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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2002
Commission File No. 0-21886


BARRETT BUSINESS SERVICES, INC.
(Exact name of registrant as specified in its charter)

Maryland 52-0812977
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

4724 SW Macadam Avenue
Portland, Oregon 97201
(Address of principal executive offices) (Zip Code)

(503) 220-0988
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [ X ] No [ ]

Number of shares of Common Stock, $.01 par value, outstanding at July 31, 2002
was 5,803,554 shares.






BARRETT BUSINESS SERVICES, INC.

INDEX

Part I - Financial Information Page

Item 1. Financial Statements

Balance Sheets - June 30, 2002 and
December 31, 2001..................................................3

Statements of Operations - Three Months
Ended June 30, 2002 and 2001.......................................4

Statements of Operations - Six Months
Ended June 30, 2002 and 2001.......................................5

Statements of Cash Flows - Six Months
Ended June 30, 2002 and 2001.......................................6

Notes to Financial Statements......................................7

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................................11

Item 3. Quantitative and Qualitative Disclosure About
Market Risk.......................................................18


Part II - Other Information

Item 4. Submission of Matters to Vote of Security Holders.................19

Item 6. Exhibits and Reports on Form 8-K..................................19


Signatures ...........................................................20


Exhibit Index ...........................................................21

2




Part I - Financial Information

Item 1. Financial Statements

BARRETT BUSINESS SERVICES, INC.
Balance Sheets
(Unaudited)
(In thousands, except per share amounts)




June 30, December 31,
2002 2001
------------------ -----------------
ASSETS
Current assets:

Cash and cash equivalents $ 580 $ 1,142
Trade accounts receivable, net 13,274 13,760
Prepaid expenses and other 1,347 1,022
Deferred tax assets 3,225 2,841
------------------ -----------------

Total current assets 18,426 18,765

Goodwill, net 18,749 18,749
Intangibles, net 83 129
Property and equipment, net 5,583 6,084
Restricted marketable securities and workers' compensation deposits 5,086 5,425
Deferred tax assets 1,694 2,268
Other assets 1,067 1,146
------------------ -----------------
$ 50,688 $ 52,566
------------------ -----------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 139 $ 708
Line of credit 3,609 3,424
Accounts payable 846 686
Accrued payroll, payroll taxes and related benefits 5,981 5,165
Workers' compensation claims and safety incentive liabilities 3,851 5,735
Other accrued liabilities 711 389
------------------ -----------------
Total current liabilities 15,137 16,107

Long-term debt, net of current portion 808 922
Customer deposits 451 520
Long-term workers' compensation claims liabilities 3,505 3,515
Other long-term liabilities 886 968
------------------ -----------------
20,787 22,032
------------------ -----------------
Commitments and contingencies

Stockholders' equity:
Common stock, $.01 par value; 20,500 shares authorized, 5,800
and 5,847 shares issued and outstanding 58 58
Additional paid-in capital 3,266 3,461
Employee loan (51) (29)
Retained earnings 26,628 27,044
------------------ -----------------
29,901 30,534
------------------ -----------------
$ 50,688 $ 52,566
------------------ -----------------

The accompanying notes are an integral part of these financial statements.

3


BARRETT BUSINESS SERVICES, INC.
Statements of Operations
(Unaudited)
(In thousands, except per share amounts)



Three Months Ended
June 30,
------------------------------------
2002 2001
----------------- -----------------
Revenues:

Staffing services $ 24,684 $ 29,949
Professional employer services 18,164 22,602
----------------- -----------------

42,848 52,551
----------------- -----------------

Cost of revenues:
Direct payroll costs 33,257 40,623
Payroll taxes and benefits 3,520 4,309
Workers' compensation 1,719 2,441
----------------- -----------------
38,496 47,373
----------------- -----------------

Gross margin 4,352 5,178

Selling, general and administrative expenses 4,072 4,652
Depreciation and amortization 288 822
----------------- -----------------

Loss from operations (8) (296)
----------------- -----------------

Other income (expense) :
Interest expense (51) (87)
Interest income 61 73
Other, net (1) (1)
----------------- -----------------

9 (15)
----------------- -----------------

Income (loss) before benefit from income taxes 1 (311)
Benefit from income taxes - (127)
----------------- -----------------

Net income (loss) $ 1 $ (184)
----------------- -----------------

Basic income (loss) per share $ - $ (.03)
----------------- -----------------

Weighted average number of basic shares outstanding 5,806 6,252
----------------- -----------------

Diluted income (loss) per share $ - $ (.03)
----------------- -----------------

Weighted average number of diluted shares outstanding 5,826 6,252
----------------- -----------------


The accompanying notes are an integral part of these financial statements.

4

BARRETT BUSINESS SERVICES, INC.
Statements of Operations
(Unaudited)
(In thousands, except per share amounts)




Six Months Ended
June 30,
-------------------------------
2002 2001
-------------- ---------------
Revenues:

Staffing services $ 47,254 $ 61,221
Professional employer services 36,559 46,483
-------------- ---------------

83,813 107,704
-------------- ---------------

Cost of revenues:
Direct payroll costs 65,118 83,383
Payroll taxes and benefits 7,212 9,183
Workers' compensation 3,344 4,618
-------------- ---------------

75,674 97,184
-------------- ---------------

Gross margin 8,139 10,520

Selling, general and administrative expenses 8,271 9,528
Depreciation and amortization 600 1,651
-------------- ---------------

Loss from operations (732) (659)
-------------- ---------------

Other income (expense) :
Interest expense (97) (208)
Interest income 123 154
Other, net (6) 46
-------------- ---------------

20 (8)
-------------- ---------------

Loss before provision for income taxes (712) (667)
Benefit from income taxes (296) (272)
-------------- ---------------

Net loss $ (416) $ (395)
-------------- ---------------

Basic loss per share $ (.07) $ (.06)
-------------- ---------------

Weighted average number of basic shares outstanding 5,814 6,326
-------------- ---------------

Diluted loss per share $ (.07) $ (.06)
-------------- ---------------

Weighted average number of diluted shares outstanding 5,814 6,326
-------------- ---------------


The accompanying notes are an integral part of these financial statements


5


BARRETT BUSINESS SERVICES, INC.
Statements of Cash Flows
(Unaudited)
(In thousands)



Six Months Ended
June 30,
--------------------------------
2002 2001
---------------- ---------------
Cash flows from operating activities:

Net loss $ (416) $ (395)
Reconciliations of net loss to net cash provided by operating activities:
Depreciation and amortization 600 1,651
Gain on sale of property - (46)
Deferred taxes 190 116
Changes in certain assets and liabilities:
Trade accounts receivable, net 486 4,757
Prepaid expenses and other (325) (463)
Accounts payable 160 (462)
Accrued payroll, payroll taxes and related benefits 816 (137)
Other accrued liabilities 322 (1,091)
Workers' compensation claims and safety incentive liabilities (1,894) (87)
Customer deposits and other assets, net 10 (81)
Other long-term liabilities (82) 23
---------------- ---------------
Net cash (used in) provided by operating activities (133) 3,785
---------------- ---------------

Cash flows from investing activities:
Proceeds from sale of property - 266
Purchase of equipment (53) (168)
Proceeds from maturities of marketable securities 1,798 239
Purchase of marketable securities (1,459) (84)
---------------- ---------------
Net cash provided by investing activities 286 253
---------------- ---------------

Cash flows from financing activities:
Proceeds from credit-line borrowings 25,701 31,645
Payments on credit-line borrowings (25,516) (31,449)
Payments on long-term debt (683) (3,019)
Payment to shareholder (28) -
Loan to employee (22) -
Repurchase of common stock (181) (1,034)
Proceeds from exercise of stock options 14 -
---------------- ---------------
Net cash used in financing activities (715) (3,857)

---------------- ---------------
Net (decrease) increase in cash and cash equivalents (562) 181

Cash and cash equivalents, beginning of period 1,142 516
---------------- ---------------
Cash and cash equivalents, end of period $ 580 $ 697
---------------- ---------------


The accompanying notes are an integral part of these financial statements.

6



BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements



Note 1 - Basis Of Presentation Of Interim Period Statements:

The accompanying financial statements are unaudited and have been prepared
by Barrett Business Services, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures typically included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results for the interim periods presented. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results may differ from
such estimates and assumptions. The financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's 2001 Annual Report on Form 10-K at pages F1 - F20. The results of
operations for an interim period are not necessarily indicative of the results
of operations for a full year. Certain prior year amounts have been reclassified
to conform with the current year presentation. Such reclassifications had no
impact on gross margin, net income or stockholders' equity.

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 141 ("SFAS 141") "Business
Combinations" and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets."
The Company's adoption date for SFAS 141 was immediate and the adoption date for
SFAS 142 was January 1, 2002. With respect to SFAS 142, the Company performed a
goodwill impairment test as of the adoption date and has determined there was no
impairment to its recorded goodwill. The Company will perform a goodwill
impairment test annually and whenever events or circumstances occur indicating
that goodwill might be impaired. Effective January 1, 2002, amortization of
goodwill, including goodwill recorded in past business combinations, ceased.

Pro forma net income, without the amortization of goodwill of $444,000, for
the three months ended June 30, 2001 was $146,000. Pro forma net income, without
the amortization of goodwill of $882,000, for the six months ended June 30, 2001
was $259,000. Pro forma basic and diluted earnings per share for the three and
six months ended June 30, 2001 were $.02 and $.04, respectively.

The Company's intangible assets are comprised of covenants not to compete
resulting from prior year acquisitions and have contractual lives principally
ranging from three to five years. The Company's intangible assets are summarized
as follows (in thousands):

June 30, December 31,
2002 2001
----------------- -----------------
Covenants not to compete $ 3,709 $ 3,709
Less accumulated amortization 3,626 3,580
----------------- -----------------
Intangibles, net $ 83 $ 129
----------------- -----------------

7



BARRETT BUSINESS SERVICES, INC.
Notes to Financial Statements (Continued)


Note 1 - Basis Of Presentation Of Interim Period Statements (Continued):

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standard No. 144 ("SFAS 144") "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS 144 supersedes FASB Statement No. 121
"Accounting for the Impairment of Long-Lived Assets to be Disposed Of" and
certain provisions of Accounting Principles Board Opinion No. 30 "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" related to the disposal of a segment of a business. The adoption
of SFAS 144 had no effect on the Company's results of operations or its
financial position.


Note 2 - Recent Accounting Pronouncements:

In May 2002, the FASB issued SFAS 145, "Rescission of FAS Nos. 4, 44 and
64, Amendment of FAS 13, and Technical Corrections." Among other things, SFAS
145 rescinds various pronouncements regarding early extinguishment of debt and
allows extraordinary accounting treatment for early extinguishment only when the
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
are met. SFAS 145 provisions regarding early extinguishment of debt are
generally effective for fiscal years beginning after May 15, 2002. Management
does not believe that the adoption of this statement will have a material impact
on its results of operations or financial position.


Note 3 - Provision For Income Taxes:

Deferred tax assets (liabilities) are comprised of the following components
(in thousands):



June 30, December 31,
2002 2001
---------------- ----------------
Gross deferred tax assets:

Workers' compensation claims and safety incentive liabilities $ 2,401 $ 3,517
Allowance for doubtful accounts 125 159
Book amortization in excess of tax amortization - 634
Deferred compensation 447 447
Net operating losses and tax credits 2,166 146
Other 131 303
---------------- ----------------
5,270 5,206
Gross deferred tax liabilities: ---------------- ----------------
Tax depreciation in excess of book depreciation (93) (97)
Tax amortization in excess of book amortization (129) -
Other (129) -
---------------- ----------------
(351) (97)
---------------- ----------------
Net deferred tax assets $ 4,919 $ 5,109
---------------- ----------------

8




Note 3 - Provision For Income Taxes (Continued):

The (benefit from) provision for income taxes for the six months ended June
30, 2002 and 2001 is as follows (in thousands):

Six Months Ended
June 30,
------------------------------------
2002 2001
----------------- -----------------
Current:
Federal $ (394) $ (324)
State (92) (64)
----------------- -----------------
(486) (388)
----------------- -----------------
Deferred:
Federal 131 102
State 59 14
----------------- -----------------
190 116
----------------- -----------------

Total benefit $ (296) $ (272)
----------------- -----------------


Note 4 - Stock Incentive Plan:

The Company has a Stock Incentive Plan (the "Plan") which provides for
stock-based awards to the Company's employees, directors and outside consultants
or advisers. The number of shares of common stock reserved for issuance under
the Plan is 1,550,000.

The following table summarizes options granted under the Plan in 2002:




Outstanding at December 31, 2001 252,206 $ 1.45 to $ 17.75

Options granted 4,000 $ 3.87
Options exercised (4,056) $ 3.39 to $ 3.50
Options canceled or expired (10,100) $ 3.50 to $ 17.75
--------------

Outstanding at June 30, 2002 242,050 $ 1.45 to $ 17.75
--------------

Exercisable at June 30, 2002 152,627
--------------

Available for grant at June 30, 2002 1,079,460
--------------


The options listed in the table generally become exercisable in four equal
annual installments beginning one year after the date of grant.


9



Note 4 - Stock Incentive Plan (Continued):

On August 22, 2001, the Company offered to all optionees who held options
with an exercise price of more than $5.85 per share (covering a total of 812,329
shares), the opportunity to voluntarily return for cancellation without payment
any stock option award with an exercise price above that price. At the close of
the offer period on September 20, 2001, stock options for a total of 797,229
shares were voluntarily surrendered for cancellation. The Compensation Committee
of the Company's board of directors may consider whether or not to grant
stock-based awards under the Plan to optionees who surrendered stock options
during the above offer period at its discretion after March 21, 2002. As of the
date of this filing, the Compensation Committee has taken no action.


10



BARRETT BUSINESS SERVICES, INC.


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

The following table sets forth the percentages of total revenues
represented by selected items in the Company's Statements of Operations for the
three and six months ended June 30, 2002 and 2001.


Percentage of Total Revenues
-----------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2002 2001 2002 2001
----------- ---------- ---------- ----------
Revenues:

Staffing services 57.6 % 57.0 % 56.4 % 56.8 %
Professional employer services 42.4 43.0 43.6 43.2
----------- ---------- ---------- ----------
100.0 100.0 100.0 100.0
----------- ---------- ---------- ----------
Cost of revenues:
Direct payroll costs 77.6 77.3 77.7 77.4
Payroll taxes and benefits 8.2 8.2 8.6 8.5
Workers' compensation 4.0 4.6 4.0 4.3
----------- ---------- ---------- ----------
Total cost of revenues 89.8 90.1 90.3 90.2
----------- ---------- ---------- ----------
Gross margin 10.2 9.9 9.7 9.8

Selling, general and administrative expenses 9.5 8.9 9.9 8.9
Depreciation and amortization 0.7 1.6 0.7 1.5
----------- ---------- ---------- ----------
Income (loss) from operations 0.0 (0.6) (0.9) (0.6)

Other income - - - -
----------- ---------- ---------- ----------
Pretax income (loss) 0.0 (0.6) (0.9) (0.6)

Benefit from income taxes - (0.2) (0.4) (0.2)
----------- ---------- ---------- ----------
Net income (loss) 0.0 % (0.4)% (0.5)% (0.4)%
----------- ---------- ---------- ----------


Three months ended June 30, 2002 and 2001

Net income for the second quarter of 2002 was $1,000, an improvement of
$185,000 from a net loss of $184,000 for the second quarter of 2001. The
improvement for the second quarter of 2002 was attributable to lower selling,
general and administrative expenses and lower depreciation and amortization,
offset in part by lower gross margin dollars, as a result of a 18.5% decline in
revenues. Cash flow per share (defined as net income plus depreciation and
amortization divided by weighted average diluted shares outstanding) for the
2002 second quarter totaled a positive $.05 as compared to a positive $.10 for
the 2001 second quarter.


11


BARRETT BUSINESS SERVICES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Results of Operations (Continued)

Revenues for the second quarter of 2002 totaled approximately $42.8
million, a decrease of approximately $9.7 million or 18.5% from the second
quarter of 2001. The decrease in revenues reflects the general softening of
business conditions in the Company's market areas, particularly in the Company's
Northern California operations, which accounted for approximately 34.0% of the
decline in total revenues. The Company's Northern California operations continue
to be adversely affected by the significant downturn in the "high-tech" industry
and related sectors. Management believes that the decline in revenues as
compared to prior quarters has stabilized during the first half of the second
quarter of 2002. Management believes that this current trend in revenues is
attributable to a very moderate increase in general business activity in most of
the geographic markets that the Company serves and to several new branch office
managers hired by the Company over the past several months.

Staffing services revenue decreased approximately $5.3 million or 17.6%
primarily due to a decline in demand for personnel in the majority of areas in
which the Company does business. Professional employer ("PEO") services revenue
decreased approximately $4.4 million or 19.6%, which was primarily due to a
18.3% decline in the Company's Oregon operations resulting from a softening in
demand from existing customers, coupled with management's decision to
discontinue the Company's business relationship with customers who generated
insufficient margins or represented a credit risk related to their ability to
consistently adhere to credit terms. The larger percentage decline in PEO
services revenue resulted in a decrease in the share of PEO services from 43.0%
of total revenues for the second quarter of 2001 to 42.4% for the second quarter
of 2002. The share of revenues for staffing services had a corresponding
increase from 57.0% of total revenues for the second quarter of 2001 to 57.6%
for the second quarter of 2002.

Gross margin for the second quarter of 2002 totaled approximately $4.4
million, which represented a decrease of $826,000 or 16.0% from the second
quarter of 2001 primarily resulting from the 18.5% decline in revenues
experienced in the second quarter of 2002. The gross margin percent increased
from 9.9% of revenues for the second quarter of 2001 to 10.2% for the second
quarter of 2002. The increase in the gross margin percentage was due to lower
workers' compensation expense, offset in part by higher direct payroll costs, as
a percentage of revenues. The increase in direct payroll costs, as a percentage
of revenues, for the second quarter of 2002 reflects the current mix of services
to the current customer base rather than an erosion of the Company's mark-up
rates for its services. Workers' compensation expense for the second quarter of
2002 totaled $1.7 million or 4.0% of revenues, which compares to $2.4 million or
4.6% of revenues for the second quarter of 2001. The decline in total dollars
was primarily due to a decrease in the number of injury claims in the 2002
second quarter compared to the same period in 2001, which is consistent with the
downturn in the Company's business.

Selling, general and administrative ("SG&A") expenses for the 2002 second
quarter amounted to approximately $4.1 million, a decrease of $580,000 or 12.5%
from the comparable period in 2001. SG&A expenses, expressed as a percentage of
revenues, increased from 8.9% for the second quarter of 2001 to 9.5% for the
second quarter of 2002. The decrease in total dollars from 2001 was primarily
attributable to branch office reductions in management personnel and related
expenses as a result of the downturn in business.

12


BARRETT BUSINESS SERVICES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Results of Operations (Continued)

Depreciation and amortization totaled $288,000 or 0.7% of revenues for the
second quarter of 2002, as compared to $822,000 or 1.6% of revenues for the same
period in 2001. The decrease of $534,000 was principally due to the Company's
adoption of SFAS 142 effective January 1, 2002, whereby the Company ceased the
amortization of its recorded goodwill. The second quarter of 2001 included
$444,000 of goodwill amortization. (See Note 1 to the financial statements.)

Other income totaled $9,000 for the second quarter of 2002, which compares
to $15,000 of other expense for the second quarter of 2001. The small increase
in other income was primarily attributable to a reduction in net interest
expense due to lower debt levels during the second quarter of 2002 as compared
to the same quarter of 2001, offset in part by lower interest income.

The Company has historically experienced significant fluctuations in its
quarterly operating results and expects such fluctuations to continue in the
future. The Company's operating results may fluctuate due to a number of factors
such as seasonality, wage limits on payroll taxes, claims experience for
workers' compensation, demand and competition for the Company's services and the
effect of acquisitions. The Company's revenue levels fluctuate from quarter to
quarter primarily due to the impact of seasonality on its staffing services
business and on certain of its PEO clients in the agriculture and forest
products-related industries. As a result, the Company may have greater revenues
and net income in the third and fourth quarters of its fiscal year. Payroll
taxes and benefits fluctuate with the level of direct payroll costs, but tend to
represent a smaller percentage of revenues and direct payroll later in the
Company's fiscal year as federal and state statutory wage limits for
unemployment and social security taxes are exceeded by some employees. Workers'
compensation expense varies with both the frequency and severity of workplace
injury claims reported during a quarter, as well as adverse loss development of
prior period claims during a subsequent quarter.

The Company offers various qualified employee benefit plans to its
employees, including its worksite employees. These qualified employee benefit
plans include a savings plan under Section 401(k) of the Internal Revenue Code
(the "Code"), a cafeteria plan under Code Section 125, a group health plan, a
group life insurance plan, a group disability insurance plan and an employee
assistance plan. Generally, qualified employee benefit plans are subject to
provisions of both the Code and the Employee Retirement Income Security Act
("ERISA"). In order to qualify for favorable tax treatment under the Code,
qualified plans must be established and maintained by an employer for the
exclusive benefit of its employees. In the event the tax exempt status of the
Company's benefit plans were to be discontinued and the benefit plans were to be
disqualified, such actions could have a material adverse effect on the Company's
business, financial condition and results of operations. Reference is made to
pages 20-21 of the Company's 2001 Annual Report on Form 10-K for a more detailed
discussion of this issue.

After several years of study, on April 24, 2002, the Internal Revenue
Service ("IRS") issued Revenue Procedure 2002-21 ("Rev Proc") to provide relief
with respect to certain defined contribution retirement plans maintained by a
PEO that benefit worksite employees. The Rev Proc outlines the steps necessary
for a PEO to avoid plan disqualification for violating the

13

BARRETT BUSINESS SERVICES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Results of Operations (Continued)

exclusive benefit rule. Essentially, a PEO must either (1) terminate its
plan; (2) convert its plan to a "multiple employer plan" by December 31, 2003;
or (3) transfer the plan assets and liabilities to a customer plan. Although
management has not fully evaluated the Rev Proc to determine which alternatives
the Company will pursue to maintain the qualified status of its plans, it
believes that the Company has adequate time to fully evaluate the Rev Proc and
to develop a comprehensive timetable to ensure compliance with the new law.
Under the Rev Proc, the Company must file a notice with the IRS by May 2, 2003,
indicating the actions it intends to take.


Six Months Ended June 30, 2002 and 2001

Net loss for the six months ended June 30, 2002 was $416,000, an increase
of $21,000 from the net loss of $395,000 for the same period in 2001. The
increased loss was attributable to lower gross margin dollars primarily due to a
22.2% decrease in revenue, partially offset by a 13.2% reduction in SG&A
expenses and a 63.7% reduction in depreciation and amortization expenses. Basic
and diluted loss per share for the first six months of 2002 were $.07 as
compared to basic and diluted loss per share of $.06 for the same period of
2001. Cash flow per share (defined as net income (loss) plus depreciation and
amortization divided by weighted average diluted shares outstanding) for the
first six months of 2002 totaled a positive $.03 as compared to a positive $.20
for the 2001 comparable period.

Revenues for the six months ended June 30, 2002 totaled approximately $83.8
million, a decrease of approximately $23.9 million or 22.2% from the similar
period in 2001. The decrease in total revenues was primarily due to the
continued softening of business conditions in the Company's market areas,
particularly in the Company's Northern California operations, which accounted
for approximately 42.5% of the decline in total revenues for the first six
months of 2002.

Gross margin for the six months ended June 30, 2002 totaled approximately
$8.1 million, which represented a decrease of $2.4 million or 22.6% from the
similar period of 2001. The gross margin percent decreased from 9.8% of revenues
for the six-month period of 2001 to 9.7% for the same period of 2002. The small
decrease in the gross margin percentage was primarily due to higher direct
payroll costs and slightly higher payroll taxes and benefits, offset in part by
lower workers' compensation expense. The increase in direct payroll costs, as a
percentage of revenues, from 77.4% to 77.7%, primarily reflects to the current
mix of services to the current customer base. The small increase in payroll
taxes and benefits for the six-month period of 2002 was primarily attributable
to slightly higher state unemployment tax rates in various states in which the
Company operates as compared to the six-month period of 2001. Workers'
compensation expense for the six months ended June 30, 2002 totaled $3.3 million
or 4.0% of revenues, which compares to $4.6 million or 4.3% or revenues for the
similar period of 2001. The decrease in the total dollars and in the percentage
of revenues for the 2002 period was primarily due to a decrease in the number of
injury claims for the six month period of 2002 compared to the same period in
2001.

14

BARRETT BUSINESS SERVICES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Results of Operations (Continued)

SG&A expenses for the six months ended June 30, 2002 amounted to
approximately $8.3 million, a decrease of $1.3 million or 13.2% from the similar
period of 2001. SG&A expenses, expressed as a percentage of revenues, increased
from 8.9% for the six-month period of 2001 to 9.9% for the same period of 2002.
The decrease in total SG&A dollars was primarily due to reductions in branch
management personnel and related expenses as a result of the downturn in
business.

Depreciation and amortization totaled $600,000 or 0.7% of revenues for the
six months ended June 30, 2002, which compares to $1.7 million or 1.5% of
revenues for the same period of 2001. The decreased expense was primarily due to
the Company's adoption of SFAS 142 effective January 1, 2002, whereby the
Company ceased the amortization if its recorded goodwill. The first six months
of 2001 included $882,000 of goodwill amortization. (See Note 1 to the financial
statements.)

Other income totaled $20,000 for the six-month period ended June 30, 2002,
which compares to $8,000 of other expense for the comparable 2001 period. The
increase in income was primarily due to a reduction in net interest expense
attributable to lower debt levels during the first six months of 2002 as
compared to the similar period of 2001.


Liquidity and Capital Resources

The Company's cash position of $580,000 at June 30, 2002 decreased by
$562,000 from December 31, 2001, which compares to an increase of $181,000 for
the comparable period in 2001. The decrease in cash at June 30, 2002, as
compared to December 31, 2001, was primarily attributable to payments on
workers' compensation claims liabilities and long-term debt offset in part by
cash provided by proceeds from maturities of marketable securities, net of
purchases.

Net cash used in operating activities for the six months ended June 30,
2002 amounted to $133,000, as compared to $3,785,000 of net cash provided by
operating activities for the comparable 2001 period. For the six-months ended
June 30, 2002, cash flow was used for funding a net loss of $416,000, and
payments on workers' compensation claims and safety incentive liabilities, and
an increase in prepaid expenses and other totaling $2,219,000, offset in part by
decreases in trade accounts receivable and increases in accrued payroll and
related benefits and other accrued liabilities totaling $1,624,000, as well as
depreciation and amortization totaling $600,000.

Net cash provided by investing activities totaled $286,000 for the six
months ended June 30, 2002, as compared to $253,000 net cash provided by
investing activities for the similar 2001 period. For the 2002 period, the
principal source of cash provided by investing activities was from net proceeds
of $1,798,000 from maturities of marketable securities, offset in part by
$1,459,000 of net purchases of marketable securities. The Company presently has
no material long-term capital commitments.

15

BARRETT BUSINESS SERVICES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Liquidity and Capital Resources (Continued)

Net cash used in financing activities for the six-month period ended June
30, 2002 was $715,000, compared to $3,857,000 net cash used in financing
activities for the similar 2001 period. For the 2002 period, the principal use
of cash for financing activities was $683,000 of payments made on long-term
debt, primarily related to the $8,000,000 three-year term loan in connection
with the Company's 1999 acquisition of Temporary Skills Unlimited, Inc., and
$181,000 used to repurchase the Company's common stock, offset in part by
$185,000 of net borrowings on the Company's credit line. The Company's
three-year term loan was paid in full on schedule as of May 31, 2002.

The Company's business strategy continues to focus on growth through the
expansion of operations at existing offices, together with the selective
acquisition of additional personnel-related businesses, both in its existing
markets and other strategic geographic areas. The Company periodically explores
proposals for various acquisition opportunities, but there can be no assurance
that any additional transactions will be consummated.

The Company maintains a credit agreement with its principal bank which
provides for (1) borrowings on a revolving credit facility up to the lesser of
(i) $13.0 million or (ii) 70 percent of total trade accounts receivable at the
end of any fiscal quarter, and (2) a security interest in all trade accounts
receivable. The credit agreement was amended June 25, 2002 to (i) ease the
restrictiveness of the advance rate on total accounts receivables and the
trailing four-quarter EBITDA minimum and (ii) extend the expiration date from
July 1, 2002 to September 2, 2002. This credit facility also includes a
subfeature for standby letters of credit in connection with certain workers'
compensation surety arrangements, as to which approximately $5.47 million were
outstanding as of June 30, 2002. In connection with the September 2, 2002
expiration date of the Company's current loan agreement, management is currently
negotiating the terms and conditions of a new loan agreement with the bank.
Management believes that the terms and conditions of a new loan agreement will
be competitive with current credit-market conditions and the Company's projected
operating performance. If, however, the terms and conditions for a new loan
agreement with the bank are unacceptable to the Company, management will
negotiate a loan agreement with one of the alternative lenders from which
management is concurrently obtaining competing proposals. While the financial
effect of new terms and conditions will increase the Company's overall borrowing
costs, such increased costs are not expected to be materially adverse to the
Company. Management expects that the funds anticipated to be generated from
operations, together with the new credit facility and other potential sources of
financing, will be sufficient in the aggregate to fund the Company's working
capital needs for the foreseeable future.

In February 1999, the Company's board of directors authorized a stock
repurchase program to repurchase common shares from time to time in open market
purchases. Since inception, the board of directors has approved six increases in
the total number of shares or dollars authorized to be repurchased under the
program. As of August 8, 2002, the repurchase program had authorized
availability of $92,000 for the repurchase of additional shares. During the
first six months of 2002, the Company repurchased 47,000 shares at an aggregate
price of $181,000. Since the inception of the repurchase program through August
8, 2002, the Company has repurchased 1,887,600 shares for an aggregate price of
$8,538,000.

16

BARRETT BUSINESS SERVICES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Liquidity and Capital Resources (Continued)

Management anticipates that the capital necessary to continue this program will
be provided by existing cash balances and other available resources.


Inflation

Inflation generally has not been a significant factor in the Company's
operations during the periods discussed above. The Company has taken into
account the impact of escalating medical and other costs in establishing
reserves for future expenses for self-insured workers' compensation claims.


Forward-Looking Information

Statements in this report which are not historical in nature, including
discussion of economic conditions in the Company's market areas, the potential
for and effect of recent and future acquisitions, the effect of changes in the
Company's mix of services on gross margin, the adequacy of the Company's
workers' compensation reserves and allowance for doubtful accounts, the
effectiveness of the Company's management information systems, the tax-qualified
status of the Company's 401(k) savings plan and the availability of financing
and working capital to meet the Company's funding requirements, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such 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 results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors with
respect to the Company include difficulties associated with integrating acquired
businesses and clients into the Company's operations, economic trends in the
Company's service areas, uncertainties regarding government regulation of PEOs,
including the ability of the Company to meet the new IRS requirements to retain
the tax-qualified status of employee benefit plans offered by PEOs, material
deviations from expected future workers' compensation claims experience, the
availability of capital or letters of credit necessary to meet state-mandated
surety deposit requirements for maintaining the Company's status as a qualified
self-insured employer for workers' compensation coverage, collectibility of
accounts receivable, and the availability of and costs associated with potential
sources of financing. The Company disclaims any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.

17

BARRETT BUSINESS SERVICES, INC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company's exposure to market risk for changes in interest rates
primarily relates to the Company's short-term and long-term debt obligations. As
of June 30, 2002, the Company had interest-bearing debt obligations of
approximately $4.6 million, of which approximately $3.6 million bears interest
at a variable rate and approximately $1.0 million at a fixed rate of interest.
The variable rate debt is comprised of approximately $3.6 million outstanding
under a secured revolving credit facility, which bears interest at the prime
rate less 1.70%. Based on the Company's overall interest exposure at June 30,
2002, a 10 percent change in market interest rates would not have a material
effect on the fair value of the Company's long-term debt or its results of
operations. As of June 30, 2002, the Company had not entered into any interest
rate instruments to reduce its exposure to interest rate risk.



18



Part II - Other Information


Item 4. Submission of Matters to a Vote of Security Holders

The Company held its 2002 annual meeting of stockholders on May 15, 2002.
The following directors were elected at the annual meeting:



For Withheld Exception
--------------- -------------- --------------


Thomas J. Carley 5,774,934 24,910
James B. Hicks, Ph.D. 5,774,934 24,910
Anthony Meeker 5,774,934 24,910
Nancy B. Sherertz 5,774,534 25,310
William W. Sherertz 5,688,734 111,110


The other matters presented for action at the annual meeting were approved
by the following vote:



For Against Abstain
--------------- -------------- --------------

Approval of the appointment of
PricewaterhouseCoopers LLP as
independent accountants 5,774,634 25,200 10



Item 6. Exhibits and Reports on Form 8-K

(a) The exhibits filed herewith are listed in the Exhibit Index
following the signature page of this report.

(b) The following Current Reports on Form 8-K were filed by the
Registrant during the quarter ended June 30, 2002:

The Company filed on April 4, 2002 a Current Report on Form
8-K dated as of April 3, 2002, to report that the Company
amended its previously announced operating results for the
fourth quarter and 12-months ended December 31, 2001 due to
adverse developments related to estimated future costs of
workers' compensation claims and, to a lesser extent, an
increased estimate for bad debt expense.

The Company filed on June 27, 2002 a Current Report on Form
8-K dated as of June 25, 2002, to report that the Company
entered into an extension of the term of its Loan Agreement
with Wells Fargo Bank, N.A., from July 1, 2002 to September 2,
2002. The Company has agreed to revisions of two financial
covenants contained in the Loan Agreement relating to the
Company's trailing four-quarter EBITDA and the advance rate
under the Loan Agreement at the end of each fiscal quarter.


19



SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

BARRETT BUSINESS SERVICES, INC.
(Registrant)






Date: August 12, 2002 By: /s/ Michael D. Mulholland
-----------------------------------
Michael D. Mulholland
Vice President - Finance
(Principal Financial Officer)


20



EXHIBIT INDEX


Exhibit


4.6 Amendment, dated June 25, 2002, to Loan Agreement between Registrant and
Wells Fargo Bank, N.A., dated May 31, 2000.

11 Statement of Calculation of Basic and Diluted Common Shares Outstanding.

99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

20