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Barrett Business Services' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Stocks in this article: BBSI

Total PEO gross revenues increased 26% to $392 million, compared to the fourth quarter of last year, primarily due to the addition of new client. Our PEO revenues from existing customers experienced a slight 1% increase or approximately $3 million compared to the year ago quarter as a result of the slight increase in average hours worked. The increase in PEO revenues from existing customers represents the seventh consecutive quarter of existing customer growth.

Staffing revenues for the fourth quarter of 2011 increased 4% to $31 million, compared to fourth quarter of 2010, principally due to a small decline in revenues from existing customers particularly in our Mountain States as new business nearly offset the loss of business from former customers.

The company reported an increase to its workers' compensation reserve of approximately $8.5 million in the fourth quarter of 2011 as a result of adverse development in the estimate of the ultimate cost of our self-insured workers’ compensation claims liabilities primarily related to claim years 2005 to 2009.

The root cause for the charge was related to the prolonged recession that came to bottleneck claim closure in these prior years leading to higher than expected development in claim costs including related legal costs, now these claims are beginning to move and close. With assistance from our independent actuary, we have performed an in-depth analysis of these prior year claims and have established what we believe to be more conservative reserves for this pool.

During this process, we discovered that while we have worked with the same actuary for the past several years, we have determined the need to better understand the drivers in their various actuarial models that we can identify and respond to trends more quickly.

With the benefit of Hindsight, we also determined that the previous quarterly actuarial reviews conducted were not robust enough to monitor developments of prior years’ end results, we have moved to having a complete analysis performed each quarters similar to the actuaries full annual analysis.

Read the rest of this transcript for free on seekingalpha.com

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