December 31, 1993 167,750
The options listed in the table will become exercisable in four equal annual
installments beginning one year after the date of grant.
15. Quarterly Financial Information (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except pershare amounts)
Year ended December 31, 1992
Revenue $17,000 $20,333 $22,597 $20,195
Cost of sales 15,123 18,101 20,197 18,109
Pro forma net income 253 408 435 289
Pro forma net income
per share .13 .20 .22 .14
Year ended December 31, 1993
Revenue from services $20,535 $25,386 $28,076 $26,270
Cost of services 18,501 22,931 25,147 23,692
Pro forma net income 389 488
Pro forma net income
per share .19 .22
Net income 702 481
Net income per share .22 2.15
Barrett Business Services, Inc.
Notes to Financial Statements
16. Market Information (Unaudited)
The Company's common stock is traded on the National Market System (NASDAQ)
under the symbol BBSI. The following table sets forth the high and low sale
prices of the stock for each quarter from the Company's June 18, 1993 initial
public offering:
1993
High Low
June 18 through June 30 $ 9.50 $ 7.00
Third quarter 14.25 7.75
Fourth quarter 16.75 13.50
Report of Independent Accountants
on Financial Statement Schedule
February 7, 1994
To the Board of Directors and
Stockholders of Barrett Business Services, Inc.
Our audits of the financial statements referred to in our report dated
February 7, 1994 appearing on page 20 of this Annual Report on Form 10-K also
included an audit of the Financial Statement Schedule included in Part II,
Item 8b of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements.
PRICE WATERHOUSE
Portland, Oregon
Schedule I - Marketable Securities-Other Investments
Approximate
Market Carrying
Issuer Description Shares Cost Value Amount
Multnomah Co. SD 3, OR Tax Anticipation Notes 2,425,000 $ 2,425,000 $ 2,456,000 $ 2,456,000
Multnomah Co. SD 7, OR Tax Anticipation Notes 1,445,000 1,445,000 1,464,000 1,464,000
Jackson Co., OR Tax Anticipation Notes 850,000 850,000 861,000 861,000
Deschutes Co., OR Tax Anticipation Notes 575,000 575,000 582,000 582,000
Clackamas Co., OR Tax Anticipation Notes 1,000,000 1,000,000 1,011,000 1,011,000
6,295,000 6,295,000 6,374,000 6,374,000
First Interstate Bank of Oregon
Time Deposit 826,000 826,000 830,000 830,000
First Interstate Bank of Oregon
Time Deposit 1,013,000 1,013,000 1,042,000 1,042,000
King Co. SD 415, WA General Obligation Bonds 601,000 601,000 602,000 602,000
State of Oregon Workers' Comp. Deposit 117,000 117,000 117,000 117,000
State of Maryland Workers' Comp. Deposit 58,000 58,000 58,000 58,000
State of Washington Workers' Comp. Deposit 41,000 41,000 41,000 41,000
State of California Workers' Comp. Deposit 38,000 38,000 38,000 38,000
2,694,000 2,694,000 2,728,000 2,728,000
8,989,000 $ 8,989,000 $ 9,102,000 $ 9,102,000
BARRETT BUSINESS SERVICES, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1993
BBSI Golden West Pro Forma Pro Forma
Historical Historical Adjustments Combined
(In thousands, except per share amounts)
Revenues
Temporary services $ 41,755 $ 24,533 $ --- $ 66,288
Staff leasing services 58,512 --- --- 58,512
100,267 24,533 --- 124,800
Cost of revenues:
Direct payroll costs 75,171 18,075 --- 93,246
Payroll taxes and benefits 9,911 2,206 --- 12,117
Workers' compensation 4,591 686 --- 5,277
Safety incentives 598 --- 598
90,271 20,967 111,238
Gross margin 9,996 3,566 13,562
Selling, general and
administrative expenses 6,290 2,378 (175) 8,493
Provision for doubtful accounts 160 23 183
Amortization of intangibles 370 3 290 663
Income from operations 3,176 1,162 (115) 4,223
Other income (expense):
Interest expense (86) (30) 30 (86)
Interest income 161 5 166
Other, net 133 --- 133
208 (25) 30 213
Income before provision for income taxes 3,384 1,137 (85) 4,436
Provision for income taxes 437 36 333 806
Net income $ 2,947 $ 1,101 $ (418) $ 3,630
Unaudited pro forma information:
Income before provision for $ 3,384 $ 4,436
income taxes
Provision for income taxes 1,324 1,735
Net income $ 2,060 $ 2,701
Net income per share $ 0.78 $ 1.03
Weighted average number of shares 2,630 2,630
BARRETT BUSINESS SERVICES, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1993
BBSI Golden West Pro Forma Pro Forma
Historical Historical Adjustments Combined
(In thousands, except per share amounts)
ASSETS
Current assets:
Cash and equivalents $ 1,127 $ 509 $ (1,469) $ 167
Marketable securities 6,374 --- (4,484) 1,890
Trade accounts receivable, net 4,954 2,637 7,591
Prepaid expenses and other 145 57 202
Deferred tax asset 894 --- 894
Total current assets 13,494 3,203 (5,953) 10,744
Intangibles, net 294 30 4,072 4,396
Property and equipment, net 1,876 69 6 1,951
Restricted marketable
securities and workers'
compensation deposits 2,728 --- 2,728
Other assets 33 17 50
18,425 3,319 (1,875) 19,869
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 123 $ --- $ $ 123
Bank line of credit --- 500 (500) ---
Income taxes payable 79 64 143
Accounts payable 91 61 152
Accrued payroll and
related benefits 3,223 636 3,859
Accrued workers' compensation
claims 2,434 --- 2,434
Customer safety incentives payable 527 --- 527
Total current liabilities 6,477 1,261 (500) 7,238
Long-term debt, net of current portion 946 --- 946
Customer deposits 522 --- 522
7,945 1,261 (500) 8,706
Stockholders' equity:
Common stock 32 86 (86) 32
Additional paid-in capital 8,469 --- --- 8,469
Retained earnings 1,979 1,972 (1,289) 2,662
10,480 2,058 (1,375) 11,163
$ 18,425 $ 3,319 $ (1,875) $ 19,869
* The accompanying notes are an integral part of this financial statement.
Notes to Pro Forma Financial Statements
Acquisition
In March 1994, the Company acquired the assets of Golden West Temporary
Services ("Golden West"), a California corporation, for $4,514,000 in cash from
working capital. Golden West had total revenues of $24,533,000 for the year
ended December 31, 1993, from the sales of temporary services provided through
four branch offices. The accompanying pro forma balance sheet and statement of
operations assume the acquisition took effect January 1, 1993.
Pro Forma Adjustments
The combined pro forma financial statements reflect the following adjustments:
(i) the purchase price of $4,514,000, paid in cash from working capital, and
the resulting increase in intangibles and equipment of $4,425,000 and $89,000,
respectively, (ii) additional amortization and depreciation expense
attributable to the acquired assets, (iii) elimination of interest expense and
other nonrecurring operating costs, and (iv) the anticipated tax effect of the
additional earnings.
Board of Directors
Golden West Temporary Services
Santa Clara, California
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the accompanying balance sheets of Golden West Temporary
Services as of December 31, 1993 and 1992, and the related statements of
income, changes in stockholders' equity, and cash flows for the years then
ended. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden West Temporary Services
as of December 31, 1993 and 1992, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
FRANK, RIMERMAN & CO.
San Jose, California
February 14, 1994
GOLDEN WEST TEMPORARY SERVICES
BALANCE SHEETS
December 31, 1993 and 1992
ASSETS
1993 1992
CURRENT ASSETS
Cash $ 509,270 $ 62,399
Accounts receivable, net of allowance for
doubtful accounts of $20,000 (Notes 2 and 3) 2,630,493 2,913,753
Other receivables 6,378 15,414
Prepaid expenses 56,771 53,216
Refundable income taxes --- 17,968
---
Total current assets 3,202,912 3,062,750
PROPERTY AND EQUIPMENT, at cost (Note 3)
Automobile 7,399 7,399
Office equipment 241,318 217,820
Leasehold improvements 30,969 16,947
279,686 242,166
Less accumulated depreciation and
amortization 210,635 184,405
69,051 57,761
INTANGIBLE ASSETS
Goodwill 63,689 63,689
Less accumulated amortization 34,282 31,090
29,407 32,599
OTHER ASSETS
Insurance deposits 7,633 36,788
Other deposits 9,717 9,717
17,350 46,505
$3,318,720 $3,199,615
See Notes to Financial Statements
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF INCOME
December 31, 199 and 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
1993 1992
CURRENT LIABILITIES
Bank borrowings (Note 3) $ 500,000 $ 580,775
Accounts payable 42,177 53,079
Accrued wages 268,151 166,593
Accrued payroll taxes 345,021 260,029
Accrued workers' compensation insurance 19,297 78,225
Other accrued liabilities 22,186 17,273
Income taxes payable 34,000 ---
Deferred income taxes (Note 4) 30,000 30,000
Total current liabilities 1,260,832 1,185,974
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY (Note 6)
Common stock, no par value, 120,000
shares authorized, 101,125 shares
outstanding (100,925 in 1992) 86,129 82,129
Retained earnings 1,971,759 1,931,512
2,057,888 2,013,641
$3,318,720 $3,199,615
See Notes to Financial Statements
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF INCOME
Years Ended December 31, 1993 and 1992
1993 1992
REVENUES (Note 2) $24,532,530 $20,188,422
DIRECT EXPENSES 20,966,949 17,312,174
Gross profit 3,565,581 2,876,248
GENERAL AND ADMINISTRATIVE
EXPENSES
Salaries and related costs 1,814,542 1,386,772
Other 589,283 590,352
2,403,825 1,977,124
Income from operations 1,161,756 899,124
OTHER INCOME (EXPENSE)
Interest income 4,897 3,822
Interest expense (29,893) (15,339)
(24,996) (11,517)
Income before income taxes 1,136,760 887,607
PROVISION FOR INCOME TAXES (Note 4) 35,600 22,500
Net income $1,101,160 $ 865,107
See Notes to Financial Statements
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1993 and 1992
Common Stock
Retained
Shares Amount Earnings
BALANCE, December 31, 1991 101,125 $75,783 $1,377,926
Net income --- --- 865,107
Repurchase of common stock (600) (1,654) (9,146)
Issuance of common stock to
employee as compensation 400 8,000 ---
Dividends ($3.00 per share) --- --- (302,375)
BALANCE, December 31, 1992 100,925 82,129 1,931,512
Net income --- --- 1,101,160
Issuance of common stock 200 4,000 ---
Dividends ($10.50 per share) --- --- (1,060,913)
BALANCE, December 31, 1993 101,125 $86,129 $1,971,759
See Notes to Financial Statements
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993 and 1992
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,101,160 $ 865,107
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for doubtful accounts --- 3,190
Depreciation and amortization 29,422 21,176
Loss on disposal of leasehold improvements --- 665
Stock bonus awarded to employee --- 8,000
Change in assets and liabilities:
Accounts receivable 283,260 (1,330,839)
Other receivables 9,036 (14,226)
Prepaid expenses (3,555) (10,032)
Refundable income taxes 17,968 (17,968)
Other assets 29,155 (3,456)
Accounts payable (10,902) 20,264
Accrued expenses 132,535 145,943
Income taxes payable 34,000 (4,745)
Deferred income taxes --- 22,500
Net cash provided by (used in) operating
activities 1,622,079 (294,421)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (37,520) (50,396)
Net cash used in investing activities (37,520) (50,396)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line of credit (80,775) 480,775
Proceeds from issuance of common stock 4,000 ---
Repurchase of common stock --- (10,800)
Dividends paid (1,060,913) (302,375)
Net cash provided by (used in) financing
activities (1,137,688) 167,600
Net increase (decrease) in cash 446,871 (177,217)
CASH, beginning of year 62,399 239,616
CASH, end of year $ 509,270 $ 62,399
(continued)
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993 and 1992
(continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ --- $21,176
Interest paid $29,893 $15,339
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
During 1992, the Company awarded a bonus of 400 shares of common stock with a
fair market value of $8,000 to an employee. The fair market value of the stock
was included in the employee's compensation.
See Notes to Financial Statements
GOLDEN WEST TEMPORARY SERVICES
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Significant Accounting Policies
Nature of Business
Golden West Temporary Services (Company) provides temporary and permanent
placement contract labor services to various industries in the San Francisco
Bay Area. The majority of the Company's accounts receivable are from high
technology companies.
Significant Accounting Policies
Depreciation and amortization:
Office equipment and the automobile are depreciated using the double
declining balance method over estimated useful lives of three to seven years.
Leasehold improvements are amortized over the lesser of the original term of
the facility leases or estimated useful lives of the assets. Maintenance and
repairs are charged to expense as incurred.
Goodwill is amortized using the straight-line method over 20 years.
Income taxes:
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109). SFAS 109 calls for measuring the
provisions for income taxes and recognizing deferred tax assets and
liabilities on the balance sheet using the liability method.
Concentration of credit risk:
The Company maintains approximately $40,000 and $108,000, respectively, in
two commercial banks located in California. These cash deposits are secured
by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per bank.
Statements of cash flows:
For purposes of this statement, cash represents bank demand and money market
accounts.
2. Major Customer
During 1993, the Company recognized revenues of approximately $6,900,000 from
one customer, of which $808,000 was outstanding at December 31, 1993. No
major customers existed at December 31, 1992.
GOLDEN WEST TEMPORARY SERVICES
NOTES TO FINANCIAL STATEMENTS
3. Bank Borrowings
The Company has a bank revolving credit agreement which provides for
borrowings of up to $1,500,000 for general working capital purposes.
Borrowings under this agreement bear interest at the bank's reference rate
(6% at December 31, 1993) and are secured by the Company's accounts
receivable and equipment. The agreement is renewable on April 30, 1994 and
requires the Company to maintain certain financial covenants.
4. Income Taxes
The Company operates for Federal income and California franchise tax purposes
as an S-Corporation. As a result, the Company does not provide for Federal
income taxes, and California franchise taxes are provided for at a 2-1/2% tax
rate (1.5% for 1994 and future years). The stockholders are responsible to
report, at the individual level, their pro rata share of taxable income and
other items affecting taxable income.
The deferred income taxes reflect the differences in the timing of reporting
results of operations for California franchise tax and financial accounting
purposes. Deferred taxes arise principally from differences between the cash
basis California franchise taxable income and the accrual basis pre-tax
accounting income.
The effective rate of 3.1% for 1993 differs from the statutory rate of 2.5%
as a result of the implementation of SFAS 109.
The provision for income taxes consists of the following:
1993 1992
Current $35,600 $ 800
Deferred -- 21,700
$35,600 $22,500
5. Lease Commitments
The Company leases office space located in Santa Clara, Mountain View, San
Jose, and Fremont, California. These leases are noncancellable operating
leases expiring from December 1994 to December 1997. The Santa Clara lease
contains an option to renew up through December 1998. Rent expense was
approximately $113,000 in 1993 ($123,000 in 1992).
GOLDEN WEST TEMPORARY SERVICES
NOTES TO FINANCIAL STATEMENTS
5. Lease Commitments (continued)
The following is a schedule of future minimum lease payments as of
December 31, 1993:
1994 $123,000
1995 97,000
1996 84,000
1997 63,000
1998 ---
$367,000
6. Incentive Stock Option Agreements
The Company has granted nonqualified incentive stock options to officers and
key employees. Each option allows the holder to purchase one share of the
Company's common stock at the fair market value on the date of grant. Fair
market value is determined by the Board of Directors.
Activity related to incentive stock option agreements is summarized as
follows:
Stock Options Option Price
Outstanding Per Share
Balance, December 31, 1991 1,200 $18.00
Granted 1,600 $20.00
Balance, December 31, 1992 2,800
Exercised (200) $20.00
Balance, December 31, 1993 2,600 $18.00-$20.00
Options expire five years from the date of grant and vest over a five year
period. At December 31, 1993, 1,400 options are exercisable (800 options at
December 31, 1992).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information required by Item 10, Directors and Executive Officers of the
Registrant, is incorporated herein by reference to the Company's definitive
Proxy Statement dated March 18, 1994 ("Proxy Statement"), pages 1-2, under the
heading "Election of Directors" or appears under the heading "Executive
Officers of the Registrant" on page 12 of this report. The information
required by Item 11, Executive Compensation, is incorporated herein by
reference to the Proxy Statement, pages 4-5, under the headings "Compensation
Committee Interlocks and Insider Participation" and "Executive Compensation."
The information required by Item 12, Security Ownership of Certain Beneficial
Owners and Management, is incorporated herein by reference to the Proxy
Statement, pages 2-3, under the heading "Stock Ownership by Principal
Stockholders and Management." The information required by Item 13, Certain
Relationships and Related Transactions, is incorporated herein by reference to
the Proxy Statement, pages 7-8, under the heading "Transactions with Management
and Principal Stockholders."
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. and 2.
The financial statements, financial statement schedules and supplementary
data listed in the index set forth in Item 8 of this report are filed as part
of this report.
(a) 3.
Exhibits are listed in the Exhibit Index beginning on page 55 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.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1993.
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 22, 1994 By:/s/ William W. Sherertz
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 22nd day of March, 1994.
Signature Title
Principal Executive Officer and Director:
/s/ William W. Sherertz President and Chief Executive
William W. Sherertz Officer and Director
Principal Financial and Accounting Officer
and Director:
/s/ Jack D. Williamson, Jr. Vice President-Finance and
Jack D. Williamson, Jr. Treasurer and Director
Other Directors:
ROBERT R. AMES* Director
Robert R. Ames
JEFFREY L. BEAUDOIN* Director
Jeffrey L. Beaudoin
ANTHONY MEEKER* Director
Anthony Meeker
STANLEY G. RENECKER* Director
Stanley G. Renecker
*By: /s/ Jack D. Williamson, Jr.
Jack D. Williamson, Jr.,
Attorney-in-Fact
EXHIBIT INDEX
Exhibits
2 Asset Purchase Agreement between Golden West
Temporary Services and the registrant dated
March 7, 1994.
3.1 Articles of Amendment and Restatement of the
registrant. Incorporated by reference to
Exhibit 3.1 to the registrant's Registration
Statement on Form S-1 (No. 33-61804) (the
"Form S-1").
3.2 Bylaws of the registrant. Incorporated by
reference to Exhibit 3.2 to the registrant's
Form S-1.
4.1 Loan Agreement between the registrant and First
Interstate Bank of Oregon, N.A., dated August
12, 1993. Incorporated by reference to Exhibit
10 to the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993.
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 cop-
ies 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.
10.2 Form of Indemnification Agreement with each
director of the registrant. Incorporated by
reference to Exhibit 10.8 to the registrant's
Form S-1.
23.1 Consent of Price Waterhouse, independent
accountants.
23.2 Consent of Frank, Rimerman & Co., independent
accountants.
24 Power of Attorney of certain officers and
directors.
_____________
Other exhibits listed in Item 601 of Regulation S-K are
not applicable.