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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE YEAR ENDED ________________DECEMBER 31, 1995_______________

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________________ TO _______________

COMMISSION FILE NUMBER 0-23828
LABOR READY, INC.
(Exact name of registrant as specified in its Charter)

Washington 91-1287341
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(State of Incorporation or Organization) (I.R.S. Employer Identification Number)

2156 Pacific Avenue, Tacoma, Washington 98402
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(Address of Principal Executive Offices) (Zip
Code)

(206) 383-9101
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(Registrant's Telephone
Number)

Securities Registered Under Section 12(g) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None
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Securities Registered Under Secton 12(g) of the Act:
Common Stock, No Par Value
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(Title of class)

Indicated by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in any definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K / /

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 last ninety days. YES _X_ NO ___

The aggregate market value (based on the average between the bid and ask prices)
of the voting stock held by non-affiliates (4,076,306 shares) of the Registrant
at March 20, 1996 was approximately $79,487,967. As of March 20, 1996 there were
6,029,133 shares of the Registrant's common stock outstanding.

The Index to Exhibits appears on page 13.
No Documents are incorporated herein by reference.

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LABOR READY, INC.
FORM 10-K/A

PART 1.

ITEM 1. BUSINESS

INTRODUCTION

Labor Ready is a leading, national provider of temporary workers for manual
labor jobs. The Company's customers are primarily businesses in the
construction, freight handling, warehousing, landscaping, light manufacturing,
and other light industrial markets. These businesses require workers for
lifting, hauling, cleaning, assembling, digging, painting and other types of
manual work. The Company has rapidly grown from eight dispatch offices in 1991
to 106 dispatch offices at December 31, 1995. Substantially all of the growth in
dispatch offices was achieved by opening Company-owned locations rather than
through acquisitions. The Company's revenues grew from $6.0 million to $94.4
million from 1991 through 1995. This revenue growth has been generated both by
opening new dispatch offices and by continuing to increase sales at existing
dispatch offices. In 1995, the average cost to open a new dispatch office was
approximately $35,000 and dispatch offices opened in 1995 typically generated
revenues sufficient to cover their operating costs in two to six months. In
1995, the average revenue per dispatch office open for more than one full year
was $1.3 million.

INDUSTRY OVERVIEW

The temporary staffing industry has grown rapidly in recent years as
companies have used temporary employees to control personnel costs and to meet
fluctuating personnel needs. According to the NATSS, the United States market
for the industrial segment of the temporary staffing marketplace (which includes
the light industrial market that the Company serves) grew at a compound annual
growth rate of approximately 25% from approximately $5.0 billion in 1991 to
approximately $12.3 billion in 1995. The Company believes the temporary staffing
industry is highly fragmented and presents opportunities for larger, well
capitalized companies to effectively compete through management of workers'
compensation costs and development of information systems which efficiently
process a high volume of transactions and coordinate multi-location activities.

Historically, the demand for temporary workers has been driven primarily by
a need to satisfy peak production needs and to temporarily replace full-time
employees due to illness, vacation or abrupt termination. More recently,
competitive pressures have forced businesses to focus on reducing costs,
including converting fixed, permanent labor costs to variable or flexible costs.
The use of temporary workers typically shifts employment costs and risks, such
as workers' compensation and unemployment insurance and possible adverse effects
of changing employment regulations, to temporary staffing companies, which can
allocate the costs and risks over a larger pool of employees and customers. In
addition, the use of temporary employees avoids the inconvenience, expense and
other effects of hiring and firing regular employees.

COMPANY STRATEGY

The Company's goal is to maintain and enhance its status as a leading,
national provider of temporary workers for manual labor jobs. Key elements of
the Company's strategy to achieve this objective are as follows:

- AGGRESSIVELY OPEN NEW DISPATCH OFFICES. The Company's strategy is to
increase revenues by rapidly expanding its network of dispatch offices.
The Company plans to open approximately 94 additional dispatch offices in
1996 and an additional 100 dispatch offices in 1997.

- INCREASE REVENUES FROM EXISTING DISPATCH OFFICES. As a dispatch office
matures, the Company attempts to increase its revenues by expanding sales
to existing customers and by aggressively expanding the number and mix of
customers served. More experienced area directors and district managers
assist the general manager in this process. The Company is also developing
and implementing at the corporate level coordinated sales and marketing
strategies designed to complement these efforts,

including the development of national accounts, electronic order entry
from the customer's location, centralized dispatch via an 800 number,
dissemination of information on local construction activity, and
implementation of a centralized customer service hotline.

- IMPROVE OPERATING EFFICIENCIES AND REDUCE OPERATING COSTS. Due to the
temporary labor market's extensive fragmentation, the Company believes its
national presence provides it with key operating efficiencies, competitive
advantages (including an ability to target national accounts and to
effectively administer workers' compensation programs) and access to
capital markets to provide needed working capital. The Company has
standardized the operation, general design, staffing and equipment of the
dispatch offices. In addition, the Company has designed and implemented a
proprietary management information system that efficiently manages an
extensive Company-wide employee and payroll database as well as delivering
valuable management reports.

- PROVIDE SUPERIOR SERVICE. The Company emphasizes customer responsiveness
and maintains a commitment to providing a superior quality of service
though policies such as opening offices no later than 5:30 a.m., providing
workers on short notice (often the same day as requested) and offering a
"satisfaction guaranteed" policy. The Company is committed to supplying
motivated workers to its customers. Most workers find the Company's "Work
Today, Paid Today" policy appealing and arrive at the dispatch office
early in the morning motivated to put in a good day's work and receive a
paycheck at the end of the day.

The Company intends to continue to focus on the manual labor, short notice,
light industrial niche of the temporary labor market. The Company believes other
national and international temporary labor businesses have not aggressively
pursued this market. Management believes that it can gain significant advantages
by capturing market share, achieving economies of scale and operating
efficiencies not available to its smaller competitors, and rapidly expanding
through opening new dispatch offices and increasing revenue at existing dispatch
offices.

DISPATCH OFFICE EXPANSION

The Company has rapidly grown from eight dispatch offices in 1991 to 106
dispatch offices at December 31, 1995. The Company's expansion has been achieved
primarily by opening Company-owned dispatch offices. The following table sets
forth the number and location of dispatch offices by geographic region open at
the end of each of the last five years. The information below does not include
four Labor Ready franchised dispatch offices located in the Minneapolis,
Minnesota metropolitan area and one franchised dispatch office located in Fargo,
North Dakota.

LABOR READY DISPATCH OFFICES
BY GEOGRAPHIC REGION

AT DECEMBER 31,
----------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----

West................ 8 9 12 23 38
Southwest/Mountain... 0 0 2 8 15
Upper Midwest....... 0 0 0 8 16
Midwest............. 0 1 3 7 20
South............... 0 0 0 1 12
Eastern............. 0 0 0 0 1
Canada.............. 0 0 0 4 4
-
---- ---- ---- ----
Total........... 8 10 17 51 106
-
-
---- ---- ---- ----
---- ---- ---- ----

The Company currently anticipates opening 94 dispatch offices in 1996, and
expects to open approximately 100 dispatch offices in 1997. Dispatch office
openings will be primarily in California, midwestern

states, southern states, and, over time, eastern states. The Company analyzes
acquisition opportunities from time to time, may pursue acquisitions in certain
circumstances and may also accelerate expansion based on future developments.

In 1994, the Company licensed one franchisee in Minnesota, who now operates
five locations, four in Minneapolis and one in Fargo, North Dakota. The Company
has not pursued, and does not intend to grant, any additional franchises.
Revenues generated from franchised dispatch offices have not been material
during the periods presented herein.

ECONOMICS OF DISPATCH OFFICES. The Company has standardized the process of
opening dispatch offices. In 1995, the average aggregate cost of opening a new
dispatch office was approximately $35,000, including salaries, training, lease
expenses, computer systems, advertising and other related expenses. These costs
are expected to increase as the Company purchases more sophisticated computer
and other office systems, expands training time and programs, leases larger
dispatch offices and expands into the northeastern United States. New dispatch
offices are expected to generate revenue sufficient to cover their operating
costs within two to six months. On average, the volume necessary for profitable
operations is approximately $12,000 per week. In 1995, dispatch offices open for
at least one full year generated average annual revenue of approximately $1.3
million, or approximately $25,000 per dispatch office per week.

CRITERIA FOR NEW DISPATCH OFFICES. Labor Ready identifies desirable areas
for locating new dispatch offices with an economic model that analyzes the
potential supply of temporary workers and customer demand based on a zip code
resolution of employment figures and the relative distance to the nearest Labor
Ready dispatch office. In addition, the Company locates dispatch offices in
areas convenient for its temporary workers, that are on or near public
transportation, and have parking available. The Company will generally avoid
downtown locations since such areas are usually inconvenient for workers and
dispatch office rental space is often more expensive. After the Company
establishes a dispatch office in a metropolitan area, the Company usually
clusters additional locations within the same area. Multiple locations in a
market reduce both opening costs and operating risk for new dispatch offices
because advertising costs are spread among more dispatch offices and because the
new dispatch office benefits from existing customer relationships with the other
dispatch offices and established Labor Ready name recognition.

DISPATCH OFFICE MANAGEMENT. The Company believes that the key factor
determining the success of a new dispatch office is identifying and retaining an
effective dispatch office general manager. Each general manager has primary
responsibility for managing the operations of the dispatch office, including
recruiting temporary workers, daily dispatch of temporary workders, and
collecting accounts receivable. The Company pays monthly bonuses to its general
managers based on accounts receivable collections during the month.

Each general manager has primary responsibility for customer service and the
dispatch office's sales efforts, including identifying and soliciting local
businesses likely to have a need for temporary manual workers. The Company's
experience is that certain types of individuals are better suited to perform the
critical management functions necessary for the dispatch office to generate the
revenues required to achieve profitability, regardless of the size of the
metropolitan area. The Company has refined its criteria for selecting general
managers and uses The Gallup Organization to screen, test, and qualify
prospective general managers. Prior to joining the Company, the typical general
manager has little or no prior experience in the temporary employment industry.
The Company commits substantial resources to the training, development, and
operational support of its general managers. In 1995, due to turnover,
attrition, or termination, the Company replaced approximately 26% of its general
managers.

OPERATIONS

DISPATCH OFFICES. Dispatch offices are locations where workers (and
prospective workers) report prior to being assigned to jobs, including those
being called back to the same employer. Workers are required to report to the
dispatch office in order to minimize "no-shows" to the customer's job site. If a
worker fails to report to the dispatch office as scheduled, the Company
identifies a replacement so that the customer has the number of workers expected
at the jobsite, on time, and ready to work.

During the early morning hours, the general manager and an assistant
coordinate incoming customer work orders, assign the available workers to the
job openings for the day, and arrange transportation to the job site. Prior to
dispatch, a branch employee checks to make sure workers have the basic safety
equipment required for the job, such as boots, back braces, hard hats, or safety
goggles, all of which are provided at no charge to the worker or the customer.
The customer provides additional safety and other equipment, if required. New
assignments are generally filled from a first come, first served daily sign-in
sheet, except for return requests. Workers who pass on a particular job are
moved to the bottom of the list. Most work assignments have been scheduled in
advance, a majority of which are repeat work orders from customers. However, a
significant portion of the job openings are requested on short notice, often the
same day as requested.

The workers are provided with a work order (which is endorsed by the
customer to confirm work performance) that each worker must present at the
dispatch office in order to receive payment for the hours worked. Workers are
generally paid daily by check. Computer systems at each dispatch office perform
the calculations necessary to determine the wages, less taxes and applicable
withholdings, and print security controlled checks, which are distributed to
each worker.

Dispatch offices generally open early, usually by 5:30 a.m., with some open
24 hours (depending on volume or activity), and generally remain open until the
last temporary laborer is paid. Dispatch offices are generally staffed with at
least two full-time employees, including the general manager and a customer
service representative. General managers manage the daily dispatch of temporary
workers, and are responsible for monitoring and collecting receivables, managing
the credit application process for each customer, inspecting customer job sites
for site safety, as necessary, and managing the sales and marketing efforts of
the dispatch office.

Employment applications are taken throughout the day for potential new
temporary employees. Applications are used to facilitate workers compensation
safeguards and quality control systems by permitting the Company to test for
alcohol or drugs in case of work-related illness or injury, to obtain a signed
"Condition of Employment" statement, and to comply with applicable immigration
requirements.

CUSTOMERS. The Company's customers are primarily businesses and, less
frequently, government agencies, that require workers for lifting, hauling,
cleaning, assembling, digging, painting and other types of manual work. The
Company's customers are typically engaged in construction, landscaping, freight
handling, warehousing, or other light manufacturing. Customers also include
retail and wholesale operations, sanitation, machine shops, printers, hotels and
restaurants.

New dispatch offices initially target the construction industry for
potential customers, except for those new dispatch offices that are located in
metropolitan areas where there is little new construction. In addition, as
dispatch offices mature, the customer base broadens and the mix of work
diversifies. Many of the businesses have elements of seasonality or cyclicality
in their work flow and have a need for one or more workers. The Company
currently derives its business from a large number of customers, and is not
dependent on any large customer for more than 2% of its revenues. During 1995,
the Company's ten largest customers accounted for $6.4 million, or 6.8% of total
sales. While a single dispatch office may derive a substantial percentage of its
revenues from a single customer, the loss of that customer would not have a
significant impact on the Company's revenues. During 1995, the Company provided
temporary workers to in excess of 29,000 customers. Labor Ready filled more than
800,000 work orders in 1995.

Many customers use Labor Ready as a screening device for future hires.
Because Labor Ready does not charge a fee if a customer hires a Company worker,
customers on occasion send prospective employees to the Company with a specific
request for temporary assignment to their business. Customers thereby have the
opportunity to observe the prospective employee in an actual working situation,
and minimize expenses involved in employee turnover and personnel agency fees.

BILLING AND COLLECTIONS. The Company has implemented a credit policy which
allows new customers to establish an account with a $2,500 initial credit limit.
Workers may be dispatched to a new customer's job site when a credit application
is completed and signed. Thereafter, the Company obtains credit reports and bank

references to evaluate whether additional credit is justified. The credit
department processes applications within 24 hours and if information indicates
credit risk, the account will be placed on a "hold" status and no further
business can be conducted until the credit risk is resolved. This policy is
designed to limit the Company's exposure to $2,500 for a new account. When the
credit risk is resolved, the account will be granted a credit line up to $5,000.
If the account requires higher credit limits, the credit department will expand
its credit investigation to justify such increase by completing trade reference
verification, analysis of financial statements and tax returns. Once a customer
has reached 75% of its credit limit, the customer screen on the Company's
information system has a red warning to alert dispatch office personnel to more
closely monitor the activity of the customer.

SALES AND MARKETING. Generally, each dispatch office is responsible for its
own sales and marketing efforts. The general manager is primarily responsible
for customer service and sales, but most branch employees are also involved in
customer sales and marketing. Each dispatch office maintains databases for area
businesses for telemarketing and direct mail. The Company expects each dispatch
office to mail 300 to 500 pieces of direct mail a week with follow-up to be made
by the general manager or the customer service representative. The corporate
office will conduct an initial mailing of 5,000 to 10,000 pieces to the
geographic area to support the new dispatch office opening.

At the corporate level, the Company is developing coordinated marketing
strategies, including the development of national accounts with electronic order
entry from the customer's location, centralized dispatch via an 800 number,
dissemination of information on local construction activity, advertising
campaigns in targeted markets prior to new dispatch office openings, and
implementation of a centralized customer service hotline which promotes prompt
and professional resolution to customer issues as they arise. In late 1995, the
Company hired a national sales manager to develop business with large employers
on a national and regional basis. The Company also employs several salespeople
who facilitate sales and marketing activities to specific dispatch offices or
for specific industries.

When entering new markets, the Company allows for an initial advertising
budget to generate an awareness of the new dispatch office. By opening
additional dispatch offices as warranted based on area demographics, the Company
can expand and coordinate its marketing efforts and benefit all the dispatch
offices in the local area. Marketing is accomplished primarily through personal
contacts, direct mail campaigns, and yellow pages advertising. Word of mouth
also provides a significant source of new business for the Company. General
managers are encouraged to work with other dispatch offices in the same
metropolitan area.

TEMPORARY WORKERS. Most workers find the Company's "Work Today, Paid Today"
policy appealing and arrive at the dispatch office early in the morning
motivated to put in a good day's work and receive a paycheck at the end of the
day. Labor Ready's temporary workers are typically persons who are unemployed or
in between jobs. Nearly all are male and most are between the ages of 18 and 40
and live in low income neighborhoods. Most temporary workers have phone numbers,
but do not own cars. The average temporary worker works for Labor Ready
approximately 90 hours per year.

The Company's daily pool of temporary workers at each dispatch office
generally numbers between 40 and 200, depending upon the time of year. Although
the Company is less dependent on weather than in its early years because of a
wider dispersion of dispatch offices in different geographic areas of the United
States, good weather, nevertheless, brings incrementally more job orders and
workers.

After reviewing work orders for the day, the general manager pre-screens the
qualifications of the temporary workers to assure they can perform the work
required. Additionally, the individual must be at least 18 years old, physically
capable and in apparent good health. The main objective is to dispatch the most
suitable workers for the positions available. Dispatch office employees over
time come to know most workers at the dispatch office and their capabilities.
The Company is an equal opportunity employer.

Under the Company's "satisfaction guaranteed" policy, replacements for all
unsatisfactory workers are promptly provided if the customer notifies the
Company within the first two hours of work. Employees who receive two concurrent
complaints from customers are generally terminated or reprimanded. The Company
will immediately terminate any employee who agrees to take a work order and does
not report at the

customer's job site. Any use of obscene language, alcohol or drugs on the
dispatch office premises or at the job site are grounds for immediate dismissal.
In addition, an employee found to be engaging in dishonest acts or filing a
false workers' compensation claim will be terminated.

The Company is responsible for withholding of FICA, Medicare, and federal,
state, and, where applicable, city and county payroll taxes from its temporary
workers for disbursement to governmental agencies. Additionally, the Company
pays federal and state unemployment insurance premiums, and workers'
compensation expenses for its temporary employees. See "-- Workers'
Compensation."

RECRUITMENT OF TEMPORARY WORKERS. The Company attracts its pool of
temporary workers through flyers, newspaper advertisments, dispatch office
displays, and word of mouth. The Company believes its strategy of locating
dispatch offices in lower income neighborhoods, with ready access to public
transportation, is particularly important in attracting workers.

The Company's "Work Today, Paid Today" policy is prominently displayed at
most dispatch offices and, in the Company's experience, is a highly effective
method of attracting temporary workers. Workers also find other Company policies
attractive, such as the emphasis on worker safety, Company provided safety
equipment, and modest advances for lunch or gas for workers short on cash.
Temporary workers are also aware of the Company's no-fee policy toward temporary
workers who receive regular position offers from the Company's customers. The
possibility of landing a regular position serves as an added incentive to its
workers. Finally, dispatch offices generally remain open to ensure workers get
paid the same day.

Management believes that Labor Ready has earned a good reputation with its
temporary labor pool because the Company consistently has jobs available and
treats these workers with respect, which the Company believes helps attract a
motivated and responsive worker pool. As a result, the Company believes
referrals by current or former employees who have had good experiences with the
Company account for a significant percentage of its temporary workers.

The Company experiences from time to time during peak periods shortages of
available temporary workers. Dispatch offices with a shortage of workers attempt
to fill work orders by asking temporary workers to inform friends, relatives and
neighbors of the job openings and by identifying prospective workers from the
Company's employee data base. On occasion, work orders requiring large numbers
of temporary workers will be filled by general managers coordinating with other
local dispatch offices.

MANAGEMENT, EMPLOYEES AND TRAINING. The Company currently employs a total
of 62 administrative and executive staff in the corporate office, and 431 people
as supervisors, general managers, customer service representatives, district
managers, area directors and support staff. General managers report to district
managers who in turn report to area directors. The Company is hiring additional
supervisory management personnel with experience in managing multilocation
operations.

After extensive interviews and tests, prospective general managers and
customer service representatives generally undergo four weeks of training at an
existing high-volume dispatch office. The employees then attend Labor Ready
University, the Company's training division, located at the dispatch office in
Tacoma, Washington. Labor Ready University, formed in 1995 with the mission of
training managers and customer service representatives on the skills necessary
for operating a dispatch office, is staffed by an experienced training
professional. The Company has developed a curriculum, training manuals, and
instruction modules for the six-day, rigorous sessions, which include sessions
on topics such as marketing, direct mail, credit and collections, workers'
compensation and safety. By operating the training center as part of an ongoing
dispatch office, the managers and customer service representatives receive
training under actual and simulated dispatch conditions. The Company is
currently establishing ten certified field training centers located in current
dispatch offices where all prospective general managers will attend their
initial four weeks training. Department heads from the Company's corporate
offices teach topics based on their area of expertise. The Company usually
arranges to have an experienced manager participate in the classes to share
experiences encountered in operating a dispatch office.

MANAGEMENT INFORMATION SYSTEMS. The Company has internally developed its
own proprietary software system to process all required payroll information and
related payroll tax returns, together with

other information important to managing thousands of workers and staff in
multiple locations. The Company completed the installation in all dispatch
offices of the most recent version of this software in 1995. Labor Ready employs
five full-time professionals that continually upgrade the systems to add
features and enhance operations and reliability. The system will continue to
require additional hardware and software to accommodate the Company's operating
and information needs while the Company conducts its rapid expansion program.

The system maintains all of the Company's key databases, from the tracking
of work orders to payroll processing to maintaining worker records. The system
regularly exchanges key database information between corporate headquarters and
dispatch offices, including customer credit information and the tracking of
workers' compensation safety claims. Dispatch offices can run a variety of
reports on demand, including receivables aging. The Company can also conduct
keyword searches in its employee database for certain types of work experience.
Regional and area directors can also call into the system and monitor their
territories from their laptops. The Company believes its proprietary software
system provides Labor Ready with significant competitive advantages over
competitors that utilize less sophisticated systems.

The Company's information system also provides the Company with its key
internal controls. All work order tickets are entered into the system at the
dispatch office level. No payroll check can be issued at a dispatch office
without a corresponding work ticket on the computer system. When a payroll check
is issued, the customer's weekly bill and the dispatch office receivables are
automatically updated. Printed checks have watermarks and computer-generated
signatures that are extremely difficult to duplicate.

WORKERS' COMPENSATION PROGRAM. The Company maintains workers' compensation
insurance, as required by state laws. The Company operates in three states
(Washington, Nevada and Ohio) in which the state provides and administers the
insurance and the Company is required to pay premiums based on its experience
ratings. Other states permit the Company to obtain insurance coverage through a
private fronting insurance carrier licensed to do business in those states. In
1995, the Company deposited $4.6 million with a foreign off-shore company for
the payment of workers' compensation claims and related claims settlement
expenses on claims originating in these states. Claims are administered by a
third party administrator retained by the Company.

The Company has established a separate department at its corporate
headquarters to manage its insurers, third party administrators, and the medical
service providers. The Company attempts to resolve claims promptly and generally
closes claims within 120 days. To reduce the wage-loss compensation claims, the
Company has established a "light duty" return to work program that requires
minimal physical exertion within the Company (dispatch office work) or outside
assignments (e.g., cafeteria help) to customers. The Company's information
system generates weekly workers' compensation loss minimization reports for both
corporate and branch location use.

GOVERNMENT REGULATIONS.

SAFETY PROGRAMS. As an employer, the Company is subject to applicable state
and/or federal statutes and administrative regulations pertaining to job site
safety. Where states do not have a safety program certified by the federal
Occupational Safety & Health Administration ("OSHA"), the Company is subject to
the standards prescribed by the federal Occupational Safety & Health Act and
rules promulgated by OSHA. However, the temporary employees are generally
considered the customer's employees while on the customer's job site for the
purpose of applicable safety standards compliance liability.

In 1995, the Company's accident rate was approximately one incident per
6,000 man hours worked. The Company continues to emphasize safety awareness,
which helps control workers' compensation costs, through training of its
management employees and office staff, safety sessions with employees, issuing
of safety equipment, monitoring of job sites, and communicating with customers
to assure that the job request order is one that can be safely accomplished.
Temporary workers are trained in safety procedures primarily by showing safety
tapes at the beginning of each day. Bulletin boards with safety-related posters
are prominently displayed. "Tailgate" safety training sessions are conducted at
the manager's and regional safety director's discretion.

The Company maintains its own inventory of safety equipment at each dispatch
office. Standard equipment includes hard hats, metal tipped boots, gloves, back
braces, ear plugs, and safety goggles. Equipment is checked out to workers as
appropriate. All construction jobs require steel-toed boots and a hard hat. The
manager ensures that workers take basic safety equipment to job sites.

Office personnel are trained to discuss job safety parameters with customers
on incoming work order calls. Managers conduct job site visits for new customer
job orders and periodic "spot checks" for existing customers to review safety
conditions at job sites. Workers are encouraged to report unsafe working
conditions to the Company.

WAGE AND HOUR REGULATION. Labor Ready is required to comply with applicable
state and federal wage and hour laws. These laws require the Company to pay its
employees minimum wage and to pay overtime at applicable rates of pay when the
employee works more than forty hours in a work week. In some states, overtime
pay may be required after eight or ten hours of work in a day.

COMPETITION

The temporary services industry is highly fragmented and highly competitive,
with limited barriers to entry. A large percentage of temporary staffing
companies are local operations with fewer than five offices. Within local or
regional markets, these firms actively compete with the Company for business.
The primary basis of competition among local firms is price and, to a lesser
extent, service. While entry into the market has limited barriers, lack of
working capital frequently limits growth of smaller competitors.

Although there are several very large full-service and specialized temporary
labor companies competing in national, regional and local markets, to date,
those companies have not aggressively expanded in the Company's targeted market
segment. Many of these competitors have substantially greater financial and
marketing resources than those of the Company. One or more of these competitors
may decide at any time to enter or expand their existing activities in the light
industrial market and provide new and increased competition to the Company. The
Company believes that, among the larger competitors, the primary competitive
factors in obtaining and retaining customers are the cost of the temporary
labor, the quality of the temporary workers provided, the responsiveness of the
temporary labor company, and the number and location of offices. The
availability to the Company's customers of multiple temporary service providers
creates significant pricing pressure as competitors compete for the available
demand, and this pricing pressure adversely impacts operating margins.

TRADEMARKS

The Company's business is not presently dependent on any patents, licenses,
franchises, or concessions. "Labor Ready," the "LR" logo and the service mark
"Work Today, Paid Today" are registered with the U.S. Patent and Trademark
Office.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS.

YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

DISPATCH OFFICES. The number of dispatch offices grew to 106 at December
31, 1995 from 51 locations at December 31, 1994, a net increase (after closings
and consolidations) of 55 dispatch offices, or 108%. The Company estimates that
its aggregate costs of opening 57 new dispatch offices in 1995 was $2.0 million
(an average of approximately $35,000 per dispatch office) compared to aggregate
costs of approximately $850,000 (an average of approximately $25,000 per
dispatch office) to open 34 new dispatch offices in 1994. Management believes
that the costs of opening new dispatch offices will continue to increase. The
increases in 1995 were primarily the result of a longer manager training period,
establishment of Labor Ready University, and the added opening costs related to
the use of more sophisticated computer and other office systems. Dispatch office
locations grew to 51 locations at December 31, 1994 from 17 locations at
December 31, 1993, a net increase of 34 dispatch offices, or 200%. The Company
estimates that its aggregate costs of opening 34 new dispatch offices in 1994
was $850,000 compared to $160,000 (an average of $20,000 per

dispatch office) to open eight new dispatch offices in 1993. The increases were
primarily the result of expanded manager training and the installation of more
sophisticated computer and other office systems at the dispatch offices.

REVENUES FROM SERVICES. The Company's revenues from services increased to
$94.4 million for 1995 from $39.0 million for 1994, an increase of $55.4
million, or 142%. This increase in revenues from services resulted from
essentially equal increases in revenues from dispatch offices open for the full
period and revenues generated from dispatch offices opened during the period, as
indicated below. The Company's revenues from services increased to $39.0 million
for 1994 from $15.7 million for 1993, an increase of $23.3 million, or 148%. As
in 1995, this increase resulted from essentially equal increases in revenues
from dispatch offices open for the full period and from revenues generated from
dispatch offices opened during the period, as indicated below.

1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)

Increase in revenues from dispatch offices open for full year..................... $ 4,536 $ 11,652 $ 27,101
Revenues from new dispatch offices opened during year............................. $ 2,699 11,640 28,310
--------- --------- ---------
Total increase over prior year.................................................... $ 7,235 $ 23,292 $ 55,411
--------- --------- ---------
--------- --------- ---------

COST OF SERVICES. Cost of services increased to $76.6 million for 1995 from
$30.7 million for 1994, an increase of $45.9 million, or 150%, reflecting the
additional wages and salaries paid to temporary workers and additional
management personnel and related payroll expenses. Cost of services as a
percentage of revenues from services increased to 81.2% for 1995 from 78.9% for
1994, an increase of 2.3%. This increase in costs as a percentage of revenues
reflects salaries of new supervisory personnel hired under new management
organizational structures, the hiring of large numbers of general managers prior
to dispatch office openings, the use of lower introductory rates to attract new
customers at new dispatch offices, and the relatively lower revenues generated
by new dispatch offices prior to reaching maturity. The Company expects to
experience significant fluctuations in such percentage in future periods as the
Company continues its rapid addition of new dispatch offices. Costs of services
increased to $30.7 million for 1994 from $12.4 million for 1993, an increase of
$18.3 million, or 148%. Costs of services as a percentage of revenues from
services were essentially unchanged from 1993 to 1994, decreasing to 78.9% for
1994 from 79.2% for 1993.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses increased to $13.6 million in 1995 from $6.6 million in
1994, an increase of $7.0 million, or 106%. As a percentage of revenues,
selling, general, and administrative expenses decreased to 14.5% for 1995 from
16.9% for 1994. This percentage decrease resulted primarily from selling,
general and administrative expenses increasing at a slower rate than the
increase in revenues. Selling, general, and administrative expenses increased to
$6.6 million in 1994 from $2.7 million in 1993, an increase of $3.9 million, or
144%. As a percentage of revenues, selling, general, and administrative expenses
were 16.9% in both 1994 and 1993. The increases in selling, general, and
administrative expenses are primarily the result of increased overhead,
including management information systems, workers compensation administration,
administrative personnel and other expenses related to the growth of the
Company.

INTEREST AND OTHER EXPENSES. Interest and other expenses increased to
approximately $866,000 in 1995 from approximately $457,000 in 1994, an increase
of 89.5%, reflecting primarily higher borrowing amounts and the additional
interest costs of the $10 million principal amount of subordinated debt issued
in October 1995. As a percentage of revenues, interest expense decreased from
1.2% to 0.9%, reflecting the increased revenues of the Company. In 1994,
interest expense increased to approximately $457,000 from $353,000 in 1993,
reflecting primarily higher borrowed amounts. As a percentage of revenues,
interest expense decreased from 2.3% to 1.2%, reflecting the Company's increased
revenues. The increase in borrowings is mainly the result of the Company
financing its accounts receivable which increased from $1,907,000 in 1993, to
$5,163,000 in 1994 and to $12,183,000 in 1995, corresponding to the significant
increase in revenues each year. The average effective interest rate on the
Company's borrowings was 16.5%, 15.3% and 29.0% for

1995, 1994 and 1993, respectively. In March 1996, the Company activated its new
$10 million revolving line of credit with U.S. Bank of Washington which bears
interest at a rate equal to prime plus 1/4% (currently 8.5%) and replaces the
Company's former credit line with Concord Growth Corporation.

TAXES ON INCOME. The Company's taxes on income increased to $1.2 million in
1995 from approximately $336,000 in 1994, an increase of approximately $816,000,
or 243%. This increase was the direct result of the corresponding increase in
the Company's income before taxes for such period. The Company had a net
deferred tax asset of approximately $715,000 at December 31, 1995, resulting
primarily from workers' compensation deposits, credits and reserves which will
reverse in 1996. The Company has not established a valuation allowance against
this net deferred tax asset as management believes that it is more likely than
not that the tax benefits will be realized in the future based on the historical
levels of pre-tax income and expected future taxable income. See Note 10 to
Consolidated Financial Statements. The Company's taxes on income increased to
$336,000 in 1994 from approximately $32,000 in 1993, an increase of
approximately $304,000, or 950%. This increase was the result of an increase in
the Company's income before taxes for such period and higher overall effective
tax rates as the Company expanded into more states with state income taxes.

NET INCOME. The increase in revenues from services also resulted in an
increase in net income to $2.1 million for 1995 from approximately $852,000 for
1994. This represents an increase of $1.2 million, or 142%. The increase in net
income corresponds to the growth in revenues. In 1994, the increase in revenues
from services also resulted in an increase in net income to approximately
$852,000 from approximately $269,000 for 1993, an increase of approximately
$583,000, or 216%. The increase in net income in 1994 is primarily the result of
increased revenues and lower interest costs.

SEASONAL AND CYCLICAL CUSTOMER DEMAND; ECONOMIC CYCLES. Many of the
Company's customers are construction and landscaping businesses that are
significantly affected by the weather. Construction and landscaping businesses
and, to a lesser degree, other customer businesses typically increase activity
in spring, summer and early fall months and decrease activity in late fall and
winter months. Inclement weather can slow construction and landscaping
activities during such periods. The Company has generally experienced a
significant increase in temporary labor demand in the spring, summer and early
fall months, and lower demand in the late fall and winter months.

Demand for the Company's services may be significantly affected by the
general level of economic activity and unemployment in the United States. As
economic activity increases, such as in recent years, temporary employees are
often added to the work force before regular employees are hired. As economic
activity slows, many companies reduce their use of temporary employees before
laying off regular employees. In addition, the Company may experience heightened
levels of competitive pricing pressure during such periods of economic downturn.
World-wide economic conditions and U.S. trade policies also impact demand for
the Company's services.

Depending upon location, new dispatch offices initially target the
construction industry for potential customers. As dispatch offices mature, the
customer base broadens and the mix of work diversifies. A slow-down in general
economic activity within the construction industry, however, could lengthen the
time period for new dispatch offices to generate sufficient revenues to cover
operating costs and thereby increase the cash necessary to fund the operations
of new dispatch offices until they begin to generate sufficient revenue to cover
their operating costs.

LIQUIDITY AND CAPITAL RESOURCES

During 1995 and 1994, the Company used net cash in operating activities of
$3.7 million and $2.3 million, an increase of 64.8%, reflecting the significant
growth in the Company's revenues and accounts receivable, increased workers'
compensation deposits, and the opening of 57 new dispatch offices in 1995 and 34
new dispatch offices in 1994. The Company incurred capital expenditures of $2.5
million and approximately $550,000 in 1995 and 1994 in connection with openings
of dispatch offices and improvements to the corporate offices. Management
anticipates continuing cash flow deficits from operations while the number of
dispatch offices continues to grow at a rapid rate. Management expects such cash
flow deficits will be financed by the proceeds of this offering and other equity
and debt financings.

The Company financed its operations and growth in 1995 primarily through the
sale of debt and equity securities. In early 1995, warrants to purchase 712,440
shares of the Company's Common Stock were exercised for aggregate consideration
of approximately $1.8 million.

In October 1995, the Company completed a private financing of $10.0 million
principal amount of 13.0% Senior Subordinated Notes (the "Notes"). Under the
terms of the Notes, which require principal payments to begin in 1998 and which
mature in 2002, the Company pledged its remaining assets as collateral and
issued warrants (the "Financing Warrants") to the purchasers of the Notes. The
Financing Warrants entitle the holders thereof to purchase 682,368 shares of
Common Stock of the Company at an exercise price of $11.67 per share, and are
exercisable at any time prior to their expiration on the earlier of the seventh
anniversary of the Notes and six years from the date the Notes are paid in full.
If the Notes are retired by the Company prior to November 1998 and before the
Financing Warrants are exercised, the number of shares subject to purchase under
the Financing Warrants is reduced to 545,894 shares.

In 1995, the Company incurred costs of $2.0 million to open 57 new dispatch
offices (an average of approximately $35,000 per dispatch office). Further, the
Company invested significant amounts of additional cash into the operations of
new dispatch offices until they begin to generate sufficient revenue to cover
their operating costs, generally in two to six months. Further, the Company pays
its temporary personnel on a daily basis, and bills its customers on a weekly
basis. The average collection cycle for 1995 was approximately 37 days. Since
the Company plans to open 94 dispatch offices in 1996 and 100 dispatch offices
in 1997, the Company expects to experience cash flow deficits from operations
and investing activities in 1996 and 1997. The Company intends to finance
opening and operating costs of new dispatch offices with the proceeds from
equity or debt financings. With such funds, and depending on its results of
operations and other factors described herein, the Company expects to have the
financial resources necessary to open at least 154 dispatch offices through
1997. To the extent that the Company's resources are not sufficient to finance
new dispatch offices, or are not sufficient to open all currently targeted
dispatch offices, the Company would either seek additional capital through
equity or debt financings or scale back its expansion plans.

INFLATION

The effects of inflation on the Company's operations were not significant
during the periods presented herein. Generally, throughout the periods discussed
above, the increases in revenues have resulted primarily from increasing sales
at existing dispatch offices and adding new dispatch office locations rather
than price increases. In the event, however, that Congress passes legislation
currently being considered to increase the federal minimum wage, the Company
would attempt to increase the rates it charges customers.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board ("FASB"), issued a
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," which requires that companies measure the cost of
stock-based employee compensation at the grant date based on the value of the
award and recognize this cost over the service period. The value of the stock
based award is determined using the intrinsic method whereby compensation cost
is the excess of the quoted market price of the stock at the date of grant or
other measurement date over the amount an employee must pay to acquire the
stock. SFAS No. 123 is effective for financial statements issued for fiscal
years beginning after December 15, 1995, and is not expected to have a
significant impact on the Company's financial statements.

In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement requires that long-lived assets and certain intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. The measurement of an impairment loss for long-lived assets and
identifiable intangibles that an entity expects to hold and use should be based
on the fair value of the asset. SFAS No. 121 is effective for financial
statements for fiscal years beginning after December 15, 1995, and is not
expected to have a significant impact on the Company's financial statements.

EXHIBIT INDEX
FORM 10-K/A
LABOR READY, INC.
EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------

3 Articles of Incorporation................................................................... *
3.1 Articles of Amendment to Articles of Incorporation..........................................
3.2 Bylaws......................................................................................
4 Instruments Defining Rights of Security Holders............................................. *
10 Material Contracts
10.1 Note Purchase Agreement..................................................................... **
10.2 Warrant Purchase Agreemetn.................................................................. **
10.3 Form of Warrant............................................................................. **
10.4 Shareholder Agreement....................................................................... **
10.5 Security Agreement (LR,LRN,LRFD)............................................................ **
10.6 Intercreditor and Subordination Agreement................................................... **
10.7 Executive Employment Agreement between LR and Glenn A. Welstad.............................. **
10.8 Independent Contractor Agreement between LR and John R. Coghlan............................. **
10.9 Employment Agreement between LR and Scott Sabo.............................................. **
10.10 Loan documents between LR and US Bank of Washington as executed on February 13, 1996........
10.11 Form of Lease for LR dispatch office........................................................
11 Computation of Earnings Per Share........................................................... **

- ------------------------
* As previously filed in the Company's Form 10 Registration Statement, SEC File
No. 0-23828.

** As previously filed in the Company's report on Form 10-K for the year ended
December 31, 1995.

COPIES OF EXHIBITS MAY BE OBTAINED UPON REQUEST DIRECTED TO MR. RALPH
PETERSON, LABOR READY, INC., 2156 PACIFIC AVENUE, TACOMA, WASHINGTON 98402.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 12th day of
June, 1996.

LABOR READY, INC.

By: /s/ GLENN A. WELSTAD

-----------------------------------
Glenn A. Welstad,
PRESIDENT

Pursuant to the requirements of the Securities Exhange Act of 1934, this
report has been signed by the following persons on behalf of the registrant in
the capacities set forth below on the 12th day of June, 1996.

/s/ GLENN A. WELSTAD
- ------------------------------------------- Chairman, Chief Executive
Glenn A. Welstad Officer and Director

/s/ RALPH E. PETERSON
- ------------------------------------------- Chief Financial Officer and
Ralph E. Peterson Director

/s/ ROBERT J. SULLIVAN
- ------------------------------------------- Director
Robert J. Sullivan

/s/ RONALD L. JUNCK
- ------------------------------------------- Secretary and Director
Ronald L. Junck

/s/ THOMAS E. MCCHESNEY
- ------------------------------------------- Director
Thomas E. McChesney