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

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

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FORM 10-Q

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

For the Quarterly Period Ended September 30, 1996

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 October 31,
1996 was 6,783,452 shares.
BARRETT BUSINESS SERVICES, INC.

INDEX

Page

Part I - Financial Information

Item 1. Financial Statements

Balance Sheets - September 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . . . 3

Statements of Operations - Three Months
Ended September 30, 1996 and 1995. . . . . . . . . . . . . 4

Statements of Operations - Nine Months
Ended September 30, 1996 and 1995. . . . . . . . . . . . . 5

Statements of Cash Flows - Nine Months
Ended September 30, 1996 and 1995. . . . . . . . . . . . . 6

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

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

Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 17

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART I - Financial Information

Item 1. Financial Statements

BARRETT BUSINESS SERVICES, INC.
Balance Sheets
(Unaudited)
(In thousands)
September 30, December 31,
1996 1995
------------ -----------
Assets

Current assets:
Cash and cash equivalents $ 4,956 $ 3,218
Trade accounts receivable, net 17,409 13,151
Note receivable 324 -
Prepaid expenses and other 746 478
Deferred tax asset (Note 3) 1,203 937
------ ------
Total current assets 24,638 17,784
Intangibles, net 9,326 6,452
Property and equipment, net 2,435 2,261
Restricted marketable securities
and workers' compensation deposits 5,716 4,681
Other assets 131 95
------ ------
$42,246 $31,273
====== ======

Liabilities and Stockholders' Equity

Current liabilities:
Current portion of long-term debt $ 36 $ 33
Income taxes payable (Note 3) 648 -
Accounts payable 714 378
Accrued payroll, payroll taxes
and related benefits 8,223 5,797
Accrued workers' compensation claims
liabilities 2,124 2,383
Customer safety incentives payable 1,037 776
------ ------
Total current liabilities 12,782 9,367
Long-term debt, net of current portion 848 875
Customer deposits 861 675
Long-term workers' compensation
liabilities 615 322
------ ------
15,106 11,239
------ ------
Commitments and contingencies

Redeemable common stock, 159 shares issued
and outstanding (Note 2) 2,825 -

Nonredeemable stockholders' equity:
Common stock, $.01 par value; 20,500
shares authorized, 6,624 and 6,551
shares issued and outstanding, respectively 66 66
Additional paid-in capital 10,926 10,437
Retained earnings 13,323 9,531
------ ------
24,315 20,034
------ ------
$42,246 $31,273
====== ======


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
September 30,
-------------------
1996 1995
------ -----
Revenues:
Staffing services $32,612 $28,333
Professional employer services 27,640 21,303
------ ------
60,252 49,636

Cost of revenues:
Direct payroll costs 45,817 37,444
Payroll taxes and benefits 5,248 4,477
Workers' compensation 2,161 1,160
Safety incentives 433 297
------ ------
53,659 43,378
------ ------

Gross margin 6,593 6,258

Selling, general and administrative
expenses 4,104 3,748
Amortization of intangibles 207 140
------ ------

Income from operations 2,282 2,370

Other income (expense):
Interest expense (20) (22)
Interest income 129 92
Other, net - -
------- ------
109 70
------- ------

Income before provision for income taxes 2,391 2,440
Provision for income taxes 730 927
------ ------

Net income $ 1,661 $ 1,513
====== ======

Primary earnings per share (Note 5) $ .24 $ .23
====== ======

Primary weighted average number of common
stock equivalent shares outstanding 7,019 6,667
====== ======






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)


Nine Months Ended
September 30,
------------------
1996 1995
------ -----
Revenues:
Staffing services $ 82,332 $ 73,271
Professional employer services 72,976 60,228
------- -------
155,308 133,499
Cost of revenues:
Direct payroll costs 117,695 100,847
Payroll taxes and benefits 14,570 12,101
Workers' compensation 4,144 5,174
Safety incentives 1,142 720
------- -------
137,551 118,842
------- -------

Gross margin 17,757 14,657

Selling, general and administrative
expenses 11,671 9,850
Amortization of intangibles 576 424
------- -------

Income from operations 5,510 4,383

Other income (expense):
Interest expense (62) (56)
Interest income 380 294
Other, net - 31
------- -------
318 269
------- -------

Income before provision for income taxes 5,828 4,652
Provision for income taxes 2,036 1,757
------- -------

Net income $ 3,792 $ 2,895
======= =======

Primary earnings per share (Note 5) $ .55 $ .44
======= =======

Primary weighted average number of common
stock equivalent shares outstanding 6,928 6,657
======= =======







The accompanying notes are an integral part of these financial statements.
BARRETT BUSINESS SERVICES, INC.
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
------------------
1996 1995
------ ------
Cash flows from operating activities:
Net income $ 3,792 $ 2,895
Reconciliation of net income to cash
from operations:
Depreciation and amortization 799 602
Gain on sale of marketable securities - (25)

Changes in certain assets and liabilities, net
of assets acquired and liabilities assumed:
Trade accounts receivable, net (4,186) (5,708)
Prepaid expenses and other (304) (58)
Deferred tax asset (266) (176)
Accounts payable 336 325
Accrued payroll, payroll taxes and related
benefits 2,426 2,531
Accrued workers' compensation claims
liabilities (259) 535
Customer safety incentives payable 261 17
Income taxes payable 648 296
Customer deposits and long-term workers'
compensation liabilities 427 (12)
------- -------
Net cash provided by operating activities 3,674 1,222
------- -------

Cash flows from investing activities:
Cash paid for acquisitions, including other
direct costs (Note 2) (685) (968)
Purchases of fixed assets, net of amounts
purchased in acquisitions (301) (302)
Proceeds from sales of marketable
securities 5,493 1,445
Purchases of marketable securities (6,528) (2,125)
------- -------
Net cash used in investing activities (2,021) (1,950)
------- -------

Cash flows from financing activities:
Payments on long-term debt (24) (21)
Proceeds from exercise of stock
options and warrants 109 499
------- -------
Net cash provided by financing activities 85 478
------- -------

Net increase in cash and cash equivalents 1,738 (250)

Cash and cash equivalents, beginning of period 3,218 2,214
------- -------

Cash and cash equivalents, end of period $ 4,956 $ 1,964
======= =======

Supplemental schedule of noncash activities:
Acquisition of other businesses:
Cost of acquisitions in excess of fair market
value of net assets acquired $ 3,450 $ 943
Tangible assets acquired 492 25
Liabilities assumed 52 -
Common stock issued in connection with
acquisitions 3,205 -

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 1995 Annual Report on Form 10-K at pages 22-41. 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 April 1, 1996, the Company acquired certain assets and the
business of StaffAmerica, Inc., pursuant to a Plan and Agreement of
Reorganization. StaffAmerica provides both temporary staffing and staff
leasing services through its two offices located in Santa Barbara and Oxnard,
California. In 1995, StaffAmerica had revenues of approximately $6.7 million.
In exchange for the StaffAmerica assets and business operations, the Company
issued 157,464 shares of its common stock valued at $2,795,000, assumed a
StaffAmerica liability of $50,000 for customer deposits and issued to each of
the two owners of StaffAmerica, 845 shares of Company common stock for their
covenants not to compete and incurred $90,000 in acquisition related costs.
The acquisition was accounted for under the purchase method of accounting
which resulted in $2,585,000 of intangible assets, a promissory note
receivable from seller of $324,000 and $56,000 in fixed assets. The $324,000
promissory note is due and payable no later than March 31, 1997.

The Plan and Agreement of Reorganization between StaffAmerica and
the Company allows StaffAmerica and the former owners to require the Company
to repurchase the shares issued to them on April 1, 1996. There are certain
conditions and restrictions imposed on StaffAmerica, and the former owners
with regard to the Company's obligation to repurchase its stock. The
Company's obligation to repurchase such shares commenced on May 1, 1996, and
expires on March 31, 1997. Upon redemption, and to the extent the note
receivable from the seller remains outstanding, the price per share shall be
the lower of $17.75 per share or the then current market value of the common
stock. If the note receivable has been fully retired, then the price per
share of the common stock for redemption purposes shall be $17.75. The total
159,154 shares of common stock is shown as redeemable common stock in the
accompanying balance sheet as of June 30, 1996, at its recorded value of
$2,825,000.
On April 8, 1996, the Company acquired certain assets and the
business of JobWorks Agency, Inc., by way of a Plan and Agreement of
Reorganization. JobWorks provides both temporary staffing and staff leasing
services through its two offices located in Hood River and The Dalles, Oregon.
JobWorks had revenues of approximately $1.2 million in 1995. The Company
issued 20,446 shares of its common stock with a then-fair value of $380,000
for the assets and business of JobWorks and assumed a customer deposit
liability of $2,000 and incurred $14,000 in acquisition related costs. The
Company paid $20,000 in cash for the selling shareholder's agreement of
noncompetition. The acquisition was accounted for under the purchase method
of accounting which resulted in $324,000 of intangible assets, $72,000 in
accounts receivable and $20,000 in fixed assets.

Effective August 26, 1996, the Company acquired certain assets of
Cascade Technical Staffing. Cascade provides technical and light industrial
staffing services primarily in the electronics industry through its Beaverton,
Oregon office. The Company paid $550,000 in cash for the assets and incurred
$6,000 in acquisition related costs. The acquisition was accounted for under
the purchase method of accounting which resulted in $536,000 of intangible
assets and $20,000 of fixed assets.


NOTE 3 - PROVISION FOR INCOME TAXES:

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

September 30, 1996 December 31, 1995
------------------ -----------------
Accrued workers' compensation claims
liabilities $1,068 $1,053

Customer safety incentives payable 245 -

Allowance for doubtful accounts 10 10

Tax depreciation in excess of book
depreciation (147) (126)

Book amortization of intangibles in excess
of tax amortization 27 -
----- -----

$1,203 $ 937
===== =====
The provision for income taxes for the nine months ended
September 30, 1996 and 1995, is as follows (in thousands):

Nine Months Nine Months
Ended Ended
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------

Current:
Federal $2,045 $1,581
State 257 352
----- -----
2,302 1,933
Deferred:
Federal (221) (145)
State (45) (31)
----- -----
(266) (176)
----- -----

Provision for income taxes $2,036 $1,757
===== =====


During the third quarter of 1996 the Company recognized a State of
Oregon surplus tax refund of approximately $145,000 related to tax years 1993
through 1995. The State is statutorily required to refund to taxpayers excess
tax revenues.


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
1996:

Outstanding at December 31, 1995 496,625 $ 3.50 to $16.36

Options granted 132,333 $15.06 to $18.69
Options exercised (82,875) $ 3.50 to $ 9.50
Options canceled or expired (58,500) $ 3.50 to $18.69
------

Outstanding at September 30, 1996 487,583 $ 3.50 to $18.00
=======

Exercisable at September 30, 1996 85,500
=======

Available for grant at
September 30, 1996 189,417
=======

The options listed in the table generally become exercisable in
four 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:

Effective November 4, 1996, the Company acquired the staff leasing
division of California Employer Services, Inc., an Orange County, California
staffing services company, for $660,000 in cash. The transaction included the
acquisition of the staff leasing contracts for approximately 100 client
companies with approximately 475 leased employees. Payment of the purchase
price is to be made in two installments. The first was made on October 31,
1996 for $400,000. The second cash payment for $260,000 is due on or before
December 13, 1996. In addition, the seller has guaranteed that not less than
90 percent of the gross profit generated by the leasing contracts will
continue to be received by Barrett for a period of four consecutive weeks
beginning with the effective date. In the event the gross profit generated by
the leasing contracts is below the amount guaranteed by the seller, the
purchase price will be reduced accordingly. The division's annual revenues
for the fiscal year ended September 30, 1996 were approximately $10.5 million
and generated a gross margin of approximately six percent. The transaction
was accounted for under the purchase method of accounting which resulted in
the recognition of approximately $685,000 of intangible assets, which includes
an estimate of $25,000 for acquisition-related costs.
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-month periods ended September 30, 1996 and 1995.

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

1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Staffing services 54.1% 57.1% 53.0% 54.9%
Professional employer services 45.9 42.9 47.0 45.1
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----

Cost of revenues:
Direct payroll costs 76.0 75.5 75.8 75.5
Payroll taxes and benefits 8.8 9.0 9.4 9.1
Workers' compensation 3.6 2.3 2.7 3.9
Safety incentives .7 .6 .7 .5
----- ----- ----- -----
Total cost of revenues 89.1 87.4 88.6 89.0
----- ----- ----- -----

Gross margin 10.9 12.6 11.4 11.0
Selling, general and administrative
expenses 6.8 7.5 7.5 7.4
Amortization of intangibles .3 .3 .4 .3
----- ----- ----- -----
Income from operations 3.8 4.8 3.5 3.3
Other income (expense) .2 .1 .2 .2
----- ----- ----- -----
Pretax income 4.0 4.9 3.7 3.5
Provision for income taxes 1.2 1.9 1.3 1.3
----- ----- ----- -----
Net income 2.8 3.0 2.4 2.2
===== ===== ===== =====


Three months ended September 30, 1996 and 1995

Net income for the third quarter of 1996 was $1,661,000, an
increase of $148,000 or 9.8% over the same period in 1995. The increase in
net income was attributable to higher revenues, offset in part by higher
workers' compensation expense, expressed as a percentage of revenues.
Earnings per share for the third quarter of 1996 were $.24 as compared to $.23
for the third quarter of 1995.

Revenues for the third quarter of 1996 totaled approximately $60.3
million, an increase of approximately $10.6 million or 21.4% over the third
quarter of 1995. The quarter-over-quarter internal growth rate of revenues
was 14.6%. The percentage increase in total revenues exceeded the internal
growth rate of revenues primarily due to the acquisition of one temporary
staffing business in December 1995, two temporary staffing and staff leasing
services businesses in April 1996, and one staffing services business in
August 1996, as discussed in Note 2 to the financial statements included in
Item 1. The mix of professional employer services as a percent of revenues
increased to 45.9%, up from 42.9% of total revenues for the comparable 1995
period due to the growth in the number of new PEO clients, primarily in Oregon
and California. Staffing services had a corresponding decline as a percent of
revenues for the third quarter of 1996 to 54.1% of total revenues as compared
to 57.1% of total revenues for the same period in 1995.

Gross margin for the third quarter of 1996 totaled approximately
$6.6 million, which represented an increase of $335,000 or 5.4% over the same
period of 1995. The gross margin percent decreased to 10.9% of revenues for
the third quarter of 1996 from 12.6% for the third quarter of 1995 as a result
of significantly higher workers' compensation expense and higher direct
payroll costs, both in terms of total dollars and as percentages of revenues.
The Company's workers' compensation expense for the third quarter of 1996
increased to 3.6% of revenues as compared to 2.3% of revenues for the third
quarter of 1995 as a result of two catastrophic injuries, coupled with an
increase in the frequency of workplace injuries during the third quarter of
1996.

The following table summarizes certain indicators of performance
regarding the Company's self-insured workers' compensation program for each of
the first three quarters of 1996 and 1995.

Self-Insured Workers' Compensation Profile

Total Workers' "IBNR Reserve"1
Total Workers' Comp Expense as a % of
No. of Injury Comp Expense as a % of "At Risk
Claims (in thousands) Total Payroll Claims"2
-------------- ------------- ------------- -------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
Q1 193 266 $ 770 $2,307 2.4% 7.8% 41.0% 33.0%
Q2 312 309 1,213 1,707 3.1 5.1 41.0 40.6
Q3 401 287 2,161 1,160 4.7 3.1 41.0 40.9
--- --- ----- -----
YTD 906 862 $4,144 $5,174 3.5% 5.1%
=== === ===== =====

1 "IBNR Reserve" in this context is defined as an additional expense
provision for both the unexpected future adverse loss development of open
claims and for claims incurred but not reported.
2 "At Risk Claims" are defined as the dollar amount of all injury claims
submitted under self-insured payroll less amounts covered by excess
reinsurance.

Although workers' compensation expense for the third quarter of
1996 was higher than the same period a year ago, the preceding table
illustrates the 1996 year-to-date improvement over the 1995 comparable period
in the Company's total workers' compensation expense both in terms of total
dollars and, more importantly, as a percent of total payroll dollars.
Concurrent with the improved expense level and percentage, the Company has
maintained its reserves for future adverse claim development at 41.0% of "at
risk claims" as of September 30, 1996, as compared to 40.9% at September 30,
1995. Beginning in the fourth quarter of 1996, the Company intends to make
additional increases in its IBNR reserve from time to time, which will result
in additional workers' compensation expense, as well as a corresponding
increase in the related accrued liability. Costs attributable to adverse loss
development of open claims, claims incurred in a prior period but not reported
currently, and catastrophic events may be shifted from the IBNR reserve to a
specific case reserve, thereby reducing the IBNR reserve level. Accordingly,
there can be no assurance that the IBNR reserve will remain at its present
level or at any future level.

Selling, general and administrative expenses (excluding the
amortization of intangibles) amounted to approximately $4.1 million, an
increase of $356,000 or 9.5% over the comparable period in 1995. Selling,
general and administrative expenses, expressed as a percentage of revenues,
decreased from 7.5% for the third quarter of 1995 to 6.8% of revenues for the
third quarter of 1996. The increase in total dollars was primarily
attributable to the acquisition of four temporary staffing and staff leasing
companies between December 1995 and August 1996.

The Company offers various employee benefit plans, including a
savings plan pursuant to Internal Revenue Code ("Code") Section 401(k) and a
cafeteria plan pursuant to Code Section 125, to its employees, including its
worksite employees. In order to qualify for favorable tax treatment under the
Code, such plans must be established and maintained by an employer for the
exclusive benefit of its employees. The IRS has established a Market Segment
Study Group regarding Employee Leasing (the "IRS Study Group") for the stated
purpose of examining whether, in a co-employer relationship, companies such as
the Company are deemed to be the employers of worksite employees under the
Code provisions applicable to employee benefit plans and are, therefore, able
to offer to worksite employees benefit plans that qualify for favorable tax
treatment. The IRS Study Group is also reportedly examining whether the
owners of client companies are employees of the employer of record in a co-
employer relationship under Code provisions applicable to employee benefit
plans. In the event the tax-qualified status of the Company's benefit plans
were to be discontinued, such action could have a material adverse effect on
the Company's business, financial condition, and results of operations. The
Company has not recorded any provision for this potential contingency, as
neither the likelihood of disqualification nor the resulting range of loss, if
any, is currently estimable, due to the lack of public direction from the IRS
Study Group. Reference is made to pages 17-18 of the Company's 1995 Annual
Report on Form 10-K for a more detailed discussion of this issue.

Nine Months Ended September 30, 1996 and 1995

Net income for the nine months ended September 30, 1996 was
$3,792,000, an increase of $897,000 or 31.0% over the same period in 1995.
The increase in net income was primarily due to continued growth in revenues
and a higher gross margin percentage owing principally to improved workers'
compensation expense. Net income per share for the nine months ended
September 30, 1996 was $.55 as compared to $.44 for the nine months ended
September 30, 1995.

Revenues for the nine months ended September 30, 1996 totaled
approximately $155.3 million, an increase of approximately $21.8 million or
16.3% over the comparable period of 1995. The internal growth rate of
revenues was 8.6%. The growth rate of total revenues exceeded the internal
growth rate of revenues primarily due to the acquisition of four temporary
staffing and staff leasing businesses between December 1995 and August 1996.
The lower internal growth rate of revenues of 8.6% for the nine-month period
ended September 30, 1996 compared to the internal growth rate of 20.8% for the
similar period of 1995, is believed to be attributable to inclement weather
conditions in Oregon, Maryland and Delaware during the first quarter of 1996,
as well as to an ongoing slowdown affecting certain of the Company's northern
California clients which continues to have a negative effect on the Company's
Santa Clara, California operations.

Gross margin for the nine months ended September 30, 1996 totaled
approximately $17.8 million or 11.4% of revenues, which compares to $14.7
million or 11.0% of revenues for the same period of 1995. The improvement in
gross margin dollars and percent from the 1995 comparable period was primarily
attributable to improved workers' compensation experience, offset in part by
higher payroll, payroll taxes and benefits, and safety incentives expressed as
a percentage of revenues.

Selling, general and administrative expenses (excluding the
amortization of intangibles) amounted to approximately $11.7 million, an
increase of $1.8 million or 18.5% over the comparable period in 1995.
Selling, general and administrative expenses, expressed as a percentage of
revenues, increased from 7.4% for the first nine months of 1995 to 7.5% for
the first nine months of 1996. The increase in total dollars was primarily
attributable to: (i) the acquisition of four temporary staffing and staff
leasing businesses between December 1995 and August 1996, which have had
higher administrative overhead requirements and (ii) additional branch office
staffing to support increased business activity and additional workers'
compensation loss control branch personnel to strengthen the administration of
the Company's self-insured workers' compensation programs.

Seasonal Fluctuations

The Company's revenues historically have been subject to some
seasonal fluctuation, particularly in its staffing services business. Demand
with respect to the Company's staffing services and certain staff leasing
clients decline during the year-end holiday season and periods of inclement
weather. Correspondingly, demand for staffing services, and the operations of
some staff leasing clients, particularly agricultural and forest products-
related companies, may increase during the third and fourth quarters.


Liquidity and Capital Resources

The Company's cash position of $4,956,000 at September 30, 1996
increased by $1,738,000 from December 31, 1995. The increase was primarily
due to cash provided by operating activities, offset in part by the use of
cash for net purchases of restricted marketable securities.

Net cash provided by operating activities for the nine months
ended September 30, 1996 amounted to $3,674,000 as compared to $1,222,000 for
the comparable 1995 period. For the 1996 period, cash flow generated by net
income and an increase in accrued payroll and benefits was offset in part by a
$4.2 million increase in accounts receivable.

Net cash used in investing activities totaled $2,021,000 for the
nine months ended September 30, 1996 as compared to $1,950,000 for the similar
1995 period. For the 1996 period, the principal use of cash for investing
activities was the purchase of restricted marketable securities to satisfy
various state self-insured workers' compensation surety deposit requirements.
The Company presently has no material long-term capital commitments.

Net cash provided by financing activities for the nine-month
period ended September 30, 1996 was $85,000, which compares to $478,000 for
the comparable 1995 period. For the 1995 period, the principal source of cash
provided by financing activities arose from the exercise of warrants by
underwriters 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 focus on growth
through the acquisition of additional personnel-related businesses, both in
its existing markets and other strategic geographic areas, and the expansion
of operations at existing offices. As disclosed in Notes 2 and 6 to the
financial statements included herein, the Company purchased, in April, August
and November 1996, certain assets of four businesses offering temporary
staffing or staff leasing services or both, two of which are located in
California and two are in Oregon. 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.

The Company maintains an unsecured $4.0 million revolving credit
facility with its principal bank. There was no outstanding balance at
September 30, 1996. Management believes the funds anticipated to be generated
from operations, together with the available credit facility and other
potential sources of financing, will be sufficient in the aggregate to fund
the Company's working capital needs for the foreseeable future.


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 appearing in this report which are not historical in
nature, including the discussions of economic conditions in the Company's
market areas, the tax-qualified status of the Company's 401(k) savings plan,
and the adequacy of the Company's capital resources, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are subject to risks and uncertainties
that may cause actual future results to differ materially. Such risks and
uncertainties with respect to the Company include difficulties associated with
integrating acquired businesses and clients into the Company's operations,
economic trends in the Company's service areas, uncertainties regarding
government regulation of PEOs and the staff leasing industry, including the
possible adoption by the Internal Revenue Service of an unfavorable position
as to the tax-qualified status of employee benefit plans maintained by PEOs,
future workers' compensation claims experience, and the availability of and
costs associated with potential sources of financing.
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, 1996.

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, 1996 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