5 unchanged sentences
We report revenues in our financial results in two categories of services:
−Removed: professional employer services (“PEO”) and staffing.
+Added: professional employer services (“PEO”) and staffing.
With our PEO clients, we enter into a co-employment arrangement in which we become the administrative employer while the client maintains physical care, custody and control of their workforce.
Our PEO services are billed as a percentage of client payroll;
−Removed: the gross amount invoiced includes direct payroll costs plus an additional percentage amount to cover employer payroll-related taxes, workers’
−Removed: compensation coverage (if provided), other service related costs and a margin.
+Added: the gross amount invoiced includes direct payroll costs plus an additional percentage amount to cover employer payroll-related taxes, workers’ compensation coverage (if provided), other service-related costs and a margin.
However, actual costs can be higher or lower than anticipated.
2 unchanged sentences
We generate staffing services revenues primarily from short-term staffing, contract staffing, on-site management and direct placement services.
−Removed: For staffing services other than direct placement, invoiced amounts include direct payroll, an amount intended to cover employer payroll-related taxes, workers’
−Removed: compensation coverage, other service related costs and a margin.
+Added: For staffing services other than direct placement, invoiced amounts include direct payroll, an amount intended to cover employer payroll-related taxes, workers’ compensation coverage, other service-related costs and a margin.
Staffing customers are invoiced weekly and typically have payment terms of 30 days.
2 unchanged sentences
Revenues generated in our California operations accounted for 72% of our total revenues in 2023, 73% in 2022 and 73% in 2021.
−Removed: Consequently, any weakness in economic conditions, changes in the regulatory or insurance environment, or natural disasters or other major events in California could have a material adverse effect on our financial results.
−Removed: Our cost of revenues for PEO services includes employer payroll-related taxes and workers' compensation costs.
−Removed: Our cost of revenues for staffing services includes direct payroll costs, employer payroll-related taxes, employee benefits, and workers’
−Removed: compensation costs.
+Added: Consequently, weakness in economic conditions, changes in the regulatory or insurance environment, or natural disasters or other major disruptive events in California could have a material adverse effect on our financial results.
+Added: Our cost of revenues for PEO services includes employer payroll-related taxes, workers’ compensation costs and employee benefits costs.
+Added: Our cost of revenues for staffing services includes direct payroll costs, employer payroll-related taxes, and workers’ compensation costs.
Direct payroll costs represent the gross payroll earned by staffing services employees based on salary or hourly wages.
−Removed: Payroll taxes and employee benefits consist of the employer's portion of Social Security and Medicare taxes, federal and state unemployment taxes and staffing services employee reimbursements for materials, supplies and other expenses, which are paid by our customer.
−Removed: Workers' compensation costs consist primarily of the costs associated with our workers' compensation program, including premiums for the insured program, claims reserves for the self-insured program, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, third-party broker commissions, risk manager payroll, premiums for excess insurance, and costs associated with operating our two wholly owned insurance companies, AICE and Ecole.
+Added: Payroll taxes and benefits consist of the employer’s portion of Social Security and Medicare taxes, federal and state unemployment taxes, and employee benefit costs, which primarily comprises health insurance premiums paid to third-party insurers and underwriting and benefit consultant payroll.
+Added: Workers’ compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, third-party broker commissions, and risk manager payroll, as well as costs associated with operating our two wholly owned insurance companies, Associated Insurance Company for Excess (“AICE”) and Ecole Insurance Company (“Ecole”).
Selling, general and administrative expenses represent both branch office and corporate-level operating expenses.
2 unchanged sentences
Depreciation and amortization represent depreciation of property and equipment, leasehold improvements, software and internally developed software costs.
−Removed: Property, equipment, software and internally developed software costs are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 39 years.
+Added: Property, equipment, software and
+Added: internally developed software costs are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 39 years.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life.
1 unchanged sentence
We have identified the following accounting estimate as critical to our business and the understanding of our results of operations.
−Removed: For a detailed discussion of the application of this and other accounting policies, see “Note 1 - Summary of Operations and Significant Accounting Policies”
−Removed: to the consolidated financial statements in Item 8 of Part II of this report.
+Added: For a detailed discussion of the application of this and other accounting policies, see “Note 1 - Summary of Operations and Significant Accounting Policies” to the consolidated financial statements in Item 8 of Part II of this report.
The preparation of this Annual Report on Form 10-K requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.
3 unchanged sentences
We recognize our liability for the ultimate payment of incurred claims and claims adjustment expenses by establishing a reserve that represents our estimates of future amounts necessary to pay claims and related expenses with respect to workplace injuries that have occurred.
−Removed: When a claim involving a probable loss is reported, our independent third-party administrator for workers’
−Removed: compensation claims (“TPA”) establishes a case reserve for the estimated amount of ultimate loss.
+Added: When a claim involving a probable loss is reported, our independent third-party administrator for workers’ compensation claims (“TPA”) establishes a case reserve for the estimated amount of ultimate loss.
The estimate reflects a judgment based on established case reserving practices and the experience and knowledge of the TPA regarding the nature and expected amount of the claim, as well as the estimated expenses of settling the claim, including legal and other fees and expenses of claims administration.
The adequacy of such case reserves depends in part on the professional judgment of the TPA to evaluate the economic consequences of each claim properly and comprehensively.
−Removed: Our reserves include an additional component for potential future increases in the cost to finally resolve open injury claims and claims incurred in prior periods but not reported (together, "IBNR") based on actuarial estimates provided by the Company’s independent actuary.
+Added: Our reserves include an additional component for potential future increases in the cost to finally resolve open injury claims and claims incurred in prior periods but not reported (together, "IBNR") based on actuarial estimates provided by the Company’s independent actuary.
IBNR reserves, unlike specific case reserves, do not apply to a specific claim but rather apply to the entire population of claims arising from a specific time period.
6 unchanged sentences
We consider significant facts and circumstances known both at the time that loss reserves are initially established and as new facts and circumstances become known.
−Removed: Due to the inherent uncertainty underlying loss reserve estimates, the expenses incurred through final resolution of our liability for our workers’
−Removed: compensation claims will likely vary from the related loss reserves at the reporting date.
+Added: Due to the inherent uncertainty underlying loss reserve estimates, the expenses incurred through final resolution of our liability for our workers’ compensation claims will likely vary from the related loss reserves at the reporting date.
Therefore, as specific claims are paid out in the future, actual paid losses may be materially different from our current loss reserves.
1 unchanged sentence
Significant structural changes to the available data can materially impact the reserve estimation process.
−Removed: To the extent a material change affecting the ultimate claim liability becomes known, such change is quantified to the extent possible through an analysis of internal company data and, if available and when appropriate, external data.
+Added: To the extent a material change affecting the ultimate claim liability becomes known,
+Added: such change is quantified to the extent possible through an analysis of internal company data and, if available and when appropriate, external data.
Actuaries exercise a considerable degree of judgment in the evaluation of these factors and the need for such actuarial judgment is more pronounced when faced with material uncertainties.
−Removed: We believe that the amounts recorded for our estimated liabilities for workers’
−Removed: compensation claims, which are based on informed judgment, analysis of data, actuarial estimates, and analysis of other trends associated with the Company’s historical universe of claims data, are reasonable.
+Added: We believe that the amounts recorded for our estimated liabilities for workers’ compensation claims, which are based on informed judgment, analysis of data, actuarial estimates, and analysis of other trends associated with the Company’s historical universe of claims data, are reasonable.
Nevertheless, adjustments to such estimates will be required in future periods if the development of claim costs varies materially from our estimates, and such future adjustments may be material to our results of operations.
Recent Accounting Pronouncements
−Removed: For a discussion of recent accounting pronouncements and their potential effect on the Company's results of operations and financial condition, see “Note 1 - Summary of Operations and Significant Accounting Policies”
−Removed: to the consolidated financial statements in Item 8 of Part II of this report.
+Added: For a discussion of recent accounting pronouncements and their potential effect on the Company's results of operations and financial condition, see “Note 1 - Summary of Operations and Significant Accounting Policies” to the consolidated financial statements in Item 8 of Part II of this report.
Forward-Looking Information
Statements in this Item or in Items 1, 1A, 3 and 9A of this report include forward-looking statements, which are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
−Removed: These forward-looking statements include, among others, discussion of economic conditions in our market areas and their effect on revenue levels, the lingering effects of the COVID-19 pandemic on our business operations, the competitiveness of our service offerings, the availability of certain fully insured medical and other health and welfare benefits to qualifying worksite employees beginning in 2023, our ability to attract and retain clients and to achieve revenue growth, the effect of changes in our mix of services on gross margin, the effect of tight labor market conditions, the adequacy of our workers' compensation reserves, the effect of changes in estimates of our future claims liabilities on our workers’
−Removed: compensation reserves, including the effect of changes in our reserving practices and claims management process on our actuarial estimates, expected levels of required surety deposits and letters of credit, our ability to generate sufficient taxable income in the future to utilize our deferred tax assets, the effect of our formation and operation of two wholly owned licensed insurance subsidiaries, the risks of operation and cost of our insured program, the financial viability of our excess insurance carriers, the effectiveness of our management information systems, our relationship with our primary bank lender and the availability of financing and working capital to meet our funding requirements, litigation costs, the effect of changes in the interest rate environment on the value of our investment securities, the adequacy of our allowance for doubtful accounts, and the potential for and effect of acquisitions.
+Added: These forward-looking statements include, among others, discussion of economic conditions in our market areas and their effect on revenue levels, the lingering effects of the COVID-19 pandemic on our business operations, the competitiveness of our service offerings, the availability of certain fully insured medical and other health and welfare benefits to qualifying worksite employees, our ability to attract and retain clients and to achieve revenue growth, the effect of changes in our mix of services on gross margin, labor market conditions, the adequacy of our workers' compensation reserves, the effect of changes in estimates of our future claims liabilities on our workers’ compensation reserves, including the effect of changes in our reserving practices and claims management process on our actuarial estimates, expected levels of required surety deposits and letters of credit, our ability to generate sufficient taxable income in the future to utilize our deferred tax assets, the effect of our formation and operation of two wholly owned licensed insurance subsidiaries, the risks of operation and cost of our insured program, the financial viability of our excess insurance carriers, the effectiveness of our management information systems, our relationship with our primary bank lender and the availability of financing and working capital to meet our funding requirements, litigation costs, the effect of changes in the interest rate environment on the value of our investment securities, the adequacy of our allowance for doubtful accounts, and the potential for and effect of acquisitions.
All our forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
1 unchanged sentence
our ability to retain current clients and attract new clients;
−Removed: the effects of governmental orders, laws or regulations imposing requirements related to the COVID-19 pandemic;
difficulties associated with integrating clients into our operations;
economic trends in our service areas;
−Removed: the potential for material deviations from expected future workers’
−Removed: compensation claims experience;
−Removed: changes in the workers’
−Removed: compensation regulatory environment in our primary markets;
−Removed: security breaches or failures in the Company’s information technology systems;
+Added: the potential for material deviations from expected future workers’ compensation claims experience;
+Added: changes in the workers’ compensation regulatory environment in our primary markets;
+Added: security breaches or failures in the Company’s information technology systems;
collectability of accounts receivable;
+Added: changes in executive management;
changes in effective payroll tax rates and federal and state income tax rates;
17 unchanged sentences
Payroll taxes and benefits
−Removed: Workers’
+Added: Workers’ compensation
Total cost of revenues
5 unchanged sentences
Provision for income taxes
−Removed: We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’
+Added: We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees.
However, management believes that gross billings and wages are useful in understanding the volume of our business activity and serve as an important performance metric in managing our operations, including the preparation of internal operating forecasts and establishing executive compensation performance goals.
3 unchanged sentences
PEO and staffing wages
−Removed: Because safety incentives represent consideration payable to PEO customers, safety incentive costs are netted against PEO revenue in our consolidated statements of operations.
−Removed: We therefore present below for purposes of analysis non-GAAP gross workers’
−Removed: compensation expense, which represents workers’
−Removed: compensation costs including safety incentive costs.
−Removed: We believe this non-GAAP measure is useful in evaluating the total costs of our workers’
−Removed: compensation program.
−Removed: In July 2020, the Company began limiting its safety incentive offering in certain markets, resulting in a substantial reduction in safety incentive costs.
−Removed: (in thousands)
−Removed: Workers' compensation
−Removed: Safety incentive costs
−Removed: Non-GAAP gross workers' compensation
In monitoring and evaluating the performance of our operations, management also reviews the following ratios, which represent selected amounts as a percentage of gross billings.
3 unchanged sentences
Payroll taxes and benefits
−Removed: Non-GAAP gross workers' compensation
+Added: Workers' compensation
The presentation of revenue on a net basis and the relative contributions of staffing and PEO services revenue can create volatility in our gross margin as a percentage of revenue.
−Removed: A relative increase in PEO services revenue will result in a higher gross margin as a percentage of revenue.
+Added: Generally, a relative increase in PEO services revenue will result in a higher gross margin as a percentage of revenue.
Improvement in gross margin percentage occurs because incremental client services revenue dollars are reported as revenue net of all related direct payroll and safety incentive costs.
−Removed: We refer to employees of our PEO clients as worksite employees (“WSEs”).
+Added: We refer to employees of our PEO clients as worksite employees (“WSEs”).
Management reviews average and ending WSE growth to monitor and evaluate the performance of our operations.
4 unchanged sentences
Diluted net income per share for 2023 was $7.39 compared to diluted income per share of $6.54 for 2022.
−Removed: Revenue for 2022 totaled $1,054.3 million, an increase of $99.2 million or 10.4% over 2021, which reflects an increase in the Company’s PEO service revenue of $93.5 million or 11.1% and an increase in staffing services revenue of $5.6 million or 5.0%.
+Added: Revenue for 2023 totaled $1,069.3 million, an increase of $15.0 million or 1.4% over 2022, which reflects an increase in the Company’s PEO service revenue of $44.9 million or 4.8% and a decrease in staffing services revenue of $29.9 million or 25.6%.
The increase in PEO services revenues was primarily attributable to an increase in average number of WSEs as well as an increase in average billing per WSE.
4 unchanged sentences
Payroll taxes and benefits for 2023 totaled $555.8 million or 52.0% of revenue compared to $522.4 million or 49.5% of revenue for 2022.
−Removed: The increase in payroll taxes and benefits expense as a percentage of revenue was primarily due to the relative decrease in workers' compensation costs and an increase in federal payroll tax rates, partially offset by lower average state payroll tax rates in 2022.
−Removed: Workers’
−Removed: compensation expense for 2022 totaled $209.1 million or 19.8% of revenue compared to $196.9 million or 20.6% of revenue for 2021.
−Removed: The decrease in workers’
−Removed: compensation expense as a percentage of revenue was primarily due to favorable adjustments of $11.3 million related to prior period claims in 2022, compared to favorable adjustments of $9.2 million in 2021.
−Removed: Selling, general and administrative (“SG&A”) expenses for 2022 totaled $169.6 million or 16.1% of revenue compared to $155.3 million or 16.3% of revenue for 2021.
−Removed: The increase of $14.3 million in SG&A expense in 2022 was primarily attributable to increased employee related costs, as well as increased travel and marketing expenses due to more in-person meetings and events.
+Added: The increase in payroll taxes and benefits expense as a percentage of revenue was primarily due to higher average payroll tax rates in 2023, in addition to PEO client benefit costs of $10.5 million related to the availability of employee benefits to our PEO clients beginning in 2023.
+Added: Workers’ compensation expense for 2023 totaled $206.0 million or 19.3% of revenue compared to $209.1 million or 19.8% of revenue for 2022.
+Added: The decrease in workers’ compensation expense as a percentage of revenue was primarily due to lower workers' compensation costs in the current year as well as favorable prior year liability and premium adjustments of $14.9 million in 2023, compared to prior year liability and premium adjustments of $13.4 million in 2022.
+Added: Selling, general and administrative (“SG&A”) expenses for 2023 totaled $174.8 million or 16.3% of revenue compared to $169.6 million or 16.1% of revenue for 2022.
+Added: The increase as a percentage of revenue was primarily due to the decrease in staffing services within the mix of our customer base.
+Added: The increase of $5.2 million in SG&A expense was primarily attributable to increased employee-related costs.
Other income, net for 2023 totaled $8.3 million compared to other income of $6.3 million for 2022.
−Removed: The decrease was primarily attributable to a decrease in investment income in 2022.
+Added: The increase was primarily attributable to an increase in investment income in 2023.
Our effective income tax rate for 2023 was 26.6% compared to 27.6% for 2022.
Our income tax rate typically differs from the federal statutory tax rate of 21% primarily due to state taxes as well as federal and state tax credits.
−Removed: See “Note 8 - Income Taxes”
−Removed: to the consolidated financial statements included in Item 8 of Part II of this report for additional information regarding income taxes.
+Added: See “Note 8 - Income Taxes” to the consolidated financial statements included in Item 8 of Part II of this report for additional information regarding income taxes.
A discussion of our financial condition and results of operations for 2022 compared to 2021 can be found in Part II, Item 7.
2 unchanged sentences
We have historically experienced significant fluctuations in our quarterly operating results, including losses or minimal income in the first quarter of each year, and expect such fluctuations to continue in the future.
−Removed: Our operating results may fluctuate due to a number of factors such as seasonality, wage limits on statutory payroll taxes, claims experience for workers’
−Removed: compensation, demand for our services, and competition.
+Added: Our operating results may fluctuate due to a number of factors such as seasonality, wage limits on statutory payroll taxes, claims experience for workers’ compensation, demand for our services, and competition.
Payroll taxes, as a component of cost of revenues, generally decline throughout a calendar year as the applicable statutory wage bases for federal and state unemployment taxes and Social Security taxes are exceeded on a per employee basis.
−Removed: Our revenue levels may be higher in the third quarter due to the effect of increased business activity of our customers’
−Removed: businesses in the agriculture, food processing and forest products-related industries.
−Removed: In addition, revenues in the fourth quarter may be reduced by many customers’
−Removed: practice of operating on holiday-shortened schedules.
−Removed: Workers’
−Removed: compensation expense varies with both the frequency and severity of workplace injury claims reported during a quarter and the estimated future costs of such claims.
−Removed: In addition, positive or adverse loss development of prior period claims during a subsequent quarter may also contribute to the volatility in the Company’s estimated workers’
−Removed: compensation expense.
+Added: Our revenue levels may be higher in the third quarter due to the effect of increased business activity of our customers’ businesses in the agriculture, food processing and forest products-related industries.
+Added: In addition, revenues in the fourth quarter may be reduced by many customers’ practice of operating on holiday-shortened schedules.
+Added: Workers’ compensation expense varies with both the frequency and severity of workplace injury claims reported during a quarter and the estimated future costs of such claims.
+Added: In addition, positive or adverse loss development of prior period claims during a subsequent quarter may also contribute to the volatility in the Company’s estimated workers’ compensation expense.
Liquidity and Capital Resources
−Removed: The Company's cash balance of $107.4 million, which includes cash, cash equivalents, and restricted cash, increased $28.7 million for the twelve months ended December 31, 2022, compared to a decrease of $155.2 million for the comparable period of 2021.
−Removed: The increase in cash at December 31, 2022 as compared to December 31, 2021 was primarily due to proceeds from the sales and maturities of investments and restricted investments, net income, increased accrued payroll, payroll taxes and related benefits, and increased other accrued liabilities, partially offset by decreased workers' compensation claims liabilities, repurchase of common stock, and purchase of property, equipment and software.
−Removed: Net cash provided by operating activities in 2022 amounted to $27.8 million, compared to net cash used of $15.5 million for the comparable period of 2021.
−Removed: In 2022, net cash provided by operating activities was primarily due to net income of $47.3 million, increased accrued payroll, payroll taxes and related benefits of $24.9 million and increased other accrued liabilities of $15.7 million, partially offset by decreased workers’
−Removed: compensation claims liabilities of $64.2 million and increased trade accounts receivable of $8.1 million.
−Removed: Net cash provided by investing activities totaled $61.2 million in 2022, compared to net cash used of $112.9 million for the comparable period of 2021.
−Removed: In 2022, net cash provided by investing activities consisted primarily of proceeds from sales and maturities of investments and restricted investments of $81.5 million, partially offset by purchase of property, equipment and software of $16.0 million, and purchase of restricted investments of $4.3 million.
+Added: The Company's cash balance of $74.8 million, which includes cash, cash equivalents, and restricted cash, decreased $32.5 million for the twelve months ended December 31, 2023, compared to an increase of $28.7 million for the comparable period of 2022.
+Added: The decrease in cash at December 31, 2023 as compared to December 31, 2022 was primarily due to the purchase of investments and restricted investments, decreased workers' compensation claim liabilities, and repurchases of common stock partially offset by increased premium payable, net income, and proceeds from the sale and maturities of investments and restricted investments.
+Added: Net cash provided by operating activities in 2023 amounted to $67.2 million, compared to net cash provided of $27.8 million for the comparable period of 2022.
+Added: In 2023, net cash provided by operating activities was primarily due to increased premium payable of $54.2 million, net income of $50.6 million, and increased accrued payroll, payroll taxes and related benefits of $12.7 million, partially offset by decreased workers’ compensation claims liabilities of $51.2 million.
+Added: Net cash used in investing activities totaled $55.2 million in 2023, compared to net cash provided of $61.2 million for the comparable period of 2022.
+Added: In 2023, net cash used in investing activities consisted primarily of purchase of investments and restricted investments of $71.1 million and purchase of property, equipment and software of $11.8 million, partially offset by proceeds from the sale and maturity of investments and restricted investments of $27.6 million.
Net cash used in financing activities in 2023 was $44.6 million compared to net cash used of $60.2 million for the comparable period of 2022.
−Removed: In 2022, net cash used in financing activities primarily consisted of repurchases of common stock of $47.2 million, dividend payments of $8.5 million and the payoff of the outstanding mortgage loan balance of $3.5 million.
−Removed: The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”).
+Added: In 2023, net cash used in financing activities primarily consisted of repurchases of common stock of $34.2 million and dividend payments of $8.1 million.
+Added: The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”).
The balance in the trust account was $210.9 million and $188.2 million at December 31, 2023 and December 31, 2022, respectively.
−Removed: The trust account balance is included as a component of the current and long-term restricted cash and investments in the Company’s consolidated balance sheets.
−Removed: See “Note 5 - Revolving Credit Facility and Long-Term Debt”
−Removed: to the consolidated financial statements included in Item 8 of Part II of this report for information regarding the Company’s credit agreement with Wells Fargo Bank, N.A.
+Added: The trust account balance is included as a component of the current and long-term restricted cash and investments in the Company’s consolidated balance sheets.
+Added: See “Note 5 - Revolving Credit Facility and Long-Term Debt” to the consolidated financial statements included in Item 8 of Part II of this report for information regarding the Company’s credit agreement with Wells Fargo Bank, N.A.
Contractual Obligations
8 unchanged sentences
QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
−Removed: The Company's exposure to market risk for changes in interest rates primarily relates to its investment portfolio and its outstanding borrowings on its line of credit.
−Removed: As of December 31, 2022, the Company’s investments consisted principally of approximately $104.0 million in corporate bonds, $57.3 million in U.S.
−Removed: treasuries, $53.1 million in mortgage backed securities, $41.0 million in money market funds, $31.4 million in U.S.
−Removed: government agency securities, $12.9 million in asset backed securities, $6.3 million in mutual funds and $2.0 million in emerging markets securities.
−Removed: Based on the Company's overall interest exposure at December 31, 2022, a 50 basis point increase in market interest rates would have a $5.9 million effect on the fair value of the Company's investment portfolio.
+Added: The Company's exposure to market risk for changes in interest rates primarily relates to its investment portfolio and outstanding borrowings on its line of credit.
+Added: The Company's investments and restricted investments, which are classified as available-for-sale, consist primarily of fixed-rate debt securities, the fair value of which fluctuates with prevailing interest rates.
+Added: Our cash equivalents consist primarily of money market funds, which are not meaningfully impacted by interest rate risk.
+Added: We attempt to limit our investment portfolio's exposure to market risk through low investment turnover and diversification.
+Added: Based on the Company's overall interest exposure at December 31, 2023, a 50 basis point increase in market interest rates would have a $5.0 million downward effect on the fair value of the Company's investment portfolio.
+Added: Outstanding borrowings on the Company's line of credit bear interest at a variable market rate, which makes the cost of borrowing on the line of credit susceptible to changing interest rates.
At December 31, 2023, the Company had no outstanding borrowings on its line of credit.
3 unchanged sentences
Barrett Business Services, Inc.
−Removed: Vancouver, Washington
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Barrett Business Services, Inc.
−Removed: and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholder's equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").
+Added: and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
−Removed: We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control —
−Removed: Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
+Added: We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
13 unchanged sentences
Workers' Compensation Claims Liabilities
−Removed: Workers’
−Removed: compensation claims liabilities represent management’s estimate of future amounts necessary to pay claims and related expenses with respect to workplace injuries that have occurred as of a given
−Removed: reporting date.
−Removed: The estimated liability for open workers’
−Removed: compensation claims is based on an evaluation of information provided by the Company’s third-party administrators for workers’
−Removed: compensation claims, coupled with an actuarial estimate of future adverse loss development with respect to reported claims and incurred but not reported claims (together, IBNR).
−Removed: Workers’
−Removed: compensation claims liabilities included case reserve estimates for reported losses, plus additional amounts for estimated IBNR claims, medical cost containment, legal costs, and unallocated loss adjustment expenses.
+Added: Workers’ compensation claims liabilities represent management’s estimate of future amounts necessary to pay claims and related expenses with respect to workplace injuries that have occurred as of a given reporting date.
+Added: The estimated liability for open workers’ compensation claims is based on an evaluation of
+Added: information provided by the Company’s third-party administrators for workers’ compensation claims, coupled with an actuarial estimate of future adverse loss development with respect to reported claims and incurred but not reported claims (together, IBNR).
+Added: Workers’ compensation claims liabilities included case reserve estimates for reported losses, plus additional amounts for estimated IBNR claims, medical cost containment, legal costs, and unallocated loss adjustment expenses.
The process of arriving at an estimate of unpaid claims and claims adjustment expense involves a high degree of judgment and is affected by both internal and external events, including changes in claims handling practices, changes in reserve estimation procedures, inflation, trends in the litigation and settlement of pending claims, and legislative changes.
−Removed: The Company’s estimates are based on informed judgment, derived from individual experience and expertise applied to multiple sets of data and analyses.
+Added: The Company’s estimates are based on informed judgment, derived from individual experience and expertise applied to multiple sets of data and analyses.
The company considers significant facts and circumstances known both at the time that loss reserves are initially established, and as new facts and circumstances become known.
−Removed: Workers’
−Removed: compensation claims liabilities as of December 31, 2022 were $216 million.
−Removed: Given the high degree of judgment required to estimate the value of the workers’
−Removed: compensation claims liabilities, performing audit procedures to evaluate the workers’
−Removed: compensation claims liabilities recorded for the year ended December 31, 2022, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.
+Added: Given the high degree of judgment required to estimate the value of the workers’ compensation claims liabilities, performing audit procedures to evaluate the workers’ compensation claims liabilities recorded for the year ended December 31, 2023, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.
How the Critical Audit Matter Was Addressed in the Audit
−Removed: Our audit procedures related to the workers’
−Removed: compensation claims liabilities included the following, among others:
−Removed: We tested the effectiveness of controls related to workers’
−Removed: compensation claims liabilities, including those involved in estimating the ultimate losses to be incurred for reported and unreported claims.
+Added: Our audit procedures related to the workers’ compensation claims liabilities included the following, among others:
+Added: • We tested the effectiveness of controls related to workers’ compensation claims liabilities, including those involved in estimating the ultimate losses to be incurred for reported and unreported claims.
• We tested the underlying data that is used as inputs into the actuarial analysis, including historical claims, to evaluate whether those inputs were reasonable.
In addition, we assessed whether any changes in the business or environment, including legislative changes, interest rates, and claims handling practices, were appropriately considered in developing the estimate of ultimate losses to be incurred for reported and unreported claims.
−Removed: With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by management to estimate the workers’
−Removed: compensation claims liabilities by performing the following:
−Removed: o Compared management’s prior-year assumptions of expected claims development and ultimate loss to actuals incurred during the current year to identify and evaluate potential bias in the determination of the workers’
−Removed: compensation claims liabilities.
−Removed: o Developed a range of independent estimates of the workers’
−Removed: compensation claims liabilities, utilizing claim payment patterns, loss development factors, and future cost trends for workers’
−Removed: compensation claims liabilities.
−Removed: We compared our estimated ranges to management’s estimates.
−Removed: o Read the Company’s reinsurance policies and compared the coverage and terms to the assumptions used by management.
+Added: • With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by management to estimate the workers’ compensation claims liabilities by performing the following:
+Added: o Compared management’s prior-year assumptions of expected claims development and ultimate loss to actuals incurred during the current year to identify and evaluate potential bias in the determination of the workers’ compensation claims liabilities.
+Added: o Developed a range of independent estimates of the workers’ compensation claims liabilities, utilizing claim payment patterns, loss development factors, and future cost trends for workers’ compensation claims liabilities.
+Added: We compared our estimated ranges to management’s estimates.
+Added: o Read the Company’s reinsurance policies and compared the coverage and terms to the assumptions used by management.
/s/ Deloitte & Touche LLP
9 unchanged sentences
Trade accounts receivable, net
+Added: Income taxes receivable
Prepaid expenses and other
7 unchanged sentences
Current liabilities:
−Removed: Current portion of long-term debt
Accounts payable
2 unchanged sentences
Current operating lease liabilities
+Added: Current premium payable
Other accrued liabilities
3 unchanged sentences
Long-term workers' compensation claims liabilities
−Removed: Deferred income taxes
+Added: Long-term premium payable
Long-term operating lease liabilities
7 unchanged sentences
Additional paid-in capital
−Removed: Accumulated other comprehensive (loss) income
+Added: Accumulated other comprehensive loss
Retained earnings
32 unchanged sentences
(In Thousands)
−Removed: Unrealized (losses) gains on investments, net of tax of ($ 10,958 ), ($ 2,478 ), and $ 1,814 in 2022, 2021 and 2020, respectively
+Added: Unrealized gains (losses) on investments, net of tax of $ 2,596 , ($ 10,958 ), and ($ 2,478 ) in 2023, 2022 and 2021, respectively
Comprehensive income
13 unchanged sentences
Cash dividends on common stock ($ 1.20
−Removed: Unrealized gain on investments, net of tax
+Added: Unrealized loss on investments, net of tax
Balance, December 31, 2021
−Removed: Common stock issued on exercise of
−Removed: options and vesting of restricted stock units
+Added: Common stock issued on exercise of options,
+Added: purchase of ESPP shares and vesting of
+Added: restricted stock units and performance awards
Common stock repurchased on vesting of
−Removed: restricted stock units
+Added: restricted stock units and performance awards
Share-based compensation expense
11 unchanged sentences
Cash dividends on common stock ($ 1.20
−Removed: Unrealized loss on investments, net of tax
+Added: Unrealized gain on investments, net of tax
Balance, December 31, 2023
19 unchanged sentences
Other accrued liabilities
+Added: Premium payable
Workers' compensation claims liabilities
5 unchanged sentences
Purchase of property, equipment and software
+Added: Proceeds from sale of property
Purchase of investments
2 unchanged sentences
Proceeds from sales and maturities of restricted investments
−Removed: Net cash provided by (used in) investing activities
+Added: Net cash (used in) provided by investing activities
Cash flows from financing activities:
5 unchanged sentences
Dividends paid
−Removed: Proceeds from exercise of stock options
+Added: Proceeds from exercise of stock options and purchase of ESPP
Net cash used in financing activities
−Removed: Net increase (decrease) in cash, cash equivalents and restricted cash
+Added: Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
6 unchanged sentences
Barrett Business Services, Inc.
−Removed: (“BBSI”
−Removed: or the “Company”), is a leading provider of business management solutions for small and mid-sized companies.
+Added: (“BBSI” or the “Company”), is a leading provider of business management solutions for small and mid-sized companies.
The Company has developed a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry.
6 unchanged sentences
AICE and Ecole provide access to more competitive and cost-effective insurance markets and provide cost-effective risk management.
−Removed: See “Note 4 - Workers’
−Removed: Compensation Claims”
−Removed: for additional information in the Company’s insurance programs.
+Added: See “Note 4 - Workers’ Compensation Claims” for additional information on the Company’s insurance programs.
Principles of consolidation
5 unchanged sentences
Revenue recognition
−Removed: Professional employer (“PEO”) services are normally used by organizations to satisfy ongoing needs related to the management of human capital and are governed by the terms of a client services agreement which covers all employees at a particular work site.
+Added: Professional employer (“PEO”) services are normally used by organizations to satisfy ongoing needs related to the management of human capital and are governed by the terms of a client services agreement which covers all employees at a particular work site.
Staffing revenues relate primarily to short-term staffing, contract staffing and on-site management services.
−Removed: The Company’s performance obligations for PEO and staffing services are satisfied, and the related revenue is recognized, as services are rendered by our workforce.
−Removed: Our PEO client service agreements have a minimum term of one year , are renewable on an annual basis and typically require 30 days’
−Removed: written notice to cancel or terminate the contract by either party.
+Added: The Company’s performance obligations for PEO and staffing services are satisfied, and the related revenue is recognized, as services are rendered by our workforce.
+Added: Our PEO client service agreements have a minimum term of one year , are renewable on an annual basis and typically require 30 days’ written notice to cancel or terminate the contract by either party.
In addition, our client service agreements provide for immediate termination upon any payment default of the client regardless of when notice is given.
2 unchanged sentences
The amount of earned but unbilled revenue is classified as a receivable on the consolidated balance sheets.
−Removed: We report PEO revenues net of direct payroll costs because we are not the primary obligor for these payments to our clients’
+Added: We report PEO revenues net of direct payroll costs because we are not the primary obligor for these payments to our clients’ employees.
Direct payroll costs include salaries, wages, health insurance, and employee out-of-pocket expenses incurred incidental to employment.
1 unchanged sentence
Cost of revenues
−Removed: Our cost of revenues for PEO services includes employer payroll-related taxes and workers' compensation costs.
−Removed: Our cost of revenues for staffing services includes direct payroll costs, employer payroll-related taxes, employee benefits, and workers’
−Removed: compensation costs.
+Added: Our cost of revenues for PEO services includes employer payroll-related taxes, workers' compensation costs, and employee benefits costs.
+Added: Our cost of revenues for staffing services includes direct payroll costs, employer payroll-related taxes, and workers’ compensation costs.
Direct payroll costs represent the gross payroll earned by staffing services employees based on salary or hourly wages.
−Removed: Payroll taxes and employee benefits consist of the employer's portion of Social Security and Medicare taxes, federal and state unemployment taxes, and staffing services employee reimbursements for materials, supplies and other expenses, which are paid by our customer.
−Removed: Workers' compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, third-party broker commissions, risk manager payroll, as well as costs associated with operating our two wholly owned insurance companies, AICE and Ecole.
+Added: Payroll taxes and benefits consist of the employer's portion of Social Security and Medicare taxes, federal and state unemployment taxes, and employee benefit costs, which primarily comprises health insurance premiums paid to third-party insurers and underwriting and benefit consultant payroll.
+Added: Workers' compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, claims administration fees, legal fees, MCC expense, state administrative agency fees, third-party broker commissions, risk manager payroll, as well as costs associated with operating our two wholly owned insurance companies, AICE and Ecole.
Cash and cash equivalents
3 unchanged sentences
The Company classifies investments as available-for-sale.
−Removed: The Company’s investments are reported at fair value with unrealized gains and losses, net of taxes, shown as a component of accumulated other comprehensive income (loss) in stockholders' equity.
+Added: The Company’s investments are reported at fair value with unrealized gains and losses, net of taxes, shown as a component of accumulated other comprehensive income (loss) in stockholders' equity.
Investments are recorded as current on the consolidated balance sheets as the invested funds are available for current operations.
3 unchanged sentences
Restricted cash and investments
−Removed: The Company holds restricted cash and investments primarily for the future payment of insurance premiums and workers’
−Removed: compensation claims.
+Added: The Company holds restricted cash and investments primarily for the future payment of insurance premiums and workers’ compensation claims.
These investments are categorized as available-for-sale.
−Removed: They are reported at fair value with unrealized gains and losses, net of taxes, shown as a component of accumulated other comprehensive income (loss) in stockholders’
+Added: They are reported at fair value with unrealized gains and losses, net of taxes, shown as a component of accumulated other comprehensive income (loss) in stockholders’ equity.
Restricted cash and investments are classified as current and noncurrent on the consolidated balance sheets based on the nature of the restriction.
2 unchanged sentences
Realized gains and losses on sales of restricted investments are included in investment income in our consolidated statements of operations.
−Removed: Restricted cash and investments also includes investments held as part of the Company’s deferred compensation plan.
+Added: Restricted cash and investments also includes investments held as part of the Company’s deferred compensation plan.
These investments are classified as trading securities and are recorded at fair value with unrealized gains and losses reported as a component of income (loss) from operations.
19 unchanged sentences
A valuation allowance is recorded against deferred tax assets if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
−Removed: The factors used to assess the likelihood of realization include the Company’s forecast of the reversal of temporary differences, future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.
−Removed: Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings.
+Added: The factors used to assess the likelihood of realization include the Company’s forecast of the reversal of temporary differences, future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.
+Added: Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings.
The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws.
16 unchanged sentences
Capitalized costs are amortized on a straight-line basis over the estimated useful life, commencing when the software is placed into service.
−Removed: Costs incurred during the preliminary project stage and the postimplementation stage, as well as general and administrative and overhead costs, are expensed as they are incurred.
+Added: Costs incurred during the preliminary project stage and the post-implementation stage, as well as general and administrative and overhead costs, are expensed as they are incurred.
Depreciation of property and equipment and amortization of software is calculated using the straight-line method over estimated useful lives of the related assets or lease terms, as follows:
6 unchanged sentences
Assets are grouped for measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.
−Removed: If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows expected to be generated by the asset group, then an impairment charge is recognized to the extent the carrying amount exceeds the asset group’s fair value.
+Added: If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows expected to be generated by the asset group, then an impairment charge is recognized to the extent the carrying amount exceeds the asset group’s fair value.
In determining fair value, management considers current results, trends, future prospects, and other economic factors.
11 unchanged sentences
Our lease agreements generally do not contain material variable lease payments or restrictive covenants.
−Removed: Workers’
−Removed: compensation claims liabilities
−Removed: Our workers’
−Removed: compensation claims liabilities do not represent an exact calculation of liability but rather management’s best estimate, utilizing actuarial expertise and projection techniques, at a given reporting date.
−Removed: The estimated liability for open workers’
−Removed: compensation claims is based on an evaluation of information provided by our third-party administrator for workers’
−Removed: compensation claims, coupled with an actuarial estimate of future loss development with respect to reported claims and incurred but not reported claims (together, “IBNR”).
−Removed: Workers’
−Removed: compensation claims liabilities include case reserve estimates for reported losses, plus additional amounts for estimated IBNR claims, MCC and legal costs, unallocated loss adjustment expenses and estimated future recoveries.
+Added: Workers’ compensation claims liabilities
+Added: Our workers’ compensation claims liabilities do not represent an exact calculation of liability but rather management’s best estimate, utilizing actuarial expertise and projection techniques, at a given reporting date.
+Added: The estimated liability for open workers’ compensation claims is based on an evaluation of information provided by our third-party administrator for workers’ compensation claims, coupled with an actuarial estimate of future loss development with respect to reported claims and incurred but not reported claims (together, “IBNR”).
+Added: Workers’ compensation claims liabilities include case reserve estimates for reported losses, plus additional amounts for estimated IBNR claims, MCC and legal costs, unallocated loss adjustment expenses and estimated future recoveries.
The estimate of incurred costs expected to be paid within one year is included in current liabilities, while the estimate of incurred costs expected to be paid beyond one year is included in long-term liabilities on our consolidated balance sheets.
3 unchanged sentences
We consider significant facts and circumstances known both at the time that loss reserves are initially established and as new facts and circumstances become known.
−Removed: Due to the inherent uncertainty underlying loss reserve estimates, the expenses incurred through final resolution of our liability for our workers’
−Removed: compensation claims will likely vary from the related loss reserves at the reporting date.
+Added: Due to the inherent uncertainty underlying loss reserve estimates, the expenses incurred through final resolution of our liability for our workers’ compensation claims will likely vary from the related loss reserves at the reporting date.
Therefore, as specific claims are paid out in the future, actual paid losses may be materially different from our current loss reserves.
6 unchanged sentences
Safety incentives represent cash incentives paid to certain PEO client companies for maintaining safe work practices and minimizing workplace injuries.
−Removed: The incentive is based on a percentage of annual payroll and is paid annually to customers who meet predetermined workers’
−Removed: compensation claims cost objectives.
−Removed: Safety incentive payments are made only after closure of all workers' compensation claims incurred during the customer’s contract period.
−Removed: The safety incentive liability is estimated and accrued each month based upon contract year-to-date payroll and the then current amount of the customer’s estimated workers’
−Removed: compensation claims reserves as established by us and our third-party administrator.
+Added: The incentive is based on a percentage of annual payroll and is paid annually to customers who meet predetermined workers’ compensation claims cost objectives.
+Added: Safety incentive payments are made only after closure of all workers' compensation claims incurred during the customer’s contract period.
+Added: The safety incentive liability is estimated and accrued each month based upon contract year-to-date payroll and the then current amount of the customer’s estimated workers’ compensation claims reserves as established by us and our third-party administrator.
In July 2020, the Company began limiting its safety incentive offering in certain markets.
5 unchanged sentences
Other comprehensive income refers to revenues, expenses, gains and losses that under U.S.
−Removed: generally accepted accounting principles (“GAAP”) are included in comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity.
+Added: generally accepted accounting principles (“GAAP”) are included in comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity.
Our other comprehensive income comprises unrealized holding gains and losses on our available-for-sale investments.
10 unchanged sentences
Basic earnings per share are computed based on the weighted average number of common shares outstanding for each year using the treasury method.
−Removed: Diluted earnings per share reflect the potential effects of the issuance of shares in connection with the exercise of outstanding stock options, vesting of outstanding restricted stock units and performance share units, and the Company’s employee stock purchase plan.
+Added: Diluted earnings per share reflect the potential effects of the issuance of shares in connection with the exercise of outstanding stock options, vesting of outstanding restricted stock units and performance share units, and the Company’s employee stock purchase plan.
Basic and diluted shares outstanding are summarized as follows (in thousands):
8 unchanged sentences
Actual results may or may not differ from such estimates.
+Added: Reclassifications
+Added: To conform to the current period’s presentation, premiums payable to third party insurance carriers of $ 18.9 million were reclassified from other accrued liabilities to current premium payable in the prior period consolidated balance sheets and premiums payable to third party insurance carriers of $ 12.1 million and $ 7.7 million were reclassified from other accrued liabilities to premium payable in the prior period consolidated statements of cash flows as of December 31, 2022 and 2021, respectively.
Recent accounting pronouncements
−Removed: There were no new or pending accounting pronouncements in 2022 that had, or will have, a material impact on our results of operations or financial condition.
+Added: The following Accounting Standards Updates (ASUs) have been recently issued by the Financial Accounting Standards Board (FASB).
+Added: ASU 2023-07, Segment Reporting (Topic 280):
+Added: Improvements to Reportable Segment Disclosures
+Added: In November 2023, the FASB issued ASU 2023-07, which expands annual and interim reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.
+Added: All disclosure requirements under the new guidance are also required for public entities with a
+Added: single reportable segment.
+Added: ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
+Added: Early adoption is permitted.
+Added: The amendments should be applied retrospectively to all prior periods presented in the financial statements.
+Added: We are evaluating the impact of applying this new accounting guidance to our financial statement disclosures.
+Added: ASU 2023-09, Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures
+Added: In December 2023, the FASB issued ASU 2023-09, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.
+Added: The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.
+Added: The ASU applies to all entities subject to income taxes.
+Added: The new requirements will be effective for annual periods beginning after December 15, 2024.
+Added: The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.
+Added: Early adoption is permitted.
+Added: We are evaluating the impact of applying this new accounting guidance to our income tax disclosures.
Note 2 - Fair Value Measurement
10 unchanged sentences
The three levels of the fair value hierarchy are described below.
−Removed: Level 1 –
−Removed: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
−Removed: Level 2 –
−Removed: Inputs to the valuation methodology include:
+Added: Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
+Added: Level 2 – Inputs to the valuation methodology include:
• Quoted prices for similar assets or liabilities in active markets;
2 unchanged sentences
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
−Removed: Level 3 –
−Removed: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
+Added: Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
In determining the fair value measurement of our financial assets, the fair value measurement level within the hierarchy is based on the lowest level input and is applied to each financial asset.
Valuation techniques are used to maximize the use of observable inputs and minimize the use of unobservable inputs.
−Removed: The following table summarizes the Company’s investments at December 31, 2022 and 2021 measured at fair value on a recurring basis (in thousands):
+Added: The following table summarizes the Company’s investments at December 31, 2023 and 2022 measured at fair value on a recurring basis (in thousands):
December 31, 2023
4 unchanged sentences
Corporate bonds
−Removed: Mortgage backed securities
Asset backed securities
government agency securities
+Added: Mortgage backed securities
Emerging markets
4 unchanged sentences
government agency securities
−Removed: Money market funds
Asset backed securities
+Added: Money market funds
+Added: Emerging markets
Total restricted cash and investments
7 unchanged sentences
Corporate bonds
−Removed: Mortgage backed
Asset backed securities
agency securities
+Added: Mortgage backed
Emerging markets
4 unchanged sentences
Asset backed securities
+Added: Emerging markets
Total investments
3 unchanged sentences
Redemption is permitted daily without written notice.
−Removed: The following table summarizes the contractual maturities of the Company’s available for sale securities at December 31, 2022 and 2021.
+Added: The following table summarizes the contractual maturities of the Company’s available for sale securities at December 31, 2023 and 2022.
Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.
−Removed: The table also includes money market funds, which are classified as cash and cash equivalents on the Company’s consolidated balance sheets.
+Added: The table also includes money market funds, which are classified as cash and cash equivalents on the Company’s consolidated balance sheets.
December 31, 2023
5 unchanged sentences
Corporate bonds
−Removed: Money market funds
government agency securities
+Added: Money market funds
Asset backed securities
7 unchanged sentences
Corporate bonds
+Added: Money market funds
government agency securities
Asset backed securities
−Removed: Money market funds
+Added: Emerging markets
The average contractual maturity of mortgage backed securities, which are excluded from the table above, was 23 years and 24 years as of December 31, 2023 and 2022 , respectively.
22 unchanged sentences
Workers' compensation claims liabilities
−Removed: Incurred but not reported (IBNR)
−Removed: Ratio of IBNR to workers' compensation claims
Insured program
−Removed: The Company provides workers’
−Removed: compensation coverage for client employees primarily through arrangements with fully licensed, third-party insurers (the “insured program”).
−Removed: Under this program, carriers issue policies or afford coverage to the Company’s clients under a program maintained by the Company.
−Removed: Approximately 83 % of the Company’s workers’
−Removed: compensation exposure is covered through the insured program.
−Removed: The Company entered into a new arrangement for its insured program effective July 1, 2021 whereby third-party insurers assumed all risk of loss for claims incurred from July 1, 2021 to June 30, 2022 (the “2021-2022 Policy”).
−Removed: The 2021-2022 Policy allows for premium adjustments depending on overall policy performance.
−Removed: If claims develop favorably, BBSI can participate in the savings up to $ 20.0 million for the twelve-month policy period.
−Removed: If claims develop adversely, additional premium may be charged up to $ 7.5 million for the twelve-month policy period.
−Removed: Effective July 1, 2022, the Company renewed the arrangement for its insured program, which now continues through June 30, 2023 (the “2022-2023 Policy”).
−Removed: Under the renewed arrangement, the Company can participate in savings up to $ 22.5 million for the twelve-month policy period.
−Removed: For the 2022-2023 Policy, no additional premium may be charged if claims develop adversely.
−Removed: The 2022-2023 Policy includes a renewal commitment through June 30, 2024.
+Added: The Company provides workers’ compensation coverage for client employees primarily through arrangements with fully licensed, third-party insurers (the “insured program”).
+Added: Under this program, carriers issue policies or afford coverage to the Company’s clients under a program maintained by the Company.
+Added: Approximately 84 % of the Company’s workers’ compensation exposure is covered through the insured program.
+Added: Effective July 1, 2021, the Company entered into a new arrangement for its insured program, whereby third-party insurers assumed all risk of loss for claims incurred from July 1, 2021 to June 30, 2022 (the “2021-2022 Policy”).
+Added: The arrangement for the insured program was extended for claims incurred from July 1, 2022 to June 30, 2023 (the “2022-2023 Policy”) and for claims incurred from July 1, 2023 to June 30, 2024 (the “2023-2024 Policy”).
+Added: The 2021-2022 Policy, 2022-2023 Policy, and 2023-2024 Policy allow for premium adjustments depending on overall policy performance.
+Added: If claims develop favorably, BBSI can participate in savings up to $ 20.0 million, $ 22.5 million, and $ 28.5 million for the 2021-2022 Policy, 2022-2023 Policy, and 2023-2024 Policy, respectively.
+Added: If claims develop adversely, additional premium may be charged up to $ 7.5 million under the 2021-2022 Policy.
+Added: No additional premiums may be charged if claims develop adversely under the 2022-2023 Policy and the 2023-2024 Policy .
+Added: For the above policies, premium amounts incurred but not paid are classified as either current or long-term based on the expected timing of the payments and are recorded in current premium payable and long-term premium payable on the consolidated balance sheets.
For claims incurred under the insured program prior to July 1, 2021, the Company retains risk of loss up to the first $ 3.0 million per occurrence on policies issued after June 30, 2020 and $ 5.0 million per occurrence on policies issued before that date.
−Removed: On June 29, 2020, the Company entered into a loss portfolio transfer agreement (“LPT 1”) to remove all outstanding workers’
−Removed: compensation claims obligations for claims incurred under its insured program between February 1, 2014 and December 31, 2017.
−Removed: This transaction reduced the Company’s outstanding workers’
−Removed: compensation liabilities and trust account balances by $ 115.7 million.
−Removed: On June 30, 2021, the Company entered into a loss portfolio transfer agreement (“LPT 2”) to remove all remaining outstanding workers’
−Removed: compensation claims obligations for client policies issued under its insured program up to June 30, 2018.
−Removed: This transaction reduced the Company’s outstanding workers’
−Removed: compensation liabilities by $ 53.1 million.
+Added: On June 29, 2020, the Company entered into a loss portfolio transfer agreement (“LPT 1”) to remove all outstanding workers’ compensation claims obligations for claims incurred under its insured program between February 1, 2014 and December 31, 2017.
+Added: On June 30, 2021, the Company entered into a loss portfolio transfer agreement (“LPT 2”) to remove all remaining outstanding workers’ compensation claims obligations for client policies issued under its insured program up to June 30, 2018.
The following is a summary of the risk retained by the Company under its insured program after considering the effects of the loss portfolio transfers and current insurance arrangements:
3 unchanged sentences
( 1) LPT 2 excluded approximately 10 % of claims from 2018 and included an approximately offsetting amount of claims from 2019.
−Removed: The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”).
+Added: The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”).
The balance in the trust account was $ 210.9 million and $ 188.2 million at December 31, 2023 and December 31, 2022, respectively.
−Removed: The trust account balance is included as a component of the current and long-term restricted cash and investments in the Company’s condensed consolidated balance sheets.
+Added: The trust account balance is included as a component of the current and long-term restricted cash and investments in the Company’s consolidated balance sheets.
Self-insured programs
−Removed: The Company is a self-insured employer with respect to workers' compensation coverage for all employees, including employees of PEO clients that elect to participate in our workers’
−Removed: compensation program, working in Colorado, Maryland and Oregon.
+Added: The Company is a self-insured employer with respect to workers' compensation coverage for all employees, including employees of PEO clients that elect to participate in our workers’ compensation program, working in Colorado, Maryland and Oregon.
In the state of Washington, state law allows only the Company's staffing services and internal management employees to be covered under the Company's self-insured workers' compensation program.
−Removed: The Company also operates a wholly owned, fully licensed insurance company, Ecole, which provides workers’
−Removed: compensation coverage to client employees working in Arizona and Utah.
−Removed: Approximately 17 % of the Company’s workers’
−Removed: compensation exposure is covered through self-insurance or Ecole (the “self-insured programs”).
−Removed: For all claims incurred under the Company’s self-insured programs, the Company retains risk of loss up to the first $ 3.0 million per occurrence, except in Maryland and Colorado, where the Company’s retention per occurrence is $ 1.0 million and $ 2.0 million, respectively.
−Removed: For claims incurred under the Company’s self-insured programs prior to July 1, 2020, the Company retains risk of loss up to the first $ 5.0 million per occurrence, except in Maryland and Colorado, where the retention per occurrence is $ 1.0 million and $ 2.0 million, respectively.
−Removed: The states of California, Maryland, Oregon, Washington, Colorado and Delaware required the Company to maintain collateral totaling $ 54.5 million and $ 58.4 million at December 31, 2022 and 2021, respectively, to cover potential workers’
−Removed: compensation claims losses related to the Company’s current and former status as a self-insured employer.
−Removed: At December 31, 2022 , the Company provided surety bonds totaling $ 54.5 million, including a California requirement of $ 22.3 million.
+Added: The Company also operates a wholly owned, fully licensed insurance company, Ecole, which provides workers’ compensation coverage to client employees working in Arizona and Utah.
+Added: Approximately 16 % of the Company’s workers’ compensation exposure is covered through self-insurance or Ecole (the “self-insured programs”).
+Added: For all claims incurred under the Company’s self-insured programs, the Company retains risk of loss up to the first $ 3.0 million per occurrence, except in Maryland and Colorado, where the Company’s retention per occurrence is $ 1.0 million and $ 2.0 million, respectively.
+Added: For claims incurred under the Company’s self-insured programs prior to July 1, 2020, the Company retains risk of loss up to the first $ 5.0 million per occurrence, except in Maryland and Colorado, where the retention per occurrence is $ 1.0 million and $ 2.0 million, respectively.
+Added: The states of Maryland, California, Oregon, Colorado, Washington, and Delaware required the Company to maintain collateral totaling $ 48.1 million and $ 54.5 million at December 31, 2023 and 2022, respectively, to cover potential workers’ compensation claims losses related to the Company’s current and former status as a self-insured employer.
+Added: At December 31, 2023 , the Company provided surety bonds totaling $ 48.1 million.
Claims liabilities
The Company provided a total of $ 167.8 million and $ 216.0 million at December 31, 2023 and 2022 , respectively, as an estimated future liability for unsettled workers' compensation claims liabilities.
−Removed: Of this amount, $ 3.0 million and $ 2.2 million on December 31, 2022 and 2021 , respectively, represent case reserves incurred in excess of the Company’s retention.
+Added: Of this amount, $ 6.0 million and $ 3.0 million on December 31, 2023 and 2022 , respectively, represent case reserves and IBNR in excess of the Company’s retention.
The accrual for costs incurred in excess of retention limits is offset by a receivable from insurance carriers of $ 6.0 million and $ 3.0 million at December 31, 2023 and 2022 , respectively, included in other assets in the consolidated balance sheets.
Note 5 - Revolving Credit Facility and Long-Term Debt
−Removed: The Company maintains an agreement (the “Agreement”) with Wells Fargo Bank, N.A.
+Added: The Company maintains an agreement (the “Agreement”) with Wells Fargo Bank, N.A.
(the "Bank") for a revolving credit line of $ 50.0 million and a sublimit for standby letters of credit of $ 25.0 million.
2 unchanged sentences
The Company had no outstanding borrowings on its revolving credit line at December 31, 2023 and 2022.
−Removed: The credit facility is collateralized by the Company’s accounts receivable and other rights to receive payment.
+Added: The credit facility is collateralized by the Company’s accounts receivable and other rights to receive payment.
The Agreement requires the satisfaction of certain financial covenants as follows:
4 unchanged sentences
• the Company may not terminate or cancel any of the AICE policies;
−Removed: if an event of default would occur, and is continuing, including on a pro forma basis, no dividends or distributions would be permitted to be paid and redemptions and repurchases of the Company’s stock would be permitted only up to $ 15 million in any rolling 12-month period.
+Added: • if an event of default would occur, and is continuing, including on a pro forma basis, no dividends or distributions would be permitted to be paid and redemptions and repurchases of the Company’s stock would be permitted only up to $ 15 million in any rolling 12-month period.
The Agreement also contains customary events of default and specified cross-defaults under the Company's workers' compensation insurance arrangements.
1 unchanged sentence
At December 31, 2023 , the Company was in compliance with all covenants.
−Removed: The Company maintained a mortgage loan with the Bank with a balance of approximately $ 3.5 million at December 31, 2021.
−Removed: On January 31, 2022, the Company paid the outstanding balance of the mortgage loan.
Note 6 - Benefit Plans
8 unchanged sentences
The current portion of the deferred compensation plan liability was $ 1.1 million and $ 1.0 million at December 31, 2023 and 2022, respectively, and is recorded in other accrued liabilities on the consolidated balance sheets.
−Removed: The fair value of the long-term portion of this plan was $ 6.7 million and $ 6.3 million at December 31, 2022 and 2021 , respectively, and is recorded in noncurrent restricted cash and investments on the consolidated balance sheets.
+Added: The fair value of the long-term portion o f this plan was $ 7.9 million and $ 6.7 million at D ecember 31, 2023 and 2022 , respectively, and is recorded in noncurrent restricted cash and investments on the consolidated balance sheets.
The fair value of the current portion of this plan was $ 1.1 million and $ 1.0 million at December 31, 2023 and 2022 , respectively, and is recorded in current restricted cash and investments on the consolidated balance sheets.
Note 7 - Leases
−Removed: The Company primarily leases office buildings under operating leases which are included in Operating lease right-of-use (“ROU”) assets, Current operating lease liabilities, and Long-term operating lease liabilities on the consolidated balance sheets.
−Removed: The Company’s leases have remaining terms of 1 to 7 years .
+Added: The Company primarily leases office buildings under operating leases which are included in Operating lease right-of-use (“ROU”) assets, Current operating lease liabilities, and Long-term operating lease liabilities on the consolidated balance sheets.
+Added: The Company’s leases have remaining terms of 1 to 7 years.
Information related to the Company's total lease costs was as follows (in thousands):
21 unchanged sentences
Total operating lease liabilities
−Removed: The Company has additional operating leases of $ 1.7 million that have not commenced as of December 31, 2022 , and as such, have not been recognized in the Company’s Consolidated Balance Sheets.
+Added: The Company has additional operating leases of $ 1.0 million that have not commenced as of December 31, 2023 , and as such, have not been recognized in the Company’s Consolidated Balance Sheets.
These operating leases are expected to commence in 2024 with lease terms of 7 years.
10 unchanged sentences
Equity based compensation
−Removed: State credit carryforward
−Removed: Customer incentives
−Removed: Payroll tax deferral
valuation allowance
Deferred income tax liabilities:
−Removed: Tax amortization of goodwill
Tax depreciation in excess of book depreciation
+Added: Tax amortization of goodwill
Operating lease right-of-use
6 unchanged sentences
Nondeductible expenses and other, net
−Removed: Adjustment for final positions on filed returns
Federal and state tax credits
+Added: Adjustment for final positions on filed returns
Effective tax rate
−Removed: Under ASC 740, “Income Taxes,”
−Removed: management evaluates the realizability of the deferred tax assets on a quarterly basis under a “more-likely-than-not”
+Added: Under ASC 740, “Income Taxes,” management evaluates the realizability of the deferred tax assets on a quarterly basis under a “more-likely-than-not” standard.
As part of this evaluation, management reviews all evidence both positive and negative to determine if a valuation allowance is needed.
1 unchanged sentence
The Company was in a cumulative income position for the 12 quarters ended at both December 31, 2023 and December 31, 2022.
−Removed: The Company’s realization of a portion of net deferred tax assets is based in part on our estimates of the timing of reversals of certain temporary differences and on the generation of taxable income before such reversals.
+Added: The Company’s realization of a portion of net deferred tax assets is based in part on our estimates of the timing of reversals of certain temporary differences and on the generation of taxable income before such reversals.
The Company is subject to income taxes in U.S.
federal and multiple state and local tax jurisdictions.
−Removed: The Internal Revenue Service is examining the Company’s federal tax returns for the years ended December 31, 2017 through 2021 .
−Removed: In November 2022, BBSI received notice that the IRS intends to disallow certain wage-based tax credits claimed for the years 2017 through 2020 , which could result in estimated total additional taxes of $ 5.5 million and penalties of $ 1.7 million.
−Removed: Tax year 2021 remains under audit, however, disallowance of similar wage-based credits would result in additional estimated tax due of $ 0.2 million.
+Added: The Internal Revenue Service (the "IRS") is examining the Company’s federal tax returns for the years ended December 31, 2017 through 2021 .
+Added: BBSI received notice that the IRS intends to disallow certain wage-based tax credits claimed for the years 2017 through 2020 , which could result in estimated total additional taxes of $ 7.4 million and penalties of $ 1.7 million.
+Added: Tax year 2021 remains under audit;
+Added: disallowance of similar wage-based credits would result in additional estimated tax due of $ 0.6 million.
The Company disagrees with the IRS determination to disallow certain wage-based credits taken by the Company and believes that the Company has the technical merits to defend its position.
−Removed: Based on management’s more-likely-than-not assessment that the position is sustainable, no reserve for the aforementioned IRS notices of disallowance of wage-based tax credits or underpayment penalties has been recorded in the financial statements.
+Added: Based on management’s more-likely-than-not assessment that the position is sustainable, no reserve for the aforementioned IRS notices of disallowance of wage-based tax credits or underpayment penalties has been recorded in the financial statements.
In the major jurisdictions where it operates, the Company is generally no longer subject to income tax examinations by tax authorities for tax years before 2017.
−Removed: As of December 31, 2022, total gross unrecognized tax benefits, excluding interest and penalties, were $ 0.6 million, which would affect the Company's effective tax rate if recognized in future periods.
+Added: As of December 31, 2023, total gross unrecognized tax benefits, excluding interest and penalties, of $ 0.8 million would affect the Company's effective tax rate if recognized in future periods.
The Company does not anticipate any material changes to the reserve in the next 12 months.
−Removed: As of December 31, 2021 and 2020, the Company had no material unrecognized tax benefits.
+Added: The Company had unrecognized tax benefit of $ 0.6 million as of December 31, 2022 and no material unrecognized tax benefit as of December 31, 2021.
A portion of the consolidated income the Company generates is not subject to state income tax.
4 unchanged sentences
The Company's 2020 Stock Incentive Plan (the "2020 Plan"), which provides for share-based awards to Company employees, non-employee directors and outside consultants or advisors, was approved by stockholders on May 27, 2020.
−Removed: The number of shares of common stock reserved for issuance under the 2020 Plan is 375,000 , of which the maximum number of shares for which incentive stock options may be granted is 375,000 .
−Removed: The 2020 Plan replaced the Company’s 2015 Stock Incentive Plan (the “2015 Plan”), and no new share-based awards may be granted under the 2015 Plan.
−Removed: The number of shares available for grant at December 31, 2022 was 77,715 .
+Added: The 2020 Plan replaced the Company’s 2015 Stock Incentive Plan (the “2015 Plan”), and no new share-based awards may be granted under the 2015 Plan.
+Added: On June 5, 2023, the Company's stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2020 Plan from 375,000 to 725,000 .
+Added: The number of shares available for grants of awards at December 31, 2023 was 312,398 .
Share-based compensation expense included in selling, general and administrative expenses during the years ended December 31, 2023, 2022 and 2021 , was $ 8.5 million, $ 7.4 million and $ 5.4 million, respectively.
2 unchanged sentences
Outstanding stock options generally vest over either four or eight years and expire ten years after the date of grant.
−Removed: A summary of the status of the Company’s stock options at December 31, 2022, together with changes during the periods then ended, is presented below:
+Added: A summary of the status of the Company’s stock options at December 31, 2023, together with changes during the periods then ended, is presented below:
(In Thousands)
5 unchanged sentences
The intrinsic value of stock options exercised for the years ended December 31, 2023, 2022 and 2021 was $ 0.1 million, $ 0.2 million, and $ 1.7 million, respectively.
−Removed: The fair value of stock options vested for the years ended December 31, 2022 and 2020 was $ 728,000 and $ 43,000 , respectively.
−Removed: No stock options vested during the year ended December 31, 2021.
+Added: The fair value of stock options vested for the year ended December 31, 2022 was $ 728,000 .
+Added: No stock options vested during the year ended December 31, 2023 or 2021.
As of December 31, 2023 , unrecognized compensation expense related to stock options was $ 1.5 million with a weighted average remaining amortization period of 2.2 years.
9 unchanged sentences
Performance Share Units
−Removed: Performance share units (“PSUs”) are granted to key employees of the Company and are conditioned on attaining specified financial performance metrics.
−Removed: Awards are subject to upward or downward adjustments depending on whether the actual financial metrics are above or below the target level, with a maximum payout up to 200 % of a target number of shares.
−Removed: PSUs fully vest on the date that the Compensation Committee determines the level of attainment of specified performance goals, generally over a three-year period.
+Added: Performance share units (“PSUs”) are granted to key employees of the Company and are conditioned on attaining financial performance metrics specified in each award.
+Added: Each award is subject to upward or downward adjustment depending on whether achievement of the financial metrics is above or below the target level, with a maximum payout of up to 200 % of the target number of shares covered by the award.
+Added: PSUs vest on the date that the Compensation Committee determines the level of attainment of the specified financial metrics, generally measured over a three-year period.
The following table presents PSU activity:
1 unchanged sentence
Nonvested at December 31, 2022
−Removed: Cancelled/Forfeited
Nonvested at December 31, 2023
−Removed: The total fair value of PSUs vested during the years ended December 31, 2022, 2021 and 2020 was $ 259,000 , $ 276,000 , and $ 743,000 , respectively.
+Added: The total grant date fair value of PSUs vested during the years ended December 31, 2023, 2022 and 2021 was $ 1.6 million, $ 259,000 , and $ 276,000 , respectively.
Employee Stock Purchase Plan
−Removed: The Company offers employees the right to purchase shares at a discount from the market price under the Company’s 2019 Employee Stock Purchase Plan.
+Added: The Company offers employees the right to purchase shares at a discount from the market price under the Company’s 2019 Employee Stock Purchase Plan.
Subject to the annual statutory limit, employees are eligible to participate through payroll deductions of up to 15 % of their compensation.
3 unchanged sentences
The Company maintains a stock repurchase program approved by the Board of Directors, which authorizes the repurchase of shares from time to time in open market purchases.
−Removed: On February 28, 2022, the Board of Directors authorized the repurchase of up to $ 75.0 million of the Company’s common stock over a two-year period beginning February 28, 2022 .
−Removed: The new repurchase program replaces the program approved in August 2019 .
+Added: On July 31, 2023, the Board of Directors authorized the repurchase of up to $ 75.0 million of the Company’s common stock over a two-year period beginning July 31, 2023 .
+Added: The new repurchase program replaces the program approved in February 2022 .
The Company repurchased 375,114 , 605,937 and 237,587 shares at an aggregate purchase price of $ 34.2 million, $ 47.2 million, and $ 17.3 million during 2023, 2022 and 2021, respectively.
In addition, shares of restricted stock units withheld to satisfy tax-withholding obligations from the vesting of restricted stock units were 32,888 , 23,113 and 20,308 in 2023, 2022 and 2021 , respectively, which are not subject to the current repurchase program.
−Removed: See “Note 5.
−Removed: Revolving Credit Facility and Long-Term Debt”
−Removed: for related restrictions.
+Added: Revolving Credit Facility and Long-Term Debt” for related restrictions on share repurchases.
Note 11 - Litigation
−Removed: On November 21, 2012, David Kaanaana (“Kaanaana”), a former staffing employee, filed a class action wage and hour lawsuit against BBSI in the California Superior Court on behalf of himself and certain other employees who worked at County Sanitation District No.
−Removed: 2 of Los Angeles County (“the District”).
−Removed: The trial court ruled in plaintiffs’
−Removed: favor regarding certain alleged meal break violations but ruled in favor of BBSI with respect to the application of the California prevailing wage law to the District and other claims.
−Removed: These latter rulings were appealed by the plaintiffs to the California Court of Appeal.
−Removed: On November 30, 2018, the California Court of Appeal for the Second Appellate District returned its decision in Kaanaana v.
−Removed: Barrett Business Services, Inc., overruling the trial court's decision to dismiss the prevailing wage claim, ruling that the work in question at the District constituted “public works”
−Removed: under the applicable law, and also ruling that plaintiffs’
−Removed: were entitled to additional remedies with regard to the meal break violations under California law.
−Removed: On January 9, 2019, BBSI filed a petition of review to the California Supreme Court.
−Removed: On February 27, 2019, the California Supreme Court granted the petition to review the Court of Appeal’s decision with respect to the prevailing wage issue.
−Removed: A decision from the California Supreme Court was issued March 29, 2021 affirming the Court of Appeal decision and concluding that the recycling sorting work performed by the staffing employees in question was a “public work”
−Removed: and therefore would be subject to prevailing wage requirements.
−Removed: No damages were awarded in the appeals process.
−Removed: The case was remanded to Superior Court for any such determination with respect to both the prevailing wage issue and any additional remedies for the meal break violations.
−Removed: On December 7, 2021 the parties engaged in a mediation effort which resulted in a settlement agreement on December 22, 2021.
−Removed: The settlement is subject to customary court approval.
−Removed: On January 17, 2018 and January 18, 2018, respectively, suits were filed in the California Superior Court for the County of Santa Cruz by Sandra Gill, Robert Seth Gill Jr.
−Removed: and Alyssa Gill, individually and on behalf of the estate of Robert S.
−Removed: Gill, Sr., and by Stephen and Torrey Whitmire, against Hildebrand and Sons Trucking, Daniel Harrington, BBSI, the State of California, Department of Transportation, the State of California, California Highway Patrol, and Statewide Traffic Safety and Signs seeking monetary damages arising out of personal injuries and a fatality suffered after Messrs.
−Removed: Gill and Whitmire were struck by a truck at a California highway mudslide removal operation.
−Removed: Hildebrand was a PEO client of BBSI and operated the truck involved in the accident.
−Removed: The actions allege that the injuries and death were the result of, among other things, the negligent actions of a Hildebrand employee, and the unsafe conditions at the mudslide removal operation.
−Removed: In February 2023, BBSI and the plaintiffs reached an agreement to settle, which will remove BBSI from the suit.
−Removed: In addition to the matters above, BBSI is subject to other legal proceedings and claims that arise in the ordinary course of our business.
+Added: On April 5, 2011, several individual plaintiffs filed a wage and hour class action in the California Superior Court, County of Fresno, naming as defendants their employer, a Merry Maids franchisee;
+Added: BBSI, which was providing PEO services to the franchisee;
+Added: and various parties related to the franchisor.
+Added: Plaintiffs claimed, among other things, that BBSI and the franchisor were their joint employer with franchisee and therefore jointly responsible for the alleged wage and hour violations.
+Added: The case was subsequently removed to the United States District Court for the Eastern District of California, and on January 18, 2019, the District Court certified a class of former non-exempt employees who resided in California and worked for the franchisee in certain positions during the period from April 6, 2007 through January 19, 2019.
+Added: On November 30, 2020, the District Court granted BBSI’s motion for summary judgment to be removed from the case.
+Added: Thereafter the plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit, and on June 2, 2022, the Court of Appeals reversed the order granting summary judgment to BBSI.
+Added: The court held that there is a triable issue of fact concerning whether or not BBSI was a joint-employer under applicable California law.
+Added: BBSI intends to vigorously defend the claim, including continuing to assert its defense on the ground that it was not a joint-employer of plaintiffs.
+Added: Given the uncertainties surrounding this litigation, management is unable to estimate a potential range of loss.
+Added: In addition to the matter above, BBSI is subject to other legal proceedings and claims that arise in the ordinary course of our business.
There are significant uncertainties surrounding litigation.
−Removed: For the matters discussed above, as well as other cases, management has recorded estimated liabilities totaling $ 3.5 million in other accrued liabilities in the condensed consolidated balance sheets.
+Added: For all other
+Added: cases not discussed above, management has recorded estimated liabilities totaling $ 0.4 million in other accrued liabilities in the consolidated balance sheets.
Note 12 - Subsequent Events
3 unchanged sentences
Evaluation of Disclosure Controls and Procedures
−Removed: We maintain “disclosure controls and procedures”
−Removed: that are designed with the objective of providing reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
+Added: We maintain “disclosure controls and procedures” that are designed with the objective of providing reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply their judgment in evaluating the cost-benefit relationship of possible controls and procedures.
−Removed: Based on their evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2022.
+Added: Based on their evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2023.
Annual Report on Internal Control over Financial Reporting
−Removed: Management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
+Added: Management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Our ICFR is a process designed by, or under the supervision of, our CEO and our CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP in the United States of America.
−Removed: Management, with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of our ICFR based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: Based upon that evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022.
−Removed: The effectiveness of the Company’s internal control over financial reporting has also been audited by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, as stated in their report included below.
+Added: Management, with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of our ICFR based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: Based upon that evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.
+Added: The effectiveness of the Company’s internal control over financial reporting has also been audited by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, as stated in their report included below.
Changes in Internal Control over Financial Reporting
−Removed: There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
+Added: There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations
3 unchanged sentences
These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple errors or mistakes.
−Removed: systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
+Added: Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
5 unchanged sentences
Barrett Business Services, Inc.
−Removed: Vancouver, Washington
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Barrett Business Services, Inc.
−Removed: and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control —
−Removed: Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
−Removed: In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control —
−Removed: Integrated Framework (2013) issued by COSO.
+Added: and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
+Added: In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated March 1, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
−Removed: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report over Internal Control over Financial Reporting.
−Removed: Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
+Added: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Annual Report on Internal Control over Financial Reporting.
+Added: Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
5 unchanged sentences
Definition and Limitations of Internal Control over Financial Reporting
−Removed: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
−Removed: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
+Added: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
+Added: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
−Removed: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
+Added: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
7 unchanged sentences
DI RECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
−Removed: Information required by this item is incorporated by reference to the information set forth under the captions "Item 1-Election of Directors," “Background and Experience of Executive Officers”
−Removed: and "Code of Ethics" in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the “Proxy Statement”).
+Added: Information required by this item is incorporated by reference to the information set forth under the captions "Item 1-Election of Directors," “Background and Experience of Executive Officers” and "Code of Ethics" in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the “Proxy Statement”).
EXE CUTIVE COMPENSATION
−Removed: The information required by this item is incorporated by reference to the information set forth under the captions “Director Compensation for 2022”
−Removed: and “Executive Compensation”
−Removed: in the Proxy Statement.
+Added: The information required by this item is incorporated by reference to the information set forth under the captions “Director Compensation for 2023” and “Executive Compensation” in the Proxy Statement.
SE CURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
−Removed: The information required by this item is incorporated by reference to the information set forth under the caption "Stock Ownership of Principal Stockholders and Management –
−Removed: Beneficial Ownership Table" and “Additional Equity Compensation Plan Information”
−Removed: in the Proxy Statement.
+Added: The information required by this item is incorporated by reference to the information set forth under the caption "Stock Ownership of Principal Stockholders and Management – Beneficial Ownership Table" and “Additional Equity Compensation Plan Information” in the Proxy Statement.
CER TAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
1 unchanged sentence
PRIN CIPAL ACCOUNTANT FEES AND SERVICES
−Removed: The information required by this item is incorporated by reference to the information set forth under the caption "Matters Relating to Our Independent Registered Public Accounting Firm”
−Removed: in the Proxy Statement.
+Added: The information required by this item is incorporated by reference to the information set forth under the caption "Matters Relating to Our Independent Registered Public Accounting Firm” in the Proxy Statement.
EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES
5 unchanged sentences
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021
−Removed: Consolidated Statements of Stockholders’
−Removed: Equity for the Years Ended December 31, 2022, 2021 and 2020
+Added: Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021
7 unchanged sentences
Bylaws of the Registrant, as amended through May 27, 2020 .
−Removed: Third Amended and Restated Credit Agreement between the Registrant and Wells Fargo Bank, National Association (“Wells Fargo”), dated as of March 1, 2022.
+Added: Third Amended and Restated Credit Agreement between the Registrant and Wells Fargo Bank, National Association (“Wells Fargo”), dated as of March 1, 2022.
+Added: First Amendment, effective as of June 12, 2023, to Third Amended and Restated Credit Agreement
+Added: between the Registrant and Wells Fargo
+Added: Bank, National Association.
Amended and Restated Security Agreement:
1 unchanged sentence
Amended and Restated Standby Letter of Credit Agreement dated as of June 20, 2018, between the Registrant and Wells Fargo .
−Removed: Fourth Amended and Restated Revolving Line of Credit Note dated March 1, 2022 of the Registrant.
+Added: Fifth Amended and Restated Revolving Line of Credit Note effective June 12, 2023 of the Registrant.
Description of the Registrant's Capital Stock .
−Removed: 2009 Stock Incentive Plan of the Registrant (the “2009 Plan”) .
2009 Stock Incentive Plan of the Registrant (the “2009 Plan”) .
2015 Stock Incentive Plan of the Registrant (the "2015 Plan") .
−Removed: Form of Performance Share Award Agreement for Executive Officers for awards granted beginning in 2018 under the 2015 Plan .
−Removed: Form of Performance Share Award Agreement under 2020 Stock Incentive Plan .
−Removed: Form of Non-Employee Director Nonqualified Stock Option Award Agreement under the 2009 Plan .
−Removed: Form of Employee Nonqualified Stock Option Award Agreement under the 2009 Plan .
−Removed: Form of Non-Employee Director Nonqualified Stock Option Award Agreement under the 2009 Plan .
+Added: Amended and Restated 2020 Stock Incentive Plan of the Registrant (the "2020 Plan").
+Added: Form of Performance Share Award Agreement under the 2020 Plan.
Nonqualified Stock Option Award Agreement between the Registrant and Thomas J.
30 unchanged sentences
Section 1350.
+Added: Executive Compensation Recovery Policy
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
12 unchanged sentences
Executive Vice President and Chief Financial Officer and Treasurer
−Removed: 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 6th day of March, 2023.
+Added: 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 1st day of March, 2024.
Principal Executive Officer and Director:
16 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.