Item 1. BUSINESS
General
Barrett Business Services, Inc. ("Barrett" or the "Company"), was incorporated in the state of Maryland in 1965. Barrett provides light industrial, clerical and technical employees to a wide range of businesses on both a temporary basis and a longer-term leased basis. The Company believes it is the largest provider of temporary staffing and staff leasing services in Oregon, measured by revenue. Services are provided through a network of 15 branch offices, nine of which are located throughout Oregon, two in northern California, two in Maryland, and two in Washington. The Company also operates ten smaller recruiting and placement offices in its general market areas which are managed by a branch office. The Company provides employees to a diverse set of customers, including forest products and agriculture-based companies, electronics manufacturers, transportation and shipping enterprises, professional firms and general contractors. See Item 6 of this report for information regarding the Company's revenues from temporary staffing and staff leasing services.
Growth Strategy
Barrett's strategic plan continues to include (1) the further expansion of its business at existing branch offices primarily through its ongoing marketing and sales program, (2) acquisition of additional personnel-related businesses, both in its existing markets and in other strategic geographic areas and (3) accelerating the growth of professional employer services (staff leasing) by seeking self-insured employer status for workers' compensation purposes in additional states.
Recent Acquisitions
The Company purchased certain assets of Personnel Management & Consulting, Inc. ("PMC") in February 1994. PMC, with unaudited 1993 revenues of $800,000, had been operating since mid-1992, with offices located in Easton and Salisbury, Maryland, and Seaford, Delaware.
On March 7, 1994, the Company acquired certain assets of Golden West Temporary Services ("Golden West") for $4,514,000 paid in cash. Golden West operated four offices in the San Francisco Bay Area of California with total audited revenues of $24,533,000 for 1993.
On December 26, 1994, the Company purchased certain assets of Max Johnson Enterprises, Inc., operating as Construction Workforce, a company located in Spokane, Washington which specializes in providing highly-skilled temporary craftsmen to the commercial construction industry. Construction Workforce had 1994 revenues of approximately $2.4 million. Of the $300,000 purchase price, the Company paid $60,000 in cash and issued 17,142 shares of its common stock with a then fair market value of $240,000.
On December 29, 1994, the Company purchased for $51,000 in cash certain assets of Advanced Temporary Systems, Inc., a company engaged in the temporary staffing business in Kent, Washington.
The Company reviews acquisition opportunities on an ongoing basis. While growth through acquisition is a major element of the Company's overall strategic growth plan, there can be no assurance that any additional acquisitions will be completed in the foreseeable future.
Temporary Staffing Services
GENERAL. Temporary employees enable businesses to meet peak or extraordinary demands caused by such factors as seasonality, increased customer demand, vacations, illnesses, parental leave and special projects without incurring the ongoing expense and administrative responsibilities associated with recruiting, hiring and retaining additional permanent employees. The use of temporary staffing services allows businesses to utilize the "just-in-time" approach to their personnel needs. The "just-in-time" concept is more commonly recognized in inventory management practices. By maintaining a core of permanent employees to satisfy minimum requirements and managing increased demand through greater use of temporary employees, companies are able to convert a portion of their fixed personnel expense to variable expense, in addition to reducing costs related to recruiting, training, payroll, benefits, severance compensation, recordkeeping and other personnel matters.
THE COMPANY'S TEMPORARY STAFFING SERVICES. The Company provides light industrial, clerical and technical workers on a temporary basis to a broad range of businesses, including forest products and agriculture-based companies, electronics manufacturers, transportation and shipping companies, professional firms, and construction contractors. Light industrial workers perform such tasks as operation of machinery, loading and shipping, site preparation for conventions and other special events, construction-site cleanup and janitorial services. The light industrial category generated approximately 51% of the Company's 1994 temporary services revenues. Clerical workers, which accounted for approximately 11% of 1994 temporary services revenues, include primarily secretaries, receptionists and office clerks. Technical personnel include electronic parts assembly workers and designers and drafters of electronic parts; these workers represented approximately 38% of the Company's 1994 temporary services revenues.
Temporary assignments may last a day, a week or months, depending upon the customer's requirements. The customer pays only for actual hours worked by temporary personnel and may terminate their services at any time. A significant portion of the temporary services provided by the Company is project-oriented, requiring one or more employees for a period of time to perform nonrecurring or periodic assignments.
The Company's temporary services customers range in size from small local firms to large national companies which use Barrett's services on a local basis. The Company provided temporary services to more than 5,000 customers during 1994, up from approximately 3,600 customers in 1993. None of the Company's temporary services customers individually accounted for more than 5% of its total annual revenues for 1994.
BUSINESS STRATEGY. The Company emphasizes prompt, personalized service in assigning quality, trained, drug-free personnel at competitive rates to users of its temporary staffing services. Since 1980, the Company has relied on internally developed computer databases of employee skills and availability to match customer needs with available qualified employees. As a local company operating in selected market areas, Barrett believes it has an understanding of the unique requirements of its clientele that allows it to offer a "money-back" guarantee to the customer if it is not satisfied with Barrett's temporary employees.
Barrett provides training to its branch office managers and sales personnel to develop and maintain a high level of customer service. The Company's ongoing training program includes seminars, in-house presentations, video instruction and role playing. The Company's sales staff is compensated through a combination of base salary and an incentive sales commission. Sales commissions are earned by new business development and the retention of existing customers. Sales commissions may represent one-third to two-thirds of a salesperson's total compensation. In addition, branch office staff participate in the Company's profit-sharing program. See "Employees and Employee Benefits," below.
RECRUITING. The Company utilizes a variety of methods to recruit its workforce of temporary employees, including among others, newspaper advertising and marketing brochures distributed at colleges and vocational schools. In addition, a substantial number of new employees are hired through referrals by Barrett's existing employees. The Company believes it is easier to recruit and retain qualified personnel during periods of higher unemployment and therefore must devote more resources to recruiting new employees during periods of lower unemployment in its market areas. The Company may be unable to pass on the full amount of such increased recruiting and personnel costs in the form of higher prices for temporary services, which in turn could result in lower profit margins.
The employee application process includes an interview, skills assessment test, reference verification and drug test. The skills test and reference verification determine level of ability and an insight into prior job performance. Following hire and placement, performance is reviewed with customers to assure their complete satisfaction.
The Company believes that its employee wage and benefit package, customer base, and opportunities for part-time and flexible scheduling have contributed significantly to its success in recruiting and retaining quality, trained, drug-free personnel in numbers sufficient to meet customer demand. See "Employees and Employee Benefits," below.
SALES AND MARKETING. The Company markets its temporary services primarily through direct sales presentations by its branch office managers and trained sales staff and, to a lesser extent, through advertising in various publications, including local newspapers and the Yellow Pages. Barrett also benefits from referrals by existing temporary services customers and from the periodic needs of the Company's staff leasing clients.
Following the development of a preliminary profile of a prospective customer's needs, a Company salesperson typically schedules a meeting with the customer's personnel manager to explain Barrett's services. Based on this information, Barrett develops a market-competitive hourly charge for its temporary staffing services. The actual cost to the customer for a temporary employee typically ranges from 135% to 150% of the base wage rate. This composite rate includes all payroll taxes, employee benefits, workers' compensation coverage and administrative costs.
The Company believes it has been able to maintain a price advantage due to the lower costs associated with its self-insured workers' compensation program when compared to the cost of workers' compensation insurance. The Company's sales and marketing efforts have generally increased during periods of economic decline, when demand for temporary services decreases. As a result of this reduced demand, the higher costs associated with sales and marketing typically cannot be recovered through price increases, which may result in lower profitability.
BILLING. The Company prepares weekly customer invoices immediately following the preparation of each payroll through the centralized payroll and billing operations at the Company's corporate headquarters. Barrett has not experienced significant problems in collecting its accounts receivable, which the Company attributes to customer satisfaction, a thorough analysis of a customer's credit history prior to agreeing to provide services and the regular monitoring of account aging by each branch manager.
Professional Employer (Staff Leasing) Services
GENERAL. Many businesses, particularly those with a limited number of employees, find personnel administration requirements to be unduly complex and time consuming. These businesses often cannot justify the expense of a full- time human resources staff. In addition, the escalating costs of health and workers' compensation insurance in recent years, coupled with the increased complexity of laws and regulations affecting the workplace, have created a compelling alternative for small to mid-sized businesses to outsource these managerial burdens through staff leasing. The increasing trend of outsourcing numerous business functions enables management to fully devote the enterprise's resources to its core competencies.
THE COMPANY'S STAFF LEASING SERVICES. In a staff leasing arrangement, Barrett enters into a contract to become a co-employer of the client company's existing workforce. Pursuant to this contract, Barrett assumes responsibility for some or all of the personnel-related matters, including payroll and payroll taxes, employee benefits, health insurance, workers' compensation coverage, employee risk management and related administrative responsibilities. Barrett also hires and fires leased employees, although the client company remains responsible for day-to-day assignments, supervision and training and, in most cases, recruiting.
The Company began offering staff leasing services to Oregon customers in 1990 and expanded these services to Maryland and Washington in the first and third quarters, respectively, of 1994. The number of Barrett's staff leasing clients increased from approximately 425 at December 31, 1993, to approximately 520 at year-end 1994. The Company has entered into staff leasing arrangements with a wide variety of clients, including companies involved in reforestation, moving and shipping, professional firms, construction, retail, manufacturing and distribution businesses. Staff leasing clients are typically small to mid-sized businesses with up to 50 employees. None of the Company's staff leasing clients individually accounted for more than 5% of its total annual revenues during 1994.
BUSINESS STRATEGY. The Company believes that it has attracted significant numbers of new staff leasing clients since 1990 by demonstrating the potential for cost reductions offered by the Company's self-insured workers' compensation program. Equally important, Barrett also offers a variety of employee benefits and services, which it can generally provide on a cost-effective basis due to its substantially larger employee base as compared to its clients. The employee benefits and human resource management services offered by the Company include a full range of health, life and disability insurance, a Section 125 cafeteria plan, a Section 401(k) savings plan, credit union participation, direct deposit for payroll or preferred payroll checks, mandatory drug testing, and advisory services related to hiring, employee evaluations and termination guidelines, among others. The Company believes these benefits and services are cost effective and reduce employee turnover, thereby increasing the appeal of staff leasing arrangements to most small to mid-sized business owners. The overall cost to the client for its leased employees is typically at or below the cost per employee that the client would incur if it employed its workforce directly.
The Company's standard staff leasing agreement provides for services indefinitely, until notice of termination is given by either party. The agreement permits cancellation by either party upon 35 days' prior written notice. In addition, the Company may terminate the agreement at any time for specified reasons, including nonpayment or failure to follow Barrett's workplace safety program. The agreement also provides for indemnification of the Company by the client against losses arising out of any default by the client under the agreement, including failure to comply with any employment- related, health and safety or immigration laws or regulations.
SALES AND MARKETING. The Company markets its staff leasing services through its Oregon, Washington and Maryland branches using its branch office sales staff. Coincident with the Company's self-insured employer status for workers' compensation purposes in California, the Company will commence its marketing of staff leasing services in California during the second quarter of 1995. The Company also obtains referrals from existing clients and other third parties, and places advertisements in the Yellow Pages. Prior to entering into a staff leasing arrangement, the Company performs an analysis of the potential client's actual personnel and workers' compensation costs based on information provided by the customer. Barrett also introduces its workplace safety program and makes recommendations as to improvements in procedures and equipment following a safety inspection of the customer's facilities. Once the client has agreed to implement the Company's safety program, the Company proposes a leasing arrangement at a price which is typically at or below the client's current overall personnel costs. Barrett also offers significant financial incentives to clients to maintain a safe work environment, thus enabling clients to achieve additional savings. Barrett strongly advocates that its client companies share these safe-work incentives with their leased employees.
BILLING. Through centralized operations at the Company's headquarters in Portland, Oregon, payroll checks are prepared for each staff leasing client on a frequency consistent with their typical payperiods, weekly or bi-weekly, and delivered by courier. The Company invoices its clients following the end of each payroll period. Such invoices are due upon receipt and are generally paid within five business days. The costs of health insurance coverage and Barrett's cafeteria plan are passed through to its staff leasing clients based on the number of participating employees. The Company often requires a deposit from its staff leasing clients to cover a portion of the anticipated billing for one payroll period. The Company has had generally favorable results with collecting accounts receivable, which it attributes to customer satisfaction, the prompt payment of receivables, its analysis of potential clients' credit history, and regular monitoring of account aging by each branch manager.
Self-Insured Workers' Compensation Program
The Company believes that its self-insured workers' compensation program is an important contributor to its growth in revenue and profitability in Oregon. Significant elements contributing to the success of the workers' compensation program include the regulatory climate surrounding workers' compensation, the Company's workplace safety program and the aggressive claims management approach taken by the Company and its third-party administrators, all of which are described in detail below.
ELEMENTS OF WORKERS' COMPENSATION SYSTEM. State law generally mandates that an employer reimburse its employees for the costs of medical care and other specified benefits for injuries or illnesses incurred in the course and scope of employment. The benefits payable for various categories of claims are determined by state regulation and vary with the severity and nature of the injury or illness and other specified factors. In return for this guaranteed protection, workers' compensation is an exclusive remedy and employees are generally precluded from seeking other damages from their employer for workplace injuries. Most states require employers to maintain workers' compensation insurance or otherwise demonstrate financial responsibility to meet workers' compensation obligations to employees. In many states, employers who meet certain financial and other requirements are permitted to self-insure.
SELF-INSURANCE FOR WORKERS' COMPENSATION. In August 1987, the Company became a self-insured employer for workers' compensation coverage in Oregon. The Company subsequently obtained self-insured employer status for workers' compensation in three additional states, Maryland in November 1993, Washington in July 1994 and Delaware on January 1, 1995. On March 20, 1995, the Company announced that its application for self-insured employer status for workers' compensation purposes had been approved by the State of California. Regulations governing self-insured employers in each state typically require the employer to maintain surety deposits of cash, government securities or other financial instruments to cover workers' claims in the event the employer is unable to pay for such claims.
Upon becoming self-insured, the Company's workers' compensation expense is tied directly to the incidence and severity of workplace injuries to its employees. Significant elements contributing to the success of the workers' compensation program include the regulatory climate surrounding workers' compensation, the Company's workplace-safety program and the aggressive claims management approach taken by the Company and its third-party administrators.
Barrett also maintains excess workers' compensation insurance for individual claims exceeding $350,000 ($300,000 prior to January 1, 1994) in an unlimited amount (up to $10,000,000 per occurrence for claims through December 31, 1993) pursuant to annual policies with major insurance companies. The excess-insurance policies contain standard exclusions from coverage, including punitive damages, fines or penalties in connection with violation of any statute or regulation and losses covered by other insurance or indemnity provisions. The Company maintained workers' compensation insurance in California through a private insurance carrier and a state program.
WORKPLACE SAFETY PROGRAM. In the late 1980's, the Company identified an opportunity to market to small and mid-sized Oregon employers its safety program designed to assist clients in managing workplace injuries and reducing workers' compensation claims. The Company's program begins with an on-site safety inspection by one of its risk managers. Barrett then designs a safety program for the client, including employee and supervisor safety training and regular meetings between management and employees to discuss safety issues and precautionary actions. Among other safety measures, the Company encourages clients to provide on-site first aid care and to make improvements in workplace procedures and equipment to further reduce the risk of injury. The Company's third-party administrators for workers' compensation claims also assists the Company in performing safety inspections of client worksites and provides technical advice regarding workplace safety measures.
A key factor to the success of the Company's safety program is its system of financial incentives to reward safe-work practices which result in reductions in the number and severity of work-related injuries. If the annual cost of claims is less than agreed upon amounts, the Company pays an annual cash incentive based on a percentage of the staff leasing client's payroll. Barrett's business philosophy strongly encourages its client companies to share these incentives with their employees. Staff leasing clients and their leased employees are thus provided an economic incentive to maintain a safer work environment and to reduce the frequency of fraudulent claims for work- related injuries. During 1993, Barrett implemented a mandatory corporate-wide pre-employment drug testing program. Results of the program are believed to include a reduction in the frequency of fraudulent claims and in accidents in which the use of illegal drugs appears to have been a contributing factor.
CLAIMS MANAGEMENT. The Company also seeks to contain its workers' compensation costs through an aggressive approach to claims management. Barrett uses managed-care systems to reduce medical costs and keeps time-loss costs to a minimum by assigning injured workers, whenever possible, to temporary assignments which accommodate the worker's physical limitations. The Company believes that these temporary assignments minimize both time actually lost from work and covered time-loss costs. Barrett has also engaged third-party administrators to provide additional claims management expertise. Typical management procedures include performing thorough and prompt on-site investigations of claims filed by employees, working with physicians to encourage efficient medical management of cases, denying questionable claims and negotiating early settlements to eliminate future case development and costs.
ELEMENTS OF SELF-INSURANCE COSTS. The costs associated with the Company's self-insured workers' compensation program include loss and loss adjustment expense payments with respect to claims made by employees, fees payable to the Company's third-party administrators, assessments payable to state workers' compensation regulatory agencies, premiums for excess workers' compensation insurance and safety incentive payments. Although not directly related to the size of the Company's payroll, the number of claims and correlative loss payments may be expected to increase with growth in the total number of employees. Third-party administrator fees also vary with the number of claims administered. The state assessments are based on payroll amounts and increase proportionately with increases in the Company's employee base. Excess insurance premiums are also based in part on the size of the Company's payroll. Safety incentives expense may increase as the number of the Company's staff leasing employees rises, although increases will only occur for any given client company if such client's claims costs are below agreed upon amounts.
Workers' Compensation Claims Experience and Reserves
In connection with its workers' compensation self-insurance program, the Company is liable for loss and loss adjustment expense payments under the workers' compensation laws of Oregon, Washington, Maryland, and most recently, Delaware and California. Several months may elapse between the occurrence of a workers' compensation loss, the reporting of the claim to the Company and the Company's payment of that claim. The Company recognizes its liability for the ultimate payment of all incurred claims and claims adjustment expenses by accruing liabilities which represent estimates of future amounts necessary to pay claims and related expenses with respect to covered events that have occurred.
When a claim involving a probable loss is reported, the Company establishes a case reserve for the estimated amount of its ultimate loss. The estimate reflects an informed judgment based on established case reserving practices and the experience and knowledge of Barrett's third-party administrators regarding the nature and expected value of the claim, as well as the estimated expense of settling the claim, including legal and other fees and expenses of administering claims. Additionally, on an aggregate basis, the Company has established a provision for losses incurred but not reported and future development in excess of case reserves on existing reported claims ("IBNR").
As part of the case reserving process, historical data is reviewed and consideration is given to the anticipated effect of various factors, including known and anticipated legal developments, inflation and economic conditions. Reserve amounts are necessarily based on management's estimates, and as other data becomes available, these estimates are revised, which may result in increases or decreases to existing case reserves. As of December 31, 1994, the Company's total accrued workers' compensation claims liabilities totaled $2,522,000, compared to $2,434,000 at year-end 1993. The total number of self-insured claims reported in 1994 was 1,051, compared to 1,085 for 1993. Barrett has engaged a nationally-recognized, independent actuary to periodically review the Company's total workers' compensation claims liability and reserving practices. Based in part on such review, the Company believes its total accrued workers' compensation claims liabilities are adequate. There can, however, be no assurance that the Company's actual future workers' compensation obligations will not exceed the amount of its accrued liabilities, with a corresponding negative effect on future earnings, due to such factors as unanticipated loss development of known claims, an increase in the number and severity of new claims and a lack of historical claims experience with new staff leasing clients.
Employees and Employee Benefits
At December 31, 1994, the Company had approximately 11,480 employees, including approximately 7,100 temporary services employees, approximately 4,200 leased employees and approximately 180 managerial, sales and administrative employees. The number of employees at any given time can vary significantly due to business conditions at customer or client companies. Less than 0.1% of the Company's employees are covered by a collective bargaining agreement. Each of Barrett's managerial, sales and administrative employees has entered into a standard form of employment agreement which, among other things, contains covenants not to engage in certain activities in competition with the Company for 18 months following termination of employment and to maintain the confidentiality of certain proprietary information. Barrett believes its employee relations are good.
Benefits offered to Barrett's temporary employees include group health insurance, a Section 125 cafeteria plan which permits employees to use pre-tax earnings to fund various services, including medical, dental and child care, and a Section 401(k) savings plan pursuant to which employees may begin making contributions upon reaching 21 years of age and completing 1,000 hours of service in any consecutive 12-month period. The Company may also make contributions to the savings plan, which vest over seven years and are subject to certain legal limits, at the sole discretion of the Company's board of directors. Leased employees may participate in the Company's benefit plans, provided that the group health insurance premiums may, at the client's option, be paid by payroll deduction. Barrett also maintains profit-sharing plans for its managerial and administrative personnel.
Regulatory and Legislative Issues
The Company is subject to the laws and regulations governing self- insured employers under the workers' compensation systems in Oregon, Washington and Maryland and, beginning in 1995, Delaware and California. In addition, legislation was adopted in Oregon in 1993 requiring a staff leasing company, such as Barrett, to be licensed by the Workers' Compensation Division of the Oregon Department of Consumer and Business Services. Temporary services companies are expressly exempt from the legislation. Staff leasing companies are also required to ensure that each leasing client provides adequate training and supervision for its employees to comply with statutory requirements for workplace safety and to give 30 days' written notice in the event of a termination of its obligation to provide workers' compensation coverage for leased employees and other subject employees of a leasing client. Although compliance with the legislation has caused Barrett to make certain changes in its staff leasing operations and contracts, which has resulted in additional financial risk, particularly with respect to those clients who breach their payment obligations to the Company, Barrett does not anticipate that compliance with the legislation will have a material impact on its business operations, financial condition or operating results.
While it is impossible to predict if, when and in what form any health care reform will be enacted, elements of such reform may have a material adverse effect on the Company's operations and its self-insured workers' compensation program.
Competition
The staff leasing and temporary staffing services businesses are characterized by rapid growth and intense competition. The temporary staffing services market includes competitors of all sizes, including several, such as Manpower, Inc., Kelly Services, Inc., The Olsten Corporation, Interim Services, Inc., and Adia Services, Inc., which are national in scope and have substantially greater financial and marketing resources than the Company. In addition to national companies, Barrett competes with numerous regional and local firms for both customers and employees. The Company estimates that at least 100 firms provide temporary services in Oregon. There are relatively few barriers to entry into the temporary services business. The principal competitive factors in the temporary services industry are price, the ability to provide qualified workers in a timely manner and the monitoring of job performance. The Company attributes its growth in temporary services revenues to the cost-efficiency of its operations, which permits the Company to price its services competitively, and to its ability through its branch office network to understand the needs of its customers and fill those needs with competent personnel.
Although there are believed to be more than 2,200 staff leasing companies currently operating in the United States, many of these potential competitors are located in states in which the Company presently does not operate. Barrett believes that at least 20 staff leasing firms are operating in Oregon, but that the Company has the largest presence in the State. The Company may face additional competition in the future from new entrants to the field, including other temporary services companies, payroll processing companies and insurance companies. Certain staff leasing companies operating in areas in which Barrett does not now, but may in the future, offer its services have greater financial and marketing resources than the Company. Competition in the staff leasing industry is based largely on price, although service and quality are also important. Barrett believes that its growth in staff leasing revenues is attributable to its ability to provide small and mid-sized companies with the opportunity to provide enhanced benefits to their employees with a concomitant reduction in the clients' overall personnel administration and workers' compensation costs. The Company's competitive advantage may be adversely affected by a substantial increase in the costs of maintaining its self-insured workers' compensation program or by a general market decrease in workers' compensation premiums.
Item 2.
Item 2. PROPERTIES
The Company provides temporary staffing services through all 15 of its branch offices. Staff leasing services are currently offered through each of Barrett's Oregon, Washington and Maryland locations. The following table shows the locations of the Company's branch offices and the year in which each branch was opened or acquired. The Company's Oregon branches accounted for 78% of its total revenues in 1994. The Company also leases space in ten other locations in its market areas which it uses to recruit and place employees.
Year Opened Year Opened Oregon Locations or Acquired Other Locations or Acquired ---------------- ----------- --------------- -----------
Portland (Industrial) 1984 Sacramento, California 1988 Portland (Bridgeport) 1988 Santa Clara, California 1994 Bend 1990 Baltimore, Maryland 1951 Medford 1990 Easton, Maryland 1994 Salem 1990 Seattle, Washington 1981 Albany 1991 Spokane, Washington 1994 Eugene 1991 Grants Pass 1991 Portland (Leasing) 1993
In May 1993, Barrett purchased an office building in Portland, Oregon, with approximately 9,200 square feet of office space, for a total purchase price of $925,000. The Company's corporate headquarters were relocated to the new building in June 1993. The building is subject to a mortgage loan with a principal balance of approximately $658,000 at December 31, 1994.
The Company also owns another office building in Portland, Oregon, in which its headquarters were previously located. The building is subject to a mortgage loan with a principal balance at December 31, 1994, of approximately $281,000 and has approximately 7,000 square feet of office space. Barrett moved its Portland (Bridgeport) branch office to this building in September 1993.
Barrett leases office space for its other branch offices. At December 31, 1994, such leases had expiration dates ranging from less than one year to five years, with total minimum payments through 1999 of approximately $1,027,000.
Item 3.
Item 3. LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to this item pending at December 31, 1994, or at the date of this report.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Barrett's executive officers appears in Item 10 of this report.
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the symbol "BBSI." At February 28, 1995, there were 59 stockholders of record and approximately 1,900 beneficial owners of the Company's common stock. The Company has not declared or paid any cash dividends since the closing of its initial public offering of its common stock on June 18, 1993, and has no present plan to pay any cash dividends in the foreseeable future. The following table presents the high and low sales prices of the Company's common stock for each quarterly period since June 18, 1993, as reported by The Nasdaq Stock Market:
1993 High Low ---- ---- ---
June 18 through June 30 $ 4.75 $ 3.50
Third Quarter 7.125 3.875
Fourth Quarter 8.375 6.75
----
First Quarter $16.00 $ 6.875
Second Quarter(1) 14.75 8.25
Third Quarter 12.25 8.00
Fourth Quarter 16.25 11.00
----
January 1 through February 28 $19.50 $14.50
(1) All per share prices prior to the second quarter of 1994 have been restated to reflect a 2-for-1 stock split effective May 23, 1994.
Item 6.
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.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the percentages of total revenues represented by selected items in the Company's Statements of Operations for the years ended December 31, 1994, 1993 and 1992, included in Item 8
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following audited financial statements of Barrett Business Services, Inc., and related documents are set forth herein on the pages indicated:
Page - ---
Report of Independent Accountants ...................................... 21
Balance Sheets at December 31, 1994 and 1993 ........................... 22
Statements of Operations for the years ended December 31, 1994, 1993, and 1992 .................................... 23
Statements of Stockholders' Equity for the years ended December 31, 1994, 1993, and 1992 ........................ 24
Statements of Cash Flows for the years ended December 31, 1994, 1993, and 1992 .................................... 25
Notes to Financial Statements .......................................... 26
Other financial statement schedules are omitted because they are not applicable or not required.
Report of Independent Accountants
February 6, 1995
To the Stockholders and Board of Directors, Barrett Business Services, Inc.
In our opinion, the accompanying balance sheets and the related statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Barrett Business Services, Inc. at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP Portland, Oregon
Barrett Business Services, Inc. Balance Sheets (In thousands) ------------------------------------------------------------------------------ ---
December 31, 1994 1993 -------- ------- - Assets Current assets: Cash and cash equivalents $ 2,214 $ 1,127 Marketable securities -- 6,374 Trade accounts receivable, net 9,631 4,954 Prepaid expenses and other 599 145 Deferred tax asset (Note 12) 914 894 ------- ------- Total current assets 13,358 13,494
Intangibles, net (Note 3) 4,936 294 Property and equipment, net (Notes 4 and 7) 2,110 1,876 Restricted marketable securities and workers' compensation deposits (Note 5) 4,196 2,728 Other assets 65 33 ------ ------- $24,665 $18,425 ======= =======
Liabilities and Stockholders' Equity Curent liabilities: Current portion of long-term debt (Notes 7 and 10) $ 31 $ 123 Income taxes payable (Note 12) -- 79 Accounts payable 218 91 Accrued payroll, payroll taxes and related benefits 5,057 3,223 Accrued workers' compensation claim liabilities (Note 5) 2,358 2,434 Customer safety incentives payable 805 527 ------- ------- Total current liabilities 8,469 6,477
Long-term debt, net of current portion (Notes 7 and 10) 908 946 Customer deposits 669 522 Long-term workers' compensation liabilities (Note 5) 164 -- ------- ------- 10,210 7,945 ------- ------- Commitments and contingencies (Note 9)
Stockholders' equity: Common stock, $.01 par value; 20,500 shares authorized, 6,367 and 3,152 shares issued and outstanding, respectively (Notes 11 and 13) 64 32 Additional paid-in capital 8,978 8,469 Retained earnings 5,413 1,979 ------- ------- 14,455 10,480 ------- ------- $24,665 $18,425 ======= =======
The accompanying notes are an integral part of these financial statements. Barrett Business Services, Inc. Statements of Operations (In thousands, except per share amounts)
Year ended December 31, 1994 1993 1992 ------- ------- ------- Revenues: Temporary services $71,148 $41,755 $34,681 Staff leasing services 69,404 58,512 45,444 ------- ------- -------
140,552 100,267 80,125 ------- ------- ------- Cost of revenues: Direct payroll costs 105,515 75,171 59,820 Payroll taxes and benefits 12,758 9,911 7,826 Workers' compensation (Note 5) 5,069 4,591 3,233 Safety incentives 1,103 598 651 ------- ------- ------- 124,445 90,271 71,530 ------- ------- -------
Gross margin 16,107 9,996 8,595
Selling, general and administrative expenses 10,302 6,450 6,003 Amortization of intangibles (Note 3) 430 370 336 ------- ------ ------
Income from operations 5,375 3,176 2,256 ------- ------ ------ Other (expense) income: Interest expense (106) (86) (77) Interest income 224 161 70 Other, net 78 133 26 ------- ------ ------ 196 208 19 ------- ------ ------
Income before provision for taxes 5,571 3,384 2,275
Provision for income taxes (Note 12) 2,105 437 - ------- ------ ------ Net income $ 3,466 $ 2,947 $ 2,275 ======= ======= =======
Net income per share $ .53 $ - $ - ======= ======= =======
Unaudited pro forma information (Note 12): Income before provision for income taxes $ 3,384 $ 2,275 Pro forma provision for income taxes 1,324 890 ------- -------
Pro forma net income $ 2,060 $ 1,385 ======= ======= Pro forma net income per share $ .39 $ .35 ======= =======
Weighted average number of shares outstanding 6,591 5,260 4,000 ======= ======= ======= The accompanying notes are an integral part of these financial statements.
Barrett Business Services, Inc. Statements of Stockholders' Equity (In thousands)
Additional Common stock paid-in Retained Shares Amount capital earnings Total ------ ------ ------- -------- ------
Balance, December 31, 1991 2,000 $ 20 $ 190 $ 752 $ 962
Net income 2,275 2,275 Distributions to stockholders (1,663) (1,663) ----- ------ ------- -------- ------
Balance, December 31, 1992 2,000 20 190 1,364 1,574
Common stock issued 1,152 12 6,816 6,828 Net income 2,947 2,947 Distributions to stockholders (869) (869) Reclassification of retained earnings on issuance of common stock 2,332 (2,332) - ----- ------ ------ ------- ------
Balance, December 31, 1993 3,152 32 8,469 1,979 10,480
Common stock issued for acquisitions 29 468 468
Common stock issued on exercise of options, net 22 41 41
Net income 3,466 3,466 Reclassification of retained earnings for stock split 3,164 32 (32) - ----- ------ ------- ------- ------
Balance, December 31, 1994 6,367 $ 64 $ 8,978 $ 5,413 $14,455 ===== ====== ======= ======= =======
The accompanying notes are an integral part of these financial statements.
Barrett Business Services, Inc. Statements of Cash Flows (In thousands)
Year ended December 31, 1994 1993 1992 ------ ------ ------ Cash flows from operating activities: Net income $ 3,466 $ 2,947 $ 2,275 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 637 530 476 Gain on sales of marketable securities - (112) (14) Provision for doubtful accounts 136 160 79 Deferred taxes (20) (894) - Changes in certain assets and liabilities: Trade accounts receivable (4,813) (969) (701) Prepaid expenses and other (454) 2 (88) Income taxes payable (79) 79 - Accounts payable 127 (135) (25) Accrued payroll and related benefits 1,834 658 620 Accrued workers' compensation claim liabilities 88 1,097 462 Customer safety incentives payable 278 (8) 307 Litigation settlement - - (600) Due to stockholder - (98) - Customer deposits and other, net 115 158 114 ------ ------ ------
Net cash provided by operating activities 1,315 3,415 2,905
------ ------ ------ Cash flows from investing activities: Payments for acquisitions (4,737) (10) (90) Purchases of fixed assets (308) (1,280) (201) Proceeds from sales of marketable securities 8,619 8,413 539 Purchases of marketable securities (3,713) (15,938) (1,421) ------ ------ ------
Net cash used by investing activities (139) (8,815) (1,173) ------ ------ ------
Cash flows from financing activities: Distributions to stockholders - (869) (1,630) Proceeds from debt issued - 752 - Payments on long-term debt (130) (196) (276) Proceeds from exercise of stock options 41 6,828 - ------ ------ ------
Net cash provided (used) by financing activities (89) 6,515 (1,906) ------ ------ ------
Net increase (decrease) in cash and cash equivalents 1,087 1,115 (174)
Cash and cash equivalents, beginning of year 1,127 12 186 ------ ------ ------
Cash and cash equivalents, end of year $ 2,214 $ 1,127 $ 12 ====== ====== =====
The accompanying notes are an integral part of these financial statements.
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------
1. Summary of Operations and Significant Accounting Policies
Nature of Operations Barrett Business Services, Inc. ("Barrett" or the "Company"), a Maryland corporation, is engaged in providing temporary staffing and professional employer (staff leasing) services to a diversified group of customers through a network of branch offices throughout Oregon, Washington, northern California, Maryland and Delaware. Approximately 78%, 92% and 92%, respectively, of the Company's revenues during 1994, 1993 and 1992 was attributable to its Oregon operations.
Revenue Recognition The Company recognizes revenue as the services are rendered by its work force. Temporary services are engaged by customers to meet short-term fluctuations in personnel needs. Professional employer (staff leasing) services are normally used by organizations to satisfy ongoing personnel needs and typically involve contracts with a minimum term of one year, renewable annually, which cover all employees at a particular work site.
Cash and Cash Equivalents The Company considers nonrestricted short-term investments which are highly liquid, readily convertible into cash and have original maturities of less than three months to be cash equivalents for purposes of the statements of cash flows.
Allowance for Doubtful Accounts The Company had an allowance for doubtful accounts of $62,500 and $25,000 at December 31, 1994 and 1993, respectively.
Marketable Securities Marketable securities are stated at cost which approximates fair market value. At December 31, 1994, marketable securities consisted primarily of municipal bonds and are expected to be held to maturity, generally from 17 to 30 years (see Note 5). At December 31, 1993, marketable securities consisted primarily of municipal tax anticipation notes and certificates of deposit.
Intangibles Intangible assets are recorded at cost and are being amortized using the straight-line method over estimated useful lives which range from 2 years to 15 years.
Property and Equipment Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operating expense as incurred, and expenditures for additions and betterments are capitalized. The cost of assets sold or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is reflected in the statements of operations.
Depreciation of property and equipment is calculated using either straight-line or accelerated methods over estimated useful lives which range from 3 years to 31.5 years.
Customer Safety Incentives Payable Safety incentives are paid annually to staff leasing clients if the cost of workers' compensation claims is less than agreed upon amounts; amounts paid are based on a percentage of payroll. The Company accrues the amounts payable under this program on a monthly basis.
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------
1. Summary of Operations and Significant Accounting Policies (Continued)
Income Taxes Effective July 1, 1987, the Company elected to be treated as an S Corporation under certain provisions of the Internal Revenue Code. As such, the income or losses of the Company were attributable to its stockholders in their individual tax returns. Accordingly, no accrual or provision for income taxes was made in the Company's financial statements for the year ended December 31, 1992. Effective April 30, 1993, the Company terminated its S Corporation status. A pro forma provision for income taxes that would have been recorded if the Company had been a C Corporation for the years ended December 31, 1993 and 1992 is provided for comparative purposes in the statements of operations.
Customer Deposits The Company requires deposits from certain staff leasing customers to cover a portion of its accounts receivable due from such customers in event of default of payment.
Common Stock Split and Change in Authorized Shares The Company's stockholders approved a 7,968-for-1 split of its common stock, an increase in authorized common shares and the authorization of preferred stock which became effective March 25, 1993. Additionally, the par value of common stock was changed to $.01 from $10 per share. Common stock and additional paid-in capital as of December 31, 1991 have been adjusted to reflect this change. On April 20, 1994, the Company's board of directors approved a 2-for-1 stock split in the form of a stock dividend, paid May 23, 1994, to holders of record of its common stock at the close of business on May 2, 1994 (the "Record Date"), at the rate of one new share for each share outstanding on the Record Date. All earnings per share amounts have been adjusted to reflect these transactions for all periods presented.
A special meeting of stockholders was held on August 10, 1994, pursuant to which the stockholders approved an amendment to the Company's charter to increase the number of authorized shares of common stock from 7,500,000 shares to 20,500,000 shares.
Statements of Cash Flows The Company has recorded the following non-cash transactions:
In September 1992, the Company, for financial reporting purposes, was deemed to have distributed to its stockholders certain non-cash assets and liabilities which aggregated a net liability of $23,000.
During 1992, notes receivable from a stockholder were extinguished.
During 1994, the Company issued common stock with an aggregate fair market value of $468,000 in connection with the acquisition of certain assets of Personnel Management & Consulting, Inc. and Construction Workforce (see Note 2).
Interest paid during 1994, 1993 and 1992 did not materially differ from interest expense.
Income taxes paid by the Company in 1994 and 1993 totaled $2,144,800 and $1,239,600, respectively.
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------ ---
1. Summary of Operations and Significant Accounting Policies (Continued)
Net Income Per Share Net income per share for the year ended December 31, 1994 is computed based on the weighted average number of common stock and common stock equivalents outstanding during the period. For the years ended December 31, 1993 and 1992, such pro forma computations were made without giving effect to securities that would otherwise be considered to be common stock equivalents, because such securities aggregated less than 3% of shares outstanding and thus were not considered dilutive. Outstanding stock options and warrants, net of assumed buy-back, are considered common stock equivalents.
Reclassifications Certain prior year amounts have been reclassified to conform with the 1994 presentation. Such reclassifications have no impact on net income or stockholders' equity.
2. Acquisitions
CDI Corporation-West In March 1993, the Company acquired a branch office of CDI Corporation- West in Sacramento, California for $10,000. The acquisition was recorded under the purchase method of accounting which resulted in $10,000 of intangible assets.
Personnel Management & Consulting, Inc. On February 27, 1994, the Company purchased substantially all of the assets of Personnel Management & Consulting, Inc., a company engaged in the temporary services business in Maryland and Delaware. Of the $270,000 purchase price, the Company paid $42,000 in cash and issued 12,000 shares of its common stock with a then-fair market value of $228,000. The acquisition was accounted for under the purchase method of accounting which resulted in approximately $241,000 of intangible assets and $29,000 of fixed assets.
Golden West Temporary Services On March 7, 1994, the Company purchased certain assets of Golden West Temporary Services ("Golden West"), a company in the temporary services business with four offices in northern California. The cash purchase price of $4,514,000 was paid by liquidating a portion of the Company's short-term marketable securities. The Company accounted for the acquisition under the purchase method of accounting which resulted in approximately $4,425,000 of intangible assets and $89,000 of fixed assets.
Construction Workforce On December 26, 1994, the Company purchased certain assets of Max Johnson Enterprises, Inc., dba Construction Workforce, a company located in Spokane, Washington which specializes in providing highly skilled temporary craftsmen to the commercial construction industry. Of the $300,000 purchase price, the Company paid $60,000 in cash and issued 17,142 shares of its common stock with a then-fair market value of $240,000. The acquisition was accounted for under the purchase method of accounting which resulted in $285,000 of intangible assets and $15,000 of fixed assets. Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------
2. Acquisitions (Continued)
Advanced Temporary Systems, Inc. On December 29, 1994, the Company purchased for $51,000 cash certain assets of Advanced Temporary Systems, Inc., a company engaged in the temporary staffing business in Kent, Washington. The Company accounted for the acquisition under the purchase method of accounting which resulted in $51,000 of intangible assets.
Pro Forma Results of Operations (Unaudited) The operating results of each of the above acquisitions are included in the Company's results of operations from the respective date of acquisition. The following unaudited pro forma summary presents the combined results of operations as if the Personnel Management & Consulting, Inc. and Golden West acquisitions had occurred at the beginning of 1993, after giving effect to certain adjustments for the amortization of intangible assets, taxation and cost of capital. The other acquisitions are not included in the pro forma information as their effect is not material.
Year ended December 31, 1994 1993 ------ ------ (In thousands, except per share amounts)
Revenue $145,066 $125,514 ======== ======== Net income $ 3,545 $ 2,366 ======== ======== Net income per share $ .54 $ .45 ======== ========
The unaudited pro forma results above have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of that date or of results which may occur in the future.
3. Intangibles
Intangibles consist of the following (in thousands):
December 31, 1994 1993 ------ ------
Covenants not to compete $ 1,490 $ 1,215 Goodwill 4,870 220 Customer lists 358 211 ------- ------- 6,718 1,646
Less accumulated amortization 1,782 1,352 ------- ------- $ 4,936 $ 294 ======= ======
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------
4. Property and Equipment
Property and equipment consists of the following (in thousands):
December 31, 1994 1993 ------- -------
Office furniture and fixtures $ 1,509 $ 1,092 Building 1,175 1,157 Vehicles 41 36 ------- ------- 2,725 2,285 Less accumulated depreciation 923 716 ------- ------- 1,802 1,569
Land 308 307 ------- -------
$ 2,110 $ 1,876 ======= =======
5. Accrued Workers' Compensation Claim Liabilities
In August 1987 and November 1993, the Company became a self-insured employer with respect to workers' compensation insurance coverage for all its employees working or living in Oregon and Maryland, respectively. The Company also became a self-insured employer for workers' compensation insurance coverage in the state of Washington effective July 1, 1994 and in Delaware effective January 1, 1995. The Company has provided $2,522,000 and $2,434,000 at December 31, 1994 and 1993, respectively, as an estimated liability for unsettled workers' compensation claims. This estimated liability represents management's best estimate which includes, in part, an evaluation of information provided by the Company's third-party administrator and its independent actuary. Included in the claims liabilities are case reserve estimates for reported losses, plus additional amounts based on projections for incurred but not reported claims, allocated loss adjustment expenses and anticipated increases in case reserve estimates. These estimates are continually reviewed and adjustments to liabilities are reflected in current operations as they become known. The Company believes that the difference between amounts recorded at December 31, 1994 for its estimated liability and the possible range of costs of settling related claims is not material to results of operations; nevertheless, it is reasonably possible that adjustments required in future periods would be material to results of operations.
The states of Oregon, Maryland and Washington require the Company to maintain specified investment balances or other financial instruments, totaling $3,802,000 at December 31, 1994 and $2,761,000 at December 31, 1993, to cover potential claims losses. To partially meet these requirements at December 31, 1994 and 1993, the Company held a $300,000 surety bond guaranteed by an irrevocable standby letter of credit. The investments are included in restricted marketable securities and workers' compensation deposits in the accompanying balance sheets.
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------ --
5. Accrued Workers' Compensation Claim Liabilities (Continued)
Liabilities incurred for work-related employee fatalities are recorded either at an agreed-upon lump-sum settlement amount or the net present value of future fixed and determinable payments over the actuarially determined remaining life of the beneficiary, discounted at a rate that approximates a long-term high quality corporate bond rate. The Company has obtained excess workers' compensation insurance to limit its self- insurance exposure to $350,000 per occurrence ($300,000 for claims before December 31, 1993). The excess insurance provides coverage up to $10 million per occurrence for claims through December 31, 1993 and unlimited excess coverage after that date. At December 31, 1994, the Company has recorded $164,000 for work-related fatalities in long-term workers' compensation liabilities in the accompanying balance sheet.
The workers' compensation expense in the accompanying statements of operations consists of $4,254,000, $4,075,000 and $2,780,000 for self-insurance expense for 1994, 1993 and 1992, respectively. Premiums in the insured states were $815,000, $516,000 and $453,000 for 1994, 1993 and 1992, respectively.
6. Credit Facility
On August 12, 1993, the Company entered into a loan agreement (the "Agreement") with a major bank which provides for (a) an unsecured revolving credit facility for working capital purposes and (b) a term real estate loan. The Agreement, as amended, expires on May 31, 1995, and currently permits total borrowings of up to $4,000,000 under the revolving credit facility. The interest rate on outstanding balances under the revolving credit facility is at the Federal Funds Rate plus 1.75%. Under the amended loan agreement, the Company is required to maintain (i) a ratio of total liabilities to tangible net worth of not more than 2.0 to 1.0, (ii) positive quarterly income before taxes, (iii) tangible net worth of not less than $6,000,000, (iv) a minimum debt coverage ratio of 1.20 to 1.00 at the end of each fiscal year, and (v) a zero outstanding balance against the revolving credit facility for a minimum of 60 consecutive days during each year. The Company is also prohibited from pledging any of its assets other than existing mortgages on its real property. There were no borrowings outstanding under the revolving credit facility at December 31, 1994 or 1993.
During the years ended December 31, 1994, 1993 and 1992, the maximum balances outstanding under the revolving credit facility were $1,500,069, $1,189,000 and $321,617, respectively; the average balances outstanding were $165,000, $59,000 and $142,000, respectively; and the weighted average interest rates during the period were 6.9%, 6.6% and 7.0%, respectively. The weighted average interest rate during the periods was calculated using daily weighted averages.
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------ --
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
December 31, 1994 1993 ------ ------ Mortgage note payable in monthly installments of $2,781, including interest at 11% per annum through 1998, with a principal payment of $269,174 due in 1998, secured by land and building $ 281 $ 283
Mortgage note payable in monthly installments of $6,730, including interest at 8.15% per annum through 2003, with a principal payment of $366,633 due in 2003, secured by land and building 658 683
Unsecured note to former stockholder, with interest at 12% per annum (Note 10) - 103 ------ ------
939 1,069 Less portion due within one year 31 123 ------ ------
$ 908 $ 946 ====== ======
Maturities on long-term debt are summarized as follows at December 31, 1994 (in thousands):
Year ending December 31, ------------
1995 $ 31 1996 33 1997 36 1998 307 1999 36 Thereafter 496 -------
$ 939 ======
8. Savings Plan
On April 1, 1990, the Company established a 401(k) employee savings plan for the benefit of its eligible employees. All employees, except those covered under a co-employer (leasing) contract, 21 years of age or older, become eligible to participate in the savings plan upon completion of 1,000 hours of service in any consecutive 12-month period following the initial date of employment. Employees covered under a co- employer (leasing) contract are eligible to participate in the savings plan beginning with their respective dates of employment. The determination of amounts, if any, of Company contributions to the plan is subject to the sole discretion of the Company. Participants' interests in Company contributions to the plan vest over a 7-year period. Company contributions to the plan were $114,000, $43,574 and $35,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
9. Commitments
Lease Commitments The Company leases its branch offices under operating lease agreements which require minimum annual payments as follows (in thousands):
Year ending December 31, ------------
1995 $ 384 1996 242 1997 196 1998 114 1999 91 ------
Total minimum payments $ 1,027 =======
Rent expense for the years ended December 31, 1994, 1993 and 1992 was approximately $423,000, $295,000 and $313,000, respectively.
10. Related Party Transactions
During 1994, 1993 and 1992, the Company recorded revenues of $3,261,000, $2,404,000 and $2,249,000, respectively, and cost of revenues of $3,112,000, $2,316,000 and $2,116,000, respectively, for providing services to a company of which a director of the Company is president and majority stockholder. At December 31, 1994 and 1993, Barrett had receivables from this company of $140,000 and $117,000, respectively.
During 1994, 1993 and 1992, the Company recorded revenues of $119,000, $480,000 and $47,000, respectively, and cost of revenues of $110,000, $475,000 and $45,000, respectively, for providing staff leasing services to a company owned by Barrett's President and Chief Executive Officer who is a stockholder of the client company. At December 31, 1993, Barrett had recorded a receivable of $35,000 from this company.
As further described in Note 7, the Company had a note payable to the estate of the former majority stockholder, the late mother of a current stockholder. The Company was also obligated to make annual payments to the former director and majority stockholder until her death in 1993 in recognition of her past services and in return for certain non-competition covenants. The payments were adjusted annually for increases in the Consumer Price Index for All Items--U.S. National Average. The Company accounted for this arrangement as a defined benefit plan. Under the plan, net pension costs were approximately $40,000 for 1992.
At December 31, 1993, the President and Chief Executive Officer of the Company, pursuant to the approval of a majority of the disinterested outside directors, agreed to personally guarantee, at no cost to the Company, the repayment of a $111,000 receivable from an unrelated, insolvent customer. The Company will exercise this guarantee at such time as the Company determines that further collection efforts are likely to be ineffective, but not later than December 31, 1995.
10. Related Party Transactions (Continued)
A director of the Company is Vice Chairman of the Board of Directors of the bank that provides the Company's unsecured revolving credit facility and certain mortgage financing. In addition to providing other banking services, the bank also serves as the transfer agent for the Company's common stock. See Notes 6 and 7.
11. Public Stock Offering
In June 1993, the Company completed an initial public offering of 1,000,000 shares of common stock at $7.00 per share. In July 1993, the underwriters exercised an option to purchase 150,000 additional shares at $7.00 per share to cover over-allotments. Total net proceeds to the Company were $6,828,000 after deducting the underwriting discount and offering expenses.
12. Income Taxes
In conjunction with the Company's public offering, the Company terminated its S Corporation status effective April 30, 1993. Accordingly, unaudited pro forma income tax information is presented below which would have been recorded if the Company had been a C Corporation during all periods presented, based on tax laws in effect during those periods, as calculated under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
The provisions for income taxes are as follows (in thousands):
Year ended December 31, 1994 1993 1992 ------ ------ ------ (Unaudited pro forma)
Current: Federal $ 1,750 $ 1,439 $ 674 State 375 284 133 ------ ------ ------ 2,125 1,723 807 ------ ------ ------
Deferred: Federal (17) (338) 70 State (3) (61) 13 ------ ------ ------ (20) (399) 83 ------ ------ ------
Total provision $ 2,105 $ 1,324 $ 890 ======= ======= =======
Barrett Business Services, Inc.
Notes to Financial Statements -----------------------------------------------------------------------------
12. Income Taxes (Continued)
The actual provision for income taxes for the first eight months of operation as a C Corporation (May 1, 1993 to December 31, 1993) is as follows (in thousands):
Current: Federal $ 1,110 State 221 ------- 1,331 -------
Deferred: Federal (327) State (62) ------- (389) ------- Provision before cumulative deferred tax asset 942
Cumulative deferred tax asset (505) -------
$ 437 =======
The provision for income taxes for the year ended December 31, 1993 is partially offset by recognition of a cumulative net deferred tax asset of $505,000 associated with the termination of the Company's S Corporation status on April 30, 1993, in accordance with SFAS 109.
Deferred tax assets (liabilities) are comprised of the following components (in thousands):
December 31, 1994 1993 ------ ------
Accrued workers' compensation claim liabilities $ 982 $ 949 Allowance for doubtful accounts 25 10 Tax depreciation in excess of book depreciation (93) (65) ------ ------
$ 914 $ 894 ====== ======
Barrett Business Services, Inc.
Notes to Financial Statements -----------------------------------------------------------------------------
12. Income Taxes (Continued)
The effective tax rate differed from the U.S. statutory federal tax rate due to the following:
Year ended December 31, 1994 1993 1992 ------ ------ ------ (Unaudited pro forma)
Statutory federal tax rate 34.0% 34.0% 34.0% State taxes, net of federal benefit 4.4 4.3 4.1 Goodwill amortization .2 .5 .7 Federal tax-exempt interest income (1.1) -- -- Other, net .3 .3 .3 ------ ------ ------ 37.8% 39.1% 39.1% ====== ====== ======
Upon termination of the Company's S Corporation status in 1993, cash distributions totaling $330,000, which represented the estimated tax liabilities of stockholders on S Corporation earnings from January 1, 1993 through April 30, 1993, were paid to the stockholders from the undistributed S Corporation retained earnings.
13. Stockholders' Equity
As of March 1, 1993, the Company adopted the 1993 Stock Incentive Plan (the "Plan") which provides for stock-based awards to the Company's employees, non-employee directors and outside consultants or advisers. As of April 20, 1994, the Company increased the number of shares of common stock reserved for issuance under the Plan from 500,000 to 800,000. An award of 4,000 restricted shares granted under the Plan in 1993 became fully vested in 1994. The following table summarizes option activity under the Plan:
Options Range of prices --------- -----------------
Outstanding at March 1, 1993 -
Options granted 166,500 $ 3.50 to $ 4.69 Options exercised - Options cancelled or expired (6,000) ------- Outstanding at December 31, 1993 160,500
Options granted 233,500 $ 9.50 to $ 13.56 Options exercised (22,175) $ 3.50 Options cancelled or expired (65,250) -------- Outstanding at December 31, 1994 306,575 ======== Exercisable at December 31, 1994 10,450 ======== Available for grant at December 31, 1994 467,250 ========
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------
13. Stockholders' Equity (Continued)
The options listed in the table generally become exercisable in four equal annual installments beginning one year after the date of grant. The number of options and the price per share have been restated to reflect the 2-for-1 stock split effective May 23, 1994.
In connection with the initial public offering, the Company issued 200,000 warrants to its underwriters and related parties for the purchase of shares of the Company's common stock exercisable in whole at any time or in part from time to time commencing June 11, 1994 at $4.20 per share, after giving effect for the 2-for-1 stock split. A total of 110,000 warrants were exercised in January 1995 for proceeds of $462,000.
14. Quarterly Financial Information (Unaudited) (In thousands, except per share data)
First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- Year ended December 31, 1992: Revenues $ 17,000 $ 20,333 $ 22,597 $ 20,195 Cost of revenues 15,123 18,101 20,197 18,109 Pro forma net income 253 408 435 289 Pro forma net income per share .07 .10 .11 .07
Year ended December 31, 1993: Revenues $ 20,535 $ 25,386 $ 28,076 $ 26,270 Cost of revenues 18,501 22,931 25,147 23,692 Pro forma net income 389 488 Pro forma net income per share .09 .11 Net income 702 481 Net income per share .11 .08
Year ended December 31, 1994: Revenues $ 27,067 $ 35,136 $ 41,149 $ 37,200 Cost of revenues 24,096 31,217 36,107 33,025 Net income 608 765 1,235 858 Net income per share .09 .12 .19 .13
Barrett Business Services, Inc.
Notes to Financial Statements ------------------------------------------------------------------------------
15. Market Information (Unaudited)
The Company's common stock trades on The Nasdaq Stock Market under the symbol "BBSI." The following table sets forth the high and low prices of the stock for each quarter since the June 1993 initial public offering:
High Low ------ ------
June 1993 $ 4.75 $ 3.50 Third quarter 7.13 3.88 Fourth quarter 8.38 6.75
High Low ------ ------ First quarter $ 16.00 $ 6.88 Second quarter(1) 14.75 8.25 Third quarter 12.25 8.00 Fourth quarter 16.25 11.00
(1) All share prices prior to the second quarter of 1994 have been adjusted to reflect a 2-for-1 stock split effective May 23, 1994.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table identifies, as of February 28, 1995, each director and executive officer of the Company. Directors serve until the next annual meeting of shareholders, or until their successors are elected and qualified. Executive officers serve at the discretion of the Board of Directors.
Principal Positions and Director Officer Name Age Business Experience since since ------------------------------------------------------------------------------
William W. Sherertz 49 President; Chief Executive 1980 1980 Officer; Acting Chairman of the Board of Directors
Robert R. Ames 54 Director; Vice Chairman of 1993 First Interstate Bank of Oregon, N.A.
Jeffrey L. Beaudoin 40 Director; President of 1993 Rose City Moving and Storage Co.
Stephen A. Gregg 50 Director; Private investor 1995 and health care consultant
Anthony Meeker 55 Director; Vice President of 1993 Spears Benzak Salomon & Farrell
Stanley G. Renecker 40 Director; Vice President- 1993 Acquisitions of The Campbell Group
Michael D. Mulholland 43 Vice President-Finance 1994 and Secretary; Chief Financial Officer
Christopher J. McLaughlin 39 Vice President-Operations 1994
Peter J. Schenk 36 Vice President-Marketing 1993 and Sales
James D. Miller 31 Controller; Principal 1994 Accounting Officer
William W. Sherertz has acted as Chief Executive Officer of the Company since 1980. He has also been a director of the Company since 1980, and was appointed President of the Company in March 1993. Mr. Sherertz also serves as Acting Chairman of the Board of Directors.
Robert R. Ames has served as a director of the Company since 1993. He is currently the Vice Chairman of the Board of Directors of First Interstate Bank of Oregon, N.A. From 1983 to 1991, Mr. Ames served as President of the Bank.
Jeffrey L. Beaudoin has served as a director of the Company since 1993. He is presently the President and a director of Rose City Moving and Storage Co., of Portland, Oregon, a staff leasing client of the Company.
Stephen A. Gregg was elected to the Company's Board of Directors in February 1995. He is currently a private investor and health care consultant. From 1985 to 1994, Mr. Gregg was Chairman and Chief Executive Officer of The Ethix Corporation, a national provider of health care programs headquartered in Portland, Oregon.
Anthony Meeker has served as a director of the Company since 1993. He has been a Vice President with Spears Benzak Soloman & Farrell, Portland, Oregon, an investment research firm, since 1993. From 1987 to 1993, Mr. Meeker was Treasurer of the State of Oregon. He has also been President and Chief Executive Officer and a director of Meeker Seed & Grain Co. since 1975.
Stanley G. Renecker has been a director of the Company since 1993. Mr. Renecker, a lawyer, is currently Vice President-Acquisitions of The Campbell Group, a timberland management firm, where he has been employed since 1989.
Michael D. Mulholland joined the Company in August 1994 as Vice President-Finance and Secretary. From 1988 to 1994, Mr. Mulholland was employed by Sprouse-Reitz Stores Inc., a former Nasdaq-listed retail company, serving as its Executive Vice President, Chief Financial Officer and Secretary. In November 1991, Sprouse-Reitz filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. Its plan of reorganization was confirmed by the Bankruptcy Court in June 1992. Subsequently, Mr. Mulholland was appointed to the additional position of Acting Chief Executive Officer prior to Sprouse's filing of a voluntary petition in connection with a prepackaged liquidating Chapter 11 in November 1993.
Christopher J. McLaughlin joined the Company in May 1993 and was appointed Corporate Operations Manager in December 1993. Mr. McLaughlin is currently Vice President - Operations, a position held since July 1994. Prior to joining the Company, Mr. McLaughlin owned and operated an organizational development consulting firm.
Peter J. Schenk joined the Company as director of operations and marketing in December 1991. He was appointed Vice President--Operations and Marketing in March 1993 and in July 1994 became Vice President - Marketing and Sales. From 1986 to 1991, Mr. Schenk was Vice President--Marketing for American Consulting Services, a provider of marketing consulting services to media companies.
James D. Miller joined the Company in January 1994 as Controller. From 1991 to 1994, he was the Corporate Accounting Manager for Christensen Motor Yacht Corporation. Mr. Miller, a certified public accountant, was employed by Price Waterhouse from 1987 to 1991.
Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires that reports of beneficial ownership of Barrett common stock and changes in such ownership be filed with the Securities and Exchange Commission ("SEC") by Section 16 "reporting persons," including directors, executive officers, and certain holders of more than 10% of the outstanding common stock or trusts of which reporting persons are trustees. To the Company's knowledge, all Section 16 reporting requirements applicable to known reporting persons were complied with during 1994, except that Jack D. Williamson, Jr., who was an executive officer of the Company until August 1994, failed to file reports reflecting his exercise of a stock option and sale of the shares of common stock received upon such exercise in July 1994, and the termination of nonvested stock options in August 1994.
Item 11.
Item 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth for the years indicated the compensation awarded or paid to, or earned by, the Company's chief executive officer and the Company's other executive officers whose salary level and bonus in 1994 exceeded $100,000:
SUMMARY COMPENSATION TABLE
Long-Term Compensation Annual Compensation Awards ------------------- ------------ Securities Underlying Name and Principal Salary Bonus Options(2) Position Year ($) ($) (#) ------------------ ------ -------- ------- ------------
William W. Sherertz 1994 $144,000 -- 77,000 President and 1993 144,000 -- 70,000 Chief Executive Officer 1992 138,000 -- --
Michael D. Mulholland Vice President-Finance 1994 42,486(1) -- 20,000 and Secretary; Chief 1993 -- -- -- Financial Officer 1992 -- -- --
Christopher J. McLaughlin 1994(3) 79,583 $39,300 20,000 Vice President-Operations 1993 -- -- -- 1992 -- -- --
-------------------
(1) Mr. Mulholland's current salary level of $115,000 became effective with his date of employment, August 17, 1994. (2) Option grants do not include stock appreciation rights ("SARs"). (3) Mr. McLaughlin became an executive officer during 1994; the amounts shown are for the full fiscal year.
Stock Option Data
The following table provides information as to options to purchase Barrett common stock granted to Messrs. Sherertz, Mulholland and McLaughlin during 1994.
Information concerning each exercise of stock options and the fiscal year-end value of unexercised options held by Messrs. Sherertz, Mulholland and McLaughlin as of December 31, 1994 is summarized in the table below.
Directors' Compensation
Under the standard arrangement in effect at the end of 1994, directors (other than directors who are full-time employees of the Company, who do not receive directors' fees) are entitled to receive a fee of $500 for each Board meeting attended and each meeting of a committee of the Board attended other than a committee meeting held on the same day as a Board meeting.
In June 1993, concurrently with the closing of the Company's initial public offering, each person who was then a non-employee director of the Company received a nonqualified option, as adjusted for the May 1994 two- for-one stock split, to purchase 3,000 shares of the Company's common stock at an exercise price of $3.50. Also, a nonqualified option for 500 shares of common stock is granted automatically to each non-employee director whose term begins on or continues after the date of each annual meeting of stockholders at an exercise price equal to the fair market value of the common stock on the date of the meeting. Accordingly, on April 20, 1994, Messrs. Ames, Beaudoin, Meeker and Renecker each received an option, adjusted for the stock split, for 1,000 shares at an exercise price of $13.56 per share.
Payment of the exercise price of options granted to non-employee directors may be in cash or in previously-acquired shares of Barrett common stock. Each option includes a reload option feature to the extent that previously-acquired shares are used to pay the exercise price. Non-employee director options (other than reload options) become exercisable in four equal annual installments beginning one year after the date of grant. Reload options become exercisable six months following the date of grant. All options granted to a non-employee director will be exercisable in full upon the director's death, disability or retirement, or in the event of a change in control of the Company. The option term will expire three months following the date upon which the holder ceases to be a director other than by reason of death, disability or retirement; in the event of death or disability, the option will expire one year thereafter, while non-employee director options will expire five years after retirement.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table gives certain information regarding the beneficial ownership of Barrett common stock as of February 28, 1995, by each director, by each executive officer named in Item 11 above, and by all directors and executive officers of the Company as a group. In addition, it gives information about each person or group known to the Company to own beneficially more than 5% of the outstanding shares of its common stock. Information as to beneficial stock ownership is based on data furnished by the persons concerning whom such information is given. Unless otherwise indicated, all shares listed as beneficially owned are held with sole voting and dispositive power.
Name and Amount and Percent Address of Nature of of Beneficial Owner Beneficial Ownership Class ---------------- -------------------- --------
Robert R. Ames 1,000(1) *
Jeffrey L. Beaudoin 5,900(1)(2) *
Stephen A. Gregg 1,000 *
Christopher J. McLaughlin 8,400(1) *
Anthony Meeker 1,000(1) *
Michael D. Mulholland -- --
Stanley G. Renecker 1,000(1) *
Nancy B. Sherertz 1,700,000 26.0% 6513 Diamond Hall Road Easton, Maryland 21601
William W. Sherertz 1,935,000(1) 29.5% 4724 S.W. Macadam Avenue Portland, Oregon 97201
Capital Consultants, Inc. 360,180(3) 5.5% 2300 S.W. First Avenue Portland, Oregon 97201
Wasatch Advisors, Inc. 661,451(3) 10.1% 68 South Main Street, Suite 400 Salt Lake City, Utah 84101
All directors and executive 1,959,300(1) 29.8% officers as a group (10 persons)
---------------------- * Less than 1% of the outstanding shares of Common Stock.
(1) Includes options to purchase Barrett common stock which are presently exercisable as follows: Mr. Ames, 1,000 shares; Mr. Beaudoin, 1,000 shares; Mr. McLaughlin, 6,000 shares; Mr. Meeker, 1,000 shares; Mr. Renecker, 1,000 shares; Mr. Sherertz, 24,500 shares; and all directors and executive officers as a group, 39,700 shares.
(2) Includes 400 shares owned by Mr. Beaudoin's wife as to which he shares voting and dispositive powers.
(3) A registered investment advisor who has filed a report of beneficial ownership on Schedule 13G reporting sole voting and dispositive power as to the indicated shares.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has provided staff leasing services to Oregon Lumber Products, a sawmill company owned by William W. Sherertz, President and Chief Executive Officer of the Company, since September 1992. During 1994, the Company recorded revenues of $119,000 and cost of revenues of $110,000 in connection with these services. Oregon Lumber Products ceased operating during 1994 and as a result, there was no outstanding account receivable due at December 31, 1994.
The Company's indebtedness to the estate of Nancy R. Barrett throughout 1993 in the amount of $103,311 pursuant to a promissory note bearing interest at 12% per annum and payable upon demand was paid in full during the first quarter of 1994. Mrs. Barrett is the late mother of Nancy B. Sherertz, who owns 26.0% of the outstanding common stock of the Company, and the late mother-in-law of William W. Sherertz. The promissory note was executed in 1986 in connection with the redemption of Barrett common stock held by Mrs. Barrett.
William W. Sherertz agreed, at December 31, 1993, to personally guarantee, at no cost to the Company and pursuant to the approval of a majority of the disinterested outside directors, the repayment of a $111,000 account receivable from an unrelated, insolvent customer. The guarantee may be exercised by the Company at such time as the Company determines that further collection efforts with respect to the customer are likely to be ineffective, but not later than December 31, 1995.
Robert R. Ames, a director of the Company, is Vice Chairman of the board of directors of First Interstate Bank of Oregon, N.A., which has provided an unsecured revolving credit facility in the amount of $4,000,000 and mortgage financing totaling approximately $658,000 to the Company.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of the board of directors of the Company during 1994 were Jeffrey L. Beaudoin and Anthony Meeker. During 1994, the Company provided services to Rose City Moving & Storage Co., of which Mr. Beaudoin, a Barrett director and a member of its compensation committee, is President and a majority stockholder. Barrett recorded revenues and cost of revenues related to such services of $3,261,000 and $3,112,000, respectively. At December 31, 1994, the Company's assets included trade accounts receivable totaling $140,000 with respect to the above services; the highest amount of such receivables outstanding at any time during 1994 was $246,000 as of June 30, 1994.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. The financial statements listed in the index set forth in Item 8 of this report are filed as part of this report.
(b) 3. Exhibits are listed in the Exhibit Index beginning on page 49 of this report. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report is listed under Item 10, "Executive Compensation Plans and Arrangements and Other Management Contracts," in the Exhibit Index.
(c) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1994.
Subsequent to the end of the year, the Company filed a Current Report on Form 8-K dated March 20, 1995, to report that the Company had obtained self-insured employer status for workers' compensation purposes in the state of California and that the Company will incur a pre-tax charge of $350,000 for workers' compensation expense in the first quarter of 1995 in connection with a serious work-related injury sustained by an employee.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BARRETT BUSINESS SERVICES, INC. ------------------------------- Registrant
Date: March 28, 1995 By: William W. Sherertz President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 28th day of March, 1995.
Principal Executive Officer and Director:
William W. Sherertz President and Chief Executive Officer and Director
Principal Financial Officer:
Michael D. Mulholland Vice President-Finance and Secretary
Principal Accounting Officer:
James D. Miller Controller
Other Directors:
Robert R. Ames Director
Jeffrey L. Beaudoin Director
Stephen A. Gregg Director
Anthony Meeker Director
Stanley G. Renecker Director
EXHIBIT INDEX
Exhibits
3.1 Charter of the registrant, as amended. Incorporated by reference to Exhibit 3 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
3.2 Bylaws of the registrant, as amended.
4.1 Loan Agreement between the registrant and First Interstate Bank of Oregon, N.A., dated August 12, 1993 ("Loan Agreement"). Incorporated by reference to Exhibit 10 to the registrant's Quarterly Report on Form 10- Q for the quarter ended September 30, 1993.
4.2 First Amendment to Loan Agreement dated March 29, 1994. Incorporated by reference to Exhibit 4 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
4.3 Second Amendment to Loan Agreement dated May 31, 1994, together with Optional Advance Note dated May 31, 1994. Incorporated by reference to Exhibit 4 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
4.4 Third Amendment to Loan Agreement dated January 3, 1995, together with Optional Advance Note dated January 3, 1995.
The registrant has incurred other long-term indebtedness as to which the amount involved is less than 10 percent of the registrant's total assets. The registrant agrees to furnish copies of the instruments relating to such indebtedness to the Commission upon request.
10 Executive Compensation Plans and Arrangements and Other Management Contracts.
10.1 1993 Stock Incentive Plan of the registrant as amended March 8, 1994. Incorporated by reference to Exhibit 10.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
10.2 Form of Indemnification Agreement with each director of the registrant. Incorporated by reference to Exhibit 10.8 to the registrant's Registration Statement on Form S-1 (No.33-61804).
11 Statement of Calculation of Average Common Shares Outstanding.
23 Consent of Price Waterhouse LLP, independent accountants.
27 Financial Data Schedule.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.