10-Q: Quarterly report pursuant to Section 13 or 15(d)

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 March 31, 1995

Commission File No. 0-21886


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

Maryland 52-0812977

(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

4724 SW Macadam Avenue
Portland, Oregon 97201

(Address of principal executive offices) (Zip Code)

(503) 220-0988

(Registrant's telephone number, including area code)


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

Yes [ X ] No [ ]

Number of shares of Common Stock, $.01 par value outstanding at April 30, 1995
was 6,479,067 shares.
BARRETT BUSINESS SERVICES, INC.

INDEX

Page

Part I - Financial Information

Item 1. Financial Statements

Balance Sheets - March 31, 1995 and
December 31, 1994. . . . . . . . . . . . . . . . . . . .3

Statements of Operations - Three Months
Ended March 31, 1995 and 1994. . . . . . . . . . . . . .4

Statements of Cash Flows - Three Months
Ended March 31, 1995 and 1994. . . . . . . . . . . . . .5

Notes to Financial Statements. . . . . . . . . . . . . .6

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . .9


Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 13

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART I - Financial Information

Item 1. Financial Statements

BARRETT BUSINESS SERVICES, INC.
Balance Sheets
(Unaudited)
(In thousands)

March 31, December 31,
1995 1994
--------- ------------

Assets

Current assets:
Cash and cash equivalents $ 3,578 $ 2,214
Trade accounts receivable, net 11,127 9,631
Prepaid expenses and other 830 599
Deferred tax asset (Note 3) 1,165 914
--------- ---------
Total current assets 16,700 13,358

Intangibles, net (Note 2) 4,791 4,936
Property and equipment, net 2,132 2,110
Restricted marketable securities
and workers' compensation deposits 4,178 4,196
Other assets 70 65
--------- ---------

$ 27,871 $ 24,665
========= =========

Liabilities and Stockholders' Equity

Current liabilities:
Current portion of long-term debt $ 31 $ 31
Income taxes payable (Note 3) 435 -
Accounts payable 635 218
Accrued payroll, payroll taxes
and related benefits 5,865 5,057
Accrued workers' compensation claims
liabilities 3,002 2,358
Customer safety incentives payable 814 805
--------- ---------
Total current liabilities 10,782 8,469
--------- ---------

Long-term debt, net of current portion 903 908
Customer deposits 750 669
Long-term workers' compensation
liabilities 164 164
--------- ---------
12,599 10,210
--------- ---------
Commitments and contingencies

Stockholders' equity:
Common stock, $.01 par value; 20,500
shares authorized, 6,478 and 6,367
shares issued and outstanding,
respectively 65 64
Additional paid-in capital 9,450 8,978
Retained earnings 5,757 5,413
--------- ---------
15,272 14,455
--------- ---------

$ 27,871 $ 24,665
========= =========

The accompanying notes are an integral part of these financial statements.
BARRETT BUSINESS SERVICES, INC.
Statements of Operations
(Unaudited)
(In thousands, except per share amounts)



Three Months Ended
March 31,
------------------------
1995 1994
---- ----
Revenues:
Temporary staffing services $ 20,604 $ 11,761
Professional employer services 18,694 15,306
---------- ----------
39,298 27,067
Cost of revenues:
Direct payroll costs 29,744 20,396
Payroll taxes and benefits 3,581 12,566
Workers' compensation 2,307 884
Safety incentives 187 250
---------- ----------

35,819 24,096
---------- ----------

Gross margin 3,479 2,971

Selling, general and administrative
expenses 2,875 1,984

Amortization of intangibles 145 67
---------- ----------
Income from operations 459 920

Other income (expense):
Interest expense (14) (27)
Interest income 107 55
Other, net 3 31
---------- ----------
96 59
---------- ----------

Income before provision for income taxes 555 979

Provision for income taxes (Note 3) 211 371
---------- ----------

Net income $ 344 $ 608
========== ==========

Primary earnings per share (Note 5) $ .05 $ .09
========== ==========

Primary weighted average number of common stock
equivalent shares outstanding 6,723 6,542
========== ==========




The accompanying notes are an integral part of these financial statements.
BARRETT BUSINESS SERVICES, INC.
Statements of Cash Flows
(Unaudited)
(In thousands)

Three Months Ended
March 31,
----------------------
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 344 $ 608

Reconciliation of net income to cash
from operations:
Depreciation and amortization 200 110
Changes in certain assets and liabilities:
Marketable securities - 2,244
Accounts receivable, net (1,496) (2,803)
Prepaid expenses and other (231) (307)
Deferred tax asset (251) 67
Accounts payable 417 75
Accrued payroll and benefits 808 2,114
Accrued workers' compensation claims 644 (166)
Customer safety incentives payable 9 71
Income taxes payable 435 198
Customer deposits and other, net 76 22
-------- --------
Net cash provided by operating activities 955 2,233
-------- --------
Cash flows from investing activities:
Increase in intangibles through
acquisitions - (4,498)
Purchase of fixed assets (77) (157)
Proceeds from sales of marketable
securities 18 4,062
-------- --------
Net cash used in investing activities (59) (593)
-------- --------
Cash flows from financing activities:
Payments on long-term debt (5) (109)
Proceeds from exercise of stock
options and warrants 473 -
-------- --------
Net cash provided by (used in) financing
activities 468 (109)
-------- --------

Net increase in cash and cash equivalents 1,364 1,531

Cash and cash equivalents, beginning of
period 2,214 1,127

-------- --------
Cash and cash equivalents, end of period $ 3,578 $ 2,658
======== ========

Supplemental non-cash disclosure:
Issues of common stock to acquire
intangibles $ 228
========

The accompanying notes are an integral part of these financial statements.
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 generally accepted accounting principles 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 financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's 1994 Annual Report on Form 10-K at pages 21-38. The
results of operations for an interim period are not necessarily indicative of
the results of operations for a full year.


NOTE 2 - ACQUISITIONS:

On February 27, 1994, the Company purchased substantially all of
the assets of Personnel Management & Consulting, Inc., a company engaged in
the temporary services business in Maryland and Delaware. Of the $270,000
purchase price, the Company paid $42,000 in cash and issued 12,000 shares of
its common stock with a then-fair market value of $228,000. The acquisition
was accounted for under the purchase method of accounting which resulted in
approximately $241,000 of intangible assets and $29,000 of fixed assets.

On March 7, 1994, the Company purchased certain assets of Golden
West Temporary Services ("Golden West"), a company in the temporary services
business with four offices in northern California. The cash purchase price of
$4,514,000 was paid by liquidating a portion of the Company's short-term
marketable securities. The Company accounted for the acquisition under the
purchase method of accounting which resulted in approximately $4,425,000 of
intangible assets and $89,000 of fixed assets.

On December 26, 1994, the Company purchased certain assets of Max
Johnson Enterprises, Inc., operating as Construction Workforce, a company
located in Spokane, Washington which specializes in providing highly skilled
temporary craftsmen to the commercial construction industry. Of the $300,000
purchase price, the Company paid $60,000 in cash and issued 17,142 shares of
its common stock with a then-fair market value of $240,000. The acquisition
was accounted for under the purchase method of accounting which resulted in
$285,000 of intangible assets and $15,000 of fixed assets.
On December 29, 1994, the Company purchased for $51,000 cash
certain assets of Advanced Temporary Systems, Inc., a company engaged in the
temporary staffing business in Kent, Washington. The Company accounted for
the acquisition under the purchase method of accounting which resulted in
$51,000 of intangible assets.


NOTE 3 - PROVISION FOR INCOME TAXES:

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


March 31, 1995 December 31, 1994
-------------- -----------------
Accrued workers' compensation claim
liabilities . . . . . . . . . . . . . . $ 1,244 $ 982

Allowance for doubtful accounts . . . 25 25

Tax depreciation in excess of book
depreciation . . . . . . . . . . . . (104) (93)
------- -----

$ 1,165 $ 914
======= =====





The provision for income taxes for the three months ended March 31, 1995 and
1994, is as follows (in thousands):

Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
Current:
Federal . . . . . . . . . . . . . . . . . $ 380 $ 251
State . . . . . . . . . . . . . . . . . . 82 53
------ ------
462 304

Deferred:
Federal . . . . . . . . . . . . . . . . . (209) 56

State . . . . . . . . . . . . . . . . . . (42) 11
------ ------
(251) 67
------ ------
Provision for income taxes $ 211 $ 371
====== ======


NOTE 4 - STOCK INCENTIVE PLAN:

In 1993, the Company adopted a stock incentive plan (the "Plan") which
provides for stock-based awards to the Company's employees, directors and
outside consultants or advisers. The number of shares of common stock
reserved for issuance under the Plan is 800,000.
The following table summarizes options granted under the Plan in 1995:



No. of
Options Range of Prices
------- ---------------
Outstanding at December 31, 1994 306,575 $ 3.50 to $ 13.56



Options granted 21,500 $ 14.00
Options exercised (1,000) $ 9.50
Options canceled or expired -
-------

Outstanding at March 31, 1995 327,075 $ 3.50 to $ 14.00
=======

Available for grant at March 31, 1995 445,750
=======

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


NOTE 5 - NET INCOME PER SHARE:

Net income per share is computed based on the weighted average
number of common stock and common stock equivalent shares outstanding during
the period.


NOTE 6 - SUBSEQUENT EVENT:

Subsequent to the end of the first quarter, on May 8, 1995, an
employee of the Company was fatally injured. Pursuant to the Company's self-
insured workers' compensation arrangements, this event will result in an
after-tax charge of not more than $217,000 in the second quarter ended
June 30, 1995.
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 months ended March 31, 1995 and 1994.


Percentage of
Total Revenues
Three Months Ended
March 31,
------------------
1995 1994
---- ----
Revenues:
Temporary staffing services 52.4% 43.4%
Professional employer services 47.6 56.6
----- -----
Total revenues 100.0 100.0
----- -----
Cost of revenues:
Direct payroll costs 75.7 75.3
Payroll taxes and benefits 9.1 9.5
Workers' compensation 5.8 3.3
Safety incentives .5 9
----- -----
Total cost of revenues 91.1 89.0
----- -----
Gross margin 8.9 11.0
Selling, general and administrative expenses 7.7 7.6
----- -----
Income from operations 1.2 3.4
Other income (expense) .2 .2
----- -----
Pretax income 1.4 3.6
Provision for income taxes .5 1.4
----- -----
Net income .9 2.2
===== =====

Three Months Ended March 31, 1995 and 1994

Net income for the first quarter of 1995 was $344,000, a decrease
of $264,000 or 43.4% from the same period in 1994. The decline in net income
was due to a lower gross margin percent which was the direct result of an
increase in workers' compensation expense. Earnings per share for the first
quarter of 1995 were $.05 as compared to $.09 for the comparable 1994 quarter.

Revenues for the first quarter of 1995 totaled approximately $39.3
million, an increase of approximately $12.2 million or 45.2% over the first
quarter of 1994. The quarter-over-quarter internal growth rate of revenues
was 19.1%. The growth rate of total revenues exceeded the internal growth
rate due to the acquisition of two temporary staffing businesses during the
first quarter of 1994. These two acquisitions also account for the principal
factors which increased the mix of temporary staffing services for the first
quarter of 1995 to 52.4% of total revenues, up from 43.4% of total revenues
for the comparable 1994 period. Professional employer (staff leasing)
services had a correlative decline in sales mix for the first quarter of 1995
to 47.6% of total revenues as compared to 56.6% of total revenues for the same
period in 1994.

Gross margin for the first quarter of 1995 totaled approximately
$3.5 million or 8.9% of revenues. Although gross margin dollars for the first
quarter of 1995 increased approximately $0.5 million over the first quarter of
1994, the 1995 gross margin of 8.9%, expressed as a percent of revenues,
declined 210 basis points from the comparable 1994 rate of 11.0%. This
decline was solely attributable to an increase in self-insured workers'
compensation expense from 3.3% to 5.8% as a percent of sales. The higher
expense for the 1995 period of approximately $1.4 million over the comparable
period a year ago was due to increases in workers' compensation claims and
adverse development of previously reserved claims, coupled with a $350,000
pre-tax charge related to one claim arising from a serious injury to an
employee.

As previously reported, it is management's belief that the Company
has taken the necessary corrective actions internally to more effectively
manage its self-insured workers' compensation risks and to further ensure
continuing compliance with safe-work standards by the Company's customers.

Selling, general and administrative expenses (including the
amortization of intangibles) amounted to 7.7% of revenues for the first
quarter of 1995 as compared to 7.6% of revenues for the comparable 1994
period. The increase for 1995 over the 1994 period was primarily due to (i)
the acquisition of two temporary staffing businesses in the first quarter of
1994, which have higher administrative overhead requirements as compared to
staff leasing services and (ii) additional management staff to support the
increased business activity.

Seasonal Fluctuations

The Company's revenues historically have been subject to some
seasonal fluctuation, particularly in its temporary services business. Demand
for the Company's temporary employees and certain staff leasing clients
decline during the year-end holiday season and periods of inclement weather.
Correspondingly, demand for temporary services and the operations of some
staff leasing clients, particularly agricultural and forest products-related
companies, increase during the second and third quarters. As staff leasing
revenues increase in comparison to total revenues, the effect of seasonal
fluctuations on the Company's revenues may diminish.


Liquidity and Capital Resources

The Company's cash position of $3,578,000 at March 31, 1995
increased $1,364,000 from December 31, 1994. This increase over the year-end
balance was principally due to cash provided by operating activities and
proceeds received from the exercise of warrants to purchase shares of common
stock.

Net cash provided by operating activities for the three months
ended March 31, 1995 amounted to $955,000 as compared to $2,233,000 for the
comparable 1994 period. For the 1995 period, cash flow generated by increases
in accounts payable, accrued payroll and benefits and workers' compensation
claims were offset in part by a $1,496,000 increase in accounts receivable.
The increase in the March 31, 1995 accounts receivable balance was due in part
to higher revenues for the first quarter of 1995 over the first quarter of
1994, together with an increase in the number of days' sales in receivables to
22.8 days at March 31, 1995 from 20.7 days at March 31, 1994. This increase
was attributable to the increase in the mix of temporary staffing revenues
which have longer credit terms as compared to the cash terms of professional
employer services.

Net cash used in investing activities totaled $59,000 for the
three months ended March 31, 1995 as compared to $593,000 for the similar 1994
period. For the 1995 period, the principal use of cash for investing
activities was the purchase of fixed assets. The Company presently has no
material long-term capital commitments. During the comparable 1994 quarter,
the $4.5 million increase in intangibles was a result of certain business
acquisitions which were funded in part by $4.1 million of proceeds from the
sale of marketable securities.

Net cash provided by financing activities for the three months
ended March 31, 1995 was $468,000, which compares to $109,000 used in
financing activities for the comparable 1994 period. The principal source of
cash provided by financing activities arose from the exercise of warrants to
purchase 110,000 shares of the Company's common stock at $4.20 per share.
Such warrants were received by the Company's underwriters in connection with
its June 1993 initial public offering of common stock. As of the date of this
filing, such underwriters continue to hold warrants to purchase 90,000 shares
of common stock at $4.20 per share.

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

As previously reported, the Company was granted self-insured
employer status for workers' compensation purposes by the state of California
during the first quarter of 1995. To satisfy that state's surety deposit
requirements, the Company provided the state of California with a letter of
credit in the amount of $1,572,000.

The Company presently has an unsecured $4.0 million revolving
credit facility which expires on May 31, 1995. There was no outstanding
balance at March 31, 1995. Management believes that the renewal of such
credit facility will be in an amount and on such terms and conditions that
will be not less favorable than the current credit arrangement. Management
also believes that the new credit facility and other sources of financing,
together with anticipated funds generated from operations, will be sufficient
in the aggregate to fund the Company's working capital needs for the
foreseeable future.

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.
Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

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

(b) Reports on Form 8-K

On March 23, 1995, the Company filed a Current Report on Form 8-K
dated March 20, 1995, to report that the Company had obtained
self-insured employer status for workers' compensation purposes in
the state of California and that the Company would incur a pre-tax
charge of $350,000 for workers' compensation expense in the first
quarter of 1995 in connection with a serious work-related injury
sustained by an employee.

Subsequent to quarter end, on May 3, 1995, the Company filed a
Current Report on Form 8-K dated April 26, 1995, to report that
the Company expects lower net earnings of approximately $.05 per
share for the first quarter of 1995 as compared to $.09 per share
for the first quarter of 1994. The reduction in expected net
income is attributable to substantially higher workers'
compensation expense which more than offset the benefit of a 45%
increase in revenues for the first quarter of 1995 over the
comparable 1994 quarter.
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: May 11, 1995 By: /s/Michael D. Mulholland
Michael D. Mulholland
Vice President-Finance
(Principal Financial Officer)

EXHIBIT INDEX



Exhibit


11 Statement of Calculation of Average
Common Shares Outstanding

27 Financial Data Schedule