Barrett Business Services Inc. (Nasdaq: BBSI), the troubled PEO, is facing not only the prospect of having its stock delisted from the Nasdaq exchange but potential trouble with its lenders. BBSI has again missed deadlines to file its financial reports for the third quarter of 2015, its 2015 annual report and the report for the first quarter of 2016. It has also not filed the required restatements for 2014. The missed deadlines also appear to violate the company’s covenants with its primary lender Wells Fargo which earlier granted it an extension that has now passed.
All this after it’s CPA decertified the company’s financial statements all the way back to 2012, including 2013 and 2014 – and 2015. The CPA said the filings that were made must be restated and should not be relied upon. The CPA cited the reporting of unsupported facts.
“By letter dated April 15, 2016, the Company’s primary bank lender waived the requirement that the Company file its Quarterly Report on Form 10-Q for the third quarter of 2015, as well as an amended 2014 Form 10-K, by April 29, 2016, provided that the Company delivers its 2015 Form 10-K to the bank no later than May 9, 2016,” Barrett said in an SEC filing last month.
But it didn’t happen; the deadline was missed.
Multiple shareholder lawsuits have been filed.
BBSI was forced to launch an independent legal investigation last year after its auditors raised questions about the legality of what had been reported. Barrett hired the Stoll Berne law firm to investigate the matter. The law firm ultimately found no illegal activity occurred.
Barrett says it now in the process of restating when it recognized various charges and will account for it in the second quarter of 2014 instead of the third quarter of that year.
The company has since admitted that it failed to file the required financial statements with the SEC in time and that it is not currently offering an estimate of when the statements might be filed. Since missing the May 9th filing deadline, the company has remained silent about the impact on its lending agreements.
For its part, Barrett says its earnings reports are being delayed by an on-going audit following the revelations that its former chief financial officer Jim Miller made unsupported financial journal entries which resulted in inaccurate filings current.
BBSI says it received notification from Nasdaq that it is out of compliance with the board’s listing requirements. The professional employer organization (PEO) says it will request a hearing with Nasdaq to stay the action to delist or suspend its stock.
Meanwhile, BBSI says it is working with its independent accountant Moss Adams to complete an audit of Barrett’s 2012, 2013, 2014 and 2015 financial reports for an eventual restatement.
It was in 2014 that Barrett was forced to disclose that it had under reserved its self-insured workers’ comp liabilities by 62%. The company had to borrow money to cover its reserves. Barrett is now covered by Ace/Chubb Insurance under a large deductible policy that has it on the hook for the first $5 million of each claim.
The current Moss Adams action follows an earlier audit by one of the “Big Four” accounting firms that were investigating the journal entries made by Miller. That review uncovered additional entries involving trade accounts receivable, marketable securities and payroll tax liability accounts that were not made in accordance with generally accepted accounting practices (GAAP). The troubled PEO maintains that these reporting irregularities did not distort its reported earnings, but is has yet to release those updated financials, so the veracity of the company’s statements has not been proven.
In March when the accounting issues were uncovered and Miller was terminated it announced that “BBSI currently intends to file its 2015 third quarter Form 10-Q, its amended quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 2015, and its amended annual report on Form 10-K for the year ended December 31, 2014, as well as unaudited financial results for the fourth quarter and full year, ended December 31, 2015, no later than April 29, 2016. BBSI also intends to file its 2015 Form 10-K no later than May 9, 2016.”
The company has missed all of these dates for these earlier period reports and is now also behind on filing its first quarter 2016 results. Barrett’s first quarter 2016 report was due May 10, but it is still unfiled.
BBSI says its request for a hearing with Nasdaq will stay any suspension of trading or delisting of its stock until June 1, 2016. “Nasdaq will advise BBSI whether its request for further stay pending a written decision from the panel has been granted by that date,” the company announced.
The company appears to have stopped predicting filing dates. Its latest announcement on the issue states only that BBSI “will file our 2015 10-K with the SEC as soon as it is complete.”
Editors Note: Neither management nor any staff member of the Workers’ Comp Executive now owns or has ever owned BBSI stock.