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 June 30, 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 July 31, 1995
was 6,483,642 shares.



BARRETT BUSINESS SERVICES, INC.

INDEX

Page

Part I - Financial Information

Item 1. Financial Statements

Balance Sheets - June 30, 1995 and
December 31, 1994. . . . . . . . . . . . . . . . . . . .3

Statements of Operations - Three Months
Ended June 30, 1995 and 1994 . . . . . . . . . . . . . .4

Statements of Operations - Six Months
Ended June 30, 1995 and 1994 . . . . . . . . . . . . . .5

Statements of Cash Flows - Six Months
Ended June 30, 1995 and 1994 . . . . . . . . . . . . . .6

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

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


Part II - Other Information

Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . 14

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 14

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART I - Financial Information

Item 1. Financial Statements

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


Assets (Unaudited)
June 30, December 31,
1995 1994
----------- ------------
Current assets:
Cash and cash equivalents $ 2,221 $ 2,214
Trade accounts receivable, net 13,485 9,631
Prepaid expenses and other 590 599
Deferred tax asset (Note 2) 1,201 914
---------- ----------
Total current assets 17,497 13,358

Intangibles, net 4,652 4,936
Property and equipment, net 2,195 2,110
Restricted marketable securities
and workers' compensation deposits 4,904 4,196
Other assets 97 65
---------- ----------
$ 29,345 $ 24,665
========== ==========

Liabilities and Stockholders' Equity

Current liabilities:
Current portion of long-term debt $ 31 $ 31
Income taxes payable (Note 2) 272 -
Accounts payable 546 218
Accrued payroll, payroll taxes
and related benefits 6,422 5,057
Accrued workers' compensation claims
liabilities 2,981 2,358
Customer safety incentives payable 830 805
---------- ----------
Total current liabilities 11,082 8,469

Long-term debt, net of current portion 895 908
Customer deposits 710 669
Long-term workers' compensation
liabilities 324 164
---------- ----------

Commitments and contingencies 13,011 10,210
---------- ----------
Stockholders' Equity:
Common stock, $.01 par value; 20,500
shares authorized, 6,483 and 6,367
shares issues and outstanding,
respectively 65 64
Additional paid-in capital 9,473 8,978
Retained earnings 6,796 5,413
---------- ----------
16,334 14,455
---------- ----------
$ 29,345 $ 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
June 30,
-------------------
1995 1994
---- ----
Revenues:
Temporary staffing services $ 24,333 $ 18,661
Professional employer services 20,231 16,475
-------- --------
44,564 35,136

Cost of revenues:
Direct payroll costs 33,659 26,213
Payroll taxes and benefits 4,044 3,246
Workers' compensation 1,707 1,511
Safety incentives 235 247
-------- --------
39,645 31,217

Gross margin 4,919 3,919
Selling, general and administrative
expenses 3,226 2,560
Amortization of intangibles 138 113
-------- --------
Income from operations 1,555 1,246

Other income (expense):
Interest expense (20) (35)
Interest income 95 29
Other, net 28 1
-------- --------
103 (5)
-------- --------

Income before provision for income taxes 1,658 1,241
Provision for income taxes 619 476
-------- --------
Net income $ 1,039 $ 765
======== ========

Primary earnings per share (Note 5) $ 0.16 $ 0.12
======== ========

Primary weighted average number of common
stock equivalent shares outstanding 6,639 6,622
======== ========









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)

Six Months Ended
June 30,
-------------------
1995 1994
-------- ------
Revenues:
Temporary staffing services $ 44,937 $ 30,421
Professional employer services 38,926 31,782
--------- ---------
83,863 62,203
Cost of revenues:
Direct payroll costs 63,403 46,609
Payroll taxes and benefits 7,626 5,812
Workers' compensation 4,014 2,396
Safety incentives 422 497
--------- ---------
75,465 55,314
--------- ---------

Gross margin 8,398 6,889

Selling, general and administrative
expenses 6,101 4,543
Amortization of intangibles 284 180
--------- ---------

Income from operations 2,013 2,166

Other income (expense):
Interest expense (33) (63)
Interest income 202 85
Other, net 30 32
--------- ---------
199 54
--------- ---------

Income before provision for income taxes 2,212 2,220
Provision for income taxes 829 847
--------- ---------

Net income $ 1,383 $ 1,373
========= =========

Primary earnings per share (Note 5) $ 0.21 $ 0.21
========= =========

Primary weighted average number of common
stock equivalent shares outstanding 6,653 6,580
========= =========








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

Six Months Ended
June 30,
--------------------
1995 1994
------- --------
Cash flows from operating activities:
Net income $ 1,383 $ 1,373
Reconciliation of net income to cash
from operations:
Depreciation and amortization 398 276
Gain on sale of marketable securities (25) -


Changes in certain assets and liabilities:
Trade accounts receivable, net (3,854) (5,179)
Prepaid expenses and other 9 (199)
Deferred tax asset (287) 28
Accounts payable 328 157
Accrued payroll, payroll taxes and related
benefits 1,365 3,257
Accrued workers' compensation claims
liabilities 783 (68)
Customer safety incentives payable 25 155
Income taxes payable 272 15
Customer deposits and other, net 9 61
---------- ---------


Net cash provided by (used in) operating
activities 406 (124)
---------- ---------


Cash flows from investing activities:
Increase in intangibles through
acquisitions - (4,498)
Purchases of fixed assets (199) (294)
Proceeds from sales of marketable
securities 1,035 6,416
Purchases of marketable securities (1,718) (501)
---------- ---------
Net cash (used in) provided by investing
activities (882) 1,123
---------- ---------

Cash flows from financing activities:
Payments on long-term debt (13) (116)
Proceeds from exercise of stock
options and warrants 496 -
---------- ---------
Net cash provided by (used in) financing
activities 483 (116)
---------- ---------

Net increase in cash and cash equivalents 7 883

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

Cash and cash equivalents, end of period 2,221 2,010
========== =========

Issuance 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 - PROVISION FOR INCOME TAXES:

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

June 30, 1995 December 31, 1994
------------- -----------------
Accrued workers' compensation claims
liabilities. . . . . . . . . . . . . . $ 1,300 $ 982

Allowance for doubtful accounts. . . . . 12 25

Tax depreciation in excess of book
depreciation. . . . . . . . . . . . . . (111) (93)
------- -----
$ 1,201 $ 914
======= =====

The provision for income taxes for the six months ended June 30, 1995 and
1994, is as follows (in thousands):

Six Months Six Months
Ended Ended
June 30, 1995 June 30, 1994
------------- -------------
Current:
Federal. . . . . . . . . . . . . . . . $ 913 $ 673
State. . . . . . . . . . . . . . . . . 203 145
------- --------
1,116 818
Deferred:
Federal. . . . . . . . . . . . . . . . (239) 24
State. . . . . . . . . . . . . . . . . (48) 5
------- --------
(287) 29
------- --------

Provision for income taxes $ 829 $ 847
======= ========

NOTE 3 - 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:


Outstanding at December 31, 1994 306,575 $ 3.50 to $13.56

Options granted 31,500 $11.50 to $14.00
Options exercised (6,325) $ 3.50 to $ 9.50
Options canceled or expired (5,000) $ 3.50 to $ 9.50
-------
Outstanding at June 30, 1995 326,750 $ 3.50 to $14.00
=======
Available for grant at
June 30, 1995 440,750
=======

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


NOTE 4 - 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 5 - SUBSEQUENT EVENT:

Subsequent to the end of the second quarter, effective July 17,
1995, the Company purchased certain assets of Mid-Del Employment Service,
Inc., Sussex Employment Services, Inc., PPI (Prestige Personnel) - Salisbury,
Inc. and Del-Mar-Va Nurses-On-Call Inc. These companies are engaged in the
temporary staffing business in eastern Maryland and Delaware. The all-cash
purchase price of $950,000 was accounted for under the purchase method of
accounting which resulted in $925,000 of intangible assets and $25,000 of
fixed assets.
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-month periods ended June 30, 1995 and 1994.

Percentage of Total Revenues
---------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Temporary staffing services . . . . . . 54.6% 53.1% 53.6% 48.9%
Professional employer services . . . . . 45.4 46.9 46.4 51.1
---- ---- ---- ----
Total revenues . . . . . . . . . . . 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of revenues:
Direct payroll costs . . . . . . . . . 75.5 74.6 75.6 74.9
Payroll taxes and benefits. . . . . . . 9.2 9.3 9.1 9.4
Workers' compensation . . . . . . . . . 3.8 4.3 4.8 3.8
Safety incentives . . . . . . . . . . . .5 .7 .5 .8
---- ---- ---- ----
Total cost of revenues 89.0 88.9 90.0 88.9
---- ---- ---- ----
Gross margin . . . . . . . . . . . . . . . 11.0 11.1 10.0 11.1
Selling, general and administrative
expenses. . . . . . . . . . . . . . . . . 7.5 7.6 7.6 7.6
---- ---- ---- ----
Income from operations . . . . . . . . . . 3.5 3.5 2.4 3.5
Other income (expense) . . . . . . . . . . .2 - .2 .1
--- --- --- ---
Pretax income. . . . . . . . . . . . . . . 3.7 3.5 2.6 3.6
Provision for income taxes . . . . . . . . 1.4 1.3 1.0 1.4
--- --- --- ---
Net income . . . . . . . . . . . . . . . . 2.3 2.2 1.6 2.2
=== === === ===


Three Months Ended June 30, 1995 and 1994

Net income for the second quarter of 1995 was $1,039,000, an
increase of $274,000 or 35.8% over the same period in 1994. The increase in
net income was attributable to increased revenues as gross margin and selling,
general and administrative expenses, expressed as a percentage of revenues,
were generally comparable. Earnings per share for the second quarter of 1995
were $.16 as compared to $.12 for the second quarter of 1994.

Revenues for the second quarter of 1995 totaled approximately
$44.6 million, an increase of approximately $9.4 million or 26.8% over the
second quarter of 1994. The quarter-over-quarter internal growth rate of
revenues was 25.6%. The percentage increase in total revenues exceeded the
internal growth rate of revenues due to the acquisition of two temporary
staffing businesses during the fourth quarter of 1994. The mix of temporary
staffing services as a percent of total revenues increased to 54.6%, up from
53.1% of total revenues for the comparable 1994 period primarily due to the
robust growth of temporary staffing services in California. Professional
employer (staff leasing) services had a correlative decline in sales mix for
the second quarter of 1995 to 45.4% of total revenues as compared to 46.9% of
total revenues for the same period in 1994.

Gross margin for the second quarter of 1995 totaled
approximately $4.9 million or 11.0% of revenues, which represented an increase
of $1.0 million over the same period of 1994. The gross margin percent
decreased to 11.0% for the second quarter of 1995 from 11.1% for the second
quarter of 1994 as a result of increased direct payroll costs as a percentage
of revenues. The increase in direct payroll costs, as a percentage of
revenues, were offset in part by decreases, as a percentage of revenues, in
workers' compensation and safety incentives expenses. In spite of a
previously reported employee fatality in May of 1995, the Company's workers'
compensation expense for the second quarter of 1995 declined to 3.8% of
revenues as compared to 4.3% of revenues for the comparable quarter in 1994.

Effective May 1, 1995, the Company was granted self-insured
employer status for workers' compensation purposes by the United States
Department of Labor for longshore and harbor workers coverage. The Company's
self-insured arrangement includes a self-insured retention of $500,000 per
occurrence combined with excess insurance through a third-party insurance
company for losses in excess of the retention. The market opportunity for the
Company's services to employers in this line of business are principally in
the greater Seattle area and other major seaport cities in Washington, Oregon,
California and Maryland.

Selling, general and administrative expenses (including the
amortization of intangibles) amounted to approximately $3.4 million, an
increase of $.7 million or 25.8% over the comparable period in 1994. The
increase was primarily attributable to additional branch office staffing to
support increased business activity. Selling, general and administrative
expenses, expressed as a percentage of revenues, decreased slightly from 7.6%
for the second quarter of 1994 to 7.5% of revenues for the second quarter of
1995.

Six Months Ended June 30, 1995 and 1994

Net income for the six months ended June 30, 1995 was
$1,383,000, an increase of $10,000 or 0.7% over the same period in 1994. The
increase in net income was due to increased sales growth which was
substantially offset by a lower gross margin percentage in the first quarter
of 1995 owing to increased workers' compensation expense. Earnings per share
for the six months ended June 30, 1995 were $.21, the same as for the six
months ended June 30, 1994.

Revenues for the six months ended June 30, 1995 totaled
approximately $83.9 million, an increase of approximately $21.7 million or
34.8% over the comparable period of 1994. The internal growth rate of
revenues was 24.7%. 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 for the increase in the mix of temporary staffing services
for the six-month period of 1995 to 53.6% of total revenues, up from 48.9% of
total revenues for the comparable 1994 period. Professional employer services
as a component of the sales mix had a correlative decline for the six-month
period of 1995 to 46.4% of total revenues as compared to 51.1% of total
revenues for the same period of 1994.

Gross margin for the six-month period ended June 30, 1995
totaled approximately $8.4 million or 10.0% of revenues. Although gross
margin dollars for the six-month period of 1995 increased approximately $1.5
million or 21.9% over the same period in 1994, the 1995 gross margin of 10.0%
declined from the comparable 1994 rate of 11.1%. This decline was primarily
attributable to an increase in self-insured workers' compensation expense from
3.8% to 4.8% as a percent of revenues. The higher expense for the 1995 period
of approximately $1.6 million over the comparable period of 1994 was due to
increases in workers' compensation claims and adverse development of pre-1995
reserved claims, which primarily occurred during the first three months of
1995.

Selling, general and administrative expenses (including the
amortization of intangibles) amounted to approximately $6.4 million or 7.6% of
revenues for the six months ended June 30, 1995 as compared to approximately
$4.7 million or 7.6% of revenues for the comparable period of 1994. The
increase in dollars was primarily due to increased branch office staff added
to support the increased business activity.


Seasonal Fluctuations

The Company's revenues historically have been subject to
some seasonal fluctuation, particularly in its temporary staffing 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 staffing services, and the operations of
some staff leasing clients, particularly agricultural and forest products-
related companies, increase during the second and third quarters. As
professional employer (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 $2,221,000 at June 30, 1995
increased by $7,000 from December 31, 1994. The small increase was primarily
due to cash provided by operating activities and proceeds received from the
exercise of warrants to purchase shares of common stock were substantially
offset by net purchases of restricted marketable securities.

Net cash provided by operating activities for the six months
ended June 30, 1995 amounted to $406,000 as compared to cash used in operating
activities of $124,000 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 accruals were offset by a $3,854,000
increase in accounts receivable. The increase in the June 30, 1995 accounts
receivable balance was primarily due to higher revenues for the first six
months of 1995 over the comparable 1994 period, as the number of days sales in
receivables remained generally consistent.

Net cash used in investing activities totaled $882,000 for the
six months ended June 30, 1995 as compared to net cash provided by investing
activities of $1,123,000 for the similar 1994 period. For the 1995 period,
the principal use of cash for investing activities was the purchase of
restricted marketable securities to satisfy various state and federal self-
insured workers' compensation surety deposit requirements. During the
comparable 1994 comparable period, the $4.5 million increase in intangibles
was the result of certain business acquisitions which were funded
substantially from the $6.4 million of proceeds from the sale of marketable
securities. The Company presently has no material long-term capital
commitments.

Net cash provided by financing activities for the six-month
period ended June 30, 1995 was $483,000, which compares to $116,000 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, an underwriter continues 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. As disclosed in Note 5 to the
financial statements included herein, the Company purchased, as of July 17,
1995, certain assets of four temporary staffing companies located in Delaware
and Maryland for $950,000 cash. The Company actively explores proposals for
various acquisition opportunities on an ongoing basis, but there can be no
assurance that any additional transactions will consummated.

As previously discussed, the Company was granted self-insured
employer status for workers' compensation purposes for longshore and harbor
workers coverage. To satisfy the surety deposit requirements of the United
States Department of Labor, the Company purchased a U.S. Treasury bill in the
amount of $640,000.

During the second quarter ended June 30, 1995, the Company
renewed its unsecured $4.0 million revolving credit facility through May 30,
1996. There was no outstanding balance at June 30, 1995. The renewal of the
credit facility was on terms and conditions not less favorable than the prior
credit arrangement which expired on May 31, 1995. Management believes that
the current 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 4. Submission of Matters to a Vote of Security Holders

The Company held its 1995 annual meeting of stockholders on May 18,
1995. The following directors were elected at the annual meeting:

ABSTENTIONS AND
FOR WITHHELD BROKER NON-VOTES
--- -------- ----------------
Robert R. Ames 5,702,565 13,976
Jeffrey L. Beaudoin 5,702,565 13,976
Stephen A. Gregg 5,702,565 13,976
Anthony Meeker 5,702,565 13,976
Stanley G. Renecker 5,702,565 13,976
William W. Sherertz 5,702,860 13,681


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

ABSTENTIONS AND
FOR AGAINST BROKER NON-VOTES
--- ------- ----------------
Approval of the appointment 5,711,479 3,326 1,736
of Price Waterhouse LLP as
independent accountants


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) Except as setforth in the Registrant's Quarterly Report on Form
10-Q, Item 6 (b) for the quarterly period ended March 31, 1995, no
reports on Form 8-K were filed by the Registrant during the
quarter for which this report is filed.

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 10, 1995 By: /s/Michael D. Mulholland
Michael D. Mulholland
Vice President-Finance
(Principal Financial Officer)

EXHIBIT INDEX




Exhibit


4.4 Fourth Amendment to Loan Agreement between the Registrant and First
Interstate Bank of Oregon, N.A. dated June 1, 1995, together with
Optional Advance Note dated June 1, 1995 and Interest Rate Option
Agreement dated June 1, 1995.

11 Statement of Calculation of Average
Common Shares Outstanding

27 Financial Data Schedule