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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, 2003
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 97239
(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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

Number of shares of common stock, $.01 par value, outstanding at July 31, 2003
was 5,643,180 shares.



BARRETT BUSINESS SERVICES, INC.

INDEX

Part I - Financial Information Page

Item 1.Financial Statements

Balance Sheets - June 30, 2003 and
December 31, 2002................................................3

Statements of Operations - Three Months
Ended June 30, 2003 and 2002.....................................4

Statements of Operations - Six Months
Ended June 30, 2003 and 2002.....................................5

Statements of Cash Flows - Six Months
Ended June 30, 2003 and 2002.....................................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.....................................................20

Item 4.Controls and Procedures.........................................21


Part II - Other Information

Item 4.Submission of Matters to Vote of Security Holders...............21

Item 6.Exhibits and Reports on Form 8-K................................22


Signatures ................................................................23


Exhibit Index...............................................................24

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,
2003 2002
---------- ------------
ASSETS
Current assets:

Cash and cash equivalents $ 1,977 $ 96
Income taxes receivable - 1,923
Trade accounts receivable, net 14,827 11,357
Prepaid expenses and other 1,893 1,040
Deferred income taxes 1,839 2,111
---------- ------------
Total current assets 20,536 16,527

Goodwill, net 18,749 18,749
Intangibles, net 35 59
Property and equipment, net 3,611 5,167
Restricted marketable securities and workers' compensation deposits 4,142 4,286
Deferred income taxes 1,445 1,445
Other assets 937 1,064
---------- ------------
$ 49,455 $ 47,297
========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 88 $ 434
Line of credit 4,056 3,513
Accounts payable 712 834
Accrued payroll, payroll taxes and related benefits 8,229 4,897
Workers' compensation claims liabilities 1,783 3,903
Safety incentives payable 439 406
Other accrued liabilities 587 305
Current portion of deferred gain on sale and leaseback 122 -
---------- ------------
Total current liabilities 16,016 14,292

Long-term debt, net of current portion 400 488
Customer deposits 441 443
Long-term workers' compensation claims liabilities 2,481 2,492
Other long-term liabilities 673 797
Long-term deferred gain on sale and leaseback 1,097 -

Commitments and contingencies - -

Stockholders' equity:
Common stock, $.01 par value; 20,500 shares authorized, 5,671
and 5,751 shares issued and outstanding 57 57
Additional paid-in capital 2,882 3,144
Employee loan (107) (107)
Retained earnings 25,515 25,691
---------- ------------
28,347 28,785
---------- ------------
$ 49,455 $ 47,297
========== ============






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,
-------------------------
2003 2002
----------- -------------
Revenues:
Staffing services $23,046 $24,684
Professional employer service fees 4,856 3,082
------- --------

27,902 27,766
------- --------

Cost of revenues:
Direct payroll costs 17,079 18,175
Payroll taxes and benefits 4,385 3,520
Workers' compensation 1,982 1,719
------- --------
23,446 23,414
------- --------

Gross margin 4,456 4,352

Selling, general and administrative expenses 3,869 4,072
Depreciation and amortization 271 288
------- --------
Income (loss) from operations 316 (8)
------- --------

Other (expense) income:
Interest expense (83) (51)
Interest income 15 61
Other, net - (1)
------- --------
(68) 9
------- --------

Income before provision for income taxes 248 1
Provision for income taxes 81 -
------- --------

Net income $ 167 $ 1
======= ========

Basic income per share $ .03 $ -
======= ========

Weighted average number of basic shares outstanding 5,708 5,806
======= ========

Diluted income per share $ .03 $ -
======= ========

Weighted average number of diluted shares outstanding 5,726 5,826
======= ========




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,
-------------------------
2003 2002
-------- --------
Revenues:
Staffing services $ 43,156 $ 47,254
Professional employer services 8,143 6,250
-------- --------

51,299 53,504
-------- --------

Cost of revenues:
Direct payroll costs 31,877 34,809
Payroll taxes and benefits 8,190 7,212
Workers' compensation 3,407 3,344
-------- --------

43,474 45,365
-------- --------

Gross margin 7,825 8,139

Selling, general and administrative expenses 7,465 8,271
Depreciation and amortization 551 600
-------- --------

Loss from operations (191) (732)
-------- --------

Other income (expense) :
Interest expense (178) (97)
Interest income 56 123
Other, net 48 (6)
-------- --------

(74) 20
-------- --------

Loss before benefit from income taxes (265) (712)
Benefit from income taxes (89) (296)
-------- --------

Net loss $ (176) $ (416)
======== ========

Basic loss per share $ (.03) $ (.07)
======== ========

Weighted average number of basic shares outstanding 5,728 5,814
======== ========

Diluted loss per share $ (.03) $ (.07)
======== ========

Weighted average number of diluted shares outstanding 5,728 5,814
======== ========



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,
--------------------------
2003 2002
------------ -------------
Cash flows from operating activities:

Net loss $ (176) $ (416)
Reconciliations of net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 551 600
Gain on sales of marketable securities (48) -
Deferred income taxes 272 190
Changes in certain assets and liabilities:
Income taxes receivable 1,923 -
Trade accounts receivable, net (3,470) 486
Prepaid expenses and other (853) (325)
Accounts payable (122) 160
Accrued payroll, payroll taxes and related benefits 3,332 816
Other accrued liabilities 282 322
Workers' compensation claims liabilities (2,131) (1,958)
Safety incentives payable 33 64
Customer deposits and other assets, net 125 10
Other long-term liabilities (124) (82)
---------- ----------
Net cash used in operating activities (406) (133)
---------- ----------

Cash flows from investing activities:
Proceeds from sale and leaseback of buildings 2,338 -
Purchase of equipment (90) (53)
Proceeds from maturities of marketable securities 3,389 1,798
Proceeds from sales of marketable securities 2,272 -
Purchase of marketable securities (5,469) (1,459)
---------- ----------
Net cash provided by investing activities 2,440 286
---------- ----------

Cash flows from financing activities:
Proceeds from credit-line borrowings 20,241 25,701
Payments on credit-line borrowings (19,698) (25,516)
Payments on long-term debt (434) (683)
Payment to shareholder - (28)
Loan to employee - (22)
Repurchase of common stock (262) (181)
Proceeds from exercise of stock options - 14
---------- ----------
Net cash used in financing activities (153) (715)
---------- ----------
Net increase (decrease) in cash and cash equivalents 1,881 (562)
Cash and cash equivalents, beginning of period 96 1,142
---------- ----------
Cash and cash equivalents, end of period $ 1,977 $ 580
========== ==========




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 ("GAAP")
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 2002 Annual Report on Form 10-K at pages F1 - F24. 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.


Note 2 - Recent Accounting Pronouncements:

In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 149 ("SFAS 149"), "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends
and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 149 is
generally effective for contracts entered into or modified after June 30, 2003.
Management believes that the adoption of this statement will not have a material
impact on its results of operations or financial position.

In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 requires that an issuer classify a financial instrument that is within its
scope as a liability if that financial instrument embodies an obligation to the
issuer. SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. Management believes that the
adoption of this statement will not have a material impact on its results of
operations or financial position.

-7-



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


Note 3 - Basic and Diluted Earnings Per Share:

Basic earnings per share are computed based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share
reflect the potential effects of the exercise of outstanding stock options.
Basic and diluted shares outstanding are summarized as follows:




Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------

Weighted average number of basic shares

outstanding 5,707,782 5,806,021 5,728,075 5,814,002

Stock option plan shares to be issued at prices
ranging from $1.45 to $17.75 per share 553,439 248,365 - -

Less: Assumed purchase at average market
price during the period using proceeds
received upon exercise of options and
purchase of stock, and using tax
benefits of compensation due to
premature dispositions (534,947) (228,164) - -
----------- ----------- ----------- -----------

Weighted average number of diluted shares
outstanding 5,726,274 5,826,222 5,728,075 5,814,002
=========== =========== =========== ===========




As a result of the net loss reported for the six months ended June 30, 2003 and
2002, potential common shares of 16,332 and 21,778, respectively, have been
excluded from the calculation of diluted loss per share because their effect
would be anti-dilutive.


Note 4 - Stock Incentive Plans:

The Company's 2003 Stock Incentive Plan (the "Plan"), which was approved by
shareholders on May 14, 2003, provides for stock-based awards to Company
employees, directors and outside consultants or advisers. The number of shares
of common stock reserved for issuance under the Plan is 400,000. New grants of
incentive stock options could not be made after March 1, 2003 under the
Company's 1993 Stock Incentive Plan. At March 10, 2003 there were option awards
covering 520,095 shares outstanding under the 1993 Plan, which upon termination,
unexercised, are carried over to the 2003 Plan as shares authorized to be issued
under the 2003 Plan.

-8-



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

Note 4 - Stock Incentive Plans (Continued):

The following table summarizes options granted under the Plan in 2003:

Number
of Options Grant Prices
-------------- --------------------
Outstanding at December 31, 2002 520,195 $ 1.45 to $17.75

Options granted 152,000 $ 3.02 to $3.07
Options exercised -
Options canceled or expired (28,816) $ 3.50 to $7.06
--------------

Outstanding at June 30, 2003 643,379 $ 1.45 to $17.75
==============

Exercisable at June 30, 2003 95,747
==============

Available for grant at June 30, 2003 276,716
==============

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


Note 5 - Stock Option Compensation

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock incentive plan. Accordingly, no compensation expense
has been recognized for its stock option grants issued at market price because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of the grant.

If compensation expense for the Company's stock-based compensation plan had
been determined based on the fair market value at the grant date for awards
under the Plan consistent with the method of SFAS No. 123, the Company's net
loss and loss per share would have been adjusted to the pro forma amounts
indicated below:




Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
2003 2002 2003 2002
------------- -------------- ------------- -------------
(in thousands, except per share amounts)

Net income (loss), as reported $ 167 $ 1 $ (176) $ (416)
Add back compensation expense recognized
under APB No. 25 - - - -
Deduct: Total stock-based compensation
expense determined under fair value based
method for all awards, net of related tax
effects (40) (42) (78) (84)
------------- -------------- ------------- -------------
Net income (loss), pro forma $ 127 $ (41) $ (254) $ (500)
============= ============== ============= =============
Basic income (loss) per share, as reported $ .03 $ - $ (.03) $ (.07)
Basic income (loss) per share, pro forma .02 (.01) (.04) (.09)
Diluted income (loss) per share, as reported .03 - (.03) (.07)
Diluted income (loss) per share, pro forma .02 (.01) (.04) (.09)




-9-



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

Note 5 - Stock Option Compensation (Continued)

The effects of applying SFAS No. 123 for providing pro forma disclosures
for the periods presented above are not likely to be representative of the
effects on reported net income for future periods because options vest over
several years and additional awards generally are made each year.


























-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, 2003 and 2002.




Percentage of Total Revenues
-----------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2003 2002 2003 2002
----------- ---------- ---------- ----------
Revenues:

Staffing services 82.6 % 88.9 % 84.1 % 88.3 %
Professional employer service fees 17.4 11.1 15.9 11.7
----------- ---------- ---------- ----------
100.0 100.0 100.0 100.0
----------- ---------- ---------- ----------

Cost of revenues:
Direct payroll costs 61.2 65.4 62.1 65.0
Payroll taxes and benefits 15.7 12.7 16.0 13.5
Workers' compensation 7.1 6.2 6.6 6.3
----------- ---------- ---------- ----------
Total cost of revenues 84.0 84.3 84.7 84.8
----------- ---------- ---------- ----------

Gross margin 16.0 15.7 15.3 15.2

Selling, general and administrative expenses 13.9 14.7 14.6 15.4
Depreciation and amortization 1.0 1.0 1.1 1.1
----------- ---------- ---------- ----------
Income (loss) from operations 1.1 0.0 (0.4) (1.3)

Other (loss) income (0.2) - (0.1) -
----------- ---------- ---------- ----------

Pretax income (loss) 0.9 0.0 (0.5) (1.3)

Provision for (benefit from) income taxes 0.3 - (0.2) (0.5)
----------- ---------- ---------- ----------

Net income (loss) 0.6 % 0.0 % (0.3)% (0.8)%
=========== ========== ========== ==========


The Company changed its reporting of PEO revenues from a gross basis to a
net basis in 2002 because it was determined that the Company was not the primary
obligor for the services provided by employees pursuant to its PEO contracts
with its customers. Gross revenue information, although not in accordance with
GAAP, is presented below because

-11-



BARRETT BUSINESS SERVICES, INC.

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

Results of Operations (Continued)

management believes such information is more informative as to the level of the
Company's business activity and more useful in managing its operations.




Unaudited Unaudited
Three Months Ended Six Months Ended
(in thousands) June 30, June 30,
-------------------- --------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Revenues:

Staffing services $ 23,046 $ 24,684 $ 43,156 $ 47,254
Professional employer services 28,342 18,164 48,881 36,559
--------- --------- --------- ---------
Total revenues 51,388 42,848 92,037 83,813
--------- --------- --------- ---------
Cost of revenues:
Direct payroll costs 40,565 33,257 72,615 65,118
Payroll taxes and benefits 4,385 3,520 8,190 7,212
Workers' compensation 1,982 1,719 3,407 3,344
--------- --------- --------- ---------
Total cost of revenues 46,932 38,496 84,212 75,674
--------- --------- --------- ---------

Gross margin $ 4,456 $ 4,352 $ 7,825 $ 8,139
========= ========= ========= =========


A reconciliation of non-GAAP gross PEO revenues to net PEO revenues is as
follows:

For the three months ended June 30 (unaudited, in thousands):




Gross Revenue Net Revenue
Reporting Method Reclassification Reporting Method
-------------------- ---------------------- --------- ---------
2003 2002 2003 2002 2003 2002
--------- --------- ---------- ---------- --------- ---------
Revenues:

Staffing services $ 23,046 $ 24,684 $ - $ - $ 23,046 $ 24,684
Professional employer
services 28,342 18,164 (23,486) (15,082) 4,856 3,082
--------- --------- ---------- ---------- --------- ---------
Total revenues $ 51,388 $ 42,848 $ (23,486) $ (15,082) $ 27,902 $ 27,766
========= ========= ========== ========== ========= =========

Cost of revenues:
Direct payroll costs $ 40,565 $ 33,257 $ (23,486) $ (15,082) $ 17,079 $ 18,175
========= ========= ========== ========== ========= =========




-12-



BARRETT BUSINESS SERVICES, INC.

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

Results of Operations (Continued)

For the six months ended June 30 (unaudited, in thousands):




Gross Revenue Net Revenue
Reporting Method Reclassification Reporting Method
-------------------- ---------------------- --------------------
2003 2002 2003 2002 2003 2002
--------- --------- ---------- ---------- --------- ---------
Revenues:

Staffing services $ 43,156 $ 47,254 $ - $ - $ 43,156 $ 47,254
Professional employer
services 48,881 36,559 (40,738) (30,309) 8,143 6,250
--------- --------- ---------- ---------- --------- ---------
Total revenues $ 92,037 $ 83,813 $ (40,738) $ (30,309) $ 51,299 $ 53,504
========= ========= ========== ========== ========= =========
Cost of revenues:
Direct payroll costs $ 72,615 $ 65,118 $ (40,738) $ (30,309) $ 31,877 $ 34,809
========= ========= ========== ========== ========= =========



Three months ended June 30, 2003 and 2002

Net income for the second quarter of 2003 was $167,000, an improvement of
$166,000 over net income of $1,000 for the second quarter of 2002. The
improvement for the second quarter of 2003 was primarily due to lower selling,
general and administrative expenses, combined with an improvement in gross
margin dollars and percent. Basic and diluted income per share for the second
quarter of 2003 was $.03.

Revenues for the second quarter of 2003 totaled $27.9 million, an increase
of approximately $136,000 or 0.5% over the second quarter of 2002. The increase
in revenues primarily reflects the growth in the Company's professional employer
("PEO") service fee revenue, partially offset by a decline in staffing services
revenue.

PEO service fee revenue increased approximately $1.8 million or 57.6%
primarily due to strong growth in California attributable to the conditions of
the workers' compensation insurance market and the opportunities available to
the Company as a qualified self-insured employer for workers' compensation
coverage. Staffing services revenue decreased approximately $1.6 million or 6.6%
primarily due to continued soft demand for such services in the majority of
areas in which the Company operates. Management expects growth in demand for its
PEO services to continue in the foreseeable future.

Gross margin for the second quarter of 2003 totaled approximately $4.5
million, which represented an increase of $104,000 or 2.4% over the second
quarter of 2002 primarily due to the 0.5% increase in revenues. The gross margin
percent increased from 15.7% of revenues for the second quarter of 2002 to 16.0%
for the second quarter of 2003. The increase in the gross margin percentage was
due to lower direct payroll costs, offset in part by higher payroll taxes and
benefits and higher workers' compensation expense. The decline in direct payroll
costs, as a percentage of revenues, for the second quarter of 2003 simply
reflects the current

-13-



BARRETT BUSINESS SERVICES, INC.

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

Results of Operations (Continued)

Three months ended June 30, 2003 and 2002 (Continued)

mix of services to the Company's customer base and the effect of their unique
mark-up percent. The increase in payroll taxes and benefits, as a percentage of
revenues, for the second quarter of 2003 was due in part to higher statutory
state unemployment tax rates in various states in which the Company operates as
compared to the second quarter of 2002, as well as to the net effect of
disproportionate growth in PEO services.

Workers' compensation expense for the second quarter of 2003 totaled $2.0
million, which compares to $1.7 million for the second quarter of 2002. The
increase in workers' compensation expense was generally due to an increased
provision for the future estimated costs of claims.

Selling, general and administrative ("SG&A") expenses for the 2003 second
quarter amounted to approximately $3.9 million, a decrease of $203,000 or 5.0%
from the comparable period in 2002. The decrease from 2002 was primarily
attributable to reductions in branch office management personnel and related
expenses.

Other expense totaled $68,000 for the second quarter of 2003, which
compares to $9,000 of other income for the second quarter of 2002. The increase
in other expense was primarily attributable to an increase in interest expense
due to higher debt levels and loan fees, as well as to a decline in interest
income resulting from lower interest yields on the Company's investments during
the 2003 second quarter.

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 and demand and competition for the Company's services. 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.

Six months ended June 30, 2003 and 2002

Net loss for the six months ended June 30, 2003 was $176,000, an
improvement of $240,000 from a net loss of $416,000 for the first six months of
2002. The improvement for the six-month period of 2003 was primarily due to
lower SG&A expenses, offset in part by a decline

-14-


BARRETT BUSINESS SERVICES, INC.

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

Results of Operations (Continued)

Six months ended June 30, 2003 and 2002 (Continued)

in gross margin dollars. Basic and diluted loss per share for the first six
months of 2003 were $.03 as compared to basic and diluted loss per share of $.07
for the comparable 2002 period.

Revenues for the six months ended June 30, 2003 totaled approximately $51.3
million, a decrease of approximately $2.2 million or 4.1% from the first six
months of 2002. The decrease in revenues primarily reflects continued weak
business activity for staffing services in the Company's market areas, offset in
part by growth in the second quarter of 2003 of the Company's PEO service fee
revenues. Staffing services revenue decreased approximately $4.1 million or 8.7%
primarily due to a decline in demand for such services owing to soft economic
conditions in the majority of areas in which the Company operates. PEO service
fee revenue, however, increased approximately $1.9 million or 30.3% primarily
due to strong growth in California owing to market conditions for workers'
compensation insurance.

Gross margin for the six months ended June 30, 2003 totaled approximately
$7.8 million, which represented a decrease of $314,000 or 3.6% from the similar
period of 2002 primarily due to the 4.1% decline in revenues. The decline in
direct payroll costs, as a percentage of revenues, for the six-month period of
2003, simply reflects the current mix of services to the Company's customer base
and the effect of their unique mark-up percent. The increase in payroll taxes
and benefits, as a percentage of revenues, for the six-month period of 2003, was
principally due to higher statutory state unemployment tax rates in various
states in which the Company operates as compared to the same period of 2002 and
to the net effect of disproportionate growth in PEO services. Workers'
compensation expense for the six months ended June 30, 2003 totaled $3.4
million, which was relatively comparable to $3.3 million for the same period of
2002.

SG&A expenses for the six months ended June 30, 2003 amounted to
approximately $7.5 million, a decrease of $806,000 or 9.7% from the comparable
period in 2002. The decrease in expense from 2002 was primarily attributable to
reductions in branch office management personnel and related expenses.

Depreciation and amortization totaled $551,000 or 1.1% of revenues for the
six months ended June 30, 2003, as compared to $600,000 or 1.1% of revenues for
the same period in 2002. The depreciation and amortization expense level
remained comparable to 2002 amounts due to the Company's current low level of
capital expenditures.

Other expense totaled $74,000 for the six-month period ended June 30, 2003,
which compares to $20,000 of other income for the comparable 2002 period. The
increase in expense was primarily due to an increase in interest expense
attributable to higher debt levels and loan fees during the 2003 period as well
as to a decline in interest income as a result of lower interest yields on the
Company's investments during the 2003 period.

-15-



BARRETT BUSINESS SERVICES, INC.

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

Liquidity and Capital Resources

The Company's cash position of $1,977,000 at June 30, 2003 increased by
$1,881,000 from December 31, 2002, which compares to a decrease of $562,000 for
the comparable period in 2002. The increase in cash at June 30, 2003, as
compared to June 30, 2002, was primarily generated from proceeds of a sale and
leaseback of two office buildings, the receipt of the Company's income tax
refund and an increase in accrued payroll, payroll taxes and related benefits,
offset in part by payments on workers' compensation claims liabilities and an
increase in trade accounts receivable.

Net cash used in operating activities for the six months ended June 30,
2003 amounted to $406,000, as compared to $133,000 of net cash used in operating
activities for the comparable 2002 period. For the six months ended June 30,
2003, cash flow was used for payments on workers' compensation claims of
$2,131,000 coupled with an increase of $3,470,000 in trade accounts receivable,
offset in part by a $1,923,000 decrease in income taxes receivable as a result
of the receipt of the 2002 federal income tax refund and an increase in accrued
payroll and related benefits of $3,332,000.

Net cash provided by investing activities totaled $2,440,000 for the six
months ended June 30, 2003, as compared to $286,000 net cash provided by
investing activities for the similar 2002 period. For the 2003 period, the
principal source of cash provided by investing activities was from $2,338,000 of
proceeds from the sale and leaseback of two office buildings owned by the
Company and from net proceeds totaling $5,661,000 from maturities and sales of
marketable securities, offset in part by $5,469,000 of net purchases of
marketable securities. The Company presently has no material long-term capital
commitments.

Net cash used in financing activities for the six-month period ended June
30, 2003, was $153,000, compared to $715,000 net cash used in financing
activities for the similar 2002 period. For the 2003 period, the principal use
of cash for financing activities was for $434,000 of payments made on long-term
debt and $262,000 used to repurchase the Company's common stock, offset in part
by $543,000 of net borrowings made on the Company's revolving credit line.

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 markets. The Company periodically
evaluates proposals for various acquisition opportunities, but there can be no
assurance that any additional transactions will be consummated.

The Company entered into a second amendment to the Amended and Restated
Credit Agreement (the "Agreement") with its principal bank effective April 30,
2003. The Agreement provides for a revolving credit facility of up to $8.0
million, which includes a subfeature under the line of credit for standby
letters of credit for not more than $5.0 million and a term loan in the original
amount of $693,750 bearing interest at an annual rate of 7.4%, as to which the
outstanding principal balance was paid in full as of June 30, 2003.

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BARRETT BUSINESS SERVICES, INC.

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

Liquidity and Capital Resources (Continued)

Under the terms of the Agreement, the Company's total outstanding
borrowings, to a maximum of $8.0 million, may not at any time exceed an
aggregate of (i) 85% of the Company's eligible billed accounts receivable, plus
(ii) 65% of the Company's eligible unbilled accounts receivable (not to exceed
$1.5 million), plus (iii) only to June 30, 2003, 75% of the appraised value of
the Company's real property collateral granted to the bank, minus the amount
outstanding under the term loan. Advances bear interest at an annual rate of
prime rate plus two percent. The Agreement expires March 31, 2004.

Effective May 22, 2003, the Company entered into a third amendment to the
Agreement temporarily increasing the total amount available under the revolving
credit facility until July 31, 2003 to accommodate a possible delay in the
closing of the Company's pending sale and leaseback transaction.

Effective July 22, 2003, the Company entered into a fourth amendment to the
Agreement with its principal bank, whereby the bank agreed to allow the Company
to invest in equity securities of publicly-traded companies believed to offer
strategic value or benefit to the Company, in amounts not to exceed an aggregate
of $200,000 plus any investment gains (net of any losses) thereon.

The revolving credit facility is collaterialized by the Company's assets,
including, without limitation, its accounts receivable, equipment, intellectual
property, real property and bank deposits, and may be prepaid at any time
without penalty. Pursuant to the Agreement, as amended, the Company is required
to maintain compliance with the following financial covenants: (1) a Current
Ratio not less than 1.10 to 1.0 through June 29, 2003, and not less than 1.15 to
1.0 from and after June 30, 2003, with "Current Ratio" defined as total current
assets divided by total current liabilities: (2) EBITDA not less than negative
$700,000 as of the quarter ended March 31, 2003, not less than negative $350,000
as of the quarter ended June 30, 2003, not less than $250,000 as of the quarter
ending September 30, 2003, and not less than $1,500,000 as of the quarter ending
December 31, 2003 and thereafter, measured on a trailing four-quarter basis,
with "EBITDA" defined as net profit before taxes, interest expense (net of
capitalized interest expense), depreciation expense and amortization expense;
(3) Funded Debt to EBITDA Ratio not more than 4.0 to 1.0 as of September 30,
2003 and not more than 2.25 to 1.0 as of December 31, 2003 and thereafter, with
"Funded Debt" defined as all borrowed funds plus the amount of all capitalized
lease obligations of the Company and "Funded Debt to EBITDA Ratio" defined as
Funded Debt divided by EBITDA; and (4) EBITDA Coverage Ratio not less than 1.0
to 1.0 as of September 30, 2003 and not less than 1.75 to 1.0 as of December 31,
2003, with "EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of long-term debt
and the prior period current maturity of subordinated debt. As of June 30, 2003,
the Company had approximately $2.0 million available under its credit facility
and was in compliance with all loan covenants.

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BARRETT BUSINESS SERVICES, INC.

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

Liquidity and Capital Resources (Continued)

Effective June 30, 2003, the Company completed a sale and leaseback
transaction involving two office buildings owned by the Company. The sale and
leaseback transaction provided net cash proceeds of approximately $2.0 million
(after the June 30, 2003 payment of the outstanding mortgage balance). The net
proceeds from the transaction were applied to the outstanding balance on the
Company's credit facility, effective July 1, 2003.

Subsequent to quarter end, in mid-July 2003, the state of California's
Department of Self-Insurance Plans released for cancellation the Company's $4.0
million letter of credit, which served as its security deposit for the Company's
self-insured workers' compensation program. As a participant in the State's new
alternative security program, the Company paid to the State an annual fee of
approximately $234,000, which was determined by several factors, including the
amount of a future security deposit and the Company's overall credit rating.

Management expects that the funds anticipated from operations, together
with available credit under the Agreement 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 seven increases
in the total number of shares or dollars authorized to be repurchased under the
program. As of August 6, 2003, the repurchase program had remaining authorized
availability of $459,000 for the repurchase of additional shares. During the
first six months of 2003, the Company repurchased 80,500 shares at an aggregate
price of $262,300. Since the inception of the repurchase program through August
6, 2003, the Company has repurchased 2,050,755 shares for an aggregate price of
$9,172,000. 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 and effect on
revenue growth, 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
Company's sources of working capital and expected use of credit, including its
ability to pay the balance on its line of credit, the adequacy of the Company's
workers' compensation reserves and allowance for doubtful accounts, the
effectiveness of the Company's management information systems and the
availability of financing and working capital to meet the Company's funding
requirements, are forward-looking statements within the

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BARRETT BUSINESS SERVICES, INC.

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

Forward-Looking Information (Continued)

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 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, material deviations
from expected future workers' compensation claims experience, the carrying
values of deferred income tax assets and goodwill, which are subject to
improvement in the Company's future operating results, 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, 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.





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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, 2003, the Company had interest-bearing debt obligations of
approximately $4.6 million, of which approximately $4.1 million bears interest
at a variable rate and approximately $0.5 million at a fixed rate of interest.
The variable rate debt is comprised of approximately $4.1 million outstanding
under a secured revolving credit facility, which bears interest at the prime
rate plus 2.0%. Based on the Company's overall interest exposure at June 30,
2003, 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, 2003, the Company had not entered into any interest
rate instruments to reduce its exposure to interest rate risk.








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Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. As of June 30,
2003, the end of the period covered by this report, the Company's
chief executive officer and its chief financial officer reviewed
and evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Exchange Act Rule
13a-15(e) and 15(d)-15(e)), which are designed to ensure that
material information the Company must disclose in its report
filed or submitted under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") is recorded, processed, summarized,
and reported on a timely basis, and have concluded, based on that
evaluation, that as of such date, the Company's disclosure
controls and procedures were effective to ensure that information
required to be disclosed by the Company in reports that it files
or submits under the Exchange Act is accumulated and communicated
to the Company's chief executive officer and chief financial
officer as appropriate to allow timely decisions regarding
required disclosure.

(b) Changes in internal control over financial reporting. In the
three months ended June 30, 2003, there has been no change in the
Company's internal control over financial reporting that has
materially affected, or is reasonably likely to materially
affect, its internal control over financial reporting.


Part II - Other Information

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

The Company held its 2003 annual meeting of stockholders on May 14, 2003.
The following directors were elected at the annual meeting:

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

Fores J. Beaudry 4,366,416 55,353
Thomas J. Carley 4,366,416 55,353
James B. Hicks, Ph.D. 4,304,116 117,653
Anthony Meeker 4,304,116 117,653
Nancy B. Sherertz 4,205,644 219,125
William W. Sherertz 4,275,816 145,953

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

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

Approval of the 2003 Stock
Incentive Plan 4,153,303 254,302 14,164

Approval of the appointment
of PricewaterhouseCoopers LLP
as independent accountants 2,196,322 2,040,137 185,310

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Part II - Other Information (Continued)

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, 2003:

On May 2, 2003, the Company furnished a Current Report on Form
8-K reporting an April 30, 2003 press release announcing the
Company's results of operations for the first quarter ended March
31, 2003.

The Company filed a Current Report on Form 8-K on June 12, 2003,
to report a Third Amendment to its loan agreement with Wells
Fargo Bank, N.A., effective for the period from May 22, 2003 to
July 31, 2003.







-22-



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, 2003 /s/ Michael D. Mulholland
--------------------------------
Michael D. Mulholland
Vice President - Finance
(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit


10.1 Fourth Amendment, dated July 22, 2003, to Amended and Restated Credit
Agreement between the Registrant and Wells Fargo Bank, N.A., dated
September 2, 2002.

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

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

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



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