QuickLinks-- Click here to rapidly navigate through this documentAs filed with the Securities and Exchange Commission on May 6, 1996.
September 5, 2002
Registration No. 333- - --------------------------------------------------------------------------------
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
Washington D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LABOR READY, INC.
(Exact
Labor Ready, Inc.
(Exact name of registrant as specified in its Charter)

charter)

WASHINGTON Washington 7360 91-1287341
(State of Incorporation
(State or (Primaryother jurisdiction of
incorporation or organization) (Primary Standard Industrial (IRS Employer Identification
Organization)
Classification Code Number) Number)
(IRS Employer
Identification No.)

2156 PACIFIC AVENUE, TACOMA, WASHINGTON1015 A Street, Tacoma, Washington 98402, (206)(253) 383-9101
(Address
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

RALPH E. PETERSON, 2156 PACIFIC AVENUE, TACOMA, WASHINGTON 98402
(509) 928-9353
(Name,office)
CT Corporation System, 520 Pike Street, Seattle, Washington 98101, (206) 622-4511
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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WITH COPIES TO

MARK R. BEATTY, ESQ. MICHAEL M. FLEMING, ESQ. WILLIAM E. VAN VALKENBERG, ESQ.
GARY J. KOCHER, ESQ. RYAN SWANSON & CLEVELAND BRADLEY B. FURBER, ESQ.
PRESTON GATES & ELLIS 1201 THIRD AVENUE, SUITE 3400 VAN VALKENBERG FURBER LAW
701 FIFTH AVENUE, SUITE 5000 SEATTLE, WA 98101 GROUP P.L.L.C.
SEATTLE, WA 98104 TELEPHONE: (206) 464-4224 1325 FOURTH AVENUE, SUITE 940
TELEPHONE: (206) 623-7580 SEATTLE, WA 98101
TELEPHONE: (206) 464-0637

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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Copies of all communications to:
Gary J. Kocher
Preston Gates & Ellis LLP
701 Fifth Avenue, Suite 5000
Seattle, Washington 98104-7078
(206) 623-7580
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If the only securities being registered on this formForm are being offered pursuant to a dividend or interest reinvestment plan,plans, please check the following box: / /box. o
If any securitiesof the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, of
1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / /box: ý
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /o
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /

o
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AGGREGATE AGGREGATE AMOUNT OF
AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TITLE OF SHARES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (2) FEE

Common Stock, no par value.................. 1,150,000 shares $24.50 $28,175,000 $9,716

Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Offering Price Per Unit Proposed Maximum Aggregate Offering Price Amount of Registration Fee
6.25% Convertible Subordinated Notes due June 15, 2007 $70,000,000 100% $70,000,000 $6,440
Common Stock, $0.01 par value per share 9,641,870 shares(1) n/a n/a n/a
(1) Includes 150,000
This number represents the number of shares whichof common stock that are initially issuable upon conversion of the Underwriters have6.25% Convertible Subordinated Notes due June 15, 2007 registered hereby. For purposes of estimating the optionnumber of shares of common stock to purchase
to cover over-allotments, if any.

(2) The proposed maximum price per share andbe included in the proposed maximum aggregate
offering price isregistration statement upon conversion of the notes, Labor Ready, Inc. calculated the number of shares issuable upon conversion of the notes based on the averagea conversion rate of 137.741 shares per $1,000 principal amount of the bid and asked pricesnotes. In addition to the shares set forth in the table, the amount to be registered includes an indeterminate number of shares of Common Stock issuable upon conversion of the Company's Common Stock onnotes, by means of adjustment to the OTC Bulletin Board on April 26, 1996,
calculated in accordance with rule 457(c)conversion price applicable thereto. Pursuant to Rule 457(i) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)there is no filing fee with respect to the shares of common stock issuable upon conversion of the exercise of the conversion privilege.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), MAY DETERMINE.

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
may determine.
The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated May 6, 1996

1,000,000 SHARES

[LABOR READY LOGO]

COMMON STOCK

All of the 1,000,000 sharesSeptember 4, 2002
Labor Ready, Inc.
6.25% Convertible Subordinated Notes Due June 15, 2007
and
Shares of Common Stock offered herebyIssuable Upon Conversion of the Notes
This prospectus relates to $70,000,000 in aggregate principal amount of 6.25% Convertible Subordinated Notes due June 15, 2007 of Labor Ready, Inc. and 9,641,870 shares of common stock of Labor Ready, Inc., which are beinginitially issuable upon conversion of the notes, plus an indeterminate number of shares as may become issuable upon conversion as a result of adjustments to the conversion rate. The notes were originally issued and sold by Labor Ready, Inc. ("Labor Ready"in a private placement on June 19, 2002. This prospectus will be used by selling securityholders to resell their notes and the common stock issuable upon conversion of the notes.
We will not receive any proceeds from the sale of the notes or shares of common stock issuable upon conversion of the notes by any of the selling securityholders. Holders of the notes or the "Company").shares of our common stock issuable upon conversion of the notes may offer the notes or the common stock for sale at any time at market prices prevailing at the time of sale or at privately negotiated prices. The Common Stock is
currently tradedselling holders may sell the notes or the common stock directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions.
Interest on the OTC Bulletin Board undernotes is payable on June 15 and December 15 of each year, commencing on December 15, 2002.
Upon the symbol LBOR. On May 3,
1996,limited circumstances described in this prospectus, including the closing bid price of our common stock reaching a specified threshold above the Common Stock was $24.00conversion premium, the notes will be convertible into 137.741 shares of our common stock per $1,000 principal amount of notes, subject to adjustment in certain circumstances. This rate results in an initial conversion price of approximately $7.26 per share. See "Price
Range of Common Stock and Dividend Policy." The Common Stock has been approved
for quotation on
On or after June 20, 2005, we may at our option redeem the Nasdaq National Market upon commencement of this offering
under the symbol "LBOR."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 6 OF THIS PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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Per Share........... $ $ $
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Total(3)............ $ $ $

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(1) See "Underwriting" for indemnification arrangements with the several
underwriters.

(2) Before deducting expenses payable by the Company, estimated at $564,000.

(3) The Company has granted the Underwriters a 45-day option to purchase up to
an additional 150,000 shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , Underwriting Discount will total
$ , and the Proceeds to Company will total $ . See
"Underwriting."

The shares of Common Stock are offered by the several Underwriters named
herein subject to receipt and acceptance by them and subject to their rights to
reject any ordernotes, in whole or in part. It is expectedpart, at the redemption prices described in this prospectus, plus any accrued and unpaid interest to the redemption date; provided that deliverythe closing price of our common stock has exceeded 125% of the certificates representing such sharesconversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the date of mailing of the provisional redemption notice to holders. In the event of a change in control (as defined in this prospectus) of Labor Ready, Inc., each holder of notes may require us to repurchase the notes at 100% of the principal amount of the notes plus accrued and unpaid interest.
The notes are junior to all of our existing and future senior indebtedness and will be made against payment therefore atstructurally subordinated to all existing and future liabilities of our subsidiaries, including trade payables, lease commitments and money borrowed.
Our common stock is listed on the officeNew York Stock Exchange under the symbol "LRW". The last reported sale price on August 30, 2002 was $6.80 per share.
The notes originally issued in the private placement are eligible for trading on the PORTAL Market of Van Kasper & Company, San Francisco, Californiathe National Association of Securities Dealers, Inc. However, notes sold pursuant to this prospectus will no longer be eligible for trading on the PORTAL Market. We do not intend to list the notes on any national securities exchange.
Investing in the notes or about Juneour common stock involves risks. See "Risk Factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or the accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus is , 1996.

VAN KASPER & COMPANY

JUNE , 1996

[LOGO]

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET OR OTHERWISE. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL
MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

[MAP OF LABOR READY DISPATCH OFFICES]

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE
NOTED, (I) ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION AND HAS BEEN ADJUSTED2002.

IMPORTANT NOTICE TO REFLECT ALL STOCK
SPLITS DURING THE PERIODS PRESENTED AND (II) REFERENCES TO THE "COMPANY" OR
"LABOR READY" ARE TO THE CONSOLIDATED OPERATIONS OF LABOR READY, INC. AND ITS
SUBSIDIARIES.

THE COMPANYREADERS
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, using a "shelf" registration process. Under this shelf registration process, the selling securityholders may, from time to time, offer notes or shares of our common stock owned by them. Each time the selling securityholders offer notes or common stock under this prospectus, they will provide a copy of this prospectus and, if applicable, a copy of a prospectus supplement. You should read both this prospectus and, if applicable, any prospectus supplement together with the information incorporated by reference in this prospectus. See "Where You Can Find More Information" and "Incorporation by Reference" for more information.
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone else to provide you with different information. If anyone provides you with different information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any document incorporated by reference in this prospectus is accurate only as of the date on the front cover of the applicable document or as specifically indicated in the document. Our business, financial condition, results of operations and prospects may have changed since that date.
Unless otherwise indicated, in this prospectus, "Labor Ready," the "Company," "we," "us" and "our" refer to Labor Ready, Inc. ("and our subsidiaries.
TABLE OF CONTENTS
IMPORTANT NOTICE TO READERS i
A WARNING ABOUT FORWARD-LOOKING STATEMENTS ii
PROSPECTUS SUMMARY 1
RISK FACTORS 5
RATIO OF EARNINGS TO FIXED CHARGES 15
USE OF PROCEEDS 15
BUSINESS 16
DESCRIPTION OF NOTES 24
DESCRIPTION OF CAPITAL STOCK 43
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES 46
SELLING SECURITYHOLDERS 52
PLAN OF DISTRIBUTION 53
LEGAL MATTERS 55
CHANGE IN ACCOUNTANTS 55
INDEPENDENT PUBLIC ACCOUNTANTS 55
WHERE YOU CAN FIND MORE INFORMATION 55
INCORPORATION BY REFERENCE 56
i

A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements about Labor Ready"Ready, which are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Labor Ready to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the "Company")forward-looking statements. Forward-looking statements include information concerning future financial performance, business strategy, projected plans and objectives of Labor Ready.
Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "project," "estimates," "plans," "may increase," "may fluctuate" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts. You should understand that the following important factors and assumptions could affect the future results of Labor Ready and could cause actual results to differ materially from those expressed in such forward-looking statements:
•
changes in the level of competition in our industry;

•
the availability of workers' compensation insurance on commercially reasonable terms and changes in the level of collateral commitments required to support our workers' compensation obligations;

•
changes in the cost of compliance with government regulations relating to employment;

•
enactment of legislation relating to temporary workers that could harm the demand for our services;

•
changes in seasonal demand for our services;

•
availability of capital; and

•
changes in the rate of economic growth in the United States and other major economies.
Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond the control of Labor Ready. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by Labor Ready.
Factors which could affect our financial results are described in the sections in this prospectus entitled "Risk Factors" and in our periodic reports filed with the SEC including under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" in our Annual Report on Form 10-K, as amended. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required under federal securities laws, we are under no duty to update any of the forward-looking statements after the date of this prospectus to conform such statements to actual results or to changes in our expectations.
ii

PROSPECTUS SUMMARY
This summary provides an overview of selected information and does not contain all the information you should consider. Before making an investment decision, you should carefully read the entire prospectus, including the section entitled "Risk Factors" and the documents incorporated by reference into this prospectus. When used in this prospectus, unless otherwise indicated, the terms "we," "our," and "us" refer to Labor Ready, Inc. and its subsidiaries.
Labor Ready, Inc.
Labor Ready, Inc., founded in Washington in 1989, is a leading national provider of temporary workers for manual labor jobs. The Company's customers are
primarilyOur diversified customer base includes businesses in the construction, freight handling, warehousing, hospitality, landscaping, construction, light manufacturing, retail, wholesale, sanitation and other light industrial businesses.printing industries. These businesses require workers for lifting, hauling, cleaning, assembling, digging, painting and other types of manual or unskilled work. The Company has rapidly
Since our inception in 1989, our revenues have grown from eight Company-ownedto $917.0 million for the fiscal year 2001 and our number of dispatch offices in 1991has grown to 146 Company-owned dispatch offices at May 1, 1996.
Substantially all753 as of June 28, 2002. All of the growth in dispatch offices was achieved organically by opening company-owned locations rather than through mergers or 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 annual revenue per dispatch office open
for more than a full year was $1.3 million.

The Company's expansion strategy is to openWe have dispatch offices in every
metropolitan area inmarkets throughout the United States, and to continue to increase its market
penetration in markets it presently serves. The Company currently anticipates
opening approximately 94 dispatch offices in 1996, of which 40 have already been
opened, and 100 dispatch offices in 1997. The Company uses its branch locations
as traditional "dispatch offices" where workers (and prospective workers) meet
to complete required documentation, receive work assignments, arrange
transportation to and from the job site, and are paid at the end of each work
day. The Company has standardized the operation, general design, staffing and
equipment of the dispatch offices and has typically opened new dispatch offices
in four to six weeks after identifying and securing a lease for a specific site.
Dispatch office leases generally permit the Company to terminate on 30 days
notice and upon payment of three months rent.

The Company's objective is to become the leading provider of temporary
workers for manual labor inCanada, the United States by emphasizing responsivenessKingdom and overall quality of service to customers. To achieve that objective, the Company
opens its offices no later than 5:30 a.m., provides workers on short notice
(often the same day as requested), and offers a "satisfaction guaranteed"
policy. The Company attracts its workers by treating them with respect and
through attractive employment policies. 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 relies on its general managers to conduct the overall operations
and sales and marketing at its dispatch offices. In addition to managing the
recruitment and daily dispatch of temporary workers, each general manager is
responsible for customer service and managing the dispatch office's sales
efforts, including identifying and soliciting local businesses likely to have a
need for temporary manual workers. At the corporate level, the Company is
currently developing and implementing coordinated sales and marketing
strategies, which include the development of national accounts, the
dissemination of information on local construction activity and the
implementation of advertising campaigns in targeted markets prior to new
dispatch office openings.Puerto Rico.
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 National Association of Temporary
Staffing Services ("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
that can effectively manage workers' compensation costs and develop information
systems to efficiently process the high volume of transactions and accurately
coordinate multi-location activities.

The Company is a Washington corporation which was incorporated in 1985. The
Company's principal executive offices are located at 2156 Pacific Avenue,
Tacoma, Washington 98402, and its telephone number is (206) 383-9101.

THE OFFERING

Common Stock offered.............. 1,000,000 Shares
Common Stock to be outstanding
after the offering (1)............ 7,066,633 Shares
Use of proceeds................... To fund the opening of new dispatch offices through
1997, for working capital and for other general
corporate purposes. See "Use of Proceeds."
Nasdaq National
Market symbol..................... LBOR

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(1) Excludes (i) 831,770 shares of Common Stock issuable upon exercise of
outstanding stock options and warrants as of May 1, 1996 at a weighted
average exercise price of $11.44 per share and (ii) 500,000 shares reserved
for future grants under the Company's stock option and purchase plans.

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 (1) 1996 (1)
--------- --------- --------- --------- --------- --------- ---------

STATEMENT OF OPERATIONS DATA:
Revenues from services..................... $ 6,020 $ 8,424 $ 15,659 $ 38,951 $ 94,362 $ 12,618 $ 26,094
Gross profit............................... 1,189 1,939 3,258 8,238 17,719 2,123 3,886
Income (loss) before taxes on income....... (715) 86 253 1,188 3,214 (536) (1,049)
Net income (loss).......................... (715) 159 269 852 2,062 (354) (685)
Earnings (loss) per common share........... $ (0.26) $ 0.06 $ 0.06 $ 0.18 $ 0.34 $ (0.06) $ (.10)
Weighted average shares outstanding (2).... 2,721 2,702 3,668 4,455 5,862 5,991 6,874
OPERATING DATA:
Revenues from dispatch offices open for
full period............................... $ 4,614 $ 8,230 $ 12,960 $ 27,311 $ 65,798 $ 11,966 $ 25,585
Revenues from dispatch offices opened
during period............................. $ 963 $ 194 $ 2,699 $ 11,640 $ 28,245 $ 652 $ 509
Dispatch offices open at period end........ 8 10 17 51 106 68 127

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(1) The information for the quarters ended March 31, 1995 and 1996 is unaudited
but includes all adjustments, consisting only of normal recurring
adjustments, that management considers necessary to fairly present such
information. The results for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year
ending December 31, 1996.

(2) Excludes (i) 831,770 shares of Common Stock issuable upon exercise of
outstanding stock options and warrants as of May 1, 1996 at a weighted
average exercise price of $11.44 per share and (ii) 500,000 shares reserved
for future grants under the Company's stock option and purchase plans.

The following tables present the Company's revenues from services, net
income (loss) and certain operating data for each calendar quarter since March
31, 1994. The information for each of the quarterly periods is unaudited but
includes all adjustments, consisting only of normal recurring adjustments, that
managment considers necessary to fairly present such information.

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1994 1994 1994 1994
----------- --------- ------------- ------------

Revenues from services....................................... $ 5,217 $ 8,318 $ 12,100 $ 13,316
Net income (loss)............................................ (135) 327 422 238
Dispatch offices open at period end.......................... 27 34 44 51
Earnings (loss) per common share............................. $ (0.03) $ 0.08 $ 0.09 $ 0.05

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
----------- --------- ------------- ------------

Revenues from services....................................... $ 12,618 $ 19,750 $ 30,873 $ 31,121
Net income (loss)............................................ (354) 391 1,471 554
Dispatch offices open at period end.......................... 68 96 104 106
Earnings (loss) per common share............................. $ (0.06) $ 0.06 $ 0.24 $ 0.08

MARCH 31,
1996
-----------
Revenues from services....................................... $ 26,094
Net income (loss)............................................ (685)
Dispatch offices open at period end.......................... 127
Earnings (loss) per common share............................. $ (0.10)

MARCH 31,
1996(1)
DECEMBER ----------------------
31, AS
CONSOLIDATED BALANCE SHEET DATA: 1995 ACTUAL ADJUSTED(2)
----------- --------- -----------

Current assets............................................ $ 20,730 $ 18,220 $ 39,976
Total assets.............................................. 26,182 25,112 46,868
Current liabilities....................................... 7,956 7,180 7,180
Long-term liabilities..................................... 9,695 9,729 9,729
Total liabilities......................................... 17,650 16,908 16,908
Shareholders' equity...................................... 8,532 8,204 29,960
Working capital........................................... 12,774 11,040 32,796

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(1) The information at March 31, 1996 is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, that management considers
necessary to fairly present such information.

(2) Adjusted to give effect to the sale of 1,000,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of $24.00
per share, and the application of the estimated net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."

RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH BELOW,
IN ADDITION TO THE OTHER INFORMATION CONTAINED AND INCORPORATED IN THIS
PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.

ABILITY TO ACHIEVE AND MANAGE GROWTH

The Company's ambitious growth plans are subject to numerous and substantial
risks. The Company's ability to continue its growth and profitability will
depend on a number of factors, including the ability of the Company to attract
and retain sufficient qualified managerial personnel to supervise multiple
dispatch offices and to manage individual dispatch offices, the availability of
temporary workers in each new location to fill the needs of customers, existing
and emerging competition, and the availability of working capital to support
anticipated growth. Labor Ready must continually adapt its management structure
and internal control systems as the Company continues its rapid growth. There
can be no assurances that the Company will be able to enter new markets through
the opening of new dispatch offices or successfully manage the costs of opening
and operating new dispatch offices. Any inability to achieve and manage the
Company's ambitious growth plans could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Company Strategy" and "-- Dispatch Office Expansion."

DEPENDENCE UPON KEY PERSONNEL

The Company's success depends to a significant extent upon the continued
service of Glenn A. Welstad, its Chairman, President and Chief Executive
Officer, and other members of the Company's executive management. The loss of
any key executive could have a material adverse effect upon the Company's
business, financial condition, and results of operations. Furthermore, the
Company's future performance depends on its ability to identify, recruit,
motivate, and retain key management personnel, including general managers,
district managers, area directors, and other personnel. The failure to attract
and retain key management personnel could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management."

GOVERNMENT REGULATIONS, INCREASED EMPLOYEE COSTS AND WORKERS' COMPENSATION

The Company is required to comply with all applicable federal and state laws
and regulations relating to employment, including occupational safety and health
provisions, wage and hour requirements, including payment of state and federal
minimum wages, and workers' compensation and unemployment insurance. Costs and
expenses related to these requirements are the Company's second largest expense
and may increase as a result of, among other things, changes in federal or state
laws or regulations requiring employers to provide specified benefits to
employees (such as medical insurance), or increases in the minimum wage or the
level of existing benefits, increased levels of unemployment, or the lengthening
of periods for which unemployment benefits are available. Furthermore, workers'
compensation expenses and the related liability accrual are based on the
Company's actual claims experience in each respective state. The Company's
management and safety programs attempt to minimize workers' compensation claims,
but significant claims could require payment of substantial benefits. There can
be no assurance that the Company will be able to increase fees charged to its
customers to offset any increased costs and expenses, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Operations" and "-- Government
Regulations."

ADEQUACY OF WORKERS' COMPENSATION ARRANGEMENTS

The Company maintains workers' compensation insurance, as required by state
laws. The Company is required to pay premiums or contributions based on its
claims experience in certain states, while in other states the Company provides
coverage through arrangements with a fronting foreign off-shore insurance
company licensed to do business in those states. The Company deposits amounts
with the insurance company to pay claims and claims administration expenses. The
Company maintains "stop loss" insurance coverage for most individual claims in
excess of $250,000 and for 1995 aggregate claims in most states in

excess of $5.4 million. There can be no assurance that the Company's premiums
will not increase substantially or that actual workers' compensation obligations
will not substantially exceed amounts deposited with the off-shore insurance
company. See "Business -- Operations."

RELIANCE ON AND ABILITY TO ATTRACT, DEVELOP AND RETAIN QUALIFIED DISPATCH OFFICE
MANAGERS

The Company relies significantly on the performance and productivity of its
dispatch office general managers. Each general manager has primary
responsibility for managing the operations of the dispatch office, including
recruiting temporary workers, daily dispatch of temporary workers and collecting
accounts receivable. In addition, each general manager has primary
responsibility for customer service and the dispatch office's sales efforts
including identifying and soliciting area businesses likely to have a need for
temporary manual workers. The Company is highly dependent on its ability to
hire, train and retain qualified general managers and the available pool of
qualified candidates is limited. 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 25% of its general
managers. There can be no assurance that the Company will be able to continue to
recruit, train and retain qualified general managers; any failure to do so would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Dispatch Office Expansion" and "--
Operations."

COMPETITIVE MARKET

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.
There are several very large full-service and specialized temporary labor
companies competing in national, regional and local markets, many of which have
not aggressively expanded into the Company's market segment. Many of these
competitors have substantially greater financial and marketing resources than
those of the Company and may decide to expand their existing activities into the
Company's market segment at any time. Price competition in the staffing industry
is intense, particularly for provision of light industrial personnel, and
pricing pressure from both competitors and customers is increasing. The Company
expects that the level of competition will remain high or increase in the
future. Competition, particularly from companies with greater financial and
marketing resources than the Company, could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Competition."

RELIANCE ON INFORMATION PROCESSING SYSTEMS

The Company's business depends upon its ability to store, retrieve, process
and manage significant amounts of information. The Company's management
information systems, including servers, networks, databases, backup and other
systems essential for communication with dispatch offices, are located and
maintained in the Company's Tacoma, Washington headquarters. Interruption,
impairment of data integrity, loss of stored data, breakdown or malfunction of
the Company's information processing systems caused by telecommunications
failure, conversion difficulties, undetected data input and transfer errors,
unauthorized access, viruses, natural disasters, electrical power outage or
disruption, or other events could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Operations."

INDUSTRY RISKS

Temporary staffing companies employ and place people in the workplaces of
their customers. Attendant risks of the industry include possible claims of
discrimination and harassment, employment of illegal aliens, violations of
occupational, health and safety, or wage and hour laws and regulations, errors
and omissions of its temporary employees, misappropriation of funds or property,
other criminal activity or torts and other similar claims. Temporary staffing
companies also are affected by fluctuations and interruptions in the business of
their customers which could have a material adverse effect on their business,
financial condition and results of operations. The temporary staffing industry
may be adversely affected if Congress or state

legislatures mandate specified benefits for temporary employees or otherwise
impose costs and expenses on employers that increase the cost or lessen the
attraction of using temporary workers. See "Business -- Operations" and "--
Government Regulations."

LIABILITY FOR ACTS OF TEMPORARY WORKERS

The Company may be held responsible for the actions at a jobsite of workers
not under the Company's direct control. Although the Company historically has
not experienced significant claims or losses due to these issues, there can be
no assurance that the Company will not experience such claims or losses in the
future or that the Company's insurance, if any, will provide coverage or be
sufficient in amount or scope to cover any such liability. The Company seeks to
reduce any liability for the acts or omissions of its temporary workers by
specifying in its contracts with customers that the customers are responsible
for all actions or omissions of the temporary workers. There can be no assurance
that the terms of the contracts will be enforceable or that, if enforceable,
they would be sufficient to preclude Company liability as a result of the
actions of its temporary personnel or that insurance coverage will be available
or adequate in amount to cover any such liability. If the Company is found
liable for the actions or omissions of its temporary workers and adequate
insurance coverage is not available, the Company's business, financial condition
and results of operations could be materially and adversely affected. See
"Business -- Operations."

LIMITED WORKING CAPITAL

In 1995, the Company incurred costs of approximately $2.0 million to open 57
new dispatch offices (an average of approximately $35,000 per dispatch office).
Once open, the Company invests 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. Consequently, the Company experiences significant
negative cash flow from operations and investment activities during periods of
high growth which also adversely impacts the Company's overall profitability.
The Company expects to continue to experience periods of negative cash flow from
operations and investment activities, and expects to require additional sources
of capital in order to continue to grow. No assurances can be given that such
capital will be available on acceptable terms. If adequate sources of working
capital are not available, the Company's anticipated growth may not be realized,
thereby adversely impacting the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

EFFECT OF ECONOMIC FLUCTUATIONS

Demand for the Company's services may be significantly affected by the
general level of economic activity and unemployment in the United States and
specifically within the construction and light industrial trades. However, 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. No assurances can be given that the Company will benefit
from increases in general economic activity in the U.S. or that the Company's
rapid expansion will continue. A slow-down in general economic activity within
the construction and light industrial trades could have a material adverse
effect on the Company's business, financial condition and results of operations.
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. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Operating
Results."

SEASONALITY OF BUSINESS OPERATIONS; INCLEMENT WEATHER

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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Operating Results" and "-- Liquidity and Capital
Resources."

LIMITED OPERATING HISTORY FOR DISPATCH OFFICES

The Company has experienced significant growth over the past few years,
primarily as result of opening new dispatch offices. Over half of the Company's
dispatch offices have been open for less than one year. As a result, there is no
assurance that the newer dispatch offices will grow at the rates achieved at
other dispatch offices or that newer dispatch offices will achieve
profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview" and "-- Liquidity and Capital Resources."

DEPENDENCE ON AVAILABILITY OF TEMPORARY WORKERS

The Company must continually attract reliable temporary workers in order to
meet customer needs. The Company competes for such workers with other temporary
personnel companies, as well as actual and potential customers, some of which
seek to fill positions with either regular or temporary employees. In addition,
the Company's temporary workers sometimes become regular employees of the
Company's customers. From time to time, during peak periods, the Company
experiences shortages of available temporary workers. The failure to attract
reliable temporary workers would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview" and "Business -- Operations."

CONTROL BY OFFICERS AND DIRECTORS

The Company's officers and directors and their affiliates will, in the
aggregate, control 19.3% of the Common Stock and 68.1% of the Company's Series A
Preferred Stock, $0.667 par value (the "Preferred Stock"), which represent in
the aggregate 26.8% of the voting power of the capital stock of the Company,
upon completion of this offering. As a result, in certain circumstances, these
shareholders, acting together, may be able to determine matters requiring
approval of the shareholders of the Company, including the election of the
Company's directors, or they may delay, defer, or prevent a change in control of
the Company. In addition, holders of the Company's subordinated debt have the
contractual right to nominate one person for election as a director. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Management," "Principal
Shareholders" and "Description of Securities."

VOLATILITY OF STOCK PRICE

The price of the Company's Common Stock has been, and is likely to continue
to be, highly volatile. The market price of the Common Stock has fluctuated
substantially in recent periods. Future announcements concerning the Company or
its competitors, quarterly variations in operating results, introduction or
changes in pricing policies by the Company or its competitors, changes in market
demand, weather patterns and other acts of nature that may affect or be
perceived to affect demand for the Company's services, or changes in sales
growth or earnings estimates by analysts, among other factors, could cause the
market price of the Common Stock to fluctuate substantially. In addition, stock
markets have experienced extreme price and volume volatility in recent years.
This volatility has had a substantial effect on the market prices of securities
for reasons frequently unrelated to the operating performance of the specific
companies. These broad market fluctuations may materially and adversely affect
the market price of the Common Stock. For the foregoing reasons, there can be no
assurance that the market price of the Common Stock will not decline below the
public offering price or experience extreme volatility. See "Price Range of
Common Stock and Dividend Policy."

NO CASH DIVIDENDS ON COMMON STOCK

The Company has never paid dividends on its Common Stock. The Company
anticipates that for the foreseeable future, it will continue to retain its
earnings for the operation and expansion of its business, and that it will not
pay cash dividends on its Common Stock. In addition, the Company's credit
agreements

restrict the Company's ability to pay common stock dividends unless certain
financial covenants are satisfied. See "Price Range of Common Stock and Dividend
Policy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares of Common Stock in the public market
following the offering could have an adverse impact on the market price of the
Common Stock. Upon completion of this offering, the Company will have
outstanding approximately 7.1 million shares of Common Stock (assuming no
exercise of outstanding options or warrants to purchase Common Stock).
Substantially all of these shares have been registered under the Securities Act
or are otherwise freely tradeable. See "Description of Capital Stock."

The Company, all of its executive officers and directors who own Common
Stock and certain beneficial owners of the Common Stock have agreed, subject to
certain exceptions, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock, now
owned or hereafter acquired, for a period of 180 days after the date of this
Prospectus without the prior written consent of Van Kasper & Company, the
representative of the Underwriters (the "Representative"). See "Underwriting."

The Company has reserved 500,000 shares of Common Stock available for grants
under its 1996 Stock Purchase Plan and Stock Option Plan. The Company has
options outstanding to purchase 125,400 shares and warrants outstanding to
purchase 706,368 shares of Common Stock. The Company has filed and intends (and
is required in the case of the warrants) to file registration statements under
the Securities Act covering the shares of Common Stock issuable under the
warrants and the Company's Stock Purchase Plan and Stock Option Plan. Upon
effectiveness of such registration, shares issued upon the exercise of options
covered thereby generally will be freely tradeable in the open market (subject
to Rule 144 limitations applicable to affiliates). No predictions can be made as
to the effect, if any, that future sales of Common Stock or the availability of
Common Stock for sale will have on the market price prevailing from time to
time.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, at an assumed public offering price of $24.00 per share and
after deducting the underwriting discount and expenses payable by the Company,
are estimated to be approximately $21,756,000. The Company intends to use $7.7
million of the proceeds to fund the opening of new dispatch offices through
1997, $10.0 million for working capital and the remainder for general corporate
purposes. Pending such use, the Company intends to invest the net proceeds from
this offering in short-term, interest-bearing instruments, including government
obligations and money market instruments. The Company continually evaluates
acquisition opportunities. If the Company identifies an attractive acquisition
opportunity, the Company may use a portion of the proceeds to fund such
acquisition. The Company currently has no commitments with respect to any
acquisition.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The following table sets forth the range of high and low bid quotation per
share for the Common Stock on the OTC Bulletin Board operated by the National
Association of Securities Dealers, Inc. for the periods indicated, as adjusted
to reflect stock splits.

HIGH LOW
--------- ---------

Year Ended December 31, 1994
First Quarter......................................................... $ 2.67 $ 1.34
Second Quarter........................................................ 2.50 2.00
Third Quarter......................................................... 3.50 2.50
Fourth Quarter........................................................ 6.25 3.50
Year Ended December 31, 1995
First Quarter......................................................... 7.17 6.00
Second Quarter........................................................ 13.67 6.42
Third Quarter......................................................... 13.67 10.83
Fourth Quarter........................................................ 17.00 10.17
Year Ended December 31, 1996
First Quarter......................................................... 22.00 13.50
Second Quarter (through May 3, 1996).................................. 25.00 19.00

The Company had 639 shareholders of record as of May 1, 1996. The bid price
reflects inter-dealer prices and does not include retail markup, markdown or
commission. The bid price does not reflect prices in actual transactions. As of
May 3, 1996 the closing bid price for the Common Stock was $24.00 per share.

The present policy of the Company is to retain earnings for the operation
and expansion of its business. The Company has never paid cash dividends on its
Common Stock and does not anticipate that it will do so in the foreseeable
future. In addition, the Company's credit agreements restrict the payment of
cash dividends. The Company pays a 5% cumulative dividend on its outstanding
Preferred Stock. See "Selected Consolidated Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1996, and as adjusted to reflect the sale by the Company of 1,000,000 shares
of Common Stock offered hereby and the receipt and application of the estimated
net proceeds to be received by the Company therefrom, at an assumed public
offering price of $24.00 per share and after deducting the underwriting discount
and estimated offering expenses payable by the Company. The capitalization
information set forth in the table below is qualified by and should be read in
conjunction with the Company's more detailed Consolidated Financial Statements
and notes thereto included elsewhere in this Prospectus.

MARCH 31, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)

Current maturities of long term debt...................................................... $ 41 $ 41
--------- -----------
--------- -----------
Long-term liabilities (1):
Long term debt, less current maturities................................................. $ 942 $ 942
Subordinated debt, less unamortized discount............................................ 8,787 8,787
--------- -----------
Total long-term liabilities........................................................... 9,729 9,729
--------- -----------
Shareholders' equity:
Preferred stock, $0.667 par value, 5,000,000 shares authorized; 1,281,123 shares issued
and outstanding........................................................................ 854 854
Common stock, no par value, 25,000,000 shares authorized; 6,030,633 shares issued and
outstanding and 7,030,633 shares as adjusted (2)....................................... 7,490 29,246
Accumulated deficit..................................................................... (140) (140)
--------- -----------
Total shareholders' equity.............................................................. 8,204 29,960
--------- -----------
Total capitalization.................................................................. $ 17,933 $ 39,689
--------- -----------
--------- -----------

- ------------------------
(1) See Notes 4, 5 and 6 to the Company's Consolidated Financial Statements.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following selected consolidated financial information of the Company has
been derived from the Company's audited Consolidated Financial Statements. The
Consolidated Balance Sheets as of December 31, 1994 and 1995, and the
Consolidated Statements of Operations, Changes in Shareholders' Equity, and Cash
Flows for the years ended December 31, 1993, 1994 and 1995 were audited by BDO
Seidman, LLP, whose report thereon appears elsewhere herein. The Balance Sheet
Data at December 31, 1991, 1992 and 1993 and the Statement of Operations Data
for the years ended December 31, 1991 and 1992, are derived from the Company's
audited financial statements which do not appear herein. The quarterly data at
and for the three months ended March 31, 1995 and 1996 are derived from the
Company's unaudited financial statements but includes all adjustments,
consisting only of normal recurring adjustments, that management considers
necessary to fairly present such data. The results for the three months ended
March 31, 1996 are not necessarily indicative of the results to be expected for
the full year ending December 31, 1996. The data should be read in conjunction
with the Company's Consolidated Financial Statements and the notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein.

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues from services............................. $ 6,020 $ 8,424 $ 15,659 $ 38,951 $ 94,362 $ 12,618 26,094
Cost of services................................... 4,831 6,485 12,401 30,713 76,643 10,495 22,207
Selling, general, and administrative expenses...... 1,717 1,482 2,652 6,593 13,639 2,495 4,500
Interest and other expenses, net................... 187 277 353 457 866 164 436
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income tax and extraordinary
item.............................................. (715) 180 253 1,188 3,214 (536) (1,049)
Taxes on income.................................... -- 21 32 336 1,152 (182) (364)
Extraordinary item, net of tax..................... -- -- 48 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).................................. $ (715) $ 159 $ 269 $ 852 $ 2,062 $ (354) $ (685)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) per common share
Income (loss) before extraordinary items........... $(0.26) $0.06 $0.06 $0.18 $0.34 $(0.06) $(0.10)
Extraordinary item................................. -- -- $0.01 -- -- -- --
Net income (loss).................................. $(0.26) $0.06 $0.07 $0.18 $0.34 $(0.06) $(0.10)
Weighted average shares outstanding (1)............ 2,721,069 2,702,271 3,668,585 4,454,883 5,861,500 5,991,424 6,873,626

OPERATING DATA:
Revenues from dispatch offices open for full
period............................................ 4,614 8,230 12,960 27,311 65,798 11,966 25,585
Revenues from dispatch offices opened during
period............................................ 963 194 2,699 11,640 28,245 652 509
Dispatch offices open at period end................ 8 10 17 51 106 68 127

DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------

(IN THOUSANDS)
BALANCE SHEET DATA:
Current assets...................................... $ 812 $ 1,454 $ 2,313 $ 7,572 $ 20,730 $ 8,314 $ 18,220
Total assets........................................ 1,149 1,880 3,153 8,912 26,182 10,226 25,112
Current liabilities................................. 436 1,086 1,706 5,631 7,956 6,664 7,180
Long-term liabilities............................... 732 578 777 319 9,695 422 9,729
Total liabilities................................... 1,168 1,664 2,483 5,950 17,651 7,086 16,908
Shareholders' equity (deficit)...................... (19) 216 670 2,962 8,531 3,140 8,204
Cash dividends declared (2)......................... -- -- 50 43 43 11 11
Working capital..................................... 376 368 607 1,941 12,774 1,650 11,040

- ------------------------------
(1) Excludes (i) 831,768 shares of Common Stock issuable upon exercise of
outstanding stock options and warrants as of May 1, 1996 at a weighted
average exercise price of $11.44 per share and (ii) 500,000 shares reserved
for future grants under the Company's stock option and purchase plans.

(2) Represents cash dividends on the Preferred Stock. The Company has never paid
cash dividends on its Common Stock and does not anticipate that it will do
so in the foreseeable future. See "Price Range of Common Stock and Dividend
Policy."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in connection with the
Company's Consolidated Financial Statements and the notes thereto and other
financial information included elsewhere in this Prospectus.

OVERVIEW

Labor Ready is a leading, national provider of temporary workers for manual
labor jobs. The Company's customers are primarily in construction, freight
handling, warehousing, landscaping, light manufacturing, and other light
industrial businesses. The Company has rapidly grown from eight dispatch offices
in 1991 to 146 dispatch offices at May 1, 1996. Substantially all of the growth
in dispatch offices was achieved by opening Company-owned location rather than
through acquisitions. The Company's revenues grew from approximately $6.0
million to $94.4 million from 1991 to 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 annual revenue per
dispatch office open for more than a full year was $1.3 million.

During the remainder of 1996 and 1997, the Company expects to open 54 and
100 new dispatch offices, respectively. In 1995, the Company incurred costs of
approximately $2.0 million to open 57 new dispatch offices (an average of
approximately $35,000 per dispatch office). The Company expects the average cost
of opening new dispatch offices to continue to increase due to more extensive
management training and the installation of more sophisticated computer and
other office systems. Further, once open the Company invests 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. The Company pays its temporary workers on a daily basis, and
bills its customers on a weekly basis. The average collection cycle for 1995 was
approximately 37 days. Consequently, the Company experiences significant
negative cash flow from operations and investment activities during periods of
high growth, which also adversely impacts the Company's overall profitability.
The Company expects to continue to experience periods of negative cash flow from
operations and investment activities while it rapidly opens dispatch offices and
expects to require additional sources of working capital in order to continue to
grow. See "-- Results of Operations" and "-- Liquidity and Capital Resources."

Many of the Company's customers are construction and landscaping businesses,
which 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 in such periods. As a result, 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.

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. The Company may discount
its rates when it enters a new market to attract customers. From time to time
during peak periods, the Company experiences shortages of available temporary
workers. See "Risk Factors -- Dependence on Availability of Temporary Workers."

Cost of services primarily includes wages and related payroll expenses of
temporary workers and dispatch office employees, general managers, district
managers and area directors, including workers' compensation, unemployment
compensation insurance, Medicare and Social Security taxes, but does not include
dispatch offices lease expenses. The Company's cost of services as a percentage
of revenues has fluctuated significantly in recent periods and it expects
significant fluctuations to continue in future periods as the Company continues
its rapid growth. Cost of services as a percentage of revenues is affected by
numerous factors, including salaries of new supervisory personnel hired under
new management organizational structure, 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.

Temporary workers assigned to customers remain Labor Ready employees. Labor
Ready is responsible for employee-related expenses of its temporary workers,
including workers' compensation, unemployment compensation insurance, Medicare
and Social Security taxes and general payroll expenses. The Company does not
provide health, dental, disability or life insurance to its temporary workers.
Generally, the Company bills its customers for the hours worked by the temporary
workers assigned to the customer. Because the Company pays its temporary workers
only for the hours actually worked, wages for the Company's temporary workers
are a variable cost that increases or decreases directly in proportion to
revenue. The Company has one franchisee which operates five dispatch offices.
The Company does not intend to grant additional franchises. Royalty revenues
from the franchised dispatch offices are included in revenues from services and
were not material during any period presented herein. See "Selected Consolidated
Financial Information."

The typical customer order is for two temporary workers and the typical
payroll check paid by the Company is less than $50.00. The Company is not
dependent on any individual customer for more than 2% of its annual revenues.
During 1995, the Company had in excess of 63,000 customers and filled more than
748,000 work orders.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenues represented by
certain items in the Company's Consolidated Statements of Operations for the
periods indicated.

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------

Revenues from services................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services....................................... 79.2 78.9 81.2 83.2 85.1
Selling, general and administrative expenses........... 16.9 16.9 14.5 19.8 17.2
Interest and other expenses, net....................... 2.3 1.2 0.9 1.3 1.7
Income (loss) before taxes on income and extraordinary
item.................................................. 1.6 3.0 3.4 (4.3) (4.0)
Net income (loss)...................................... 1.7 2.2 2.2 (2.8) (2.6)

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995

DISPATCH OFFICES. The Company opened 21 dispatch offices during the first
quarter of 1996 compared to 17 dispatch offices during the first quarter of
1995.

REVENUES FROM SERVICES. The Company's revenues from services increased to
$26.1 million for the three months ended March 31, 1996 compared to $12.6
million for the three months ended March 31, 1995, an increase of $13.5 million
or 107%. This increase resulted substantially from increases in revenues from
dispatch offices open for the full period.

COST OF SERVICES. Cost of services increased to $22.2 million for the three
months ended March 31, 1996 compared to $10.5 million for the three months ended
March 31, 1995, an increase of $11.7 million or 111.4%, reflecting the
additional wages and salaries paid to temporary workers and additional
management personnel and related payroll expenses. As a percentage of revenues,
cost of services increased to 85.1% for the three months ended March 31, 1996
from 83.2% for the three months ended March 31, 1995, an increase of 1.8%. Cost
of services increased due to several factors, including higher workers
compensation costs, increased salary costs for branch managers in training,
longer training periods for new management personnel and for additional
supervisory personnel hired to implement new management organizational
structures. The Company expects significant continuing fluctuations in cost of
services as the Company pursues further aggressive growth.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $4.5 million for the three months ended
March 31, 1996 compared to $2.5 million for the year earlier period, an increase
of $2.0 million or 80.0%. As a percentage of revenues from services, selling,
general, and

administrative expenses decreased to 17.2% for the three months ended March 31,
1996 from 19.8% for the three months ended March 31, 1995, a decrease of 2.6%.
This decrease is primarily the result of selling, general and administrative
expenses increasing at a slower rate than the increase in revenues from
services.

INTEREST AND OTHER EXPENSES. Interest and other expenses increased to
approximately $435,000 for the three months ended March 31, 1996 compared to
approximately $164,000 for the three month period ended March 31, 1995, an
increase of approximately $271,000 or 264%, reflecting primarily higher
borrowing amounts, the relatively higher interest costs of the $10 million
principal amount of subordinated debt issued in October 1995 and certain
prepayment penalties incurred in paying off the Company's prior lender. As a
percentage of revenues, interest and other expenses increased to 1.7% for the
three months ended March 31, 1996 from 1.3% for the three months ended March 31,
1995.

TAXES ON INCOME. The Company recorded a tax benefit from its loss on
operations of approximately $364,000 for the three months ended March 31, 1996,
compared to a tax benefit of approximately $182,000 for the three months ended
March 31, 1995.

NET LOSS. The Company incurred a net loss from operations of approximately
$685,000 for the three months ended March 31, 1996 compared to $353,776 for the
three months ended March 31, 1995, an increase of approximately $332,000 or
93.7%. As a percentage of revenues, the net loss remained relatively constant.

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 $ 27,823
Revenues from new dispatch offices opened during year............................. $ 2,699 11,640 27,588
--------- --------- ---------
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.

QUARTERLY OPERATING RESULTS

The following tables set forth certain consolidated statements of income
data (dollars in thousands, except per share amounts) for each of the Company's
last nine quarters. The quarterly information is unaudited but includes all
adjustments, consisting only of normal recurring adjustments, that management
considers necessary to present fairly this information. The results of
operations for any quarter, and quarter-to-quarter trends, are not necessarily
indicative of the results to be expected for any future period.

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1994 1994 1994 1994
----------- ----------- ------------- ------------

Revenues from services........................................ $ 5,217 $ 8,318 $ 12,100 $ 13,316
Net income (loss)............................................. (135) 327 422 237
Dispatch offices open at period end........................... 27 34 44 51
Earnings (loss) per common share.............................. $ (0.03) $ 0.08 $ 0.09 $ 0.05

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
----------- --------- ------------- ------------

MARCH 31,
1996
-----------
Revenues from services........................................ $ 26,094
Net income (loss)............................................. (685)
Dispatch offices open at period end........................... 127
Earnings (loss) per common share.............................. $ (0.10)

The following table indicates, for each of the quarters presented, cost of
services and net income as a percentage of revenues from services.

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1994 1994 1994 1994
------------ ----------- --------------- --------------

Revenues from services....................................... 100.0% 100.0% 100.0% 100.0%
Cost of services............................................. 80.6 80.3 77.8 78.2
Net income (loss)............................................ (2.6) 3.9 3.5 1.8

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
------------ ----------- --------------- --------------

Revenues from services....................................... 100.0% 100.0% 100.0% 100.0%
Cost of services............................................. 83.2 80.4 80.0 82.2
Net income (loss)............................................ (2.8) 2.0 4.8 1.8

MARCH 31,
1996
------------
Revenues from services....................................... 100.0%
Cost of services............................................. 85.1
Net income (loss)............................................ (2.6)

The Company's quarter-to-quarter operating results have been subject to
significant variability based on a number of factors, including seasonality, but
primarily due to the number of new dispatch offices opened during the period and
preceding periods. As newly opened dispatch offices mature, revenues have
historically increased significantly, although expenses of opening and operating
new dispatch offices continues to increase as the number of new dispatch offices
increases.

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 the first quarter of 1996, the Company utilized significant amounts
of cash to open 21 dispatch offices during the first quarter and in advance of
opening 19 dispatch offices in April 1996. During the first quarter of 1995 and
1996, the Company used net cash in operating activities of approximately
$461,000 and $2.1 million, respectively, an increase of 356%, reflecting
primarily increases in workers compensation deposits and a reduction in accounts
payable. Management anticipates ongoing that cash flow deficits from operating
and investing activities will continue while the Company adds substantial
numbers of new dispatch offices. Management expects to finance such cash flow
deficits with the proceeds from this offering and other equity or debt
financings.

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 $350,000 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 1997 and before the
Financing Warrants are exercised, the number of shares subject to purchase under
the Financing Warrants is reduced to 546,374 shares.

In March 1996, the Company obtained a new revolving credit facility from
U.S. Bank of Washington which provides for borrowings of up to $10.0 million
secured by eligible accounts receivable. As of March 31, 1996, the Company had
borrowed $4.4 million against this line. The U.S. Bank revolving credit facility
bears interest at a rate of prime plus 1/4% (currently 8.5%).

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 54 dispatch offices in the remainder of 1996, for a
total of 94 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 this offering and other 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. See "Risk Factors -- Ability to
Achieve and Manage Growth," and "-- Liquidity and Capital Resources."

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.

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 146 dispatch offices at May 1, 1996. 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 athe need to satisfy peak production needsrequirements and to temporarily replace full-time employees who are absent 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 the possible adverse effects of changing employment regulations, to temporary staffing companies, which can allocate thebetter manage those costs and risks over a larger pool of employees and customers.risks. In addition, through the use of temporary employees, avoidsbusinesses avoid the inconvenience and expense of searching for, interviewing, screening, testing and other effects of hiring and firingterminating regular employees.

COMPANY STRATEGY
We believe the short-term, light industrial segment of the temporary staffing industry is highly fragmented and presents opportunities for larger, well capitalized companies to compete effectively, mainly through systems and procedures which efficiently process a high volume of transactions, coordinate multi-location activities and manage workers' compensation costs.
The Company'smailing address of our principal executive offices is 1015 A Street, Tacoma, Washington 98402 and our telephone number is (800) 610-8920.

Company Strategy
Our goal is to enhance our position as one of the leading national providers of temporary manual labor. Key elements of our strategy include the following:
•
Improve Revenues and Profit in all Existing Offices. We intend to increase revenues and profits in each dispatch office by expanding sales to existing customers and by aggressively expanding the size and mix of our customer base. To that end, we intend to significantly develop new and existing large accounts through our National Accounts staff, which provides a single source of customer care for our large regional and national customers. Because a significant degree of our branch cost structure is fixed, we are positioned to leverage existing branch infrastructure to drive profitability upon increased demand for our services. Moreover, our experience has been that our dispatch offices generally increase their sales volumes as they mature over time. We
1
expect that annual sales volumes in the large number of dispatch offices that we opened in the Northeast and elsewhere in 1999 and 2000 will similarly increase as these offices mature.
•
Grow the Number of Dispatch Offices Through Strategic, Measured Level of Expansion. Our low overhead strategy allows us to expand or retract our number of offices quickly and cost-effectively, depending on economic and labor demand conditions. We believe that we can generally open dispatch offices for less than $50,000 per office. Although recent difficulties in the U.S. economy and the temporary staffing sector have caused us to focus on improving operating efficiencies rather than aggressive expansion, we expect to continue seeking opportunities to expand. We intend to pursue a measured approach to expansion by opening new dispatch offices only if they are expected to achieve profitability in a reasonable time frame. We also intend to continue to cluster multiple locations in a single market. This strategy allows us to reduce opening costs and operating risks in clustered areas, as marketing, advertising and other costs are shared among nearby offices. Additionally, while we will continue to target major markets, we intend to establish a presence, where appropriate, in small- to medium-sized markets.

•
Pursue Further International Expansion and Selected Acquisitions. We intend to continue to seek growth opportunities internationally, particularly in the United Kingdom, where we currently have 35 dispatch offices, including seven new offices that we opened in the first eight months of 2002. Moreover, while our historical growth has been organically-driven, we intend to evaluate selected acquisition opportunities of complementary or related businesses.
The Offering
Securities Offered $70 million aggregate principal amount of 6.25% Convertible Subordinated Notes due June 15, 2007 and 9,641,870 shares of our Common Stock, $0.01 par value per share, issuable upon conversion of the notes.

Maturity

The notes are due on June 15, 2007, unless earlier converted or redeemed by us at our option or repurchased by us at your option.

Interest Rate

The notes bear interest at 6.25% per year. Interest will be payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2002. The initial interest payment will include accrued interest from June 19, 2002.

Conversion Rights

Holders may convert their notes into our common stock at any time prior to the close of business on the business day prior to the maturity date of the notes, unless previously redeemed or repurchased, at a conversion price of $7.26 per share (equal to a conversion rate of approximately 137.741 shares per $1,000 principal amount of notes), subject to adjustment as described under "Description of the Notes—Conversion Rights."

Provisional Redemption of Notes at Our Option

We may redeem all or a portion of the notes for cash at any time on or after June 20, 2005, at 100% of their principal amount plus accrued and unpaid interest to, but excluding, the redemption date; provided, that the current market value (as defined in this prospectus) of our common stock equals or exceeds 125% of the conversion price then in effect for at least 20 trading days in any consecutive 30 trading day period ending on the date we mail the provisional redemption notice to holders. We will therefore be required to make at least six interest payments on the notes before being able to redeem any notes. See "Description of the Notes—Provisional Redemption by Labor Ready."

Sinking Fund

None.

Change of Control Put Right

Upon a change of control of Labor Ready, each holder may require us to repurchase for cash all or a portion of its notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest thereon to, but excluding, the repurchase date. See "Description of the Notes—Repurchase at Option of Holders Upon a Change of Control."

Events of Default

If there is an event of default on the notes, the principal amount of the notes plus accrued and unpaid interest to the date of acceleration may be declared immediately due and payable subject to certain conditions set forth in the indenture. These amounts automatically become due and payable in the case of certain types of bankruptcy or insolvency events of default involving Labor Ready.

Subordination

The notes are unsecured and will be subordinated to all of our existing and future Senior Debt (as defined in this prospectus) and will be structurally subordinated to all indebtedness of our subsidiaries. As of June 28, 2002, we had $114.3 million of indebtedness outstanding that constitutes Senior Debt under the indenture (net of cross-collateralized obligations). As of June 28, 2002, except for intercompany liabilities and debt guaranteed by Labor Ready, Inc., our subsidiaries had no liabilities to which the notes would be effectively subordinated that would constitute Indebtedness under the indenture.

Use of Proceeds

All of the notes and the shares of our common stock issuable upon conversion of the notes are being sold by the selling securityholders or by their pledgees, donees, transferees or other successors in interest. We will not receive any proceeds from the sale of the notes or the shares of our common stock issuable upon conversion of the notes.

DTC Eligibility

The notes are issued in book-entry form and are represented by one or more permanent global certificates deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company in New York, New York. Beneficial interests in the notes will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for definitive securities, except in limited circumstances. See "Description of the Notes—Form, Denomination and Registration."

Registration Rights

Pursuant to a registration rights agreement, we have filed a shelf registration statement, of which this prospectus is part, with respect to the notes and the common stock issuable upon conversion of the notes. See Description of the Notes—Registration Rights."

Indenture and Trustee

We have issued the notes under an indenture, dated as of June 19, 2002, between The Bank of New York, as trustee, and us.

Trading

The notes originally issued in the private placement are eligible for trading on the PORTAL market of The Nasdaq Stock Market. However, notes sold pursuant to this prospectus will no longer be eligible for trading on the PORTAL Market. We do not intend to include the notes in any other automated interdealer quotation system or list the notes on any securities exchange. Our common stock is traded on the New York Stock Exchange under the symbol "LRW."
4

RISK FACTORS
Before purchasing these notes, you should carefully consider the following risk factors and all of the other information included and incorporated by reference in this prospectus. Keep the risk factors in mind when you read "forward-looking" statements elsewhere in this prospectus and in the documents incorporated by reference in this prospectus. These are statements that relate to our expectations for future events and time periods. Generally, the words "anticipate," "expect," "intend" and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. Investing in the notes and our common stock involves a high degree of risk. Additional risks and uncertainties that are not yet identified or that we currently think are immaterial may also harm our business and financial condition in the future. Any of the following risks could harm our business, operating results or financial condition and could result in a complete loss of your investment.
Risks Related to Our Business
Competition for customers in our industry is intense, and if we are not able to effectively compete, our financial results could be harmed and the price of our securities could decline.
The short-term, light industrial niche of the temporary services industry is highly competitive, with limited barriers to entry. Several very large full-service and specialized temporary labor companies, as well as small local operations, compete with us in the staffing industry. Competition in some markets is intense, particularly for provision of light industrial personnel, and these competitive forces limit our ability to raise prices to our customers. For example, competitive forces have historically limited our ability to raise our prices to immediately fully offset increased costs of doing business, including increased labor costs and increased costs for workers' compensation insurance. As a result of these forces, we have in the past faced pressure on our operating margins. This margin pressure has been particularly severe during the past three quarters and we expect it to remain severe throughout the balance of 2002. We cannot assure you that we will not continue to face pressures on our margins. If we are not able to effectively compete in our targeted markets, our operating margins and other financial results will be harmed and the price of our securities could decline.
We have recently experienced a decline in revenues and profits, and this trend may continue, which could cause the price of our securities to decline.
Our revenues were $917.0 million in 2001 compared to $976.6 million in 2000. The decline in revenues in 2001 was primarily due to our consolidation of dispatch offices and a decrease in average revenues per dispatch office during the recent economic downturn. Our net income has also decreased in each of 2001 and 2000 compared to the levels realized in 1999 due to the recent economic downturn. We cannot assure you that these declining revenues and net income trends will not continue or that our revenues and profits will not continue to be adversely affected by unfavorable economic conditions. Any continuation of these trends could cause the price of our securities to decline.
If we are not able to obtain workers' compensation insurance on commercially reasonable terms, our financial condition or results of operations may suffer.
We are required to pay workers' compensation benefits for our temporary workers and regular employees. We have seen a tightening insurance market that has resulted in significantly increased insurance costs and higher deductibles, including workers' compensation insurance. Under our workers' compensation insurance program, we maintain "per occurrence" insurance, which covers any claims for a particular event above a set deductible. We have also historically maintained "aggregate stop loss" insurance coverage that would allow us to recover from an insurer if the aggregate amount of
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deductible payments incurred by us in a given year exceeded a dollar threshold. In order to manage our overall insurance costs under our policy covering the 2002 plan year, we have significantly increased our per occurrence insurance deductible and enhancedropped our aggregate stop loss coverage, which means there is no aggregate limit to our potential liability other than on a per occurrence basis. In addition, while we have renewed our workers' compensation insurance for 2002, we cannot be certain that this insurance will always be available or will be available with reasonable terms at a reasonable cost.
We expect that the amount of collateral that we are required to post to support our workers' compensation obligations will increase, which will reduce the capital we have available to grow and support our operations.
We are required to maintain commitments such as standby letters of credit and surety bonds to secure repayment to our insurance companies (or in some instances, the state) of the deductible portion of all open workers' compensation claims. Historically, we have been required to pledge cash or other assets in order to obtain standby letters of credit. However, we have also been able to obtain surety bonds while posting no or very little collateral. The amounts and costs of our surety bonds are subject to annual review and renewal, and they generally can be cancelled by the issuer with 60 days notice. We have received notice from certain providers of our surety bonds that they intend to cancel these bonds unless we provide them with additional collateral. As the availability of these bonds declines, we will likely be required to replace them with letters of credit or similar commitments, for which we also would likely be required to pledge cash or other collateral. We sometimes face difficulties in recovering our collateral from insurers, particularly where those insurers were themselves in financial distress, and we cannot guarantee that our collateral for past claims will be released in a timely manner as we pay down claims. As a result, we expect that the amount of collateral required to secure our commitments to our insurance carriers will increase. We believe that our current sources of liquidity will satisfy our immediate needs for these obligations; however, our currently available sources of collateral for these commitments are limited and we could be required to seek additional sources of capital in the future. These additional sources of financing may not be available on commercially reasonable terms. Even if they are available, these financings could result in dilution to our existing shareholders.
Our reserves for workers' compensation claims, allowance for doubtful accounts, and other expenses may be inadequate, and we may incur additional charges if the actual costs of these claims exceed the amounts estimated.
We maintain a reserve for workers' compensation claims using actuarial estimates of the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not reported. This reserve, which reflects potential liabilities that span several years, is discounted for net present value using a discount rate of 6%. We evaluate the accrual rates for our reserves regularly throughout the year and make adjustments as needed. If the actual cost of such claims and related expenses exceed the amounts estimated, or if the discount rate represents an inflated estimate of our return on capital over time, actual losses for these claims may exceed reserves and/or additional reserves may be required. We cannot assure you that our reserves for workers' compensation claims, allowance for doubtful accounts, and other expenses are adequate. We may incur additional charges if the actual costs of these claims exceed the amounts estimated. We also establish an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We have also established reserves for contingent legal and regulatory liabilities, based on management's current best estimates and judgments of the scope and likelihood of these liabilities. If the actual outcome of these matters is less favorable than expected, an adjustment would be charged to income in the period the estimate changes.
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Determinations that we have misclassified the jobs performed by our workers for workers' compensation insurance purposes, even if the misclassifications are inadvertent, could result in us owing penalties to government regulators or having to increase our workers' compensation reserves.
In three states, Canada and Puerto Rico, we pay workers' compensation insurance premiums directly to the government in amounts based in part on the classification of jobs performed by our workers. From time to time, we are subject to audits by various state regulators regarding our classifications of jobs performed by our workers. An audit conducted by the Washington Department of Labor and Industries resulted in assessments of $734,000 for 1998, and the Department has subsequently assessed $235,000 for the first quarter of 1999 and $257,000 for the second quarter of 1999. While our actual claims experience has to date indicated that we in fact over-paid (as opposed to underpaid) workers' compensation premiums in Washington for the periods in question, we cannot assure you that we will not be subject to additional inquiries, or that additional deficiencies and/or penalties will not be assessed. In addition, the classification of jobs performed by our workers is one of many factors taken into account by our actuaries in helping us determine the adequacy of our financial reserves for our workers' compensation exposure. To date, our third-party actuaries have not challenged or raised any material objections to our job classifications and our historical claims experience has indicated that our reserves are appropriate to cover our potential exposure in this area. Nevertheless, if it is determined that we have materially misclassified a number of our workers, we could be required to increase our financial reserves for our workers' compensation liability, which could harm our results of operations and could cause the price of our securities to decline.
Some insurance companies with which we have previously done business are in financial distress. If our insurers do not fulfill their obligations, we could experience significant losses.
We have purchased annual insurance policies in connection with our workers' compensation obligations from three primary carriers. Kemper Insurance Company provides coverage for occurrences in 2001 and the current year and, prior to 2001, Legion Insurance Company and Reliance Insurance Company provided coverage to us. Many insurance carriers are experiencing unfavorable claims experience and loss of their own reinsurance coverage. As a result, many of these carriers are in substantially weakened financial condition, including Legion and Reliance. To the extent that we experience claims that exceed our deductible limits and our insurers do not satisfy their coverage obligations, we may be forced to satisfy a portion of those claims directly; this in turn could harm our financial condition or results of operations. In addition, our insurance policies must be reviewed annually, and we cannot guarantee that we will be able to successfully renew such policies for the coming year or any year thereafter.
Our credit facilities require that we meet certain levels of financial performance. In the event we fail either to meet these requirements or have them waived, we may be subject to penalties and we could be forced to seek additional financing.
Our credit facilities contain strict financial covenants. Among other things, these covenants require us to maintain certain earnings and net worth levels and a certain ratio of earnings to fixed expenses. In the past we have negotiated amendments to these covenants to ensure our continued compliance with their restrictions. We cannot assure you that our lender would consent to such amendments on commercially reasonable terms in the future if we once again required such relief. In the event that we do not comply with the covenants and the lender does not consent to such non-compliance, we will be in default of our agreement, which could subject us to penalty rates of interest and accelerate the maturity of the outstanding balances. Moreover, the indenture governing our Notes and a number of our smaller loan arrangements contain cross-default provisions, which accelerate our indebtedness under these arrangements in the event we default under our credit facilities. Accordingly, in the event of a default under our credit facilities, we could be required to seek additional sources of capital to
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satisfy our liquidity needs. These additional sources of financing may not be available on commercially reasonable terms. Even if they are available, these financings could result in dilution to our existing shareholders.
A significant portion of our revenues is derived from operations in a limited number of markets. Recessions in these markets have harmed and could continue to harm our operations.
A significant portion of our revenues is derived from our operations in a limited number of states. Revenues generated from operations in California, Texas and Florida, in the aggregate, accounted for approximately 32.4% and 35.2% of our overall revenues in 2000 and 2001, respectively. According to numerous published reports, the California economy has been particularly hard-hit by the most recent economic recession. California is our largest market and continued economic weakness in this region or our other key markets could harm our business.
Any significant economic downturn could result in our clients using fewer temporary employees, which could harm our business.
During 2001, the slowdown in the U.S. economy significantly impacted the light industrial labor markets, which in turn reduced our revenues significantly. Because demand for personnel services and recruitment services is sensitive to changes in the level of economic activity, our business may suffer during economic downturns. As economic activity slows down, companies tend to reduce their use of temporary employees and recruitment services before undertaking layoffs of their regular employees, resulting in decreased demand for our personnel. As a result, any significant economic downturn could harm our business, financial condition or results of operations.
Labor unions have attempted to harm our business.
A department of one of the largest labor unions in the country has been engaged in an ongoing campaign to disrupt our business. This union has backed legislation designed to adversely impact our business, coordinated legal actions directed at our activities and engaged in a public relations campaign to discredit members of our management team and influence our customers. This union has repeatedly issued press releases that contain false and misleading statements, including claims that we inappropriately account for our workers' compensation obligations and that our public reporting is not otherwise in compliance with SEC requirements. We cannot assure you that this union's activities will not harm our business or the price of our securities.
Our business would suffer if we could not attract enough temporary workers.
We compete with other temporary personnel companies to meet our customer needs and we must continually attract reliable temporary workers to fill positions. We have in the past experienced short-term worker shortages and we may continue to experience such shortages in the future. If we are unable to find other temporary workers to fulfill the needs of our customers over a long period of time, we could lose customers and our business could suffer.
We may be exposed to employment-related claims and costs that could harm our business, financial condition or results of operations.
We are in the business of employing people and placing them in the workplaces of other businesses. As a result, we are subject to a large number of federal and state regulations relating to employment. This creates a risk of potential claims of discrimination and harassment, violations of health and safety and wage and hour laws, criminal activity and other claims. From time to time we are subject to audit by various state and governmental authorities to determine our compliance with a variety of these regulations. We have in the past been found, and may in the future be found, to have
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violated regulations or other regulatory requirements applicable to our operations. We may, from time to time, incur fines and other losses or negative publicity with respect to any such violation. In addition, some or all of these claims may give rise to litigation, which could be time-consuming for our management team and costly and could harm our business. We cannot assure you that we will not experience these problems in the future or that our insurance will be sufficient in amount or scope to cover any of these types of liabilities.
Our dismissal of Arthur Andersen LLP together with Andersen's uncertain future could impair our ability to make timely SEC filings.
Arthur Andersen LLP served as our independent auditor from 1997 until May 3, 2002, when our board of directors dismissed Andersen due to recent events that have cast doubt on Andersen's future. As a result of our termination of Andersen, we have retained the accounting firm of PricewaterhouseCoopers LLP to serve as our new independent accountants. We have a limited history with PricewaterhouseCoopers and cannot guarantee that our new independent accountants can adequately fulfill our needs in connection with the preparation of our audit. Moreover, the SEC has said that it will only continue accepting financial statements audited by Andersen so long as Andersen is able to make certain representations to its statusclients. We have been informed by Andersen that our former engagement partner and the other members of our audit team are no longer employed by Andersen. As a result, Andersen has indicated that it is no longer willing to provide us with representations relating to our historical financial statements for the year ending on December 31, 2001 and prior years. We cannot predict the impact of Andersen's failure to make the required representations and cannot assure you that our ability to make timely SEC filings will not be impaired. Furthermore, relief that may be available to investors under the federal securities laws against auditing firms may not be available as a practical matter against Andersen in the event that Andersen fails, does not otherwise continue in business or seeks protection from creditors.
The cost of compliance with government regulations is significant and could harm our operating results.
We incur significant costs to comply with all applicable federal and state laws and regulations relating to employment, including occupational safety and health provisions, wage and hour requirements (including minimum wages), workers' compensation and unemployment insurance. We cannot assure you that we will be able to increase fees charged to our customers to offset increased costs relating to these laws and regulations. If we incur additional costs to comply with these regulations and we are not able to increase the rates we charge our customers to fully cover any such increase, our margins and operating results will be harmed.
We are continually subject to the risk of new regulation, which could harm our business.
In 2001 and 2002, a number of bills were introduced in Congress and various state legislatures—which, if enacted, would impose conditions which could harm our business. This proposed legislation, much of which is backed by labor unions, has included provisions such as a requirement that our temporary workers receive the same pay and benefits as our customers' regular employees, prohibition on fees charged in connection with our CDMs and a requirement that our customers provide workers' compensation insurance for our temporary workers. We take a very active role and incur expense in opposing proposed legislation adverse to our business and in informing policy makers as to the social and economic benefits of our business. However, we cannot guarantee that any of these bills will not be enacted, in which event demand for our service may suffer.
Organized labor has sought to enact legislation in the State of California, our largest market. For example, legislation has been introduced into the California state legislature that would modify the current rules governing workers' compensation insurance in that state. Although the exact impact of this legislation on our business is unclear, the successful implementation of this or other similar
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legislation in California or our other large markets could significantly increase our costs of doing business or decrease the value of our services to our customers. Either result could harm our results of operations.
Our business depends extensively on recruiting and retaining qualified dispatch office managers. If we are not able to attract a sufficient number of qualified dispatch office managers, our future growth and financial performance may suffer.
We rely heavily on the performance and productivity of our dispatch office managers, who manage the operation of the dispatch offices, including recruitment and daily dispatch of temporary workers, marketing and providing quality customer service. We have historically experienced a high degree of turnover among our branch managers. As a result, we must continue to recruit a sufficient number of managers to staff new offices and to replace managers lost through attrition or termination. Our future growth and financial performance depend on our ability to hire, train and retain qualified managers from a limited pool of qualified candidates who frequently have no prior experience in the temporary employment industry.
We have recently experienced significant management turnover. The loss of any of our key personnel could harm our business.
In 2000 and 2001, we experienced significant turnover in our executive officers, including a Chief Executive Officer in each of those two years. We must successfully integrate all new management and other key positions within our organization in order to achieve our operating objectives. Our future financial performance will depend to a significant extent on our ability to motivate and retain key management personnel. Competition for qualified management personnel is intense and in the event we experience further turnover in our senior management positions, we cannot assure you that we will be able to recruit suitable replacements. Even if we are successful, turnover in key management positions will temporarily harm our financial performance and results of operations as new management becomes familiar with our business. We do not maintain key person life insurance on any of our executive officers.
We are subject to a number of challenges and uncertainties that could limit our ability to grow our business.
We intend to grow our business through improvement of our average sales per dispatch office, expansion of our share of the market niche in which we compete, development of new service lines and expansion of our operations abroad, all of which are subject to uncertainties. Our ability to grow is dependent upon such factors as our ability to attract and retain sufficient qualified management personnel to manage multiple and individual dispatch offices, the availability of sufficient temporary workers to meet customer needs, our ability to deal with increasing workers' compensation costs, effective collection of accounts receivable and availability of working capital.
Our operations expose us to the risk of litigation, which we try to manage but could lead to significant potential liability.
From time to time we are party to litigation in the ordinary course of our business. Moreover, certain labor unions have coordinated legal actions directed at us designed to further their own interests. The claimants in two current proceedings have aggregated claims as class actions. The costs of defense and the risk of loss in connection with class action suits are incrementally greater than in standard commercial litigation. We cannot assure you that such litigation will not disrupt our business or impact our financial results, due to the costs of defending against such litigation, any judgments that may be awarded against us and the loss of significant management time devoted to such litigation.
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Establishment and expansion of our international operations will burden our resources and may fail to generate a substantial increase in sales.
As of June 28, 2002, we had 35 dispatch offices in the United Kingdom, 31 in Canada and four in Puerto Rico. We currently anticipate opening additional dispatch offices in the United Kingdom in 2003. Establishing, maintaining and expanding our international operations expose us to a number of risks and expenses, including:
•
substantially increased costs of operations;

•
temporary diversion of existing management resources;

•
establishment of an efficient and self-reliant local infrastructure;

•
ability to deal effectively with local labor organizations and trade unions;

•
ability to attract, hire and train qualified local sales and administrative personnel;

•
compliance with additional local regulatory requirements;

•
fluctuations in the value of foreign currencies;

•
longer payment cycles;

•
expansion of our information and control systems to manage expanded global operations; and

•
the additional expense and risks inherent in operations in geographically and culturally diverse locations.
We cannot assure you that we will effectively deal with the challenges of expanding our foreign operations and our attempts to do so could harm our financial performance or results of operations.
We have significant working capital requirements.
We require significant working capital in order to operate our business. While our cash flow was positive in 2001, we have historically experienced periods of negative cash flow from operations and investment activities, especially during seasonal peaks in revenue experienced in the third and fourth quarter of the year. We invest significant cash into the opening and operations of new dispatch offices until they begin to generate revenue sufficient to cover their operating costs. We also pay our temporary personnel on a daily basis and bill our customers on a weekly basis. As a result, we must maintain cash reserves to pay our temporary personnel prior to receiving payment from our customers. In addition, we are required to pledge amounts to secure letters of credit that collateralize certain of our workers' compensation obligations, and these amounts may increase in future periods. Any such increase in pledged amounts would decrease amounts available for working capital purposes. As a result of these factors, if our available cash balances and borrowing base under our existing credit facilities do not grow commensurate with the growth in our working capital requirements, we would explore alternative sources of financing to satisfy our liquidity needs, including the issuance of additional equity or debt securities. Any such issuances could result in dilution to existing shareholders.
Our information and computer processing systems are critical to the operations of our business and any failure could cause significant problems.
Our management information systems, located at our headquarters, are essential for data exchange and operational communications with dispatch offices throughout the country. Any interruption, impairment or loss of data integrity or malfunction of these systems could severely hamper our business and could require that we commit significant additional capital and management resources to rectify the problem. We are currently undertaking a substantial upgrade to our software systems. If we
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experience unforeseen difficulties or delays in connection with this implementation our business and results of operations will be harmed.
Risks Related to the Notes
If we are unable to pay all of our debts, you will receive payment on your notes only if we have funds remaining after we have paid our existing and future senior indebtedness.
The notes will be unsecured and subordinated in right of payment to all of our existing and future senior indebtedness. In the event of our bankruptcy, liquidation or reorganization, upon acceleration of the notes due to an event of default under the indenture and in other limited events, our assets will be available to pay obligations on the notes only after all "Senior Debt" has been paid. As a result, there may not be sufficient assets remaining to pay amounts due on any or all of the outstanding notes. In addition, we may be unable to fulfill our obligations to offer to repurchase the notes upon a change of control.
We are not limited in or prohibited from incurring senior indebtedness or any other indebtedness or liabilities under the indenture. If we were to incur additional debt or liabilities, our ability to pay our obligations on the notes could suffer. As of June 28, 2002, we had approximately $114.3 million of indebtedness outstanding which constitutes "Senior Debt" for purposes of the indenture, including the letters of credit and surety bonds to which the notes are subordinated but net of cross-collateralized obligations. See "Description of the Notes—Subordination."
The notes will effectively be subordinated to the debt of our subsidiaries.
Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of the notes to participate in those assets, will be effectively subordinated to the claim of that subsidiary's creditors, including trade creditors. As of June 28, 2002, except for intercompany liabilities and liabilities guaranteed by Labor Ready, Inc., our subsidiaries had no liabilities outstanding that would constitute "Indebtedness" under the indenture. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us. Our subsidiaries have no obligation to pay any amounts due on the notes or to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Furthermore, we are not limited in or prohibited from transferring cash or other assets to our subsidiaries from time to time.
Substantially all of our accounts receivable are currently pledged to support senior debt.
We have a $100 million accounts receivable facility that is secured by eligible accounts receivable. Under the terms of this facility, we and certain of our subsidiaries transfer accounts receivable to Labor Ready Funding Corporation, a wholly owned subsidiary of Labor Ready, Inc. These accounts receivable are then pledged to our lenders under the facility on an ongoing basis. We also have a letter of credit facility, that is secured by a pledge of all of the outstanding stock of Labor Ready Funding Corporation. In addition, the majority of assets in our wholly owned insurance company subsidiaries, Labor Ready Assurance Company and Workers' Assurance of Hawaii, Inc., consist of restricted cash balances that secure letters of credit relating to our workers' compensation obligations. As of June 28, 2002, we had an aggregate of $46.5 million of restricted cash in our subsidiaries. We and our subsidiaries may increase our level of restricted cash balances or incur additional indebtedness and grant security interests to secure that indebtedness, which could harm our ability to pay our obligations under the notes.
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If an active trading market for the notes does not develop, then the market price of the notes may decline or you may not be able to sell your notes.
There is no established trading market for the notes. The notes originally issued in the private placement of our convertible subordinated notes are eligible for trading on the PORTAL Market. However, notes sold pursuant to this prospectus will no longer be eligible for trading on the PORTAL Market. We do not intend to include the notes in any other automated interdealer quotation system or list the notes on any securities exchange. We cannot assure you that an active trading market for the notes will develop or, if such market develops, how liquid it will be. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the price of our common stock, our performance and other factors. The lead managers of our private placement have advised us that they currently intend to make a market in the notes. However, these lead managers are not obligated to make a market and may discontinue this market activity at any time without notice. As a result, we do not know whether an active trading market will develop for the notes. To the extent that an active trading market does not develop, the price at which you may be able to sell the notes, if at all, may be less than the price you pay for them. The notes and common stock issuable upon conversion of the notes have not been registered under the Securities Act. Unless and until the notes and underlying common stock are registered, they may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, registration under the Securities Act and applicable state securities laws. See "Description of the Notes—Registration Rights" and "Plan of Distribution."
Increased leverage as a result of the private placement of our notes offering may harm our financial condition and results of operations.
At June 28, 2002, we had $71.7 million of outstanding debt as reflected in our balance sheet (inclusive of the notes, but exclusive of outstanding letters of credit and surety bonds). We may incur additional indebtedness in the future and the notes do not restrict our future issuance of indebtedness. Our level of indebtedness will have several important effects on our future operations, including, without limitation:
•
a portion of our cash flow from operations will be dedicated to the payment of any interest required with respect to outstanding indebtedness;

•
increases in our outstanding indebtedness and leverage will increase our vulnerability to adverse changes in general economic and industry conditions, as well as to competitive pressure; and

•
depending on the levels of our outstanding debt, our ability to obtain additional financing for working capital, capital expenditures, general corporate and other purposes may be limited.
Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If we are not able to generate sufficient cash flow from operations in the future to service our debt, we may be required, among other things:
•
to seek additional financing in the debt or equity markets;

•
to refinance or restructure all or a portion of our indebtedness, including the notes;

•
to sell selected assets;

•
to reduce or delay planned capital expenditures; or

•
to close existing dispatch offices or delay opening new ones.
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Such measures might not be sufficient to enable us to service our debt. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms.
The notes do not contain restrictive covenants, and there is limited protection in the event of a change in control.
The indenture under which the notes are issued does not contain any restrictive covenants that would protect you from several kinds of transactions that may adversely affect you. In particular, the indenture does not contain covenants that limit our ability to pay dividends or make distributions on or redeem our capital stock or limit our ability to incur additional indebtedness and, therefore, may not protect you in the event of a highly leveraged transaction or other similar transaction. In addition, the requirement that we offer to repurchase the notes upon a change of control is limited to the transactions specified in the definition of a "change of control" under "Description of the Notes—Repurchase at Option of Holders Upon a Change of Control." Accordingly, we could enter into certain transactions, such as acquisitions, refinancings or a recapitalization, that could affect our capital structure and the value of our common stock but would not constitute a change of control.

RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratio of earnings to fixed charges for us and our consolidated subsidiaries for the periods indicated. In calculating the ratio of earnings to fixed charges, earnings consist of income before income taxes and cumulative effect of accounting change and fixed charges. Fixed charges consist of interest expense, amortized premiums related to indebtedness and a reasonable estimate of interest within rental expense.

At December 31,

June 28, 2002(1) June 29, 2001(1)

2001 2000 1999 1998 1997
Ratio of earnings to fixed charges — — 3.1x 3.3x 7.9x 9.6x 8.0x
(1)
For the six months ended June 28, 2002 and June 29, 2001, earnings were inadequate to cover fixed charges by $240 thousand and $132 thousand, respectively.

USE OF PROCEEDS
All of the notes and the shares of our common stock issuable upon conversion of the notes are being sold by the selling securityholders or by their pledgees, donees, transferees or other successors in interest. We will not receive any proceeds from the sale of the notes or the shares of our common stock issuable upon conversion of the notes.

BUSINESS
Labor Ready, Inc., founded in Washington in 1989, is a leading national provider of temporary workers for manual labor jobs. Our diversified customer base includes businesses in the freight handling, warehousing, hospitality, landscaping, construction, light manufacturing, retail, wholesale, sanitation and printing industries. These businesses require workers for lifting, hauling, cleaning, assembling, digging, painting and other types of manual or unskilled work.
Since our inception in 1989, our revenues have grown to $917.0 million for the fiscal year 2001 and our number of dispatch offices has grown to 753 as of June 28, 2002. All of the growth in dispatch offices was achieved organically by opening company-owned locations rather than through mergers or acquisitions. We have dispatch offices in markets throughout the United States, Canada, the United Kingdom and Puerto Rico.
Industry Overview
The temporary staffing industry has grown in recent years as companies have used temporary employees to control personnel costs and to meet fluctuating personnel needs. Historically, the demand for temporary workers has been driven primarily by the need to satisfy peak production requirements and to temporarily replace full-time employees who are absent 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 the possible adverse effects of changing employment regulations, to temporary staffing companies, which can better manage those costs and risks. In addition, through the use of temporary employees, businesses avoid the inconvenience and expense of searching for, interviewing, screening, testing and terminating regular employees.
We believe the short-term, light industrial segment of the temporary staffing industry is highly fragmented and presents opportunities for larger, well capitalized companies to compete effectively, mainly through systems and procedures which efficiently process a high volume of transactions, coordinate multi-location activities and manage workers' compensation costs.
Company Strategy
Our goal is to enhance our position as one of the leading national providers of temporary manual labor. Key elements of our strategy include the Company's strategy to achieve this objective are as follows:

- AGGRESSIVELY OPEN NEW DISPATCH OFFICES. The Company's strategy isfollowing:
•
Improve Revenues and Profit in all Existing Offices. We intend to increase revenues by rapidly expanding its network ofand profits in each dispatch offices.
The Company plans to open approximately 54 additional dispatch offices
prior to the end of 1996, for a total of 94 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 numbersize and mix of customers served. More experienced area directorsour customer base. To that end, we intend to significantly develop new and district managers
assistexisting large accounts through our National Accounts staff, which provides a single source of customer care for our large regional and national customers. Because a significant degree of our branch cost structure is fixed, we are positioned to leverage existing branch infrastructure to drive profitability upon increased demand for our services. Moreover, our experience has been that our dispatch offices generally increase their sales volumes as they mature over time. We expect that annual sales volumes in the general managerlarge number of dispatch offices that we opened in this process. The Company is also developingthe Northeast and implementing atelsewhere in 1999 and 2000 will similarly increase as these offices mature.

•
Grow the corporate level coordinated salesNumber of Dispatch Offices Through Strategic, Measured Level of Expansion. Our low overhead strategy allows us to expand or retract our number of offices quickly and marketing
strategies designed to complement these efforts, includingcost-effectively, depending on economic and labor demand conditions. We believe that we can generally open dispatch offices for less than $50,000 per office. Although recent difficulties in 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,U.S. economy 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 continuesector have caused us 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 improving
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operating efficiencies not availablerather than aggressive expansion, we expect to its smaller competitors, and rapidly expanding
throughcontinue seeking opportunities to expand. We intend to pursue a measured approach to expansion by opening new dispatch offices only if they are expected to achieve profitability in a reasonable time frame. We also intend to continue to cluster multiple locations in a single market. This strategy allows us to reduce opening costs and increasing revenue at existing dispatchoperating risks in clustered areas, as marketing, advertising and other costs are shared among nearby offices. DISPATCH OFFICE EXPANSION

The Company has rapidly grown from eightAdditionally, while we will continue to target major markets, we intend to establish a presence, where appropriate, in small- to medium-sized markets.
•
Pursue Further International Expansion and Selected Acquisitions. We intend to continue to seek growth opportunities internationally, particularly in the United Kingdom, where we currently have 35 dispatch offices, including seven new offices that we opened in 1991 to 146
dispatch offices at May 1, 1996. The Company's expansionthe first eight months of 2002. Moreover, while our historical growth has been achieved
primarily by opening Company-owned dispatch offices. Oforganically-driven, we intend to evaluate selected acquisition opportunities of complementary or related businesses.
Dispatch Offices
We have established a national "footprint" with a presence throughout the 146 dispatchUnited States, which we believe provides us a significant competitive advantage, particularly with large national accounts. Last year we undertook a program of consolidating certain offices open at May 1, 1996, 140 dispatch offices have been owned and operated by the
Company from inception.to achieve increased efficiency without abandoning any significant markets. The following table sets forth the number and locationcountry of dispatch offices by geographic region open at the end of each of the last five years and at May 1, 1996. The information below does not include four years.
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, AT MAY 1,
---------------------------- ---------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---------

West................ 8 9 12 23 38 42
Southwest/Mountain... 0 0 2 8 15 20
Upper Midwest....... 0 0 0 8 16 29
Midwest............. 0 1 3 7 20 25
South............... 0 0 0 1 12 24
Eastern............. 0 0 0 0 1 2
Canada.............. 0 0 0 4 4 4
-
---- ---- ---- ---- ---
Total........... 8 10 17 51 106 146
-
-
---- ---- ---- ---- ---
---- ---- ---- ---- ---

The Company currently anticipates opening 54 dispatch offices during the
remainder of 1996 for a total of 94Dispatch Offices
by Country
At December 31,
2001 2000 1999 1998 1997
United States 689 765 670 474 308
Canada 34 33 15 11 8
Puerto Rico 4 4 1 1 —
United Kingdom 29 14 1 — —
Total 756 816 687 486 316
We have opened nine new dispatch offices in 1996,the first five months of 2002. We will continue to analyze individual dispatch office performance, which may lead to additional dispatch office closures in 2002. We analyze acquisition opportunities, 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 opportunitiesmay, from time to time, may pursue acquisitions in certain circumstances and may also accelerate
expansion based on future developments.

In 1994, the Company's franchise subsidiary licensed one franchise 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 officesacquisitions.
Criteria for New Dispatch Offices. We have not been material during the periods presented herein.

ECONOMICS OF DISPATCH OFFICES. The Company has standardized the process of opening dispatch offices.offices and believe our operations are highly scalable. In 1995, the average aggregate cost of opening ageneral, we believe that we can open new dispatch offices for less than $50,000 per office, was approximately $35,000, including costs for salaries, recruiting, testing, training, lease expenses,and leasehold improvements, computer systems, advertisinga CDM and related equipment, 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 largercosts. We generally will only consider opening new dispatch offices and expands into the northeastern United States. New dispatch
offices are expected tothat we believe will generate revenuerevenues 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 revenuea reasonable period of approximately $1.3
million, or approximately $25,000 per dispatch office per week.

CRITERIA FOR NEW DISPATCH OFFICES.time.
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 aan analysis by zip code resolution of employment figures, demographics and the relative distance to the nearest existing Labor Ready dispatch office. In addition, the Company locateswe locate dispatch offices in areas convenient for itsour temporary workers, thatwhich 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
establisheswe establish a dispatch office in a metropolitan area, the Companywe usually clusterscluster additional locations within the same area. Multiple locations in a market reduce both opening costs and operating risk for new dispatch offices because direct mail and other advertising costs are spread among more dispatch offices and because
17

the new dispatch office benefits from existing customer relationships with the other
dispatch offices and established Labor Ready namebrand recognition. DISPATCH OFFICE MANAGEMENT. The Company believesMultiple locations also allow us to close offices in a contracting market, while allowing the customers of the closed office to be serviced by a nearby office.
Dispatch Office Management. We believe that the key factor determining the success of a new dispatch office is identifying and retaining an effective dispatch office general manager. Each generaldispatch office manager has primary responsibility for managing the operations of the dispatch office, including the recruiting temporary workers,and daily dispatch of temporary workders,workers, sales, customer service and collecting accounts receivable. The Company paysreceivable collection. We pay monthly bonuses to its generalqualifying dispatch office managers based on accounts receivable collections and gross margins during the month.
Each generaldispatch office 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 ofWe continuously seek individuals are better suitedwho have the aptitude 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 commitsprofitability. We commit substantial resources to the training, development, retention and operational support of its generalour dispatch office managers. In 1995, due to turnover,
attrition, or termination, the Company replaced approximately 25% of its general
managers.

OPERATIONS

DISPATCH OFFICES.
Operations
Dispatch offices are locations whereOffices. Typically, workers (and
prospective workers) report prior to being assigned to jobs, including those
being called back to the same employer. Workers are required to reportcome to the dispatch office in orderthe morning to minimize "no-shows"check on the availability of jobs and 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.indicate their availability for assignment. During the early morning hours, the generaldispatch office manager and an assistant coordinate incoming customer work orders, assign the available workers to the job openings for the day, and arrangeassist as necessary in arranging transportation to the job site. Most job openings are requested on short notice, often the same day as the workers are needed at the job site. Work assignments are filled on a nondiscriminatory basis, with the dispatch office manager endeavoring to match customer needs with available workers.
Prior to dispatch, a branch employee checks to make sureensures workers have the basic safety equipment required for the job, such as protective boots, back braces, hard hats, or safety goggles, all of which are provided at no 23
charge to the worker orand 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, (whichwhich is endorsed by the customer to confirm work performance) that each worker mustperformance. The workers then present atthe endorsed order to the dispatch office in order to receive payment for the hours worked. Workers are generally paid daily by check.check, but with the addition of a CDM at most dispatch offices, workers have the choice of being paid each day in cash. Computer systems at each dispatch office perform the calculations necessary to determine the wages, less taxes and applicable withholdings, and print security controlledsecurity-controlled checks, which are distributed to each worker. If the worker elects to use a CDM, the system prints a payroll voucher which contains a unique security code. The worker enters the code into the CDM and the net pay is disbursed, less the change and $1 transaction fee for the CDM service. Revenues from the CDMs are substantially offset by the direct and indirect costs of the CDM program. The primary purpose of the CDM program is to provide an additional service to our temporary workers. We believe our CDMs enhance our ability to attract temporary workers. Our corporate management information systems monitor our payroll process, including accounting, controls and disbursement.
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 laborerworker is paid. Dispatch offices are generally staffed with at least two full-time employees, including the generaldispatch office manager and a customer service representative. GeneralDispatch office managers manageoversee 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.
18

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

CUSTOMERS. The Company's
Customers. Our customers are primarily businesses in the freight handling, warehousing, hospitality, landscaping, construction, light manufacturing, retail, wholesale, sanitation and less
frequently, government agencies, thatprinting industries. Our customers 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.unskilled work.
New dispatch offices initially target businesses in their market area with direct mail and telemarketing campaigns. Our dispatch office managers, regional or local sales force and telemarketers are responsible for following up the construction industry for
potentialmarketing campaigns with telephone or personal calls. Many 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 flowworkflow, especially customers in the construction and have a need for one or more workers. The Companylandscaping industries. We currently derives itsderive our business from a large number of customers, and iswere not dependent on any single large customer for more than 2% of its revenues. During 1995,
the Company'sour revenues in 2000 and 2001. Our ten largest customers accounted for $6.4 million, or 6.8%4.3% of total sales.revenues in 2001 and 4.3% of total revenues in 2000. 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'sour revenues. During 1995, the Company2001, we provided temporary workers to in excess of 63,000nearly 300,000 customers. Labor Ready filled more than
748,000 work orders in 1995.
Many customers use Labor Ready as a screening deviceto screen prospective employees for future permanent hires. Because Labor Ready doeswe do not charge a fee if a customer hires a Company worker,our workers, customers on occasion send prospective employees to the Companyus 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 inminimizing the expense of employee turnover and personnel agency fees.

BILLING AND COLLECTIONS. The Company has
Credit and Collections. We have implemented an automated credit and collections system that allows each dispatch office to establish a credit policy which
allowslimit for new customers to establish an account withby telephonically accessing a $2,500 initialcomputer based credit limit.
Workers may be dispatched tosystem. Initial credit limits are based on 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.credit-scoring matrix we developed. The credit department, processes applications within 24 hoursusing other credit reporting agencies, bank/trade references and if information indicatesbalance sheet analysis, reviews and approves additional 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 higherextensions beyond those recommended by this system. Initial credit limits the credit department will expand its credit investigationrange from COD to justify
such increase by completing trade reference verification, analysis of financial
statements$100,000 and tax returns. Onceonce a customer has reached 75% of its credit limit, the customer screen on the Company's informationour system has a red warning to
alertalerts the dispatch office personnel to monitor more closely monitor the activity of the customer.

SALES AND MARKETING. Generally, each
Sales and Marketing. Marketing is accomplished primarily through telemarketing and direct-mail campaigns, yellow-page advertising, personal sales contacts, word of mouth and billboard advertising. Each dispatch office is responsible for its own sales and marketing efforts.efforts in its local market area in coordination with corporate marketing and advertising. The generaldispatch office manager is primarily responsible for sales and customer service, and sales, but mostwith all branch employees are alsobeing involved in customer sales and marketing. Eachcustomer relations. We purchase a direct marketing database, and from a centralized direct mail department, conduct an intensive direct-mail campaign in the local market area of each dispatch office. For a new dispatch office, maintains databases for areathe direct-mail campaign targets a broad range of businesses for telemarketingin its local market area. Follow-up mailings target business in our traditional market niche. Follow-up telephone and direct mail. The Company expects each dispatch
office to mail 300 to 500 pieces of direct mail a week with follow-up to bepersonal calls on qualified leads are made by the generaldispatch office manager or the customer servicea sales 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 allowswe allow for an initial advertising budget to generate an awareness of the new dispatch office. ByWhen opening additional dispatch offices as warranted, based on area demographics, the Companywe can also expand and coordinate itsour marketing efforts andto the benefit all the dispatchof other established 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.
Temporary Workers. Most workers find the Company'sour "Work Today, Paid Today" policy appealing and arrive at the dispatch office early in the morning motivatedready to put in a good day's work and receive a paycheck or a CDM voucher
19

for cash at the end of the day. Labor Ready's temporaryThe majority of the 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 incomelow-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
Because of temporary workers at each dispatch office
generally numbers between 40increasing diversification of our customer base 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, goodwe are less dependent on weather than in our early years. Good weather, nevertheless, brings incrementally more job orders and workers. After reviewing work orders forConsequently, we are busiest in 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
capablelate spring, summer 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.early fall.
Under the Company'sour "satisfaction guaranteed" policy, replacements for all unsatisfactory workers are promptly providedreplaced and the customer is not charged for their time if the customer notifies the
Companyus within the first two hours of work. Employees who receive two concurrent
complaints from customers are generally terminatedreprimanded or reprimanded. The Companyterminated. We 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
We withhold FICA Medicare, and federal, state, and, where applicable, city and county payrollincome taxes from itsour temporary workersworkers' wages for disbursement to governmental agencies. Additionally, the Company
payswe maintain federal and state unemployment insurance, premiums, and workers' compensation expensescoverage for itsour temporary employees. See "-- Workers'
Compensation."

RECRUITMENT OF TEMPORARY WORKERS. The Company attracts its
Recruitment of Temporary Workers. We attract our pool of temporary workers through billboard advertisements, flyers, newspaper advertisments,advertisements, dispatch office displays, and word of mouth. The Company believes itsWe believe our strategy of locating dispatch offices in lower income neighborhoods,areas convenient for our workers, with ready access to public transporta-
tion,transportation, is particularly important in attracting workers.

The Company's
Our "Work Today, Paid Today" policy is prominently displayed at most dispatch offices and, in the Company'sour experience, is a highly effective method of attracting temporary workers. Workers also find other Company policies
attractive, such asOur ability to pay workers' wages in cash through the emphasis on worker safety, Company provided safety
equipment, and modest advances for lunch or gas for workers short on cash.use of the CDMs is an additional attraction. 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.that we do not charge a fee if a customer decides to offer them a full-time position. The possibility of landinglocating a regularfull-time position serves as an added incentive to itsour workers. Finally, dispatch offices generally remain open to ensure
We experience shortages of available temporary 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, particularly during peak periods shortages of
available temporary workers.periods. 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'sour employee data base.database. On occasion, work orders requiring large numbers of temporary workers will be filled by general managers coordinatingthrough coordination with other local dispatch offices.

MANAGEMENT, EMPLOYEES AND TRAINING. The Company currently employs a total
of 62
Management, Employees and Training. At June 28, 2002, we employed approximately 230 administrative and executive staff in the corporate office, and 404approximately 2,500 people as supervisors, generaldispatch office managers, customer service representatives, district managers, area directors and support staff. GeneralDispatch office managers report to district managers who in turn report to area directors. The Company isFor positions above dispatch office manager, we focus on hiring additionalmanagement and supervisory management personnel with experience in managing multilocationmulti-location operations.
After extensive interviews and tests, prospective generaldistrict and dispatch office managers undergo approximately one week of training at our training center, which is located at the corporate office in Tacoma, Washington, and
customer service representatives generally undergo four weeks of on-the-job training at an
existing high-volumea dispatch office. The employees then attend Labor Ready
University,training center is charged with providing the Company's training division, located at the dispatch office in
Tacoma, Washington. Labor Ready University, formed in 1995managers with the mission of
training managers and customer service representatives on the skills necessary for operating a dispatch office, is staffedoffice. Staffed by an experienced training professional. The Companyprofessionals, the training center has developed a curriculum, training manuals, and instruction modules for the six-day,training program. The training program includes rigorous sessions, which include sessions on topics such as marketing and direct mail, credit and collections, payroll and personnel policies, workers' compensation management and safety. By operating the training center as part of an ongoing
dispatch office, the managers and customerCustomer service representatives receive on-the-job training under actual and simulated dispatch conditions. The Company is
currently establishing ten certified fieldat the branch where they work, supplemented by a computerized 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 toprogram.
Management Information Systems. We believe our proprietary software system provides us with significant competitive advantages over competitors that utilize less sophisticated systems. We have an experienced manager participate in the classes to share
experiences encountered in operating a dispatch office.

MANAGEMENT INFORMATION SYSTEMS. The Company has internally
20

developed itsour own proprietary software system to process all required credit, billing, collection, temporary worker payroll information and related payroll information for tax returns, together with other information important to
managingand reporting systems necessary for the management of hundreds of 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'sour key databases, from the tracking of work orders to payroll processing to maintaining worker records. The current system regularly exchanges key databaseall point of sale information between the corporate headquarters and the dispatch offices, including customer credit information and the tracking of
workers' compensation safety claims.outstanding receivable balances. Dispatch offices can run a variety of reports on demand, includingsuch as receivables aging. The Company can also conduct
keyword searches in its employee database for certain types of work experience.
Regionalaging, margin reports, and areacustomer activity reports. Area directors can also call into the system and district managers are able to 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 informationremote locations.
Our system also provides the Companyus 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 or CDM voucher is issued, the customer's weekly billinvoice and the dispatch office receivables ledger are automatically updated. Printed checks have watermarks and computer-generated signatures that are extremely difficult to duplicate. WORKERS' COMPENSATION PROGRAM. The Company maintainsCustomer invoicing is centrally controlled. All cash receipts are received in lockbox accounts and are matched to customers' receivable records using an automated data capture system.
Workers' Compensation Program. We are required to pay workers' compensation insurance for our temporary workers and regular employees. For workers' compensation claims originating in the majority of states, we purchase deductible insurance policies from third party insurance companies unrelated to us. Under the terms of the policies, our workers' compensation exposure is limited to a deductible amount per occurrence and covers any claims for a particular event above a set deductible. We have also historically maintained aggregate stop loss insurance coverage that would allow us to recover from an insurer if the aggregate amount of deductible payments incurred by us in a given year exceeded a dollar threshold. In order to manage our overall insurance costs under our policy covering the 2002 plan year, we have significantly increased our per occurrence insurance deductible and dropped our aggregate stop loss coverage.
For workers' compensation claims originating in Washington, Ohio, West Virginia, Canada and Puerto Rico, we pay workers' compensation insurance premiums as required by state laws.government administered programs. The Company operates in three states
(Washington, Nevadainsurance premiums are established by each jurisdiction, generally based upon the job classification of the insured workers 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 ofour previous claims experience. For workers' compensation claims originating in the United Kingdom, we have purchased an employers' liability insurance policy.
We establish our reserve for workers' compensation using actuarial estimates of the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not reported. We regularly assess our estimates of our claims settlement
expenses on claims originating in these states. Through March 31, 1996 an
additional $1.5 million was deposited with the foreign offshore company. Claims
are administered by areserves against third party administrator retained byactuarial estimates, our claims history and industry data. Adjustments to the Company. At
March 31, 1996, approximately $3.3 million remained on deposit forclaims reserve are expensed or credited to costs of services in the payment
of future claims and claims settlement expensesperiods in which were estimated by the
Company at $1.3 million.

The Company has establishedthey occur.
We maintain a separaterisk management department at itsour corporate headquarters to manage itsour insurers, third party claims administrators and the medical service providers. The Company attemptsproviders and to resolveoversee our safety programs. We employ claims promptly and generally
closes claims within 120 days. Tocoordinators to reduce the wage-loss compensation claims. The claims coordinators manage the Company has established a "light duty"acceptance, processing and final resolution of claims and administer our return to work program, wherein workers are employed at the local dispatch office or on customer assignments that requiresrequire minimal physical exertion withinexertion. We have an on-line connection with our third party administrator that allows the Company (dispatch office work) or outside
assignments (e.g., cafeteria help)claims coordinators to customers. The Company's information
system generates weekly workers' compensation loss minimization reports for both
corporatemaintain visibility of all claims, manage their progress and branch location use.

GOVERNMENT REGULATIONS.

SAFETY PROGRAMS. As an employer, the Company isgenerate required management information.
21

Government Regulations
Safety Programs. We are subject to applicablea number of state and/orand federal statutes and administrative regulations pertaining to the safety of our workers. These laws generally require us to provide general safety awareness training and certain safety equipment to our workers. In most jurisdictions, when our temporary workers are on a customer's 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 employeesthey are generally considered the customer's employees while on the customer's job site for the
purposepurposes of applicablesite-specific safety standards compliance liability.

In 1995, the Company's accident rate was approximately one incident per
6,000 man hours worked. The Company continuescompliance. Under Occupational Safety and Health Administration (OSHA) regulations, responsibility for recording jobsite injuries to our temporary workers lies with our customers.
We continue to emphasize safety awareness which helps control workers' compensation costs, throughby training of itsour management employees, and office staff safety sessions with employees,and temporary workers, issuing
of safety equipment, monitoring of job sites and communicating with customers to assure that thepromote job request order is one that can be safely accomplished.site safety. Each district maintains a safety committee which meets regularly to review safety issues and policies. Temporary workers are trained in safety procedures primarily by showingviewing safety tapes, reviewing a safety manual and completing a safety test at the beginning of each day.their employment. 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
We maintain our own inventory of safety equipment at each dispatch office. Standard equipment includes hard hats, metal tippedprotective boots, gloves, back braces, ear plugs,earplugs and safety goggles. Equipment is checked out to workers as appropriate. All construction jobs require steel-toed boots and a hard hat. The dispatch office manager ensures that workers take basic safety equipment to job sites.

Office
Dispatch office personnel are trained to discuss job safety parameters with customers on incoming work order calls.requests. Managers conduct job site visits for new customer job orders and periodic "spot checks" forof 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 isus.
Wage and Hour Regulation. We are required to comply with applicable state and federal wage and hour laws. These laws require the Companyus to pay itsour employees minimum wage and to pay overtime at applicable ratesrates. When our workers are employed on public works projects we are generally required to pay prevailing wages and to comply with additional reporting obligations.
Proposed New Regulation. In 2001 and 2002, we have seen an increased level of activity in various state legislatures and in Congress with respect to proposed legislation that could affect our business. This proposed legislation, much of which is backed by labor unions, has included provisions such as a requirement that our temporary workers receive the same pay whenand benefits as our customers' regular employees, prohibitions on fees charged in connection with our CDMs and a requirement that our customers provide workers' compensation insurance for our temporary workers. We take a very active role in opposing such legislation and in informing policy makers as to the employee works more than forty hourssocial and economic benefits of our business. We cannot guarantee that any such proposed legislation will not be enacted, in a work week. In some states, overtime
paywhich event demand for our services may be required after eightadversely affected.
Organized labor has sought to enact legislation in the State of California, our largest market. For example, legislation has been introduced into the California state legislature that would modify the current rules governing workers' compensation insurance in that state. Although the exact impact of this legislation on our business is unclear, the successful implementation of this or ten hoursother similar legislation in California or our other large markets could significantly increase our costs of work in a day.

COMPETITIONdoing business or decrease the value of our services to our customers.
Competition
The short-term, manual labor sector of the temporary services industry is highly fragmented and highly competitive, with limited barriers to entry. A large percentage of temporary staffing companies serving this sector of the industry are local operations with fewer than five offices. Within local or regional markets, these firms actively compete with the Companyus for business. The primary basisbases of competition among local firms isare price,
22

service and the ability to a lesser
extent, service.provide the requested amount of workers on time. 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 yet aggressively expanded in the Company's targetedour market segment. ManyHowever, many of these competitors have substantially greater financial and marketing resources than those of the Company.we do. One or more of these competitors may decide at any time to enter or expand their existing activities in the short-term, light industrial market and provide new and increased competition to the Company. The
Company believesus. We believe 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 customerspresence of multipleone or more temporary service providers
createscompetitors in a particular market can create significant pricing pressure as competitors compete for the available
demand, and this pricing pressure adversely impacts operatingcould harm our profit margins.

TRADEMARKS

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

The Company leasesWe have also been granted a patent by the U.S. Patent and Trademark Office for the system of controlling a network of CDMs for the disbursement of payroll.
Properties
We lease virtually all of itsour dispatch offices. Dispatch officeUnder most of these leases, generally generally permitwe have the Companyright to terminate the lease on 3090 days notice and upon payment of three months rent. CertainA small percentage of leases haveprovide for a minimum one year term
and require additional payments for taxes, insurance, maintenance and renewal
options.one-year term.
In February 1995, the Company purchased a labor dispatch building which also
serves as a training center and warehouse facility for supplies and storage in
Tacoma, Washington. In March 1995, the Company also purchased2001, we sold a 24,000 square foot facilitybuilding and a 44,000 square foot office building with an adjoining 10,000 square foot warehouse, which had served as our corporate headquarters and administrative offices in Tacoma, Washington until March 2001. In March 2001, we moved into a company-owned, 157,000 square foot office building with an attached parking garage in downtown Tacoma, Washington, which serves as its headquarters and
administrativeour headquarters. We also own a dispatch office building. The headquarters location is currently being
remodeled to accommodate the Company's continuing expansion. The Company's prior
facility in Tacoma is for sale and is not currently in use. The Company also
owns dispatch buildings in Kent, Washington, and Kansas City, Missouri.Tacoma. Management believes all of the Company'sour facilities are currently suitable for their intended use. At present growth rates, management believes the new
building willuse and that additional space can be adequate for administrative offices through the year 1998.

LEGAL PROCEEDINGS

The Company is not currently subjectobtained at commercially reasonable terms to any material legal proceedings. The
Company may frommeet future requirements.
Legal Proceedings
From time to time become awe are party to various legal proceedings
arising in the normal course of its business. These actions could include
employee-related issues and disputes with customers. The Company carries
insurance for actions or omissions of its temporary employees. Since the
temporary workers are under the supervision of the customer or its employees,
the Company believes the terms of its contracts with its customers, which
provide that the customers are responsible for all actions or omissions of the
temporary workers, limit the Company's liability. Nevertheless, any future
claims are subject to the uncertainties related to litigation and other legal proceedings in the ultimate
outcomeordinary course of our business. Please refer to our public reports filed with the SEC, which describe certain material proceedings to which we are party and which are incorporated into this prospectus by reference. See the section below entitled "Incorporation By Reference."

DESCRIPTION OF NOTES
We issued the notes under an indenture, dated as of June 19, 2002, between us and The Bank of New York, as trustee. The terms of the notes include those provided in the indenture, the notes and those provided in the registration rights agreement, which we will enter into with the initial purchasers. The following description is only a summary of the material provisions of the notes, the indenture and the registration rights agreement. We urge you to read these documents in their entirety because they, and not this description, will define your rights as holders of these notes. You may request copies of these documents at our address set forth above on the cover page of this prospectus.
When we refer to Labor Ready, "we", "our" or "us" in this section, we refer only to Labor Ready, Inc., a Washington corporation, and not its subsidiaries.
Brief Description of the Notes
The notes are:
•
limited to $70 million in aggregate principal amount;

•
general unsecured obligations, ranking junior in right of payment to all of our existing and future Senior Debt and, as indebtedness of Labor Ready, will be effectively subordinated to all existing and future indebtedness and liabilities of our subsidiaries;

•
convertible into our common stock at an initial conversion price of $7.26 per share, subject to adjustment as described below under "—Conversion Rights";

•
redeemable at our option in whole or in part beginning on June 20, 2005 upon the terms set forth under "—Provisional Redemption by Labor Ready";

•
subject to repurchase by us at your option if a change of control occurs as set forth below under "—Repurchase at Option of Holders Upon a Change of Control"; and

•
due on June 15, 2007, unless earlier converted, redeemed by us at our option or repurchased by us at your option.
The indenture does not contain any financial covenants and does not restrict us or our subsidiaries from paying dividends, incurring additional debt or issuing or repurchasing our other securities. In addition, the indenture does not protect you in the event of a highly leveraged transaction or a change in control of Labor Ready except to the extent described below under "—Repurchase at Option of Holders Upon a Change of Control".
No sinking fund is provided for the notes. The notes are not be subject to defeasance. The notes are issued only in registered form in denominations of $1,000 and any integral multiple of $1,000 above that amount. No service charge will be made for any registration of transfer or exchange of notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
You may present definitive notes for conversion, registration of transfer and exchange, without service charge, at our office or agency in New York City, which shall initially be the office or agency of the trustee in New York City. For information regarding conversion, registration of transfer and exchange of global notes, see "—Form, Denomination and Registration".
Interest
The notes bear interest from June 19, 2002 at the rate of 6.25% per year. We will pay interest semiannually on June 15 and December 15 of each year to the holders of record at the close of
24

business on the preceding June 1 and December 1, respectively, beginning December 15, 2002. There are two exceptions to the preceding sentence:
•
In general, we will not pay accrued and unpaid interest on any note that is converted into our common stock. See "—Conversion Rights—Conversion Procedures".

•
We will pay interest to a person other than the holder of record on the relevant record date if we redeem, or holders elect to require us to repurchase, the notes on a date that is after the record date and on or prior to the corresponding interest payment date. In this instance, we will pay accrued and unpaid interest on the notes being redeemed to, but excluding, the redemption date or repurchase date, as the case may be, to the same person to whom we will pay the principal of those notes.
We will pay the principal of, interest on, and any additional amounts due in respect of the global notes to DTC in immediately available funds.
In the event definitive notes are issued, we will pay interest and any additional amount due on:
•
definitive notes having an aggregate principal amount of $5,000,000 or less by check mailed to the holders of those notes;

•
definitive notes having an aggregate principal amount of more than $5,000,000 by wire transfer in immediately available funds if requested by holder of those notes; and

•
at maturity, we will pay the principal of and interest on the definitive notes at our office or agency in New York City, which initially will be the office or agency of the trustee in New York City.

•
Interest generally will be computed on the basis of a 360-day year comprised of twelve 30-day months.
Conversion Rights
General
You may convert any outstanding notes (or portions of outstanding notes) into our common stock, initially at the conversion price of $7.26 per share, equal to a conversion rate of 137.741 shares per $1,000 principal amount of notes. The conversion price will be subject, however, to adjustment as described below under "—Conversion Price Adjustments". We will not issue fractional shares of common stock upon conversion of notes. Instead, we will pay cash to you in an amount equal to the market value of that fractional share based upon the closing sale price of our common stock on the trading day immediately preceding the conversion date. You may convert notes only in denominations of $1,000 and whole multiples of $1,000.
You may exercise conversion rights at any time prior to the close of business on the business day prior to the final maturity date of the notes. However, if you are a holder of notes that have been called for redemption, you must exercise your conversion rights prior to the close of business on the second business day preceding the redemption date, unless we default in payment of the redemption price. In addition, if you have exercised your right to require us to repurchase your notes because a change of control has occurred, you may convert your notes into our common stock only if you withdraw your notice and convert your notes prior to the close of business on the business day immediately preceding the change of control repurchase date.
Conversion Procedures
Except as provided below, if you convert your notes into our common stock on any day other than an interest payment date, you will not receive any interest that has accrued on these notes since the
25
prior interest payment date. By delivering to the holder the number of shares issuable upon conversion, determined by dividing the principal amount of the notes being converted by the conversion price, together with a cash payment, if any, in lieu of fractional shares, we will satisfy our obligation with respect to the converted notes. That is, accrued but unpaid interest will be deemed to be paid in full rather than canceled, extinguished or forfeited.
If you convert after a record date for an interest payment but prior to the corresponding interest payment date, you will receive on the interest payment date interest accrued and paid on such notes, notwithstanding the conversion of such notes prior to such interest payment date, because you will have been the holder of record on the corresponding record date. However, at the time you surrender such notes for conversion, you must pay us an amount equal to the interest that has accrued and will be paid on the notes being converted on the interest payment date. The preceding sentence does not apply, however, to a holder that converts, after a record date for an interest payment date but prior to the corresponding interest payment date, notes that we call for redemption prior to such conversion on a redemption date that is on or prior to the third business day after such interest payment date. Accordingly, if we call your notes for redemption on a date that is after a record date for an interest payment date but on or prior to the third business day after the corresponding interest payment date, and prior to the redemption date you choose to convert your notes, you will receive on the date that has been fixed for redemption the amount of interest you would have received if you had not converted your notes.
You will not be required to pay any transfer taxes or duties relating to the issuance or delivery of our common stock if you exercise your conversion rights, but you will be required to pay any transfer tax or duties which may be payable relating to any transfer involved in the issuance or delivery of the common stock in a name other than yours. Certificates representing shares of common stock will be issued or delivered only after all applicable transfer taxes and duties, if any, payable by you have been paid.
To convert interests in a global note, you must deliver to DTC the appropriate instruction form for conversion pursuant to DTC's conversion program.
To convert a definitive note, you will be required to:
•
complete the conversion notice on the back of the note (or a facsimile of it);

•
deliver the completed conversion notice and the notes to be converted to the specified office of the conversion agent;

•
pay all funds required, if any, relating to interest on the notes to be converted to which you are not entitled, as described in the second preceding paragraph; and

•
pay all transfer taxes or duties, if any, as described in the preceding paragraph.
The conversion date will be the date on which all of the foregoing requirements have been satisfied. The notes will be deemed to have been converted immediately prior to the close of business on the conversion date. We will deliver, or cause to be delivered, to you a certificate for the number of shares of common stock into which the notes are converted (and cash in lieu of any fractional shares) as soon as practicable on or after the conversion date.
Conversion Price Adjustments
We will adjust the initial conversion price for certain events, including:
(1)
issuances of our common stock as a dividend or distribution on our common stock;

(2)
certain subdivisions, combinations or reclassifications of our common stock;
26
(3)
issuances to all holders of our common stock of certain rights or warrants to purchase our common stock (or securities convertible into our common stock) at less than (or having a conversion price per share less than) the current market price of our common stock;

(4)
distributions to all holders of our common stock of shares of our capital stock (other than our common stock), evidences of our indebtedness or assets (including securities, but excluding:

•
the rights and warrants referred to in paragraph (3) above;

•
any dividends and distributions in connection with a reclassification, change, consolidation, merger, combination, sale or conveyance resulting in a change in the conversion consideration pursuant to the fifth succeeding paragraph;

•
any dividends or distributions paid exclusively in cash; or

•
common stock distributions referred to in paragraph (1) above);

(5)
distributions consisting exclusively of cash to all holders of our common stock to the extent that such proceedingsdistributions, combined together with:

•
all other such all-cash distributions made within the preceding 12 months for which no adjustment has been made; plus

•
any cash and the fair market value of other consideration paid for any tender or claims cannot be predicted. See "Risk Factors
- -- Liabilityexchange offers by us or any of our subsidiaries for Actsour common stock expiring within the preceding 12 months for which no adjustment has been made,
exceeds 10% of Temporary Workers."

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL

The names, ages and positionsour market capitalization (defined as the product of the directors, executive officersmarket price of our common stock multiplied by the number of shares of our common stock then outstanding on the record date or date of payment for such distribution) on the record date or the date of payment; and
certain key employees
(6)
purchases of the Company are listed below along with their business
experience during the past five years. The business address of all executive
officers of the Company is 2156 Pacific Avenue, Tacoma, Washington 98402. All of
these individuals are citizens of the United States. The Company's Board of
Directors currently consists of five directors. Directors are elected at the
annual meeting of shareholders to serve until they resign or are removed, or are
otherwise disqualified to serve, or until their successors are elected and
qualified. Executive officers of the Company are appointed at the Board's first
meeting after each annual meeting of the shareholders. No family relationships
exist among any of the directors or executive officers of the Company, except
that Todd A. Welstad is the son of Glenn A. Welstad.

NAME AGE POSITION
- ----------------------------------------------------- --------- -----------------------------------------------------

Glenn A. Welstad..................................... 52 Chairman of the Board, Chief Executive Officer and
President
Ralph E. Peterson.................................... 62 Director, Chief Financial Officer, and Assistant
Secretary
Robert J. Sullivan................................... 65 Director
Thomas E. McChesney.................................. 49 Director
Ronald L. Junck...................................... 48 Director and Secretary
Scott J. Sabo........................................ 35 Director of Operations
Todd A. Welstad...................................... 27 Director of Management Information Systems
Keith T. Terrano..................................... 40 Director of Risk Management

GLENN A. WELSTAD has served as the Company's Chairman of the Board of
Directors, Chief Executive Officer and President since February 1988. Prior to
joining the Company, Mr. Welstad was an officer of Body Toning, Inc., W.I.T.
Enterprises, and Money Mailer from February 1987 to March 1989. In 1969 Mr.
Welstad founded Northwest Management Corporation, a holding company for
restaurant operations. Over the course of 15 years, Mr. Welstad expanded the
operations to twenty-two locations in five states, which included eight Hardee's
Hamburger Restaurants as well as pizza and Mexican restaurants. In March 1984,
Mr. Welstad sold his ownership interest in Northwest Management Corporation.

RALPH E. PETERSON has served as a director and Chief Financial Officer and
Assistant Secretary of the Company since January 1996. Prior to joining the
Company he served as Executive Vice President and Chief Financial Officer of Rax
Restaurants, Inc. from December 1991 until August 1995. Rax Restaurants, Inc.
entered Chapter 11 bankruptcy on November 23, 1992 and emerged from bankruptcyour common stock pursuant to a plantender offer made by us or any of reorganizationour subsidiaries to the extent that the same involves an aggregate consideration that, together with:

•
any cash and the fair market value of any other consideration paid in any other tender or exchange offer by us or any of our subsidiaries for our common stock expiring within the 12 months preceding such tender offer for which no adjustment has been made; plus

•
the aggregate amount of any all-cash distributions referred to in paragraph (5) above paid to all holders of our common stock within 12 months preceding the expiration of tender offer for which no adjustments have been made,
exceeds 10% of our market capitalization on November 8, 1993. From April 1983the expiration of such tender offer.
We will not make any adjustment if holders may participate in the transaction or in certain other cases. In cases where the fair market value of assets, debt securities or certain rights warrants or options to his
retirement in December 1991, Mr. Peterson was Executive Vice President and Chief
Financial Officer and a directorpurchase our securities, applicable to one share of Hardee's Food Systems, Inc., a restaurant
company operating and franchising over 4,000 restaurants located throughoutcommon stock, distributed to stockholders:
•
equals or exceeds the United States and abroad.

ROBERT J. SULLIVAN has served as a directoraverage quoted price of the Company since November
1994. Priorcommon stock, or

•
such average quoted price exceeds the fair market value of such assets, debt securities or rights, warrants or options so distributed by less than $1.00,
rather than being entitled to joining the Company he served as a financial consultant of the
Company from July 1993 to June 1994. Mr. Sullivan served as Chief Financial
Officer of Unifast Industries, Inc. from June 1990 to November 1991, and General
Manager of Reserve Supply Company of Long Island from July 1992 to December
1993.

THOMAS E. MCCHESNEY has served as a director of the Company since July 1995.
In January 1996, Mr. McChesney became associated with Bathgate and McColley
Capital, Inc. Previously, Mr. McChesney was an officer and director of Paulson
Investment Co. and Paulson Capital Corporation from March 1977 to June 1995.

RONALD L. JUNCK has served as a director and Secretary of the Company since
November 1995. He is an attorney in Phoenix, Arizona where he has specialized in
business law and commercial transactions since 1974. Mr. Junck serves as legal
counsel to the Company and received $184,269 for legal services during 1995.

SCOTT J. SABO has served as Director of Operations of the Company since
February 1995. Mr. Sabo joined the Company June 1990 and held positions within
the Company as a customer service representative, sales manager, branch manager
and area director before being promoted to Regional Director, Eastern Region in
June 1994. Prior to joining the Company he was employed by Labor World, a
national temporary labor service company, from April 1987 to May 1990, as a
branch manager.

TODD A. WELSTAD has served as Director of Management Information Systems of
the Company since October 1994. Mr. Welstad joined the Company in January 1994
as the manager of the Tacoma branch office and in August 1994 was promoted to a
Systems Analystadjustment in the MIS Department. Priorconversion price, the holder of a note will be entitled to joining the Company he was
employed as a Technical Supervisor at Micro-Rel, a division of Medtronics from
February 1989receive upon conversion, in addition to December 1994.

KEITH T. TERRANO has served as Director of Risk Management of the Company
since April 1996. Prior to joining the Company he was Vice President of
Cornerstone Insurance Company and Senior Director of Risk Management of
Hillhaven Corporation from October 1987 to March 1996.

APPOINTMENT OF DIRECTORS

Pursuant to the terms of the Shareholders Agreement (the "Shareholders
Agreement") entered into as of October 31, 1995, between Allied Investment
Corporation, Allied Investment Corporation II, Allied Capital Corporation II
(collectively referred to herein as "Allied"), Seacoast Capital Partners Limited
Partnership ("Seacoast"), Glenn A. Welstad, John R. Coghlan, Coghlan Family
Corporation, and the Company, Allied and Seacoast may collectively appoint one
of the Company's directors. To date they have not appointed a director.

The Company has established a Compensation Committee and an Audit Committee,
the majority of members of which are independent, outside directors. Messrs.
Junck (Chairman), Sullivan and Welstad are members of the Compensation
Committee, and Messrs. Sullivan, Peterson and McChesney are members of Audit
Committee.

INDEMNIFICATION OF DIRECTORS

The Washington Business Corporation Act (the "Washington Business Act")
provides that a company may indemnify its directors and officers as to certain
liabilities. The Company's Articles of Incorporation and By-laws provide for the
indemnification of its directors and officers to the fullest extent permitted by
law. The effect of such provisions is to indemnify the directors and officers of
the Company against all costs, expenses and liabilities incurred by them in
connection with any action, suit or proceeding in which they are involved by
reason of their affiliation with the Company, to the fullest extent permitted by
law.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, Preferred Stock, and total voting stock (which
includes the Common Stock and Preferred Stock, the "Voting Stock") as of May 1,
1996, and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, for (i) each person knowncommon stock, the kind and amount of assets, debt securities or rights, warrants or options comprising the distribution that such holder would have received if such holder had converted such notes immediately prior to the Companyrecord date for determining the shareholders entitled to own beneficially 5% or morereceive the distribution.
27
We will not make an adjustment in the conversion price unless such adjustment would require a change of each class ofat least 1% in the Company's outstanding Voting Stock, as of May 1, 1996, (ii)
each director of the Company, (iii) each executive officer of the Companyconversion price then in effect at such time. We will carry forward and take into account in any subsequent adjustment any adjustment that would otherwise be required to be identified as a Named Executive Officer pursuant to Item 402 of
Regulation S-K and (iv) all officers and directors of the Company as a group.made. Except as otherwise noted,stated above, we will not adjust the named beneficial owner has sole voting and
investment power. See "Management"conversion price for a descriptionthe issuance of each individual's
position with the Company, if any.

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING(1) OFFERING(1)
NAME & ADDRESS (IF APPLICABLE) ----------------------- -----------------------
OF BENEFICIAL OWNER TITLE OF CLASS NUMBER PERCENT NUMBER PERCENT
- -------------------------------------------------------- ------------------ ---------- ----------- ---------- -----------

Glenn A. Welstad ....................................... Common Stock 1,263,671 20.8% 1,263,671 17.9%
2342 Tacoma Ave. S. Preferred Stock 872,325 68.1 872,325 68.1
Tacoma, WA 98402 Voting Stock 2,135,996 29.1 2,135,996 25.6
Robert J. Sullivan ..................................... Common Stock 9,000 * 9,000 *
Preferred Stock 0 0.0 0 0.0
Voting Stock 9,000 * 9,000 *
Thomas E. McChesney (2)................................. Common Stock 29,158 * 29,158 *
Preferred Stock 0 0.0 0 0.0
Voting Stock 29,158 * 29,158 *
Ronald L. Junck......................................... Common Stock 46,158 * 46,158 *
Preferred Stock 0 0.0 0 0.0
Voting Stock 46,158 * 46,158 *
Ralph E. Peterson (3)................................... Common Stock 20,000 * 20,000 *
Preferred Stock 0 0.0 0 0.0
Voting Stock 20,000 * 20,000 *
John R. Coghlan (4) .................................... Common Stock 530,794 8.7 405,794 5.8
5102 S. Morrill Lane Preferred Stock 0 0.0 0 0.0
Spokane, WA 99223 Voting Stock 570,509 7.2 412,750 4.
Seacoast Capital Partners (5) .......................... Common Stock 341,184 5.3 341,184 0 4.6
Limited Partnership Preferred Stock 0 0.0 341,184 0.0
55 Ferncroft Rd. Voting Stock 341,184 4.4 3.9
Danvers, Massachusetts 01923
Allied Investment Corporation (6) ...................... Common Stock 341,184 5.3 341,184 4.6
1666 K St., N.W., Suite 901 Preferred Stock 0 0.0 0 0.0
Washington D.C. 20006 Voting Stock 341,184 4.4 341,184 3.9
Pauline L. Ferrell ..................................... Common Stock 118,302 2.0 118,302 1.7
6736 N. 58th Preferred Stock 165,032 12.9 165,032 12.9
Scottsdale, AZ 85253 Voting Stock 283,334 3.9 283,334 3.4
Sandra F. Jacques, Trustee ............................. Common Stock 0 0.0 0 0.0
M. Jack Ferrell Trust Preferred Stock 165,032 12.9 165,032 12.9
c/o David Hega Voting Stock 165,032 2.2 165,032 1.2
2800 North Central, #1100
Phoenix, AZ 85004

Dwight G. Enget ........................................ Common Stock 23,900 * 23,900 *
3400 S. Mill Ave., Suite 128 Preferred Stock 78,734 6.1% 78,734 6.1%
Tempe, Arizona 85286 Voting Stock 102,634 1.4 102,634 1.2
All Officers and Directors as a Group (5 individuals)... Common Stock 1,367,987 22.5 1,359,987 19.3
Preferred Stock 872,325 68.1 872,325 68.1
Voting Stock 2,240,312 30.5 2,240,312 26.8

- ------------------------
* Less than 1%.

(1) Beneficial ownership is calculated in accordance with Rule 13d-3(d)(1) of
the Exchange Act of 1934, as amended (the "Exchange Act") and includes
shares of Common Stock issuable upon exercise of options, warrants, and
otherour common stock or any securities convertible into or exchangeable for Commonour common stock or carrying the right to purchase any of the foregoing.
In the event that we distribute shares of capital stock of a subsidiary of ours, the conversion price will be adjusted, if at all, based on the market value of the subsidiary stock so distributed relative to the market value of our common stock, in each case over a measurement period following the distribution.
With respect to our rights issued pursuant to our rights plan as described under "Description of Capital Stock—Rights Plan," if holders of notes exercising the right of conversion attaching thereto after the date the rights separate from the underlying common stock are not entitled to receive the rights that would otherwise be attributable (but for the date of conversion) to the shares of common stock received upon conversion, the conversion price will be adjusted as though the rights were being distributed to holders of common stock on the date of such separation. If such an adjustment is made and the rights are later redeemed, invalidated or terminated, then a corresponding reversing adjustment will be made to the conversion price on an equitable basis.
If we:
•
reclassify or change our common stock (other than changes resulting from a subdivision or combination); or

•
consolidate or combine with or merge into any person or sell or convey to another person all or substantially all of our property and assets,
and the holders of our common stock receive stock, other securities or other property or assets (including cash or any combination thereof) with respect to or in exchange for their common stock, each outstanding note would, without the consent of any holders of notes, become convertible only into the consideration the holders of notes would have received if they had converted their notes immediately prior to such reclassification, change, consolidation, combination, merger, sale or conveyance. We may not become a party to any such transaction unless its terms are consistent with the foregoing.
If a taxable distribution to holders of our common stock or other transaction occurs which results in any adjustment of the conversion price (including an adjustment at our option), you may, in certain circumstances, be deemed to have received a distribution subject to U.S. income tax as a dividend. In certain other circumstances, the absence of an adjustment may result in a taxable dividend to the holders of our common stock. See "Certain United States Federal Income Tax Considerations".
We may from time to time, to the extent permitted by law, reduce the conversion price of the notes by any amount for any period of at least 20 days. In that case, we will give at least 15 days notice of such decrease. We may make such reductions in the conversion price, in addition to those set forth above, as our board of directors deems advisable to avoid or diminish any income tax to holders of our common stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes.
If we adjust the conversion price pursuant to the above provisions, we will issue a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing the relevant information and make this information available on our web site or through another public medium as we may use at that time.
28

Provisional Redemption by Labor Ready
We may not redeem the notes in whole or in part at any time prior to June 20, 2005. At any time on or after June 20, 2005, we may redeem some or all of the notes on at least 30 but not more than 60 days notice, at redemption price equal to 100% of the principal amount of notes to be redeemed;provided, that, the Current Market Value of our common stock equals or exceeds 125% of the conversion price then in effect for at least 20 trading days in any consecutive 30 trading day period ending on the trading day prior to the date the notice of the provisional redemption is mailed. The "Current Market Value" means the closing sale price of our common stock, as reported on the New York Stock ("Convertible Securities")Exchange or the principal national securities exchange or inter-dealer quotation system on which our common stock is then listed, on such trading day.
In addition, we will pay interest on the notes being redeemed, including those notes which are converted into our common stock after the date the notice of the redemption is mailed and prior to the third business day after the provisional redemption date. This interest will include interest accrued and unpaid to, but excluding, the provisional redemption date. In this instance, we will pay accrued and unpaid interest on the notes being redeemed to, but excluding, the provisional redemption date to the same person to whom we will pay the principal of these notes.
Procedures for Partial Redemption
If we do not redeem all of the notes, the trustee will select the notes to be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by lot or on a pro rata basis. If any notes are to be redeemed in part only, we will issue a new note or notes in principal amount equal to the unredeemed principal portion thereof. If a portion of your notes is selected for partial redemption and you convert a portion of your notes, the converted portion will be deemed to be taken from the portion selected for redemption.
Repurchase at Option of Holders Upon a Change of Control
Repurchase Upon a Change of Control
If a change of control occurs, holders may require us to repurchase all of their notes not previously called for redemption, or any portion of those notes that is equal to $1,000 or a whole multiple of $1,000, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid interest to, but excluding, the repurchase date.
A "change of control" will be deemed to have occurred at such time after the original issuance of the notes when any of the following has occurred:
•
the acquisition by any person, including any syndicate or group deemed to be a "person" under Section 13(d)(3) of the Securities Exchange Act of 1934, or the Securities Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of our capital stock entitling that person to exercise 50% or more of the total voting power of all shares of our capital stock entitled to vote generally in elections of directors, other than any acquisition by us, any of our subsidiaries or any of our employee benefit plans (except that such person shall be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable within 60
daysonly upon the occurrence of May 1, 1996.

(2) Includes 19,158a subsequent condition); or

•
the first day on which a majority of the members of our board of directors does not consist of continuing directors; or
29
•
the consolidation or merger of us with or into any other person, any merger of another person into us, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of our properties and assets to another person, other than:

(1)
any transaction:

—
that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock held individually by Thomas E.
McChesneyour capital stock; and 10,000

—
pursuant to which the holders of 50% of more of the total voting power of all shares of Common Stock held by his wife, Elizabeth R.
McChesney.

(3) Includes currently exercisable optionsour capital stock entitled to purchase 10,000vote generally in elections of directors immediately prior to such transaction have the right to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Common
Stock at $11.90 per share.

(4) Includes 75,294our capital stock entitled to vote generally in elections of directors of the continuing or surviving person immediately after giving effect to such issuance; and

(2)
any merger primarily for the purpose of changing our jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock held individually by John Coghlan and
455,500common stock solely into shares of Common Stock held bycommon stock of the Coghlan Family Corporation,surviving entity.
However, a Washington corporation,change of which John Coghlan is President. 125,000 shares
of Common Stockcontrol will be sold by deemed not to have occurred if:
•
the Coghlan Family Corporation under Rule
144 prior to consummationclosing sale price per share of our common stock for any five trading days within:

—
the period of 10 consecutive trading days ending immediately after the later of the offering.

(5) Represents shareschange of Common Stock issuable upon exercisecontrol or the public announcement of the change of control, in the case of a warrant that
is currently exercisable. The exercisechange of control under the first or second bullet point above; or

—
the period of 10 consecutive trading days ending immediately before the change of control, in the case of a change of control under the third bullet point above,

equals or exceeds 110% of the conversion price of the warrant is $11.67 per
sharenotes in effect on each such trading day; or
•
all of the consideration in the transaction or transactions (other than cash payments for fractional shares and the warrant expires on October 31, 2002.

(6) Representscash payments made in respect of dissenters' appraisal rights) constituting a change of control consists of shares of Common Stock issuable upon exercisecommon stock traded or to be traded immediately following such change of warrants held by
Allied Investment Corporation for 180,828 shares, Allied Investment
Corporation II for 88,707 shares,control on a national securities exchange or the Nasdaq National Market and, Allied Capital Corporation II for
71,649 shares, a family of investment companies whose investments are
managed by Allied Capital Corporation. The exercise price of the warrants is
$11.67 per share and the warrants expire on October 31, 2002.

CERTAIN TRANSACTIONS

In December 1992, two Washington corporations, P.N.L.F., Inc. ("PNLF") and
Labor Ready of So. Calif., Inc. ("LRSC") merged with and into the Company, which
was the surviving corporation. Asas a result of the mergertransaction or transactions, the notes become convertible solely into such common stock (and any rights attached thereto).
Beneficial ownership shall be determined in accordance with PNLF,Rules 13d-3 and 13d-5 under the Company
acquiredSecurities Exchange Act. The term "person" includes any syndicate or group which would be deemed to be a "person" under Section 13(d)(3) under the remaining outstanding securitiesSecurities Exchange Act.
"Continuing directors" means, as of any date of determination, any member of the board of directors of Labor Ready Franchise
Development Corp., Inc. ("LRFD")who:
•
was a member of the board of directors on June 13, 2002; or

•
was nominated for election or elected to the board of directors with the result that LRFD becameapproval of a wholly-owned
subsidiarymajority of the Company. Each of PNLF, LRSC and LRFDcontinuing directors who were owned in part by
Messrs. Glenn A. Welstad, John R. Coghlan, then an officer and director and
beneficial owner of greater than 5%members of the Company's Common Stock,board at the time of new director's nomination or election.
The definition of "change of control" includes a phrase relating to the conveyance, transfer, sale, transfer, lease or disposition of "all or substantially all" of our properties and M. Jack
Ferrell (deceased)assets. There is no precise, established definition of the phrase "substantially all" under applicable law. In interpreting this phrase, courts, among other things, make a subjective determination as to the portion of assets conveyed, considering many factors, including the value of assets conveyed, the proportion of an entity's
30

income derived from the assets conveyed and the significance of those assets to the ongoing business of the entity. To the extent the meaning of such phrase is uncertain, uncertainty will exist as to whether or not a change of control may have occurred and, accordingly, as to whether or not the holders of notes will have the right to require us to repurchase their notes.
Repurchase Right Procedures
Within 30 days after the occurrence of a change of control, we will be required to give notice to all holders of the occurrence of the change of control and of their resulting repurchase right. The repurchase date will be no later than 30 days after the date we give that notice. The notice will be delivered to the holders at their addresses shown in the register of the registrar and to beneficial owners as required by applicable law, stating, among other things, the procedures that holders must follow to require us to repurchase their notes as described below.
If holders have the right to cause us to repurchase their notes as described above, we will issue a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing the relevant information and make this information available on our web site or through another public medium as we may use at that time.
To elect to require us to repurchase notes, each holder must deliver the repurchase notice so that it is received by the paying agent no later than the close of business on the second business day immediately prior to the repurchase date, unless we specify a later date, and must state certain information, including:
•
the certificate numbers of the holders' notes to be delivered for repurchase;

•
the portion of the principal amount of notes to be repurchased, which must be $1,000 or an integral multiple of $1,000; and

•
that the notes are to be repurchased by us pursuant to the applicable provision of the indenture.
A holder may withdraw any repurchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the repurchase date. The notice of withdrawal must state certain information, including:
•
the principal amount of notes being withdrawn;

•
the certificate numbers of the notes being withdrawn; and

•
the principal amount, if any of the notes that remain subject to the repurchase notice.
The Securities Exchange Act requires the dissemination of certain information to security holders and that an issuer follow certain procedures if an issuer tender offer occurs, which may apply if the repurchase right summarized above becomes available to holders of the notes. In connection with any offer to require us to repurchase notes as summarized above we will, to the extent applicable:
•
comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Securities Exchange Act which may then be applicable; and

•
file a Schedule TO or any other required schedule or form under the Securities Exchange Act.
Our obligation to pay the repurchase price for notes for which a repurchase notice has been delivered and not validly withdrawn is conditioned upon the holder delivering the notes, together with necessary endorsements, to the paying agent at any time after delivery of the repurchase notice. We will cause the repurchase price for the notes to be paid promptly following the later of the repurchase date or the time of delivery of the notes, together with such endorsements.

If the paying agent holds money sufficient to pay the repurchase price of the notes for which a repurchase notice has been given on the business day following the repurchase date in accordance with the terms of the indenture, then, immediately after the repurchase date, the notes will cease to be outstanding and interest on the notes will cease to accrue, whether or not the notes are delivered to the paying agent. Thereafter, all other rights of the holder shall terminate, other than the right to receive the repurchase price upon delivery of the notes.
We may, to the extent permitted by applicable law and the agreements governing our Senior Debt, at any time purchase the notes in the open market or by tender at any price or by private agreement. Any notes so purchased by us shall be surrendered to the trustee for cancellation. Any notes surrendered to the trustee may, to the extent permitted by applicable law, be reissued or resold or may be surrendered to the trustee for cancellation. Any note surrendered to the trustee for cancellation may not be reissued or resold and will be canceled promptly.
Limitations on Repurchase Rights
The repurchase rights described above may not necessarily protect holders of the notes if a highly leveraged or another transaction involving us occurs that may adversely affect holders.
Our ability to repurchase notes upon the occurrence of a change of control is subject to important limitations. The occurrence of a change of control could cause an event of default under, or be prohibited or limited by, the terms of our existing or future Senior Debt. As a result, any repurchase of the notes upon a change of control would, absent a waiver, be prohibited under the subordination provisions of the indenture until our Senior Debt is paid in full. Further, we cannot assure you that, in that event, we would have the financial resources, or would be able to arrange financing, to pay the repurchase price for all the notes that might be delivered by holders of notes seeking to exercise the repurchase right. Any failure by us to repurchase the notes when required following a change of control would result in an event of default under the indenture, whether or not such repurchase is permitted by the subordination provisions of the indenture. Any such default may, in turn, cause a default under our Senior Debt or any Senior Debt that we may incur in the future. See "—Ranking" below. In addition, our ability to repurchase notes may be limited by restrictions on our ability to obtain funds for such repurchase through dividends from our subsidiaries and other provisions in the agreements governing our Senior Debt.
The change of control repurchase provision of the notes may, in certain circumstances, make more difficult or discourage a takeover of our company. The change of control repurchase feature, however, is not the result of our knowledge of any specific effort to accumulate shares of our common stock, to obtain control of us by means of a merger, tender offer solicitation or otherwise or by management to adopt a series of anti-takeover provisions. Instead, the change of control purchase feature is a standard term contained in convertible securities similar to the notes.
Ranking
The notes are subordinated in right of payment to the prior payment in full of all our existing and future Senior Debt.
The indenture provides that in the event of any distribution of our assets to creditors upon our dissolution, winding up, liquidation, reorganization or similar proceeding, the holders of our Senior Debt will first be paid in respect of all Senior Debt in full in cash or other payment satisfactory to the holders of Senior Debt before we make any payments of principal of and interest (including additional amounts, if any) on the notes. In addition, if the notes are accelerated because of an event of default, the holders of any Senior Debt would be entitled to payment in full in cash or other payment satisfactory to the holders of Senior Debt of all obligations in respect of Senior Debt before the holders of the notes are entitled to receive any payment or distribution. Under the indenture, we are
32

required to promptly notify holders of Senior Debt if payment of the notes is accelerated because of an event of default.
The indenture further provides that if any default by us has occurred and is continuing in the payment of principal of or premium, if any, or interest on, rent or other payment obligations in respect of, any Senior Debt, no payment may be made on account of principal of or interest on the notes (including any additional amounts), thenuntil all such payments due in respect of that Senior Debt have been paid in full in cash or other payment satisfactory to the holders of that Senior Debt. During the continuance of any event of default with respect to any Designated Senior Debt (other than a directordefault in payment of the principal of or premium, if any, or interest (including any additional amounts) on, rent or other payment obligations in respect of any Designated Senior Debt), permitting the holders thereof to accelerate the maturity thereof (or, in the case of any lease constituting Indebtedness, permitting the landlord under such lease either to terminate the lease or to require us to make an irrevocable offer to terminate the lease following an event of default thereunder), no payment may be made by us, directly or indirectly, with respect to principal of or interest (including any additional amounts, if any) on the notes for 179 days following written notice from any holder, representative or trustee under any agreement pursuant to which that Designated Senior Debt may have been issued, that such an event of default has occurred and owneris continuing, unless such event of default has been cured or waived or that Designated Senior Debt has been paid in full in cash or other payment satisfactory to the holders of that Designated Senior Debt. However, if the maturity of that Designated Senior Debt is accelerated (or, in the case of a lease constituting Indebtedness, as a result of such events of default, the landlord under such lease has given us notice of its intention to terminate the lease or to require us to make an irrevocable offer to terminate the lease following an event of default thereunder), no payment may be made on the notes until that Designated Senior Debt has been paid in full in cash or other payment satisfactory to the holders of that Designated Senior Debt or such acceleration (or termination, in the case of the lease) has been cured or waived. Not more than 5%one payment blockage notice may be given in any consecutive 365-day period, irrespective of the Company's
Common Stock. Consideration fornumber of defaults with respect to the mergers and the stock purchase was sharesDesignated Senior Debt during such period.
By reason of the Company's Common Stock and sharessubordination provisions described above, in the event of insolvency, funds which we would otherwise use to pay the Company's Preferred Stock. Mr.
Ferrell's wife, Pauline Ferrell, owns 118,302 sharesholders of Common Stock and 165,032
sharesnotes will be used to pay the holders of Preferred Stock. The M. Jack Ferrel Trust owns 165,032 sharesSenior Debt to the extent necessary to pay Senior Debt in full in cash or other payment satisfactory to the holders of Preferred Stock.Senior Debt. As a result of these transactions, Mr. Welstad received 361,507
sharespayments, our general creditors may recover less, ratably, than holders of Senior Debt and such general creditors may recover more, ratably, than holders of notes.
"Senior Debt" means:
•
the principal of, premium, if any, interest (including all interest and additional amounts, if any, accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such proceeding), and rent payable on or termination payments with respect to or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, our Indebtedness, whether outstanding on the date of the Company's Preferred Stockindenture or subsequently created, incurred, assumed, guaranteed or in effect guaranteed by us; and 375,000 shares

•
all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing,
unless in the case of any particular Indebtedness, the instrument creating or evidencing such Indebtedness or the assumption or guarantee thereof expressly provides that the Indebtedness shall not be senior in right of payment to the notes or expressly provides that such Indebtedness is equal with or junior to the notes. However, the term "Senior Debt" will not include: (1) the Indebtedness we owe to any of our subsidiaries of which we own, directly or indirectly, a majority of the Company's
Common Stock,voting stock, (2) any
33

liability for federal, state, local or other taxes owed or owing by us, (3) any trade payables and Mr. Coghlan(4) the notes offered hereby.
"Indebtedness" means, with respect to any person:
(1)
all indebtedness, obligations and Mr. Ferrell each received 220,043 sharesother liabilities (contingent or otherwise) of that person for borrowed money (including obligations in respect of overdrafts, and any loans or advances from banks, whether or not evidenced by notes or similar instruments) or evidenced by bonds, notes or other instruments for the payment of money, or incurred in connection with the acquisition of any property, services or assets (whether or not the recourse of the Company's Preferred Stock and 375,000 shareslender is to the whole of the Company's Common Stock.assets of such person or to only a portion thereof), other than any accounts payable or other accrued current liability or obligation to trade creditors incurred in the ordinary course of business in connection with the obtaining of materials or services;

(2)
all reimbursement obligations and other liabilities (contingent or otherwise) of that person with respect to letters of credit, bank guarantees, bankers' acceptances, surety bonds, performance bonds or other guaranty of contractual performance;

(3)
all obligations and liabilities (contingent or otherwise) in respect of (A) leases of such person required, in conformity with generally accepted accounting principles, to be accounted for as capitalized lease obligations on the balance sheet of such person, and (B) any leases or related documents (including a purchase agreement) in connection with the lease of real property which provides that such person is contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a minimum residual value of the leased property to the landlord and the obligations of such person under such lease or related document to purchase or to cause a third party to purchase the leased property;

(4)
all obligations of such person (contingent or otherwise) with respect to an interest rate or other swap, cap or collar agreement or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement;

(5)
all direct or indirect guaranties or similar agreements by that person in respect of, and obligations or liabilities (contingent or otherwise) of that person to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another person of the kind described in clauses (1) through (4) above;

(6)
any indebtedness or other obligations described in clauses (1) through (4) above secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by such person, regardless of whether the indebtedness or other obligation secured thereby shall have been assumed by such person; and

(7)
any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (1) through (6) above.
"Designated Senior Debt" means (1) our Credit Agreement dated as of January 4, 2002 between us and Wells Fargo Bank, National Association (the "Wells Fargo Facility"), (2) our Accounts Receivable Facility, and (3) our Senior Debt which, at the date of determination, has an aggregate amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $15.0 million and is specifically designated in the instrument evidencing or governing that Senior Debt as "Designated Senior Debt" for purposes of the indenture. However, the instrument may place limitations and conditions on the right of that Senior Debt to exercise the rights of Designated Senior Debt.
At June 28, 2002, we had approximately $114.3 million of Senior Debt (net of cross-collateralized obligations), of which $68.8 million is Designated Senior Debt. In March 1994,addition, at June 28, 2002, we had
34

available, subject to collateral pledging requirements, up to an additional $31.2 million (inclusive of amounts to secure letters of credit) under our Accounts Receivable Facility and an additional $9.9 million under our Wells Fargo Facility, all of which would be Designated Senior Debt if drawn. The indenture will not restrict our ability to incur Senior Debt or any other indebtedness in the Company's franchisefuture.
The notes are our obligations exclusively and are, in effect, subordinated to all Indebtedness and other liabilities (including trade payables) of our subsidiaries. The indenture does not limit the amount of Indebtedness or other liabilities our subsidiaries may incur in the future. Our ability to make required interest, principal, redemption or repurchase payments on the notes may be impaired as a result of the obligations of our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due under the notes or to make any funds available therefor, whether by dividends, loans or other payments. Any right we have to receive assets of any of our subsidiaries upon their liquidation or reorganization (and the consequent right of the holders of the notes to receive those assets) will be effectively subordinated to the claims of that subsidiary's creditors, except to the extent that we are ourselves recognized as a creditor of that subsidiary, LRFD,in which case our claims would still be subordinated or to any security interests in the assets of that subsidiary and any indebtedness of that subsidiary senior to that held by us. At June 28, 2002, except for intercompany liabilities and debt guaranteed by Labor Ready, Inc., our subsidiaries had no liabilities outstanding that would constitute Indebtedness under the indenture.
We are obligated to pay reasonable compensation to the trustee and to indemnify the trustee against any losses, liabilities or expenses incurred by it in connection with its duties relating to the notes. The trustee's claims for such payments are senior to those of holders of the notes in respect of all funds collected or held by the trustee.
Consolidation, Merger, Etc.
The indenture provides that we may, without the consent of the holders of any of the notes, consolidate with or merge into any other person or convey, transfer, sell, lease or otherwise dispose of all or substantially all of our properties and assets to another person as long as, among other things:
•
the resulting, surviving or transferee person is organized and existing under the laws of the United States, any state thereof or the District of Columbia;

•
that person assumes all of our obligations under the indenture and the notes; and

•
Labor Ready or such successor is not then or immediately thereafter in default under the indenture and no event which, after notice or lapse of time, would become an event of default under the indenture, shall have occurred and be continuing.
The occurrence of certain of the foregoing transactions could also constitute a change of control under the indenture.
The covenant described above includes a phrase relating to the conveyance, transfer, sale, lease or disposition of "all or substantially all" of our properties and assets. There is no precise, established definition of the phrase "substantially all" under applicable law. In interpreting this phrase, courts, among other things, make a subjective determination as to the portion of assets conveyed, considering many factors, including the value of assets conveyed, the proportion of an entity's income derived from the assets conveyed and the significance of those assets to the ongoing business of the entity. To the extent the meaning of such phrase is uncertain, uncertainty will exist as to whether or not a change of control may have occurred and, accordingly, as to whether or not the holders of notes will have the right to require us to repurchase their notes.
35

Events of Default
Each of the following constitutes an event of default under the indenture:
(1)
our failure to pay when due the principal of any of the notes at maturity, upon redemption or exercise of a repurchase right or otherwise, whether or not such payment is prohibited by the subordination provisions of the indenture;

(2)
our failure to pay an installment of interest (including additional amounts, if any) on any of the notes for 30 days after the date when due, whether or not such payment is prohibited by the subordination provisions of the indenture;

(3)
our failure to perform or observe any other term, covenant or agreement contained in the notes or the indenture for a period of 60 days after written notice of such failure, requiring us to remedy the same, shall have been given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the notes then outstanding;

(4)
a default under any Indebtedness for money borrowed by us or any of our subsidiaries that is a "significant subsidiary" (as defined in Rule 405 of the Securities Act) the aggregate outstanding principal amount of which is in an amount in excess of $15 million, for a period of 30 days after written notice to us by the trustee or to us and the trustee by holders of at least 25% in aggregate principal amount of the notes then outstanding, which default:

•
is caused by a failure to pay principal or interest when due on such Indebtedness by the end of the applicable grace period, if any, unless such Indebtedness is discharged; or

•
results in the acceleration of such Indebtedness, unless such acceleration is waived, cured, rescinded, annulled or such Indebtedness is discharged; and

(5)
certain events of bankruptcy, insolvency or reorganization with respect to us or any of our subsidiaries that is a significant subsidiary.
The indenture provides that the trustee will, within 90 days of the occurrence of a default, give to the registered holders of the notes notice of all uncured defaults known to it, but the trustee shall be protected in withholding such notice if it, in good faith, determines that the withholding of such notice is in the best interest of such registered holders, except in the case of a default in the payment of the principal of or interest on, any of the notes when due or in the payment of any redemption or repurchase obligation.
If an event of default specified in clause (5) above occurs and is continuing with respect to us, then automatically the principal of all the notes and the interest thereon shall become immediately due and payable. If an event of default shall occur and be continuing, other than with respect to clause (5) above with respect to us (the default not having been cured or waived as provided under "—Modifications and Amendments" below), the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding may declare the notes due and payable at their principal amount together with accrued interest, and thereupon the trustee may, at its discretion, proceed to protect and enforce the rights of the holders of notes by appropriate judicial proceedings. Such declaration may be rescinded or annulled either with the written consent of the holders of a majority in aggregate principal amount of the notes then outstanding.
The indenture contains a provision entitling the trustee, subject to the duty of the trustee during default to act with the required standard of care, to be indemnified by the holders of notes before proceeding to exercise any right or power under the indenture at the request of such holders. The indenture provides that the holders of a majority in aggregate principal amount of the notes then outstanding through their written consent may direct the time, method and place of conducting any
36

proceeding for any remedy available to the trustee or exercising any trust or power conferred upon the trustee.
We are required to furnish annually to the trustee a statement as to the fulfillment of our obligations under the indenture.
Modifications and Amendments
Changes Requiring Approval of Each Affected Holder
Except as set forth below and under "—Changes Requiring No Approval," we and the trustee may amend or supplement the Indenture or the notes with the consent of the holders of a majority in aggregate principal amount of the outstanding notes. However, the indenture, including the terms and conditions of the notes, may not be modified or amended without the written consent or the affirmative vote of the holder of each note affected by such change to:
•
change the maturity of the principal of or the date any installment of interest (including any payment of additional amounts) is due on any note;

•
reduce the principal amount, repurchase price or redemption price of, or interest (including any payment of additional amounts) on, any note;

•
change the currency of payment of such note or interest thereon;

•
impair the right to institute suit for the enforcement of any payment on or with respect to any note;

•
modify our obligations to maintain an office or agency in New York City;

•
except as otherwise permitted or contemplated by provisions concerning corporate reorganizations, adversely affect the repurchase rights of holders or the conversion rights of holders of the notes;

•
modify the redemption provisions of the indenture in a manner adverse to the holders of notes;

•
modify the subordination provisions of the indenture in a manner adverse to the holders of notes; or

•
reduce the percentage in aggregate principal amount of notes outstanding necessary to modify or amend the indenture or to waive any past default.
Changes Requiring No Approval
The indenture, including the terms and conditions of the notes, may be modified or amended by us and the trustee, without the consent of any holders of notes, for the purposes of, among other things:
•
adding to our covenants for the benefit of the holders of notes;

•
surrendering any right or power conferred upon us;

•
providing for conversion rights of holders of notes if any reclassification or change of our common stock or any consolidation, merger or sale of all or substantially all of our assets occurs;

•
providing for the assumption of our obligations to the holders of notes in the case of a merger, consolidation, conveyance, transfer or lease;

•
reducing the conversion price, provided that the reduction will not adversely affect the interests of the holders of notes;
37
•
complying with the requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939;

•
curing any ambiguity or correcting or supplementing any defective provision contained in the indenture, provided that such modification or amendment does not, in the good faith opinion of our board of directors, adversely affect the interests of the holders of notes in any material respect; or

•
adding or modifying any other provisions with respect to matters or questions arising under the indenture that we or the trustee may deem necessary or desirable and that will not, in the good faith opinion of our board of directors, adversely affect the interests of the holders of notes.
Satisfaction and Discharge
We may satisfy and discharge our obligations under the indenture while notes remain outstanding, subject to certain conditions, if:
•
all outstanding notes will become due and payable at their scheduled maturity within one year; or

•
all outstanding notes are scheduled for redemption within one year,
and, in either case, we have deposited with the trustee an amount sufficient to pay and discharge all outstanding notes on the date of their scheduled maturity or the scheduled date of redemption.
Governing Law
The indenture and the notes are governed by, and construed in accordance with, the law of the State of New York.
Information Concerning the Trustee and the Transfer Agent
The Bank of New York, as trustee under the indenture, has been appointed by us as paying agent, conversion agent, registrar and custodian with regard to the notes. American Securities Transfer and Trust, Inc. is the transfer agent and registrar for our common stock. The trustee or its affiliates may from time to time in the future provide banking and other services to us in the ordinary course of their business.
Registration Rights
We have entered into a franchiseregistration rights agreement with Labor Forcethe initial purchasers dated as of Minnesota, Inc. ("Labor Force"),June 19, 2002 for the benefit of the holders of the notes. Pursuant to the agreement, we are required, at our expense, to:
•
file with the SEC not later than the date 90 days after the earliest date of original issuance of any of the notes a companyshelf registration statement (of which this prospectus is a part) covering resales by holders of all notes and the common stock issuable upon conversion of the notes;

•
use our reasonable best efforts to cause such shelf registration statement to become effective as promptly as is practicable, but in no event later than 180 days after the earliest date of original issuance of any of the notes; and

•
use our reasonable best efforts to keep the shelf registration statement effective until the earliest of:

(1)
two years after the last date of original issuance of any of the notes;
38
(2)
the date when the holders of the notes and the common stock issuable upon conversion of the notes are able to sell all such securities immediately without restriction pursuant to the volume limitation provisions of Rule 144 under the Securities Act; and

(3)
the date when all of the notes and the common stock into which the notes are convertible are registered under the shelf registration statement and disposed of in accordance with the shelf registration statement.
At least 20 business days (but not more than 40 business days) prior to the date we in good faith expect the shelf registration statement to be declared effective by the SEC, we will mail a form to all holders of the notes and common stock issued upon conversion of the notes that provides notice of the impending effectiveness of the shelf registration statement and requests each holder to elect to be named as a selling securityholder in this prospectus and certain related information. To be named as a selling securityholder in this prospectus, a holder will be required to complete and deliver the notice and questionnaire within 20 business days of the date of the questionnaire. Holders that do not complete and deliver the election form and questionnaire in a timely manner will not be named as selling securityholders in this prospectus at the time of effectiveness. Thereafter, upon receipt of a completed notice and questionnaire, we will as promptly as reasonably practicable file any amendments or supplements to the shelf registration statement, to allow holders to be named as selling securityholders in the prospectus contained in it.
We will:
•
make available to each holder for whom the shelf registration statement was filed copies of this prospectus;

•
notify each such holder when the shelf registration statement has become effective; and

•
take certain other actions as are required to permit unrestricted resales of the notes and the common stock issuable upon conversion of the notes.
Each holder who sells securities pursuant to the shelf registration statement generally will be:
•
required to be named as a selling stockholder in this prospectus;

•
required to deliver a copy of this prospectus to purchasers;

•
subject to certain of the civil liability provisions under the Securities Act in connection with the holder's sales; and

•
bound by the provisions of the registration rights agreement which are applicable to the holder (including certain indemnification rights and obligations).
Each holder must notify us not later than three business days prior to any proposed sale by that holder pursuant to the shelf registration statement. This notice will be effective for five business days. We may suspend the holder's use of the prospectus for a reasonable period not to exceed 45 days in any 90-day period, and not to exceed an aggregate of 90 days in any 360-day period, if:
•
the prospectus would, in our judgment, contain a material misstatement or omission as a result of an event that has occurred and is continuing; and

•
we reasonably determine that the disclosure of this material non-public information would have a material adverse effect on us and our subsidiaries taken as a whole.
However, if the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede our ability to consummate such transaction, we may extend the suspension period from 45 days to 90 days. Each holder, by its acceptance of a note, agrees to hold any communication by us in response to a notice of a proposed sale in confidence.
39

Upon the initial sale pursuant to the shelf registration statement of notes or common stock issued upon conversion of the notes, each selling holder will be required to deliver a notice of such sale, in substantially the form attached as Exhibit 1 to this prospectus, to the trustee and us. The notice will, among other things:
•
identify the sale as a transfer pursuant to the shelf registration statement;

•
certify that the prospectus delivery requirements, if any, of the Securities Act have been complied with; and

•
certify that the selling holder and the aggregate principal amount of notes or number of shares, as the case may be, owned by Glenn A. Welstad's brother-in-law, Myron D. Thompson. LRFD
grantedsuch holder are identified in the related prospectus in accordance with the applicable rules and regulations under the Securities Act.
If the registration statement ceases to be effective or fails to be usable and (1) we do not cure the registration statement within five business days by a post-effective amendment or a report filed pursuant to the Securities Exchange Act or (2) if applicable, we do not terminate the suspension period, described in the preceding paragraph, by the 45th or 90th day, as the case may be, or the suspension periods exceed an aggregate of 90 days in any 360 day period (each, a "registration default"),
then additional amounts will accrue on the notes, from and including the day following the registration default to but excluding the day on which the registration default has been cured. Additional amounts will be paid semiannually in arrears, with the first semiannual payment due on the first interest payment date, as applicable, following the date on which such additional amounts begin to accrue, and will accrue at a rate per year equal to:
•
an additional 0.25% of the principal amount to and including the 90th day following such registration default; and

•
an additional 0.50% of the principal amount from and after the 91st day following such registration default.
In no event will additional amounts accrue at a rate per year exceeding 0.50%. If a holder has converted some or all of its notes into common stock, the holder will be entitled to receive equivalent amounts based on the principal amount of the notes converted.
If a shelf registration statement covering the resales of the notes and common stock into which the notes are convertible is not effective, these securities may not be sold or otherwise transferred except pursuant to Rule 144 or Rule 144A of the Securities Act, Regulation S under the Securities Act or another exemption to the registration requirements under the Securities Act.
Form, Denomination and Registration
Denomination and Registration
The notes are issued in fully registered form, without coupons, in denominations of $1,000 principal amount and whole multiples of $1,000.
Global Notes; Book-Entry Form
Except as provided below, the notes are evidenced by one or more global notes deposited with the trustee as custodian for DTC, and registered in the name of Cede & Co. as DTC's nominee.
Record ownership of the global notes may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee, except as set forth below. A holder may hold its interests in a global note directly through DTC if such holder is a participant in DTC, or
40

indirectly through organizations which are direct DTC participants if such holder is not a participant in DTC. Transfers between direct DTC participants will be effected in the ordinary way in accordance with DTC's rules and procedures and will be settled in same-day funds. Holders may also beneficially own interests in the global notes held by DTC through certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a direct DTC participant, either directly or indirectly. Transfers between direct DTC participants will be effected in the ordinary way in accordance with DTC's rules and procedures and will be settled in same-day funds.
So long as Cede & Co., as nominee of DTC, is the registered owner of the global notes, Cede & Co. for all purposes will be considered the sole holder of the global notes. Except as provided below, owners of beneficial interests in the global notes:
•
will not be entitled to have certificates registered in their names;

•
will not receive or be entitled to receive physical delivery of certificates in definitive form; and

•
will not be considered holders of the global notes.
The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, the ability of an owner of a beneficial interest in a global note to transfer the beneficial interest in the global note to such persons may be limited.
We will wire, through the facilities of the trustee, payments of principal of and interest on the global notes to Cede & Co., the nominee of DTC, as the registered owner of the global notes. None of Labor ForceReady, the trustee and any paying agent will have any responsibility or be liable for paying amounts due on the global notes to owners of beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal of and interest on the global notes, to credit participants' accounts on the payment date in amounts proportionate to their respective beneficial interests in the notes represented by the global notes, as shown on the records of DTC, unless DTC believes that it will not receive payment on the payment date. Payments by DTC participants to owners of beneficial interests in notes represented by the global notes held through DTC participants will be the responsibility of DTC participants, as is now the case with securities held for the accounts of customers registered in "street name".
If you would like to convert your notes into common stock pursuant to the terms of the notes, you should contact your broker or other direct or indirect DTC participant to obtain information on procedures, including proper forms and cut-off times, for submitting those requests.
Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants and other banks, your ability to pledge your interest in the notes represented by global notes to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate.
Neither Labor Ready nor the trustee (nor any registrar, paying agent or conversion agent under the indenture) will have any responsibility for the performance by DTC or direct or indirect DTC participants of their obligations under the rules and procedures governing their operations. DTC has advised us that it will take any action permitted to be taken by a holder of notes, including, without limitation, the presentation of notes for conversion as described below, only at the direction of one or more direct DTC participants to whose account with DTC interests in the global notes are credited and only for the principal amount of the notes for which directions have been given.
DTC has advised us as follows: DTC is a limited nonassignable licensepurpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to use the Company's

proprietary softwareprovisions of Section 17A of the Securities Exchange Act. DTC was created to hold securities for DTC
41

participants and to employfacilitate the Company's methodsclearance and techniquessettlement of doing
businesssecurities transactions between DTC participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations, such as the initial purchasers of the notes. Certain DTC participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in Minnesota's Hennepinorder to facilitate transfers of interests in the global notes among DTC participants, it is under no obligation to perform or continue to perform such procedures, and Ramsey counties. Insuch procedures may be discontinued at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days, we will cause notes to be issued in definitive form in exchange for these
rightsthe global notes. None of Labor Force paid LRFD royalties, equalReady, the trustee or any of their respective agents will have any responsibility for the performance by DTC, direct or indirect DTC participants of their obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to, 2.0%or payments made on account of, beneficial ownership interests in global notes.
According to DTC, the foregoing information with respect to DTC has been provided to its gross receipts,participants and other members of $50,976the financial community for informational purposes only and $42,896 for 1994 and 1995.

In 1995, Glenn A. Welstad loaned the Company $70,000 for 20 days at 12.0%
interest and $195,686 for 42 days at 12.0% interest, and John R. Coghlan loaned
the Company $74,000 for 20 days at 12.0% interest and $65,000 for 7 days at
12.0% interest. The loans were unsecured and believed by managementis not intended to be on
comparableserve as a representation, warranty or more favorable terms than those available from unrelated third
parties.

As the Company's Directorcontract modification of Management Information Systems, in 1994, Mr.
Todd A. Welstad was granted options to purchase 4,500 shares of Common Stock at
an exercise price of $2.98 per share. In 1995, Mr. Welstad was granted options
to purchase 1,200 shares at an exercise price of $11.19 per share and 400 shares
at an exercise price of $13.60 per share.

Upon appointment as the Company's Chief Financial Officer, Mr. Ralph E.
Peterson was granted options to purchase 50,000 shares of Common Stock at $11.90
per share.

any kind.

DESCRIPTION OF CAPITAL STOCK

The authorized
This summary highlights selected information about our capital stock and the associated rights, and may not contain all of the Company consistsinformation that is important to you. Under our articles of 25,000,000incorporation we are authorized to issue up to 100,000,000 shares of Common Stock,our common stock, no par value, and 5,000,00020,000,000 shares of preferred stock. COMMON STOCK

AsThe following summary of May 1, 1996,certain provisions of the Company had 6,066,633 outstandingcommon stock and preferred stock is not complete and may not contain all the information you should consider before investing in the notes. We encourage you to read our articles of incorporation and our shareholder rights agreement that creates the rights to acquire shares of Common
Stock held by 639our preferred stock upon the occurrence of certain events because they, and not this summary, define the rights of holders of record.common stock and the associated rights. We have filed our articles of incorporation and the rights agreement with the SEC. See "Where You Can Find More Information" for information on how to obtain these documents.
Common Stock
Holders of Common Stockour common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders and have no cumulative voting rights. Holders of Common Stockour common stock are not entitled to preemptive, subscription, redemption or sinking fund rights.rights, or rights to convert their common stock into any other securities. Subject to preferences that may be applicable to any then outstanding preferred stock, holders of Common Stockour common stock will be entitled to receive ratably such dividends as may be declared by the
Boardour board of Directorsdirectors out of funds legally available therefor. See "Price Range of
Common Stock and Dividend"Dividend Policy." In the event of a liquidation, dissolution or winding up of the Company,Labor Ready, holders of Common Stockour common stock will be entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference to any then outstanding preferred stock. PREFERRED STOCKAll outstanding shares of our common stock are fully paid and nonassessable.
In June 1999, the board of directors authorized a three-for-two common stock split. This common stock split was effected in the form of three shares of common stock issued for every two shares of common stock outstanding as of the date of declaration. All applicable share and per share data have been adjusted for the effect of this stock split.
During 2001, 2000 and 1999, we repurchased 836,000 shares, 2,377,000 shares and 136,000 shares of common stock on the open market for cash consideration of $3.1 million, $10.8 million and $1.4 million, respectively. The repurchased shares were retired and are not available for reissuance.
Preferred Stock
Pursuant to our articles of incorporation, our board of directors has the authority, without further action by the shareholders, to issue up to 20,000,000 shares of blank check preferred stock is issuable in one or more series each with suchand to fix the designations, powers, preferences, privileges and relative, participating, optional or special rights and the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and restrictions
asliquidation preferences, any or all of which may be greater than the Boardrights of Directorsour common stock. The board of directors, without shareholder approval, can issue preferred stock with voting, conversion or other rights that could adversely affect the voting power and other rights of the Company may determine and set forthholders of our common stock. Preferred stock could thus be issued quickly with terms that could delay or prevent a change in supplemental resolutions atcontrol of Labor Ready or make removal of management more difficult. Additionally, the time of issuance without further shareholder
action.

In accordance with the Company's Articles of Incorporation, the Board of
Directors has authorized one series of preferred stock designated as Series A
Preferred Stock, $0.667 par value (the "Preferred Stock"). At May 1, 1996,may decrease the Company had 1,281,123 outstanding sharesmarket price of our common stock and may adversely affect the Preferred Stock held by 6
holders of record.

Each share of Preferred Stock entitles the holder thereof to one vote in all
matters submitted to a vote of the shareholders of the Company. The Preferred
Stock votes with the Common Stock as a single class unless the action being
considered involves a change in thevoting and other rights of the Preferred Stock. The Preferred
Stock bears a cumulative annual dividend rateholders of 5% accrued on December 31 of
each year, is redeemable at any time at par value plus accumulated dividends at
the option of the Company, and contains a preferential liquidation distribution
equivalent to the par value plus all accumulated but unpaid dividends.

CERTAIN ARTICLES OF INCORPORATION, BYLAWS AND STATUTORY PROVISIONS AFFECTING
SHAREHOLDERS

SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT

The Company's Articles of Incorporation permit any action required or
permitted to be taken by the Company's shareholders to be effected at a duly
called annual or special meeting of shareholders or by unanimous consent in
writing. Additionally, the Articles of Incorporation and Bylaws authorize
special

meetings of the shareholders of the Company to be called by any officer, the
Board of Directors or one or more shareholders holding at least 10% of the
shares entitled to vote on any issued proposed to be considered.

REGISTRATION RIGHTS

The Company is obligated to register under the Securities Act of 1933, as
amended, shares of Common Stock underlying outstanding warrants and shares of
Common Stock sold by the Company in prior private placements. In connection with
such obligation, the Company currently has an effective registration statement
covering approximately 2.0 million shares of Common Stock for resale by the
holders thereof. The Company plans to terminate such registration statement in
June 1996 and to file a new registration statement covering such shares after
completion of this offering. See "Risk Factors -- Shares Eligible for Future
Sale."

TRANSFER AGENT AND REGISTRAR

The Company's transfer agent and registrar for its Common Stock is
TranSecurities International, Inc., located in Spokane, Washington.

UNDERWRITING

The underwriters named below (the "Underwriters") acting through their
Representative, Van Kasper & Company, have severally agreed on the terms and
subject to the conditions of an Underwriting Agreement with the Company to
purchase from the Company the number of shares of Common Stock set forth
opposite their respective names:

NUMBER OF
NAME OF UNDERWRITER SHARES
- ----------------------------------------------------------------------------- ----------

Van Kasper & Company.........................................................

----------
Total........................................................................
----------
----------

The shares of Common Stock are being offered by the Underwriters named
herein, subject to receipt and acceptance by them, to their right to reject any
order in whole or in part, and to certain other conditions. The Underwriters are
committed to purchase all of the above shares of Common Stock if any are
purchased.

The Representative has advised the Company that the Underwriters propose to
offer the shares of Common Stock to the public initially at the offering price
set forth on the cover page of this Prospectus and to certain dealers at that
price less a concession not in excess of $ per share, and that the Underwriters
and such dealers may reallow to certain dealers, including any Underwriters, a
discount not in excess of $ per share. After the initial offering, the public
offering price, concessions and reallowance to dealers may be changed by the
Representatives as a result of market conditions or other factors.

The Company has granted an option to the Underwriters, exercisable by the
Representative within 45 days after the date of this Prospectus, to purchase up
to 150,000 additional shares of Common Stock at the initial offering price, less
underwriting discounts and commissions. The Representative may exercise the
over-allotment option solely for the purpose of covering over-allotments, if
any, incurred in the sale of the shares of Common Stock offered hereby. To the
extent that the over-allotment option is exercised, each of the Underwriters
will have a firm commitment to purchase approximately the same percentage of the
additional shares as the number of shares to be purchased and offered by that
Underwriter in the above table bears to the total.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the
Company by Preston Gates & Ellis, Seattle, Washington. Certain legal matters
arising in connection with this offering will be passed upon for the
Underwriters by Ryan Swanson & Cleveland, Seattle, Washington.

EXPERTS

The financial statements included in this Prospectus and in the Registration
Statement have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Securities and Exchange Commission ("Commission"). Reports, proxy statements,
and other information filed by the Company can be inspected at the public
reference facilities of the SEC, Judiciary Plaza, 450 Fifth Street Northwest,
Washington, D.C. 20549, as well as the following Regional Offices: 7 World Trade
Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies can be obtained
by mail at prescribed rates. Requests should be directed to the SEC's Public
Reference Section, Judiciary Plaza, 450 Fifth Street Northwest, Washington, D.C.
20549.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits and schedules thereto filed with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies may be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office in Washington, D.C. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to the exhibit for a more complete description of the matter involved.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The documents listed below have been filed by the Company under the
Securities Exchange Act of 1934, as amended, with the Commission and are
incorporated herein by reference:

1. Annual Report on Form 10-K for the fiscal year ended December 31, 1995;
and

2. All documents filed by the Company pursuant to Sections 13(a), 13(c),
14, and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Common
Stock; such documents shall be deemed to be incorporated by reference in
this Prospectus and to be part hereof from the date of filing such
documents.

Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

Copies of all documents that are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates) will be provided without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
requests. Requests should be directed to the Assistant Secretary of the Company,
2156 Pacific Avenue, Tacoma, WA 98402, telephone (206) 383-9101.

LABOR READY, INC.
INDEX TO FINANCIAL STATEMENTS

PAGE
---------

Report of Independent Certified Public Accountants......................................................... F-2
Consolidated Balance Sheets at December 31, 1994 and 1995.................................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995................. F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1993, 1994 and 1995....... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995................. F-7
Notes to Consolidated Financial Statements................................................................. F-9

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders of
Labor Ready, Inc.

We have audited the accompanying consolidated balance sheets of Labor Ready,
Inc. and subsidiaries as of December 31, 1994 and 1995 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Labor Ready, Inc. and subsidiaries at December 31, 1994 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

Spokane, Washington /s/ BDO Seidman, LLP

May 1, 1996

F-2

LABOR READY, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

ASSETS (NOTES 3 AND 5)

DECEMBER 31,
----------------------------
1994 1995
------------- ------------- MARCH 31,
1996
-------------
(UNAUDITED)

CURRENT ASSETS:
Cash and cash equivalents............................................... $ 603,977 $ 5,359,113 $ 2,959,779
Accounts receivable, less allowance for doubtful accounts of $365,927,
$868,607 and $1,100,304 (Notes 3 and 13)............................... 5,162,830 12,182,806 11,636,043
Workers' compensation deposits and credits (Note 2)..................... 1,337,369 1,886,644 2,206,644
Prepaid expenses and other.............................................. 348,814 602,052 875,753
Deferred income taxes (Note 10)......................................... 118,590 698,930 542,000
------------- ------------- -------------
Total current assets.................................................. 7,571,580 20,729,545 18,220,219
------------- ------------- -------------

PROPERTY AND EQUIPMENT (Note 4):
Buildings and land...................................................... 366,920 1,536,086 1,623,321
Computers and software.................................................. 704,150 2,005,985 2,770,920
------------- ------------- -------------
1,071,070 3,542,071 4,394,241
Less accumulated depreciation........................................... 244,497 690,648 839,018
------------- ------------- -------------
Property and equipment, net........................................... 826,573 2,851,423 3,555,223
------------- ------------- -------------

OTHER ASSETS:
Intangible assets, less amortization of $69,020, $114,588 and
$124,483............................................................... 191,431 962,632 952,737
Workers' compensation deposits and credits, less current portion (Note
2)..................................................................... 105,832 1,427,905 2,091,000
Deferred income taxes (Note 10)......................................... 94,366 16,477 99,000
Other................................................................... 122,194 193,653 193,723
------------- ------------- -------------
Total other assets.................................................... 513,823 2,600,667 3,336,460
------------- ------------- -------------
Total assets (Notes 3 and 5).............................................. $ 8,911,976 $ 26,181,635 $ 25,111,902
------------- ------------- -------------
------------- ------------- -------------

See accompanying notes to consolidated financial statements.

F-3

LABOR READY, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996

LIABILITIES AND SHAREHOLDERS' EQUITY

DECEMBER 31,
----------------------------
1994 1995
------------- ------------- MARCH 31,
1996
-------------
(UNAUDITED)

CURRENT LIABILITIES:
Checks issued against future deposits................................... $ -- $ 514,842 $ 886,833
Accounts payable........................................................ 364,639 1,118,081 1,313,375
Accrued wages and related expenses...................................... 821,487 1,588,147 1,458,105
Workers' compensation claims (Note 2)................................... 708,869 1,943,338 2,051,769
Income taxes payable (Note 10).......................................... 497,000 1,161,000 --
Note payable (Note 3)................................................... 3,160,580 1,591,206 1,428,158
Current maturities of long-term debt (Note 4)........................... 78,291 39,117 41,318
------------- ------------- -------------
Total current liabilities............................................. 5,630,866 7,955,731 7,179,558
------------- ------------- -------------

LONG-TERM LIABILITIES:
Long-term debt, less current maturities (Note 4)........................ 244,250 953,937 942,227
Subordinated debt, less unamortized discount of $1,259,377 and
$1,213,303 (Note 5).................................................... -- 8,740,623 8,786,697
Convertible debentures (Note 7)......................................... 75,000 -- --
------------- ------------- -------------
Total long-term liabilities........................................... 319,250 9,694,560 9,728,924
------------- ------------- -------------
Total liabilities..................................................... 5,950,116 17,650,291 16,908,482
------------- ------------- -------------

Commitments and contingencies (Note 11)
SHAREHOLDERS' EQUITY:
Preferred stock, $0.667 par value (Note 8): 5,000,000 shares authorized;
issued and outstanding 1,281,123 shares................................ 854,082 854,082 854,082
Common stock, no par value (Note 9) 25,000,000 shares authorized;
issued and outstanding, 4,971,594, 5,879,133 and 6,030,633 shares.... 3,540,187 7,116,422 7,489,635
Cumulative foreign currency translation adjustment.................... (2,853) (28,707) (33,844)
Retained earnings (accumulated deficit)................................. (1,429,556) 589,547 (106,453)
------------- ------------- -------------
Total shareholders' equity............................................ 2,961,860 8,531,344 8,203,420
------------- ------------- -------------
Total liabilities and shareholders' equity............................ $ 8,911,976 $ 26,181,635 $ 25,111,902
------------- ------------- -------------
------------- ------------- -------------

See accompanying notes to consolidated financial statements.

F-4

LABOR READY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996

THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED)

Revenues from services............... $ 15,658,832 $ 38,950,683 $ 94,361,629 $ 12,617,752 $ 26,093,924
Costs and expenses:
Cost of services................... 12,400,599 30,712,945 76,642,962 10,494,339 22,207,458
Selling, general and
administrative.................... 2,651,702 6,592,555 13,639,034 2,495,051 4,500,319
Interest and other, net.............. 353,569 457,378 866,113 164,386 435,471
------------- ------------- ------------- ------------- -------------
Income (loss) before taxes on income
and extraordinary item.............. 252,962 1,187,805 3,213,520 (536,025) (1,049,324)
Taxes on income (Note 10)............ 31,775 336,000 1,151,713 (182,249) (364,000)
------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary
item................................ 221,187 851,805 2,061,807 (353,776) (685,324)
Extraordinary item -- forgiveness of
debt (net of income tax effect of
$24,635)............................ 47,821 -- -- -- --
------------- ------------- ------------- ------------- -------------
Net income (loss).................... $ 269,008 $ 851,805 $ 2,061,807 $ (353,776) $ (685,324)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Earnings per common share:
Income (loss) before extraordinary
item.............................. $ 0.06 $ 0.18 $ 0.34 $ (.06) $ (.10)
Extraordinary item................. 0.01 -- -- -- --
------------- ------------- ------------- ------------- -------------
Net income (loss).................. $ 0.07 $ 0.18 $ 0.34 $ (.06) $ (.10)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average shares
outstanding....................... 3,668,585 4,454,883 5,861,500 5,991,425 6,856,367
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

See notes to consolidated financial statements.

F-5

LABOR READY, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996

CUMULATIVE
RETAINED FOREIGN
COMMON STOCK PREFERRED STOCK EARNINGS CURRENCY
------------------------ ------------------------ (ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT DEFICIT) ADJUSTMENT
---------- ------------ ---------- ------------ -------------- -----------

BALANCE, January 1, 1993................. 2,524,902 $ 1,819,756 1,504,632 $ 1,003,088 $ (2,606,516) $ --
Net income for the year................ -- -- -- -- 269,008 --
Common Stock exchanged for:
Equipment from related party......... 60,000 8,000 -- -- -- --
Notes................................ 142,500 95,000 -- -- -- --
Services............................. 8,100 2,850 -- -- -- --
Real estate.......................... 49,341 37,500 -- -- -- --
Software............................. 4,500 7,500 -- -- -- --
Common Stock sold for cash............. 22,500 11,250 -- -- -- --
Common Stock options exercised......... 1,079,310 143,908 -- -- -- --
Debentures converted................... 13,158 10,000 -- -- -- --
Preferred Stock dividend............... -- -- -- -- (50,154) --
---------- ------------ ---------- ------------ -------------- -----------
BALANCE, December 31, 1993............... 3,904,311 2,135,764 1,504,632 1,003,088 (2,387,662) --
Net income for the year................ -- -- -- -- 851,805 --
Debentures converted................... 356,843 271,200 -- -- -- --
Common Stock issued from private
placement............................. 712,440 1,130,223 -- -- -- --
Preferred Stock canceled............... -- -- (223,509) (149,006) 149,006 --
Common Stock canceled on lapsing
subscriptions......................... (3,500) (2,000) -- -- -- --
Common Stock issued for services....... 1,500 5,000 -- -- -- --
Foreign currency translation........... -- -- -- -- -- (2,853)
Preferred Stock dividend............... -- -- -- -- (42,705) --
---------- ------------ ---------- ------------ -------------- -----------
BALANCE, December 31, 1994............... 4,971,594 3,540,187 1,281,123 854,082 (1,429,556) (2,853)
Net income for the year................ -- -- -- -- 2,061,807 --
Common Stock issued on conversion of
debt.................................. 149,902 382,364 -- -- -- --
Common Stock issued for 401(k) Plan.... 1,197 7,679 -- -- -- --
Common Stock issued from private
placement............................. 14,000 69,998 -- -- -- --
Common Stock issued on warrants
exercised............................. 712,440 1,781,100 -- -- -- --
Common Stock issued on the exercise of
options............................... 30,000 45,000 -- -- -- --
Detachable stock warrants.............. -- 1,290,094 -- -- -- --
Preferred Stock dividend............... -- -- -- -- (42,704) --
Foreign currency translation........... -- -- -- -- -- (25,854)
---------- ------------ ---------- ------------ -------------- -----------
BALANCE, December 31, 1995............... 5,879,133 7,116,422 1,281,123 854,082 589,547 (28,707)
Net loss for the period (unaudited)...... -- -- -- -- (685,324) --
Common Stock issued on the exercise of
options (unaudited)..................... 151,500 373,213 -- -- -- --
Preferred Stock dividends (unaudited).... -- -- -- -- (10,676) --
Foreign currency translation............. -- -- -- -- -- (5,137)
---------- ------------ ---------- ------------ -------------- -----------
BALANCE, March 31, 1996 (unaudited)...... 6,030,633 $ 7,489,635 1,281,123 $ (854,082) $ (106,453) $ (33,844)
---------- ------------ ---------- ------------ -------------- -----------
---------- ------------ ---------- ------------ -------------- -----------

See notes to consolidated financial statements.

F-6

LABOR READY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- -------------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss):..................................... $269,008 $851,805 $2,061,807 $(353,776) $(685,324)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization........................ 65,135 178,416 522,436 80,424 204,329
Common stock issued for services..................... 2,850 5,000 -- -- --
Provision for doubtful accounts...................... 119,049 341,799 1,084,526 258,541 1,020,544
Forgiveness of debt, extraordinary................... (72,456) -- -- -- --
Deferred income taxes................................ 47,044 (260,000) (502,451) (100,000) 74,407
Changes in assets and liabilities:
Accounts receivable.................................... (1,045,788) (3,597,793) (8,104,502) (869,908) (473,781)
Workers' compensation deposits and credits............. (177,239) (1,265,962) (1,871,348) (311,374) (983,095)
Prepaid expenses and other............................. (44,224) (234,221) (324,697) (281,264) (273,771)
Accounts payable....................................... 46,353 239,186 753,442 705,236 195,294
Accrued wages and benefits............................. 188,021 535,281 774,339 511,908 (130,042)
Accrued workers' compensation claims................... 173,038 458,938 1,234,469 231,182 108,431
Income taxes payable................................... (20,717) 497,000 664,000 (332,248) (1,161,000)
------------ ------------ ------------ ----------- -------------
Net cash used in operating activities.................... (449,926) (2,250,551) (3,707,979) (461,279) (2,103,998)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (176,383) (549,959) (2,471,001) (396,744) (852,170)
Intangible assets acquired............................. -- (43,501) -- -- --
------------ ------------ ------------ ----------- -------------
Net cash used in investing activities.................... (176,383) (593,460) (2,471,001) (396,744) (852,170)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on note payable......................... 163,771 2,177,409 (1,569,374) (140,015) (163,048)
Checks issued against future deposits.................. -- 514,842 -- 371,991
Proceeds from issuance of common stock................. 11,250 1,130,223 69,998 -- --
Proceeds from warrants exercised....................... -- -- 1,781,100 514,295 --
Proceeds from options exercised........................ -- -- 45,000 -- 373,213
Debt issue costs....................................... -- -- (816,769) -- --
Proceeds from stock subscriptions...................... 13,675 79,325 -- -- --
Proceeds from issuance of convertible debentures....... 356,200 -- -- -- --
Borrowings on long-term debt........................... 10,000 74,000 11,529,951 -- --
Payments on long-term debt............................. (103,075) (189,221) (552,074) (20,532) (9,509)
Dividends paid......................................... -- (50,154) (42,704) (10,676) (10,676)
------------ ------------ ------------ ----------- -------------
Net cash provided by financing activities.............. 451,821 3,221,582 10,959,970 343,072 561,971
Effect of exchange rates............................... -- (2,853) (25,854) (11,669) (5,137)
------------ ------------ ------------ ----------- -------------
Net increase (decrease) in cash and cash equivalents... (174,488) 374,718 4,755,136 (526,620) (2,399,334)
Cash and cash equivalents, beginning of period........... 403,747 229,259 603,977 603,977 5,359,113
------------ ------------ ------------ ----------- -------------
Cash and cash equivalents, end of period................. $ 229,259 $ 603,977 $ 5,359,113 $ 77,357 $ 2,959,779
------------ ------------ ------------ ----------- -------------
------------ ------------ ------------ ----------- -------------

See notes to consolidated financial statements.

F-7

LABOR READY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ------------- ----------- -----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid...................................... $ 344,302 $ 513,497 $ 1,302,929 $ 151,653 $ 506,436
Income taxes paid.................................. $ 46,552 $ 99,000 $ 990,164 $ 250,000 $ 983,315
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for subscriptions, assets
and debt.......................................... $ 278,233 $ -- $ -- $ -- $ --
Issuance of common stock for conversion of
promissory notes.................................. -- -- $ 307,364 $ 40,000 $ --
Contribution of common stock to employer 401(k)
plan.............................................. -- -- $ 7,679 $ -- $ --
Assets acquired in exchange for note............... $ 35,000 -- -- -- --
Debt forgiven...................................... $ 2,456 -- -- -- --
Cancellation of preferred stock.................... -- $ 149,006 -- -- --
Issuance of common stock for conversion of
convertible debentures............................ $ 10,000 $ 271,200 $ 75,000 -- --
Refinance of note payable, net..................... -- $ 2,000 -- -- --

See notes to consolidated financial statements.

F-8

LABOR READY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996

INFORMATION AT MARCH 31, 1995 AND 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Labor Ready,
Inc. and its wholly-owned subsidiary Labour Ready Temporary Services Limited
(collectively referred to as "the Company"). The Company's principal business
activity involves providing temporary help services to construction and small
manufacturing companies in the United States and Canada. The Company was
incorporated under the laws of the State of Washington on March 19, 1985.

All intercompany balances and transactions have been eliminated in
consolidation.

B. INTERIM FINANCIAL INFORMATION
The consolidated financial statements at March 31, 1995 and 1996 and for the
three months ended March 31, 1995 and 1996 are unaudited, but include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the financial position at such
dates and the operating results and cash flows for those periods. Results for
interim periods are not necessarily indicative of results to be expected for the
entire year.

C. REVENUE RECOGNITION
Revenues from services and the related cost of services are recorded in the
period in which the services are performed. Franchise activity and fees are
minimal.

D. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments purchased with a
remaining maturity of three months or less to be cash equivalents.

E. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
assets.

F. INTANGIBLE ASSETS
The intangible assets primarily consist of deferred financing costs,
customer lists, and non-compete agreements. Deferred financing costs resulted
from the issuance of subordinated debt, and are being amortized over the life of
the subordinated debt. Amortization of the other intangible assets is computed
using the straight line method over periods not exceeding ten years. Management
evaluates, on an ongoing basis, the carrying value of the intangible assets and
makes a specific provision against the asset when an impairment is identified.

G. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". Deferred income taxes are provided for temporary differences
between the financial reporting and tax basis of assets and liabilities.
Deferred taxes are measured using enacted tax rates in effect in the years in
which the temporary differences are expected to reverse. Tax credits are
accounted for as a reduction of income taxes in the year in which the credit
originates.

H. EARNINGS PER SHARE
The primary earnings per common share was computed by dividing the net
income less preferred stock dividends by the weighted average number of shares
of common stock and common stock equivalents outstanding for all periods
presented. Fully diluted earnings per share does not differ materially from
primary earnings per share. In 1995, the Company declared a three-for-two Common
Stock split, which has been retroactively applied for 1993 and 1994, in the
determination of the weighted average number of shares of Common Stock and
Common Stock equivalents outstanding.

F-9

LABOR READY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996

INFORMATION AT MARCH 31, 1995 AND 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
I. FOREIGN CURRENCY TRANSLATION
Assets and liabilities of Labour Ready Temporary Services Limited are
translated at the rate of exchange in effect on the balance sheet date; income
and expenses are translated at the weighted average rates of exchange prevailing
during the year. The related translation adjustments are reflected in the
accumulated translation adjustment section of the stockholders' equity.

J. WORKERS' COMPENSATION
The Company is generally self-insured for losses and liabilities related to
workers' compensation claims. The Company established provisions for future
claim liabilities based on estimates of the future cost of claims and claim
losses (including future claim adjustment expenses) that have been reported but
not settled, and of losses that have been incurred but not reported. Adjustments
to the claims reserve are charged or credited to expense in the periods in which
they are made.

K. MANAGEMENT'S ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

L. ADVERTISING COSTS
The Company adopted Statement of Position 93-7, "Reporting on Advertising
Costs" in 1995. This statement was issued by the American Institute of Certified
Public Accountants and requires the costs of advertising to be expensed as
incurred or the first time that the advertising takes place. The adoption of
this standard did not have a significant effect on the financial statements of
the Company.

M. STOCK-BASED COMPENSATION
In October 1995, the FASB issued 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 value method whereby compensation cost is the
excess of the quoted market prices of the stock at grant date 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.

N. ACCOUNTING FOR LONG-LIVED ASSETS

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 amount 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.

O. RECLASSIFICATION

Certain items in the 1994 and 1993 consolidated financial statements have
been reclassified to conform to the classifications used in 1995.

F-10

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Years Ended December 31, 1993, 1994, and 1995 and
For the Three Months Ended March 31, 1995 and 1996
Information at March 31, 1995 and 1996 and
For the Three Months Ended March 31, 1995 and 1996 is Unaudited

2. WORKERS' COMPENSATION CREDITS RECEIVABLE
As required by the laws of the various states in which Labor Ready does
business, the Company provides workers' compensation insurance to its temporary
workers and office staff. Each state has specific workers' compensation programs
and requirements regarding the deposit of funds for the payment of workers'
compensation claims and related claim settlement and administrative expenses. In
Washington, Nevada and Ohio (the "Monopolistic States"), the Company is required
to make payments at rates established by each state based on the job
classification of the insured workers and previous claims experience of the
Company. These payments are made directly to a workers' compensation
administrator employed by the State, who in turn disburses funds for the
settlement of claims and related expenses. Amounts paid to these state
administered programs which are not disbursed for claims and related claim
settlement and administrative expenses are returned to the Company. At December
31, 1994 and 1995, the Company recorded workers' compensation deposits and
credits receivables from the Monopolistic States of $312,626 and $967,644.

Workers' compensation claims in the remaining states (the "Non-Monopolistic
States") are managed by a third party administrator engaged by the Company.
These Non-Monopolistic States allow a fronting insurance company licensed to do
business in those states to guarantee Labor Ready's ability to pay these claims
and related expenses as they occur, and allow the claims to be managed by the
Company or selected claims administrators. For Non-Monopolistic State workers'
compensation, the Company purchased "stop loss" insurance coverage for most
individual claims in excess of $250,000 and for 1995 aggregate losses in excess
of $5.4 million.

In 1995, the Company deposited $4.6 million with a foreign off-shore company
for the payment of workers' compensation claims and related expenses on claims
originating in the Non-Monopolistic States. At December 31, 1995, $2.3 million
remained on deposit for the payment of future claims and is recorded as workers'
compensation deposits and credits. Estimated incurred losses and related
settlement and administrative expenses to be paid from those deposits of
$1,063,000 are recorded as current workers' compensation claims payable at
December 31, 1995. Through March 31, 1996, an additional $1.5 million was
deposited with the foreign insurance company and at March 31, 1996,
approximately $3.3 million remained on deposit for the payment of future claims
and claims settlement expenses which were estimated by the Company at $1.3
million.

In 1994, the workers' compensation claims for Non-Monopolistic States were
managed by a domestic third party administrator and insured by the various
states in which the Company employed workers. Workers' compensation expense of
$3,126,601 and $5,907,771 was recorded as a component of cost of services in
1994 and 1995.

3. NOTE PAYABLE
The Company pledged its accounts receivable to a private financing company
for an accounts receivable revolving credit line. On October 31, 1995, the
Company renegotiated its loan agreement which changed the nature of the
borrowings to an asset based loan limited to the lesser of 80% of eligible
receivables (as defined in the credit agreement) or $5,000,000. Borrowings under
the line, which expired on April 30, 1996, were secured by the Company's
accounts receivable. Interest on borrowings was charged at prime plus two
percent plus a facility fee of one percent per annum and an administrative fee
equal to one-fifth of one percent per month. The agreement required compliance
with certain financial covenants principally relating to working capital, debt
to equity, and dividend payment restrictions. As of December 31, 1995, the
Company was in compliance with the covenants except for the dividend payment
restrictions, for which a waiver was obtained.

F-11

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
INFORMATION AT MARCH 31, 1995 AND 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED

3. NOTE PAYABLE (CONTINUED)
On February 15, 1996, the Company entered into an agreement with US Bank to
provide the Company with a $10,000,000 revolving line of credit that carries an
interest rate of prime plus 1/4% (8.5% at March 31, 1996), and a maturity date
of September 30, 1996. At the option of the Company, the interest rate can be
fixed at the rate in effect as of the date this option is exercised. This
agreement replaced the Company's former line of credit which was repaid in
February 1996. The line of credit is collateralized by all the Company's
accounts, chattel paper, contract rights and general intangibles.

Short-term borrowing activity was as follows:

DECEMBER 31,
------------------------
1994 1995
----------- -----------

Balance outstanding at year-end............................................. $ 3,160,580 $ 1,591,206
Stated interest rate at year-end, including applicable fees................. 11.25% 11.95%
Maximum amount outstanding at any month end................................. $ 4,483,762 $ 7,731,789
Average amount outstanding.................................................. $ 2,898,549 $ 5,907,364
Weighted average interest rate during the year, including applicable fees... 15.27% 16.49%

The average amount outstanding and the weighted average interest rate during
the year were computed based upon the average daily balances and rates.

4. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1994 and 1995:

DECEMBER 31,
--------------------
1994 1995
--------- ---------

Mortgage note payable -- secured by a building in Tacoma, Washington, payable at
$4,721 per month through May 2005, including interest at 9.71%.................. $ -- $ 523,124
Mortgage note payable -- secured by a building in Tacoma, Washington, payable at
$1,736 per month through January 2015, including interest at 8.5%............... -- 196,707
Mortgage note payable -- secured by a building in Tacoma, Washington, payable at
$1,637 per month through February 2004, including interest at 8%................ 122,589 112,366
Mortgage note payable -- secured by a building in Kansas City, Missouri, payable
at $988 per month through June 2005 including interest at 10.5%................. -- 70,757
Mortgage note payable -- secured by a building in Kent, Washington, payable at
$1,142 per month through January 2000, including interest at 9%................. 55,000 46,671
Mortgage note payable -- secured by a building in Kansas City, Missouri, payable
at $601 per month through March 2004, including interest at 8%.................. 46,999 43,429
Other notes payable.............................................................. 97,953 --
--------- ---------
Long-term debt................................................................... 322,541 993,054
Less current maturities.......................................................... 78,291 39,117
--------- ---------
Long-term debt, less current maturities.......................................... $ 244,250 $ 953,937
--------- ---------
--------- ---------

F-12

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LONG-TERM DEBT (CONTINUED)
Scheduled long-term debt maturities at December 31, 1995 are as follows:

YEAR ENDING DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------- ---------

1996...................................................................... $ 39,117
1997...................................................................... 45,360
1998...................................................................... 47,690
1999...................................................................... 52,097
2000...................................................................... 43,881
Thereafter................................................................ 764,909
---------
Total............................................................... $ 993,054
---------
---------

5. SUBORDINATED DEBT
On October 31, 1995, the Company issued subordinated debt with detachable
stock warrants in exchange for $10,000,000. The debt, which is secured by
substantially all assets of the Company including a key man life insurance
policy, bears interest at 13% and is to be repaid in 17 quarterly installments
of $588,235 commencing in October 1998. The Company recorded a debt discount and
allocated $1,259,377 of the proceeds to the value of the detachable stock
warrants (see note 9). In connection with arranging the debt agreement, the
Company incurred costs of approximately $800,000 which is included in other
assets and is being amortized over the life of the debt. The debt agreement
contains various financial covenants, primarily related to minimum net worth,
capital additions and cash flow requirements, with which the Company was in
compliance at December 31, 1995 and March 31, 1996.

Scheduled maturities of the subordinated debentures at December 31, 1995 are
as follows:

YEAR ENDING DECEMBER 31, AMOUNT
- ----------------------------------------------------------------------- ------------

1996................................................................... $ 0
1997................................................................... 0
1998................................................................... 588,235
1999................................................................... 2,352,940
2000................................................................... 2,352,940
Thereafter............................................................. 4,705,885
------------
Total............................................................ 10,000,000
Less unamortized discount.............................................. 1,259,377
------------
Subordinated debt, net of discount..................................... $ 8,740,623
------------
------------

6. RELATED PARTY DEBT
In 1995, officers of the Company provided cash to the Company in exchange
for short term notes payable. These notes payable aggregated $424,687 and
carried an interest rate of 12%. These notes payable were paid in full during
1995.

In January 1993, officers of the Company used $143,908 of the related
long-term debt due related parties outstanding at December 31, 1992 to exercise
Common Stock options. The officers forgave $72,456 of this debt which is
reflected as an extraordinary item in 1993.

F-13

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. CONVERTIBLE DEBENTURES
In 1993, the Company sold $356,200 of convertible debentures. The debentures
were convertible into Common Stock at a price of $.76 per share through June 30,
1994 with the conversion price increasing $.09 on June 30 of each subsequent
year through 1998. In 1994, $271,200 of the debentures was converted into
356,843 shares at $.76 per share. In 1995, the remaining $75,000 of convertible
debentures was converted into 87,893 shares of Common Stock at $.85 per share.

8. PREFERRED STOCK
The Company has authorized 5,000,000 shares of blank check Preferred Stock.

The Preferred Stock is issuable in one or more series, each with such
designations, preferences, rights, qualifications, limitations and restrictions
as the Board of Directors of the Company may determine and set forth in
supplemental resolutions at the time of issuance, without further shareholder
action.
The initial series of Preferred Stockblank check preferred stock of the corporation authorized by the
Boardour board of Directorsdirectors in accordance with the Articlesour articles of Incorporation,incorporation, was designated as Series A Preferred Stock. At December 31, 1994 and 1995, the
Company had 1,281,123 outstanding shares of the Series A Preferred Stock with
the following terms:

Par value $0.667, with eachEach share of Series A Preferred Stock is entitled to one vote in all matters submitted to a vote of the shareholders of the Company.our shareholders. The Series A Preferred stockStock will vote on par with the Common Shares as a single class unless the action being considered involves a change in the rights of the Series A Preferred Stock. The
43
Series A Preferred Stock bears a cumulative annual dividend rate of five percent accrued on December 31 of each year, is redeemable at par value plus accumulated dividends at theour option of the Company at any time after December 31, 1994, and contains an involuntary preferential liquidation distribution equivalent to the par value plus all accumulated dividends remaining unpaid.
In February 1996, the BoardJune 1999, our board of Directorsdirectors authorized a three-for-two Preferred Stockpreferred stock split. This Preferred Stockpreferred stock split was effected in the form of three shares of Preferred Stockpreferred stock issued for every two shares of Preferred Stockpreferred stock outstanding as of theeach date of declaration. All applicable share and per share data have been adjusted for the effect of the stock split.

During 1994, 223,509splits.
Pursuant to the Rights Plan as defined below, 2,000,000 shares of Preferred Stockpreferred stock have been reserved for issuance under terms of the Rights Plan.
At June 28, 2002 and December 31, 2001 and 2000, we had no outstanding were canceledshares of preferred stock. We repurchased, at the par value of $0.131 per share plus accumulated dividends, and retired 6,486,000 preferred shares in 2000.
Special Meetings of Shareholders; Shareholder Action By Written Consent
Our articles of incorporation permit any action required or permitted to be taken by our shareholders to be effected at a duly called annual or special meeting of shareholders or by unanimous consent in writing. Additionally, our articles of incorporation and bylaws authorize special meetings of our shareholders to be called by any officer, our board of directors or one or more shareholders holding at least 10% of the shares entitled to vote on any issued proposed to be considered.
Anti-Takeover Effects Of Certain Provisions Of Our Articles of Incorporation, Bylaws And Washington Law
As noted above, our board of directors, without shareholder approval, has the authority under our articles of incorporation to issue preferred stock with rights superior to the rights of the holders of our common stock. As a result, preferred stock could be issued quickly and easily, could adversely affect the rights of holders of our common stock and could be issued with terms calculated to delay or prevent a change in control of Labor Ready or make removal of management more difficult.
Washington law imposes restrictions on certain transactions between a corporation and certain significant shareholders. Chapter 23B.19 of the Washington Business Corporations Act prohibits a "target corporation," with certain exceptions, from engaging in certain significant business transactions with a person or group of persons that beneficially owns 10% or more of the voting securities of the target corporation (an "acquiring person") for a period of five years after the acquisition of the securities, unless the transaction or acquisition of securities is approved by a majority of the members of the target corporation's board of directors prior to the time of acquisition. Such prohibited transactions include, among other things, a merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from, the acquiring person; termination of 5% or more of the employees of the target corporation as a result of settlementthe acquiring person's acquisition of litigation. There10% or more of the shares; or allowing the acquiring person to receive any disproportionate benefit as a shareholder.
After the five-year period, a "significant business transaction" may occur, as long as it complies with certain "fair price" provisions of the statute. A corporation may not "opt out" of this statute. This provision may have the effect of delaying, deterring or preventing a change in control of Labor Ready.
Rights Plan
In 1998, our board of directors adopted a Shareholders Rights Plan (the "Rights Plan") and authorized a dividend distribution of one right for each share of our common stock outstanding as of February 2, 1998 and the issuance of one right with respect to each additional share of our common stock issued thereafter. Among other things, the Rights Plan provides that as of a distribution date, each right entitles the holder to purchase one one-hundredth of a share of the Series A Junior
44
Participating Preferred Stock at an exercise price of $50.25, subject to adjustment. We have reserved 2,000,000 shares of the Series A Junior Participating Preferred Stock for issuance upon exercise of the rights. The rights may be redeemed by us, subject to the approval of the board of directors, for $0.01 per right in accordance with the Rights Plan.
The rights will expire ten years after the date of issuance, or January 8, 2008, unless earlier redeemed, and will become exercisable and transferable separately from the common stock following the tenth day after a person or group (1) acquires beneficial ownership of 15% or more of our common stock or (2) announces a tender or exchange offer the consummation of which would result in any person or group becoming the beneficial owner of 15% or more of our common stock. If any group or person acquires 15% or more of our common stock, the holders of the unredeemed rights (except for the acquiring group or person) may purchase for the exercise price, the number of common shares having a market value equal to two times the exercise price. In the event that (1) we merge into another entity, (2) an acquiring entity merges with or into us and our common stock is changed into or exchanged for stock or other assets, (3) we effect a statutory share exchange of the outstanding shares of our common stock for securities in another entity or (4) we sell or otherwise transfer 50% or more of our consolidated assets or earning power, then each right will entitle the holder to purchase, at the then-current exercise price, a number of shares of common stock of the entity engaging in the transaction having a market value equal to two times the exercise price.
The Series A Junior Participating Preferred Stock purchasable upon exercise of the rights will be nonredeemable and junior to any other series of our preferred stock. Each share of the Series A Junior Participating Preferred Stock will be entitled to a minimum preferential quarterly dividend of $1.00 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per share of our common stock. In the event of our liquidation, the holders of shares of the Series A Junior Participating Preferred Stock will be entitled to a minimum preferential payment of $100.00 per share but will be entitled to an aggregate payment equal to 100 times the payment made per share of common stock. Each share of the Series A Junior Participating Preferred Stock will have 100 votes, voting together with shares of common stock. In the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each share of Series A Junior Participating Preferred Stock will be entitled to receive 100 times the amount received per share of common stock.
On June 13, 2002, we adopted an amendment to the Rights Plan exempting the acquisition of the notes directly from the initial purchasers in the private placement of our notes and the subsequent conversion of the notes from the provisions of the Rights Plan. As with most shareholder rights agreements, the terms of our Rights Plan are complex and not easily summarized, particularly as they relate to the acquisition of our common stock and the exercisability of the rights. This summary may not contain all of the information that is important to you. Accordingly, if you want more complete information, you should read the Rights Plan in its entirety.
Transfer Agent And Registrar
The transfer agent and registrar for the common stock is Computershare Trust Company, located in Golden, Colorado.
New York Stock Exchange Listing
Our common stock is listed on the New York Stock Exchange under the symbol "LRW."
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material US federal income tax consequences relating to the purchase, ownership, and disposition of the notes and of common stock into which notes may be converted, but does not purport to be a complete analysis of all the potential tax consequences that may be material to an investor based on such investor's particular tax situation (such as the alternative minimum tax provisions of the Code). This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury Regulations promulgated or proposed thereunder ("Treasury Regulations"), judicial authority and current administrative rulings and practice as of the date of this prospectus. All of those authorities are subject to change, possibly on a retroactive basis, or differing interpretation, so as to result in US federal income tax consequences different from those discussed below. This summary deals only with beneficial owners of notes that will hold such notes and common stock into which notes may be converted as "capital assets," within the meaning of Section 1221 of the Code, and does not address tax consequences applicable to US Holders that may be subject to special tax rules, such as financial institutions, tax-exempt organizations, expatriates, pension funds, insurance companies, dealers in securities or foreign currencies, persons that will hold notes as a position in a hedging transaction, "straddle," "conversion transaction" or other risk reduction transaction for tax purposes, persons who hold notes through a partnership or other pass through entity, or persons that have a "functional currency" other than the US dollar (except as disclosed below under "Non-US Holders"). We have not sought any ruling from the Internal Revenue Service (the "IRS") with respect to the statements made and the conclusions reached in the following summary, and there can be no establishedassurance that the IRS will agree with such statements and conclusions. Moreover, this discussion does not address the effect of any applicable state, local or foreign tax laws, and except where noted, the U.S. federal estate, gift or alternative minimum tax consequences, if any, to the holder of the notes and common stock into which notes may be converted.INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE US FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
As used herein, the term "US Holder" means a beneficial owner of a note or common stock that is for US federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation, limited liability company or partnership created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate, the income of which is subject to US federal income taxation regardless of its source, or (iv) (a) a trust, the administration of which is subject to the primary supervision of a court within the United States and which has one or more US persons, as defined in Section 7701(a)(3) of the Code, with authority to control all substantial decisions, or (b) a trust in existence on August 20, 1996 that has elected to continue to be treated as a US trust. As used herein, the term "Non-US Holder" means a beneficial owner of a note or common stock that is not a US Holder. It should be noted that certain "single member entities" are disregarded for US federal income tax purposes. Thus, for US federal income tax purposes, the income, gain, loss and deductions of such an entity are attributed to the owner of such single member entity. The discussion below for US Holders may not apply to certain single member non-corporate entities that are treated as owned by a Non-US Holder. Investors which are single member noncorporate entities should consult with their own tax advisors to determine the US federal, state, local and other tax consequences that may be relevant to them.
Treatment of Convertible Notes as Debt or Equity
We intend to treat the notes as debt for federal income tax purposes. This characterization is binding on the holders of the notes unless the holder discloses on his, her or its federal income tax return that he, she or it is taking a contrary position. The following assumes that the notes will be treated as debt for federal income tax purposes.
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US Holders
The following is a summary of the principal US federal income tax consequences resulting from the ownership and disposition of the notes and common stock by US Holders.
Payment of Interest
Stated interest on a note generally will be includable in the income of a US Holder as ordinary income at the time such interest is received or accrued, in accordance with such US Holder's method of accounting for US federal income tax purposes.
Sale, Exchange or Redemption of the Notes
Except as discussed in "US Holders—Market Discount" below, upon the sale, exchange or redemption of a note, a US Holder generally will realize and recognize capital gain or loss equal to the difference, if any, between the amount realized on the sale, exchange or redemption and the US Holder's adjusted tax basis in such note. For these purposes, the amount realized on the sale, exchange or redemption of the notes is equal to the amount of cash plus the fair market value of any other property received, but does not include any amount attributable to accrued but unpaid interest, which will be taxable as such unless previously taken into account. A US Holder's adjusted tax basis in a note generally will be the US dollar value of the purchase price of such note on the date of purchase. Gain or loss so recognized will generally be capital gain or loss and will be long-term capital gain or loss if, at the time of the sale, exchange or redemption, the note was held for more than one year. The deductibility of net capital losses is subject to limitations.
Constructive Dividends on Notes
The conversion price of the notes is subject to adjustment under certain circumstances. Under Section 305 of the Code, adjustments to the conversion ratio that increase a holder's proportionate share of our assets or our earnings may in certain circumstances result in a constructive dividend to such holder, resulting in ordinary income to the holder to the extent of our current and accumulated earnings and profits, as determined under US federal income tax principles. Similarly, a failure to adjust the conversion price of the notes to reflect a stock dividend or similar event could in some circumstances give rise to constructive dividend income to US Holders of common stock.
Conversion of the Notes
A US Holder generally will not recognize any income, gain or loss upon conversion of a note into common stock, except with respect to cash received in lieu of a fractional share of common stock. A US Holder's tax basis in the common stock received on conversion of a note will be the same as such US Holder's adjusted tax basis in the note at the time of conversion reduced by any basis allocable to a fractional share. The holding period for the common stock received on conversion will generally include the holding period of the note converted.
Cash received in lieu of a fractional share of common stock upon conversion will be treated as a payment in exchange for the fractional share of common stock. Accordingly, the receipt of cash in lieu of a fractional share of common stock generally will result in capital gain or loss (measured by the difference between the cash received for the fractional share and the US Holder's adjusted tax basis in the fractional share). The fair market value of the shares of common stock received which is attributable to accrued interest will be taxable as ordinary interest income.
Dividends on Common Stock
Generally, a distribution by us with respect to our common stock will be treated as a dividend, subject to tax as ordinary income, to the extent of our current or accumulated earnings and profits as of the year of such distribution, then as a tax-free return of capital to the extent of a US Holder's tax
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basis in the common stock that such US Holder holds and thereafter as gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate US Holder may qualify for the 70% dividends received deduction if the US Holder owns less than 20% of the voting power and value of our stock (other than any non-voting, non-convertible, non-participating preferred stock). A corporate US Holder that owns 20% or more of the voting power and value of our stock (other than any non-voting, non-convertible, non-participating preferred stock) may qualify for an 80% dividends received deduction subject to important exceptions.
Sale of Common Stock
Upon the sale or exchange of common stock, a US Holder generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) such US Holder's adjusted tax basis in the common stock. Such capital gain or loss will be long-term if the US Holder's holding period is more than one year and will be short-term if the holding period is equal to or less than one year.
Market Discount
The resale of the notes may be affected by the market discount provisions of the Code. For this purpose, the market discount on a note generally will equal the amount, if any, by which the stated redemption price at maturity of the note exceeds the US Holder's adjusted tax basis in the note immediately after its acquisition (other than an acquisition at original issue). Subject to a limited exception, these provisions generally require a US Holder who acquires a note at a market discount to treat as ordinary income any gain recognized on the disposition of that note to the extent of the accrued market discount on that note at the time of maturity or disposition, unless the US Holder elects to include accrued market discount in income over the life of the note. The stated redemption price at maturity of a note is the principal amount of such note.
This election to include market discount in income over the life of the note, once made, applies to all market discount obligations acquired on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. In general, market discount will be treated as accruing on a straight-line basis over the remaining term of the note at the time of acquisition, or, at the election of the US Holder, under a constant yield method. If a constant yield election is made, it will apply only to the note with respect to which it is made, and may not be revoked. A US Holder who acquires a note at a market discount and who does not elect to include accrued market discount in income over the life of the note may be required to defer the deduction of all or a portion of the interest on any indebtedness incurred or maintained to purchase or carry the note until maturity or until the note is disposed of in a taxable transaction. If a US Holder acquires a note with market discount and receives common stock upon conversion of the note, the amount of accrued market discount not previously included in income with respect to the converted note through the date of conversion will be treated as ordinary income when the holder disposes of the common stock.
Amortizable Premium
A US Holder who purchases a note at a premium over its stated principal amount, plus accrued interest, generally may elect to amortize that premium from the purchase date to the note's maturity date under a constant-yield method that reflects compounding based on the note's payment period. Amortizable premium, however, will not include any premium attributable to a note's conversion feature. The premium attributable to the conversion feature is the excess, if any, of the note's purchase price over what the note's fair market value would be if there were no conversion feature.
Amortized premium is treated as an offset to interest income on the acquired note and not as a separate deduction. The election to amortize premium on a constant yield method, once made, applies
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to all debt obligations held or subsequently acquired by the electing US Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS.
Non-US Holders
The following discussion is a summary of the principal US federal income and estate tax consequences resulting from the ownership of the notes or common stock by Non-US Holders.
Special rules may apply to certain Non-US Holders such as "controlled foreign corporations," "passive foreign investment companies," "foreign personal holding companies," corporations that accumulate earnings to avoid federal income tax, or in certain circumstances, United States expatriates. Such Non-US Holders should consult their own tax advisors to determine the US federal, state, local and other tax consequences that may be relevant to them.
Payment of Interest
Subject to the discussion below of backup withholding, interest paid on the notes to a Non-US Holder generally will not be subject to US federal income tax if:
(1)
such interest is not effectively connected with the conduct of a trade or business within the United States by such Non-US Holder and applicable certification requirements are met;

(2)
the Non-US Holder does not actually or constructively own 10% or more of the total voting power of all classes of our stock entitled to vote within the meaning of Section 871(h)(3) of the Code;

(3)
the Non-US Holder is not a controlled foreign corporation that is related to us through stock ownership (for this purpose, the holder of notes would be deemed to own constructively the common stock into which it could be converted);

(4)
the Non-US Holder, under penalty of perjury, certifies that he, she or it is not a US person (as defined in Section 7701(a)(3) of the Code) and provides his, her or its name and address; and

(5)
the Non-US Holder is not a bank receiving interest on the notes pursuant to a loan agreement entered into in the ordinary course of its trade or business.
If certain requirements are satisfied, the certification described in item 4 above may be provided by a securities clearing organization, a bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business. In addition, the certification described in clause 4 above may also be provided by a qualified intermediary on behalf of one or more beneficial owners (or other intermediaries), provided that such intermediary has entered into a withholding agreement with the IRS and certain other conditions are met.
With respect to foreign partnership and certain foreign trusts, Treasury Regulations require such entities to provide additional documentation which (i) certifies that the individual partners, beneficiaries, or owners of the partnership or trust are not US Holders, and (ii) provides the names and addresses of the individual partners, beneficiaries or owners.
A holder that is not exempt from tax under these rules will be subject to US federal income tax withholding at a rate of 30% on payments of interest, unless the interest is effectively connected with the conduct of a US trade or business of the holder or a lower treaty rate applies and, in either case, the Non-US Holder provides us with proper certification as to the holder's exemption from withholding. If the interest is effectively connected to the conduct of a US trade or business of the Non-US Holder, it will be subject to the US federal income tax on net income that applies to US persons generally. In addition, with respect to corporate holders and under certain circumstances, a Non-US Holder may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of earnings and profits for the taxable year, subject to adjustments, that are effectively connected with the US trade or business. For this purpose, interest will be included in the earnings and profits of such
49

foreign corporation. Non-US Holders should consult applicable income tax treaties, which may provide different rules.
Sale, Exchange or Redemption
Subject to the discussion below on backup withholding, a Non-US Holder generally will not be subject to US federal income tax or withholding on the gain realized on the sale, exchange or redemption of a note, or the sale or exchange of common stock, unless:
(1)
the gain is effectively connected with the conduct of a trade or business within the United States by such Non-US Holder;

(2)
in the case of an individual Non-US Holder, such holder is present in the United States for 183 days or more in the year of such sale, exchange or redemption and certain other requirements are met; or

(3)
the Non-US Holder is subject to tax pursuant to the provisions of US tax law applicable to certain US expatriates.
Conversion of the Notes
A Non-US Holder generally will not be subject to US federal income tax on the conversion of a note into shares of common stock. To the extent a Non-US Holder receives cash in lieu of a fractional share on conversion, such cash may give rise to gain that would be subject to the rules described below with respect to the sale or exchange of a note or common stock.
Dividends
Subject to the discussion below on backup withholding, dividends, if any, paid on the common stock to a Non-US Holder that are not treated as effectively connected to a trade or business carried on by the Non-US Holder in the United States generally will be subject to a 30% US federal withholding tax, subject to reduction for Non-US Holders eligible for the benefits of certain income tax treaties. Dividends for this purpose may include stock distributions treated as deemed dividends as discussed in "US Holders—Constructive Dividends on Notes" above. A Non-US Holder who wishes to claim the benefits of an applicable tax treaty will be required to satisfy certain certification and other requirements.
Except to the extent otherwise provided under an applicable tax treaty, a Non-US Holder generally will be taxed in the same manner as a US Holder on dividends paid (or deemed paid) that are effectively connected with the conduct of a trade or business in the United States by the Non-US Holder (and if required by an applicable tax treaty, is attributable to a permanent establishment maintained in the United States). Certain certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. In addition, if such Non-US Holder is a foreign corporation, it may also be subject to a US branch profits tax on such effectively connected income at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
US Federal Estate Tax
A note held by an individual who at the time of death is not a citizen or resident of the United States (as specially defined for US federal estate tax purposes) will not be subject to US federal estate tax if the individual did not actually or constructively own 10% or more of the total combined voting power of all classes of our stock and, at the time of the individual's death, payments with respect to such note would not have been effectively connected with the conduct by such individual of a trade or business in the United States. However, common stock held by an individual who at the time of death is not a citizen or resident of the United States (as specially defined for US federal estate tax purposes)
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will be included in such individual's estate for US federal estate tax purposes, and the rate of tax that applies thereto may be reduced or eliminated if an applicable estate tax treaty otherwise applies.
Backup Withholding and Information Reporting
US Holders
A US Holder of notes or common stock may be subject to "backup withholding" with respect to certain "reportable payments," including interest payments, dividend payments and, under certain circumstances, principal payments on the notes and certain other consideration received upon the call, exchange, redemption or conversion of a note. These backup withholding rules apply if the US Holder, among other things, (i) fails to furnish a social security number or other taxpayer identification number ("TIN") certified under penalties of perjury within a reasonable time after the request therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly interest or dividends or (iv) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN furnished is the correct number and that such US Holder is not subject to backup withholding. A US Holder who does not provide us with its correct TIN may also be subject to penalties imposed by the IRS. Any amount withheld from a payment to a holder under the backup withholding rules is creditable against the holder's federal income tax liability. Backup withholding will not apply, however, with respect to payments made to certain US Holders, including corporations and tax-exempt organizations, provided their exemption from backup withholding is properly established. We will report to US Holders of notes and common stock and to the IRS the amount of any "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to such payments.
Non-US Holders
We must report annually to the IRS and to each Non-US Holder the amount of any dividends paid on our common stock or interest paid on the notes to, and tax withheld with respect to, such holder, regardless of whether any tax was actually withheld on such payments. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the Non-US Holder resides or is incorporated.
Under current Treasury Regulations, backup withholding and information reporting will not apply to payments of interest or principal of the notes by us or our agent to a Non-US Holder if the Non-US Holder certifies as to its Non-US Holder status under penalties of perjury or otherwise establishes an exemption (provided that neither we nor our agent has actual knowledge that the holder is a US person or that the conditions of any other exemptions are not in fact satisfied). The payment of the proceeds on the disposition of notes or share of common stock to or through the US office of a US or foreign broker will be subject to information reporting and backup withholding unless the owner provides the certification described above or otherwise establishes an exemption. The proceeds of the disposition by a Non-US Holder of notes or shares of common stock effected outside the United States to or through a foreign office of a broker generally will not be subject to backup withholding or information reporting. However, if such broker is, for US federal income tax purposes, a US person, a controlled foreign corporation, a foreign person that derives 50% or more of its gross income from all sources for certain periods from activities that are effectively connected with a US trade or business, a foreign partnership in which one or more US persons, in the aggregate, own more than 50% of the income or capital interests in the partnership or a foreign partnership that is engaged in a trade or business in the United States, information reporting requirements, but not backup withholding, will apply unless such broker has documentary evidence in its files of the holder's Non-US status and has no actual knowledge (or reason to know) to the contrary or unless the holder otherwise establishes an exemption.

SELLING SECURITYHOLDERS
We originally issued the notes in a private placement that initially closed on June 19, 2002. The initial purchasers of the notes have advised us that the notes were resold in transactions exempt from the registration requirements of the Securities Act to "qualified institutional buyers," as defined in Rule 144A of the Securities Act. Selling securityholders may offer and sell the notes and/or shares of common stock issuable upon conversion of the notes pursuant to this prospectus.
The following table sets forth information as of �� , 2002 about the principal amount of notes and the underlying common stock beneficially owned by each selling securityholder that may be offered using this prospectus.
Name and Address of Selling Securityholder
Principal Amount of Notes Beneficially Owned That May be Sold Percentage of Notes Outstanding Number of Shares of Common Stock That May be Sold(1) Percentage of Common Stock Outstanding(2)
Unnamed holders of notes or any future transferees, pledges, donees or successors of or from any such unnamed holder(3) $ 70,000,000 100% 9,641,870
Total $ 70,000,000 100% 9,641,870
*
Less than 1%.

(1)
Assumes conversion of all of the holder's notes at a conversion rate of 137.741 shares of common stock per $1,000 principal amount of the notes. However, this conversion rate will be subject to adjustment as described under "Description of Notes—Conversion Rights." As a result, the amount of common stock issuable upon conversion of the notes may increase or decrease in the future.

(2)
Calculated based on shares of common stock outstanding as of , 2002. In calculating this amount, we treated as outstanding that number of shares of common stock issuable upon conversion of all of a particular holder's notes. However, we did not assume the conversion of any other holder's notes.

(3)
Information about other selling securityholders will be set forth in prospectus supplements or amendments to this prospectus, if required.
We prepared this table based on the information supplied to us by the selling securityholders named in the table. Unless otherwise disclosed in the footnotes to the table, no selling securityholder has indicated that it has held any position or office or had any other material relationship with us or our affiliates during the past three years. The selling securityholders listed in the above table may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some of all of their notes since the date as of which the information is presented in the above table. Information about the selling securityholders may change over time. Any changed information supplied to us will be set forth in prospectus supplements or amendments to this prospectus.
Because the selling securityholders may offer all of some of their notes or the underlying common stock from time to time, we cannot estimate the amount of the notes or the underlying common stock that will be held by the selling securityholders upon the termination of any particular offering. See "Plan of Distribution."

PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and the underlying common stock offered by this prospectus. The notes and the underlying common stock may be sold from time to time to purchasers:
•
directly by the selling securityholders; or

•
through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions; or

•
commissions from the selling securityholders or the purchasers of the notes and underlying common stock.
The selling securityholders and any such broker-dealers or agents who participate in the distribution of the notes and the underlying common stock may be deemed to be "underwriters." As a result, any profits on the sale of the underlying common stock by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders may be subject to statutory liabilities including, but not limited to, those of Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
If the notes and the underlying common stock are sold through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions.
The notes and the underlying common stock may be sold in one or more transactions at:
•
fixed prices;

•
prevailing market prices at the time of sale;

•
varying prices determined at the time of sale; or

•
negotiated prices.
These sales may be effected in transactions:
•
on any national securities exchange or quotation service on which the notes and underlying common stock may be listed or quoted at the time of the sale, including the New York Stock Exchange in the case of the common stock;

•
in the over-the-counter market;

•
in transactions otherwise than on such exchanges or services or in the over-the-counter market; or

•
through the writing of options.
These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the transaction.
In connection with the sales of the notes and the underlying common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the notes and the underlying common stock in the course of hedging their positions. The selling securityholders may also sell the notes and the underlying common stock short and deliver notes and the underlying common stock to close out short positions, or loan or pledge notes and the underlying common stock to broker-dealers that, in turn, may sell the notes and the underlying common stock.
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To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the notes and the underlying common stock by the selling securityholders. Selling securityholders may decide not to sell all or a portion of the notes and the underlying common stock offered by them pursuant to this prospectus or may decide not to sell notes or the underlying common stock under this prospectus. In addition, any selling securityholder may transfer, devise or give the notes and the underlying common stock by other means not described in this prospectus. Any notes or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act, or Regulation S under the Securities Act, may be sold under Rule 144 or Rule 144A or Regulation S rather than pursuant to this prospectus.
Our common stock is listed on the New York Stock Exchange under the trading symbol "LRW." We do not intend to apply for listing of the notes on any securities exchange or for quotation through any automated quotation system. The notes originally issued in the private placement are eligible for trading on the PORTAL Market. However, notes sold pursuant to this prospectus will no longer be eligible for trading on the PORTAL Market. Accordingly, no assurance can be given as to the development of liquidity or any trading market for the Company's Preferred Stocknotes.
The selling securityholders and management estimatedany other persons participating in the valuedistribution of the notes or underlying common stock will be subject to the Securities Exchange Act. The Securities Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the underlying common stock by the selling securityholders and any such other person. In addition, Regulation M of the Securities Exchange Act may restrict the ability of any person engaged in the distribution of the notes and the underlying common stock to engage in market-making activities with respect to the particular notes and underlying common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the notes and the underlying common stock and the ability to engage in market-making activities with respect to the notes and the underlying common stock.
Under the registration rights agreement that has been filed as an exhibit to this registration statement, we agreed to use our reasonable best efforts to keep the registration statement of which this prospectus is a part effective until the earliest of:
•
two years after the original issuance of the notes;

•
the date when the holders of the notes and the common stock issuable upon conversion of the notes are able to sell all such securities immediately without restriction pursuant to the volume limitation provisions of Rule 144 under the Securities Act; and

•
the date when all of the notes and the common stock into which the notes are convertible are registered under the shelf registration statement and disposed of in accordance with the shelf registration statement.
We are permitted to prohibit offers and sales of securities pursuant to this prospectus under certain circumstances and subject to certain conditions for a period not to exceed 45 days in the aggregate in any three-month period or 90 days in the aggregate in any 360-day month period. During the time periods when the use of this prospectus is suspended, each selling securityholder has agreed not to sell notes or shares of common stock issuable upon conversion of the notes. We also agreed to pay liquidated damages to certain holders of the notes and shares of common stock issuable upon conversion of the notes if the prospectus is unavailable for periods in excess of those permitted.
Under the registration rights agreement, we and the selling securityholders will each indemnify the other against certain liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection with these liabilities.
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We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the notes and the underlying common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents.

LEGAL MATTERS
Preston Gates & Ellis LLP, Seattle, Washington, has issued an opinion about the validity of the notes covered by this prospectus and the shares of common stock issuable upon conversion of the notes.

CHANGE IN ACCOUNTANTS
On May 3, 2002, we dismissed Arthur Andersen LLP ("Andersen") as our independent auditors and appointed PricewaterhouseCoopers LLP to serve as our new independent auditors. This decision was approved by our board of directors. The report of Andersen on the consolidated financial statements of Labor Ready, Inc. incorporated by reference in this prospectus contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principle.
The report of Andersen incorporated by reference in this prospectus was previously issued by Andersen on February 4, 2002. We have not been able to obtain, after reasonable efforts, a re-issued report from Andersen. Andersen has not consented to the inclusion of its report in this prospectus, and we have dispensed with the requirement to file their consent in reliance upon Rule 437a of the Securities Act. Because Andersen has not consented to the inclusion of its report in this prospectus, you will not be able to recover against Andersen under Section 11 of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Andersen or any omissions to state a material fact required to be stated therein. We refer you to "Risk Factors—Risks Related to Our Business—Our dismissal of Arthur Andersen LLP together with Andersen's uncertain future could impair our ability to make timely SEC filings" for a discussion of the risks associated with our inability to obtain Andersen's written consent.
In connection with Andersen's audits of our consolidated financial statements as of December 31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and 1999 contained in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2001 incorporated by reference in this prospectus, there were no disagreements with Andersen and us on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Andersen would have caused them to make reference thereto in their reports on the financial statements for such years.

INDEPENDENT PUBLIC ACCOUNTANTS
The audited consolidated financial statements as of and for each of the three years in the period ended December 31, 2001 incorporated by reference in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing therein.

WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. Our SEC filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, and obtain copies of our filings at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. We "incorporate by reference" into this
55

prospectus certain information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. Any information that we file subsequently with the SEC prior to the completion of the distribution of the notes will automatically update this prospectus and any information included directly in this prospectus updates and supersedes any information previously filed with the SEC.

INCORPORATION BY REFERENCE
The information incorporated by reference, as updated, is an important part of this prospectus. We incorporate by reference the following documents:
•
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2001;

•
Our Quarterly Report on Form 10-Q for the quarter ended March 29, 2002 and our Quarterly Report on Form 10-Q for the quarter ended June 28, 2002 (provided that the information in Exhibits 99.1 and 99.2 to our Quarterly Report on Form 10-Q for the quarter ended June 28, 2002 is not incorporated in, and not deemed part of, this prospectus);

•
Proxy Statement on Schedule 14A for our annual meeting of shareholders held on June 19, 2002 (biographical information relating to our directors and the sections entitled "Executive Compensation—Summary Compensation Table," "—Employment Agreements" and "Certain Relationships and Related Transactions" only);

•
Our Current Report on Form 8-K filed with the SEC on May 7, 2002; and

•
all documents that we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act after the date of this prospectus and prior to the completion of this offering.
You may request a copy of these canceled
sharesfilings (other than exhibits, unless that exhibit is specifically incorporated by reference into that filing) at no cost, by writing to or telephoning us at our address and telephone number set forth elsewhere in this prospectus.
Any statement contained in a document incorporated by reference, or deemed to be insignificant.incorporated by reference, in this prospectus shall be deemed to be modified and superseded for purposes of this prospectus to the extent that a statement contained herein or in any subsequently filed document which also is incorporated by reference in this prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Statements contained in this prospectus as to the contents of any contract or other document referred to in this prospectus do not purport to be complete, and where reference is made to the particular provisions of such contract or other document, such provisions are qualified in all respects by reference to all of the provisions of such contract or other document.

EXHIBIT 1

FORM OF NOTICE TO TRANSFER PURSUANT TO REGISTRATION STATEMENT

Labor Ready, Inc.
1015 A Preferred Stock dividend in theStreet
Tacoma, Washington 98402
Attention:
Re:
Labor Ready, Inc. (the "Company")
6.25% Convertible Subordinated Notes due 2007 (the "Notes")
Dear Sirs:
Please be advised that has transferred $ aggregate principal amount of $42,704 was accrued December 31,
1994 and 1995, and paid in January 1995 and 1996. At March 31, 1996, the accrued
Preferred Stock dividend was $10,676.

9. COMMON STOCK
In 1995, the Board of Directors granted options to purchase 54,900above-referenced Notes or shares of the Company's Common Stock, at a price equal to 85%issued on conversion of the Notes, pursuant to the Registration Statement on Form S-3 (File No. ) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the Securities Act, as amended, have been satisfied with respect to the transfer described above and that the above-named beneficial owner of the Notes or Common Stock's bid
price atStock is named as a selling securityholder in the dateProspectus dated , 2002 or in amendments or supplements thereto, and that the aggregate principal amount of grant ($5.45 to $13.60 per share) and in February 1996, the BoardNotes or number of Directors granted additional options to purchase 50,000 shares of Common Stock undertransferred are [all] [a portion] of the same terms previously described. These options are 20%
vested on the date of grant and the remainder will vest evenly over a four year
period beginning one year from the date of grant and generally expire five years
from the date of grant.

F-14

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMON STOCK (CONTINUED)
In November 1995, the Board of Directors declared a three-for-twoNotes or Common Stock split. This Common Stock split was effectedlisted in the form of three shares of
Common Stock issued for every two shares of Common Stock outstanding,such Prospectus as of the
date of declaration. All applicable share and per share data have been adjusted
for the stock split.

In 1994, the Board of Directors granted options to purchase 226,500 shares
of the Company's Common Stock. Of these options, 46,500 are exercisable at 85%
of the Common Stock's bid price at the date of grant ($2.27 to $4.82 per share).
The options will vest evenly over a four year period beginning one year from the
date of grant and generally expire five years from the date of grant. The
remaining 180,000 of stock options outstanding at December 31, 1994 are
exercisable at prices atamended or above the Common Stock's market price at the date of
grant ($1.83 to $5.00 per share). These options were fully vested upon grant and
expire two years from the date of grant.

On September 30, 1994 and October 31, 1994, the Company issued 287,700 and
424,740 shares of Common Stock, respectively, for $1.67 per share in a private
placement. Each share of Common Stock issued included a detachable warrant for
one share of Common Stock. All of these warrants were exercised in March 1995 at
a price of $2.50 per share.

In connection with the issuance of $10,000,000 of subordinated debt in 1995
(see Note 5), the Company issued warrants to purchase 742,368 shares of Common
Stock at an exercise price of $11.67 per share. The warrants expire in October
2002.

10. INCOME TAXES
Temporary differences which gave rise to the deferred tax assets
(liabilities) consisted of the following at December 31, 1994 and 1995:

DECEMBER 31,
------------------------
1994 1995
----------- -----------

Allowance for doubtful accounts............................................... $ 143,635 $ 323,990
Prepaid expenses.............................................................. (114,277) (161,385)
Workers' compensation credits receivable...................................... (125,050) (360,931)
Workers' compensation claims.................................................. 153,475 721,895
Net operating loss carryforwards.............................................. 146,653 126,985
Vacation accrual.............................................................. -- 20,515
Foreign net operating loss carryforwards...................................... -- 75,166
Other, net.................................................................... 8,520 (30,828)
----------- -----------
Total deferred tax assets, net................................................ 212,956 715,407
Less non-current deferred tax assets, net..................................... 94,366 16,477
----------- -----------
Current deferred tax assets, net.............................................. $ 118,590 $ 698,930
----------- -----------
----------- -----------

The Company has assessed its past earnings history and trends, budgeted
sales, expiration dates of loss carryforwards, and its ability to implement tax
planning strategies which are designed to accelerate or increase taxable income.
Based on the results of this analysis, no valuation allowance has been
established as management believes that it is more likely than not that the
deferred tax asset will be realized.

F-15

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES (CONTINUED)
As of December 31, 1995, the Company has net operating loss carryforwards
totaling $340,444, limited to use of $26,188 per year, the majority of which
expire in 2006.

The provision (benefit) for income taxes consists of:

DECEMBER 31,
------------------------------------
1993 1994 1995
--------- ----------- ------------

Current:
Federal................................................................... $ -- $ 506,919 $ 1,419,728
State..................................................................... 9,366 89,081 234,436
--------- ----------- ------------
Total current............................................................... 9,366 596,000 1,654,164
--------- ----------- ------------
Deferred:
Federal................................................................... 47,044 (221,074) (482,051)
State..................................................................... -- (38,926) (20,400)
--------- ----------- ------------
Total deferred.............................................................. 47,044 (260,000) (502,451)
--------- ----------- ------------
Total taxes on income....................................................... $ 56,410 $ 336,000 $ 1,151,713
--------- ----------- ------------
--------- ----------- ------------

A reconciliation between taxes computed at the United States federal
statutory tax rate, and the consolidated effective tax rate is as follows:

DECEMBER 31,
----------------------------------------------------------------------
1995
1993 1994 -----------------------
--------------------- ---------------------- %
AMOUNT % AMOUNT % AMOUNT --
---------- --- ----------- --- ------------

Income tax expense based on statutory rate.............. $ 110,642 34 $ 403,853 34 $ 1,092,597 34
Increase (decrease) resulting from:
State income taxes, net of federal benefit............ 71,268 6 106,046 3
Change in valuation allowance......................... (157,128) (13) --
Utilization of net operating losses not previously
benefited.............................................. (58,794) (18) -- (46,930) (1)
Other, net.............................................. 4,562 1 18,007 1 --
-- -- --
---------- ----------- ------------
Total taxes on income................................... $ 56,410 17 $ 336,000 28 $ 1,151,713 36
-- -- --
-- -- --
---------- ----------- ------------
---------- ----------- ------------

11. COMMITMENTS AND CONTINGENCIES
The Company rents certain properties for temporary labor dispatch
operations. The leases generally provide for termination on 30 days notice and
upon payment of three months rent. Certain of these leases have 1 year minimum
terms and require additional payments for taxes, insurance, maintenance and
renewal options. Lease commitments for 1996 at December 31, 1995 total $358,000.
Lease expenses for the years ended December 31, 1993, 1994 and 1995 and the
three months ended March 31, 1995 and 1996 totaled $162,000, $380,000,
$1,113,000, $198,000, and $396,000, respectively.

The Company is, from time to time, involved in various lawsuits arising in
the ordinary course of business which will not, in the opinion of management,
have a material effect on the Company's results of operations.

F-16

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Board of Directors entered into an executive employment agreement with a
key officer of the Company. The agreement is for a period of time commencing on
October 31, 1995, and ending December 31, 1998, and which contains certain
restrictions on the covered employee. Officer compensation under this agreement
has been set by the Board at $375,000 per year and shall be increased annually
on the first of each calendar year to 110% of the preceding years' salary.

12. RETIREMENT PLAN
Effective October 1, 1994, the Company established a 401(k) savings plan for
qualifying employees. Employee contributions to the 401(k) plan are matched by
the Company $0.25 for every $1 up to the legal maximum eligible employee's gross
earnings. Employees are eligible the calendar quarter following the completion
of one year of service and are fully vested in the 401(k) plan after five years
of service. The amount charged to expense under the 401(k) plan totaled $7,800
and $48,150 for the years ended December 31, 1994 and 1995.

13. VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts activity was as follows:

DECEMBER 31,
-------------------------
1994 1995
----------- ------------

Balance at beginning of year................................................. $ 149,361 $ 365,927
Charged to expense........................................................... 341,799 1,084,526
Write-offs, net of recoveries................................................ (125,233) (581,846)
----------- ------------
Balance at end of year....................................................... $ 365,927 $ 868,607
----------- ------------
----------- ------------

14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial instruments
were as follows:

DECEMBER 31,
------------------------------------------------------
1994 1995
-------------------------- --------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------

Cash and cash equivalents................................ $ 603,977 $ 603,977 $ 5,359,113 $ 5,359,113
Short-term borrowings.................................... 3,160,580 3,160,580 1,591,206 1,591,206
Long-term debt........................................... 322,541 304,248 993,054 1,012,248
Subordinated debt........................................ -- -- 8,740,623 8,709,000
Warrants................................................. -- -- -- 1,290,000

The following methods and assumptions were used by the Company in estimating
fair values for financial instruments:

Cash and cash equivalents: The carrying amount reported in the balance
sheets for cash and cash equivalents approximates fair value.

Short-term borrowings: The carrying amounts of the short-term borrowings
approximates fair value due to the short-term maturity of the debt.

F-17

LABOR READY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Long-term debt: The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same maturities.

Subordinated debt: The fair value of the subordinated debt, representing the
amount at which the debt could be exchanged on the open market, are determined
based on the Company's current incremental borrowing rate for similar types of
borrowing arrangements.

Warrants: The fair value of the warrants is based on the difference between
the face value of the related debt and the present value of the future stream of
debt payments.

F-18

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

PAGE
-----

Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 11
Price Range of Common Stock and Dividend
Policy........................................ 11
Capitalization................................. 12
Selected Consolidated Financial Information.... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 14
Business....................................... 21
Management..................................... 30
Principal Shareholders......................... 32
Certain Transactions........................... 33
Description of Capital Stock................... 34
Underwriting................................... 36
Legal Matters.................................. 37
Experts........................................ 37
Available Information.......................... 37
Incorporation of Certain Documents By
Reference..................................... 37
Index to Consolidated Financial Statements..... F-1

1,000,000 SHARES

[LOGO]

COMMON STOCK

---------------------

PROSPECTUS

---------------------

VAN KASPER & COMPANY

JUNE , 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
supplemented opposite such owner's name.
Very truly yours,
(Name)
By:
(Authorized Signature)
Dated:
57

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs andvarious expenses other than
underwriting discounts and commissions, payable by the Companyto be incurred in connection with the sale and distribution of Common Stockthe securities being registered (allhereby, all of which will be borne by the Registrant (except expenses incurred by the Selling Securityholders for brokerage fees, selling commissions and expenses incurred by the Selling Securityholders for legal services). All amounts shown are estimatedestimates except the SEC Registration Fee, the Nasdaq Listing FeeSecurities and the NASD Filing Fee):

SEC Registration Fee........................................... $ 9,716
Nasdaq Listing Fee............................................. $ 36,000
NASD Filing Fee................................................ $ 3,318
Blue Sky Qualification Fees and Expenses (including Legal
Fees)......................................................... 25,000
Transfer Agent and Registrar Fees.............................. 5,000
Legal Fees and Expenses........................................ 300,000
Printing Expenses.............................................. 100,000
Auditors' Fees and Expenses.................................... 75,000
Miscellaneous Expenses......................................... 9,966
---------
TOTAL.................................................... $ 564,000
---------
---------

- ------------------------
* To be supplied by amendment.

Exchange Commission registration fee.
Securities and Exchange Commission registration fee $ 6,440
Legal fees and expenses $ 50,000
Trustee fees and expenses $ 7,500
Accounting fees and expenses $ 15,000
Printing expenses $ 10,000
Miscellaneous fees and expenses $ 11,060
Total Expenses $ 100,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 23B.08.510
Sections 23B.08.500 through 23B.08.600 of the Revised CodeWashington Business Corporation Act authorize a court to award, or a corporation's board of Washington authorizes Washington
corporationsdirectors to indemnify theirgrant, indemnification to directors and officers and directors under certain circumstances against expenses and liabilities incurred in legal proceedings involving such persons because of their being or having been an officer or director. The Company's Articles of Incorporation and Bylaws require indemnification of the Company's officers, directors, employees and directorsagents (each, an "Indemnitee") to the fullest extent permitted by Washington law. Any amendment or repeal to our Articles of Incorporation or Bylaws may not adversely affect any right or protection of an Indemnitee with respect to any acts or omissions of such Indemnitee occurring prior to such amendment or repeal. The Company also maintains directors' and officers' liability insurance.

The Company's Bylawsinsurance, under which our directors and Articles of Incorporation provide thatofficers may be indemnified against liability they incur for serving in their capabilities as directors and officers.
Additionally, the Company shall,has entered into employment agreements (collectively, the "Employment Agreements") with Joseph P. Sambataro, Jr., Steven C. Cooper, Timothy J. Adams and Matthew J. Rodgers (collectively, the "Executives"), under the terms of which, the Company has generally agreed to procure and maintain policies of liability insurance for the fullest extent permitted by the Washington Business Corporation
Act, as amended from time to time, indemnify allprotection and benefit of directors and officers of the Company. In addition,The Employment Agreements also require the Company's Bylaws containCompany to indemnify and hold harmless each Executive for any and all loss, cost, damage and expense, including attorneys' fees and court costs incurred or sustained by Executive, arising out of the proper discharge of the Executive's duties under the Employment Agreement in good faith.
Furthermore, Section 23B.08.320 of the Washington Business Corporation Act authorizes a provision eliminating the
personalcorporation to limit a director's liability of directors to the Companycorporation or its shareholders for monetary damages arising out of a breach of fiduciary duty. Under Washington law, this
provision eliminates the liability offor acts or omissions as a director, for breach of fiduciary duty
but does not eliminate the personal liability of any director forexcept in certain circumstances involving (i) acts or omissions of a director finally adjudged to be intentional misconduct or a knowing violation of law, (ii) conduct finally adjudicated to be in violation of Section 23B.08.310 of the Washington Business Corporation Act (which section relates to unlawful distributions) or (iii) any transaction with respect to which it is finally adjudged that a director personally received a benefit in money, property or services to which the director was not legally entitled. The Company's Bylaws contain such a provision limiting a director's liability to the Company and its shareholders.
II-1

The descriptions in this item are intended as a summary only and are qualified in its entirety by reference to the Articles of Incorporation, the Bylaws, the Employment Agreements and the Washington Business Corporation Act.
ITEM 16. EXHIBITS.

EXHIBITS

EXHIBIT
NO. DESCRIPTION
- ------------------------------------------------------------------------

1.1* Exhibit Number Description
3.1 * Amended and Restated Articles of Incorporation

3.2
*
Bylaws

4.1

Indenture, between the Company and The Bank of New York, as Trustee, dated June 19, 2002 (incorporated by reference to Exhibit 4.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 2002)

4.2
*
Form of UnderwritingGlobal Security representing 6¹/4% Convertible Subordinated Note due 2007

4.3

Resale Registration Rights Agreement 5.1* between the Company and the Initial Purchasers of the Notes, dated June 13, 2002 (incorporated by reference to Exhibit 4.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 2002)

5.1
*
Opinion of Preston Gates & Ellis 23.1 ConsentLLP

12.1
*
Statement Regarding Computation of BDO Seidman, LLP
23.2* Ratios of Earnings to Fixed Charges

23.1
*
Consent of Preston Gates & Ellis (containedLLP (included in Exhibit 5.1)

24.1
*
Power of Attorney (see(included on the signature page)
27.1 Financial Data Schedule
page to this registration statement)

25.1
*
Statement of Eligibility of Trustee on Form T-1

- ------------------------
*
Filed herewith.

Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) (§ 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more that 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
II-2

(2) That, for the purpose of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4), or 497(h) under the Act shall be deemed to be a part of this Registration Statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the Act, each post-effective amendment II-1

ITEM 17. UNDERTAKINGSthat contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to provideSection 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the Underwriterssecurities offered therein, and the offering of such securities at that time shall be deemed to be the closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or Otherwise,otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
D. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDEbona fide offering thereof.

(3) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.

(4) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.

II-2
II-3

SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly authorized and has duly caused this Registration Statementregistration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tacoma, State of Washington, on this 3rd4th day of May, 1996.

LABOR READY, INC.

By /s/ GLENN A. WELSTAD

------------------------------------
Glenn A. Welstad
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

Know all men by these presents,September, 2002.
LABOR READY, INC.

By:

/s/ JOSEPH P. SAMBATARO, JR.
Joseph P. Sambataro, Jr.
Chief Executive Officer, President and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
belowof the undersigned directors and officers of Labor Ready, Inc., a Washington corporation, which is filing a Registration Statement on Form S-3 with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), hereby constitutes and appoints jointlyJoseph P. Sambataro, Jr., Steven C. Cooper and severally, Glenn A. WelstadTimothy J. Adams, and Ralph
E. Peterson, with full power to act alone,each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, and in any and all capacities, to sign and file any and all amendments (including post-effective amendments) to the Registration Statement,
and file the same,this registration statement, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting untoit being understood that said attorney-in-factattorneys-in-fact and agents, and each of them, shall have full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person and that each of the undersigned hereby ratifyingratifies and confirmingconfirms all that said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF
II-4

Pursuant to the requirements of the Securities Act of 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW ON MAY 3, 1996 BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED.

this registration statement has been signed by the following persons in the capacities on this 4th day of September, 2002:
SIGNATURE
TITLE
- ------------------------------------------------------ ---------------------------------------------------------

/s/ GLENN A. WELSTAD Chairman,

/s/ JOSEPH P. SAMBATARO, JR.
Joseph P. Sambataro, Jr. Chief Executive Officer, President and Director (Principal
------------------------------------------- Executive Officer)
Glenn A. Welstad

/s/ RALPH E. PETERSON

/s/ STEVEN C. COOPER
Steven C. Cooper

Chief Financial Officer and Executive Vice President

/s/ MARK R. BEATTY
Mark R. Beatty

Director (Principal Financial
------------------------------------------- and Accounting Officer)
Ralph

/s/ THOMAS E. Peterson

/s/ MCCHESNEY
Thomas E. McChesney

Director

/s/ GATES MCKIBBIN
Gates McKibbin

Director

/s/ CARL W. SCHAFER
Carl W. Schafer

Director

/s/ WILLIAM W. STEELE
William W. Steele

Director

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

Robert J. Sullivan

/s/ THOMAS E. MCCHESNEY
-------------------------------------------

Director
Thomas E. McChesney

/s/ RONALD L. JUNCK
------------------------------------------- Secretary
II-5

INDEX TO EXHIBITS
Exhibit Number Description
3.1 * Amended and Director
Ronald L. Junck

II-3

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------

1.1* Restated Articles of Incorporation
3.2
*
Bylaws

4.1

4.2
*
Form of UnderwritingGlobal Security representing 6¹/4% Convertible Subordinated Note due 2007

4.3

5.1
*
Opinion of Preston Gates & Ellis 23.1 ConsentLLP

12.1

Statement Regarding Computation of BDO Seidman, LLP
23.2* Ratios of Earnings to Fixed Charges

23.1
*
Consent of Preston Gates & Ellis (containedLLP (included in Exhibit 5.1)

24.1
*
Power of Attorney (see(included on the signature page)
27.1 Financial Data Schedule
page to this registration statement)

25.1
*
Statement of Eligibility of Trustee on Form T-1

- ------------------------
* To be filed by amendment.

~~Filed herewith.~~

~~II-6~~

QuickLinks
IMPORTANT NOTICE TO READERS
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
PROSPECTUS SUMMARY
Company Strategy
RISK FACTORS
RATIO OF EARNINGS TO FIXED CHARGES
USE OF PROCEEDS
BUSINESS
DESCRIPTION OF NOTES
DESCRIPTION OF CAPITAL STOCK
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
SELLING SECURITYHOLDERS
PLAN OF DISTRIBUTION
LEGAL MATTERS
CHANGE IN ACCOUNTANTS
INDEPENDENT PUBLIC ACCOUNTANTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION BY REFERENCE
FORM OF NOTICE TO TRANSFER PURSUANT TO REGISTRATION STATEMENT
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
INDEX TO EXHIBITS

Washington	7360	91-1287341 ~~(State of Incorporation~~
(State or ~~(Primary~~other jurisdiction of incorporation or organization)	(Primary Standard Industrial ~~(IRS Employer Identification Organization)~~ Classification Code Number) ~~Number)~~	(IRS Employer Identification No.)


Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee

6.25% Convertible Subordinated Notes due June 15, 2007	$70,000,000	100%	$70,000,000	$6,440

Common Stock, $0.01 par value per share	9,641,870 shares(1)	n/a	n/a	n/a

IMPORTANT NOTICE TO READERS		i
A WARNING ABOUT FORWARD-LOOKING STATEMENTS		ii
PROSPECTUS SUMMARY		1
RISK FACTORS		5
RATIO OF EARNINGS TO FIXED CHARGES		15
USE OF PROCEEDS		15
BUSINESS		16
DESCRIPTION OF NOTES		24
DESCRIPTION OF CAPITAL STOCK		43
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES		46
SELLING SECURITYHOLDERS		52
PLAN OF DISTRIBUTION		53
LEGAL MATTERS		55
CHANGE IN ACCOUNTANTS		55
INDEPENDENT PUBLIC ACCOUNTANTS		55
WHERE YOU CAN FIND MORE INFORMATION		55
INCORPORATION BY REFERENCE		56

Securities Offered		$70 million aggregate principal amount of 6.25% Convertible Subordinated Notes due June 15, 2007 and 9,641,870 shares of our Common Stock, $0.01 par value per share, issuable upon conversion of the notes.
Maturity		The notes are due on June 15, 2007, unless earlier converted or redeemed by us at our option or repurchased by us at your option.
Interest Rate		The notes bear interest at 6.25% per year. Interest will be payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2002. The initial interest payment will include accrued interest from June 19, 2002.
Conversion Rights		Holders may convert their notes into our common stock at any time prior to the close of business on the business day prior to the maturity date of the notes, unless previously redeemed or repurchased, at a conversion price of $7.26 per share (equal to a conversion rate of approximately 137.741 shares per $1,000 principal amount of notes), subject to adjustment as described under "Description of the Notes—Conversion Rights."

Provisional Redemption of Notes at Our Option		We may redeem all or a portion of the notes for cash at any time on or after June 20, 2005, at 100% of their principal amount plus accrued and unpaid interest to, but excluding, the redemption date; provided, that the current market value (as defined in this prospectus) of our common stock equals or exceeds 125% of the conversion price then in effect for at least 20 trading days in any consecutive 30 trading day period ending on the date we mail the provisional redemption notice to holders. We will therefore be required to make at least six interest payments on the notes before being able to redeem any notes. See "Description of the Notes—Provisional Redemption by Labor Ready."
Sinking Fund		None.
Change of Control Put Right		Upon a change of control of Labor Ready, each holder may require us to repurchase for cash all or a portion of its notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest thereon to, but excluding, the repurchase date. See "Description of the Notes—Repurchase at Option of Holders Upon a Change of Control."
Events of Default		If there is an event of default on the notes, the principal amount of the notes plus accrued and unpaid interest to the date of acceleration may be declared immediately due and payable subject to certain conditions set forth in the indenture. These amounts automatically become due and payable in the case of certain types of bankruptcy or insolvency events of default involving Labor Ready.
Subordination		The notes are unsecured and will be subordinated to all of our existing and future Senior Debt (as defined in this prospectus) and will be structurally subordinated to all indebtedness of our subsidiaries. As of June 28, 2002, we had $114.3 million of indebtedness outstanding that constitutes Senior Debt under the indenture (net of cross-collateralized obligations). As of June 28, 2002, except for intercompany liabilities and debt guaranteed by Labor Ready, Inc., our subsidiaries had no liabilities to which the notes would be effectively subordinated that would constitute Indebtedness under the indenture.
Use of Proceeds		All of the notes and the shares of our common stock issuable upon conversion of the notes are being sold by the selling securityholders or by their pledgees, donees, transferees or other successors in interest. We will not receive any proceeds from the sale of the notes or the shares of our common stock issuable upon conversion of the notes.

DTC Eligibility		The notes are issued in book-entry form and are represented by one or more permanent global certificates deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company in New York, New York. Beneficial interests in the notes will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for definitive securities, except in limited circumstances. See "Description of the Notes—Form, Denomination and Registration."
Registration Rights		Pursuant to a registration rights agreement, we have filed a shelf registration statement, of which this prospectus is part, with respect to the notes and the common stock issuable upon conversion of the notes. See Description of the Notes—Registration Rights."
Indenture and Trustee		We have issued the notes under an indenture, dated as of June 19, 2002, between The Bank of New York, as trustee, and us.
Trading		The notes originally issued in the private placement are eligible for trading on the PORTAL market of The Nasdaq Stock Market. However, notes sold pursuant to this prospectus will no longer be eligible for trading on the PORTAL Market. We do not intend to include the notes in any other automated interdealer quotation system or list the notes on any securities exchange. Our common stock is traded on the New York Stock Exchange under the symbol "LRW."

			At December 31,
	June 28, 2002(1)	June 29, 2001(1)	At December 31,
	June 28, 2002(1)	June 29, 2001(1)	2001	2000	1999	1998	1997
Ratio of earnings to fixed charges	—	—	3.1x	3.3x	7.9x	9.6x	8.0x

Name and Address of Selling Securityholder	Principal Amount of Notes Beneficially Owned That May be Sold		Percentage of Notes Outstanding	Number of Shares of Common Stock That May be Sold(1)
Unnamed holders of notes or any future transferees, pledges, donees or successors of or from any such unnamed holder(3)	$	70,000,000	100%	9,641,870

Total	$	70,000,000	100%	9,641,870

Securities and Exchange Commission registration fee	$	6,440
Legal fees and expenses	$	50,000
Trustee fees and expenses	$	7,500
Accounting fees and expenses	$	15,000
Printing expenses	$	10,000
Miscellaneous fees and expenses	$	11,060

Total Expenses	$	100,000

Exhibit Number		Description
3.1	*	Amended and Restated Articles of Incorporation
3.2	*	Bylaws
4.1		Indenture, between the Company and The Bank of New York, as Trustee, dated June 19, 2002 (incorporated by reference to Exhibit 4.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 2002)
4.2	*	Form of ~~Underwriting~~Global Security representing 6¹/4% Convertible Subordinated Note due 2007
4.3		Resale Registration Rights Agreement 5.1* between the Company and the Initial Purchasers of the Notes, dated June 13, 2002 (incorporated by reference to Exhibit 4.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 2002)
5.1	*	Opinion of Preston Gates & Ellis ~~23.1 Consent~~LLP
12.1	*	Statement Regarding Computation of BDO Seidman, LLP 23.2* Ratios of Earnings to Fixed Charges
23.1	*	Consent of Preston Gates & Ellis ~~(contained~~LLP (included in Exhibit 5.1)
24.1	*	Power of Attorney ~~(see~~(included on the signature ~~page) 27.1 Financial Data Schedule~~ page to this registration statement)
25.1	*	Statement of Eligibility of Trustee on Form T-1

SIGNATURE		TITLE ~~- ------------------------------------------------------ ---------------------------------------------------------~~ ~~/s/ GLENN A. WELSTAD Chairman,~~

/s/ JOSEPH P. SAMBATARO, JR. Joseph P. Sambataro, Jr.		Chief Executive Officer, President and Director ~~(Principal ------------------------------------------- Executive Officer) Glenn A. Welstad /s/ RALPH E. PETERSON~~
/s/ STEVEN C. COOPER Steven C. Cooper		Chief Financial Officer and Executive Vice President
/s/ MARK R. BEATTY Mark R. Beatty		Director ~~(Principal Financial ------------------------------------------- and Accounting Officer) Ralph~~
/s/ THOMAS E. ~~Peterson /s/~~ MCCHESNEY Thomas E. McChesney		Director
/s/ GATES MCKIBBIN Gates McKibbin		Director
/s/ CARL W. SCHAFER Carl W. Schafer		Director
/s/ WILLIAM W. STEELE William W. Steele		Director
/s/ ROBERT J. SULLIVAN ~~------------------------------------------- Director~~ Robert J. Sullivan ~~/s/ THOMAS E. MCCHESNEY -------------------------------------------~~		Director ~~Thomas E. McChesney /s/ RONALD L. JUNCK ------------------------------------------- Secretary~~