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

 
FORM 11-K
 
ý   ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended: December 31, 2002
 
OR
 
o   TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number: 001- 14543

 
A.  Full title of the plan and the address of the plan, if different from that of the issuer named below:
 
LABOR READY, INC. 401(k) Plan
 
B.  Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
 
Labor Ready, Inc
1015 A Street
Tacoma, Washington 98402

 
REQUIRED INFORMATION
 
Labor Ready, Inc. 401(k) Plan (the Plan) is subject to the Employee Retirement Income Security Act of 1974 (ERISA).  Therefore, in lieu of the requirements of Items 1-3 of Form 11-K, the following financial statements and schedules have been prepared in accordance with the financial reporting requirements of ERISA.
 
The following financial statements, schedules and exhibits are filed as a part of the Annual Report on Form 11-K.

Independent Auditor’s Report	
 	
Financial Statements	
 	
Statements of Net Assets Available for Benefits	
 	
Statement of Changes in Net Assets Available for Benefits	
 	
Notes to Financial Statements	
 	
Supplemental Schedule	
 	
Schedule of Assets Held for Investment Purposes	
 	
Signatures	
 	
Exhibits	

 
Independent Auditor’s Report
 
To the Employee Benefits Committee of the
Labor Ready, Inc. 401(k) Plan
 Tacoma, Washington
 
We have audited the accompanying statements of net assets available for benefits of Labor Ready, Inc. 401(k) Plan as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002.  These financial statements are the responsibility of the Plan’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  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 financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Labor Ready, Inc. 401(k) Plan as of December 31, 2002 and 2001, and the changes in net assets available for benefits for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
 
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental schedule of assets held for investment purposes as of December 31, 2002 is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the United States Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 .  The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/  McGladrey & Pullen, LLP	 	
 	 	
McGladrey & Pullen, LLP	 	
Tacoma, Washington	 	
May 2, 2003	 	
 
1

 
Statements of Net Assets Available for Benefits
 
Labor Ready, Inc. 401(k) Plan
December 31, 2002 and 2001

 	 	2002	 	2001	 	
 	 	 	 	 	 	
Assets	 	 	 	 	 	
Investments:	 	 	 	 	 	
ING Fixed Account	 	$	732,648	 	$	645,976	 	
ING Money Market Fund	 	66,485	 	47,393	 	
ING Strategic Allocation Growth Fund	 	42,539	 	28,590	 	
ING Strategic Allocation Balance Fund	 	42,618	 	39,179	 	
ING Strategic Allocation Income Fund	 	62,134	 	34,647	 	
ING Balanced Fund	 	63,560	 	54,286	 	
ING Index Plus Large Cap Fund	 	304,715	 	328,347	 	
ING Small Company Fund	 	117,143	 	96,173	 	
ING International Fund	 	223,103	 	219,073	 	
AIM Premier Equity Fund	 	290,982	 	366,208	 	
Invesco Growth Fund	 	220,612	 	313,449	 	
Baron Growth Fund	 	258,401	 	193,653	 	
Oppenheimer Main Street Growth & Income Fund	 	207,464	 	155,782	 	
Templeton Growth Fund	 	146,807	 	82,429	 	
Other miscellaneous mutual funds	 	115,976	 	—	 	
Participant loans	 	146,249	 	186,305	 	
Labor Ready, Inc. Common Stock Fund	 	1,283,295	 	1,083,956	 	
Total investments	 	4,324,731	 	3,875,446	 	
 	 	 	 	 	 	
Contributions receivable:	 	 	 	 	 	
Participant	 	—	 	58,293	 	
Employer - employer stock	 	283,779	 	278,428	 	
Employer - cash	 	24,470	 	—	 	
Total contributions receivable	 	308,249	 	336,721	 	
 	 	 	 	 	 	
Total assets	 	4,632,980	 	4,212,167	 	
 	 	 	 	 	 	
Liabilities	 	—	 	—	 	
 	 	 	 	 	 	
Net assets available for benefits	 	$	4,632,980	 	$	4,212,167	 	
 
See notes to financial statements.
 
2

 
 
Statement of Changes in Net Assets Available for Benefits
 
Labor Ready, Inc. 401(k) Plan
Year Ended December 31, 2002

Additions to Net Assets	 	 	 	
Investment income (loss):	 	 	 	
Net depreciation in fair value of investments	 	$	(187,820	)	
Dividend and interest income	 	52,057	 	
Total investment income (loss)	 	(135,763	)	
 	 	 	 	
Contributions:	 	 	 	
Participant	 	1,242,293	 	
Employer	 	294,831	 	
Total contributions	 	1,537,124	 	
 	 	 	 	
Total additions to net assets	 	1,401,361	 	
 	 	 	 	
Deductions from Net Assets	 	 	 	
Benefits paid to participants	 	977,323	 	
Administrative fees	 	3,225	 	
Total deductions from net assets	 	980,548	 	
 	 	 	 	
Net increase	 	420,813	 	
 	 	 	 	
Net Assets Available for Benefits	 	 	 	
Beginning of year	 	4,212,167	 	
 	 	 	 	
End of year	 	$	4,632,980	 	
 
See notes to financial statements.
 
3

 
Notes to Financial Statements
 
Labor Ready, Inc. 401(k) Plan
December 31, 2002 and 2001
 
Note 1 - Description of Plan
 
The following description of Labor Ready, Inc. 401(k) Plan (the Plan) provides only general information.  Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
 
General
 
The Plan is a defined contribution plan established by Labor Ready, Inc. (the Company) under the provisions of Section 401(a) of the Internal Revenue Code (IRC), which includes a qualified cash or deferred arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company.  All employees of the Company who are 21 years of age or older and who have completed six months of service are eligible to participate.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
 
Contributions and Participant Investment Options
 
Eligible employees may contribute to the Plan up to 15% of compensation, as defined by the Plan, subject to certain limitations under the IRC.  Participants may also contribute amounts representing distributions from other qualified defined contribution plans.  During 2002, the Company provided a discretionary matching contribution equal to 25% of each participant’s deferral contribution.  Participants must be employed as of the end of the year to receive the matching contribution.  Participants may direct the investment of their contributions, along with matching contributions, into various investment options offered by the Plan; currently a variety of mutual funds (underlying investments of the group annuity contract), a guaranteed interest account (the fixed account), and Company common stock.
 
Participant Accounts
 
Participant accounts are valued daily based on quoted market prices.  Each participant’s account is credited with the participant’s contribution and allocations of the Company’s contribution, Plan earnings and costs associated with the funds and loan processing fees.  Allocations are based on participant earnings or account balances as defined.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
 
Vesting
 
Participants are fully vested in their contributions, plus actual earnings thereon.  Vesting in the Company’s discretionary matching contribution portion of their accounts, plus earnings thereon is based on years of continuous service.  A participant is 100% vested after five years of credited service or upon death or disability.  In the event of termination of employment prior to the completion of five years of continuous service, for any reason other than death or disability, participants forfeit their nonvested portion of employer matching contributions.
 
4

 
Participant Loans
 
A participant may borrow the lesser of $50,000 or 50% of his or her vested account balance, with a minimum loan amount of $1,000.  The loans are secured by the balance in the participant’s account and are repayable through payroll deductions over periods ranging up to 60 months, unless the loan is used to acquire a principal residence, in which case the loan may be issued for a reasonable time, determined by the Plan administrator.  The interest rate is also determined by the Plan administrator and is fixed over the life of the loan.  Interest rates on loans outstanding at December 31, 2002 ranged from 8.75% to 9.50%, with maturities through March 2009.
 
Forfeited Accounts
 
Forfeited nonvested accounts are used to reduce future employer discretionary matching contributions.  Unallocated forfeitures as of December 31, 2002 and 2001 totaled approximately $66,500 and $47,400, respectively.
 
Payments of Benefits
 
On termination of service due to death, disability or retirement, a participant may elect to receive an amount equal the participant’s vested interest in his or her account.  The form of payment is a lump-sum distribution or an annuity as administratively practicable following the participant’s separation from service.  Participants are fully vested in the event of death or disability.
 
Plan Administration
 
ING Life Insurance and Annuity Company (ING) serves as the investment manager, record keeper and trustee for the Plan.  The Plan is administered by an employee benefits committee, whose members are appointed by the Compensation Committee of the Board of Directors of the Company.  Certain Plan investments are shares of registered investment company funds and a guaranteed interest account (the fixed account) managed by ING; transactions in these funds and account qualify as party-in-interest transactions.
 
Note 2 - Summary of Accounting Policies
 
Basis of Accounting
 
The financial statements of the Plan are prepared under the accrual method of accounting.
 
Use of Estimates
 
In preparing the financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and disclosure of contingent assets and liabilities.  Actual results could differ from those estimates.
 
5

 
Investment Valuation and Income Recognition
 
The Plan’s investments consist of a group annuity contract with ING (underlying assets are mutual funds and a guaranteed interest or fixed account), a Labor Ready, Inc. common stock fund, and participant loans.
 
Investments in mutual funds are reported at fair value based on quoted market price.  The fixed account (guaranteed interest contract) is not considered fully benefit responsive; therefore, it is reported at fair value.  Participant loans are recorded at book value, which approximate fair value.  The Labor Ready, Inc. common stock fund includes shares of Labor Ready, Inc. and cash, and is reported at fair value based on quoted market prices.
 
Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded as earned on the accrual basis.  Dividend income is recorded on the ex-dividend date.
 
Payment of Benefits
 
Benefits are recorded when paid.
 
Note 3 - Investments
 
The following presents investments that represent 5% or more of the Plan’s net assets at either December 31:

 	 	2002	 	2001	 	
 	 	 	 	 	 	
Guaranteed interest contract:	 	 	 	 	 	
ING Fixed Account (Interest rate: 5% for 2002 and 2001)	 	$	732,648	 	$	645,976	 	
Mutual Funds:	 	 	 	 	 	 	 	
ING Index Plus Large Cap Fund	 	304,715	 	328,347	 	
ING International Fund	 	223,103	 	219,073	 	
AIM Premier Equity Fund	 	290,982	 	366,208	 	
Baron Growth Fund	 	258,401	 	193,653	 	
Invesco Growth Fund	 	220,612	 	313,449	 	
Other	 	864,726	 	538,479	 	
Labor Ready, Inc. Common Stock Fund	 	1,283,295	 	1,083,956	 	
Participant loans	 	146,249	 	186,305	 	
 	 	 	 	 	 	
Total investments	 	$	4,324,731	 	$	3,875,446	 	
 
During 2002, the Plan’s investments, including gains and losses on investments bought and sold, as well as held during the year, appreciated or (depreciated) in value as follows:

Mutual funds	 	 	 	$	(564,178	)	
Labor Ready, Inc. Common Stock Fund	 	 	 	376,358	 	
 	 	 	 	 	 	
Net depreciation in fair value of investments	 	 	 	$	(187,820	)	
 
6

 
Note 4 - Plan Termination
 
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contribution at any time and to terminate the Plan subject to the provisions of ERISA.  In the event of Plan termination, participants will become 100% vested in their employer contributions.
 
Note 5 - Tax Status
 
The Company adopted a non-standardized Prototype Profit Sharing Plan with CODA, which received a favorable opinion letter from the Internal Revenue Service (IRS) on August 30, 2001 stating that the Plan and related trust were designed in accordance with applicable sections of the Internal Revenue Code (IRC).  The Plan sponsor believes the Plan is currently being operated in compliance with applicable requirements of the IRC.
 
Note 6 - Administrative Fees
 
Certain administrative functions are performed by officers and employees of the Company.  No such officer or employee receives compensation from the Plan.
 
The Company has retained the services of a third party to perform certain administrative functions.  The Company pays all administrative expenses of the Plan, except for the administrative costs of mutual funds and loan processing fees.
 
7

 
Schedule of Assets Held for Investment Purposes
 
Labor Ready, Inc. 401(k) Plan
December 31, 2002
 
EIN #:     91-1287341
Plan #:   001

(a) and (b)
Identity of Issuer, Borrower
or Similar Party	 	(c)
Description of Investment, Including
Maturity Date, Rate of Interest,
Collateral, Par or Maturity Value	 	(d)
Cost	 	(e)
Current
Value	 	
 	 	 	 	 	 	 	 	
ING Aetna Financial Services*	 	Fixed Account	 	**	 	$	732,648	 	
 	 	Money Market Fund	 	**	 	66,485	 	
 	 	Strategic Allocation Growth Fund	 	**	 	42,539	 	
 	 	Strategic Allocation Balance Fund	 	**	 	42,618	 	
 	 	Strategic Allocation Income Fund	 	**	 	62,134	 	
 	 	Balanced Fund	 	**	 	63,560	 	
 	 	Index Plus Large Cap Fund	 	**	 	304,715	 	
 	 	Small Company Fund	 	**	 	117,143	 	
 	 	International Fund	 	**	 	223,103	 	
 	 	Bond Fund	 	**	 	11,209	 	
 	 	GNMA Income Fund	 	**	 	59,564	 	
 	 	Index Plus Small Cap Fund	 	**	 	12,170	 	
 	 	Value Opportunity Fund	 	**	 	178	 	
 	 	 	 	 	 	 	 	
Invesco	 	Growth Fund	 	**	 	220,612	 	
 	 	 	 	 	 	 	 	
AIM	 	Premier Equity Fund	 	**	 	290,982	 	
 	 	 	 	 	 	 	 	
Baron Funds	 	Growth Fund	 	**	 	258,401	 	
 	 	 	 	 	 	 	 	
Fidelity	 	Advisor Mid Cap Fund	 	**	 	17,149	 	
 	 	 	 	 	 	 	 	
Oppenheimer Funds	 	Main Street Growth & Income Fund	 	**	 	207,464	 	
 	 	Capital Appreciation Fund	 	**	 	15,706	 	
 	 	 	 	 	 	 	 	
Franklin Templeton	 	Growth Fund	 	**	 	146,807	 	
 	 	 	 	 	 	 	 	
Labor Ready, Inc.*	 	Common Stock Fund	 	**	 	1,283,295	 	
 	 	 	 	 	 	 	 	
Participant loans*	 	Secured by participant’s vested interest in the Plan, with interest rates of 8.75% to 9.50%, maturing through March 2009	 	**	 	146,249	 	
 	 	 	 	 	 	 	 	
 	 	 	 	 	 	$	4,324,731	 	

*                                          Represents party-in-interest.
 
**                                   Cost information not required for participant-directed investments.
 
8

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Employee Benefits Committee of the Labor Ready, Inc. 401(k) Plan, which is the Plan administrator of the Labor Ready, Inc. 401(k) Plan, has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 	 	Labor Ready, Inc. 401(k) Plan	
 	 	 	
 	 	By: Employee Benefits Committee of the Labor Ready, Inc. 401(k)
Plan	

June 26, 2003	 	/s/ Thomas J. Stonich	
 	 	Thomas J. Stonich, Vice President of Human Resources & Training	
 
9

Exhibit 23
 
CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statement(s) on Form S-8 (Nos. 333-99049; 333-76420; 333-36191; 333-16455; 333-16459) under the Securities Act of 1933 of our report dated May 2, 2003, relating to the financial statements and supplemental schedule of the Labor Ready, Inc. 401(k) Plan , which appears in this Form 11-K.

/s/ McGladrey & Pullen, LLP	 	 	
McGladrey & Pullen, LLP	 	
Tacoma, Washington	 	
June 30, 2003	 	
 
1

Exhibit 99.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
                Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, in his capacities as trustee of the Labor Ready, Inc. 401(k) Plan, does hereby certify with respect to the Annual Report of the Labor Ready, Inc. 401(k) Plan on Form 11-K for the year ended December 31, 2002 (the “11-K Report”) that:
 
(1)                     The 11-K Report fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934; and
 
(2)                     The information contained in the 11-K Report fairly represents, in all material respects, the net assets available for benefits, and changes in net assets available for benefits, of the Plan.
 
The undersigned has executed this Certification effective as of June 30, 2003.

 

/s/ Thomas J. Stonich	 	
 	
Thomas J. Stonich	
Trustee, Labor Ready, Inc. 401(k) Plan	
 
A signed original of this written statement has been provided to Labor Ready, Inc. 401(k) Plan and will be retained by the Plan and furnished to the Securities and Exchange Commission or its staff upon request.