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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 September 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 October 31,
2003 was 5,638,380 shares.


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BARRETT BUSINESS SERVICES, INC.

INDEX

Part I - Financial Information Page
----

Item 1. Financial Statements

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

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

Statements of Operations - Nine Months
Ended September 30, 2003 and 2002................................5

Statements of Cash Flows - Nine Months
Ended September 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 6. Exhibits and Reports on Form 8-K................................21


Signatures....................................................................22


Exhibit Index.................................................................23


-2-




Part I - Financial Information

Item 1. Financial Statements

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





September 30, December 31,
2003 2002
-------------- -------------
ASSETS

Current assets:

Cash and cash equivalents $ 450 $ 96
Income taxes receivable - 1,923
Trade accounts receivable, net 18,449 11,357
Prepaid expenses and other 1,749 1,040
Deferred income taxes 1,658 2,111
--------- ---------
Total current assets 22,306 16,527

Goodwill, net 18,749 18,749
Intangibles, net 23 59
Property and equipment, net 3,465 5,167
Restricted marketable securities and workers' compensation deposits 4,063 4,286
Deferred income taxes 1,114 1,445
Other assets 482 1,064
--------- ---------
$ 50,202 $ 47,297
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 88 $ 434
Line of credit - 3,513
Accounts payable 781 834
Accrued payroll, payroll taxes and related benefits 12,933 4,897
Workers' compensation claims liabilities 1,749 3,903
Safety incentives payable 681 406
Other accrued liabilities 326 305
Current portion of deferred gain on sale and leaseback 122 -
--------- ---------
Total current liabilities 16,680 14,292

Long-term debt, net of current portion 400 488
Customer deposits 447 443
Long-term workers' compensation claims liabilities 2,476 2,492
Other long-term liabilities 27 797
Long-term deferred gain on sale and leaseback 1,066 -

Commitments and contingencies - -

Stockholders' equity:
Common stock, $.01 par value; 20,500 shares authorized, 5,638
and 5,751 shares issued and outstanding 56 57
Additional paid-in capital 2,699 3,144
Employee loan (107) (107)
Retained earnings 26,458 25,691
--------- ---------
29,106 28,785
--------- ---------
$ 50,202 $ 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
September 30,
-----------------------------
2003 2002
--------- ---------
Revenues:

Staffing services $ 26,727 $ 26,935
Professional employer service fees 8,046 3,155
--------- ---------
34,773 30,090
--------- ---------
Cost of revenues:
Direct payroll costs 19,740 20,032
Payroll taxes and benefits 6,181 3,627
Workers' compensation 2,501 2,058
--------- ---------
28,422 25,717
--------- ---------

Gross margin 6,351 4,373

Selling, general and administrative expenses 4,582 3,984
Depreciation and amortization 256 282
--------- ---------
Income from operations 1,513 107
--------- ---------

Other (expense) income:
Interest expense (55) (91)
Interest income 13 50
Other, net (20) 27
--------- ---------
(62) (14)
--------- ---------

Income before provision for income taxes 1,451 93
Provision for income taxes 508 37
--------- ---------

Net income $ 943 $ 56
========= =========

Basic income per share $ .17 $ .01
========= =========

Weighted average number of basic shares outstanding 5,645 5,804
========= =========

Diluted income per share $ .16 $ .01
========= =========

Weighted average number of diluted shares outstanding 5,927 5,816
========= =========



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)




Nine Months Ended
September 30,
-------------------------
2003 2002
-------- --------
Revenues:

Staffing services $ 69,883 $ 74,189
Professional employer services 16,189 9,405
-------- --------
86,072 83,594
-------- --------
Cost of revenues:
Direct payroll costs 51,617 54,841
Payroll taxes and benefits 14,371 10,839
Workers' compensation 5,908 5,402
-------- --------
71,896 71,082
-------- --------

Gross margin 14,176 12,512

Selling, general and administrative expenses 12,047 12,255
Depreciation and amortization 807 882
-------- --------
Income (loss) from operations 1,322 (625)
-------- --------
Other (expense) income:
Interest expense (233) (188)
Interest income 69 173
Other, net 28 21
-------- --------
(136) 6
-------- --------

Income (loss) before provision for income taxes 1,186 (619)
Provision for (benefit from) income taxes 419 (259)
-------- --------

Net income (loss) $ 767 $ (360)

======== ========
Basic income (loss) per share $ .13 $ (.06)
======== ========

Weighted average number of basic shares outstanding 5,700 5,810
======== ========

Diluted income (loss) per share $ .13 $ (.06)
======== ========

Weighted average number of diluted shares outstanding 5,805 5,810
======== ========



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

-5-







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





Nine Months Ended
September 30,
-------------------------
2003 2002
-------- --------
Cash flows from operating activities:

Net income (loss) $ 767 $ (360)
Reconciliations of net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 807 882
Gain on sales of marketable securities (48) (24)
Gain recognized on sale and leaseback (31) -
Deferred income taxes 784 262
Changes in certain assets and liabilities:
Income taxes receivable 1,923 -
Trade accounts receivable, net (7,092) 966
Prepaid expenses and other (709) (160)
Accounts payable (53) (45)
Accrued payroll, payroll taxes and related benefits 8,036 727
Other accrued liabilities 21 63
Workers' compensation claims liabilities (2,170) (2,910)
Safety incentives payable 275 73
Customer deposits and other assets, net 586 51
Other long-term liabilities (770) (160)
-------- --------
Net cash provided by (used in) operating activities 2,326 (635)
-------- --------
Cash flows from investing activities:
Proceeds from sale and leaseback of buildings 2,338 -
Purchase of equipment (188) (99)
Proceeds from maturities of marketable securities 4,361 2,708
Proceeds from sales of marketable securities 2,272 807
Purchase of marketable securities (6,362) (2,384)
-------- --------
Net cash provided by investing activities 2,421 1,032
-------- --------
Cash flows from financing activities:
Proceeds from credit-line borrowings 38,750 37,954
Payments on credit-line borrowings (42,263) (37,802)
Payments on long-term debt (434) (696)
Payment to shareholder - (28)
Loan to employee - (78)
Repurchase of common stock (446) (183)
Proceeds from exercise of stock options - 14
-------- --------
Net cash used in financing activities (4,393) (819)
-------- --------
Net increase (decrease) in cash and cash equivalents 354 (422)

Cash and cash equivalents, beginning of period 96 1,142
-------- --------

Cash and cash equivalents, end of period $ 450 $ 720
======== ========


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.

Barrett, a Maryland corporation, is engaged in providing both staffing and
professional employer services to a diversified group of customers through a
network of branch offices throughout Oregon, Washington, California, Arizona,
Maryland, Delaware and North Carolina. Staffing services are engaged by
customers to meet short-term and long-term personnel needs. Professional
employer services ("PEO") are normally used by organizations to satisfy ongoing
human resource management needs and typically involve contracts with a minimum
term of one year, renewable annually, which cover all employees at a particular
work site.


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


-7-




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


Note 2 - Recent Accounting Pronouncements (Continued):

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.


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 Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
2003 2002 2003 2002
--------- --------- ---------- ---------

Weighted average number of basic shares

outstanding 5,644,946 5,803,647 5,700,366 5,810,075

Stock option plan shares to be issued at prices
ranging from $1.45 to $17.75 per share 643,379 401,098 572,308 -

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 (360,995) (388,745) (467,292) -
--------- --------- --------- ---------

Weighted average number of diluted shares
outstanding 5,927,330 5,816,000 5,805,382 5,810,075
========= ========= ========= =========



As a result of the net loss reported for the nine months ended September 30,
2002, potential common shares of 18,636 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

-8-




Note 4 - Stock Incentive Plans (Continued):

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.

The following table summarizes options activity 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 September 30, 2003 643,379 $ 1.45 to $17.75
==========

Exercisable at September 30, 2003 172,497
==========

Available for grant at September 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, "Accounting for
Stock-Based Compensation", the Company's net loss and loss per share would have
been adjusted to the pro forma amounts indicated below:

-9-





Note 5 - Stock Option Compensation (Continued)




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


Net income (loss), as reported $ 943 $ 56 $ 767 $ (360)
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 (47) (42) (125) (126)
------ ------ ------ ------
Net income (loss), pro forma $ 896 $ 14 $ 642 $ (486)
====== ====== ====== ======
Basic income (loss) per share, as reported $ .17 $ .01 $ .13 $ (.06)
Basic income (loss) per share, pro forma .16 - .11 (.08)
Diluted income (loss) per share, as reported .16 .01 .13 (.06)
Diluted income (loss) per share, pro forma .15 - .11 (.08)




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 nine months ended September 30, 2003 and 2002.




Percentage of Total Revenues
----------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2003 2002 2003 2002
----- ----- ----- -----
Revenues:

Staffing services 76.9 % 89.5 % 81.2 % 88.7 %
Professional employer service fees 23.1 10.5 18.8 11.3
----- ----- ----- -----

100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of revenues:
Direct payroll costs 56.7 66.6 60.0 65.6
Payroll taxes and benefits 17.8 12.1 16.7 13.0
Workers' compensation 7.2 6.8 6.8 6.4
----- ----- ----- -----

Total cost of revenues 81.7 85.5 83.5 85.0
----- ----- ----- -----

Gross margin 18.3 14.5 16.5 15.0

Selling, general and administrative expenses 13.2 13.3 14.0 14.7
Depreciation and amortization 0.7 0.9 0.9 1.0
----- ----- ----- -----

Income (loss) from operations 4.4 0.3 1.6 (0.7)

Other (expense) income (0.2) - (0.2) -
----- ----- ----- -----

Pretax income (loss) 4.2 0.3 1.4 (0.7)

Provision for (benefit from) income taxes 1.5 0.1 0.5 (0.3)
----- ----- ----- -----

Net income (loss) 2.7 % 0.2 % 0.9 % (0.4)%
===== ===== ===== =====



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-





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 Nine Months Ended
(in thousands) September 30, September 30,
------------------------ ------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenues:

Staffing services $ 26,727 $ 26,935 $ 69,883 $ 74,189
Professional employer services 46,886 18,710 95,767 55,269
-------- -------- -------- --------

Total revenues 73,613 45,645 165,650 129,458
-------- -------- -------- --------

Cost of revenues:
Direct payroll costs 58,580 35,587 131,195 100,705
Payroll taxes and benefits 6,181 3,627 14,371 10,839
Workers' compensation 2,501 2,058 5,908 5,402
-------- -------- -------- --------

Total cost of revenues 67,262 41,272 151,474 116,946
-------- -------- -------- --------

Gross margin $ 6,351 $ 4,373 $ 14,176 $ 12,512
======== ======== ======== ========




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





Unaudited Three Months Ended September 30,
-------------------------------------------------------------------------------------
Gross Revenue Net Revenue
(in thousands) Reporting Method Reclassification Reporting Method
----------------------- ---------------------- -----------------------
2003 2002 2003 2002 2003 2002
-------- -------- -------- -------- -------- --------
Revenues:

Staffing services $ 26,727 $ 26,935 $ - $ - $ 26,727 $ 26,935
Professional employer
services 46,886 18,710 (38,840) (15,555) 8,046 3,155
-------- -------- --------- -------- -------- --------
Total revenues $ 73,613 $ 45,645 $(38,840) $(15,555) $ 34,773 $30,090
-------- -------- --------- -------- -------- --------

Cost of revenues:
Direct payroll costs $ 58,580 $ 35,587 $(38,840) $(15,555) $ 19,740 $ 20,032
======== ======== ======== ======== ======== ========



-12-




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

Results of Operations (Continued)




Unaudited Nine Months Ended September 30,
-------------------------------------------------------------------------------------
Gross Revenue Net Revenue
(in thousands) Reporting Method Reclassification Reporting Method
----------------------- ---------------------- -----------------------
2003 2002 2003 2002 2003 2002
-------- -------- -------- -------- -------- --------
Revenues:

Staffing services $ 69,883 $ 74,189 $ - $ - $ 69,883 $ 74,189
Professional employer
services 95,767 55,269 (79,578) (45,864) 16,189 9,405
-------- -------- -------- -------- -------- --------
Total revenues $165,650 $129,458 $(79,578) $(45,864) $ 86,072 $ 83,594
======== ======== ======== ======== ======== ========

Cost of revenues:
Direct payroll costs $131,195 $100,705 $(79,578) $(45,864) $ 51,617 $ 54,841
======== ======== ======== ======== ======== ========



Three months ended September 30, 2003 and 2002

Net income for the third quarter of 2003 was $943,000, an improvement of
$887,000 over net income of $56,000 for the third quarter of 2002. The
improvement for the third quarter of 2003 was primarily due to higher gross
margin dollars as a result of significant growth in professional employer
("PEO") services business, partially offset by higher selling, general and
administrative expenses. The diluted income per share for the third quarter of
2003 was $.16.

Revenues for the third quarter of 2003 totaled $34.8 million, an increase
of approximately $4.7 million or 15.6% over the $30.1 million for the same
quarter in 2002. The increase in revenues primarily reflects the significant
growth in the Company's PEO service fee revenue, partially offset by a slight
decline in staffing services revenue.

PEO service fee revenue increased approximately $4.9 million or 155.0%
primarily due to strong growth in California attributable to the business
opportunities available to the Company as a qualified self-insured employer for
workers' compensation coverage owing to the adverse market conditions for
workers' compensation insurance. Staffing services revenue decreased
approximately $0.2 million or 0.8% primarily due to continued soft economic
conditions 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 third quarter of 2003 totaled approximately $6.4
million, which represented an increase of $2.0 million or 45.2% over the third
quarter of 2002 primarily due to the 15.6% increase in revenues. The gross
margin percent increased from 14.5% of revenues for the third quarter of 2002 to
18.3% for the third quarter of 2003. The increase in the gross



-13-





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

Results of Operations (Continued)

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

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 third
quarter of 2003 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 third 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 third quarter of 2002,
as well as to the effect of significant growth in PEO services.

Workers' compensation expense for the third quarter of 2003 totaled $2.5
million, which compares to $2.1 million for the third quarter of 2002. The
increase in workers' compensation expense was generally due to an increased
provision for the future estimated costs of claims due to the increase in
business activity.

Selling, general and administrative ("SG&A") expenses for the 2003 third
quarter amounted to approximately $4.6 million, an increase of $598,000 or 15.0%
over the comparable period in 2002. The increase over 2002 was primarily
attributable to higher profit sharing and related taxes and to an increase in
risk management personnel and related expenses. SG&A expenses, as a percent of
net revenues, declined slightly in the 2003 third quarter as compared to the
same period a year ago.


Nine months ended September 30, 2003 and 2002

Net income for the nine months ended September 30, 2003 was $767,000, an
improvement of $1.1 million over a net loss of $360,000 for the first nine
months of 2002. The improvement for the nine-month period of 2003 was primarily
due to higher gross margin dollars and lower SG&A expenses, offset in part by an
increase in other expense. The diluted income per share for the first nine
months of 2003 was $.13 as compared to a diluted loss per share of $.06 for the
comparable 2002 period.

Revenues for the nine months ended September 30, 2003 totaled
approximately $86.1 million, an increase of approximately $2.5 million or 3.0%
over the first nine months of 2002. The increase in revenues primarily reflects
continued growth of the Company's PEO service fee revenues, offset in part by
continued weak overall economic conditions, which have a corresponding effect on
the demand for the Company's staffing services. PEO service fee revenue
increased approximately $6.8 million or 72.1% primarily due to strong growth in
California owing to market conditions for workers' compensation insurance.
Staffing services revenue decreased approximately $4.3 million or 5.8% 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.

-14-




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

Results of Operations (Continued)

Nine months ended September 30, 2003 and 2002 (Continued)

Gross margin for the nine months ended September 30, 2003 totaled
approximately $14.2 million, which represented an increase of $1.7 million or
13.3% over the similar period of 2002 primarily due to the 3.0% increase in
revenues coupled with an increase in the gross margin percentage from 15.0% to
16.5% of revenues. The decrease in direct payroll costs, as a percentage of
revenues, for the nine-month period of 2003 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
nine-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 effect of significant growth in
PEO services. Workers' compensation expense for the nine months ended September
30, 2003 totaled $5.9 million, which compares to $5.4 million for the same
period of 2002. The increase in workers' compensation expense was primarily
attributable to an increased provision for the future estimated cost of claims
due to the increase in business activity.

SG&A expenses for the nine months ended September 30, 2003 amounted to
approximately $12.0 million, a decrease of $208,000 or 1.7% 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, offset in
part by higher profit sharing and related taxes and additional risk management
personnel.

Depreciation and amortization totaled $807,000 or 0.9% of revenues for the
nine months ended September 30, 2003, as compared to $882,000 or 1.0% 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 $136,000 for the nine-month period ended September
30 2003, which compares to $6,000 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.

Factors Affecting Quarterly Results

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 statutory payroll taxes, claims experience
for workers' compensation and demand and competition for the Company's services.
The Company's revenue levels may fluctuate from quarter to quarter primarily due
to the impact of seasonality on its staffing services business and on certain of
its PEO clients. 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


-15-




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

Factors Affecting Quarterly Results (Continued)

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.

Liquidity and Capital Resources

The Company's cash position of $450,000 at September 30, 2003 increased by
$354,000 over December 31, 2002, which compares to a decline of $422,000 for the
comparable period in 2002. The increase in cash at September 30, 2003, as
compared to December 31, 2002, was primarily generated from the proceeds of a
sale and leaseback of two Company-owned office buildings, the receipt of the
Company's 2002 income tax refund and an increase in accrued payroll, payroll
taxes and related benefits, offset in part by payments on workers' compensation
claims liabilities, net payments on the credit-line and an increase in trade
accounts receivable.

Net cash provided by operating activities for the nine months ended
September 30, 2003 amounted to $2,326,000, as compared to $635,000 of net cash
used in operating activities for the comparable 2002 period. For the nine months
ended September 30, 2003, cash flow was provided 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
$8,036,000, offset in part by payments on workers' compensation claims of
$2,170,000 coupled with an increase of $7,092,000 in trade accounts receivable.

Net cash provided by investing activities totaled $2,421,000 for the nine
months ended September 30, 2003, as compared to $1,032,000 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 and from net proceeds totaling $6,633,000 from maturities and
sales of marketable securities, offset in part by $6,362,000 of net purchases of
marketable securities. These transactions generally represent scheduled
maturities and the replacement of such securities held for workers' compensation
surety deposit purposes. The Company presently has no material long-term capital
commitments.

Net cash used in financing activities for the nine-month period ended
September 30, 2003, was $4,393,000, compared to $819,000 for the similar 2002
period. For the 2003 period, the principal use of cash for financing activities
was for $3,513,000 of net payments made on the Company's revolving credit line,
$446,000 used to repurchase the Company's common stock pursuant to its
repurchase program, and $434,000 of payments made on long-term debt.

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.

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

Liquidity and Capital Resources (Continued)

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.

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). Subsequent to the quarter ended September 30, 2003, the bank
reduced the interest rate on advances from an annual rate of prime rate plus two
percent to prime plus one percent. The Agreement expires March 31, 2004.

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 collateralized 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 currently
required to maintain compliance with the following financial covenants: (1) a
Current Ratio 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 $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 September 30,
2003, the Company had approximately $7.1 million available under its $8 million
credit facility and was in compliance with all loan covenants.

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.

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

Liquidity and Capital Resources (Continued)

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 generated from future 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 November 10, 2003, the repurchase program had remaining
authorized availability of $443,800 for the repurchase of additional shares.
During the first nine months of 2003, the Company repurchased 112,655 shares at
an aggregate price of $446,000. Since the inception of the repurchase program
through November 10, 2003, the Company has repurchased 2,053,555 shares for an
aggregate price of $9,187,200. 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 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,

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

Forward-Looking Information (Continued)

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 may be affected by 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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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 September 30, 2003, the Company had interest-bearing debt obligations of
approximately $0.5 million, which bears interest at a fixed rate. Based on the
Company's overall interest exposure at September 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 September 30,
2003, the Company had not entered into any interest rate instruments to reduce
its exposure to interest rate risk.










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BARRETT BUSINESS SERVICES, INC.


Item 4. Controls and Procedures

The Registrant carried out an evaluation, under the supervision and with
the participation of the Registrant's management, including the Registrant's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
Registrant's disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that the
Registrant's disclosure controls and procedures as of September 30, 2003 were
effective in providing a reasonable level of assurance that information required
to be disclosed by the Registrant in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.

There were no changes in the Registrant's internal control over financial
reporting that occurred during the quarter ended September 30, 2003 that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.


Part II - Other Information

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) No Current Reports on Form 8-K were filed by the Registrant
during the quarter ended September 30, 2003.


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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: November 12, 2003 /s/ Michael D. Mulholland
-------------------------
Michael D. Mulholland
Vice President - Finance
(Principal Financial Officer)







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EXHIBIT INDEX


Exhibit


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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